A weekly reality check on sensible investing and financial decision-making, from three Canadians. Hosted by Benjamin Felix, Cameron Passmore, and Dan Bortolotti, Portfolio Managers at PWL Capital.
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Have you ever wondered how vibes can shape the economy? Or how the economy differs from financial markets? Or even how meme stocks operate? In this episode, we dive into the intersection of economic theory, social media, and public sentiment with Kyla Scanlon, an insightful economic commentator known for her relatable approach to explaining complex economic concepts. Kyla is a prolific content creator and founder of the financial education company, Bread. She produces a weekly newsletter, informative YouTube videos, the Let's Appreciate Podcast, and (almost) daily short-form videos that break down complex economic concepts into engaging, bite-sized content. She's also the author of In This Economy?: How Money & Markets Really Work, an indispensable guide to the "mad math and terrible terminology" of economics. Join us as we explore her unique vibecession concept, discuss the impact of social media-driven market movements, examine the housing crisis through the lens of generational wealth transfer and zoning laws, and much more. As Kyla explains it, economics isn't just about numbers. It's about the stories we tell and how they influence the world around us. For a fun, fascinating, and highly accessible look at the state of the economy today, don't miss this conversation with one of the internet's favorite financial educators!
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Key Points From This Episode:
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(0:03:19) Kyla's definition of economics, who the main players are, and how it's understood.
(0:05:04) How "vibes" influence the economy and intersect with economic theory and reality.
(0:07:07) Money, its impact on the economy, and whether GDP reflects economic health.
(0:09:45) Ways that expectations about inflation affect vibes in the economy.
(0:10:50) Kyla's take on housing, what people get wrong about it, and renting versus owning.
(0:15:16) Surprisingly simple reasons for the housing crisis in the US and beyond.
(0:17:48) Key distinctions between financial markets, the economy, and the stock market.
(0:20:53) The difference between investing, speculating, and gambling.
(0:22:08) GameStop, meme stocks, and the power of social media.
(0:24:43) Reasons that "new era" thinking is dangerous and where crypto went wrong.
(0:29:49) How to know when we're in a recession and what a "vibecession" is.
(0:33:52) Why US national debt isn't always bad and why the Federal Reserve exists.
(0:39:43) Problems that can arise from strictly adhering to economic beliefs.
(0:42:53) Ways that the economy is connected to the mental health of individuals.
(0:45:10) The impact of social media and media business models on vibes.
(0:48:45) Kyla's biggest learnings from her work and how she defines success.
Which account should you choose, a registered retirement savings plan (RRSP) or a Tax-free savings account (TFSA)? This is one of the most common decisions that Canadians must make when it comes to investing, but it will also elicit some of the most passionate responses. RRSPs especially get a lot of undue skepticism, with some even labelling it as a scam. Today we take a deep dive into both of these savings accounts, exploring the downsides and benefits of each, and how to decide which account is right for you based on your savings goals. With the help of Conquest Planning, a specialized, in-depth modelling tool, we look at a range of scenarios incorporating different variables, like income and family size, and break down our analysis regarding the RRSP vs. TFSA decision for each scenario. We discuss key factors to consider, including the basic personal amount tax credit, which allows RRSPs to act as a tax flow-through, and the guaranteed income supplement (GIS), which can impact retirement planning. Our conversation also examines how to approach family size and longevity, as RRSPs become more advantageous with longer lifespans. Join us today to learn about the benefits and flexibility of each of these accounts, the surprising ways RRSPs often outperform TFSAs, and find out which one is right for you!
Key Points From This Episode:
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(0:00:20) An introduction to the RRSP vs. TFSA debate.
(0:08:11) How we used the Conquest Planning tool and the scenarios we analyzed.
(0:10:34) Taxation and contribution considerations and strategies for RRSPs and TFSAs.
(0:20:11) An analysis of scenario one; $60,000 income and no children. (0:22:38) Basic personal amount tax credit; how it allows RRSPs to act as a tax flow-through.
(0:27:20) The Guaranteed Income Supplement (GIS) and its impact on RRSP vs. TFSA analysis in different scenarios.
(0:36:16) How GIS is tied to Old Age Security (OAS) payments.
(0:41:12) An analysis of scenario two; a couple with two children, and the impact of the Canada Child Benefit on RRSP vs. TFSA contributions.
Episode 310 - Professor Antoinette Schoar: Consumer Finance, Crypto, and Private Equity
Season 2 Β· Episode 310
Thursday, June 20, 2024 β’ Duration 01:13:00
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!
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Key Points From This Episode:
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(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.
Permanent Life Insurance (EP.221)
Season 2 Β· Episode 221
Thursday, October 6, 2022 β’ Duration 01:16:14
Of course, you want to protect your family and your savings from unforeseen consequences, but is life insurance the best option? Can life insurance be an investment rather than a cost? In today's episode of the Rational Reminder Podcast, we take a look at everything life insurance and dig into some hard-hitting research on the subject. We break down the various insurance products available and unravel the nuances regarding returns, dividends, and the associated fees. We discuss why there is so much confusion regarding returns and associated risk, how your contribution can affect your returns, and why you may not get the payout you expected. We also delve into what makes each insurance product different from the next, whether predictions on insurance policy returns are possible, and how insurance compares to other asset classes. If you're looking for insight into the potential tax benefits of life insurance and a breakdown of the different scenarios where life insurance is needed, this is the episode for you!
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Key Points From This Episode:
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The main topic of the episode: permanent life insurance. (0:04:29)
Defining insurance and how it is typically structured. (0:04:44)
'Term life insurance' and how it works. (0:05:41)
A brief outline of the differences between term insurance and permanent insurance. (0:07:37)
Details about term life insurance and the benefits to the policyholder. (0:09:37)
Another type of life insurance: universal life insurance. (0:11:05)
How investments within a life insurance policy are designed. (0:13:20)
An interesting insight Ben came across while researching insurance. (0:14:38)
Non-participating whole life insurance and the associated cash value. (0:16:00)
A breakdown of participating life insurance and what makes it different. (0:18:42)
The basis for performance and premiums on participating insurance. (0:21:43)
Jonathan Berk and Jules van Binsbergen: The Arithmetic of Active Management, Revisited (EP.220)
Season 2 Β· Episode 220
Thursday, September 29, 2022 β’ Duration 01:23:16
Do you feel like you have a good grasp of financial markets? Think again! In this episode, we take a plunge into the world of financial markets with experts Jules van Binsbergen and Jonathan Berk. Jules is a Professor of Finance at the Wharton School of the University of Pennsylvania and Jonathan is a Professor of Finance at Stanford Graduate School of Business. They also host a popular podcast calledΒ Else Equal,Β which explores the science and strategy of making better financial decisions, and have written several academic papers that challenge the status quo. In our conversation, we discuss their research on the relationship between manager skill and fund performance, the best ways to measure performance, and reasons why benefits are in favour of the managers. We also explore the dogma surrounding mutual funds, the differences between active and passive management, and how to measure efficient capital markets. Listeners will also hear perspectives that challenge their understanding of capital markets and viewpoints that completely disagree with previous guests. Although we have covered this topic before in previous episodes, this conversation will fundamentally change the way you view financial markets and how to think about them.
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Key Points From This Episode:
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What information fund performance contains about manager skill. (0:04:04)
Reasons why manager skill and performance are unrelated. (0:04:59)
We learn how manager skills should be measured. (0:06:57)
How to choose the appropriate benchmark to measure value added. (0:09:26)
Find out if you can use factor-mimicking portfolios to measure risk-adjusted returns. (0:12:05)
Whether funds that directly target risk factors can be used as an investable benchmark. (0:16:35)
What the skill of active managers are when skill is measured as value-added. (0:20:52)
The proportion of value-added between security selection and market timing. (0:23:20)
Understanding Crypto 17: Ari Juels: The Technical Case for Blockchain
Friday, September 23, 2022 β’ Duration 01:22:50
Critics of blockchain often say that it is nothing more than a database, but today's guest, Ari Juels, has a different opinion. His technical expertise (he is a Professor of Computer Science at Cornell Tech), combined with his ability to understand both sides of a divisive topic like this one, make for a very insightful conversation about Bitcoin, NFTs, and smart contracts. We talk about the reasons for the valid skepticism that surrounds blockchain technology, the various reasons that Ari believes that it is a powerful, useful tool, despite its downfalls, pyramid schemes, decentralized exchanges and more!
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Key Points From This Episode:
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The significance of the Bitcoin innovation to Ari's field of study. (0:03:40)
What piqued Ari's initial interest in digital currency. (0:04:46)
Ari explains the difference between permission and permissionless blockchains. (0:06:27)
Comparing a permission blockchain with a distributed-append-only database with authorized contributors. (0:08:34)
A number of reasons why permissionless blockchains have been so widely embraced (despite Ari's initial prediction to the contrary). (0:12:24)
Fraud in the cryptocurrency space; Ari shares his thoughts. (0:14:28)
The benefits of the cultural phenomenon of NFTs. (0:19:25)
Examples of NFT-related issues that still need to be addressed. (0:26:04)
How smart contracts can be used by criminals to their advantage. (0:30:09)
Why smart contracts are well suited for compliance. (0:32:02)
An example of a smart contract pyramid scheme. (0:35:48)
Some of the pros and cons of the inflexibility of smart contracts. (0:41:09)
What flash loans are and what they can be used for. (0:46:11)
Understanding the value of oracle systems. (0:50:04)
How the Candid system that Ari's group developed helps to mitigate the problem of lost Bitcoin keys.
