In this episode, we tackle the timely topic of higher interest rates and their potential impact on investors' decisions. With rates soaring to unprecedented levels, many are tempted to veer off their investment paths in pursuit of short-term gains. But is this a rational choice? We break it down and offer invaluable insights into why staying the course might be the wiser option. We also welcome new PWL team member Mark McGrath. Mark possesses an innate talent for crafting concise, valuable, and captivating financial planning nuggets on social media. His content has struck a chord with the audience, evident from his rapidly expanding following. Next, we take a nostalgic trip back to one of our favourite past episodes, featuring a remarkable guest, David Booth, co-founder of Dimensional Fund Advisors. With a quick review of the episode, listeners get a refresher on Booth's sage advice and investment philosophies, reminding us all why this episode remains a standout. For the book segment, Michael Tremblay, a listener, and stoicism expert, reached out to suggest an exploration of The Handbook of Epictetus. We welcome Michael to the show for an enlightening discussion on the principles of stoicism and how they can be applied to investing and everyday life.

Key Points From This Episode:

• Introducing new PWL team member, Mark McGrath. (0:02:22)

• Background about Mark and his journey to PWL Capital. (0:03:35)

• What Mark appreciates most about working at PWL: its core values. (0:08:45)

• Why cash is an extremely risky long-term investment option. (0:11:47)

• We explore ‘buying the dip’ and expected returns versus return expectations. (0:24:31)

• Highlights and key takeaways from our conversation with David Booth. (0:29:07)

• The Handbook of Epictetus and devoted listener Michael Tremblay's background. (0:31:22)

• Stoicism basics, who Epictetus was, and the key idea behind the philosophy. (0:33:30)

• How stoicism can benefit everyday investors. (0:36:09)

• A breakdown of the various ‘tools’  and practices The Stoics developed. (0:39:26)

• Similarities Stoicism has with the rational reminder approach to investing. (0:43:07)

• Making the distinction between what is in your control and what is not. (0:46:16)

• The role of emotions and death in investing from a Stoicism perspective. (0:47:41)

• Michael shares his definition of success. (0:53:45)

• The after-show featuring updates, book recommendations, upcoming guests, and more. (0:55:11)

Read the Transcript:

Ben 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 265. Happy 5th anniversary, Ben. If you can believe it.

Ben Felix: Yeah, crazy.

Cameron Passmore: It's completely crazy. Anyways, on today's podcast. With the higher interest rates that we've seen, certainly the highest rates we've seen in many years, many investors might be thinking about abandoning their current investment strategy in favour of some of these high-interest rates. I think we're going to take a nice look at why that might not be such a rational decision to be made.

Then we'll do a quick review of one of my personal favourite past episodes where we welcome co-founder of Dimensional Fund Advisors, David Booth, that was back on episode 131. And for our book segment this week, we have something cool where a listener, Michael Trembley, who's an expert in Stoicism reached out and suggested that we talk about The Handbook of Epictetus. And he joined us to talk about Stoicism. So that's a really cool conversation that we have coming up.

Ben Felix: I also want to mention quickly that we have a live webinar. People will actually pay attention when we say this. We had a live event and that people were surveyed about how they heard about the event. And I kind of figure we say this stuff in the beginning of the podcast and nobody actually pays attention. But in this one event, every single attendee had gotten there from hearing on the podcast.

Cameron Passmore: No way.

Ben Felix: Yeah.

Cameron Passmore: And they're good. They're getting good reviews as well.

Ben Felix: Yeah. Yeah. The next one is on August 25th. The title is What Are My Options with My Options? Understanding Equity-Based Compensation. It's a talk designed for employees of firms with equity-based compensation. Anyone is welcome to that. That's on August 25th. And we'll post the link to sign up in the show notes.

We are aiming to have events like this every two weeks. And it's not Cameron and I delivering them. It's financial planners from across PWL that have an interesting topic that they think they can deliver a talk on. But like you said, Cameron, the reviews of these talks have been great so far.

Cameron Passmore: Yeah. And they're highly interactive. Highly engaging. And the team is great at them.

Ben Felix: Yeah, definitely. Okay. Right now, we're going to have a quick conversation with PWL's newest team member, Mark McGrath.

***

Ben Felix: All right. Before we get into the main part of the episode, this week was an exciting week for the team at PWL as we welcomed Mark McGrath to our team. People may remember Mark from episode 245. Or they may recognize him from Twitter. Mark, welcome back to the Rational Reminder Podcast. And welcome to PWL Capital.

Mark McGrath: Thanks. Thanks, man. I appreciate it. It's kind of crazy that you're saying welcome back to the Rational Reminder Podcast. It's wild that I've been on for a second time now. So thank you.

Ben Felix: That is cool. I know it's only been a few days. But how does it feel to be at PWL?

Mark McGrath: Yeah. It's day three today as we're recording this. And it's going to sound super cheesy when I say this, but it feels like home. You may not understand just how influential PWL has been on me over the past nearly decade. And I'm honestly still kind of pinching myself. I was driving home yesterday from a meeting in Vancouver, which is about an hour away from where I live, and I just have this kind of Moment of clarity. I was like, "Wow. I'm seeing the team's messages come in on my phone and it's from Ben Felix and Cameron Passmore at PWL." And it just kind of all hit me at once like, "Wow. I'm here now. Wild."

Ben Felix: Awesome.

Cameron Passmore: How's the podcast related to your journey coming here?

Mark McGrath: Yeah, do you want the whole story? I'm going to go all the way back or just the podcast?

Cameron Passmore: You're the ultimate storyteller. So go ahead.

Mark McGrath: The podcast has been massive. But it goes back even further than that actually. I think it was around 2015 that I stumbled upon the Canadian Couch Potato Blog. And eventually, the Canadian Portfolio Manager Blog, which for those listeners that don't know, those are colleagues of ours. Dan Bortolotti and Justin Bender respectively.

And their blogs primarily focus on an approach to portfolio management that was basically total market indexing. And this was a somewhat foreign concept to me back in 2015. I mean, we'd heard about it. But working for a firm that was primarily engaged in active management and typical active mutual funds.

I had a bit of an epiphany reading this blog. And then the more I read the more it just made sense. And so, I did a full about-face with all my clients at the time and converted the entire portfolio for all of my clients over to these index funds. And I actually followed Dan and Justin's model pretty closely and I was implementing that for clients for a number of years.

And then in 2018 when the Rational Reminder came out, I think I was a listener from day one. And it was that same type of epiphany, like, "Wow. There's even a better way to do things.” And the concept of factor investing and the Fama-French 5 models – these are totally foreign concepts to me altogether. And I'm sure to many, many advisors that they've had an influence on over the past – I guess coming up to five years now.

And so, again, I was thinking, "Well, how can I implement this?" This just makes so much sense and it's so well-grounded in the academic literature that I've got to do this now.” But I couldn't. The firm I was working with – that just wasn't an option for me.

It led me down a path where I decided to leave the firm I was with. And at that time, you guys had just recorded an episode with Jordan, Jordan Tarasoff. If I'm pronouncing that correctly? Correct me if I'm not.

Ben Felix: Tarasoff. Yeah.

Mark McGrath: It was that episode where I realized these guys are approachable. Here's Jordan telling his story on the podcast. But he had reached out to you. And his background and his journey to where he was at that time of his life was very similar to my own. And I thought, "Wow. I can just email those guys and maybe set up the time to chat?"

