Podcasts, since 2014 have had their renaissance moment. There are over 800,000 podcast and it’s almost an embarrassment of riches out there. The only problem is the shortage of time to listen to all the amazing podcasts being created. In this thread, I’ll share the best podcasts on all things markets, I come across.
Has it ever happened that, you see a bid or an ask and you try to hit but it vanishes or you just get a partial execution? Well, what might be a common occurrence to you and I is what led Brad Katsuyama to start Investors Exchange (IEX).
Brad, a prodigious trader, while working for RBC was puzzled at the deteriorating execution quality. After a prolonged period of research and discover he happened upon the world of high-frequency trading (HFT).
Ronan Ryan was the son of Irish immigrants enamoured by the American dream. Ronan always wanted to work in the wall street and he just got that. He was working for a company that helped traders speed up their trades. Soon Ronan was helping traders all around the US, move to New Jersey, because that was where the stock exchanges servers were located. Little did he know that he was on the frontlines of an arms race involving traders, hedge funds and other big whales who were looks for ways to send their orders to the exchanges as fast as possible.
What these HFTs were doing were is popularly known as Frontrunning.
But in the process, it turns out smaller investors, institutions and mid-sized firms were getting a bad deal. The two men went on later to found the IEX exchange. The whole pitch of the exchange was that everybody gets the same preference regardless of the stature of the size. What this meant was that a small retail trader buying 1 share of APPLE would get the same preference as hedge funds buying a million shares. But the path was not easy for them. They had to battle the entrenched interest of wall street to build an exchange that was fair and equitable.
What they did is build a speed bump, which slowed down all orders by a tiny fraction so that everybody got the same speed. Some studies apparently found that this saved investors between 1-12 basis. (1 basis point = 1/100th of a percent) This might sound small right? Across the American stock market, 1 basis point comes to $7 billion dollars a year.
This particular episode is fascinating for a lot of reasons and I highly recommend it.
PS: If you didn’t realize, the show is hosted by Michael Lewis, the author of Flash Boys, Moneyball, The Undoing project among other bestsellers.
Here’s a pretty fun and interesting podcast. How do you prepare for a life of crime? That too in the public markets, no less.
This is the story of Sam Antar, whose entire life was dedicated to being a criminal. As funny as it sounds, that’s the truth. The Antar family used to run an electronics chain. But competing against the bigger electronics chains was difficult. So, these guys decided to give it to the big guys. As Sam describes in the podcast:
We were not businessmen turned criminals, we were criminals running a business as a front. Crime was part of the business plan.
Back in the late '60s and '70s in the US, electronics manufacturers fixed the retail prices and retailers had to follow it. Which was a problem for the little guys, because they didn’t have the ad budgets to compete against the big guys. So Crazy Eddie and Sam Antar started skimming sales tax to compete. The used to the skimmed sales taxes to discount the prices to drive business.
Eventually, they took the company public in the hopes of taking it private once they had made enough money. But as the saying goes
The best-laid plans of mice and men often go awry.
The scam unraveled, family members turned against each other and Sam had to co-operate with the authorities to save his “behind” as he puts it. What makes Sam unique is that unlike other fianncial frauds, where things happened due to a lapse of judgement or misstep, this was deliberately planned from the get go.
It’s an absolutely enjoyable episode, I’d highly recommend it.
It’s conventional wisdom that stocks and bonds have a negative correlation - meaning they move in opposite directions. And these two are the most used assets when building a diversified portfolio.
Equities are risky and hence they carry a risk premium compared to all other asset classes. That is the reason why equities have delivered higher returns historically. Bonds on the other hand, are viewed as an asset class that delivers steady and stable returns in a portfolio.
But how does this conventional wisdom holdup in real life? Are stocks and bonds always negatively correlated? It’s a fascinating question and the answer requires a lot of nuance and context.
When someone wants to buy a phone, they put in hours of work in researching, comparing phones, reading reviews and looking for deals to buy it. But when it comes to investing people rarely bother spending time to actually look at what they are investing in. The end result - they end up investing in terrible products such as ULIPS, high-cost close ended funds, LIC policies and other shitty products.
