Resolve Riffs Investment Podcast

Our good friend Eric Balchunas (Senior ETF Analyst at Bloomberg Intelligence) joined us once again, this time to discuss his new book “The Bogle Effect: How John Bogle and Vanguard Turned Wall Street Inside Out and Saved Investors Trillions”.

We covered topics that included:

• Bogle’s early life as a university student and his 1949 thesis
• Becoming the young CEO of Wellington Fund at age 35
• Bogle’s initial enthusiasm with active management before building his “passive juggernaut”
• The beginnings of Vanguard – starting off as a “back-office company”
• His rough yet friendly attitude to competitors
• Vanguard as the “Amazon of asset managers”
• Giving people what they wanted before they even knew it
• Mutual ownership structure as a key feature of the ETF revolution
• Growing and taking market share from “closet beta” funds
• Vanguard took 30 years to get to USD 1 trillion in AUM, and another 15 years to get to USD 8T
• Crypto ETFs as a possible next step for Vanguard
• Thematic ETFs as the “hot sauce” on top of vanilla portfolios
• And much more

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

We were joined this week by Preet Banerjee, host of the Mostly Money podcast, management consultant focused on commercial applications of behavioral finance, and founder of MoneyGaps’: "Light Financial Planning" software for advisors. Our conversation included topics such as:

• Preet’s diverse background – from neuroscience and financial advisory to auto racing
• Realizing everything is about psychology
• Outgrowing his advisory practice and becoming a consultant
• Setting out to quantify the value of financial advice across multiple channels
• Navigating industry minefields and the trouble with incentives
• The risks involved with Order Execution Only
• Innovations in the “high volume, light touch” advice
• The many faces of financial guidance
• The evolution of the robo-advisory model
• Separating wheat and chaff in advisory land
• Hyperbolic discounting
• Time inconsistent preferences
• Process, discipline and maximizing potential outcomes
• Regulations, choice abundance and Australia’s superannuation model
• And much more…

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

We were joined this week by none other than Alex Gurevich, founder and CIO of HonTe Investments, author of The Next Perfect Trade, and more recently The Trades of March 2020 – A Shield Against Uncertainty, and a legend in the macro hedge fund industry. Our conversation included topics such as:

• His background in math, and as a competitive chess, GO and poker player
• An analytical approach that was well-suited for a Wall Street trader
• Skin in the game – he wanted to be a trader from the start, not an analyst
• Typical patterns in financial markets tend to repeat themselves much more frequently than most investors realize
• Employment and energy prices as strong leading indicators for a recession
• Interest rate momentum and a bearish outlook for equities
• How tighter monetary policy may be the wrong tool to fight inflation caused by higher energy prices and supply chain disruptions (and could backfire)
• Political pressures, the Fed, and the increasing likelihood of a policy error
• An investment approach focused on major global asset classes and big picture thinking
• Seeking opportunities with asymmetric odds
• Precious metals are less about inflation and more about liquidity
• A risky moment for the global reserve currency
• How to protect against low probability scenarios that can pose devastatingly negative outcomes
• Creative hedging
• Avoiding unnecessary complexity when expressing views – vanilla is usually better than exotic options
• Time horizons, and differentiating risk management for a trade vs portfolio holding
• Sizing, stress analysis and conviction – why stop losses are not always the best way to manage risk

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

This week we had the pleasure of speaking with Marcos Bueno, CIO at Ascent Systematic Advisors. Marcos has a diverse and well-rounded backgrounded in finance, and our conversation covered topics that included:

