We have reached the end of another year, our third while doing this podcast. We are spending this episode on our customary year-end review, and we will be pulling segments from some of the great interviews we hosted over the course of 2021. In doing so, we hope to create a bit of summary of the year and the biggest lessons we all learned together. The podcast has continued to grow beyond our wildest expectations and we are so grateful to be on this journey with our ever-increasing community and audience. We touch on many themes in this recap, moving from general ideas about life, goals, happiness, abundance, and purpose, to more financial subjects of money values, retirement, and crypto, and then into the deeper technical aspects of investment such as value premiums, factors, bonds, and much more. We have tried our best to focus on the segments that we found most enlightening and that changed our perspective, and have highlighted them with reflections and commentary. So to hear it all, join us today, and we'll see you next year, for more of the Rational Reminder Podcast.
Key Points From This Episode:
Looking at some of the amazing numbers around the growth of our community. [0:02:37.2]
A few shoutouts to the wonderful people who make this podcast possible. [0:04:27.8]
Bill Schultheis on how to find and fund a good life. [0:08:34.5]
Hal Hershfield's thoughts on making better decisions with your future wellbeing in mind. [0:10:44.3]
Ashley Whillans on the relationship between time-poverty and wellbeing, and increased leisure time. [0:13:39.7]
Jennifer Risher weighs in on the importance of performing meaningful work. [0:17:24.5]
Robin Taub's family money value's from her book, The Wisest Investment: [0:20:04.1]
Jennifer Risher's approach to managing money values at home. [0:22:27.7]
Katy Milkman applies the central idea from How to Change to saving money. [0:23:22.7]
Johanna Peetz on how to use the idea of a future self to reach a goal. [0:26:38.6]
Paul Merriman shares his experiences of the relationship between money and a good life. [0:28:27.7]
Adriana Robertson's legal perspective on the rise of index funds. [0:33:48.4]
Jay Ritter on the question of market efficiency. [0:36:41.8]
Hersh Shefrin's emphatic and nuanced advice about how to act in relation to the market. [0:38:20.3]
John Cochrane on the shifting relative value of stocks. [0:39:43.3]
Rob Arnott shares his thoughts on the drawbacks of cap-weighted indexing. [0:42:31.5]
Antonio Picca on the drawbacks of a factor-based investment strategy. [0:47:01.6]
John Cochrane on making decisions around owning value stocks. [0:48:10.7]
Campbell Harvey talks about conditions for concentrated portfolios. [0:52:20.2]
Bill Schultheis on tilting for factors versus sticking with market cap indices. [0:54:02.6]
Adriana Robertson shares what the research tells us about the basis for investment decisions. [0:54:46.1]
Hersh Shefrin on what really matters with regards to portfolio construction. [0:57:33.0]
Antonio Picca on more active approaches and capturing premiums through rebalancing. [0:41:26.0]
Brad Cornell explains the differences between a factor and a characteristic. [1:01:52.2]
Rob Arnott, David Booth, and Antonio Picca weigh in on the question of value stocks at present. [1:04:22.6]
Robert Novy-Marx's approach to cheap stocks and high profitability. [1:11:54.1]
Dave Plecha on owning bonds today, in light of historically low interest rates. [1:15:12.0]
Anna Lembke on how our daily and long-term decisions are influenced by dopamine. [1:18:20.0]
Cullen Roche shares his thoughts on the future of market inflation. [1:22:57.2]
Don Ezra's lessons for retirement and better preparation. [1:24:57.6]
Anna Lembke on the results of increases in leisure time. [1:27:37.1]
David Blanchett's thoughts on the evolving role of the financial advisor. [1:30:50.0]
Don Ezra 'seven asset classes of life's abundance portfolio'. [1:33:42.9]
Read the Transcript:
Benjamin Felix: This is the Rational Reminder podcast, a weekly reality check on sensible investing and financial decision-making from two Canadians. We are hosted by me, Benjamin Felix, and Cameron Passmore, portfolio managers at PWL Capital.
Cameron Passmore: Welcome to Episode 181. And this is for our third year-in-review episode. It's incredible. Three years has gone by so fast, but this is the episode where we select portions of some of the guest interviews we've had. And weave together a brief summary of how we view 2021 on the podcast. This year we have 46 segments to share. So how would you describe 2021?
Benjamin Felix: It's tough to describe it in a sentence, but it was quite a year for the podcast and also for our business, which, of course, is behind everything that we're doing. People that have been listening from the very beginning know that the genesis of the podcast was an outlet for us to communicate with our clients. And it's just kind of grown into something greater than that.
Cameron Passmore: Yeah, for sure.
Benjamin Felix: Yep. Some of the stats we'll talk about in terms of the growth of the podcast are pretty staggering really.
Cameron Passmore: Yeah. We never would've guessed when we started this 3+ years ago, for sure.
Speaking of guests, we wanted to let everybody know that we are going to have a 2021 guest mug, much like last year's guest mug, where all the guests and the episode numbers are on the side of the mug. Pretty cool new design that we've got coming, too. So watch for that. It should be out by the time this episode airs. So a story that's weaved with all of these different segments is, basically it starts with life's purpose, meaning, which I think was a big theme of this year. Then we get into goal setting, time, happiness, money values, retirement, market efficiency factors, value premiums, profitability, bonds, inflation, skewness, crypto, Cape, spending flexibility in retirement, and then we finish off with living an abundant life. So for those regular listeners, none of these topics will surprise you, but hopefully you'll find some value in having all of these segments attached together in a bit of a storyboard.
Benjamin Felix: It also reflects what's new. What are the new things that people are going to learn from listening to this? A lot of these clips reflect things that changed our perspective, or we found enlightening throughout the year. So hopefully the fact that we're highlighting some of these things and plus we're giving commentary as we go through them as well.
Cameron Passmore: So by the numbers, some of these numbers, as you said earlier, are pretty crazy. So for 2021, so this year the podcast has been downloaded almost 1.3 million times. That's a 55% increase over 2020. YouTube views, so 336 000 times this year versus 140 in 2020, a 25% increase.
Benjamin Felix: 250% increase, right?
Cameron Passmore: Yeah. So we had four AMAs this year with Larry Swedroe, West Grade, Jack Vogel and Paul Marryman. All were very first of all, a lot of fun to do. Did them live and to interact with the audience live was super fun. Why don't you talk about the community since you're a lot more active there than I am.
Benjamin Felix: It's at almost 6,000 users now. Most of that growth of about 4,800 of those users signed up in calendar year 2021. So huge growth in the Rational Reminder community on average, 109 engaged users per day, so that's people actively posting and participating in discussions and about 500 visitors per day, on average. That's people that are just viewing the community. Tremendous growth, tons of activity. You kind of notice it online, more people are identifying this as a place to go to have really good high quality discussions about these topics. Bogle had spent many years and it still is a great community, but it's spent many years being the place to go. But it's, I think difficult to manage a community when it gets to be such a large size. And I think the smaller nature of the Rash Reminder community has made it a really good place to go.
Cameron Passmore: In the merchandise store, we had 339 orders so far this year. So pretty busy in the store. Also want to take time as you do every year and just to thank the incredible team that puts out this podcast each week, because it is a ton of work by a lot of people. So on the PWL side, really want to give a good shout out to Angelica Montagano who's our Digital Marketing Lead. You've probably seen Angelica at our AMA events or perhaps chatted with her in the community. So big shout out to Angelica. Martin Dallaire, who is our head of Marketing Communications, Sandrine Dugre who's our Digital Marketing Coordinator. So you've probably seen an improvement in our social media posts lately, especially on Instagram.
And you've also probably noticed some improvements if you follow our YouTube channel. So shout out to Matt Gambino who's our Multimedia Specialist here at PWL, beautiful work on those productions. And last but not least want to give a shout out to Karine Delande, who is our Chief Compliance Officer. So every week she has to review every post and every podcast we put out. So thanks to Karine.
Benjamin Felix: Karen listens to every episode. At the time that we're recording the Spotify wrapped little animation, things have been coming out. I don't know if Karin uses Spotify, but if she does, we're probably her top podcast.
Cameron Passmore: We also want to thank our a producer. So Matthew Passey at the Podcast Consultant, if you are out there and considering a podcast and having a producer will make your life much easier. And Ben and I can't recommend Matt enough. He's fantastic to work with, he has a whole team and does fabulous work. And we're very grateful to Matt. Also want to thank Shannon Rojas, who is the Chief Operating Officer at the Podcast Consultant. And she's instrumental in making sure that all the different parts that go into making a podcast, keep moving and keep moving along. So thanks to them. Also want to thank Jennifer Beldham at Northern craft, which is our supplier of merchandise. Wanted to give a special shout to Sachin and his great company Ever Socks. So Sachin reached out to us a little over two years ago and suggested we offer socks to our audience.
So he and his team did up a great design, gave us a good price. And we had given out so many Rational Reminder socks. It's incredible. I think we're on our third or fourth order now of socks. Great people at University of Chicago, Financial Education Initiative who helped us get the Rational Reminder branded Talking Sense cards available in Canada. So with them produced in Canada it makes them a lot cheaper and more affordable to get out to everybody. So we, again, we are second order coming in soon. We've shipped out over 200 decks, if you can believe it. Second order's on its way in. I want to thank our friend, Trevor May who created the original music for the podcast. I know some people said it's sometimes a little bit loud, but hey, we like it.
Benjamin Felix: People also say that it's Canadian though.
Cameron Passmore: It is very good. It's a very Canadian track. Probably most of all that we want to thank everyone for listening and watching. This is why we do it all. It's tremendous fun for Ben and I. So thanks to you we're off next week. So you got two weeks to listen to this episode, but we are back in the new year. We have an incredible conversation on January 6th with Mac McQuown. And then two weeks after that we have Robin Wigglesworth then, who's the author of Trillions.
