July 29, 2021

Episode 160: Day Trading in 2020: Did Free Trading Change Everything?

July 29, 2021

Today we get the chance to take some very interesting listener questions and dig into fascinating findings on day trading in 2020. To kick things off we have a quick review of Simon Sinek's insightful new book, The Infinite Game before rounding up some of the news from the investing space. Then it's time to tackle a number of questions from a member of our thriving community and break down some helpful responses to queries about bonds, retirement, convexity, different types of ETFs, and more. We were lucky enough to draw on some great wisdom within our network of advisors to help us answer these complex questions, so you will not want to miss the specifics that we dive into. From there, we dive into the main course of today's show, exploring the topic of day trading in 2020. With the rise of mobile trading on apps like Robinhood, there has been a spike in what some may call casual or free trading. We unpack some of the surprising and not-so-surprising findings on the impact of Robinhood's model, looking at the community's trend towards herding and how the smartphone platforms are changing the way people invest. The main conclusion here may not be a big surprise to any of our listeners, with the higher frequency of transactions leading to worse returns in the long run. For all this, plus some Talking Sense questions cards, and a whole lot more, listen in with us.

Key Points From This Episode:

This week's book review of The Infinite Game by Simon Sinek. [0:06:02.7]
News from the world of investing: Vanguard's latest move into indexing, and more. [0:10:30.8]
A series of listener questions dealing with bonds and retirement. [0:15:51.2]
An argument for federal government bonds when prioritizing liquidity. [0:18:26.7]
Understanding convexity and 'bullet' portfolios in this context. [0:20:36.7]
Ten-year treasury ETFs versus all duration ETFs. [0:23:52.4]
Weighing provincial bonds and their lack of liquidity against Canada's governmental bonds. [0:26:12.1]
Looking into what the research shows us about day trading during last year. [0:29:01.6]
Available data on Robinhood users and their general tendency to herd investments. [0:33:40.7]
The losses incurred by the Robinhood community during herding. [0:38:29.0]
Digging a little deeper on transaction costs and how this actually plays out at Robinhood. [0:44:20.1]
Market efficiency as it relates to these new ways of 'free' trading. [0:48:29.6]
Another round of Talking Sense cards; things to save and decision hindsight. [0:52:32.1]
Bad advice of the week courtesy of Canada's big banks. [0:59:18.6]

Read The Transcript:

Ben Felix: This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision-making for Canadians. We were hosted by me, Benjamin Felix and Cameron Passmore, portfolio managers at PWL Capital.

Cameron Passmore: So we're lucky today. I was just telling Ben outside my house the ice cream truck comes around with that crazy electronic, I don't know what kind of music. Some song they keep playing on this loop and it's right in front of my house. So they just pulled away. So we're not going to get interrupted by that. Ben your side, you got some construction going on or something.

Ben Felix: Yeah well there's some electrical work being done in my garage right now to finish up our new kitchen set up. So we're not so lucky on that end, but our microphones are pretty good. So I think we'll be okay.

Cameron Passmore: So I was just on a call with a couple of our colleagues Matt and Ben, with our friends at Wealth Stream in New York City. Good friends down there. And on the call, on the Zoom call, they all had their, three of them had their Rational Reminder shirts on. So we're all in uniform almost. So it's actually kind of neat to know that the number of advisors I was thinking that reach out to us from all over the world. Like last week, I got connected to someone in Australia. Which is super cool to hear what they're up to and the impact of the podcast. And it's just great to hear from people. So if you did want to connect, please do reach out.

Ben Felix: Definitely.

Cameron Passmore: The summer sale ends today, this crazy Rational summer sale. Unbelievable number of orders came in.

Ben Felix: Today being today that we're recording or today on the release of the episode?

Cameron Passmore: Today on the release, the 29th. So we're recording the 26th, but I know you're getting it on Thursday the 29th, for those who are keen to listen to it on the Thursday. So two weeks sale. Wow. I mean for us it was a lot kind of neat. And we unfortunately ran out of socks. They're back in stock now. So any orders going forward get the free socks there in. And I was talking to Angelica the other day, maybe she can set up something in the community board about some ideas for Christmas. If people have ideas for merchandise for this Christmas season-

Ben Felix: Oh like special Christmas merch?

Cameron Passmore: Yeah like if people want a Christmas merch, she thought of maybe a ... She did or I did a Christmas ornament perhaps. I don't know. Maybe that's a little too nerdy. I don't know. So if you have ideas, drop us a note.

Ben Felix: We had a thread at one point in the community for merch ideas. And there's a bunch of neat ideas that came out of that.

Cameron Passmore: I have to go back and check that out. Had some very nice reviews lately. One was from Funnyjer, "Analysis and research is often challenging. It drives me to learn more and keep developing my own intelligence and rational development. Keep up the great work." Very nice to hear. Also, from Johnny F123, "With all the hype out there these days, you guys are keeping it real for the rest of us." The third one from Patrikd, so we talked about two weeks ago and we talked about the guy who gave us a three-star.

Ben Felix: Their number one finance podcast and we got three stars.

Cameron Passmore: So he dropped us a note back saying "My top number one finance podcast by far. Love the academic approach to investing. It really feels like you want to help and inform the audience. Greetings from Sweden." Edit though he said, "I never said it was my top number one podcast overall, this would explain the three haha. Of course your podcast deserves five stars and I laughed so hard when I heard you talk about my review." So you heard again so maybe he's laughing again, we'll see. Upcoming guests next week, Katy Milkman. And then two weeks after that is fixed income manager, Dave Plecha from dimensional funds. And then two weeks after that is Gordon Olan , someone you discovered. Great interview.

Ben Felix: The Rational Reminder community discovered Gordon Olan and pointed charitable in the community to a bunch of his research. And then I reached out to him probably almost a year ago now, and he agreed to come on.

Cameron Passmore: Awesome. It's great interview. Coming up in the community, Larry Swedroe is going to be in the community on August 18th Wednesday at noon Eastern.

Ben Felix: Yeah. We've got a good flow of questions coming in from the community for things that they would like to hear us talk to Larry about. So if you have ideas for that conversation, let us know. And the format will be similar to last time where it'll be us speaking with Larry live. If we have lots of good questions from the audience beforehand, then that'll help us have a good productive discussion that's going to be interesting for everybody.

Cameron Passmore: So it will be like the Wes Gray interview.

Ben Felix: Yeah same format, a little bit more casual than a podcast recording, but yeah same idea.

Cameron Passmore: So that Wes Gray by the way, it's up on the YouTube channel now. And then on Wednesday, September 15th at three Eastern Jack Vogel will be joining us.

