Not Another Investment Podcast

Send us a textData drives nearly every aspect of modern life, from the algorithms suggesting what you should watch tonight to the autonomous vehicles navigating city streets. Yet in the world of finance—where you might expect data to reign supreme—the relationship between information and decision-making is surprisingly complicated (and relatively new).Professor Mike Gallmeyer pulls back the curtain on this fascinating paradox, revealing why financial markets present unique challenges for data-driven approaches. While Tesla collects millions of data points daily to perfect self-driving technology, investors working with a century of stock market returns have barely over a thousand data points to analyze. This fundamental limitation—what Gallmeyer calls the difference between "big data" and finance's "small data" reality—creates profound implications for how we should think about investment decisions.The conversation delves into the historical evolution of financial data, from the pre-1960s era when decisions relied heavily on intuition and "soft information," through the development of the CRISP database at the University of Chicago, to today's sophisticated algorithmic trading systems. Gallmeyer explains how market participants continuously adapt to new information sources, creating an ever-evolving landscape where yesterday's winning strategy becomes tomorrow's conventional wisdom. This endogenous change within financial markets makes them fundamentally different from systems where data collection leads to steady, predictable improvement.For anyone fascinated by markets, data science, or the intersection of human judgment and quantitative analysis, this episode offers valuable perspective on the promises and limitations of data-driven decision making. Whether you're managing your retirement portfolio or simply curious about how markets function, you'll gain insights into why certain problems remain resistant to even our most sophisticated analytical tools—and where human judgment still provides irreplaceable value.Show Notes:Dimson, Marsh, & Staunton, Global Investment Returns Yearbook 2025Kim, Muhn, et al., Financial Statement Analysis with Large Language Models (2024)New York Fed Staff NowcastFederal Reserve Bank of Atlanta, GDPNowThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textTake everything you thought you knew about how markets work and prepare for a fundamental rethinking. When NVIDIA's stock price skyrockets after negative news, or the Federal Reserve successfully manipulates interest rates through bond purchases, classical economic theories struggle to explain what we're witnessing in real time.Professor Aditya Chaudhry from Ohio State University joins us to explore the revolutionary concept of "demand-based asset pricing" - a framework that's challenging decades of financial orthodoxy. Traditional models suggest that when investors irrationally pile into a stock, deep-pocketed arbitrageurs should quickly step in to correct any mispricing. But what if there simply isn't enough arbitrage capital available to enforce rational pricing, especially at the macro level?We dive into groundbreaking research showing that shifts in investor demand might impact security prices up to 100 times more than classical theories predict. This "inelastic markets hypothesis" helps explain everything from market booms and busts to why quantitative easing actually works. The implications extend from central bank policy to government debt issuance, potentially reshaping how we interpret market movements.The conversation bridges complex financial theory with practical examples, making sophisticated concepts accessible without sacrificing depth. Whether you're trying to understand the current bull market, puzzling over Federal Reserve decisions, or simply seeking to make smarter investment choices, this episode provides crucial context for navigating today's financial landscape.While uncertainty remains a fundamental feature of markets, the one clear takeaway reinforces timeless wisdom: for most individual investors, passive products remain the most reliable strategy rather than attempting to outguess the market's complex demand dynamics.Show Notes:Supply and DemandGaigax & Koijen, Inelastic Markets Hypothesis (2023)Chaudhry & Li, Endogenous Elasticities (forthcoming)Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textDiscover the secrets of disciplined investing and strategic asset allocation with Stephen Parker, head of specialized strategies at JP Morgan Private Bank. In our conversation, we explore the nuances of aligning investments with personal goals, focusing on the importance of understanding individual needs, investment horizons, and risk tolerance. Stephen shares JP Morgan's insights on long-term forecasts for over 200 asset classes, emphasizing the critical role of maintaining discipline and the power of staying invested over time.Ever struggled with market volatility or wondered how to balance short-term needs with long-term growth? We unpack the concept of bucketing in financial planning, a strategy that segments investments into liquidity, lifestyle, and growth categories to meet various life goals. This approach not only helps navigate market fluctuations but also protects long-term plans from being disrupted by short-term market movements. Learn how strategic asset allocation, rebalancing, and