• His background at proprietary trading desks and macro funds
• Starting his career in fundamental, research-oriented investing
• Early successes during a bull market while recognizing the role of luck
• The GFC, the Volker Rule and leaving Wall Street to join Graham Capital in London
• Combining global macro with trend-following
• The different perspectives between value investors and macro traders
• Opinion vs Gospel, Humility vs Hubris
• Bitten by the ‘systematic bug’ and becoming enamored with its elegance and efficiency
• Systematic thinking as a superior approach by keeping biases in check and limiting your downside
• Why the market is always ‘right’, even when it’s ‘wrong’
• The emotional investment that comes with deep fundamental equity analysis and how it can skew investors’ perception
• How trend following takes advantage of some of the permanent features in markets
• Reflection on cognitive biases and trading intuition from a systematic perspective
• Signaling, information diffusion and self-fulfilling prophecies
• And much more…

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

After a multi-decade slumber, inflation has been dominating the economic and financial zeitgeist over the last twelve months. The sustained sell-off in both US stocks and bonds at the start of 2022 was an unfamiliar sight to investors that grew accustomed to the negative correlation that created the once mighty 60/40 portfolio. Are we entering a new paradigm where inflation has both higher mean and variance? Adam, Mike and Rodrigo lay out their views for navigating inflationary times, including topics such as:

• The difference between sustained and volatile inflation
• Large supply and demand mismatch, combined with a reversal of globalization gains of recent decades
• The huge difference in effects between monetary and fiscal stimuli
• The post-war years as a better analogy than the 1970’s for the current backdrop
• Different types of inflation and varied downstream effects
• Path dependency and the wide dispersion of possible scenarios
• Whether transitory or sustained, it’s hard to disagree that we now have higher inflation volatility
• What types of strategies can thrive during inflationary periods
• Shifting regimes and the ‘primordial soup’ of portfolio construction
• Transition phases and leadership changes on decade-long cycles
• Why commodity-sensitive stocks haven’t really protected portfolios in inflationary shocks
• The case for multi-asset trend and global macro momentum strategies
• Protecting against inflation volatility and prolonged bear markets – a historical perspective
• Portfolio construction for a new macroeconomic scenario

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

Our guest this week was Cullen Roche, CIO of Disciplined Funds, founder of Orcam Financial Group and author of Pragmatic Capitalism: What Every Investor Needs to Know About Money and Finance. We discussed topics that included:

• Disciplined Funds’ macro-oriented investment approach
• Cullen’s rude awakening – classic economics learned in university is largely at odds with real world economics
• Taking a step back and learning public finances from first principles
• Digging into the mechanics of quantitative easing, fiscal policy and other major interventions
• “If you're not confused, you don't understand what's going on”
• The Kalecki Equation and wealth concentration
• Fiscal Stimulus – how much is too much
• An introduction to Modern Monetary Theory
• The role played by a “currency monopoly”
• From an MMT perspective, unemployment is a failure of government
• Why the median voter is so disappointed with the current system that they will likely swing to one of the extremes – the question is which one?
• The need for productivity improvement to keep up with fiscal outlays
• The Real Estate Conundrum – a depreciating block of wood on an ever-scarcer plot of land
• What percentage of homeowners can withstand rising interest rates?
• The demographic question, Japanification and home prices
• Thinking of portfolio construction in the current environment – core and satellites
• Cullen’s 90/10 Rule – helping investors stick with their structured portfolio allocations by “allowing” them to speculate on a small portion of their assets

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

This week we had the privilege of hosting Viktor Shvets, Managing Director at Macquarie Securities and author of ‘The Great Rupture - Three Empires, Four Turning Points and the Future of Humanity - Do we need to be free?’. This deeply insightful conversation touched on topics that included:

• Is freedom truly a prerequisite for prosperity?
• Hong Kong’s transition from global hub to China-centric
• US and Chinese societies face similar challenges, but have a vastly different toolkit to tackle them
• China as the world’s locomotive for 18 of the last 20 centuries
• The extraordinary, and largely unknown, impact Genghis Khan and the Mongols had on civilization
• The interplay between institutions, culture and geography, and their combined role in the wealth of nations
• Roman institutions as the great inheritance bestowed upon the West
• Keynesian and Marxist canon – more similarities than many would believe
• The highly disruptive labor dislocations between the first and second Industrial Revolutions
• The likely disruption and dislocation over the next couple of decades
• How we got here – capital abundance, declining productivity and inequality
• Technology, financialization and the Fujiwara Effect – when hurricanes collide and compound
• Maslowian disappointment and the dwindling faith in institutions and the system
• Breaking the loop – finding the right set of carrots and sticks
• Building a bridge to the future
• Inflation volatility, continued secular deflation and a ripe moment for active management