Ben Felix: Yeah. And for Jack, he said that he had some good ideas that he thought the community knowing how sort of geeky and factor focused the community is, that he had some really good ideas that he thought would be interesting. So we're waiting for him to give us those and then we'll post those in the thread for him and hopefully get a good discussion started for us to prepare for that conversation with him.

Cameron Passmore: And today we're restarting listener questions. I don't know why we stopped doing them. Maybe we just forgot.

Ben Felix: We talked about this a while ago. We created the community. So all of the listener questions would happen there. And I would often chime in and participate in those discussions. But that kind of because all the discussion was there instead of individual emails coming to me, we kind of stopped talking about it on the podcast, but we wanted to start it again. So Angelica started a thread in the community to source listener questions, and we already have a bunch of good ones. We're going to talk about one today. The hope is to do at least one listener question per episode, going forward. So again, if you have a list or a question, you can send it to us by email if you like, or go into the community in that thread that Angelica has created for listener questions and stick it in there. And we'll select one each week or each alternating week, I guess.

Cameron Passmore: Cool. Anything else?

Ben Felix: No. Looks good.

Welcome to episode 160 of the Rational Reminder Podcast.

Cameron Passmore: So getting lots of book recommendations coming directly to me, maybe you're getting them also, but it's great to hear.

Ben Felix: No, I'm not. People know that I don't read the books.

Cameron Passmore: Well, you read enough other books. Anyways so I appreciate it very much. I don't always have enough time to read them all, but I do take note of them and we'll hopefully talk about some going forward. But some really good book ideas coming through. Anyways, this week's book is the Infinite Game by Simon Sinek. So, as we talked about it a couple of weeks ago, I'm into learning about strategy, business strategy of late and after having read Playing To Win, which I loved. My Kindle came up and recommended the Infinite Game. And so Simon Sinek also wrote the book, Start With Why, which we reviewed back in episode 121. The most people know who Simon Sinek is. They've probably seen his Start With Why Ted Talk on YouTube.

Anyways, this book is I thought it was phenomenal. I went after and read some of the reviews and Goodreads reviews weren't that great? That's okay. I really liked it. It was, I think really compelling and engaging to me because it talked about the way we think about our business, which is kind of this infinite at least a 100 year timeframe. We don't view our own practice as short-term wins. We view it about long-term relationships, multi-generational money. We view the world as there's enough business to go around for everybody, which is why we love helping this community and believe that good things always come and come back and help you out. And he's quite emphatic that business is not something to win per se. And this is very much at odds with the book Playing To Win, which is all about the drive to win.

And that is not Simon Sinek's thing at all. And he compared business to a game. So a game has finite rules, finite scoring, finite amount of time. At the end of that time, whoever wins, wins. And he says in business, there's really no fixed rules. There's certain laws you have to follow of course and ethics, but the rules change, businesses evolve, customers evolve, the marketplace evolves and different companies also have different objectives. You may want to give back to the community more. You may want to have a higher profit margin. You may want to go public. You may want to be bought out. Everyone has their own personal objectives. Therefore, everyone's own rules are different. Therefore, he thinks viewing it as winning is not the ideal way to look at it. So again, it is very much in conflict with playing to win. So I'm trying to reconcile that, but he says "The benefit of the infinite game is that your focus becomes much longer term."

Think about multi-generational, think about the next generation of successes in your business and being resilient long-term. So he highlights that to build a strong resilient company, you need to be advancing adjust cost, so this is what's important to the people in the business. Like what is your real, your mission and your purpose. Then you build a trusting team around that, you of course study other people in the marketplace so that you're ready to pivot if need be to compete. And he said you have to be courageous enough to lead that business towards that just cause. I really enjoyed the book. I think it very much speaks to how we think about how we look at our practice.

Ben Felix: Great. I love getting your insights about these books because then I don't have to read them.

Cameron Passmore: See, I'm saving you time.

Ben Felix: And you do a good job. You do a good job distilling them. I don't even say that during them.

Cameron Passmore: I read a tweet this morning someone said, "If you don't remember the book you've read, did you really read it?" So I've started to come up with books, like when it's in the Kindle, they're all there, right? So I think there's going to be a bunch of books I'm going to kind of put on repeat because they do kind of melt away. I think every book has it impact, but they do start to kind of melt away in the background.

Ben Felix: Shane Parrish had a blog post. I'm sure he still has it on the Farnam Street blog about how to read a book. And if I remember correctly, one of the big takeaways was that you read the book and then you put it down for a week and then you read it again because the second time you come back to it, you're a different person because you've started to integrate some of the information from the book. And the second time you read it, it so much more impactful.

Cameron Passmore: I remember a saying a long time ago, and I don't know who to attribute it to. But you only change based on the people you meet and the books you read. There you go. In recent news, Vanguard is moving into direct indexing. But that was a pretty big story this week, especially given the topics that we've talked about two weeks ago and also your main topic today. But the story that I came across in financial planning magazine is that Vanguard has just acquired Just Invest, which is a provider of direct indexing via separately managed accounts and they manage about a billion dollars right now. And Vanguard of course is trillions of dollars, four trillion in five trillion or something. So you can only imagine where this might go and the other personal advice service. So the author of the article is warning if direct indexing could be a complimentary service inside that package. Again, you can only imagine where this could go.

Ben Felix: It could go wherever the proponents wanted to push it. I mean, we have obviously Vanguard entering the mix here. O'Shaughnessy launched the Canvas product. I'm sure there are others there and there have been others that came before those two as well. I mean, you have it right here. The fees are currently 40 basis points. If Vanguard drives the fees to 10 basis points, hey, you know what? As a business, that's still twice as much revenue as they're getting from SBTi.

Cameron Passmore: Yeah. Exactly.

Ben Felix: Who knows? I can't speak to what Vanguard's strategy is going to be, but if they really push it down to 10 basis points, good for them. But to 40 basis points, that's the fee level that I've seen most other separately managed account offerings.

Cameron Passmore: And Fintwit lately has so many tweets about this as the future of investing, direct indexing. And I get the appeal from the consumers and I guess from perceived value added by advisors, but it's almost like you can make the argument this is basically the active management in a new wrapper.

Ben Felix: All you have to get is what you just said. It can be sold. People will buy it. That sounds like a pretty good business proposition to me. Consumers may want it or think that they want it and it becomes a part of the reason that an advisor can charge a fee. I don't think it's a very strong value proposition and loss harvesting always comes up in the context of separately managed accounts of direct indexing. There's the customization piece and the loss harvesting piece. And I'm not really convinced of either in terms of real benefits to the client.

Cameron Passmore: And the author agreed with you on the tax loss harvesting. He said, it's just a deferral that basically gave quick points to your point from two weeks ago. You want to talk about something new from CIBC?