Benjamin Felix: And that's a cool combo because Mac, as you'll hear is the godfather, so to speak of index funds. So we hear Mack and then a couple weeks after that, Robin tells us the full story from beginning to end of index funds, including Mac, but it just gives you additional context for how important the conversation we have with Mac is.
Cameron Passmore: Yeah, I don't think we could have book ended it any better. It's really good back to back, to kickoff 2022 Ben, anything else?
Benjamin Felix: Nope. I think that it's good. Let's go ahead to the episode. Welcome to episode 181 of the Rational Reminder podcast. Our third year end wrap up episode.
Cameron Passmore: So to kick off this year's episode, every conversation we have has a certain impact on us, but one in particular this year brought me back to the reason why we do what we do as part of our day jobs, and frankly, why I've been doing it for so long. And it was pretty cool this past year to connect with Bill Schultheis. People who heard that episode, heard me tell a story about how reading Bill's book way back when, The Coffee House Investor, had such an influence on me. And I used to read his blog every single week, as it came out. Anyways, to reach out we had a great chat with him. He was quite complimentary about the work that you and I have been doing. And I just thought how we talked about finding and funding a good life and what is a rich life, which is such a good place to kick off this episode
Bill Schultheis: For me, a rich life means, and I have a quote by a philosopher in my first book that kind of sums it all up. It means finding a place at which your passions and interests intersect with the needs of the world, and then moving forward in your life so that when you wake up every day, you've got a purpose in life and it doesn't have to be something that's grand. I mean, I have many stories in my second book of my mom who inspires so many people because she wakes up and she's kind to people. I've got another story in my book about a bus driver who was so darned, uplifting and the way she embraced her passengers, it changed people's lives. It changed my life.
And you know, we don't have to do these grand things, but when we find and I'm sure you've got the same stories for folks who are older getting on in their lives. Their purpose in life is to be good examples to their grandchildren and to make sure that their grandchildren are doing the right things and making the right decisions. That's their purpose in life. And when you give someone the financial freedom to embrace those things, I mean that for me, that's what gets me up every day. And I'm sure it's what gets you two up every day.
Cameron Passmore: Much of the purpose of the podcast is to help people make better decisions. However perspective on what is important does shift over time. And the shifting of what's important makes making decisions even more difficult. So Hal Hershfield from UCLA I thought had some great thoughts on this.
Hal Hershfield: People can get caught in the trap of setting long term goals, thinking that they're going to live their rich life. As we just heard bill talk about later, I'll be happy later. I'll focus on myself later, but understanding who we are are today and who we want to be in the future is really important in living a good life today, but also in figuring out what goals you should be setting for the future. And then you touched on a Cameron. People don't know, you can't know who you're going to be in the future. You can think about your future self and that helps, but you can't know who you're going to be in the future.
Cameron Passmore: So we ask Hal, how people can make the right decisions to have more wellbeing?
Bill Schultheis: Well, first off, let me just commend you by saying that last part is what's so important because I always think it's important to say, what do we mean by the right decisions, right? Because my right decision, maybe my right decision is I need to have an 80% replacement ratio in order to feel satisfied in retirement. I don't know how I came up with that, but somehow I did, but someone else is going to say, no, I don't need all that money in retirement. So what's most important is, can we first identify what's the right metric so that we can say, okay, well, what is a give in person? What do I need? What does somebody else need? Some of the stuff we can't know. Right. And I want to come back to that in a second, but I would say that one of the most important things that we can do here is to think a little bit more deeply about who we think we'll be in the future, who we want to be in the future and what that future life will look like.
And I mean that, from this to standpoint of what will we be doing? Where will we be living? How much time do I want to have, and do I need to have? These are really hard questions to answer, and I'm not suggesting that people are going to have the answers to them. But I think one of the problems that I've observed anecdotally in this sort of financial advisory and financial decision making space is that people set goals for the future. And we know this is such a common practice in the wealth management business. Let's see, what goal do you have? When do you want to retire? How much money do you want to have? How many trips do you want to go on? But they set those goals before they really think about what life will look like and who they want to be from a more sort of holistic standpoint. And my question is how meaningful are those goals?
If you've come up with them before you really had that conversation with your future self or with your future selves especially, I think a lot of these decisions are joint decisions, family decisions. What does life look like on the other side for my whole family? That's one of the first pieces of advice I would give was to have that conversation. Think about that self and think about all these other aspects of time and the trade offs you want to have.
Cameron Passmore: Ashley Whillans was another spectacular guest this year. She was the author of the book, Time Smart and is also a professor at Harvard. So time I found was a very popular topic of discussions throughout 2021 and how time relates happiness. So we asked Ashley what the relationship is between time poverty and wellbeing.
Ashley Whillans: So the reason I'm interested in studying it as a happiness researcher is that people who report feeling time poor also report lower levels of happiness, more stress, lower quality social relationships, are more likely to get divorced, less likely to exercise, less likely to eat healthy. My PhD students, and I published a review paper in Nature of Human Behavior last year, documenting all the pernicious effects of the psychological experience of time poverty, and really, truly there are many, and it makes sense because we feel overwhelmed by the demands of working life. It's hard to disconnect. It's hard to check in, be present, exercise, cook well and we can really see that in the data. In one data set, another different one that we analyzed of 3.1 million Americans, we found that time poverty had a stronger negative effect on happiness than being unemployed. So, we can see again that the effects sizes are not trivial when it comes to these feelings of stress. They've been on the rise all over the world, not just in the US and they are coming at a cost to our happiness.
Benjamin Felix: When you start thinking about time poverty, you can't ignore technology. Technology adds to efficiency in our day-to-day lives. It makes us more productive people today are unquestionably, more productive than humans were a hundred years ago, but it can also have a detrimental impact to the quality of our leisure time. We have more leisure time, but it may not be better leisure time, both because of technology. So we asked Ashley Whillans about this as well.
Ashley Whillans: Yeah, social psychologists and organizational scholars called this paradox, the autonomy paradox. So technology is supposed to free us from the office and yet we take our offices everywhere we go. So although we have technically more freedom, we're also now under this assumption that we need to be more constantly responsive to work at all times of the day and night.
Benjamin Felix: The other interesting angle on time poverty is whether you can thoroughly enjoy what you do for work and still be time poor. People spend a lot of time doing their jobs. Many people like Cameron and I often talk about this, enjoy the work that they do. So there's an interesting question in there, if you love your job and spend a lot of time doing it, can you still suffer from the symptoms of time poverty? So again, we asked Ashley about this.
Ashley Whillans: So we do still see the effects of time stress, even for people who enjoy their work. And this is consistent with some evidence suggesting that even for people who love their jobs, when you start working 60 or 70 hours a week, it's still coming at the cost of other things that are important for happiness. Work is one facet of our lives. And there is many other factors that you need proper sleep, health, social relationships, leisure that are critical for happiness. And so even if you love your job, if you're only focusing on that one element of your life, then it's unlikely you're going to reach your maximum happiness and meaning potential because you're only allocating all of your energy to one aspect of your life and usually that's coming at the expense of others.
Cameron Passmore: Wow. And at the other end of the spectrum is a view that even if you don't need to work, work offers so many benefits. So we talked to Jennifer Risher, who's the author of the book We Need to Talk. And as you'll recall she was an early employee at Microsoft and her husband was very early at Amazon. So they don't have a need to work. However, she shared some incredible thoughts on the role and importance and meaning of work.
Jennifer Risher: Yeah. There's another fantasy. Like we always think, oh, if I didn't have to work, I'd sit on the beach or I'd go out with friends. It would be just so wonderful. And yeah for a couple weeks, it really is very nice. And I think the fantasy of not having to work, it's big in our minds too, but work gives us a lot and it places us in society. It gives us a reason to get up in the morning. It gives structure to our day. It gives us a comradery with our colleagues. It gives us goals to achieve, a sense of purpose and meaning it's much more than just a paycheck. And I felt that right away. And when I left Microsoft my identity was really wrapped up in work. And I realized how much I was getting from work. And then not having work. It can be very challenging, especially when in the US we kind of define each other through our work.
Often the second question someone asks you is what do you do? What you do is your work. And when you don't have that, it can be more challenging than we realize to find that sense of purpose. Because I think where does happiness come from? It does come from feeling a sense of purpose, making a difference, having meaning in your life. It comes from being generous with other people, ultimately from the connections you have in your life and your work connections are part of that.
Benjamin Felix: That clip from Jennifer Risher makes me think of Happiness Hypothesis. The book that I've talked about many times by Jonathan Haidt, he says in the book that love and work are crucial for human happiness, because when they're done well, they draw us out of ourselves and into connection with people and projects beyond ourselves, which is, I think what Jennifer was saying, or at least a big part of it. But the other thing that he's very careful to point out is that work is not necessarily the thing that you do to get a paycheck, which again, I think speaks to what Jennifer was saying. His definition of work that he says in the book is the answer to the question, "so what do you do?" But he says like in his book, he gives the examples of a student or a full-time parent. Those are both examples of answers to that question that aren't going to a job to earn a paycheck. So I think as much as we talk about the importance of work, we're not talking about having a job to pay the bills. That's an important distinction.
Cameron Passmore: Yeah it's interesting to kind of bridge this with a discussion on values, because we did talk about that to some degree this year and how you spend your time and your money is a reflection of your values. And this may be a subject that a lot of people don't spend a ton of time thinking about. But however, when you're raising children, it's super important to realize that they are observing you, they're picking up on your values, whether it be, do you work, how do you work? What habits do you have? And they're seeing the signals of your decisions all over the place, including how you spend your funds.
Benjamin Felix: It's definitely important with kids. And I see that in my personal life, but I think just in a relationship, generally speaking, and Robin touches on this too, having clearly defined values, even if they're not the same between two partners in a relationship, knowing what each person values is a pretty powerful idea that can anchor a lot of really important decisions.
