May 14, 2020
We spend the bulk of today’s episode considering whether Wealthsimple’s use of long bonds and low volatility stocks is really protecting their clients’ downside, and summing up recent arguments by Cliff Asness and AQR leveled against critiques on value investing. Before that, we kick things off with thoughts on why Elon Musk aims to have no possessions, before looking at the links between empathy and the theory of relativity as well as some productivity secrets in recent books by Charles Duhigg and Shane Parrish. Next up, we briefly address a bunch of listener questions on factor tilting, and ETFs concerning COVID-19, the Smith Maneuver, and more! A final listener question about Wealthsimple’s claim mentioned above leads our hosts to wonder whether volatility and drawdown are good measures of risk. Ben made a few models to help answer this question which tested consumption models as another possible measure and brings up an interesting point about the significance of considering long bonds from an expected return or a risk parity perspective. From there, we move to the investment topic of the week – the historic state of value investing. This is a contentious topic with recent papers by Cliff Asness and AQR both weighing in and you’ll hear Ben and Cameron distill the main points from both. We hear about medium-term odds being on the side of value, and some great arguments showing common critiques leveled at value investing to be premature. Finally, Cameron takes us through the psychometric profiling side of measuring risk tolerance before telling listeners why they shouldn't make investment decisions based on reckless critiques. Tune in to get it all!
Key Points From This Episode:
- A reminder to comment on the new comments section on the RRP website. [0:00:44.2]
- Why Elon Musk ways he intends throw away his possessions. [0:04:36.1]
- New books about productivity and the links between science and empathy. [0:07:08.2]
- Factor tilting: being aggressive versus non-aggressive. [0:12:43.6]
- Is there a benefit in capturing size premium using a combination of ETFs? [0:16:54.2]
- How to adjust RESP asset allocation as kids get closer to school age. [0:18:46.2]
- What ETFs are best to use while implementing the Smith Maneuver. [0:22:36.2]
- Has the role of bonds ETFs changed in light of COVID-19? [0:24:12.2]
- Thoughts on Wealthsimple’s claim to have protected their clients in this downturn. [0:28:34.2]
- Critiquing long term bonds: is volatility/drawdown a good measure of risk? [0:33:28.2]
- Ben’s model testing consumption objectives as a measure of risk. [0:36:28.2]
- Portfolio topic of the week: the historic state of value investing. [0:42:22.2]
- Considering Cliff Asness’s paper about whether value investing is dead. [0:46:05.2]
- Considering AQR’s paper addressing critiques levelled at value investing. [0:54:04.2]
- Planning topic: the psychometric approach to measuring risk tolerance. [1:05:50.2]
- Bad advice of the week: don’t make investment decisions based on predictions! [1:10:14.2]