Ben Felix: Yeah, I thought this was really interesting. So people may be familiar with American Depository Receipts EDRs, which are instruments that allow American investors to trade foreign securities on American exchanges. So kind of a neat little financial product that's been around for a long time. I don't know when EDRs started trading, but they've been around for as long as I've been in this world, in financial services. I don't know. Do you know Cameron when EDR started trading?

Cameron Passmore: It could be as long as you've been in this world, period. Just guessing.

Ben Felix: They've been around for a long time and Canada has not had a similar product, but CIBC is launching some Canadian depository receipts CDRs, doesn't sound quite as catchy. Maybe it needs some time. EDR sounds so good. Anyway. So CDRs are going to start trading and the article I read, it looks like they're starting with one CDR for Amazon. So what this means is that as a Canadian investor on the Neo exchange, you can buy CDR, that gives you exposure to the Canadian dollar hedged price movements of Amazon, and they trade in units of $20. So instead of doing an FX and paying $3,600 at the time this article was written U.S. for our share of Amazon, you can stay in Canadian dollars in a purchase, a $20 a unit of the depository receipt currency hedged,. Which I'm not crazy about that, but I guess if you're speculating on the stock, maybe you want the currency to be out of it.

So I can see that, you don't want to speculate on the currency in that situation. I didn't have it in my notes, but there were some nodding significant fees in there for creating the product. I don't know if you caught those Cameron.

Cameron Passmore: No, I did not.

Ben Felix: Yeah. It was something that caught my eye. The spread there in small fees from foreign exchange transactions that it makes in the background to manage the currency hedge for investors. The maximum spread rates that CIBC can collect from those transactions is capped at 60 basis points on an annualized basis. So that's part of the profits CIBC expects to make, but either way I think it's a pretty neat little financial innovation and could be the start of something interesting for Canadian investors. Not that I'm promoting investing in individual stocks, but I think the more mature our financial market gets the better it is for all Canadians. So that's it. I thought this was just an interesting story and it'll be neat to see what comes and what other financial institutions get in on it.

Cameron Passmore: Good perspective. All right. Listener question.

Ben Felix: Yeah. So as we mentioned in the introduction or our plan is to get back into doing listener questions each episode, and this one was more than a question. It was a whole bunch of questions. It was from Spreadsheet who, if anybody is active in the Rational Reminder community they'll recognize who that is. He's one of the most prolific posters in the community. He makes lots of great contributions and he's recently done a bunch of analysis on adding bonds to a portfolio of stocks for an early retiree. And so he sent me some questions in the community and asked if I would answer them. And I said that I would do it on the podcast. So I did that and we'll talk about it. The other thing that I did to answer these questions is I talked to Ray who works with me in our PWL research team.

And Ray brings to this discussion specifically because it's about bonds, Ray brings some really unique insight because in his former life, he was an institutional fixed income portfolio manager. So he knows bonds better than most people. Although as a separate note on that, we do have Dave Plecha Dimensional's global head of fixed income coming up in the podcast pretty soon. And there was a lot of overlap between the questions that we're asking Dave and Spreadsheet's questions. So hopefully my answers here match up somewhat with Dave Plecha's. But I think as far as bond knowledge goes, I said Ray knows more than most people. I would venture to say that Dave Plecha knows maybe more than anybody, more than most at least.

Cameron Passmore: It's a pretty good anecdote, though it answers Spreadsheet's questions.

Ben Felix: That's true. That's true. Okay. So to kick it off Spreadsheet says, "I think a small allocation to bonds for an early retirement can add value in the worst case event. I have decided to allocate roughly 10% to bonds, which I will phase away after I reach a level of spending that is more than enough." So starting the questions, the purpose of bonds would be to help provide liquidity in a worst case scenario. Based on this, would you use treasuries or stick to something like zag as you have in the model portfolio? Based on these tables, which we can show in the YouTube video heat map type tables that Spreadsheet's made. I do not see the benefit of adding corporates and he's showing the performance of different securities of stocks, different types of bonds in crisis scenarios and how they performed and corporates didn't do so great relative to government bonds and treasuries.

Oh, I didn't mention. So I talked to Ray about this. I'm going to give you what Ray said and then I'll give my take. So Ray told me that if liquidity is the objective and that's the key here, if liquidity is the objective, there's nothing better than federal government bonds. Ray thinks that zag and treasuries are not directly comparable because they're not denominated in the same currency, which is another point that we're going to talk about as we go through these questions. So Ray suggests for this purpose specifically if liquidity is the objective, then you've got to own short-term federal government bonds in a currency that matches your expenses. So pretty sensible answer there. My take on this is that if we're defining liquidity as a primary objective of the bond allocation, we're heavily constrained in answering the question to the most liquid assets, which are going to be cash or other short-term government debt obligations.

If we expanded the question, which is probably what I would suggest doing to ask whether corporate bonds have a place in a portfolio at all, I think that they do. There's a documented credit risk premium which we've talked about a fair amount on the podcast. I also think it's important to note that there are an infinite number of combinations of risky assets to suit the needs of every investor. You can take on less credit risk and more equity risk. That's fine. That can be a good portfolio. You can take on less equity risk and more credit risk and arrive at a somewhat similar risk profile. I think that can also make sense. So I don't think there's a single right answer here. In the question that spreadsheets is asking I want liquidity in a crisis situation. You have to pick the most liquid assets, which and excluding corporate bonds from that.

But I don't know if I agree with the premise of the question, I guess is what I'm saying there. The next part of the question also based on these tables, I think using intermediate term treasuries, something around 10 years, it seems appropriate considering that long-term treasuries and short-term treasuries are both helpful during equity crashes at different times. And an intermediate treasury seems like a rough average of the two. Would you agree? Ray said a mix of short and long bonds have more convexity and are likely to outperform a bullet intermediate treasury bond of the same duration in a crisis situation. This said, unless you have a 100 million dollars plus to manage, I would not overthink this decision. Good insight there. Now, I'm going to explain a little bit about convexity and I'm going to explain what Ray meant when he said a bullet portfolio.

So two bond portfolios can have the same duration, but they can be structured differently in terms of their expected response to changes in the yield curve. And that's called convexity. Two main strategies if you pick up like a CFA textbook, the two main strategies for dealing with expected changes in the yield curve. So if you're an active bond portfolio manager or using bullet and barbell portfolios because they respond to differently, depending on the type of change that you're anticipating. A bullet portfolio is concentrated insecurities of the same duration as the portfolio's target duration. While the barbell portfolio is concentrated that shorter and longer ends of the maturity spectrum to give you an average duration that matches the portfolio's target duration. So you've got two portfolios of the same duration, but the barbell portfolio is going to have more convexity. The implication of that is that if the yield curve flattens the higher convexity is going to boost the performance of the barbell portfolio over the bullet portfolio.

So that's a flattening yield curve. And if you think about it, if the yield curve flattens, you've got short rates rising, but short term debt instruments aren't really going to change in price if a short rate rises. Long rates fall but long bonds get a price boost because they're more price sensitive to changes and rates. So if you've got a barbell portfolio, this is good because you're insulated on the short end and you get a boost from the long end. Insulate on the short end, because the prices just don't change much. But if you've got a bullet portfolio, you don't really get the boost on the long end. And it's kind of similar if there's a parallel downward shift in the yield curve, because again, the short prices don't change much, long prices change more than intermediate. So if you're in a bullet portfolio or a barbell portfolio the higher convexity is helpful in a downward shift.

If the yield curve steepens with short and intermediate falling and long rates remaining unchanged then the bullet portfolio performs. So there's the one case where the bullet portfolio cannot perform. But I think what's important as a takeaway for a Spreadsheet's question here is that it's not obvious to say that one strategy is better than the other. They just have different responses to changes in the yield curve. And I think that to say that one is objectively better than the other for the purpose of providing liquidity in a crisis is also a prediction on how the yield curve is going to respond to that crisis scenario. And I don't know if we can make that prediction. We can look at the past and say this is what the yield curve has historically done, but it doesn't tell us much about what's going to happen in a future crisis. So which one is better for Spreadsheet's purpose? I don't have the answer. I think Ray's point was that given what tends to happen in a crisis, the convexity would be helpful. But-

Cameron Passmore: That's the premise of why you're having is for periods of crisis. You need liquidity. So that's the argument to take advantage of what the yield curve might do as opposed to no, just take the higher or give me the safe short-term stuff.

Ben Felix: But you're taking both in this case, right? It's like we're taking the mix of super short term and longterm, or we're taking intermediate?

Cameron Passmore: But you could go all short though and say there's prices, I just want security. That's a precious question, right?

Ben Felix: Yep. So the next, probably the question, what do you think of buying an ETF with 10 year treasuries versus buying an ETF with a blend of alterations with an effective duration of 10 years? So he's comparing the ETF GEO VT versus IEF. The question is very similar to what we just talked about. It's going to be back to convexity where geo VT is not quite a barbell because it's holding the full spectrum of maturities, but it's closer to a barbell portfolio than IEF, which is definitely a bullet portfolio. So I don't really know how you pick, unless you're making a call on what the yield curve is going to do in the short term. I mean in the long run, maybe you take the one with the higher yield. I think Ray said he'd picked one with a shorter duration.

So it depends what you're trying to accomplish. So I think for the purpose of being the short term hedge in a crisis, then you're going to want the shorter duration, but there are a lot of different ways to think about this and that and to answer the question. Spreadsheet then asks, what do you think of Canadian treasury ETFs versus US? It seems that an ETF like ZFM which focuses on Canadian treasuries, isn't diversified enough due to the availability of Canadian treasuries. It has 21 holdings and 135% turnover. Ray comes back to what he said earlier that depends on the currency of your expenses. You don't really want to hold. It's basically like holding USD as a hedge against a crisis when your expenses are in Canadian dollars. Historically that's probably worked out okay because Canadian dollar tends to depreciate against USD in a crisis.

But again, we don't really know what's going to happen in a future crisis. So I think you can kind of want to be denominated in your home currency, or have exposure in your home currency if you will safety. Otherwise you're taking on that currency volatility as well. I don't really think the number of issues held in the fund, like Spreadsheet's mentioned 21 holdings with stocks. We worry about the number of holdings because skewness is an issue in stock returns and when we're talking about bonds, government bonds I'm not super worried about skewness. Each issue is going to perform relatively similarly. Turnover is also not really an issue. The trading costs for these securities are extremely low. So again, whereas that would be an issue with stocks, it's not so much of an issue in this type of bond portfolio. Yeah, so that's it there.

Last question relates to provincial, municipalities and agencies. And Ray had a really cool answer for this one, which is just experience in the bond market type answer. He said, "Provincial and agencies are treated by markets as credits that are less liquid in a stressed environment. If you're at risk of selling in the middle of the panic, then the government of Canada bonds are preferable." Yep. So I thought that was all pretty interesting. Oh, and then one more question was, "Is there any merit to leaning more towards short-term treasuries considering the low interest rate environment we were in?" I think this speaks to your comment Cameron. If the ultimate goal is liquidity and safety, then I think going with anything other than short-term treasuries is a bet on a crisis response, similar to the past. Where intermediate maybe did really well in historical crises, but that doesn't mean they're going to do well in the future.

I guess, with short-term treasuries the other side of that comment that I just made is that if the crisis is paired with high inflation, well now you'd be better off in short-term treasuries in that case. If the goal is liquidity sleeve, it doesn't get better than short term treasuries. And I think like the analysis that Spreadsheet did which was very interesting, I think a lot of it is well it's historical analysis, a lot of it relies on how different assets have performed in past crises. And I just don't know how much insight we can gain from that for structuring an optimal portfolio for the future. And then Spreadsheet asked "Which ETFs specifically?" I don't really want to make specific ETF recommendations on the podcast at the moment without doing a whole bunch more due diligence that I'm not actually going to do. So probably just won't go there for making a specific recommendation. But he also asked "Which ETF would you use or would you maybe still have corporate?"

So what I wrote in my notes for that question is in structuring my own portfolio I would not have fixed income for the sole purpose of providing a liquidity sleeve. I don't really know if I can answer the question anyway. I think a liquidity sleeve implies a market timing decision because you're effectively increasing your exposure to equities after a crash by spending fixed income without rebalancing. And that's something that just doesn't make a whole lot of sense to me. I think it's a market timing decision. I'm not convinced that it's a sensible approach. If I were to add bonds to my portfolio, which I don't currently have, but if I were to add them, I would want to have the same kind of variable maturity variable credit, globally diversified strategy that we talked about in our factor investing with fixed income episode. That is all for the listener question.

Cameron Passmore: Pretty good set of answers from our friend Spreadsheets.

Ben Felix: I think so hopefully we get some more insight from Dave, Dave Plecha. He probably forgot more about bonds yesterday than I've learned so far in my career.

Cameron Passmore: Dave's amazing. So onto the main topic, day trading in 2020.

Ben Felix: I was contacted by Global News to do an interview on fractional shares at Wealthsimple. It was supposed to come out on this past weekend, but it hasn't come out yet. Apparently it's going to come out soon. Anyway, so it got me thinking-

Cameron Passmore: Is it a video interview?

Ben Felix: A video interview yeah. And they're doing a written post about it. It's going to be on their social media and whatever, whatever, whatever. I'm looking forward to seeing it. But the questions that they were asking me, it was based on Wealthsimple Trade having fractional shares now, which is a new development in Canada. So the questions were focused on that and what it's going to do to the market and all this kind of stuff. But my answers were more about what it's going to do to well investors and whether it's a good thing ultimately for them. But then it got me thinking, I did a video on day trading in October of last year, which seems crazy. It feels like I just released that. It's almost been I guess, not quite a year but it's coming up on that anyway, time just flies.

So it got me thinking that I should revisit my research on that just because last year was such a crazy year. And I figured somebody must've looked at what happened with day-trading last year from an academic perspective. So I started poking around and I found some pretty good stuff. A lot of the feedback that I got when I released that day trading video, was that the papers that I was relying on to draw my conclusions were too old to be relevant in the modern day of free trading and online access to information and all that stuff. And it's true, a lot of those papers were old and even the papers that were newer, most of them, not all of them, but most of them still relied on data sets from the early 2,000s or even the late 90s in some cases.

I did have one paper there that was based on more recent data, but most of them were older and even the more recent one was like 2014. And that's like without fast technology has been moving with respect to trading that is a long time ago. Yeah, it really is. I think that things have changed a lot. So in that video, the conclusions that I drew based on I think I had six published academic papers, all these old papers. And they show dude that day trading is not profitable for most people, more frequent trading leads to higher likelihood of poor performance. Individuals tend to focus their trades on attention grabbing stocks rather than rationally assessing the full global opportunity set. And that increases the likelihood of trust railing the market given the intense skewness in stock returns that we often talk about.

Now, last year and this year to an extent as well, stocks like GameStop and EMC have gone to the moon, so to speak. And that made it seem like there was a lot of money to be made by joining in on this action that all of these app based free trading investors were getting it on. Everybody observed this happening. And just as I found it interesting, there were some academic researchers that also found it interesting. And Robinhood, I believe they've stopped now, but for a time, I don't actually know if that's true. For a time Robinhood an API where you could act as all of their anonymized trading data. So there was a website called Robintrack, which was just pulling that data and downloading it and making it accessible to researchers.

So there are people that took that data and examined it. All have Robinhood traders done. So the first one I looked at Brad Barber and Terrance Odean, they're the guys that have authored a ton of the literature on like in my last video on day trading, a majority of the papers were written by those guys. They've managed to get their hands on some crazy data sets. And we've learned from them so many of the behavioral finance issues that we know plague investors. We've learned that from the research that these guys have done. One of their papers summarize all of their research findings. And they said that, "Individual investors tend to underperform. They tend to sell their winners and hold onto their losers." What's that one called? The endowment effect, that what it is?

Anyway, many of the behavioral biases that we are aware of come from this research. They're also heavily influenced by attention grabbing stocks, and recent past performance. And they hold undiversified stock portfolios. So that's individual investors in a nutshell based on Barber and Odean's past research. They came up with a 2020 paper, Attention Induced Trading and Returns: Evidence from Robinhood Users. And them and two co-authors they examined the Robintrack data that I mentioned, which let them look at all of the trading from Robinhood users and just ask this question of how do?

Cameron Passmore: That is the endowment effect. I just looked it up. When you hold on to something longer that you own, you attribute more value to something you already own.

Ben Felix: So Barber and Odean and their coauthors in this paper, they suggest that attention influenced investors are more likely to exhibit hurting behavior. So that's like they're more likely to all do the same stuff at the same time. And you think about it, one of the examples they give in the research is that the Robinhood app shows the top movers up and down of stocks for each day. And if everyone has the same information, then they're going to all do the same stuff if they're trading based on attention, based on something that's catching their attention. So they find that 35% of Robinhood users, net buying activity is concentrated in only 10 stocks compared to 24% for the general population of retail investors, which I thought was still pretty high.

Cameron Passmore: Even that, exactly I was blown away by that stuff.

Ben Felix: But a lot higher for Robin hood users. And they find multiple hurting episodes per day, where the number of Robinhood users owning a particular stock increases dramatically. And the herding behavior is predicted, this is the interesting part, predicted by measures for attention like recent investor interest, recent extreme returns or unusual trading volume. There does appear to be herding behavior going on within the Robinhood community. They also find that during Robinhood outages, so if the Robinhood app is down, retail trading drops more in high attention stocks. Chasing attention grabbing stocks is not a new thing like this isn't specific to Robinhood investors. It was documented by Barber and Odean in 2007 where they showed similar effects. Just for day traders in general, not just for app based commission free day traders. And this part I found really interesting.

So the effect of attention on buying behavior was documented as being more prevalent among new investors in a 2007 paper. So attention based buying is prevalent among investors, but more so among new investors. Now, why is that relevant? Using Robinhood data from their S-1 the document that they filed before going public. They explained that nearly half ... And you talked with these stats recently to Cameron in a past episode. Nearly half of their 18 million customers were first time investors when they signed up. Thinking about those three statements. So day traders tend to trade based on attention. And that's like recent extreme returns, higher, low, stocks that have been in the news. Stocks that are on Wall Street bets, those were all attention grabbing stocks. Investors tend to trade those types of stocks more so among new investors.

And if Robinhood is a good sample for other institutions like this, then a lot of the users are new. And there's another thing that I read about, there was another paper, I didn't end up referencing it in these notes here, but there was another paper that defined commission-free traders, I think is what they call them as newer investors who are attracted by zero account minimums, no commissions and fractional shares. So they're really attributing a lot of these traits to these newer, younger investors, without a lot of experience or a lot of money. So they find Barber and Odean and the coauthors of this paper, they find support in the data for the idea that Robinhood's app design like I mentioned a minute ago is impacting the trading decisions of its users. If the concentrated buying and selling that stems from retention driven investors resulted in good returns as the internet might lead you to believe, then this would be good news for investors that with the Robinhood app is really helping people make better investment decisions.

But in Barber and Odean's study they find that the top 0.5% of stocks bought on Robinhood every day lose about 4.7% on average over the subsequent month. So the high attention stocks that Robinhood users are most frequently trading are going on to lose typically after they've been the most popular stock. Now, that doesn't mean necessarily that the Robinhood users are the ones taking those losses. They could be the ones riding the herd up to the top of the price and then dumping the stocks before somebody else eats those losses. So they asked that question too. They said, "What if we took the aggregate portfolio of Robinhood investors and see how they do around these herding events? Are they timing the herd well?" They found that the Robinhood community loses about 5% during each herding event or 6% if we adjust that for market returns.