It's funny because in a recent episode of yours, I think it was with Alex Potts, I want to say he talked about how he reached out to Harry Markowitz. And he just couldn't believe that Markowitz wrote him back. The analog to that was when I reached out to you guys back in 2018. And lo and behold, Cameron wrote me back. And we set up a chat.

And that chat for me wasn't really – I wasn't applying at PWL in my mind. I was just looking for some guidance. What's an advisor to do when they're faced with this crossroads? This sort of uncertainty? And Cameron, it wasn't until about maybe two-thirds or three-quarters of the way through that discussion that we were having that I sort of realized, "I think he's interviewing me."

And I had said some things that I probably – nothing bad. But I had said some things that I probably wouldn't have said had I known that this was going to be an interview. I hadn't prepared for it as an interview.

And I remember just being so mortified after that call. I closed my laptop and I just like hung my head and I told my wife, "I can't believe it. I think he was interviewing me and I just blew it."

And so, I was so embarrassed. I didn't even follow up with you, Cameron. I just thought, "Well, there goes that opportunity." And I went on to something else. And I went to an independent firm. It was a fantastic firm and it allowed me the opportunity to do the things that I'd always wanted to do, which was focused really deeply on financial planning and implement the type of portfolio management that you guys taught me on the podcast.

And so, in February of this year, Cameron, I think when you reached out to me again and said, "Hey, we should catch up. I see what you're doing on Twitter and I see conversations you're having out there with Canadians and I'd love to catch up." And I told my wife, "Okay, I'm not going to screw it up again. I'm not going to presume that it's an interview either. But I'm going to go into this prepared." We had a great discussion and here we are four and a half months later. Yeah. PWL as a firm and the podcast specifically have been absolutely formative in how I deliver financial planning and portfolio management advice.

Ben Felix: That's really cool to hear all that. You had gotten yourself set up at an independent firm. How did you make the decision to join PWL?

Mark McGrath: It's funny because I was there for about two and a half years and things were going really, really well for those of your listeners that are Canadian and that might follow me on Twitter. I've developed a little bit of a presence there and I was engaging with a lot of people. And it actually ended up driving a lot of conversations with people that many became clients and many who are interested in having those discussions with me. Things were going really, really well.

And my vision being independent was to build what I now know is very similar to PWL today. My big 30,000-foot high-level view of what I wanted to do was to build a firm those very optimized, very evidence-based, and very financial planning-focused. But I wanted to do it by myself because I wanted to be able to look back 10, 20, 30 years from now and look back on my career and say, "I did it. Not necessarily alone. But I did it just through my own endeavours and my own hard work and my own ethic.”

When Cameron reached out, I actually considered saying, "No. I'm not going to join PWL because I want to do this thing on my own. I want that reward, that recognition." And when I told my wife that, she kind of just looked at me and said, "Those guys are your heroes. They're potentially offering you to join this firm of your dreams that you've been talking to me about for years and you're going to say no? Are you crazy? Isn't getting their attention and having them reach out to you to discuss potentially joining the firm, isn't that equivalent to the same reward and recognition that you were looking to build for yourself?"

And so, that was a really pivotal moment in my decision-making process when it came to joining PWL. And I look at back on that moment incidentally as I think the turning point that I said, "Yeah, I've got to do this."

Cameron Passmore: So now that you're here, three days in, what are you most excited about?

Mark McGrath: Yes, it's a good question. Because to your point, it's three days in and it's like any new firm or any new job, you're drinking from a fire hose. You're meeting all sorts of new people and new processes, new tools and new systems. I'm still wrapping my head around things.

But I think a lot of it for me comes down to the core values of the firm but a couple in particular. And those are, “Know what's right. Do what's right. And evidence over ego.” And those values resonate very strongly with me. A lot of people say that and it's not always that obvious that it's really ingrained and entrenched really in the culture and the values of the firm.

And so, being able to just lean on those two values as sort of the guiding principles for how we work with our clients and work with the public, to me that's really, really exciting. But I can just do that freely. And I don't have to just say I'm doing it. It's apparent and it's really written into the background of PWL. That's really, really exciting.

Obviously, being here again on the Rational Reminder has been a very exciting thing for me with how influential the podcast has been. Being able to just engage here. And lots of things I'm excited about. I think maybe we're discussing a more regular appearance on the podcast with some of my – I don't know what we're going to call it yet. We come up with some funny names potentially about some of the stuff that I talk a lot about on Twitter just revolves around little snippets about financial planning. Little tips and little nuances or some unknown strategies that people might not be aware about. And so, maybe getting the opportunity to share those from time to time here is really exciting.

Ben Felix: I'll mention a little bit about that. Because, Mark, you have this just knack for writing. Like I read your tweets and it's like even if it's something that I knew or maybe something I'd forgotten, the way that you communicate stuff is just like it's just so good. I don't know what it is about it. But it's just so good. It's like engaging.

Mark McGrath: Thanks.

Ben Felix: You can make these relatively boring financial – maybe it's because I'm a nerd. I don't know. But a lot of other people seem to like it, too. You can make these just facts. Like, this is information. But you make it really engaging. What I think we're probably going to do is have an ongoing segment with Mark on the podcast where he'll present one of those little financial planning factoids on an ongoing basis. I think it'll be a good segment. Maybe we can say that it replaces the bad advice that people used to call their guilty pleasure. We scrapped that. So maybe this is the replacement.

Cameron Passmore: The good advice.

Mark McGrath: Good advice of the week. There you go.

Cameron Passmore: Good advice of the week.

Ben Felix: That could be the name of the segment actually. I don't know.

Cameron Passmore: Anyone who's from Quebec and over the age of 50 or so, they might remember the store of Miracle Mart. So I said we could call it Miracle Mark.

Ben Felix: It's a very niche joke.

Cameron Passmore: Who knows how many people like that in the audience?

Mark McGrath: We'll see. I don't know if they're quite miracles. But I appreciate the sentiment certainly.

Ben Felix: Anyway, Mark, great to have you back on the podcast. Great to have you with us at PWL. And definitely looking forward to working together.

Mark McGrath: Yeah, likewise. Thanks for having me. And it's a pleasure to be here and a pleasure to be part of the PWL story.

***

Cameron Passmore: All right. Let's get going with episode 265. And that was great to have Mark join us not only on the podcast, but join the firm. He's just a great guy. Great addition.

Ben Felix: Great story, too. It all ties in with the podcast. And really cool.

Cameron Passmore: Very cool.

Ben Felix: All right. So the main topic today. What I've called it is, ‘5% HYSA (high-yield savings account) for the long run?

Cameron Passmore: Catchy.

Ben Felix: Basically, is cash a good long-term investment? The question that kicks it off is with a 5% return on cash, why would anybody want to invest in stocks? And that's a question that we've gotten. That's why I think it's a relevant topic to cover.

Cash feels good. We know this. This is something that's well-documented. People like having cash. Its nominal value is stable. It just feels safe because you can check your bank account and the money's going to be there. And then, of course, on the other hand, at the other end of the spectrum, financial markets are uncertain. Financial asset prices are uncertain from day to day.

But what I'm going to argue – and I think a lot of listeners probably would agree. But I think it's still worth making the arguments. What I'm going to argue is that cash is extremely risky for long-term investors from a few different angles. Cash is a poor hedge against falling expected returns. It is historically much more likely to lose purchasing power than stocks in the long run. And real returns on stocks and bonds have historically been higher at higher levels of real interest rates making cash a relatively poor investment even when interest rates are high.