But, there has been a quiet revolution when it comes in investing in the US. Low cost index funds have grown in popularity and are taking in trillions of dollars at the expense of high cost active mutual funds. You may ask why? Given that active funds have high cost, on a 10-year period over 85% of all active mutual funds underperform their benchmarks. The simple reason being - high fees. And investors have realized this and are making it know by moving their money. Here’s the end result:
In this episode of Freakonomics (one if my personal favourites) Stephen Dubner talks to some of the smartest people on the planet including Nobel laureates to drive home the point why it makes sense to invest in low-cost index funds.
Factor investing in the past decade has become very popular. It probably one of the most controversial things to have come out of Wall Street ever. No two people will agree on what it is. But here’s the definition by MSCI:
A factor can be thought of as any characteristic relating a group of securities that is important in explaining their return and risk. A large body of academic research highlights that long term equity portfolio performance can be explained by factors.
This research has been prevalent for over 40 years. Certain factors have historically earned a long-term risk premium and represent exposure to systematic sources of risk. Factor investing is the investment process that aims to harvest these risk premia through exposure to factors. We currently identify six equity risk premia factors: Value, Low Size, Low Volatility, High Yield, Quality and Momentum. They are grounded in academic research and have solid explanations as to why they historically have provided a premium. - MSCI
Factor funds aim to harvest the factor premium that certain factors have been know to exhibit. This is done by tilting portfolios to reflect these factors. Example would Value, Quality or momentum focussed funds. We don’t have many of these Factor oriented funds in India yet, save for a few Value and Quality ETFs.
Wes Gray is the founder of Alpha Architect and is one of the biggest names in quant investing world. His firm is well know for running pure factor style funds, unlike other smart-beta funds whose portfolios tend to be watered down. Wes has a stories background. He holds a Ph.D. in finance from the University of Chicago where he studied under Nobel Prize Winner Eugene Fama. Eugene Fama and Kenneth French developed the original 3-facor model on which all factor and smart-beta models are based on.
In this Episode he speaks to Rick Ferri, one of the most well know financial advisors out there on all things factor investing.
William Bernstein is one of the smartest people in the investment profession. He is a neurologist turned investment guru and he is an absolute delight to listen, given the sheer depth and breadth his wisdom.
On the first episode of the Morningstar’s new podcast The Long View, Bill talks about:
- Portfolio construction process
- The academic view on active management
- Factor investing (smart-beta). Bill also talks about the recent under-performance of the Value Factor and whether there is too much money chasing the factor and it is dead
- The psychology of risk
- His debate with the great Jack Bogle on international diversification
- Retirement and if the current US retirement system need to be reformed
and a whole lot more…
In my view of all the things in the investing world, no other topic is talked about the most but understood the least as inflation. Today, the major economies in the world including the US and India follow an inflation targeting regime and managing it paramount.
Emi Nakamura is the chancellor’s Professor of Economics at University of California, Berkeley and also a Research Associate of the National Bureau of Economic Research. She was also recently awarded the prestigious John Bates Clark Medal.
In this conversation Emi talks about how inflation statistics are calculated, the utility and validity of the Philips curve, how the inflation shock during the Paul Volcker era defined modern inflation expectations and a whole lot more.
This conversation is very wonkish and if you are an economist enthusiast like me, you will have to listen to this a couple of times t fully understand the sheer depth of the topic that is inflation.
Spotify is the world’s biggest streaming platform with over 217 million monthly active users worldwide. It is nothing short of a cultural phenomenon. But being Spotify is not easy. The top 4 labels are responsible for over 87% of all music streams, this means they have an enormous stranglehold on the industry and by extension on Spotify. But at the same time, Spotify has accelerated the unbundling phenomenon, which means the music industry has a vested interest in Spotify’s growth. And this is increasingly tenuous and fraught relationship. The company pays round ¢79 cents on every dollar to the music labels and one point it was ¢88 cents on every dollar.
But building this company into the behemoth that is today was no mean feat. Given the power dynamics of the music industry, what Daniel EK (founder) has achieved is nothing short of a miracle. In this conversation he talks about everything from the early beginnings, to the company’s relationship with the music labels to the company’s new bets on podcasting to reduce its reliance on music revenues.