Expected Returns for Alternative Asset Classes (plus Reading Habits w/ David Senra) (EP.219)
Season 2 Β· Episode 219
Thursday, September 22, 2022 β’ Duration 01:29:26
The type of assets which usually come to mind when considering investments are stocks, bonds, or cash, but what are the alternatives? And what kind of returns do alternative asset classes offer? In today's episode, we delve into the returns which can be expected from alternative asset classes such as private equity, venture capital, angel investing, private credit, hedge funds, direct real estate, and cryptocurrencies. Hear an in-depth analysis based on empirical studies and the expertise of your hosts, Ben and Cameron, to discover whether there is any merit to alternative asset classes as investments. We unpack the extra layer of complexity associated with predicting returns on alternative assets, how to approach calculating returns, and why the associated fees are an essential consideration. We also hear details about an interesting conference Cameron recently attended and briefly recap cryptocurrencies as an investment. You'll also hear our conversation with our 22 in 22 reading challenge guest David Senra about his reading habits, the books that most inspire him, and his advice for people who want to read more.
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Key Points From This Episode:
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Outline of today's main topic: expected returns for alternative asset classes. (0:01:51)
Why predicting returns of alternative asset classes has an extra layer of complexity. (0:03:18)
How to approach estimating the returns of private equity, specifically buyouts. (0:05:04)
We unpack historical data regarding the returns of private equity. (0:07:35)
Calculating the returns on venture capital and reasons to be cautious about it as an asset class. (0:16:35)
The distribution of returns from venture capital based on the market numbers. (0:20:09)
Learn what angel investing is and its associated returns. (0:20:54)
What returns on angel investing are most dependent on and why. (0:22:21)
The different types and the associated returns. (0:25:23)
Understanding Crypto 16: Chris DeRose: Uncensored Crypto Perspectives
Friday, September 16, 2022 β’ Duration 01:36:58
In this episode, we speak to Chris DeRose, software developer and former co-host of the Bitcoin Uncensored podcast, about both the downsides and upsides of cryptocurrencies and the associated technologies. We took the time to dive deep into the subject with Chris and learned about some of the common misconceptions about blockchain technology, the value of cryptocurrencies to society, ways in which the crypto space has evolved, using economic theories to understand financial systems, the definition of money, what he thinks about the associated technologies, the role blockchain technology can have in society and why cryptocurrencies will not replace the dollar.
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Key Points From This Episode:
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The motivation behind Chris's decision to get involved with Bitcoin in 2010. (0:00:48)
How the Bitcoin community has evolved since Chris got involved in 2010. (0:03:00)
Some of the common misconceptions associated with blockchain technology. (0:06:03)
Whether new technologies pushing back against regulations is common. (0:08:08)
Ways in which Chris's perception of crypto has changed since he discovered it. (0:09:53)
Chris explains what his definition of money is. (0:11:19)
Find out what Bitcoin actually is, if it is not money. (0:14:39)
Aspects of the current financial system that Bitcoin improves on. (0:16:42)
A discussion around the recent controversy regarding Canadian trucker convoys. (0:17:54)
Some of the problems anonymity associated with cryptocurrencies causes. (0:20:33)
Why not being able to verify transactions is a problem for privacy coins. (0:21:18)
A discussion about the US monetary system and the US dollar. (0:24:12)
Chris discusses the reliance on economic theories to understand the economy. (0:30:59)
What he thinks about crypto markets through the lens of market efficiency. (0:32:26)
Colleen Ammerman: Gender and Human Capital (EP.218)
Season 2 Β· Episode 218
Thursday, September 15, 2022 β’ Duration 01:08:07
The gender pay gap is still a persistent problem in today's society, reflecting the overall state of gender inequality. It is full of complexity and comprises different facets, making it hard to understand the overall situation. We have covered the topic before, but in this episode, we go into a whole new level of detail. To help us unpack the nuance of this essential topic is Colleen Ammerman, Director of the Gender Initiative at Harvard Business School. She is also the author ofΒ Glass Half-Broken,Β providing readers with hard evidence and detailed analysis of the different drivers of gender inequality in the workplace. We cover the basics of gender inequality, such as how it currently exists, how it manifests in the workplace, and the subtle and less obvious ways it occurs. We also find out whether men are generally aware of the problem, the obstacles that prevent men from taking action, and the power men have to initiate positive change within organizations. Colleen also untangles the intricacies of the topic, explaining why gender equality is still a pervasive problem, how gender inequality extends to promotions, how management explains away the issue, how gender equality is also beneficial for men, and the influence of perceived gender roles in career decisions. Tune in and learn about the intricacies of gender inequality, as well as the possible solutions, with Colleen Ammerman!