And I think that speaks to shortfall risk, like the risk of not achieving your goals because your returns were too low. Your expected returns were too low and that led to low realized returns.

Now I do want to be clear that this argument, this topic, is about money that you can direct toward long-term investments. It does make sense in many cases to have cash set aside in an emergency fund. And that emergency fund probably shouldn't be capped in anything volatile.

Now we've talked in past episodes that how much you should have in an emergency fund and whether you need one or not depends on your situation. But let it be said that this topic is about money that could alternatively reasonably be invested in longer-term assets.

Now why is this relevant? A 5% yield on cash roughly is accessible right now through various means. The easiest one to talk about is probably the high-interest savings account, ETFs, that anybody can go and buy right now. That's kind of the thing where people go and see that I can get a guaranteed 5% yield over here. And over here, I've got these risky stocks and bonds. So why would I not just hold cash?

And this is actually beyond that, like beyond the kind of anecdotal observation. It is documented that investors' exposure to risky assets is sensitive to interest rates when interest rates are lower. Investors reach for yield in riskier assets. And then when rates are higher, they go in the opposite direction.

Now we know cash is safe day to day, especially in Canada. Markets are volatile. But your bank account in Canada, especially, like I said, it's going to be there when you need it. Usually, I mean. It'd be a real catastrophe if that wasn't the case. But Canadian banks in particular I think are pretty solid.

And we obviously saw what happened with the US where there were some problems and they ended up being largely resolved for depositors. But I think to make all this worse, we know the reaching for yield stuff is a real thing. We know that, okay, the 5% yield on cash is pretty enticing.

What exacerbates that? Or maybe it's just related to it. I don't know. We also know that investors are worried about the next big market crash. We know that they're probably more worried than they should be about the probability of the next major market crash.

Now risky assets, like stocks and bonds, sound risky. We call them risky assets for a reason. But the thing is, in investing, risk is not always a bad thing. And risk is a very broad term. There are lots of different ways we can define risk. But try and talk about some of that.

I think most investors – and this is another thing we've talked about in past episodes and with past guests, most investors think about cash or short-term government bills as the risk-free asset when they're thinking about managing their portfolios. But I think that definition is really only applicable to a short-term investor.

The first thing to understand about cash returns is that, well, the value of your cash expected returns, I guess, is that, well, the value of cash is stable. Like we said, your bank account is going to be there today and tomorrow. The expected return on cash is unpredictable. And this is something that we looked at. We did a lot of work on this recently because we wanted to update our assumption for cash expected returns because that's the question, right? Okay, there's a 5% yield on cash right now, is that its expected return?

So we did a bunch of work just using historical data and running regressions. But what we found is that the relationship between the current short-term return on cash, like the current yield on cash or on bills, is not strongly related at all to the long-term return on cash.

What we ended up doing for our financial planning assumptions, it's only a very, very small portion of the expected return on cash that we are now attributing to the current yield when we're running financial planning projections. Our assumption ends up being much more dominated by the long-term return.

People may remember from when we've talked about our expected returns in the past that we have two main inputs. There's the historical return that we call the kind of equilibrium cost of capital. And there's the market-based estimate, which in this case would be the T-bill yield. And so, we're putting much more weight on the historical return than the current yield.

So anyway, all that to say that a 5% yield on bills are on cash today does not mean a 5% yield on cash tomorrow. And I think that's a real big problem for long-term investors who are looking at cash as a long-term investment.

Now we know that short-term volatility matters a lot to short-term investors. Again, it speaks to when cash can make sense. If you wake up tomorrow and you have, I don't know, 20% less in your bank account that you are going to use to buy your lunch, that sucks. That hurts. That's damaging.

But on the other hand, if you wake up the cash that you can use to buy your lunch is earning a 3% yield instead of 5%, well, you can still afford your lunch. And you're not actually foregoing much interest because you're going to use that cash anyway.

Now long-term investors, it's kind of the opposite. They care less about volatility and more about how their expected returns respond to volatility. As an example, if a drop in the value of a long-term portfolio is offset by an increase in the portfolio's expected return over the investor's horizon, that drop in value is actually irrelevant to the long-term investor.

We talked about this a lot with bond funds in 2022 when bond price is kind of tanked but expected returns went up. And we are saying that this is good news. But that was a difficult message to deliver. There's a psychological piece where volatility is no fun regardless.

But for a rational long-term investor, volatility matters less if it's related to expected returns. If your expected returns go up when your portfolio value goes down, you're not as worried about it.

And so, based on that logic, the risk-free asset for a long-term investor is definitely not cash. It's probably a long-term inflation index bond in really, really simple terms. When you lock in your inflation-indexed future coupon payments, you don't really care about the price of your bond in the end term since a drop in its price is offset by an increase in its expected return. You can use your coupon payments to buy your lunch even if the bond price falls 20%. That's a simplification of the concept. But I think it still gets the point across.

Now to give the volatility perspective on that, long-term inflation index bond prices can be extremely volatile. And we saw that in 2022 in a big way. A short-term investor would still call the long-term bonds risky even if they're risk-free for the long-term investor.

Now cash doesn't change in price in response to changes in interest rates. Its nominal value is stable. And again, that's one of the reasons why people like it. And that is really good for a short-term investor because they want to be able to spend their cash today and tomorrow. But it leaves long-term investors exposed to the risk of falling expected returns.

And I think this is one of the big points to take away. Expected returns matter a lot for long-term investors because they're relying on their assets to generate returns far into the future.

My example earlier of if your interest rate on your cash changes from 5% to 3% but you're going to spend that money on your lunch today, it doesn't really matter. But if you need, I don't know, $50,000 per year for the next 30 years and you go and buy a 30-year bond, you're set. You can get your coupon payments even if interest rates fall.

But if you go and buy a one-year bond at 5% and then interest rates fall to 3%, now you've got a massive shortfall to fund for the next 29 years. What are you going to do? That's a huge liability. If expected returns fall, long-term bonds hedge your ability to afford your consumption to meet your needs in the future. But cash does not offer that protection. So just thinking about cash is long-term investment, I think that's one of the big deficiencies.

Now stocks are sort of like bonds, in the sense that when their prices fall, their expected returns rise. Noisy relationship. But it's still there. And I think this also means that like long-term bonds, stocks are less risky for a long-term investor than their short-term price fluctuations would otherwise suggest.

When expected returns fall long-term asset prices, like stocks and bonds, they'll tend to rise offsetting the effects of lower expected returns for long-term investors. And we saw a lot of that. When we had John Campbell on – I don't remember if we talked about this specifically. We probably did. But he's got papers on growth stocks being a good hedge for changes in market discount rates because they're very sensitive to that. Value stocks, maybe less so.

But anyway, the next piece that I think is important and it's related to the risk of not meeting your long-term goals is the cash just has lower expected returns. We talked about the hedging piece. It doesn't hedge changes in expected returns. But cash also has lower expected returns than stocks and bonds in most environments because there's no risk premium in the case of cash. Stocks and bonds have a risk premium above and beyond the cash expected return to compensate investors for taking risk in those riskier assets.

Now based on that, theoretically, we would expect that when interest rates increase, expected returns on stocks and bonds also increase. Now in the Dimson, Marsh, and Staunton data, that's exactly what they find going back to 1900. They've got their global sample of countries with continuous histories back to 1900. And what they do in their yearbook is they look at the five-year returns on stocks and bonds sorted on their starting real interest rate.

