The Rational Reminder Podcast Benjamin Felix & Cameron Passmore

During this episode, we welcome back Eduardo Repetto, Chief Investment Officer of Avantis Investors. In his leadership capacity, he directs research design and the implementation of strategies and oversees the investment team and marketing initiatives. Our conversation kicks off with Edoardo’s explanation of how Avantis systemizes active management before we dive into strategies for launching in Europe and beyond. He weighs in on the most significant capacity issues that people face today, offering solutions to tweak your approach. We touch on what makes Avantis strategies preferable for advisors and Eduardo shares his insights on the future of small-cap value strategies for emerging markets. We discuss short-term reversals, towing the line between growth and value and factors that should inform asset allocation before diving deeper into small-cap value in the US and Canada. Tune in today to hear more. 
 
Key Points From This Episode:
 
(0:05:51) What sets Avantis Investors apart from other investment firms. 
(0:09:26) Five strategies for launching in Europe starting with free and equity UCITS.
(0:14:00) Accessing UCITS and adapting strategies in accordance with currencies, geographical regulations and restrictions. 
(0:22:49) The most significant capacity issue: an inability to invest cashflows. 
(0:27:59) Feedback from the advisor community on why they are choosing Avantis strategies. 
(0:32:43) Eduardo’s view on the future potential for the emerging markets small cap value strategy. 
(0:35:58) Improvements and adaptations to portfolio implementation at Avantis since 2019.
(0:39:01) The controversial nature of short-term reversals and advice for investors thinking about growth and value.
(0:44:40) What should inform asset-allocation decision-making.
(0:45:46) The potential of expanding into a Canadian base. 
(0:50:16) Mark’s thoughts on small-cap value in the US and Canada. 
 
Quotes:
 
“We have to adapt to the regulatory framework. But the strategies are the same. We manage the strategies in the same way, with the same people, with the same philosophy.” —  Eduardo Repetto (0:17:44)
“Just expand the offering. Anywhere we go, we do the same because that's the right thing to do. That's the right thing to help people that trust you on day one.” —  Eduardo Repetto (0:21:52)
 
“So, if you think about our valuation, we are using today's profits as a proxy for future profits. Can you improve that proxy? Can you have something better to say, about not level, but changes in level?” —  Eduardo Repetto (0:41:16)
 
Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Eduardo Repetto on Linkedin — https://www.linkedin.com/in/eduardo-repetto-653231155/
Avantis Investors — https://www.avantisinvestors.com/
Episode 313 — https://rationalreminder.ca/podcast/313
Econompic  —  https://econompicdata.blogspot.com/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

In this episode, we sit down with Professor Valentin Haddad to unpack the intricacies of market elasticity, passive investing, and the dynamic nature of financial markets. Valentin is an Associate Professor of Finance at UCLA Anderson School of Management and a research fellow for the National Bureau of Economic Research’s Asset Pricing Program. His research focuses on how financial institutions trade, and manage risk, and their impact on market prices and the broader economy. Notably, his work challenges traditional assumptions, such as the perceived safety of life insurance companies' investments in Treasuries. In our conversation, we delve into the impact of index funds on the market, stock market bubbles around the development of new technology, and the response of investment-grade corporate bonds to the COVID-19 crisis. Discover the definition of demand elasticity, strategic interaction, and how market elasticity has changed over time. Explore how he defines a market bubble, ways stock market bubbles are related to new technology, and how to measure the value of innovation. We also discuss the impact of COVID-19 on investment-grade corporate bonds, the Federal Reserve’s response, the implications for bond safety, and much more. Tune in and join us as we uncover the mess of the market with Professor Valentin Haddad!
 