Cameron Passmore: For sure. So we asked Robin Taub who's the author of the book, The Wisest Investment, teaching your kids to be responsible, independent, and money smart for life. We asked her how important are family money values?
Robin Taub: Very, and that's my second strategy for parents. So the first was being a good role model. And the second one is to communicate and use your values to help guide and prioritize financial decisions. And I find values is sometimes overlooked or if you know, values are, it's the things that are most important to you that you're willing to take a stand for and that you hold dear. They're at your core of who you are. And sometimes we just don't pay attention to them and we take it for granted, but they can really help. They're almost like an invisible framework to ground financial decisions and for parents to help pass on the way they prioritize money decisions and how they set goals. So I think it's so important.
And in my book I have an exercise called the values validator, which is a way to tease out what your top values are. And I encourage parents to do it partners to do it. And then you can compare and have your kids do it too, and see where your values are the same, where they may be a bit different. What are the most important values that you want your kids to also have.
Cameron Passmore: We asked Jennifer Risher how she and her husband manage their family money values and here was her response.
Jennifer Risher: Yeah. I feel fortunate, even though Dave and I have slightly different views of money and ways of dealing with it, that we share common values and common goals. And I think that's, what's made it easy for us to navigate this because we pretty much agree on kind of where we want to be and how we want to walk through the world and live our lives. And it's hard in any relationship. It's a negotiation. And so are people, when one person feels that they have enough and the other person doesn't, that's a tricky negotiation in a marriage, in any aspect of a marriage, right. Do you want to have another child or do you want to have children or do you want to go on vacation or do you not want to go on vacation? Do we need a second home? All those kind of conversations are about values and what you care about and how you want to live your life.
Benjamin Felix: Getting clear on your money values and your values more generally is a big step in the financial planning process. But even once we've figured that out and said, okay, we've got to save to achieve this objective. That's aligned with our values. There are always going to be other competing forces at play, like spending, for example, in the savings scenario that are going to make it challenging based on that, it's kind of easy to push off the financial planning process. We'll figure it out later, because it can be hard. So one of the things that we ask Katie Milkman about that, she's the author of the book, How to Change is what people can do to make saving money more fun.
Katy Milkman: Yeah. It's a really, really great question. When it comes to sort of maintaining and adhering and engaging and things that offer long term benefits, but not so much short term satisfaction. We always face an uphill battle because we are wired to overvalue instant gratification. We get more from that instant gratification dramatically. We overweigh it's, called present bias, relative to imagining a comfortable retirement or the home you'll be able to buy for your family if you keep growing that nest egg. Whatever it is, those things they're discounted heavily. And we overweight that today warm, fuzzy feeling we get from spending on a trinket.
So then the question is what to do, as you said. The classic answer that I focus on in the book that so much research of late has really supported is finding ways to actually bring some of the reward forward in time so that it's instantly gratifying to do what's good for you. So it's easy to see how to do this with something like going to the gym, studying right, by associating it. I use a technique I call temptation bundling where I only let myself binge watch my favorite TV show.
I call temptation bundling, where I only let myself binge watch my favorite TV shows. For instance, at the gym, or listen to my favorite podcast while doing household chores. And that makes it fun in the moment, but that's kind of hard to think about, how do you temptation bundle with saving? I have heard of some clever strategies that people use to try to make saving more fun. So for instance, you could imagine making sure your accountant is someone you really like. Bringing a bottle of wine, having a regularly scheduled meeting, or having it in a nice restaurant. So there's something you look forward to about that interaction that will help you do your financial planning and setting aside. So there are ways to make it social, which is a way of making things fun to adhere to your goals, or to save yourself a small treat, some small reward, whether it's a donut from your favorite shop, or a favorite TV show you save, or a movie you watch once a year, only after you've done your taxes.
So there may be ways, but I'd say it's probably going to depend on the person, and really the principle is, try to think of how you can make sure it's not all delayed gratification, when you do the things that are good for you, because if it's all delayed gratification, we tend not to persist on our goals. Even though, we think we will, we have this misperception that I can just push through and do the thing that's right. If it's not fun, we don't tend to persist and so anything you can find that will make the financial planning experience fun, whether it's doing it with friends or family, bringing in treats. It's worth considering and trying to do.
Cameron Passmore: One of the biggest learnings for me, in 2021, was about how difficult it is for people to imagine their future self's. So this makes the whole planning process so much more difficult as clearly. Current priorities will take priority over some unknown future self. So we asked Johanna Peetz, who is a psychology professor here at Carlton University in Ottawa, how this distance to our future self's plays in the motivation to reach a future goal.
Johanna Peetz: I think it's great that you guys are doing this because I do think people need all the help they can get to plan that far in the future, because for most people, these distant future selves are almost like strangers. They don't really see the point of saving for this distant future stranger, that doesn't even feel like that's them. What we found is outside of financial behavior, we found this in academic goals, and those kinds of things, because the closer you are to academic goals, the more motivated you are to pursue them, so it's much easier to pursue goals that are close in time than it is to pursue goals that are 60 years in the future. The further away it is, the harder it is to get yourself motivated to do something towards it right now.
Cameron Passmore: So obvious question, what can you do to feel closer to those goals?
Johanna Peetz: One thing you can do, and one thing that's been studied in various psych labs, is to make these future self's more vivid. So to really think about, what will you look like then? So there's like studies by Hal Hershfield to make people picture the future self. There's some recent work on writing letters to the future self, so they're writing letters to the self that is in retirement, realizing that it's themselves. So talking in the first person and things like that. Anything that makes it more vivid, more real, that would also make it feel psychologically closer.
Cameron Passmore: I mentioned Bill Schultheis off the top of the episode, and another character from my early years was Paul Merriman. So Merriman financial was a leader in our field and I loved the image of their firm in the early days of websites, frankly in our space. I thought it was so cool because remember we talked about how I grew up in this business just as the internet was getting going. Anyways, so this podcast gave us a chance to reach out and invite Paul Merriman to join us and what a gracious, nice guy. I reached out to him by email, and he phoned me back within minutes, and he's just so nice and so decent. And he actually shared a pretty raw and real story about his relationship with money and the concept of what is enough. So we asked him what he has learned throughout his life and about relationship between him, and money, and a life well lived. And I thought his answer was just spectacular.
Benjamin Felix: His answer's spectacular, but it comes from, he had a financial success before starting his firm, and then continued to have financial success after starting his firm, and then had another liquidity event, eventually when he sold it. He's lived this, he's lived a life of having windfalls, but he's also lived a life giving people financial advice. So his answer to this question is absolutely fascinating and insightful.
Paul Merriman: Well that's a tough one. I'll be as straight as I can without exposing too many of my flaws. I was raised in a household where it wasn't particularly safe. I had a father who I was totally afraid of. I hated. That was a kid feeling hate, that was not an adult feeling hate. I thought was going to kill me, he never did, and probably never intended to, but it felt like it was on his mind, and it turned out he was my stepfather. And I was probably an inconvenience for him in his life with my mother, who was absolutely amazing, and by the way, I was very happy to find out he wasn't my father because it explained everything.
But what came out of that with money, was I did not trust my life. And I started thinking that money was the salvation that would protect me from all things evil in my life at a fairly young age. And I also, because of not wanting to be at home, found it most enjoyable to do other things in the world rather than be at home. So I joined everything that I could join, just because every one of those things required me to do something out of the house. But I will tell you that money itself drove me for a long time. And I'm not sure that was really helpful for my personal life. I think it caused me to be a terrible workaholic.
Now my wife would say that I am still a workaholic, as I get up at 3:00 to 4:00 in the morning and break for lunch with her and then break for dinner. She knows, I love what I'm doing, she supports what I'm doing. There's a lot that we do beyond just doing podcasts and writing articles. But it took a long time for me to get to the point where I was at peace over my money. And like I mentioned earlier, I was always afraid, I was always afraid of the bad thing that would happened when I went around next corner. That made me a very conservative investor, personally. It also made me a pretty conservative advisor, which probably wasn't all bad, but it might have been good for my clients if I had been a little more aggressive in hindsight, but it was what it was. But I can tell you now, that I feel like I have everything together in terms of money and freedom. I'm a great believer in working, if you can, and if you like it, beyond having enough.
I purposefully worked until I had, let's say, more than twice what I really needed. I don't live a high life. Now. I live a high enough life, I'm not complaining, but it's not a life of a rich man. I still consider myself to be frugal, but the first day of each year, the business day, we take out 5% of the portfolio, and that's what we get to spend for that year, and give. And I'm totally at peace with that. I have no fear of running out of money, before I run out of life.
Cameron Passmore: So let's switch gears a bit and jump into some more technical things. We welcomed some unbelievable academics this year who shared a ton of great information. Adriana Robertson has a such an interesting perspective. As her research, and I remember commenting this to her, when we talked to her. She's at the intersection of law and finance, which is a pretty rare spot to be, and she's a professor of law and finance at University of Toronto. So index funds have soared in popularity over the past decade. So we asked her if she thought there were any issues, from a corporate behavior or a stop market function perspective.
Benjamin Felix: This question comes up a lot, and I've copied and pasted the transcript from this episode with Adriana to answer the question many times, quoting her, of course. We've asked other people throughout the year or two and the answers were pretty similar across the board, but she speaks to the issue with such authority. It's definitely a good perspective.
Adriana Robertson: So I'm, I'll say, a little more sanguine about this, than some other folks are. Mostly because in my view, again, index fund is not a meaningful category, and so to say that there is lots of money in index funds, tells me, essentially, nothing about who's controlling anything because those indices are doing all sorts of different things. So to the extent that you're worried, and I think this conversation, because it happens a lot in academia, and in the popular press to some extent as well, misses the fact that there's two different things going on here. There is the growth of the so-called Titans, some people call them wall street, or just the big three asset managers. But if you're worried about the big three asset managers, BlackRock, Vanguard, and State Street, they have a ton of AUM that's not an index fund.
