Sep 30, 2021
Today's conversation is an extremely enlightened and highly
detailed one, that you may want to return to, in order to accrue
all of its value. We host John Cochrane, an economist specializing
in financial economics and macroeconomics. John has a popular blog
and podcast called The Grumpy Economist and also hosts the
GoodFellows Podcast. He is a Rose-Marie and Jack Anderson Senior
Fellow at the Hoover Institution and a senior fellow at Stanford
Institute for Economic Policy Research, and was a Professor at the
Booth School of Business at the University of Chicago. In this
fascinating chat, John shares so much of his expertise, going
in-depth on the subjects that we and our audience are constantly
exploring and excited about. We discuss long-horizon stocks, market
inefficiency and return predictability, classic portfolio theory,
risk-less assets, and performance evaluation. John also shares his
perspectives on the future of centralized finances, digital and
cryptocurrencies, and where the business of financial advice is
headed. So for all this and more from a leader in his field, be
sure to join us for this great episode of the Rational
Key Points From This Episode:
- Breaking down the basics of why stock prices go up and looking
at the market as a whole. [0:02:05.8]
- The information contained in valuation ratios about
long-horizon stock returns. [0:04:25.3]
- Market inefficiency and return predictability; unpacking the
opinions on the correlation. [0:07:17.8]
- What the research on available information and market timing
tells us about predictability. [0:12:59.6]
- Under-appreciating risk and asking important questions about
dividend growth in the future. [0:18:46.5]
- The huge impact that predictability can have on classic
portfolio theory. [0:22:36.2]
- Volatility aversion and communicating important concepts across
- John explains the risk-less asset for the long-term investor.
- Using the example of bonds to get to grips with performance
- Unpacking the roots of wealth inequality and the best
perspectives for understanding it.
- Misguided thoughts about the market and the usefulness of
keeping general equilibrium in mind.
- Market portfolios and the zero-sum game; hedging state variable
- Decisions about the ability to bear the value risk premium and
- John's thoughts on the future of financial advice.
- Describing the fiscal theory of the price level and its
predictions about inflation. [1:06:03.6]
- Cryptocurrencies and value maintenance; John's perspective.
- Assessing the longevity of traditional or centralized finance.
- John's own definition of success in the different areas of his