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Key Points From This Episode:
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We start by finding out what the current situation is for women in the workplace. (0:03:22)
How to quantify gender inequality symptoms in the workplace. (0:04:12)
Whether there are similar effects of gender inequality for men of colour. (0:05:03)
Why people might still deny that there is a problem concerning gender inequality. (0:05:35)
An outline of the career obstacles that uniquely affect women. (0:07:18)
Find out if men are aware that women have additional barriers to overcome. (0:12:03)
Reasons why women may leave the workplace before retaining a leadership role. (0:14:05)
Β Book From Today's Episode: Β Links From Today's Episode:
Understanding Crypto 15: Prof. Vili Lehdonvirta: Cryptocracy: The Obfuscation of Power
Friday, September 9, 2022 β’ Duration 01:06:47
Today, we speak to Vili Lehdonvirta, Professor of Economics, Sociology, and Digital Social Research at the Oxford Internet Institute at the University of Oxford. Professor Lehdonvirta is a social scientist whose research focuses on ways digital technologies are reshaping the organization of economies, including their associated social effects. He is also the author of two books,Β Cloud EmpiresΒ andΒ Virtual Economies,Β which provide readers with an in-depth look into the power that crypto platforms hold and a well-rounded characterization of digital markets. In this episode, we talk about the ideological underpinnings of crypto and the role of governance in making cryptocurrencies possible. We discuss the role of states in scaling markets, how states and platform companies differ, the impacts of smart contracts on governance issues, and how control and power are centralized within crypto markets, as well as the social implications of blockchain technology. Listeners will also learn about past controversies within the crypto space, why people are still needed within crypto, and the blockchain paradox, plus more!
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Key Points From This Episode:
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We start by learning about John Perry Barlow's vision for cyberspace. [0:05:06]
Find out about the role that states play in markets. [0:07:03]
How markets function at scale if the state is not involved. [0:07:55]
Professor Lehdonvirta's view on whether governance may precede markets. [0:08:59]
The role massive platform companies play in today's economy. [0:09:44]
Ways in which states and platform companies differ. [0:10:42]
Why he thinks public blockchain technology has garnered so much attention. [0:11:27]
An explanation of the influence John Perry Barlow's vision had on cryptocurrencies. [0:13:04]
Learn what a Kleroterion is and the role it played in Athenian democracy. [0:14:01]
Professor Lehdonvirta shares what it means to 'trust in the code.' [0:17:05]
(0:45:21) The impact of mortality and longevity on RRSP and TFSA in various scenarios.
(0:47:01) Main takeaways from today's scenarios and the advice our hosts would give to different clients regarding TFSAs and RRSPs.
(0:50:50) Why RRSPs are of greater benefit if you live longer compared to TFSAs.
(0:52:13) Our aftershow section: listener feedback, what Ben is working on regarding renting versus buying, the zombie apocalypse, and more.
(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.
An outline of the new properties smart contracts created. [0:18:59]
Social and economic implications of unstoppable censorship-resistant contracts. [0:21:08]
A brief rundown of how impactful smart contracts have been. [0:22:27]
How the trustless and unstoppable claims of cryptocurrencies and DAOs were affected by the DAO story. [0:24:20]
Whether the Bitcoin block-size conflict affected the perception of crypto as a trustless system. [0:28:17]
We find out the current size of the Bitcoin development team. [0:31:05]
Other examples of human discretion affecting the direction of Bitcoin. [0:31:46]
Professor Lehdonvirta explains the strategies used to preserve trustlessness after the human interventions took place. [0:35:16]
Details about an important strategy: the appeal to technical expertise. [0:38:53]
Find out if the ability to fork blockchain networks restores trustless claims of crypto. [0:39:42]
Whether users of a blockchain network, who are not miners, can influence crypto markets. [0:45:02]
Professor Lehdonvirta's opinion on who has the most control over cryptocurrency networks. [0:49:35]
Hear what aspect of Athenian democracy Nakamoto failed to replicate. [0:54:26]
We learn what the blockchain paradox is (also known as the governance paradox). [0:56:50]
Find out if Professor Lehdonvirta thinks technology changes the fundamental aspects which shape how societies are organized. [01:00:11]
Find out if blockchain has eliminated the need for nation-states. [01:02:11]
What cryptocurrencies have accomplished since their inception. [01:03:40]
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