So their finding suggests that extreme herding causes negative wealth outcomes for the overall Robinhood community. So based on all of that, keeping in mind that when my last video on day trading came out everyone's like, "Well, you're not thinking about commission-free trades and apps like Robinhood." Based on that paper from Barber and Odean, the so-called technological advantage of investors being able to sort of band together through an easy to use low cost app is actually making profitable day trading harder rather than easier due to be effective attention on buying and selling behavior.

Cameron Passmore: Is that not what you would have expected though?

Ben Felix: Well, it's what I would have expected, but I don't think it's what the average Robinhood user expects. They don't feel like they're part of a herd.

Cameron Passmore: No, I agree with you there. But you make it fun, you make it instantaneous, you make it free, how do you expect that to lead to better behavior?

Ben Felix: Yeah. Well, so listen to this next one. So there's another study specific to the impact of trading on smartphones on a mobile app. And I thought this one was even more fascinating because it's like, why would that? And they go into some theory of why they think this is true, but I didn't touch on that part. I just looked at the empirical portion of this paper. So this is a 2021 paper by Ankit Kalda and some co-authors titled Smart(Phone) Investing and it's Smart(Phone) Investing, within investor time analysis of new technologies and trading behavior. So they got data from two large German retail banks that had recently introduced trading applications for mobile devices. They had 18,000 bank clients and I let them observe whether trades were placed on a PC or on a smartphone. They found that the probability of purchasing assets, this is so interesting, the probability of purchasing assets with higher volatility and more positive skewness.

Those are the lottery lake stocks that we sometimes talk about, like the small cap growth type stocks. So they've got high probabilities of bad payoffs and low probability of really good payoffs. Buying those types of securities increases in smartphone trades compared to non smartphone trades. So the lottery risk seeking behavior seems to increase when people are trading on a smartphone. And they actually found that people who started trading on their smartphones were more likely to start trading that way on their PC as well. So it's like this experience initiates that risk seeking or skewness seeking behavior because it's not even compensated risk we're talking about. They found a 67% increase in the probability of buying lottery type stocks for smartphone users.

Cameron Passmore: Come on.

Ben Felix: They found that smartphone traders hold more non diversifying assets which they've classified as not mutual funds, but I'm guessing it means individual stocks and other stuff like that. And the smartphone users are more likely to buy attention grabbing assets. So again, we're back to attention like past winners and losers. In this German bank sample, they found that smartphone trades trailed the market by an average of 1% for the 12 months following the trade while also having a lower Sharpe ratio on average. So again we're back at sort of risk seeking, attention driven investing. But this time it's not based on driven it seemingly by the fact that the trades are happening on a smartphone. So I don't know what exactly the connection is there, but it's a very interesting observation.

Okay. So we've touched on attention and the sort of social aspect of mobile trading or maybe something else that's causing investors to take these risk seeking behaviors. But I think the other big one here, and there's not really academic literature that looks at this being true, what I'm about to say. But my hunch is that free trades are going to make people more likely to trade, which just makes sense. If you're not paying a commission, yeah I don't think-

Cameron Passmore: I don't think that's a big leap of logic.

Ben Felix: There's the everyone drinks more at an open bar type idea. So now, I said there was no academic literature supporting this. There was data in a New York Times article showing that in the first quarter of 2020 Robinhood users traded nine times as many shares as each trade customers and 40 times as many shares as Charles Schwab customers per dollar in the average customer. So, that does support the free trading at Robinhood resulting in more trading. Now, why does that matter? Why does more trading matter? Well there's a paper and again, this is one of the old papers, but I don't see why this one would have changed because it's not based on technology or anything. Journal finance paper by again, Barber and Odean trading is hazardous to your wealth. The common stock investment performance of individual investors.

They looked at 66,465 households with accounts at a large U.S. discount broker between 1991 and 1996. They found that individual investors are overconfident and they base that on the empirical evidence that the average household earns a return close to the market before costs but trails the market by about 1.1% annually after costs. So in other words, they trade to their own detriment, which is something that we would expect overconfident, but unskilled traders to do. The average household in their sample turned over about 75% of its holdings annually. And the transaction costs explained their poor performance. The 20% of households in their sample that traded the most often turning their holdings over more than twice annually, earn net returns that trail the market by 5.5% annually. And they trail a risk appropriate benchmark by 10.3% annually. So more turnover, more transactions leads to worse realized returns, which I mean shouldn't be surprising for anybody to hear considering that there are costs to transactions. Now, for anyone that's really paying attention, something that I just said, I talked about transaction costs and people might be thinking well, commissions are free now.

So transaction costs are different. They're maybe smaller. And it's true in the study. That I just mentioned by Barber and Odean, commissions were the largest contributor to costs with the remainder being the bid-ask but with no commissions. Good, maybe trading's less expensive. So high turnover is less relevant. I don't really think that's true. There is a December 2020, the SEC charged Robinhood for misleading customers about their revenue sources and for failing to satisfy their duty of best execution. And without getting into the nitty-gritty details of this concept, Robinhood makes money by selling the trades that their customers place to other financial institutions and the result can be trade execution that's detrimental to the investor. It can also be trade execution that's better. But in the case of Robinhood, that was found not to be the case. But this is called payment for order flow.

It's not necessarily a bad thing like I just mentioned, but in Robinhood's case, it was determined by Robinhood which they were required to do, but between October 2016 and June 2019, for most orders of more than a 100 shares, Robin hood customers would be better off trading at another broker dealer. Because the additional price improvement that such orders would receive at the other broker dealers would likely exceed the approximately $5 per order commission costs that those broker dealers were charging at the time.

Now keep in mind, that was for orders of more than a 100 shares. If you're trading one share on Robinhood, it's probably the right platform. But for larger orders it wasn't so good. And that's how they're making their money. In Canada, we don't have payment for order flow. It's not currently legal in Canada. But Wealthsimple Trade which is our only free trading option as of now does charge a 1.5% currency conversion fee if you want to trade securities outside of Canada. Which I mean, if we think about the attention based trading that we've been talking about, I think anybody trading on Wealthsimple Trade is likely to be at least enticed to trade USD securities. So they're going to make their money somehow which should not be surprising. I mean, if you just think about, take a different perspective, Robinhood is set to go public this week. Is that right?

Soon. Wealthsimple just took a big round of funding. They're both extremely valuable companies. That doesn't happen if you don't have a way to monetize your business. So the fact that they're making money and that their customers are allowing them to make money shouldn't be a surprise. And therefore nothing's free, even if it does seem to be so by looking at the transactions in your account. So the point of that somewhat of a digression was that trading always has a cost and people said after I released my last video, well commissions are zero. Okay, fine, commissions are zero, trading costs are not zero. The more you trade the lower your net of cost expected returns are. The last point I want to touch on, on this topic of the free trading phenomenon of 2020 and beyond relates to market efficiency.