And we'll put the chart in the video. But you see this kind of monotonic increase of realized returns in excess of the cash rate basically is a persistent risk premium. So as interest rates rise, stock and bond expected returns rise theoretically. And empirically, that does seem to have been delivered. But it's kind of neat.

But it's also really important. Because if interest rates are high, expected returns, risk premiums are being left on the table if you hold cash. We can't just look at the 5% cash yield and say that looks pretty good compared to stocks. It's like, well, that's a judgment that the risk premium on stocks has changed because we don't care as much about the absolute return. You're still giving up expected return.

And then the reason that's an issue is that the consistently lower expected return on cash makes it much harder to meet your long-term financial goals. You've got to save more or spend less in the future to compensate for that. But then I think even beyond that, if we just look at, "So, okay, your expected returns are lower. You're not hedged against falling expected returns. Those are both not great."

Then if we go and look empirically, and this is from the Scott Cederberg stuff, investors have historically been much more likely to lose purchasing power. So now we're not just talking about while your expected returns were lower, you're actually losing purchasing power holding cash empirically. Well, at least in their bootstrap samples using historical data, Cederberg finds, and his co-authors, in a sample of 38 developed markets from 1890 to 2019 their 30-year bootstrap estimates of real loss probabilities for government bills is 37% compared to 27% for intermediate bonds, 13% for domestic stocks, and 4% for international stocks.

Cameron Passmore: How compelling.

Ben Felix: The main point there is holding cash of long-term investors, not so great. And it's actually interesting. When you look in their data, it's not just the probability of loss that's been greater in cash or in bills. But also, the magnitude. The worst-case outcomes for bills has been worse than the worst-case outcome for stocks at long horizons.

At short horizons, that's not true. Cash does its job if we can say that. At short horizons, it has been safer than stocks. But when you extend that time horizon longer and longer, in real terms, cash has been kind of risky. Kind of real risky.

Cameron Passmore: Real risky.

Ben Felix: Real risky in real terms. Now one of the things that I've also heard from talking to people is that, with cash rates where they are right now, "Well, I'll just sit in cash until the market drops. and then I'll get back in."

Now, of course, we have looked at the idea of ‘buying the dip,’ sitting on cash until a market decline. And in our work on this, we looked at market drops of 10% and 20%. So waiting, sitting in cash. It's like on day zero, I guess, you're making the decision of should I invest the lump sum in cash or should I wait?

And in the buy-the-dip strategies, we have the lump sum, where they just say let's invest today. And then we have to buy the dip strategies, where in one case you wait for a 10% drop. And then the other case, you wait for a 20% drop and then you invest a lump sum.

And we found that buying the dip trails a lump sum most of the time. And on average, by a pretty significant margin. And the 20% buy-the-dip strategy was worse than the 10%. That's I think just consistent with stocks and bonds having higher expected returns than cash, which just makes sense.

To finish on that, cash yields are high today, which I think is enticing. And we know empirically that tends to be the case. Enticing long-term investors to basically reduce their risky share of assets. Hold less risky assets. And again, anecdotally, I've had these conversations multiple times since rates went up.

I want to do a whole episode on this. But the other funny thing about expected returns and return expectations. I'm going to do an episode on that. Expected returns and return expectations. People's return expectations, which is distinct from like the financial concept of a discount rate. An expected return as a discount rate.

The returns that people subjectively expect, I think, and there's research on this, too, but also just anecdotally, people's return expectations are informed by recent history. The market kind of sucked. I mean, it hasn't been too bad this year. But say the markets kind of sucked last year. And so, people think markets are going to suck next year. They extrapolate from recent experiences. We know people do that. And again, we know that empirically. We also know it anecdotally.

People extrapolate on recent experience. When the market kind of sucked last year, return expectations go down. Right now, people are looking at a 5% cash yield. Rates just went up. Asset prices went down. So people see that and think, "Geez. My return expectations are kind of bad right now." But the funny thing is return expectations will tend to be – based on the scenario I just described, will tend to be inversely related to expected returns.

Cameron Passmore: Correct.

Ben Felix: It's kind of funny. There's a really good paper on exactly that. They have a whole bunch of survey-based return expectations. And they compare that to expected returns and they do find an inverse relationship. Anyway, there's a whole future —

Cameron Passmore: But anecdotally, that's what we live.

Ben Felix: 100%. Market sucked last year. People expect it to suck next year. But expected returns, that's why they're higher, which is hard. You could see why investors trail, whatever, the asset class they're investing in.

Cameron Passmore: Getting market returns is not easy. Simple but not easy.

Ben Felix: Yeah. People might be enticed to invest in these 5% yields because their return expectations are low for stocks and bonds even if expected returns are higher.

One of the big problems though is that expect the return on cash is unpredictable. The current yield on cash is not a good predictor of the long-term return on cash. And if expected returns decline while you're holding cash, you are not hedged against that decline at all. The opposite's also true. If you could hold cash waiting for interest rates to increase and asset to fall, that would be a winning move. But we already talked to buying the dip. Not so easy to get right.

Cash also has lower expected returns than stocks and bonds in all environments. Even as rates go up, the risk premium seems to be pretty persistent. The real risk premium in the Dimson, Marsh, Staunton data. And cash is much more likely to lose purchasing power in the long run, which makes it much harder to meet your long-term financial goals.

Holding cash, it can feel good. I get that. We've seen that in Adriana Robertson and James Troy's research that people just want to hold cash. And even more so at 5%. That's all reaching for yield idea or the inverse of that. But I think long-term investors are much likely to be better off in stocks and bonds in the long run than holding cash.

Cameron Passmore: Love it. That's it?

Ben Felix: That is it.

Cameron Passmore: Beautiful. That's great. Very timely, too. Okay. Shall we do a quick review of a past episode? This is where we give new listeners a chance to hear about some of our favourite past episodes and gives you a bit of guidance on which ones to go back and listen to if you're going to go back through the 264 episodes plus your crypto series. It's a lot if you want to dig in. Our goal is to make it a little bit easier.

And David Booth was here on episode 131, which was certainly a highlight for me. I know for us, David is a super important figure in the index fund revolution. Had an unbelievable career. And it was a pretty cool conversation. With that, I'll see if I can do a quick summary in one minute.

This podcast is about sensible investing and financial decision-making. At the root of each of these is science. Our goal is to bring rational findings so you can implement better solutions and ultimately have a better life. And a business leader that absolutely epitomizes this as David Booth, who was our guest on episode 131 back in the beginning of 2021.

David was on track for a career in academia. And he studied under Professor Fama. But decided implementing these ideas he was learning into real-world solutions was far more important to him.

He then joined Wells Fargo where he was part of launching, yes, the world's first index portfolio in 1971 five years before Vanguard did it. Then in 1981, he co-founded Dimensional to offer institutional investors access to the benefits of diversifying into small CAP stocks. And then in the 90s, they open up their portfolios to financial advisors to deal with individual investors. And that's what led us to discovering Dimensional.

David shared the story of how they grew up to become what they are now, an $800 billion success story. He also tells how he got other giants like Fama-French and McQuown to become involved in his mission. Dave has been a big part of the index fund revolution.

And this conversation, in my opinion, is a must listen to learn about how it all happened. That was David Booth back on episode 131.

