Sep 24, 2020
For the first part of today’s discussion, we are joined by Don
Coletti from The Central Bank of Canada. He is here to talk about
their upcoming recommendation for a monetary policy framework for
the next five years which is incorporating public feedback into its
development through the survey, Lets Talk Inflation. From there, we
touch on some favourite books, Starbucks’s stored value card
liabilities, the benefits of keeping inheritance in a separate
account, new standards for financial planners and advisors proposed
by the FSRA, and why SoftBank did not pile into call options and
cause the rally in tech as the previous headlines suggested.
Heading into the meat of the episode next, Ben shares some findings
from a model he built inspired by a program written by one of this
show’s listeners that tests historical safe withdrawal rates for
factor loaded portfolios. Ben gets into a series of papers that
speak to the diversification benefit of adding factors in this
section too. He wraps up the discussion with a spanner in the works
though, which looks at this question through the lens of
time-series momentum rather than cross-sectional momentum. Here, he
considers trend following as another type of diversification that
has shown favourable impacts on portfolio returns in the data that
exists. As usual, we wrap up with our bad advice of the week,
hearing Cameron relate the bizarre ‘findings’ of a Forbes
article claiming that active management beats passive investing in
the face of piles of data to the contrary!
Key Points From This Episode:
- Updates: An upcoming guest, great reviews of this show, and the
brilliant discussions thread. [0:00:23.0]
- Introducing Don Coletti to talk about The Bank of Canada’s
outreach programme. [0:04:52.0]
- Alternative approaches to monetary policy the Bank of Canada is
- Thoughts on the US Federal Reserve’s change to average
inflation targeting. [0:11:43.0]
- How open the Bank of Canada is to making a change.
- Why the Bank of Canada is placing more emphasis on engaging
with the public as part of their renewal.
- Why questions about large scale asset purchases and forward
guidance were included in the survey.
- The response rate so far to the Bank of Canada’s Let’s Talk
Inflation survey. [0:18:59.0]
- Favourite books and series, and Starbucks’s stored value card
- The benefits of keeping inheritance in a separate account.
- Standards for financial planners and advisors the FSRA is
- Why SoftBank was not piling into call options and responsible
for the rally in tech. [0:31:43.0]
- Ben’s remodelling of a listener’s code that tests historical
safe withdrawal rates for factor loaded portfolios.
- Safe withdrawal rates for different stock indexes according to
Ben’s model. [0:37:15.0]
- A paper looking at the interaction between factors historically
and the results this produced. [0:47:52.0]
- Findings of a paper looking at the five factors through
business cycles. [0:56:57.0]
- Papers exploring whether a factor can be cheap and therefore
have a higher extended premium. [1:00:41.0]
- The shadow time-series momentum casts on this; the impact of
trend following on safe withdrawal rates.
- Bad advice of the week: Active management beats the stock