Key Points From This Episode:
 
(0:03:10) The impact of passive investing on financial markets, what investors’ demand elasticity is, and the role of index funds.
(0:06:07) Learn about strategic interactions, their influence on financial markets, and how they react to rising passive investing. 
(0:10:10) Why active investors’ options are limited in a passive investment landscape and how demand elasticities influence asset prices.
(0:13:05) How individual investor elasticities are related to aggregate market elasticity and the ways investor elasticity has changed. 
(0:20:54) Large and small stock elasticity trends, the implications of his research for asset prices, and the relationship between elasticity and information.
(0:25:32) His opinion on a bubble in large stocks forming due to flows into index funds and how market bubbles drive innovation.
(0:29:31) Potential measures to address the issues with index funds and how individual investors should be reacting to the situation. 
(0:34:46) Unpack how he defines a market bubble, measuring the value of innovation, and their effect on the value of technology. 
(0:42:29) What his research findings mean for innovation policy and what to consider before investing in innovative companies.
(0:46:33) Insights from his paper examing the impact of COVID-19 on fixed-income and the different market reactions.
(0:53:40) Explore the Fed’s intervention during the pandemic, what effect it had, and the safety that bonds offer during a crisis.
 
Quotes:
 
“You choose how you trade based on how other people are trading. So, it's not really just what you like to do, but how you react to others in the market.” — Professor Valentin Haddad (0:06:40)
 
“If nobody's acquiring information, then markets are very inefficient. Then, you should step in, in a way. So, if everybody is becoming passive, there are more gains for being not passive.” — Professor Valentin Haddad (0:22:59)
 
“Speculation often comes with innovation.” — Professor Valentin Haddad (0:28:30)
 
“I think these concerns with passive investing are meaningful. I don't think it's quite yet the time for a very strong regulatory call. Regulators should keep track of this evolution.” — Professor Valentin Haddad (0:31:42)
 
“You can gain from bubbles, but at the end, the end of the bubble comes. The long-term gains of innovation are still there, but many people who partake in the bubble are going to suffer a lot.” — Professor Valentin Haddad (0:43:57)
 
Links From Today’s Episode:


Rational Reminder on iTunes — https://itunes.apple.com/ca

Low-cost index funds and digital tools have revolutionized wealth-building, making it easier than ever before to manage your own investment portfolio. However, additional support and expert advice can be critical to help you reach your financial goals, especially when facing complex financial decisions, feeling overwhelmed, or deciding to change your investment strategy. Today on the Rational Reminder Podcast, we discuss when it makes sense to hire a full-service financial advisor, whether or not every investor needs one, and how professional guidance can enhance your financial outcomes. You’ll find out how delegating your financial decision-making can not only boost your wealth but also improve your wellbeing, increase your peace of mind, and mitigate the impact of cognitive decline on your financial decisions as you age, plus so much more. For valuable insights that could transform your financial future, tune in today!
 
Key Points From This Episode:
 
(0:02:15) Why you would hire a financial advisor when DIY investing is so easy.
(0:06:35) The services that financial advisors offer and how you can benefit from them.
(0:10:09) What investor inertia is, how to overcome it, and what the trade-offs are.
(0:16:31) How delegating financial decision-making can improve wealth and wellbeing.
(0:18:16) Insight into the value of financial advice for retirement planning.
(0:22:17) Your Trusted Contact Person (TCP) and why they matter.
(0:23:05) Ways that financial literacy shapes demand and expectations for financial advice.
(0:24:21) Common reasons that people seek professional financial advice.
(0:26:22) How financial advisors act as a commitment device for good financial behaviours.
(0:27:47) Important considerations and questions to ask when hiring a financial advisor.
(0:32:43) Our after-show observations, feedback, banter, updates, and more!
 
Links From Today’s Episode:
 
Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP
‘Why Do Investors Hire Their Financial Advisor?’ — https://www.morningstar.com/financial-advisors/why-do-investors-hire-their-financial-advisor
‘Why Do Investors Keep Their Financial Advisors Around?’ — https://www.morningstar.com/financial-advisors/why-do-investors-keep-their-financial-advisors-around
Center for Fiduciary Excellence (CEFEX) — https://www.cefex.org/
 
Papers From Today’s Episode: 
 