Ben Felix: A little over a minute. But worth it. Well worth it.

Cameron Passmore: Worth it. Yeah. I think the world of David. Had interactions with him for over 20 years. And just solid, great person.

Ben Felix: I agree with that assessment.

***

Cameron Passmore: For the book review this week, we do something different. This is really fun actually where you get interaction with a listener who has an idea and shares his idea and links it to the book reading.

A long-time listener, Michael Trembley, reached out. He's an expert in Stoicism. And offered to join us to talk about Stoicism and how it relates to the Rational Reminder. And he knew we did book segments. He proposed the book. The book is The Handbook of Epictetus, which is available widely. The PDFs online. I got it on my Kindle. Although the way it comes down into Kindle, I guess it's a PDF on Kindle. So you can't actually take notes from it. But it is available widely. It's not expensive in the PDF. There's many PDFs for free online.

Michael writes about the benefits of Stoicism, which is an ancient philosophy focused on using rational decision-making to manage your emotions and live well. Michael has a Ph.D. in philosophy from Queen's University where his dissertation focus on strategies for self-improvement in Stoicism.

He's a co-founder of the Stoa Meditation App and co-host of the Stoic Conversations Podcast, which both focus on helping people live happier, better lives through Stoicism. I've checked out his podcast, they're great. Him and his co-hosts are really good. It's excellent.

He's also a management consultant working with leaders in the private, public and community sectors on issues that have a substantial positive influence on people's lives. He recommended, like I said, The Epictetus Handbook. It's short. It's excellent. It's interesting. It's a great read. And instead of just me giving a review of the book, we thought it'd be fun to welcome Michael on to talk about us. Let's go to our conversation with Michael Tremblay, who joins us from Toronto.

Michael Tremblay, welcome to the Rational Reminder podcast.

Michael Tremblay: Yeah, thanks for having me.

Cameron Passmore: It's great to have you. Thanks for suggesting this segment. I think this is a really interesting material and yet, a good format idea. So thanks for that.

Michael Tremblay: I thought it was very applicable to listeners. I think it would be helpful for those that are interested in investing, interested in the content you're putting out. Glad to talk about it.

Cameron Passmore: That's awesome. Off the top, what is Stoicism and who is Epictetus?

Michael Tremblay: Stoicism is an ancient Greek philosophy. I'm going to assume people maybe don't nerd out on philosophy the same way I do. But ancient Greek philosophy, this is like 300 BC in Athens. There's a lot of different schools of philosophy back there. And they really looked at philosophy as a way of life.

You think of this as something before Christianity. It was a way of establishing your values. A way of thinking about the right way to live. Stoicism is one of those schools. Again, around 300 BC, it originated. And it was really popular all the way into the Roman Empire. For around 500 years until Christianity took over, as I would say, the major cultural and religious approach to life.

And Epictetus is a stoic. He was really interesting because he was actually born as a slave. He's born as a Roman slave. Lived in slavery for the first 30 so, however many years of his life. Studied Stoicism while he was a slave. Had that opportunity. And then he gained his freedom. And when he gained his freedom, he left Rome and opened up a school of stoic philosophy and taught there.

And so, one of the major stoic texts we have is actually notes from his lectures. A student writing down what he was saying to students and the debates he had in classrooms. And that gave us a perspective into stoic philosophy.

Ben Felix: What would you say is the key idea behind Stoicism?

Michael Tremblay: There's a couple different ways to think about Stoicism. But I would say the main idea is that what makes a good life, what makes – when you're judging a person. You can think about somebody on their funeral. Say, what makes a good life is that that person made good decisions with the situations they had. It's a focus on the internal instead of the external.

If you think about this in terms of we're judging a poker player. We say, "Well, the poker player is the person who plays the cards they're dealt the best of their capacity." If you think of an investor – and I want to try some investing metaphors. So feel free to change those around if you have a better one.

But we're thinking about relative return instead of absolute return. If somebody doubles their investment, that's a better investor than if Bill Gates makes a million dollars. But that happens to be a minuscule return.

So Stoicism is this real concept of what matters is your choices, your decisions, your character. These kinds of responses to situations. Rather than external results. Because external results are all – they're muddied up by chance.

First of all, there's kind of a practical consideration about why you should focus on yourself. But then there's also just the kind of value claim, that really what you should actually be focusing on is yourself because that actually is what matters at the end of the day.

Cameron Passmore: You mentioned investing. How can Stoicism help everyday investors make more rational decisions?

Michael Tremblay: First of all, Stoicism offers a set of tools. If people are hearing about Stoicism for the first time, you might think of just the adjective to be a stoic. And it's like, "Well, where does that come from?"

Well, it comes from this idea that people who are good at focusing on themselves, people who are good at focusing on the decisions they make rather than outcomes, find themselves a lot less emotionally stressed, a lot less perturbed by the situations because they're always thinking, "Okay. Well, what can I do now? How can I respond or react in this situation?"

There's this emotional aspect of Stoicism, this kind of cool-headedness. And that cool-headedness comes from adopting this growth mindset and adopting this focus on what's in your control.

And so, the first thing that I think investors can learn is just that kind of mindset shift. I mean, I think a lot of people are already doing it. I think that's something that you emphasize in your podcast and then you're working more generally. But there's this focus on decision-making as the core of good investing, rather than results, rather than experimentation, rather than big risk. But thinking about, given my values, given what I want out of this situation, what's the best decision I can make? And then there's actually a kind of a psychological strategy to staying in that mindset. And The Stoics offer a bunch of tools for doing that.

I would say the second thing is that The Stoics argue that this is not just the way you should approach investing. This is the way you should approach the entirety of your life. So if somebody is very not stoic or very not rational in their decision-making outside of investing, then there can become this big jump. I have to treat my portfolio this way. But I don't treat the rest of my life this way. And I think the stoic argument would be, "Look, this is the right way to approach all things with this emphasis on clear evidence-based decision-making."

And I would say the third way is that The Stoics offer a really clear conceptual model with what we should care about going wrong. And this is something that I use in my own life. And Ben, I think you either said it in a YouTube video or you said it on a podcast episode and is this idea of what determines whether a decision was good or not is the decision itself, not the outcome of that.

And so, it's the same kind of thing where if when something has gone wrong, you're looking to the external circumstance. You're making yourself vulnerable to chance and vulnerable to these things outside of your control.

Wherein Stoicism it says, "Look, something's only gone wrong when you made a bad decision." That's the only time something's gone wrong because that's the part that we're evaluating here. That's the part that we should care about is those decisions that you make.

In those ways, it's kind of a defensive-like philosophy. And to say, "Look, if I can get through this situation without making a mistake, without jumping to a conclusion, telling myself a story that's not true, getting caught up in the hype or something or getting too greedy, too fearful. If I can make it through this whatever historical event, this timeline horizon, whatever it is, without making those mistakes, then I've done pretty good. Because that's what I should be looking at and evaluating.

I think that focus on mistakes as coming down to the decisions you make. I think that defensive approach to living is also a really helpful approach I would say to investing. And also, I should say wealth management more generally.

Ben Felix: You mentioned that The Stoics have tools that people can use. Can you talk about some of those tools?

Michael Tremblay: The first main tool I would say is the dichotomy of control. The dichotomy of control is just a mental model, which is to say, "Look, there's some things that are up to you. Some things that are not up to you." This is a core division of all things, right? Anything you look at, it's either up to you or it's not. That's a descriptive claim.