So that's really not a story about indices. That's just a story about really large asset managers. So maybe you're worried about that, that's one story. Then there's a story about, more than half of AUM in domestic equities is now in so-called, passive, or index funds, and so we worry about that. But of course, then the question is, what are those indices actually doing? That's a very different problem to have in your mind. So I have not yet been persuaded that, either of those two distinct things are really a problem, but it's certainly the case that both are huge changes in the capital markets, and there's something to pay attention to. But no, I'm not sort of terrified that it's going to destroy liquidity in the markets, or it's going to mean that we don't have price efficiency anymore, or corporate governance has gone out the window. None of those things, I think yet, I haven't seen any evidence to make me worry.
Benjamin Felix: Index investing as a concept hinges on my market efficiency. In an efficient market prices reflect available information, and trying to beat the market, if it's efficient, is a losing game, on average.
Cameron Passmore: Another great guess was professor Jay Ritter, Who's a scholar at the University of Florida. So he joined us and had a great answer to the question of, whether the stock market is efficient. And then he links this to the bad behavior of the average investor.
Jay Ritter: Yes and no. As one of my former professors, Eugene Fama has said, all models are wrong, but some are useful. The efficient markets' hypothesis can be a useful way of thinking about things, but that doesn't mean that it's perfectly correct. I wouldn't be shorting Tesla if I thought that the stock market was completely efficient. During the internet bubble period, I thought tech stocks were ridiculously overvalued. There was 100% certainty in my mind that a bubble was going on, and I was right. I didn't know when the turning point would be, just like today, nobody knows where the turning points will be. But a problem for most individuals, when they try and time the market, is they do things exactly wrong. People tend to chase past returns. So they invest in real estate after real estate prices have gone up. They invest in tech stocks after tech stocks have gone up. Maybe they'll continue to go up for a while, but on average, chasing past returns has proven to be the wrong strategy. But that's the strategy that most investors follow.
Benjamin Felix: We also asked professor Hersh Shefrin if the market is efficient, and as you might guess, based on him being in the behavioral finance world, he gave us an emphatic, no, as the answer to the question, but he did say that you should treat the market as if it is efficient, even if he doesn't believe that it is. And I thought that was a very useful insight for people to hear.
Hersh Shefrin: Yes. And so at the end of beyond green fear, I talk about, in the lessons, the takeaways. The lessons for most investors, not all investors, but for most investors is, from a financial wealth generation perspective, act as if markets are efficient, even though they're not. If you're in it for the long term, you want to be careful not to outsmart yourself, because there are two counterbalancing forces at work because of behavioral issues. The first is, markets are not fully efficient and so there are theoretical profit opportunities. And the second is, you can be the victim of your own behavioral biases and if the biases are stronger, then the potential for alpha, you will be sorry in the long run. Most people will be sorry.
Benjamin Felix: One of the other things that I've heard people say about market efficiency, is that an efficient market can't possibly be so volatile. Why are prices bouncing around if the market is efficient? We ask professor John Cochrane, why the value of stocks, relative to their fundamentals, bounce around so much.
John Cochrane: So why do prices change? This is one about facts, not about opinions. There's a lot of study, I'm going to try to summarize 30 years of research in two sentences here. Why does the stocks price go up? Big question. Now there's two possibilities. One is the stocks price goes up because everybody understands that the future dividends, the future cash flows, the price is, there's more money coming later on. But there's another possibility, which is the price goes up, and I'm being careful here about the cause word, that the price will come back down again. In other words, so if we look at this through a present value formula, the prices up corresponding to a lower discount rate, not to a higher set of future cash flows. But the empirical work establishes the fact, but not the causality.
And you also said ratio. So prices go up when dividends go up, and prices go up when earnings go up, we know that. But does price relative to current earnings go up, does that mean that future earnings are going to be even higher than current earnings? And for the market as a whole, the answer is pretty much no, that higher prices relative to current earnings correspond to lower returns in the future. I take a view, I work on economic models where, the causality is lower risk premiums, lower expected returns, cause the price to go up. But the facts are consistent with fads, and fallacies, and bubbles. If you'd like, that the higher prices are the cause and the lower future returns are the effect.
But let's not overstate it, it is, for the market as a whole and current relative to current earnings, individual stocks have a lot of that feature. So a lot of high prices relative to whatever you want, are a reflection of, or associated with, lower returns going forwards, but less so than the market as a whole. So there's more evidence for individual stocks that higher prices relative to current earnings means that earnings will grow in the future.
Benjamin Felix: The answer to the question that we asked John, is that discount rates change in response to risk effectively, which causes relative prices to change. This is an empirical finding that was a pretty big deal. And it was the focus of John's 2011 presidential address to the American finance Association. He rattles it off and makes it seem like it's a pretty basic thing. But the empirical discovery that discount rates cause price variation is a pretty big deal. Now in an efficient market, index investing makes sense, as we've mentioned. But discount rates, which is another way of saying expected returns on some types of stocks are higher than others. The market cap weighted index naturally has a lot of exposure to stocks with low discount rates.
Cameron Passmore: And there's a ton of money in market cap, weighted indices, just a ton. That's such a big part of the whole Vanguard message. So we ask Rob Arnott to talk about some of the drawbacks of cap weighted indexing.
Rob Arnott: Absolutely. Well firstly, cap waiting is a perfectly good answer. You own the market, for all of its good features and bad features, the turnovers nice and low, the fees are negligible, and so you capture the return of the market, which is great. But you also chase every fad and bubble that comes along, you also underweight every stock that is trading at apocalypse lows, and you also miss out on rebalancing alpha. We all think it makes sense to rebalance with our asset allocation of stocks and sword, trim your stocks, top up a little bit on the bonds, and yet doing it within the equity portfolio doesn't happen with indexing. Cap waiting's biggest Achilles heel, is that, any stock that's overpriced, by which I mean a stock that is priced above what the future truly has in store for it, something you can't know, and that is destined to underperform, is above its fair value weight in the portfolio.
And every stock that's below its fair value weight is destined to outperform, and vice versa. So the implication is you're overweight the overvalued, underweight the undervalued, this criticism was leveled at index construction, way back in 1957 when S&P launched the S&P 500. It was easily refuted by the index providers by saying, yeah, that's absolutely true, but you can't tell me, which is which. And that is accurate, but if you're overweight the overvalue and underweight the undervalued, most of your portfolio will underperform, too little will outperform. So you have a performance drag.
Benjamin Felix: We can use the information in prices to make portfolios that differ from the market cap way to index, in a way that leads to higher expected returns. And this is an idea that many of our listeners know by the now is generally referred to as, factor investing.
Cameron Passmore: And it's safe to say that factor investing is becoming pretty popular for good reason. We talk about a lot. We spend a ton of time on factors, and we do believe they can add value to one's own investment experience. But does the industry, and this is a good question, does the industry oversell factor funds? So we put that question to Rob Barnett as well.
Rob Arnott: The narrative is, these factors all work, they've all been vetted by academia and proven to be effective. No, they've been proven to be effective in back tests. These factors all work at different times. Yes, true. Therefore, combining them, means you're going to smooth your ride. You'll have less jarring draw downs, less extravagant wins, yes, but the draw downs are not diminished as much as you might hope because the draw downs are often correlated. The cliche on wall street is that the only thing going up in a market crashes correlation, so that's a worrisome component. And the final part of the sales pitch is, is all work, historically over long periods of time, they work at different times, so if you blend them, you have near certainty of winning if you're patient over a three to five year span. No, you don't have near certainty, you have odds modestly in your favor. So correctly positioned, multifactor is a very useful concept that's egregiously over hyped.
Benjamin Felix: Rob made factor investing sound, not so great, which is actually an important point. We don't want to oversell factors either. It's not all that special, but Rob's point is perfect. A factor tilted portfolio gives you odds modestly in your favor of an improved outcome. That's actually pretty good, it's not magical, it's not that special, but it's pretty great, especially for a long term investor.
Cameron Passmore: So we got to meet Vanguards, Antonio Picca another great guest. And so we asked him what some of the drawbacks are of a factor based strategy.
Antonio Picca: Yeah, absolutely. Listen, and I know we value you clearly seeing it, you are taking active risk. So, that is a good chance that you can underperform, even productive periods in time. So, you have to be ready to stomach that under performance, and willing to stay the courts. Again, it goes back to the fact that this is an active form of active investing, and any active investing can lead to under performance over periods of time, any cyclical. Well, you almost by definition is cyclical, because you are exactly compensated for your potential under performance in periods, when in periods slow down or contraction, when investors are the most adverse to losses. But it's exactly that understanding, that you can underperforming periods of time when you don't like it, that compensates you for the risk that you're taking. So again, there's a lot of education and understanding that you need before you can be a successful factor investor.
Benjamin Felix: So you heard what Antonio said. We have to remember that factor investing is a lot like selling insurance. By buying, for example, value stocks, you're selling insurance to people who are, unwilling, or unable to bear risk in bad economic conditions. Now that implies that you are willing and able to do so. We asked John Cochrane how an investor might decide if they should own value stocks.
John Cochrane: Well, there used to be a good answer for this, back when there was value. It's done badly in the last 10 years, and in some sense, value, when they said it was a risk, not a perpetual alpha, they were right. That there's a risk, it doesn't do well. Certainly when you look at the value stocks, it correlates very much with things that feel like risk. So this was back in the day, when there was a reliable value premium, I'll tell you my story for the value premium and who should invest in it. I would start my MBA class on the value stocks, by saying value premium, look, isn't this wonderful, we'll look at this wonderful alpha, let's all invest. And they say, yeah, let's all invest. Then I would get out a list of what the value stocks were.