viewing portfolio construction as a series of dimmers and dials can enhance your investment strategy.Join us as we tackle the complexities of economic forecasting, market timing, and the active versus passive management debate. Stephen sheds light on the importance of seeking contradictory information to improve decision-making and the strategic use of alternative investments. Even seasoned investors will find value in the discussion on the role of recessions in investment decisions and the balance between active management and passive strategies. This episode promises a wealth of knowledge to enhance your understanding of disciplined investing, making it a must-listen for anyone eager to sharpen their financial acumen.Show Notes:JPMorgan, 2025 Long Term Capital Market AssumptionsCembalest, Eye on the Market Outlook 2025Marks, On Bubble Watch (Jan 7 2025)Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textWhat if you could transform your understanding of the commercial real estate market in one insightful conversation? Join me, Edward Finley, as I engage with John Sweeney from Park Madison Partners, who guides us through the complexities and potential of this dynamic sector. Together, we uncover how commercial real estate is anything but a singular asset class, highlighting its diverse components and the significant role location plays in its valuation. From the ripple effects of corporate giants like Amazon on local economies to understanding commercial real estate as a hedge against inflation, this episode provides a comprehensive view of the market's intricacies.Our discussion takes a deeper dive into the strategies investors use to navigate the commercial real estate landscape. We categorize investment opportunities into Core, Core Plus, Value-Add, and Opportunistic, demystifying industry jargon like Internal Rate of Return (IRR) and capitalization rates (cap rates) along the way. By examining how major market shifts and macroeconomic factors affect each investment type, we offer listeners the tools to assess risk and return potential in this fluctuating environment. John shares real-world insights into how recent economic conditions, including post-COVID realities and rising interest rates, have reshaped investor strategies and asset pricing.With an eye on the future, we explore the transformative changes that the commercial real estate market faces today. The evolution of workplace dynamics and the pervasive shift towards high-end office spaces are set against the backdrop of hybrid work models and remote collaboration. As we reflect on the challenges and opportunities these changes present, it becomes clear that active management and strategic foresight are essential. Whether you're a seasoned investor or simply curious about the future of real estate, this episode invites you to consider new perspectives and adapt to a rapidly changing market landscape.Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textThis episode delves into the complexities of hedge funds and private credit, exploring their distinct roles within investment portfolios. We address the performance challenges of hedge funds over the past two decades and the rising prominence of private credit, considering how both options can coexist as alternative assets in investor strategies. Discussion on misconceptions about hedge funds Overview of various hedge fund strategies and their risksAnalysis of hedge fund performance in relation to equities and bondsExamination of fees associated with hedge fund investmentsInsight on private credit as a growing investment avenueComparison between the roles of hedge funds and private creditUnderstanding the implications of competition on future returnsEmphasis on the evolving landscape of alternative investmentsShow notes:Malkiel, A Random Walk Down Wall StreetLowenstein, When Genius Failed:  the Rise and Fall of LTCMThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textThe headlines today are full of scary references to how corporate lending has become too agressive with phrases like "cov-lite" and "wall of maturities".  What does it all mean?Discover the fascinating dynamics of corporate credit and loan covenants with Edward Finley as he sits down with the esteemed professor of finance David C. Smith from the University of Virginia. David and his co-authors have studied the evolution of loan covenants and particularly whether there is any cause for concern today.David unravels the complexities of credit risk and lender behavior, especially in the realm of syndicated loans. Learn how large banks transform these loans into investment opportunities and uncover the crucial differences between bank loans and bonds, from their public versus private nature to how their interest rates are structured.Explore the nuanced world of corporate loan covenants and the strategic decisions lenders face when borrowers violate these agreements. Instead of immediately declaring defaults, lenders often prefer renegotiation. Delve into the reasons behind this approach, including the costs and complexities of declaring defaults, and see how financial covenants serve as vital performance benchmarks. This episode also highlights the challenges bonds present due to their weaker covenants and dispersed bondholder structure, offering listeners a comprehensive view of the current financial landscape.In the final segment, trace the evolution