‘Time Is Money: Rational Life Cycle Inertia and the Delegation of Investment Management’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2350785
‘The Use and Value of Financial Advice for Retirement Planning’ — https://www.pm-research.com/content/iijretire/7/3/46
‘Professional Financial Advice and Subjective Well-Being’ — https://www.researchgate.net/publication/359635224
‘Smoking Hot Portfolios? Overtrading from Self-Control Failure’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3347625

Discover the hidden underbelly of financial markets in today’s episode featuring Professor John M. Griffin, a leading forensic finance expert and the James A. Elkins Centennial Chair in Finance at McCombs School of Business at the University of Texas at Austin. Tuning in, you'll learn how forensic finance exposes illicit activities in crypto markets, revealing how entities like Tether (a cryptocurrency pegged to the US dollar) facilitate scams and money laundering. We also delve into the disturbing world of pig butchering scams, which have stolen more than $75 billion from victims globally, and how the victims of these scams have helped John study the flow of illicit funds in crypto markets. Find out how John uncovered massive fraud in the Paycheck Protection Program during the COVID-19 pandemic, and how this exposed the central role of fintech lenders and social networks in spreading fraud. We also discuss the importance of rigorous academic research and its practical implications in uncovering financial fraud, emphasizing the need for robust oversight and transparency in both emerging and traditional financial systems. Tune in for a thought-provoking discussion that challenges established practices and calls for greater scrutiny in financial systems!


Key Points From This Episode:
 
(0:05:23) An overview of John’s research,  the definition of forensic finance, and what sets forensic finance research apart from more traditional finance papers.
(0:09:55) The economics of pig butchering scams and how the victims of these scams help John study the flow of illicit funds in crypto markets.
(0:14:42) How crypto exchanges fail to monitor for potential scammer activity.
(0:18:44) The role of so-called legitimate crypto exchanges in criminal activity; why Tether (a cryptocurrency pegged to the US dollar) is the most important cryptocurrency in scam activity. 
(0:21:43) Unpacking the $75 billion figure in John and Kevin Mei’s paper on Pig Butchering and how it finances slavery; how this compares to fraud estimates from firms like Chainalysis.
(0:26:25) How the methods in John and Kevin’s paper can be used to improve the monitoring of crypto exchanges, and how the crypto community has responded to their paper.
(0:29:14) An overview of John’s paper on Tether with Amin Shams and how often fraud and misinformation are associated with asset price bubbles.
(0:30:52) What Tether is, the difference between it being demand-driven or pulled, and supply-driven or pushed, and why Tether creators want to inflate the price of Bitcoin.
(0:34:46) Decentralization in the crypto space and why decentralized finance is a misnomer, how to test whether Tether is pushed or pulled, and investigating Tether’s relationship to Bitcoin.
(0:35:56) How to test whether Tether is pushed or pulled; investigating Tether’s relationship to Bitcoin and how it can be exploited by bad actors.
(0:42:05) Tether’s response to John’s paper and why he tries not to listen to nay-sayers with vested interests.
(0:46:10) John and his co-writers’ findings on the prevalence of fraud in the Paycheck Protection Program (PPP) during the COVID-19 pandemic.
(0:48:05) The role of fintech lenders and social networks in the propagation of PPP fraud and the impact PPP fraud had on real estate prices.
(0:56:07) Policy implications and recommendations for future financial relief efforts.
(0:59:47) John’s personal journey and his profound definition of success.
 
Links From Today’s Episode:


Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — http

When witnessing the dramatic payouts of miracle trades, it's easy to be lured into thinking that your big score is just a few trades away. But as is evident in trading options for retail investors, it is neither quick, simple, nor easy to make guaranteed returns on your investments. In today's episode, Ben and Cam walk us through the many reasons why trading options is a losers’ game; especially for retail investors. Trading options is definitely today's hot topic and we unpack how the recent resurfacing of Roaring Kitty affirms how life-changing payouts are the exception rather than the rule. We dive deeper into trading options and their uses, the trading demographics of the current market, why trading options are an expensive choice for retail investors, and why people still choose to trade even when doing so at a loss. To end, Ben and Cam highlight the dangers of being a copycat and how social media adds fuel to the fire and we hear some heartwarming Rational Reminder Podcast reviews from a few of our dedicated listeners. 
 