So this is one of the other things that I have heard a lot and continue to hear is that this advancement in financial markets has changed the nature of market efficiency. I think market efficiencies is important as a concept, and I think it's an important framework for making investment decisions. So if it is broken, that would be highly relevant to me and the way that I think about markets. But I do not think that app based commission-free fractional share herding makes markets inefficient or breaks the hypothesis of efficient markets. You got to keep in mind when pharma came up with the efficient market hypothesis, all he was really saying was the prices reflect available information. It's a pretty broad statement. Image does not make a judgment on the information that is in prices, just that it's there.

And what information is in prices is a theoretical debate that is not solvable. We can't say whether it's risk or mispricing or preferences that affect prices. Those are all things that can affect prices. I mentioned preferences, and I think with the meme stock phenomenon, we were seeing a preference to hold that specific stock preferences, like a reason unrelated to risk and expected returns for owning that stock. And in that case, it was engaging in war with Wall Street, I think was the reason for that preference. So thinking about that, I was thinking about this and the thought that came to my mind is that in that way, meme stocks are kind of similar to other preferences like environmental considerations. And that may make someone like Tim Nash cringe for me to compare those two things. Tim, if you're listening I apologize.

But if a lot of investors have a preference to own greener companies for reasons unrelated risk and expected return, that can increase the price of the company, decrease the expected return for the remaining investors and decrease the cost of capital for the business. That's what happens if every large group of investors has a preference to hold a type of asset. Now, if that happens, it's good for the company because the cost of capital goes down. It's good for the realized returns of the investors that were holding the stock before its price went up. And that's one of the things we've talked about in the past. That can be confusing about looking at ESG returns. And it's like, oh wow, the historical returns have been pretty good, but that means expected returns are lower if this theory is accurate.

So you end up in the meme stock case, if you didn't ride the wave on the way up, or even if you did, if you're holding it at the top when the price has gone up a bunch based on the preference of all this meme stock investors, your expected returns are lower. And that's an insight that you get just from looking at the price. So for making investment decisions, which is why we'll be using the efficient market hypothesis. I don't think that the difference in where the information originates matter a whole lot. I don't think you have to make a judgment on how the information got into prices. Prices still contain information that can be used to assess differences and expected returns. Higher price is relative to business fundamentals like book value or profits or something. Mean lower expected returns, lower prices mean higher expected the returns. Pretty simple. Trying to outsmart that by joining a herd, I think that's typically going to be a losing game.

So to you wrap all of that up and put a bow on it, free trades have not made day trading any easier to profit from. If anything, I think free trading in the social nature of meme stock culture have increased herding behavior. They've increased the preference for lottery type stocks. They've increased the concentration and attention grabbing stocks, and they've increased the frequency of transactions for the individual investors trading on these what feel like free trading platforms even if they're not actually free. And you wrap all that stuff together and I think it's detrimental to the investment outcomes of the people that are using those platforms for the rest of the market participants. I don't think that the herding behavior of app based investor is breaking market efficiency or should change the way that we're thinking about anything.

Market efficiency just means prices reflect information. Even if that's coming from a group of investors with a preference for owning a certain type of stock, we can still use the information to gain insight about expected returns. And the game stop is a good example where the price went up for reasons unrelated to risk and expected return. And if you're a small cap value investor, you would stop holding that stock for that reason, which is an insight that you gained from the price rather than from anything productive.

Cameron Passmore: Amazing. I thought it was pretty interesting. We're getting a thunderstorm here. Some people watching this on YouTube see, I'm looking into my desk. Poor Oscar is freaking out.

Ben Felix: It's nice and sunny over here.

Cameron Passmore: No. Yeah, it's rolling pretty good here right now. Did you ever watch Johnny Carson? You're probably too young, right?

Ben Felix: No.

Cameron Passmore: I think he went off the air in the early 90s. Anyways, there was a character in Johnny Carson. So some of the listeners might know and he's Carnac the Magnificent, so he'd hold up these cards and then read the cards. Every time we do this talking sense thing I think of Carnac the Magnificent. Anyways, so ready for your cards from the University of Chicago Financial Education Initiative, what is something you already have that you want to save for the rest of your life? That's a tough one. I don't really think about stuff like that.

Ben Felix: Was it the thing? Is that what it was? Something.

Cameron Passmore: What is something you already have that you want to save for the rest of your life? I guess other than health of course, and family.

Ben Felix: Yeah. No stuff jumped in my mind either. My family was the first thing.

Cameron Passmore: Neither of us are really stuff kind of people.

Ben Felix: But family for sure. Health for sure those are the things that I currently have that I hope to keep for ideally as long as I'm- go ahead.

Cameron Passmore: Something we've talked about is like, I'm kind of obsessive about family photos. I've gone through and taking my parents' slides and digitized them, organized them all. And I think I'm kind of the end of that breed in our family. Kids don't really ... Like, I've got whatever 25,000 pictures all categorized. So you can imagine on my Google Drive. I care about that, but I'm not sure if the next generation really cares that much about it. But I enjoy them. Question number two, if I could change one money decision I made in the past it would be?

Ben Felix: Wow. I mean.

Cameron Passmore: There's some stocks I wish I had bought.

Ben Felix: I wish I had bought some certain stock. Wish I bought some certain digital currencies. Wish I'd bought a house in Vancouver a few years back.

Cameron Passmore: But it's hard though, because at the time we get so many ideas like that, I'm not equating all stock to this. But you hear so much or you see so many things that don't go well, but there's a couple of boy that - .

Ben Felix: Is that what the question's at though? I don't know if there's a better way to think about it. Because those are ways-

Cameron Passmore: Well money does ... I'm just saying that's one. That's one you could change your balance sheet, but I don't regret things that I've done like savings habits or maybe I'm sure you didn't waste a whole lot of money on stupid stuff. I didn't blow money in casinos. And if you enjoy that, that's fine. I'm just saying that's just-

Ben Felix: Yeah.

Cameron Passmore: We're both pretty conservative.

Ben Felix: Yeah. I can't think of, I remember when I bought my first car, it was a used car-

Cameron Passmore: A beauty too,

Ben Felix: Such a small thing. You used to have the same type of vehicle. I remember you telling me that when I got it. I was with my dad and he was all fired up and getting my first car. So I'm like, all right. So I buy this used car and a few years later, well it was a good vehicle but I had to go trade it in. And then I ended up looking at the numbers from what I paid to what I was able to get for it when I traded in at the dealer, which probably wasn't the best thing to do but whatever. I would have been better off just leasing probably in that case. So, that was one of the reasons that I decided to lease the next time around. I didn't want to take that price because I felt super bad.

