Prof. John Y. Campbell: Financial Decisions for Long-term Investors | Rational Reminder 250

[@rationalreminder]

Due to minor technical issues with the Zoom call between Ben, Cameron and Professor Campbell, there are portions of audio that were not picked up throughout the interview.

[@christopherknight5526]

Didn’t use Microsoft Teams lol

[@penelopecarson5068]

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[@AndrewGill73]

I'm a buyer, this is not what I'm experiencing. All the best properties are selling. Tried to offer on one yesterday and it was sold.

[@jasonhobbs2405]

This conversation is mind blowing. I understand the value premium better than ever before.

[@conw_y]

John Campbell is a Genius! And interviewers ask great, informed questions, as usual.

[@yu-weiwang6002]

There are a couple occasions that the voice of Prof. Campbell are missing. Like, 19:20-24, 22:43-47, 22:58-23:00.

[@Zadeska]

John gives one of the best answers to how to the "how do you define success in your life" question. It might actually be the best answer given yet.

[@muffemod]

Yea especially the part about business serving the clients and the employees.

[@muffemod]

"expected future real returns on stocks declines when the level of the stock market goes up." The amount of people I meet who are oblivious to this is just jaw dropping.

[@j.s.9981]

Since real rate of returns on equity investment merely adjust for the impact of inflation and taxes on the nominal return, I assume what they are at talking about in this presentation is the law of diminishing returns? The law of diminishing returns states that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain at a constant. I suspect many investors do recognize this principle when it is stated as such.

[@ajitkirpekar4251]

I think that's right but the mechanism is one of risk tolerance.

[@AntonioGracia-j3v]

@@j.s.9981 the problem with this tactic started in 2000 when people were looking for assets to make up for differences and werent allowed so that throws the whole notion away.....proof me wrong

[@vadimlesan3055]

This was one of the best episodes in a while. Thank you for sharing it with us.

[@petercanuel]

Wow !!!! Incredible episode covering such an array in finance. Really well done . Great guest as usual. Ben if you could share the best place to locate these papers by Dr. Harvey I would appreciate it.

[@williamcruz5869]

Excellent conversation! The most interesting and informative guest in a very long time. Great job guys! P.S: I think he meant that the total amount of the mortgage would increase, not the interest rate, by buying point. (1:28 or so).

[@armin5500]

I was confused by this as well; what he describes sounds like the opposite of typical mortgage points (i.e. "discount points"). Turns out there's something called "negative mortgage points" which align with his description. I think he messed up the terminology.

[@seiman1111]

a worthy episode nr. 250!

[@nikolagencic6681]

One of the most educational episodes!

[@acres0296]

Thank you amazing episode as always !

[@thomas6502]

Thank you all so much.

[@CosmicBarrilet]

3rd time I'm watching this phenomenal interview... learned a lot have to say.

[@AAkCN1]

What an incredible episode. Thanks!

[@bradleystoldt318]

As a Value tilter this episode confused me slightly. Why is the risk associated with value equities considered "bad beta"? If cash flows are generally higher for value I'd assume that's good. Is hedging against discount rate shocks(such as right now with rising interest rates) really considered bad? I guess what I'm asking is, what does value being considered "bad beta" mean to a long term investor regarding portfolio allocation?

[@pfranco81]

My understanding from the conversation is that the risk associated with “good beta” is the hits from discount rate shocks, but those are temporary. “Bad beta” is the hits that a stock takes when there is bad qualitative news about the stock. On a 30 year timeline the only beta that affects your portfolio performance is the beta caused by “bad beta”. Value stocks have more good beta, their price fluctuates more but the fluctuations are caused by temporary “good beta”. Value stocks are more susceptible to “bad beta”, their stocks when they fluctuate, are usually caused by substantive issues with the company that causes long term reductions in return. And that’s why there is a premium.

[@pfranco81]

But also, he then recommends value stocks for investors with more risk tolerance. Because like value stocks gain more cash and are less effected by temporary downturns. He doesn’t say specifically, but I’m assuming he’s suggesting a rebalancing benefit, like buying the rest of the market while it’s low. That’s the “dry powder” reference.

[@rudi5764]

Incredible episode! Thank you

[@donpeters9534]

On Currency Hedging, how should one consider the USD JPY pair where, whilst Prof. Campbell puts USD and JPY in the same basket as moving against the market, the cross rate has changed from 76 Yen to the Dollar in 2009 to 150 at the highest in 2022, and is now floating around 136, which before 2022 was last seen in 1998, with 150 going back to 1990?

[@webdesignsutherlands]

Where is the long tail video? Though you might share some gold nuggets info

[@bleacherz7503]

I hold a masters of (mathematical) finance. This interview is 2 years of material ! Of course you are only hearing the conclusions but nevertheless WoW

[@philistineau]

Biggest problem with this entire episode is that variance isn’t a good representation of risk. People only care about the downside risk. No one ever complains about upside risk. The entire model is flawed when you build everything off variance when half of that variance is desirable. It’s an academic model that doesn’t match reality.

[@rationalreminder]

You may have misunderstood. John Campbell is one of the leading academics on describing why variance is not a good measure of risk for long-term investors. -Ben

[@bleacherz7503]

Prep of questions amazing, did JC have Qs in advance?

[@rationalreminder]

He had them in advance.

[@andrewfriedrichs9340]

The US just solved the mortgage issue by making fees for good credit scores higher than for bad credit scores. Complexity solved

[@j.s.9981]

Leave it to the government to always make the wrong decision out of a binary even money bet. They are batting a 1000 in that respect.