Thank you for watching and listening. See you next week.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

The prospect of normalizing monetary policy has been the main catalyst for a major equity rotation that has favored value stocks. Could this be the long-awaited reawakening of value investing? We had the pleasure of speaking to Rafael “Rafa” Resendes, co-founder of Applied Finance and prominent value investor. Our conversation covered:

• Economic ValueTM as a core metric
• The power of the Investment Factor
• The importance of capitalizing R&D and other balance sheet adjustments
• Sensitivity analyses – recognizing how impactful assumptions on growth and cost of capital can be for valuations
• Risks that cannot be diversified away must offer higher returns
• Why CAPM doesn’t make sense, both empirically and logically
• A market implied approach to cost of capital
• Leverage and size matter (a lot), though the former even more than the latter
• Taking advantage of historic mis-pricings
• Multiples, profitability, risk and competition
• The relevance of a company’s cash flow duration, and how it relates to interest rates
• Balancing risk vs duration
• Intrinsic value and asset pricing models
• Valuation as measured by implied future growth

Thank you for watching and listening. See you next week.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

To kick off the new year, our 2022 inaugural episode welcomed back Jeff Weniger, Head of Equity Strategy at WisdomTree Asset Management. Sharp-witted and pulling no punches, Jeff and the team covered topics that included:

• The early year equity rotation as the inflation narrative gathers steam
• The third leg of the portfolio stool that most investors are likely missing
• Owning commodities vs commodity-linked equities
• Most investors today have barely had any experience with inflation in markets – remembering the commodity super-cycle of the early 2000s
• Not all inflation is created equally – how it arises determines what asset-classes and instruments can be used most effectively
• The types of risk gold responds to, and why it hasn’t performed as many expected
• Owner’s Equivalent Rent and its delayed effect in the Consumer Price Index
• Maybe the cure for high commodity prices… is high commodity prices
• The “stealth crash” in the Nasdaq and aggressive equity sector rotation
• Market-cap weighted equity investors can miss out on huge gains in underrepresented sectors over prolonged periods
• The possible upcoming perils for Big Tech
• An ESG Conundrum – the anti-social externality caused by social media platforms
• Disclosure and the new paradigm of ESG – how sticky can this be?
• The era of crisis, necessity and change on both micro and macro levels
• The toughest decade ever for diversified portfolios
• The reawakening of the value factor

Thank you for watching and listening. See you next week.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

This week we had the pleasure of hosting Mark Yaxley, founding partner of Strategic Wealth Preservation, which specializes in the acquisition and storage of precious metals for investors around the world. He also brought his team member Philip Zappacosta to the conversation, which covered topics that included:

• Mark’s journey through the commodity space, before founding SWP
• The reasons that drive investors to own physical precious metals
• Different wealth objectives – creation vs growth vs preservation
• Property rights and jurisdiction considerations
• Understanding the role gold has played throughout history
• Watching the behavior of central banks
• Why loyalty to an asset-class doesn’t always stem from being “bitten by a bug”
• Why gold should be considered true money
• The role of other precious metals in portfolios
• The densest precious metal that you probably never heard of
• Silver – hundreds of industrial applications, less attractive in Asia and Europe and likely the most underpriced today
• Bar sizes, purity, utilities and different premiums
• The importance of holding smaller bars for liquidity – fractional ownership in the physical space
• Why gold hasn’t performed as expected in a year of high inflation
• When to invest in futures, ETFs or miners vs outright physical metals

Thank you for watching and listening. Happy holidays, see you in January.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.