Here's another one. You're going to think this is ridiculous. There's a paper, I can't remember the name of the paper now. It's a behavioral finance paper that talks about price shopping and how it's detrimental to your happiness. One of the worst things you can do is price shop. You just make a decision and move on with it. I bought a hose at the home Depot. I needed some just pieces of hose, like two foot pieces of hose to come out of the dehumidifier and drain into the floor drain and some other random stuff.

I built a mud kitchen for my kids where you cut out holes in a piece of plywood and put metal bowls in there so they can play with the mud. And I used the hose with a pump in it so they can have water coming out of the mud kitchen. Anyway so I needed some hose, and I was at home Depot to get something else. And I bought a hose it's $49 for a 50 foot hose. It ended up being a little bit too small for the female connector that I bought. So I really to jam it, super annoying experience.

I'm at Costco the next day, they've got a hundred foot hose for $32. And it was the right diameter for the female connector that I had at home. And it's just like, I was so frustrated, but I already cut the hose at Home Depot so they wouldn't take a return. The thing that I found most interesting though, is that I agonized over this for the whole day. And it's such as like a $17 difference in price and the hose still work for what I want to do. But I was acutely aware of the fact that I was in agony over this. The silliest thing ever, for almost one I was telling myself "Ben you're being ridiculous. Why do you feel upset about this when it's irrelevant?" And I was thinking about the price shopping research and it was just an interesting experience to observe how I felt.

Cameron Passmore: So take that the other direction, which is if you don't worry about price shopping you start to see why Amazon is so appealing. And so many people are saying, "Yeah, you should be buying more local and support local companies." But oh this is a good example? My hose burst in the back yard, I've seen a new hose. It was like, just give me a hose. Go on Amazon, 15 seconds later another one's ordered and it's here the next day. I ordered it Saturday night at five o'clock it was there Sunday morning. It's not crazy. That may not be great for local businesses, but I just don't want to screw around looking for prices of hoses.

Ben Felix: Someone, and I can't remember where I saw it, might've been on Twitter. Somebody said one of the best things you can do if you don't want to support Amazon is find something that you want to buy on Amazon and then go to the supplier's website and they'll probably be able to send you the same thing and ship it for the same price in the same timeframe. So I did that. I needed a hygrometer to measure the humidity. I went on Amazon and found the top rated one, went directly to the retailer site, free shipping, same price, all that kind of stuff.

Cameron Passmore: Oh really? Yeah. Now with Shop Pay so easy.

Ben Felix: Oh Shop Pay is the best.

Cameron Passmore: It's the slickest-

Ben Felix: Such a good experience.

Cameron Passmore: Any other money decisions?

Ben Felix: No, I think it's-

Cameron Passmore: I'm super proud of how my kids handle money. I mean, you're going to learn how to do that with your kids, which is part of these cards I guess.

Ben Felix: Wait, I had a good experience with the kids that we went to Toys R Us because my oldest son has been really into Digimon and he wanted a Digimon toy. I give them a not really an allowance because it's not money that's free for them to spend, but I put a dollar amount into each of their bank accounts monthly and they know how much is there, and we talk about it. They haven't spent any of it yet, but we went to get a Digimon toy and they didn't have any because Digimon's like it's old. They don't make much stuff for it anymore. So they didn't have any Digimon toys, but then they're looking all this other stuff, you got the transformers and the hot wheels and whatever. Oh look at that, look at that. But we agreed that we came to get a Digimon toy, they didn't have it so we should leave. All right.

Cameron Passmore: Nicely done.

Ben Felix: I guess so.

Cameron Passmore: So you're starting. Okay. On the bad advice of the week and this one comes from a long time listener and as he says a proud owner of two hoodies already. So his name is Max. So Max, thanks for this pretty much. And he's an advisory and he wanted to highlight another example of a Canadian big banks communications, which you talked about in recent bad advice segments. So recent big banks communication to clients as they prepare for the client focused reforms that are happening in Canada. So these are changes that are being made to national instrument 31-103, which is a regulatory document from the Canadian securities administrators that governs how clients relationship between clients and advisors. And the changes are intended to increase the standard of how all advisors operate and require any recommendation that's made by the advisor to the client to be in the client's best interest.

So it covers things like, know your client, know your product, risk tolerance. And part of the rules is a disclosure of potential conflicts of interest and this he sent was a screenshot of an example of that disclosure that he got from this bank. So it states that "The representative's compensation is such that they," and I'm quoting here "Are not influenced to make decisions in client's account in specific issuers or financial products," so far so good. However, it continues later that document to state, "You may not invest in any other mutual funds. Although you may transfer into your account securities of third-party mutual funds as an accommodation to your wishes." This means that when considering and recommending products that are suitable to you, big bank will not consider other proprietary products nor any non-proprietary products or whether those products would be better, worse or equal in meeting your needs and objectives. If that is-

Ben Felix: That is absolutely incredible. A lot of it, I get like we have an approved securities list that we vet and people within our firm are required to use stuff on that list. You need to constrain the opportunity set that advisors can use so that you can do the due diligence on products. It's the whole know your product situation. But to constraint it to products that you have created-

Cameron Passmore: To your own inhouse products.

Ben Felix: And that seems like a pretty obvious conflict of interest. But fair enough I guess at least they're disclosing it.

Cameron Passmore: Anyway. It is what it is. Nothing we can do. Oh, there's that word? I think that was on the bingo card.

Ben Felix: I don't know what those things are.

Cameron Passmore: On the bingo card that someone made the community was hilarious.

Ben Felix: The bingo cards with stuff that is commonly said by us on the podcast.

Cameron Passmore: Anyways, that was good. Anything else to add?

Ben Felix: No, I think that's good. The reviews on iTunes, like Cameron mentioned in the beginning we always appreciate. And I noticed something that we got an influx of new reviews. There were six new reviews that came in all at once last week and coincident with that, our ranking in the iTunes charts jumped a bunch. We were ranked as high as we've been in quite a while. I think we were number seven on the Canadian chart for investing podcasts. So if you're enjoying the podcast, please leave us a review, which we always read and read on the podcast, but just rate it if you don't want to write. A review really does seem to help us move up in the chart, and the chart makes us more visible to people that are browsing on their podcast app. So I think it's worth doing if you want to help us grow the podcast.

Cameron Passmore: It's going to be interesting if and when people get back to more working in the office, because I read about podcast consumption fell when commuting times fell. But I also saw a tweet and I don't know if we talked about this last time, a podcast producer Mat Passy put out a tweet saying that there's more active listeners to podcasts than there are Netflix subscribers.

Ben Felix: Wow.

Cameron Passmore: So we'll see what happens this fall.

Ben Felix: Yep. We'll see what happens.

Cameron Passmore: All right. All right. Thank you. As always for listening.