And then there's this idea that we should then focus on the things that are up to us. So there's this kind of value claim. That given that there's these two types of things, you should focus on the things up to you.

The dichotomy of control then as a tool, it's almost like a mantra. It's something you repeat to yourself or something you keep in mind. In any situation, you think, "Well, okay. Let me just consider the dichotomy of control right now.” Let me just think you know, "Is this a thing that's up to me or it's not up to me? If it's not up to me, maybe I shouldn't be getting so stressed about it. If it is up to me, I better make sure I do the right thing. I better make sure I put the work in. I make the correct decision." There's that one tool, the dichotomy of control. Really, really famous one.

The second one, The Stoics have all these tools, again, for staying even keel through the kind of turmoil that comes in any investment decision or in life. The second is the premeditation of evil. And what is meant by that is this idea that bad things can happen. If you think about those bad things beforehand, when they do happen, it's less of a surprise.

And so, if you think of this in terms of investing, I might think there's going to be a natural market downturn. These are going to happen eventually. These are going to be kind of black swan events that might take out a large chunk of your portfolio.

And if you've never considered that possibility, you haven't actually emotionally internalized that. The first time it happens, it's going to really freak you out and it might lead you to doing something silly.

The second tool is just premeditate. So actually, just think about that. Anticipate the kind of things that can happen. And it's not to be pessimistic or negative. It's to be emotionally prepared for these things when they do come about. That's the second tool.

The third tool that The Stoics use – and I think this is really cool. Because this is 2000 years ago. They're writing this still super useful and applicable, is what we call the view from above. And that's the idea that when you get caught in a situation, actually pull yourself out of yourself and imagine yourself looking down literally from the sky on the situation to give yourself context and perspective.

And that's a great tool to use when you're feeling very stressed about a specific situation. But you can also do that, you can take a view from above spatially. You can zoom out and look down from the sky. But you can also do it over time. And you can take the view from above across a long-time horizon. And so, when you do that, again, thinking of the kind of variations and investments and your portfolio.

Well, something that is stressful on a day-to-day if you zoom out and you think about it in terms of a year, five years, ten years until you retire, that's not actually something that deserves the kind of emotional stress you're giving in the moment. If you zoom out, it's not really a big deal at this day-to-day, week-to-week, month-to-month fluctuations.

Again, those three. Dichotomy of control. Something's up to you. Some not. Premeditation of evil, which is just consider that bad things happen. Accept those. Internalize them. Think about them so you're ready when they do. And then view from above, which is if you're stressed in the moment, you feel like you might be making a bad decision because of it, zoom out and see if that changes the kind of criteria for your decision.

Ben Felix: It's really interesting. And I'm not an expert in this at all. But a lot of it sounds like cognitive behavioural therapy.

Michael Tremblay: Cognitive behavioural therapy is explicitly stoic. The founder of cognitive behavioral therapy took Stoicism and said, "Look I want to make this into a contemporary psychological method."

Ben Felix: There you go. Cool. You touched on this already, but I want to make sure that we ask about it explicitly because I think this is one of the reasons that you've got in touch and wanted to come on. Can you talk about what Stoicism has in common with the rational reminder approach to investing?

Michael Tremblay: Yeah. And I mean, you correct me if I'm getting the rational reminder approach wrong. I'm a fan. This is my perspective. I would say first, one part about Stoicism that I haven't introduced yet, because obviously there's a lot here, is the main stoic idea about how you should live. Okay, focus on yourself. Live well. But what does it mean to live well? Well, they would say it means living in accordance with nature.

And what they mean by nature is not the trees and the animals, but the facts of the universe. They say live in a quarter with the facts. That's what it means to live well. So don't make up a story. Don't have an ego that's based on something that isn't true. Don't get caught up in lies that make you feel better. Just live in accordance with the facts the way they are.

I think first of all, the rational reminder approach to investing I would say is one that's evidence-based. There's a humility with that and there's an effort with that. The right approach to investing is one that is borne out by the facts. It's not driven by a bone to pick. It's not driven by some sort of position that you're worried about advocating. And that position – if you do have a position you're advocating, it's because it's born out in the research, in the literature. And it will change if the literature changes or the research changes. That's one thing, is living in accordance with the facts.

Marcus Aurelius, emperor of Rome, was a Stoic. Has a great quote where he says, "Look, I would not be a Stoic if you can prove to me that it's wrong. I'm looking for the truth. I'm not looking to defend Stoicism." And I would say that's the thing, is this idea in your investing and in your living accordance with the facts. Then update how you live based on changes to the facts.

Second thing that I would say is – I've already hit on this. But I would say that your approach to investing in Stoicism are both about maximizing what's up to you. That dichotomy of control. Focusing on the parts that are up to you.

We're not going to evaluate success or failure by these absolute returns as I talked about earlier, but on did you make good decisions with the money you had? Did you allocate it properly? Were you responsible in kind of emotionally difficult situations?

And the third thing, which is one thing that I really like about your show, is Stoicism – ancient Greek philosophy in general and the rational reminder, you encourage introspection about your values, about your goals out of life.

When you're evaluating something, you have to evaluate it in relation to your goals, in relation to what you want at the end of it. And so, this idea of, "Well, what do I want retirement to look like both in my timeline and in the kind of the way I live? And do I want to have some money left over that I distribute to my children? Do I want to use it all up so that I can have kind of the life that I want? Do I want to donate some of it?" You have to have these questions answered. What that good life looks like to you? And then you can invest appropriately.

And so, Stoicism is also about evaluating what you think a good life looks like to you. Evaluating what your values are. And understanding that you're not really able to have success or failure. You're not really able to evaluate those terms without being clear on your own values. But I think it would take that, it would extend that beyond just investing and extend it to the rest of your life.

Cameron Passmore: I want to touch on that part you mentioned about stuff being up to us. Can you explain more about the stoic distinction between what is up to us and what is not up to us?

Michael Tremblay: This is something that people often get confused about. For Stoicism, what is up to us is exclusively our minds. Exclusively, the choices and decisions that we make. So they have this model of psychology, which I think there's some variation now. But it's borne out to a certain extent in modern psychology where we receive an impression or the world seems to us in some sort of way. We feel a certain way about something. And then there's – before we commit or act on it, there's this pause. There's this gap.

And so, that space between you know impression and then belief, action, choice, that's really where our freedom is. That's where our ability to improvise, determine ourselves, that's where that is. And that's the most important moment. Not only is that the most important moment. But that's ultimately the only thing that's up to us. Because the impression that we receive is not up to us. The consequences of my decisions aren't up to me. And then certainly, things like my reputation, my body, my wealth or portfolio, these are not up to you at all in an absolute sense. Because there could be some sort of catastrophic event or something like this that could take this all away.

What's up to you is really that psychological process. And that's where they put our identity to. That's where they say that's who you are, is that thing that can make decisions. That's really what matters.

Ben Felix: What does Stoicism have to say about the role of emotions in investing?

Michael Tremblay: Yeah, it's a good question. Because when you think about a stoic, you think of somebody who's not emotional. But the stoic idea of emotions, the stoic theory of emotions is the idea that emotions are value judgments. So sometimes if you haven't thought about emotions a lot or haven't thought about this aspect, you can think of emotions as sometimes being these irrational things, these parts that kind of bubble up the subconscious. And Stoicism was these proto-psychologists. They're the first to really point out in a way that's been borne out in modern neuroscience, the results of judgments.