And you would see railroads, you would see Sears Roebuck. You would see, company after company, in old dying industries, on the verge of bankruptcy, or very low price just churning steel mills, churning out earnings at a very low price. No growth opportunities, no sexiness, very little trading, no information content in these industries. Whereas, the opposite of course is the Googles or the Yahoos, all the sexy ones. And then I'd say, okay, who wants to buy these stocks? And you got to be kidding, I'm not buying that junk over there, I'm buying the sexy stuff over here. Well, there's a value premium. No, looking at it gives you some sense, there was a strong economic difference between the value stocks and the growth stocks. So you could tell a story about people not holding the value stocks.
Benjamin Felix: Professor Cochrane also offered up a powerful tool for assessing whether you should invest in anything other than the market portfolio, the average investor theorem. And the theory is the average investor holds the value weighted portfolio of all assets.
John Cochrane: Before we get to what are the most important sources. Let me repeat your question at great length, because I think there's a deep insight there. Most people thinking about the market think only, "Well, do I want to a buy or do I want to sell? Do I think the price is going up or the price is going down? Is this a risk I want to take? And I don't want to take?" It was a very hard question to answer, but you should always, anytime someone wants to sell you something, you should ask yourself, "What does he know that I don't know. Why is he selling?" Now most people think he's selling because of moron and I'm smarter than he is, but he thinks he's the smart one. And you're the moron. So, and one of you's wrong. This is the theorem. One of you is wrong. So how do you get around that conundrum?
So you mentioned it very quickly, but let me just take a deep breath. The average investor holds the market portfolio. The average investor must hold the market portfolio. That's just the definition. The average is the average. All the children can't be above average as Garrison Keillor famously said, well, he said the opposite and it was joke. Now that means if you look honestly in the mirror and say, "I'm not any smarter than average, I'm not any... I don't have any better than average ability to hold risks or analyze the economy." Then you should hold the market portfolio. And in fact anything but holding the market portfolio is a zero sum game. So investing in general is a wonderful thing to do because it's not a zero sum game.
Benjamin Felix: I think before anybody is going to consider implementing a factor investing strategy, you have to do what Professor Cochrane said you have to ask yourself, "how are you different from average?" And you might have a safer income stream from your job that lets you take on a little bit more risk, that other investors can't take, or maybe you're just more psychologically risk tolerant, but either way, if you want to invest in risky assets, you're going to have to be able to stick to it. And I think this also extends to concentration versus diversification. We tend to say that more diversified portfolios are better, but who are we really to make that judgment call? Some people might want more concentrated portfolios and the characteristics that come with them. And again, it comes back to that question of people asking themselves, who they are and how they're different from average. So we ask Professor Cam Harvey, under what circumstances he thinks somebody might actually want to have a concentrated portfolio.
Campbell Harvey: Yes. And so people say, "Oh, well you shouldn't have a concentrated portfolio because you're not diversified" but people don't understand the concept of diversification. And this is again remarkable to me that there's a few things that people in finance think that everybody understands. And one of those concepts is diversification. And it really depends upon your preferences and you need those preferences to be over, not just variance. So if it is variance, then it doesn't make any sense not to diversify because you get rid of a lot of risk in diversification. However, if you've got a preference for skew, then you might have to take what appears to be an undiversified portfolio to get that profile that you want in terms of the upside. So those criticizing the concentrated portfolio just don't understand the concept of diversification in the broader sense where you're looking at diversification, not just in terms of variance, but in terms of higher moments also.
Cameron Passmore: Then we asked Bill Schultheis should investors tilt for factors or stick with market cap indices, and also what he thought people needed to do to stick with their strategy?
Bill Schultheis: Well, I would say, what is diversification? Diversification is owning different dimensions or different asset classes that may move dissimilar in the short run, if not the long run. I would show them, and we do show people data from 2000 to 2008. And we say, "Hey, the decision is yours, but whatever you choose, you have got to have the confidence that you're going to stick with it when it's working against you." And more often than not people say, "Hey, I want to be diversified." So most of the time it's a short discussion.
Cameron Passmore: So let's continue with this train of thought about the individual investors portfolio and how does one decide on their own asset allocation? What factors influence the most in that decision? What was the rationale for the decisions made leading to the asset allocation? So these are the kinds of questions we asked Adriana Robertson.
Benjamin Felix: There's a really important empirical question here, where we just heard a lot of theory from professors Cochrane and Harvey who are two giants in finance.
Cameron Passmore: To say the least.
Benjamin Felix: So their perspectives on finance theory are very important. But what Adriana Robertson's about to tell us about is what do people actually base their investment decisions on. When you go and ask people, making real household level financial decisions, why did you do that? The empirical question is whether their actions line up with the theory.
Adriana Robertson: Yeah. So as you know, we've got all these theories in the literature. And so what my co-author, James Troy and I decided to do was we just sort of ask people what's important to them. And so some of the ones that rose to the top were, and are important theories in the sort of the academic literature, like rare disasters. So people worry about sort of a crash and that's something that has both theoretical academic foundation and did really well in the survey. Some of the other ones that did really well are things like fixed cost of market participation. So it turns out that about half of the people in our sample who have no equities say it's because, just basically it's not worth it. "I don't have enough money to invest to make it worthwhile, to go and set up the brokerage account and figure out what to buy and all it's just not worth it for me."
Other things are number of years until retirement was really important to people, risk of illness or injury, one of the ones and that risk of illness or injury, it's hard to square with a lot of the academic literature. But on the other hand, if you've talked to a human recently, it's probably not that surprising to you. And I think that's sort of the biggest thing that came out of this was if you try to explain this to like your mother-in-law, she's going to look at you, like, why are you surprised by this?
But if you try to map it onto some of the academic literature, it doesn't always fit very well. And so that I think is the biggest thing that came out of it to me, that and the fact that again, in the literature and the theory literature, we have this idea in our mind of kind of the representative investor. And if we could just find which model accurately captures what the representative investor is doing is kind of like one thing out there. And that's what it is. Again, if you've talked to a human, I'm not going to surprise you so much when I tell you that turns out lots of things matter to different people.
Cameron Passmore: So if the academic literature doesn't map that well with how people make real life decisions, we have to wonder whether premiums like the equity risk premium are really risk premiums at all. So we ask Hersh Shefrin whether this matters to portfolio construction.
Hersh Shefrin: Not if you simply take the perspective that I just know that over the long term, there's actually a decent equity premium. I don't know what extent it's behaviorally driven or fundamentally driven. And I'm not smart enough to figure it out, but the historical track record tells me that it's a good bet, but it's still a bet, it could go the other way, but it's a good bet to invest as if the market's efficient and then just let it run and wait for the returns and ride the rollercoaster and have the discipline not to get discouraged in the middle when things look absolutely terrible. The odds are in our favor that the returns in the long run will be decent.
Cameron Passmore: So one of the debates I can recall having, and this is probably going back 20, 25 years in the office was whether factor investing was being active, such a taboo word, was I being active or not? So the definition I used use for active was anything that was predictive or subjective, I called active. I now have a greater appreciation for other definitions of what active are, but that's what we use way back when, or at least I use way back when.
Benjamin Felix: You got to remember when it comes to factor investing that implementation is huge, huge in the product actually capturing the premiums that they're pursuing. And today, lots of factor products like Avantis, Vanguard, Dimensional, they're using for their ETFs, they're using the active ETF structure. And I think people see active and they gasp, "Oh no, it's active. I don't want to invest in this thing" because we've been conditioned that passive market cap weighted index funds are good and everything else is bad. So for clarification on this, we asked Vanguard's head of factor investing Antonio Picca, why factor investors should want to be active?
Cameron Passmore: And really active now means to be different than the market that's one definition, that makes sense to me.
Benjamin Felix: For sure, it is in the case of the ETFs, it means more frequent implementation, right, like an index fund is tracking index or reconstitutes quarterly or reconstitutes semi-annually, which is okay if you're tracking a market cap weighted index, because it's not going to change that much.
But if you're trying to capture value or momentum is maybe an even more obvious example. If the index is reconstituting once, twice a year, maybe even a few times a year, that might not be enough to capture the premiums. And we talked to Antonio quite a bit about this, and they've got a paper out, looking at rebalancing frequency and they found as you might expect, or maybe you wouldn't, I don't know. But they found that more frequent rebalancing captures more of the premiums or generates bigger CAPM alphas. So that what he means when he is talking about active, it's like frequency of implementation.
Antonio Picca: For sure. I mean, listen, a couple of things that first, this idea of active that has a bad connotation might be potentially changing because now you see many more activity Fs coming into the market. And when we launch these as activity Fs, we totally face the same conversations. People were like, why do you label as active? That's a bad connotation. We made the choice very deliberately because when it comes to delivering a strong and consistent exposure to the factor, you want to have the flexibility of rebalancing, not on a schedule, right. You don't want to be tied to a schedule like every six months because within six months, your exposure to the factor can change completely. So over six months, your exposure to a factor like value or momentum will became meaningfully. So if you are able to rebalance a little bit over time and what people get most of the time they get confused with is that they believe that because it is active, it needs to have more turnover.
Benjamin Felix: All right. So we're going to go pretty deep on factors for a second here on a nuanced topic that I don't think gets a whole lot of attention is we asked Professor Brad Cornell to disentangle the concept of a factor from a characteristic.
Brad Cornell: Well, here's the way I understand it. Let's take a specific example like stocks with high PE ratios. That's certainly a characteristic. You could sort stocks that way. And you'd say here the high PE stocks, and then you could examine whether or not they had higher returns than other stocks. But the factor pricing theory is that this price earnings ratio is a systematic factor that reflects some sort of underlying risk is the way Fama and French put it when they first developed this approach. And therefore it earns a risk premium by nature of that underlying risk. Whereas as a characteristic, it may or may not be associated with any premium.