This is absolutely fascinating because it gives us a glimpse on what it takes to be a disruptive company.
Are you considering something like set of YouTube videos as well for that very same purposes here. I do not understand why not cause they are seems better visualisation for me it seems. For example - https://www.youtube.com/results?search_query=investing%2C+markets%2C+economics+and+finance
Micheal Kitces is one of the most well know thought leaders in financial advice industry in the US. He is also the founder of XY Planning network, a fee only advisory network which serves millenials, Gen X and Y clients. I had earlier linked to another substantiative and far reaching conversation
In this conversation Micheal talks about:
- How advisers are adapting to changing technological shifts.
- What they can do to distinguish themselves.
- His thoughts on behavioral finance, the shortcomings and his advice on how advisers should use it.
- Emerging fee models. % of AUM vs flat fee and hourly models.
- How the custodial giants such as Vanguard and Schwab are approaching digital advice.
6 . Why direct indexing is the innovation of the future.
- Thoughts on robo-advisors and the future of advice and more.
When we as individual investors read headlines about institutional investors, pension funds, sovereign wealth funds etc, we really don’t understand the scale at which these funds. To give you an idea, here are the biggest sovereign wealth funds
Today, the largest institutions in the world such as sovereign wealth funds control over $100 trillion in assets. 1.5% of total global listed equity is held by Norway’s sovereign wealth fund, to give you some context as to the scale.
But they way they operate and the challenges they have to deal with is unique. Dr. Ashby Monk is the Executive and Research Director of the Stanford Global Projects Center. He is an expert on all things sovereign wealth funds, pension funds, endowments and sovereign wealth funds. In this conversation he talks to Meb Faber about:
- Insourcing vs outsourcing
- The most successful institutional models he has seen. Yale (David Swensen) Harvard, etc.
- Pension fund managers compensation and the inherent problem in public pension funds.
4 His views on private markets and the problem with them.
- How work with the Long-Term Stock Exchange, the newest stock exchange to be approved in the US.
- How the Long Game works and his views on incensing savings.
This in an incredibly interesting conversation because understanding how institutional investors is fascinating.
Patrick O’Shaughnessy – O’Shaughnessy Asset Management (First Meeting, EP.01)
Qaunts (Quant investors) are eating the world of finance. Patrick W. O’Shaughnessy is the Chief Executive Officer and Portfolio Manager at O’Shaughnessy Asset Management (OSAM). OSMA was founded by Patrick’s father Jim O’Shaughnessy, one of the original pioneering quants on Wall Street along with Cliff Asness among others.
If you are wondering what quant investing is, then OSAM uses factors such as value, momentum, quality and shareholder yield to build portfolios.
Patrick is also the host of Invest Like The Best, one of my favorite podcasts and I’ve posted multiple episodes from the show.
In this conversation he talks about:
- How he got started in the world of investing
- What are the 4 core factors OSAM uses and the portfolio construction process
- His thoughts on other quant investors
- How they use machine learning in their research and investment process
- The story behind The Invest Like The Best podcast and his interviewing style
- OSAM’s research framework and how they collaborate with others
- His learning framework
The Retirement Time Bomb
If you are still in your prime working age then you most likely wouldn’t have thought about your retirement. Chances are you wouldn’t have even started saving. But make no mistake, this will come back and bite you in the ass. Retirement is a scary thing, what with the increasing lifestyle, healthcare and old age care costs -yes, the last two are separate.
But the thing, if you start as early as possible, the complexity of saving for retirement reduces dramatically and your investments will also have a long time to compound, increasing your chances of building a sufficient nest egg.
PV Subramanyam is a financial trainer and one of the smartest and wittiest voices around. He is also the author of the popular book Retire Rich – Invest ₹40 a day.
In this conversation he starts with the absolute basics of retirement. He distills a rather fraught and complex topic into something palatable and easily achievable.
I think that podcasts can be very interesting and also good learning material which can present interesting and also important topics to traders. I personally like prefer to learn from video materials, more than learning from books. I am not lazy, just it is better when you can see full picture