If I think something good has happened, I feel happy. If I think something bad has happened, I feel sad. If I think something bad, bad might happen, then I feel fearful. I feel afraid. The stoic goal for emotions is not to not have emotions. But it is to only have the emotions that come from true value judgments. So actually correct judgments about the world.

You two might have better examples. But I think something like my portfolios dropped 2% in one day and I think, "Wow. My life is ruined. This is terrible. This is the start of a huge market crash. I better withdraw everything." That's a fearful reaction. That's not based in reality. That's not borne out by the facts of the situation. And so, that's an unhelpful emotion. That's an incorrect emotion. And those are the kinds of emotions we're looking to eliminate.

Likewise, if your portfolio goes up 2% and you think, "Wow. This is amazing. I'm going to be able to retire way ahead of schedule if this keeps up for the next couple weeks. My problems are all over." That's also a positive emotion, but it's an unhelpful emotion and one that leads, again, to foolish decisions later on.

The Stoic advice for emotions and investing is that, look, I don't want to be cold. Epictetus says this thing, like we shouldn't be cold like a statue. But what we should be careful is that, when we indulge in emotions, we want to make sure as much as possible that those are based on things that are true and that we really believe.

And if we're making up stories, if we're making up stories about our investments, about our portfolio, what that means for our lives, those stories are going to lead to emotional reactions that are unhelpful even if they're kind of maybe pleasant in the moment or even if they feel appropriate because everybody else is doing it. That's when you think about someone being stoic. I think in an investing context, I think of that person being kind of even keel through these variations because they're not attaching. They'll just stay in that level of description. Not at that level of storytelling.

So, okay, the markets went up this much today. That's a description. But there's no story there. Okay, the markets went down this much today. That's a description but there's no story. It's only when you have that story do you start feeling that kind of emotional variation, which ultimately a lot of people have trouble even investing long term because of that kind of turmoil. They'd rather stay in cash. They'd rather stay in something that's maybe less optimal but higher security just because of the emotional fluctuations that come with the value fluctuations. I think having that stoic approach not only does it make you sleep better at night but it will I think have better returns, too. Help you achieve your goals.

Ben Felix: You already explained this. But there's so much cognitive behavioural therapy in there, where it's like catastrophizing based on the 2% down day and then it's stepping back and asking, "What are the facts?" That's fascinating stuff.

Cameron Passmore: What does Stoicism have to say about death and investing?

Michael Tremblay: This is one thing that I wanted to talk about because I think it's an important one. I talked about the premeditation of evils and things like that. But Stoicism is about, as I said, living in accordance with the facts. It's about accepting the facts of life.

One of the facts of life is that we'll all die. The three of us, we're all going to die. But it's not a very fun fact. So it's not one that we always like to talk about. But because it's not fun, it can cause a kind of, I would say, mental blind spot. So then when you're doing your investing decisions, when you're doing your long-term planning, if your long-term planning in terms of kind of your death as a blind spot, then either you're not comfortable talking about it or you don't have those conversations to the best of your ability because it makes you uncomfortable. Then you're not planning optimally.

And so, The Stoics looked at death as not a thing to be avoided or not a thing to be ignored, but something that you want to do well like everything else. You want to die well. So your question doesn't become, "How can I avoid death?" It becomes, "Well, when it's time to die, how can I die well?"

And when I think about that in terms of portfolio management, I'm hopefully still a long ways off. Maybe not. But when I think about that in terms of portfolio management, I think about that not as retirement. That's not the end goal. But the end goal is, "Well, when I pass away, in what state do I want my portfolio to be in? What do I want to have left over for other are people? What do I want to have spent?" And having that, incorporating that actually as part of my decision-making process rather than having retirement as this end goal.

Because I think sometimes you can have retirement as an end goal because it's a very nice score. It's very like, "Wow. That's when it's beaches and sailing. And that sounds great." But instead, actually looking at the whole journey and each part of the journey, death included, I think is really important. And The Stoics had this phrase called memento mori, which is just Latin for remember that you will die. And it's something that underpins your decision-making process.

Another part I should say to this also is actually the opposite end of this is you get people who maybe over-save because they think – you talk a lot about the 4% rule of the 3% rule now. And this idea of, "Well, after I retire, I'm going to live for another 40 years." I think of something like fire for example. There's this almost assurance of like I'm going to not enjoy my life now because then I'll get to enjoy it for that 50 years in retirement.

And something about memento mori is just the idea of well that's not 100%. That's not a certainty. And that's not to say don't commit to fire or don't not save for retirement. But just saying live according to the facts, which is the fact that you don't know. You can only have a certain degree of confidence.

And it's not the funniest thing to talk about, but I think it's important. And I think it's helpful and The Stoics think that that memory of death permeates all of your decisions and helps them actually be better if you can figure out how to do that well.

Cameron Passmore: That's really interesting. Michael, I have to ask you our typical final question. How do you define success in your life?

Michael Tremblay: I've defined success always as to love and to be loved. I define it as like good personal relationships with the people close to me. And I view work, study, anything else, as the capacity to be better in those roles. So, like, as I gain skills, it puts me in a better position to support the other people that are close to me. Really, that's what I would view success, is being able to enjoy those relationships with other people effectively, I would say.

Cameron Passmore: Great answer. Michael, thanks for joining us. This has been great. And thanks for reaching out and recommending The Handbook of Epictetus.

Michael Tremblay: Yeah, thanks for having me. It's great.

Ben Felix: Thanks, Michael.

***

Cameron Passmore: That's pretty cool though Michael on.

Ben Felix: Really cool. And he's right. He got in touch because the principles of Stoicism line up pretty nicely with a lot of stuff that we talk about on the podcast. And hearing him go through that information, they do line up.

Cameron Passmore: And as we said to him, even though this segment's after your part about investing in HYSAs and high-interest rates, he teed it up perfectly by saying are you going to stick with how are you going to make the decision based on rational decision making or the emotion at that time? You might find 5% emotionally appealing. But you just demonstrated that it's perhaps not rational if you're a long-term investor. It was a perfect setup.

Ben Felix: I love when that happens when topics line up like that.

Cameron Passmore: Yeah. And it actually happens more often than you think. Purely accidentally.

Ben Felix: It makes it seem like we have a grand vision for each episode.

Cameron Passmore: Grand chaos. Last week, I had like the ultimate week at the cottage. Unbelievable weather. Seven solid days of like perfect weather. Somehow, the lake where we were, West of Ottawa, dodged all these storms that came through Ottawa. We had a terrific week. And you know my old saying, if you can lean, you can clean, which is a line we used to use at the butcher shop I worked in as a kid. I now change it to, "If you can lean, you can learn." I cranked out last week eight books. If you can believe it.

Ben Felix: That's a lot.

Cameron Passmore: It's a little insane. It's a little crazy. Brings me up to 43 for the year. Just so many great books. It was so much fun just to hang out on the dock. Of course, the 23 and 23 challenge is still going on, which you can join at the website. Our website, rationalreminder.ca.

Ben Felix: I do want to mention actually, because while you were on the dock reading books, I was also reading a book. I read Cass Sunstein's book to prepare the questions that we would ask him, which we've now done. I think this is a fine area to share it.

You tweeted, thanking him for coming on. And he co-tweeted you and said, "This was probably the best and most probing interview I have ever had all about decisions about decisions." Many thanks to Cameron Passmore and Rational Reminder. That was a cool interview. That's upcoming.

