Podcast: Keep Calm and Carry On Investing (TM)

The legendary Martin Fridson joins me to review his classic Investment Illusions: A Savvy Wall Street Pro Explodes Popular Misconceptions about the Markets (Wiley, 1993). What has changed? What is the same? Want a good bead on the present and future of the markets?  Get up to speed on the past.

It’s easy to say you don’t trust anyone or anything in the investment community. That would be a big mistake. Listen in and learn why.

Vassar College Professor Benjamin Ho joins me to discuss the role of trust in finance and economics. He is the author of the just published Why Trust Matters: An Economist’s Guide to the Ties That Bind Us. (Columbia University Press, 2021)

Financial historian Paul Schmelzing takes on many of the assumptions of 20th century financial economics–about risk-free rates, real rates, risk premia–and suggests that they fail the “out of sample” test.  How has he done that? By meticulously creating an 800 year data set that indicates more than six centuries of declining returns. In the process, he takes on Thomas Piketty’s claim that returns on financial assets have consistently exceeded broader economic growth, leading to ever greater economic inequality. Not so says Schmelzing. If you are thinking about asset allocation for the next decade or so when rates are supposed to return …

Consider the shibboleths of our trade, deeply embedded in our risk models, our IPSs, our return expectations: stocks are better than bonds over time, stocks are risk assets, bonds are risk-control assets, a resulting equity risk premium, with real growth from equities.  What if it turns out that these are not exactly true? What if these conclusions are based on incomplete data? That would be a problem, wouldn’t it?  And what about the present time, what’s unusual about it compared to earlier investment periods? These answers and more when  Edward McQuarrie, retired business professor from Santa Clara University, joins me …

How does an art historian, TV producer and art museum director end up teaching quantitative finance? I am joined by Will Goetzmann, the Beinecke Professor of Finance at Yale’s School of Management, to discuss the virtues of changing careers, being interdisciplinary, and following your curiosity.  He is one of the most interesting people you are likely to encounter.    

Ever wonder about the economics of higher education? Are the people in the classroom, “students” or “customers”? Who is accountable to whom?  Who is in charge? Chatham University President David Finegold joins me to view higher education through the lenses that we often use to examine businesses: value creation, accountability, and future trends. It makes for sober listening.

Thinking about the dollar, crypto, fiat currency, MMT? Get some perspective on the purpose of currency, managing money supply, inflation, wage pressures and all the currently popular financial issues……from a review of how Soviet bureaucrats grappled with similar challenges in the 1950s. Yes, Soviet bureaucrats. Seem remote? Of course, on one obvious level it is. On many other levels, however, the challenges were quite similar. Professor Kristy Ironside from McGill University joins me on the show to discuss her just published Full Value Ruble: The Promise of Prosperity in the Postwar Soviet Union (Harvard University Press, 2021).

The brilliant Adriana Robertson, professor of law and finance at the University of Toronto, joins me to discuss what’s really going on behind the scenes at “passive” ETFs and index funds. You might be surprised to learn that they are nowhere near as passive as you think.  Investing is about making decisions under conditions of uncertainty. Modern finance, including the mountain of marketing and academic literature behind index products, seems to offer a way around that fundamental human challenge. Not so. Hear why.

How is your investment account doing? Do you really know? This episode of Keep Calm & Carry On addresses how investment returns are measured, and not measured. Is the race to the swift and the battle to the strong? Well, it turns out, “it’s complicated.”

In this special episode, I admit to several heterodox views of dividend investing.  The first concerns the market’s yield as a predictor of future returns.  The second offers an unusual view of dividend cuts.

Where did all the dividends go? In this episode, I explain how dividend-free growth investing became the norm in the US stock market. For dividend-focused investors, how we got to this state of affairs should be of some interest. And they make take some comfort in the realization that cashless investment is to a great extent a historical, and I would argue, a logical anomaly. For growth investors content with the current situation, knowing whence they came serves at least some utility, even if I do not believe that those conditions will persist.

Treat your investments like holdings in actual businesses is a common invocation on this podcast. To that end, today I talk to an entrepreneur on the front lines of business ownership. My high school classmate, Jeff Brown, is the owner of 12 grocery stores in Philadelphia. How does he survive in a brutally competitive low-margin environment? How did he respond to the additional challenges of Covid? How does he make being in food deserts work?   It turns out there is an answer, and it’s not on the University of Chicago MBA curriculum: community involvement. Listen to the very end. There …

In his new book Inside Money: Brown Brothers Harriman and the American Way of Power, the prolific Zachary Karabell uses the history of Brown Brothers Harriman to follow the arc of American political economy, from the muscular capitalism of the early generations of the Brown family in the 19th century, to their maturation as genteel private bankers in the 20th century, to the sense of service of the BBH partners when they were regularly called to Washington from the 1930s through the 1960s. It is a (mostly) positive tale about American history, American finance, American economic growth and innovation.  That makes it …

After four decades of declining interest rates, and widespread meddling in the risk-signaling mechanism of the US 10-Year Treasury Note, stock investors are justifiably confused by the prospect of rising rates. What’s it mean, particularly for income-oriented stock investors? In this episode, I try to clear the air and simplify the confusing narrative about rising rates and dividend-paying stocks.

With journalists being pulled off planes in Minsk and tensions between Russia and the US at a multi-decade high, Dina Fainberg‘s new book, Cold War Correspondents, just out from Johns Hopkins University Press, could not be more timely. She joins me on the show to discuss the long arc of super-power media relations through the decades.

Interest rates have been falling for 40 years. Few people now in the profession were active the last time rates were rising significantly.  Bond guru Marty Fridson is one of those few. If we are at the end of a supercycle in interest rates, recalling investment practices and strategies from that “before” time should be of great use to investors.

Before you sit down with your retirement planner, or begin doing your own planning, you should ask yourself several critical questions: about how you define risk and return, how much of the decision making you want to do yourself versus having third parties do it on your behalf, among other choices that have to be made. I go through this exercise with Ron “Everyman,”  an attorney in his late 50s thinking about how to plan for retirement.

Douglas Skinner (along with his collaborators, Linda & Harry DeAngelo) is the author of an important framework for understanding why companies pay dividends and investors would seek them out. That stands in stark contrast to the dominant narrative on Wall Street and some of Main Street that is, to a substantial degree, dismissive of the distribution of free cashflow to company owners. Douglas Skinner is Deputy Dean for Faculty and the Eric J. Gleacher Distinguished Service Professor of Accounting at the University of Chicago Booth School of Business. You can find his work here.

This episode of Keep Calm and Carry On Investing focuses on achieving Polonius’s advice in Hamlet: “to thine own self be true.” In regard to investing, that turns out to be harder than one might imagine.

David Solomon (along with his co-author Samuel Hartzmark) write on the challenges of dividend investing from an academic perspective. While we may have to agree to disagree on certain points, all dividend-oriented investors, advisors, and consultants should be aware of the issues that arise from being a dividend investor in very stock-price oriented market. David Solomon is Associate Professor at the Carroll School of Management at Boston College. You can find his work here.  Samuel Hartzmark is Associate Professor at the University of Chicago School of Business. His site.

Nearly 40 years with Kiplinger’s has given Jeff Kosnett unique insights into the market and investor behavior. Hear his thoughts on investing for income when rates are in the teens (the early 1980s) and when they are close to zero (now.)

Jim Garland is the retired, long-time president of the Jeffrey Company, a family office. He is also one of the industry’s “wise men.” You’ll understand why as we discuss his approach to portfolio management as reflected in a “Brief” that he wrote for the CFA Institute in 2019.  That article can be found here.  His other publications can be found here.