Benjamin Felix: So the following question is whether the difference between a factor and a characteristic matters from the perspective of portfolio implementation?
Brad Cornell: Well, it's even more important I think from the perspective of investing too, if it is a risk premium as Fama and French say, then it's going to be permanent unless the risk somehow goes away. So you would expect to earn it, but it is not in any sense, a beating the market premium. You're simply paying for risk. I mean the same way if you hold the S&P 500, instead of treasury bills, you're paying for risk. So from an asset pricing theory, that's the way it works. A lot of people sell funds on the grounds that they're going to invest in these factors and they make it sound like they're going to be beating the market. That is actually more like a characteristic saying, "We've discovered some stocks that tend to be under or overpriced, and we're going to invest in them or short them." So it's a very important distinction and it's not appreciated, and it's not much understood outside academia.
Benjamin Felix: So the key there is that the factors are not a free lunch. It is not alpha. It is compensation for are taking risk.
Cameron Passmore: Yeah. And it's tricky too, right. Because that's true if you believe that you're a factor investing, but you might not, you might say, "Well, no, I'm going after the characteristic than it is alpha. So it makes it all pretty messy. John Cochrane alluded to the value risk premium not showing up for about a decade. Some people have said for a whole bunch of different reasons, more than I could list that the value premium is structurally dead. And that this time is different for value. And it's not coming back. So we asked Rob Arnott who is entrenched in value investing. We asked him if this time is different for value.
Rob Arnott: Well certainly it is because we've never had to draw down this long or this deep, even the tech bubble people think of the tech bubble as the decade of the '90s. Now it was really '97 to 2000. It was three years. And so value underperformed growth by 4,000 basis points using the Fama French methodology, using price to book. It got it back in the space of 14 months after the low, it got the whole thing back. So the snapbacks can be profound, but it was a horrible drawdown, a little under three years. And this one, no matter how you cut it is at least three and a half and by some measures 13 years, and it's deeper. The value underperformed growth by 40% in the tech bubble and by 58% using price to book from 2007 to 2020. But here's what's interesting. The value of factors worked just fine the last dozen years.
Now that sounds like a radical preposterous statement. Here's what I mean, value has gotten cheaper relative to growth by a larger magnitude than its performance draw down. So let's say you have a stock that fell 58% like value relative to growth. Let's say the stock's price to book value fell 68%, that means the book value's risen. Are you going to look at that and say, "Get me out of here. I can't stand the pain." Many investors would say that. But if they looked at the drop and price to book value, they might say, "I can't believe how cheap this is. It's the cheapest ever. It's cheaper than it was during the tech bubble. Let me at least rebalance in. And if I can possibly persuade my clients to do so, let me over rebalance and overweight value at this stage."
Cameron Passmore: And we also ask David Booth, the founder of Dimensional Fund Advisors, if he thought it was different this time for value stocks.
David Booth: Well, every time's different. So in that sense, there's nothing different here, because it's different this time, it's different every time. I think people get confused. For example, we've used price to book primarily as our way of determining value, other people use price to cash flow and all of those things are fine because it's not about the accounting variable. You're just trying to buy low price stocks. And it's a pathology to say the lower the price you pay for something the higher the eventual return.
So there's a lot of common sense associated with the value story. That being said we've gone through a difficult time with value. All investment styles will go through long periods of time when the results are disappointing. That's the nature of the stock market. The reason being, here again, starting with Fama, it was actually Fama's dissertation in the early '60s where we learned for the first time with distribution of stock returns has fat tails, and by fat tails meaning they're more extreme events than you would expect things were normally distributed and you have unusually good returns sometimes like the last nine months. And you have unusually horrible returns too often like in the first three months.
Benjamin Felix: It's not that easy to find someone who has had skin in the game for this long managing the same type of strategies. I mean value for David Booth for many years. So his perspective on this is so valuable.
Cameron Passmore: Well, they've been managing a demand factor portfolios for over 40 years. So we asked David what they've learned over that kind of timeframe with respect to factor investing?
David Booth: In the '80s due to performance it wasn't a lot of fun, but the people that stayed with it got amply rewarded. And I think that's the way to think about it. Five years from now, or 10 years from now, as you look back on returns and you want to say, "look, oh yeah, we had a nasty three year period for value. So we got out." I mean everything points to, if you look at fundamental values like PE ratios or price to book ratios, this looks like expected premium is unusually high for value. I'm not forecasting, wipe my mouth out with soap, if you've heard me forecasting.
Cameron Passmore: No, no, we know that.
Benjamin Felix: So let's pose a question to Antonio Picco of Vanguard to find out how he responds when investors express concerned about the value premium going away.
Cameron Passmore: I guess we asked a lot of people, if value is dead this year.
Benjamin Felix: Well, it comes up enough, right?
Cameron Passmore: Yeah.
Benjamin Felix: And we had such great people to ask that question.
Cameron Passmore: The best people. So Antonio was of course at the helm of Vanguard's factor strategies. And in hindsight, they were launched at probably the worst possible time in hindsight. And nobody knew that was going to happen. But factor performance has been terrible since they launched these products that are targeting the factors. I mean, value being probably the worst offenders. So I think Antonio is in a really good position to talk about how he has been sticking with these strategies. And he's been getting Vanguard to stick with it too. He's leading this thing. And there's likely, I think he mentioned this in the full version of this episode, there's people within Vanguard that still need a little bit of convincing as well.
Antonio Picca: It goes back to the point we were discussing before about valuations, right. And I'm not the only one making this point, but we've been looking at it all along like RAFI has been making the same point, AQR has been making the same points, which is, yeah, it's true. Value is getting... The underperformance of value has been getting worse, right, we've rebounded over the last year, right. But at the same time, the valuation discount with respect to the market was getting wider. So you expect that at some point to mean revert. It wouldn't be a completely different consideration if value stocks were getting crushed and we're also staying relatively comparable in terms of valuations, relative to the market. And at that point you know that you pretty much have lost the money, but no, that's not the case actually just telling you that there is even stronger opportunity today in value than there was a few years ago.
And you need the long term focus because they will remain revert, but valuations are terrible indicators of when to time, right. Because they can be dislocated for a long period of time, but they are a good indicator about the opportunity. So you can look at them from that perspective. We believe it's going to happen. We don't know when, of course it has happened this year. And also the important thing is that has happened exactly for the reasons that we expected, which is buying stocks are secret. You can say whatever you want, but buying stocks are secret. They tend to do well during early stage recovery and during expansion. And what we've seen in the last year has been a recovery. Now that recovery hasn't been smooth because of continuous conversations around and concerns around COVID, right. And COVID coming back representing a big headwind to that recovery. But I think we've just seen the beginning of it and there's much more to come.
Cameron Passmore: So we were so lucky to also speak with Professor Robert Novy-Marx from the University of Rochester. He brings an incredible perspective, I found anyways, on the value premium. So instead of buying the cheapest stocks, you buy companies with higher profitability. So as he explained, it's basically the flip side of value and it's also, I find we're understandable by the end investor.
Benjamin Felix: Yeah, definitely more understandable if you think about value as a standalone factor. So take the unconditional value premium, just value on its own. It has some problems. If you're looking for cheap companies, if you're just looking at cheapness, you don't know why they're cheap. Are they cheap because they're bad businesses or are they cheap because they're good businesses with high discount rates? So that's what we asked Professor Novy-Marx about.
Robert Novy-Marx: The way academics had been thinking about value, it was part of our standard asset pricing model, but it was all coming from sort of the traditional Benjamin Graham price based value where you buy cheap stocks and you short expenses stocks, and you on average earn a difference in returns between those two because the cheaper stocks have had higher expected returns over time. My paper was sort of incorporating in what I would call buffet value in some sense. He's sort of repeatedly written in his newsletters about how it was back in the day that Charlie Munger taught him that it was far better to buy a wonderful stock at a fair price than to buy a fair stock at a wonderful price. And I sort of viewed the profitability based strategies as being that flip sided value, where when you buy cheap stocks, you get the Benjamin Graham style, but where you buy the high profitability stocks, you're getting those wonderful stocks and hopefully at fair values.
So I kind of viewed them as similar philosophically where in both cases, you were trying to get a lot of productive capacity at a good price for what you're getting. But I think in terms of why it was kind of took off in finances, partly because while philosophically similar, it has a very different sort of investment solution where the traditional value strategies, a lot of the stocks you buy in them, they're good investments, but they don't look like great firms in some way. Whereas for the profitability strategies, it's a good investment and you're getting good firm. So it actually has a growth tilt, which made it really attractive to value investors as a strategy to run in tandem because it tends to outperform when traditional value underperforms and vice versa. So they tend to smooth out the performance of each other and they're just highly complimentary.
And I think they also, it helps for the academics that they both come out of the value equation. There's an economic principle on which we can hang a hat. The fact that we know that prices are, that stock prices are they're expected, discounted future dividends, and the value strategies are trying to find, you use low prices to try and identify stocks with high discount rates. But the problem there is that the low price stocks can also be stocks that have low expected future cash flows. And so I think profitability helps you distinguish between the two reasons for low prices. It helps you find the stocks that have low prices because they have high discount rates and avoid the stocks that have low prices because they have low discount rates and avoid the stocks that have low prices because they have low expected future dividends.
Benjamin Felix: We spent a lot of time talking about stocks, but most investors, or at least the theoretical average investor, own bonds in their portfolio. We talked with Dave Plecha, who's the head of fixed income at Dimensional Fund Advisors, about why people would still want to own bonds in their portfolio today, given things like historically low interest rates.