Key Points From This Episode:
 
(0:00:48) Why today's topic is widely discussed in the current financial climate. 
(0:03:34) What we can learn from the resurfacing of Roaring Kitty. 
(0:05:35) A brief background on stock options and their various uses and the current state of retail trading. 
(0:08:13) Understanding the trading demographics at play in today's markets. 
(0:10:24) Discussing why trading options are expensive for retail investors. 
(0:12:35) Why people keep trading despite losing on average. 
(0:16:16) Exploring the dangers of copying successful traders and the role of social media. 
(0:17:17) The after show, headlined by inspirational Rational Reminder Podcast reviews from you, our dear listeners.
 
Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 
Rational Reminder Email — info@rationalreminder.ca 
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://x.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
 
Books From Today’s Episode: 
 
Wealthier: The Investing Field Guide for Millennials — https://wealthierbook.com/
 
Papers From Today’s Episode: 
 
‘Retail Trading in Options and the Rise of the Big Three Wholesalers’ — https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.13285

There is a huge range of factors that can impact our investment decisions, whether we realize it or not, from our level of financial literacy to our political affiliations. This is borne out in research conducted by today’s guest Professor Antoinette Schoar, the Stewart C. Myers-Horn Family Professor of Finance at MIT Sloan. Today, Antoinette joins us to share her insights and challenge conventional wisdom on various topics from target date funds to cryptocurrencies. Tuning in, you’ll learn about the transformative impact of target date funds on investment behaviours and asset allocation, before delving into the subject of financial literacy and financial advisors. Antoinette also sheds light on the unique dynamics of crypto trading and breaks down why retail investors' strategies in crypto differ significantly from those in traditional markets. We also discuss the complexities of private equity and venture capital, focusing on why these asset classes might not be suitable for retail investors due to high barriers and risks. Our conversation also covers the critical role of regulation in maintaining market stability and protecting investors. Join us for a thought-provoking discussion that promises to deepen your understanding of financial markets and enhance your investment decisions!
 
Key Points From This Episode:
 
(0:00:18) An introduction to today's guest, Antoinette Schoar, and her extensive research.
(0:03:44) The rise of target date funds in the American retirement system: how it’s affected asset allocation and trading behaviour of retail investors.
(0:09:39) The impact of target date funds: how they have affected mutual fund flows, arbitrage opportunities, market efficiency, the elasticity of aggregate demand, and trend-chasing anomalies.
(0:16:48) The influence of individual beliefs, like political affiliation, on financial decision-making and portfolio adjustments, and how to counteract it.
(0:21:54) Perceptions of risk in housing investments: how this affects the rent versus buy decision, what changes people’s housing risk perceptions, and how to make better housing decisions.
(0:29:29) Findings from Antoinette’s study on financial advisors and their effectiveness at undoing bias in their prospective clients.
(0:33:51) How investors' prior beliefs affect their receptiveness to receiving financial advice and why better financial literacy is essential.
(0:41:38) What consumers need to know about advisor compensation structures and what they should look for when seeking out financial advice.
(0:47:05) How Antoinette’s students motivated her to research cryptocurrency and teach it.
(0:49:40) Antoinette’s insights on the applications of cryptocurrency and blockchain, and some of the surprising positive outcomes from the rise in cryptocurrency.
(0:52:13) The trading behaviours of retail investors in cryptocurrencies compared to traditional asset classes.
(0:57:30) An analysis of the Terra Luna collapse explaining the systemic issues and resulting financial impact on smaller investors.
(01:02:14) The broader implications of cryptocurrency trading and the need for regulatory oversight to protect investors.
(01:06:05) An overview of the challenges and risks of investing in private equity and venture capital for retail investors.
(01:11:56) Antoinette’s reflections on success, professional goals, and the broader impact of research on financial markets and investor behaviour.
 
Links From Today’s Episode:


Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/