Cameron Passmore: Yeah, it's next week actually. He was incredible. Many people recognized the name from Nudge he co-authored with Richard Thaler. What a nice, brilliant communicator. How he communicates in such plain language, which was one of our hurdles we thought about. Because the book is fantastic. However, it is not an easy read.

Ben Felix: No. It's dense material.

Cameron Passmore: But the conversation was a very easy conversation.

Ben Felix: Well, I think I said this in the intro to that episode, that as we're going through the book, it's like this is dense stuff. But it's important stuff. If Cass can pull off making this interesting, it's going to be an incredible episode. And he sure did that. Anyway, so people I think will enjoy that coming up.

Cameron Passmore: Speaking of other guests coming up, we're going to keep doing having authors join us for the book review. We've lined up Matthew Dicks, who wrote the book called Storyworthy. Just a great book. So he's coming on. Brittany Hodak wrote a book called Creating Superfans, which is a really cool marketing book. She's going to join us.

And then we also have two friends of the podcast coming back, Preet Banerjee and Rob Carrick are going to be coming up in the next month or so. Two separate episodes. And then you found academic, Itzhak Ben-David, who's joining us.

Ben Felix: That'll be a great episode.

Cameron Passmore: Yeah, I think we're now booked up through the end of the year almost.

Ben Felix: We might have one spot left. But, yeah. It's mostly booked.

Cameron Passmore: Mostly booked. Do you want to take a look at this first review we got?

Ben Felix: Gigapeck. I don't know what that means. It makes me feel like I should get back to bench pressing. Gigapeck from the United States says, "Finance explained. The track list of guests and topics is unbelievable. It is the pinnacle of financial education. A profound thank you to the hosts for the public service." Very nice.

Cameron Passmore: I had a bunch of emails and pitches on LinkedIn. We got an email from Simon who's a financial advisor near Montreal saying, "I've listened to your podcast for years now almost since the beginning. And I chose to begin my practice in financial services in some ways, thanks to your work. Keep the work going. I love to listen to you, your everyday insights and guests while doing everyday stuff."

Max from Germany on Linkedin reached out saying, "Hi, Cameron. Just a quick thank you for the great content you and Ben keep producing. Since I started watching in 2019, you guys had a huge positive impact on my investment strategy, the way I give advice to my clients and on me as a person. The way you explain complex topics in easy-to-understand terms, it's just phenomenal. And the high-quality conversations you have with guests on the podcast made me learn so much about many different aspects of life. You made me realize that I chose the right career path, the right employer and what motivates me. Thank you. Best wishes from Germany. Keep up the outstanding work."

Here's another interesting one. Harry from New Zealand reached out and wanted to thank us and connect with us, "I'm a listener of the Rational Reminder Podcast and a member of the online community. I'm wondering if you'd be willing to ask some questions I have around setting up my own independent wealth management business acting as a fiduciary."

He actually grabbed my Calendly link and my Twitter handle and set up a time. We had a conversation earlier this week. Just a great guy in New Zealand. Really thoughtful questions. Young guy. But with people like that coming through the industry, if that represents what the industry will become, it's in a good spot, which is pretty cool.

Ben Felix: That is very cool.

Cameron Passmore: In the community, Ben, any updates?

Ben Felix: Yeah, it's worth mentioning that we do have CE credits, continuing education credits, available for both FP Canada and CRO, the Canadian Securities Regulator. We created a bunch of those courses. They've all been accredited.

Fewer people than we had hoped have signed up to take these courses. Maybe this was just a bad idea and people don't want to take these CE credit courses. I think it's a kind of a good idea. And maybe just not enough Canadian financial advisors have found the product yet. They're really good courses. They're really nicely designed questions. And I think listening to those episodes and then doing the questions is probably a valuable learning exercise. Maybe people don't want that when they do their continuing education credits. Maybe they just want the quick easy ones.

Cameron Passmore: But if you're listening anyways.

Ben Felix: Yeah, if you're listening anyways. Yeah. I don't know. Anyway, if you're a Canadian financial planner or registered with CRO as an advisor and you need your CE credits, because we're coming up to the end of the year, then we do have learn.rationalreminder.ca. We have a bunch of courses available.

If more people sign up, we'll keep making courses. But as it sits now with the amount of people that have signed up, we probably wouldn't keep making new courses.

Cameron Passmore: Coming up, we're going to Future Proof in Southern California. Just over a month away, Ben, if you can believe it. I think we're going to meet a lot of advisors ahead. Oliver reached out from the UK this morning. Saw that we were on the agenda. So meet up with him at some point. I think we'll meet up with a lot of other people.

We're having a Canadian breakfast on September 11th down there. If you want to join us, you can email info@rationalreminder.ca. We're doing a live recording of an episode at Future Proof on Tuesday morning at 9am on the Social Audio Experiment Stage. Hal Hershfield, our good friend, will be our special guest, which will be very cool.

We're also recording a live interview with the CFA Toronto Wealth Event on September 21st during the day. And that evening, we're hosting a meet-up in Toronto for any listener that wants to come out. Again, reach out to info@rationalreminder.ca if you want to come join us.

Anything else?

Ben Felix: I don't think so. I think that's good.

Cameron Passmore: People can reach us as always. We're on – do you still call it Twitter or is it Zitter? Changes name as a Zitter? I don't know.

Ben Felix: It's just called X.

Cameron Passmore: X. It's on X. We're both on X. We both have Calendly links on there. If you want to set up a time, help yourself. Both on LinkedIn. It's really cool. That email we got this morning is pretty cool.

Ben Felix: I feel like we need permission to share that.

Cameron Passmore: Don't share. I'm just saying, we got this email. It's pretty cool.

Ben Felix: We got an email from someone who it was very cool to get an email from. That's as vague as I feel I need to be. But they listened to our podcast and they're interested in coming on as a guest. But it's someone who I was familiar with and was excited to receive an email from.

Cameron Passmore: Yeah, it's just a kind reach out. People are still kind like even how Professor Cass Sunstein comes on. I started reading the book. And this Sunday morning, emailed him. And he responded and said, "Sure."

Ben Felix: Yeah. Well, I think Mark talked about that, too. Michael sent you an email. It's the same thing. People are perceptive and nice most of the time. We have this experience all the time where we send emails to – like you just said, with Cass. People that we feel like we have no business talking to. You show an interest in their work and people are receptive.

Cameron Passmore: I guess that's how the world revolves. Excellent. All right. Great episode. Thanks, everybody, for listening.

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Mark McGrath on X — https://twitter.com/MarkMcGrathCFP

Michael Tremblay — https://www.tremblaymichael.com/

Stoa Meditation Website — https://stoameditation.com

Stoa Letter — https://www.stoaletter.com

'Reaching for yield: Evidence from households' — https://doi.org/10.2139/ssrn.4283008

'Crash beliefs from investor surveys' — https://doi.org/10.3386/w22143

'Who should buy long-term bonds?' — https://doi.org/10.1257/aer.91.1.99

'Portfolios for long-term investors' — https://doi.org/10.1093/rof/rfab038

'Presidential address: Discount rates' — https://doi.org/10.1111/j.1540-6261.2011.01671.x

'Long-horizon losses in stocks, bonds, and bills: Evidence from a broad sample of developed markets' — https://doi.org/10.2139/ssrn.3964908