Dave Plecha: No, I don't really think the role has changed. I would start by saying, what is the role? And that's going to be different for different investors, but generally the role of fixed income is going to have to do something with some sort of risk control, right?
I mean, if we are just simply in the pursuit of returns, if we had no view towards risk, but just want returns. Well, we know that in the overall scheme of things, equities will have higher returns. So, the role of fixed income is generally having to do with some risk controls.
So, you think about some of the risk controls, asset/ liability matching. So, you're trying to control interest rate risk. Well, it's just as good as it's ever been, right? Or from the standpoint of volatility. Bringing down the volatility of an equity portfolio. Just as good as it's ever been.
Now, yes the expected returns are lower, but I always like to turn the focus onto the premiums, right? So, when we look at any asset pricing model, we start with a risk-free rate. Plus we add some premiums, presumably for taking risks. That's true for the equity asset pricing models as well.
Well, we're all starting with the same risk-free rate. So in some sense, we're all in the same boat, a low risk-free rate. Our premiums in fixed income, expected premiums, are in line with historical premiums, but like I say we're just in a low and straight world, which affects all financial assets.
Benjamin Felix: So many investors are aware of the factors of higher expect returns in stocks. However, so many people are not aware of the factors of higher expect returns in fixed income. So, who better to ask for an explanation than Dave Plecha?
Dave Plecha: The two that we've identified as primary drivers of fixed returns term and credit, those are not controversial. They're certainly not meant to be controversial. It's pretty straightforward.
So, you pick out a single issue where let's say the Canadian government, and you look at Canadian government bonds and you form portfolios of short-term bonds, or intermediate-term bonds, long-term bonds, and you let them run through time and you see differences in returns.
It's the same issuer across the whole spectrum. Well, obviously it's the difference in term that's driving the difference in returns or you can go to the other axis, you could say, well, I'll hold a bunch of five-year bonds. They're all the exact same term.
Some of them are government bonds, and some are single-A bonds and some are triple-B bonds. And we could see difference in the return along that axis as well. So, term and credit are the main drivers of returns.
Our research all shows that in the end, the current price of the security is reflecting all the available information. There's information about those expected premiums that we could get from the current price.
Benjamin Felix: It's pretty obvious when you hear it. Bonds still bring down volatility in a portfolio, and even though the risk-free rate is low, there are still factor premiums in fixed income.
Cameron Passmore: So, time for a little bit of a pivot. One of the favorite books for me this year was Dopamine Nation by Dr. Anna Lembke from Stanford, and I thought this topic was particularly timely, given all the issues around social media, and Facebook, and TikTok, and all that goes with it.
At the heart of a lot of these issues is the dopamine is being created in our current environment. So, we had a chance to ask Dr. Lembke how dopamine influences our behaviors on a daily basis.
Anna Lembke: Well, we are evolutionarily designed to approach pleasure and avoid pain, and that's what's kept us alive in a world of scarcity and ever present danger, and pleasure and pain work very much like a balance.
So, imagine there's a balance in your brain, like a teeter-totter in a kid's playground. And when we do something pleasurable, or ingest something pleasurable, that balance tips slightly to the side of pleasure and dopamine is released in our brain's reward pathway.
But one of the overriding rules governing that pleasure-pain balance is that it wants to remain level. It doesn't want to be tipped for very long to the side of pleasure or pain. And the brain will work very hard to restore a level-balance or what's called homeostasis.
And it does that by downregulating dopamine and dopamine transmission, right after we get a release of dopamine in the reward pathway. But the really key piece is that it doesn't just downregulate dopamine levels back to tonic baseline, it actually decreases dopamine transmission to below baseline.
So, there's a dopamine deficit state that occurs in response to a dopamine elevation before dopamine levels go back to baseline. And with the balance, one way to think about this is that you have these little gremlins hopping on the pain side of the balance to bring it level of again, but they like it on the balance.
So they stay on until it's tipped and equal, an opposite amount to the side of pain before jumping off and before homeostasis being restored. And that's a really key piece of how pleasure and pain work. That with every pleasure, there's essentially a pain. It's often so subtle that it's outside of our conscious awareness, but it's still operating in the brain.
Benjamin Felix: It's important information from Dr. Lembke, considering all of the action we saw with Robin Hood, and meme stocks, and all of that gambling-like behavior that we saw throughout the course of this year and last year.
The obvious question that we had ask Dr. Lembke, especially relevant to our field, is how the dopamine-rich world that we live in, including the gambling situations with stocks that I just mentioned, how does that affect our ability to make long-term decisions?
Anna Lembke: Think it really does. One of my neuroscience colleagues, he did a fascinating experiment where he showed that when people are engaging in a game or a task that involves short-term rewards, that the part of their brain that lights up most prominently is the limbic brain or the emotion brain, which is exactly where are this reward pathway, this pleasure-pain balance is located.
When people are engaging in a task that requires them to think about and anticipate longer-term rewards, the part of their brain that lights up most is the prefrontal cortex. Prefrontal cortex is that big gray matter area right behind our foreheads, that's central to delayed gratification, future consequences, storytelling, planning.
So, what that tells us is that we're engaging very different parts of our brain when we are anticipating short-term rewards versus long-term rewards. And that short-term rewards are especially dangerous because they do primarily engage our emotion brain.
And when we're just living in emotion brain, we're probably not able to truly and objectively see future consequences. So, I do think that in your work it's very important, I would imagine, that you help people understand that they need to sit on those decisions. That this is something that they should give it 24 hours.
They shouldn't do it impulsively or in the moment. Although the pull to do it then is very, very strong, especially again, if you add in the social media and the herd mentality factor where you see everybody else piling on, but I really think that there's a huge danger of not really objectively being able to engage the prefrontal cortex to see the true data and the true implication of that choice if we're just working out of our limbic brain.
Benjamin Felix: One of the big underlying tones throughout the course of this year, especially the second half of the year has been inflation. Everybody seems to be worried about inflation. Inflation is in fact picking up a little bit, at least as measured by CPI.
We've covered inflation from a few different angles throughout the course of the year. Like, what should you do in your portfolio? Basically nothing, is what we found in our analysis. But people are still wondering, is inflation going to explode? Or are we going to have hyperinflation?
So, we are fortunate to be able to ask Cullen Roche, who's got a very pragmatic-practical perspective on money in the capitalist economy. We were able to ask Cullen his thoughts on where inflation is going.
I love his answer. And we also talked a little bit about whether the money printing, in air quotes, money printing. Whether that's a cause for concern, with respect to inflation.
Cullen Roche: One of the most, I think, disconcerting things about my evolution and education of Macroeconomics is that I've learned that nobody knows what the hell causes inflation. Which is crazy, because there's lots of theories about it and the general theories that more money chases more goods and that we've discovered over time that it's a lot more complex than that.
The money supply has increased by any measure is really significantly in the last year or the last 10 years. And especially by any traditional sort of measure. But we haven't had really high inflation, which was surprising to a lot of people.
And I think that what we're finding out is that a lot of these other things matter a lot more than people believe. Technology trends matter, the demographic trends matter a lot.
So, we have all these big other secular trends that are occurring that make this a lot harder to analyze than this sort of generalization, that more money will chase more goods and therefore you'll get inflation.
Benjamin Felix: Okay. Let's do another shift over to a retirement discussion. So, author and former Russell Investments executive Don Ezra brought some pretty cool perspective to retirement. So, Don is interesting in that he has spent his career studying retirement.
He's written about it and now he's living it. In his book Life Two, he suggested that the experience of not knowing what you want to do in retirement is not uncommon. So, we asked him what he thought people could do to change that.
Don Ezra: From my experience, one of the things you need to do is prepare. So, you need to start thinking about it at least a couple of years before you plan to retire, possibly more, possibly five years, because with some of the statistics I've seen in the States, in the UK, about half of retirements take place earlier than the retiree wants.
It's unexpected early retirement. It could be because something happens to your employer. It could be redundancy. It could be illness. Either your will, or someone you have to look after.
But all of a sudden, things happen and you have no idea about it. So, the earlier you start thinking about it the better. These should be the happiest days of your life. It's awful to get it off to a negative start.
Benjamin Felix: So, can you talk about the U curve of happiness, and its relationship to the typical retirement age?
Don Ezra: Yeah. With pleasure, because that's where I am right now. It's interesting. If you record the happiness ratings that people give themselves, and this is a very personal thing, but if you record that and average it over the population in a country, in every country you look at, by age, it ends up with a U curve.
So, it starts off very high and then gradually it's there by age 20 when you know nothing, but you are filled with adventure and you're going to put the world to rights. And then gradually as you experience real life and nothing quite works out the way you want, there are still some huge pleasures, but perfection is tough to reach and it starts going down.
It tends to go down to somewhere on average and the age range, 45 to 50, and then it starts climbing again. By the time you're 70, it's higher than it was even when you were 20. So, it just keeps going on and on.
In fact, when I investigated this and studied it, I ended up writing a book that I called Happiness: The best is yet to come, because the peak of the curve is at the end. So, no matter what age you are, your best years are still in the future. And this has nothing to do with retirement, even though it's those retirement years at the end. This has to do purely with brain chemistry.
Benjamin Felix: So, we heard from Don Ezra that a lot of people don't don't really know what they want to do in retirement and that can be a little bit of a problem. One of the things that we talked about with Dr. Anna Lembke, is that more people are going to have more free time.
Just based on where technology is going, and where the economy is going, people have more leisure time. So, people don't know what they're going to want to do in retirement people have more leisure time.
Generally speaking as technology gets better, like we mentioned early on in this episode, people will have more time. But people need to understand that that can actually be detrimental. People need to be aware of the possible issues that can come with too much free time. So, we ask Dr. Lembke what people are going to do with all this free time.
