behavioral finance

On today’s episode, Clay is joined by financial history expert, Jamie Catherwood, to discuss market forecasting, interest rates, and the efficiency of markets from a historical perspective. Jamie Catherwood is a Client Portfolio Specialist at O'Shaughnessy Asset Management and also the author of the popular blog, Investor Amnesia. IN THIS EPISODE, YOU’LL LEARN: 00:00 - Intro 01:35 - Why we shouldn’t try to make market forecasts. 04:56 - Psychological biases that play into why investors are prone to forecast markets. 08:47 - How we can determine which market forecasts are worth putting weight on. 17:10 - Jamie’s thoughts on the AI craze of 2023. 25:52 - Jamie’s take on where interest rates may head from here. 30:23 - Broader consequences of zero percent interest rates and loose monetary policy. 33:59 - Historical examples of governments restructuring their debt. 40:47 - How investor access to information has impacted the efficiency of markets. 47:53 - Jamie’s favorite book from 2023. Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Learn more about the Berkshire Summit by clicking here or emailing Clay at clay@theinvestorspodcast.com. Related Episode: TIP505: The Price of Time w/ Edward Chancellor | Youtube Video. Jamie’s blog: Investor Amnesia. Jamie’s Sunday Reads Blog. Marc Andreeson’s article: Why Software Is Eating the World. Books mentioned: Seeking Wisdom by Peter Bevelin, Confusion de Confusiones by Josef De La Vega, The Price of Time by Edward Chancellor, and Taming the Street by Diana B. Henriques. Follow Jamie on Twitter. Follow Clay on Twitter. Check out all the books mentioned and discussed in our podcast episodes here. NEW TO THE SHOW? Check out our We Study Billionaires Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts. SPONSORS Support our free podcast by supporting our sponsors: River Toyota Linkedin Marketing Solutions Fidelity Efani Shopify NDTCO Fundrise Wise NetSuite TurboTax Vacasa NerdWallet Babbel HELP US OUT! Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds, and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Learn more about your ad choices. Visit megaphone.fm/adchoices

My guest this week for the third time is Michael Mauboussin. If there is a major question about markets and investing, Michael has usually written one of the best pieces of research on that topic. Today’s conversation is a mix of several of his research pieces, but focuses on the sources of alpha. The framing of the conversation is the brilliant question “who is on the other side” of a given trade. If you are buying, who is selling, and why? Knowing the answer to this question is one key to understanding where excess return comes from. As is usual with Michael, we also explore tons of other interesting ideas that will serve as food for thought. Please enjoy. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 1:23 - (First Question) – An outline of the syllabus for the course he teaches 4:02 – What are smart people missing when it comes to decision making 5:33 – Why Michael went down the path of defining major investing concepts             7:41 – On the impossibility of informational inefficient markets 9:14 – Beware behavioral finance 12:03 – What are the behavioral errors that people can take advantage of in a trade 15:14 – Timing opportunities             17:25 – Modest Proposal Podcast Episode 17:47 – Where the analytical edge comes from 21:16 – Is there an advantage to exhibit time arbitrage 23:53 – Technical arbitrage 29:34 – What impact do flows into ETFs play on the market 32:25 – Informational edge and how you source that edge 36:39 – Biggest changes that he has seen on the buy side 43:18 -  How would Michael apply this as a sports GM 48:35 – His views on stock buybacks             51:02 – The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success 52:55 – EBIT to EBITDA paper             54:43 – What Does a PE Multiple Mean? 59:28 – The concept of benign myths 1:02:06 – What the future holds of Michael             1:04:17 – The Myth of Capitalism: Monopolies and the Death of Competition   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

My guest this week is Dr. Ben Hunt, the chief investment strategist at Salient and the author of the extremely popular epsilon theory. I’ve always enjoyed Ben’s writing style, particularly his use of farm and animal based analogies to describe market phenomenon. In this conversation, we discuss his recent post the three body problem, why growth has been beating value, and why a strategy that he calls profound agnosticism—a take on risk parity—may be the most appropriate investing strategy in what he views as a very uncertain world. We also discuss some of his favorite lessons from the farm.  Please enjoy our conversation!   For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Links Referenced The Three-Body Problem   Show Notes 1:54 - (First Question) – Applying the three-body problem to investing  7:24 – Fundamental view of investing, Profound Agnosticism  8:24 – Why has value done so poorly relative to growth in this framework  11:01 -  Ben’s thoughts on why value has been underperforming for so long  13:52 – Investors should be able to adapt  17:49 – Thoughts on the risk parity approach  23:23 – Ben’s strategy for working with several teams  26:48 – What’s the best way to gain an edge, top down factors vs company/bond individual analysis  28:29 – How do you measure risk amid the large amount of uncertainty that exists in markets  32:40 – How does Ben personally think about investing  34:41 – Ben’s farm and the investing lessons learned by some of the animals  39:55 – How bees can plan out their entire work structure by the angle of the sun  42:58 – Defining basis risk  44:59 – Personal risk vs portfolio risk  49:30 – The concept of fingernail clean and our perception of what eggs are  53:57 – How ETFs are like mass produced eggs  54:56 – Exploring the idea of quality vs scaling  58:39 – What is the current challenge/puzzle that Ben is focused on right now  1:01:59 – What is Ben looking for when looking into game theory and applying it to the words that are published and spoken about investing  1:03:57 – Most memorable day on Ben’s farm  1:05:04 – Kindest thing anyone has done for Ben   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

My guest today is Michael Mauboussin, who is the head of global financial strategies at Credit Suisse and is on my short list of must read writers on all things investing. If you read his entire catalogue, Howard Marks's memos, and Buffett's shareholder letters, you be sitting pretty. Michael was also a big reason for the early success of this show appearing as my second guest and now my 37th. He and his team have been prolific in the last six months, publishing several long research reports on the most interesting aspects of the investing landscape. In this conversation, we talk about business moats, industry analysis, and how to combine man and machine when building an investment strategy and portfolio. As I tell Michael at the end, you won't be able to listen to this episode at two times speed, because we go deep quickly. For comprehensive show notes on this episode go to http://investorfieldguide.com/michael For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag