Michael Burry says we should get out of indexing. Jim Cramer says it’s time to jump in. These are interesting times in the world of investing! On today’s episode, we discuss Burry’s recent claims about passive investing and advise on a plan of action should he turn out to be right. Benjamin recently posted a new video on dividends, and we have a conversation about the responses the video triggered and give some good reasons for our stance about the irrelevance of dividends. We also talk about negative interest rates, how they affect that market and explain why it’s not a good idea to do day trading for a living. In the second part of the episode, we are thrilled to be joined by Benjamin’s mom to whom we will attempt to explain the ABCs of factors. Following many requests from listeners to discuss factors in layman’s terms, we hope that our explanation today will shed some light on the topic!

 


Subscribe to the Rational Reminder podcast


 

Key Points From This Episode:

  • The irrelevance of dividends and the debate our video provoked. [0:01:54.0]
  • How much a portfolio should be tilted towards each factor and the overlaps. [0:05:57.0]
  • A balanced perspective on Michael Burry’s assertions about index funds. [0:09:43.0]
  • What you should do if Michael Burry is right and why you should do it anyway. [0:15:25.0]
  • How negative interest rates affect a global fixed income allocation. [0:17:57.0]
  • Some interesting facts about day trading for a living and why to stay away. [0:22:05.0]
  • Unpacking the terms “discounted cash flow” and “discount rate”. [0:26:58.0]
  • How the risk of a stock is determined and what the market mechanism does. [0:30:37.0]
  • Where the factors come from and the different types of risk. [0:33:26.0]
  • Using factors to explain the differences in returns between two portfolios. [0:40:03.0]
  • The crux of why you want a diversities portfolio. [0:41:20.0]
  • And much more!

 

Tweetables:

“There’s still a very large contingent of people who believe wholeheartedly that picking dividend stocks is the smartest thing you can possibly do and that me citing academic research is just complete foolery.” — @benjaminwfelix [0:02:36]

“When you build, for example, a value portfolio, you are going to be short the profitability factor. And likewise, when you build a profitability tilted portfolio, you are going to be short value, which is just the nature of the types of companies that fall into those categories.” — @benjaminwfelix [0:06:44]

“Whether the market is broken or not, tilting towards small-cap and value and away from large-cap growth is probably a good idea.” — @benjaminwfelix [0:15:40]

 

Links From Today’s Episode:

Rational Reminder Website — https://rationalreminder.ca/

Jim Cramer on Twitter — https://twitter.com/jimcramer?ref_src

Common Sense Investing: “The Irrelevance of Dividends” — https://www.youtube.com/watch?v=f5j9v9dfinQ

Daniel Crosby on Twitter — https://twitter.com/danielcrosby?ref_src

BlackRock — https://www.blackrock.com/

Vanguard — https://about.vanguard.com/

Eric Nelson on Twitter — https://twitter.com/servowealth?lang=en

Mad Money https://www.cnbc.com/mad-money/

 

Download the transcript of this episode here: Rational Reminder Podcast – EP. 64 – Transcript