Anna Lembke: Great question. I think that we haven't yet figured out how to handle all of the time that we have. So, not only are we seeing increases in leisure time. So, the average person today has, I think, something like four to five hours of leisure time per day, a hundred, 150 years ago, it was more like one or two hours a day.
And at that time there were people who had no leisure time, right? People who worked 24/7, people who worked and lived in slavery. In 2025 or 2050 we're projected to have even more leisure time. We have some seven or eight hours of leisure time today.
People talk about the universal basic income. That we would give people an income such they wouldn't have to work at all and they could have a subsistence living. The problem is, that we need to be much more thoughtful about how we're using this leisure time.
Because as of right now, it looks like we're mainly using it to consume highly rewarding, feel-good drugs and behaviors. One statistic that was really powerful for me, is that we've seen an exodus of young men out of the workforce. There are fewer young men employed and working today than in many prior generations. And what they're mostly lost to is video games. So, we really have this situation where people are working less, but they don't know what to do with that extra time. And many of them are using that time to engage in these highly reinforcing escapist behaviors that ultimately I think will make them very unhappy and that are fundamentally addictive.
So, I'm concerned. I'm concerned. Also, we're living longer, right? I mean the average human lived to about age 30 for most of human existence. Now, we're living on average to age 80. So we've got more time on any given day. We've got more days.
I'm seeing more and more people in retirement coming in with new onset addiction of all sorts. People who could drink alcohol in moderation through their whole lives, retire, have all this time, and then all of a sudden drinking all day long and then cross that physiologic threshold, get dependent, experience withdrawal, and are really in full blown addiction.
And of course, the danger there is further that as we age our brains get less plastic. And so these habits that we're creating later in life, it's harder to undo them.
Benjamin Felix: Sometimes it feels kind of funny. Cameron and I are here educating the thousands of people that listen to our podcast about how to manage their finances when that's what we do professionally.
And I say it's kind of funny because we're providing people with the information that they would need to go and do this themselves. And the products are out there for people to do this themselves fairly easily.
Now, meanwhile, we still have a reasonably successful business and people are still paying for our services. And I think that's because we do provide a valuable service. Bit of a shameless plug, I guess.
Now we did ask David Blanchett what he thinks financial advisors need to be doing to justify charging a fee in excess of what somebody could pay to just purchase a low-cost index fund on their own.
David Blanchett: So, it's funny I was talking to a reporter earlier this week and it was about this idea those Bogleheads' have. The three-fund portfolio. It's cash, the global stock, and the global bond. And I'm like, wait a minute. I can give you a one-fund portfolio. Just go out and buy the Vanguard Balanced Index, whatever else it is. Right?
And so, again, we have to get paid for what we do. We all help people do things, we get paid to do it. And I think the question is what is your value proposition? I'm not convinced that advisors' going to add a ton of value by beating the market, right?
And so again, Alpha. I want Alpha. I want Alpha. Well, if you want Alpha versus advisors, invest in an incredibly low-cost portfolio, right? So, if you as an advisor can convince a client to own a balanced portfolio of indexes, I would contend that you will on average outperform the average advisor, because the expenses of your portfolio are lower.
Right now, that isn't nearly as sexy as owning 13 mutual funds and allocating to this new emerging markets fund. But, what is the objective? The key objective at the end is to help someone accomplish their financial goals. Okay? And a huge piece of that is behavioral.
And so, if you can define your role as hey, I'm going to create a portfolio for you that is very good and very cheap. I'm going to keep you investing into that for the next 20 or 30 years, that could be worth 1% easily if you're doing extra stuff too, if you're doing the financial planning.
But I think that for better or for worse, our industry has evolved from stock brokerage, where you have to pick stocks and beat the market. Well, beating the market doesn't matter if you can't help a client accomplish their goals. And so to me, the focus is on doing what it takes to accomplish a goal.
And sure, Alpha helps. If you can beat the market by 8% of the year, that client's going to do a spectacular job. The problem is, that's a zero-sum game before fees. Everyone can't do that. And so I think that the question is how do you define yourself as an advisor?
And if you're an Alpha guy, it's a cool story. I get it. But what is the true impact of that on clients? And are you really adding Alpha in the grand scheme of things, maybe? But if you ever pull an audience of advisors and ask them how many don't add Alpha, nobody raises their hand.
Benjamin Felix: Don Ezra was such a great guest. And I thought this passage was the perfect cap to this episode. Life has so much to offer, and this is what Don calls life's abundance. So much of the interviews and the conversations we had this year do help people lead a better life. So, we asked Don to talk about the seven asset classes of the life's abundance portfolio.
Don Ezra: Oh, yes. And given that it's such a cool concept. I mean, it's been a huge part of my life. And so, you can guess that it isn't original in my mind because very few things are original in my mind. I got this from a guy called Ed Jacobson, and I had just retired. I was at a conference speaking, and he was speaking.
I thought this sounds like interesting stuff. And he was talking to financial advisors about how to have useful meetings with your clients. And one of the components of the useful meeting was, so I've got this concept called the Life's Abundance Portfolio.
So, think of all the good things in life. This is your life's abundance. It's your portfolio. It's all the holdings you have there, divided up in seven pieces. So, I think of them as seven asset classes in your portfolio.
My geeky friends love the idea about after classes in the Life's Abundance Portfolio. And I can't remember the names that Ed gave to them, but I remember them in pairs. So, family and friends, work and play, physical health and mental health, that's six. And money.
Yeah. The one that's on its own is the one we think about all the time. I like the idea, there's one of seven important things in life. And the idea of that is to say, think of your life. This is an exercise you can go through maybe every fifth year as your age goes up, et cetera, et cetera, et cetera.
So, think of these seven asset classes. Give yourself a score. A personal rating on each one, from one to 10. There is no right answer. There is no wrong answer. Nobody's rating except your own is relevant. And so, how would you rate yourself on each of them?
When you've done that just think, okay, which are the ones I'm comfortable with? I don't have to have a 10 on everything and maybe only a four on this, but you know, it's less important to me. That's okay.
And so, which are the ones that are okay? And which are the ones where you would like to raise your score? And when you want to raise your score, what is it that is within your power, within your control, to raise that score? And that starts giving you a sense of purpose, et cetera, et cetera.
Cameron Passmore: And that is what this year has been all about. What we can learn that will help us all raise our score as Don mentioned. So 2021, we've welcomed unbelievable guests, all of whom have been super generous with their time and all in all helped us fill in this matrix that will help us make better decisions.
So Ben and I wish you a super holiday season and we thank you for listening and watching for the past year.
Benjamin Felix: Yeah, definitely. Thanks again, from the entire rational reminder team, we wish everyone a great 2022 and we truly appreciate you listening and engaging with us and being part of this thing that we're creating and plan to continue creating.
Cameron Passmore: Now, we'll see everybody next year.
Books From Today’s Episode:
Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever — https://amzn.to/3DXhUe4
The Coffeehouse Investor's Ground Rules — https://amzn.to/3hqJsyQ
Time Smart — https://amzn.to/36XsN0L
The Happiness Hypothesis — https://amzn.to/2PLng8X
The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life — https://amzn.to/3BWQfZw
How to Change — https://amzn.to/363m9pB
Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing — https://amzn.to/3E0C5J4
Dopamine Nation: Finding Balance in the Age of Indulgence — https://amzn.to/3BZEBxB
Happiness: The Best is Yet to Come — https://amzn.to/3gYtFav
Life Two: How to get to and enjoy what used to be called retirement — https://amzn.to/3sfqa6P
We Need To Talk: A Memoir About Wealth — https://amzn.to/3qa9ScN
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/
Shop Merch — https://shop.rationalreminder.ca/
Join the Community — https://community.rationalreminder.ca/
Follow us on Twitter — https://twitter.com/RationalRemind
Follow us on Instagram — @rationalreminder
Benjamin on Twitter — https://twitter.com/benjaminwfelix
Cameron on Twitter — https://twitter.com/CameronPassmore
Larry Swedroe — https://buckinghamstrategicwealth.com/people/larry-swedroe
Wes Gray — https://alphaarchitect.com/about/
Jack Bogle — https://www.investopedia.com/terms/j/john_bogle.asp
Paul Merriman — https://paulmerriman.com/
Mac McQuown — https://www.bloomberg.com/news/articles/2021-07-01/-anarchist-mac-mcquown-started-an-index-revolution-50-years-ago
Bill Schultheis — https://soundmarkwealth.com/the-team/bill-schultheis
Hal Hershfield — https://www.halhershfield.com/
Ashley Whillans — https://www.awhillans.com/
Jennifer Risher — http://jenniferrisher.com/
Jonathan Haidt — https://www.stern.nyu.edu/faculty/bio/jonathan-haidt
Robin Taub — https://robintaub.com/
Katy Milkman — https://www.katymilkman.com/
Johanna Peetz — https://carleton.ca/psychology/people/johanna-peetz/
Adriana Robertson — https://www.law.utoronto.ca/faculty-staff/full-time-faculty/adriana-robertson
Jay Ritter — https://site.warrington.ufl.edu/ritter/
Hersh Shefrin — https://www.scu.edu/business/finance/faculty/shefrin/
John Cochrane — https://www.johnhcochrane.com/
Rob Arnott — https://www.researchaffiliates.com/about-us/our-team/rob-arnott
Antonio Picca — https://citywireselector.com/manager/antonio-picca/d37782
Campbell Harvey — https://www.fuqua.duke.edu/faculty/campbell-harvey
David Booth — https://www.forbes.com/profile/david-booth/
Robert Novy-Marx — http://rnm.simon.rochester.edu/
Dr. Anna Lembke — https://www.annalembke.com/
Cullen Roche — https://www.pragcap.com/meet-cullen-roche/
Don Ezra — https://donezra.com/
David Blanchett — https://www.morningstar.com/authors/1738/david-blanchett