of financial covenants and the syndicated loan market. Understand why the shift towards an "originate and distribute" model has influenced covenant stringency and learn about the improvements in covenant quality over time. David also shares invaluable insights on following your passion within the investment world, leaving listeners inspired to pursue what truly excites them. Don't miss the chance to gain unique perspectives from a leading expert in the field.Show Notes:Griffin, Nini, & Smith, "Losing Control? The Two-Decade Decline in Loan Covenant Violations" (forthcoming)Nini, Sufi, & Smith, "Creditor Control Rights, Corporate Governance, and Firm Value" (2012)Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textWhat happens when the traditional safeguards of portfolio diversification unravel? Join me, Edward Finley, with my distinguished guest, Larry Kochard, as we navigate the complexities of a changing financial world where stocks and bonds, once reliable opposites, have lately moved in tandem. We promise you'll walk away with a fresh perspective on the classic 60-40 portfolio and insights into the impact of today's macroeconomic forces. Inflation, interest rates, and the Federal Reserve's moves no longer just affect markets—they reshape investment strategies, pushing investors to rethink their approach to risk and seek alternatives beyond traditional assets.Larry and I explore the shifting dynamics of equity risk premiums, the allure of credit allocation, and the strategic decisions that come with navigating rising bond yields and expensive U.S. stocks. As portfolio managers adapt to new market conditions, you'll gain a deeper understanding of the opportunities in private equity and private credit, as well as the importance of a flexible bond portfolio during volatile times. We also tackle the evolution of today's corporate giants and the regulatory challenges they face, discussing whether the tech leaders dominating the market can sustain their reign amidst growing scrutiny and the AI investment surge.Finally, we delve into the ongoing debate of active versus passive strategies, the diminishing small-cap premium, and the contrasting roles of public and private markets in fostering financial discipline and growth. Discover how private equity's alignment of incentives might provide an edge over public markets, especially in an era of fluctuating interest rates and refinancing hurdles. As we wrap up our conversation, Larry and I offer insights into strategic investment approaches that balance short-term challenges with long-term opportunities, helping you navigate the evolving landscape with confidence.Research links:Bessembinder, Which US Stocks Generated the Highest Long-Term ReturnsThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textJoin me as we kick off the exciting second season of Not Another Investment Podcast, featuring an in-depth conversation with Jeff Henriksen, the visionary founder of Thorpe Abbotts Capital. This episode offers a wealth of insights into the realm of behavioral investing and market dynamics, particularly within the US small-cap equity landscape. Jeff sheds light on market inefficiencies caused by behavioral mispricings and unravels how he uses those as a tool for seizing opportunities amidst market biases. Gain a fresh perspective on how crowd wisdom can enhance market efficiency and the intricate dance between investor preferences and market errors.Listeners will be intrigued by our exploration of market extremes and valuation reversals, where we dissect the patterns of systematic behavioral mistakes that create windows for strategic investing. Using Keynes' analogy of newspaper beauty pageants, we unpack how collective biases can cloud intrinsic value assessments, especially under the influence of inflation and fluctuating interest rates. Dive into the concept of the "correction fulcrum" and discover how markets self-correct after overreactions. Our conversation also delves into Mandelbrot's fractal theories, highlighting the potential for arbitrage across market cycles.The conversation provides a thought-provoking discussion of the interplay between passive investing and active strategies like Jeff's. Understand how passive funds can inadvertently intensify market cycles, presenting challenges for active managers while simultaneously offering strategic openings for those adept at navigating market momentum.Whether you're a seasoned investor or new to the market, this episode promises to equip you with actionable insights and a deeper understanding of market behavior, enriching your investment journey.Research links:Cochrane, Discount Rates (2011)Mandelbrot, The (Mis)behavior of MarketsDamadoran, Narrative and Numbers: The Value of Stories in Business Soros, The Theory of ReflexivityBhaskar & Suleyman, The Coming Wave: Technology, Power, and Twenty-first Century's Greatest DilemmaBernanke, 21st Century Monetary PolicyGabaix & Koijen, In Search of the Origins of Financial Fluctuations:  The Inelastic Markets HypothesisThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textUnlock the secrets of sophisticated investment strategies with seasoned Wall Street investor Edward Finley. Discover how to leverage probabilistic methods like Monte Carlo simulations to evaluate the potential success of your asset allocations. You'll gain a practical understanding of how to visualize potential portfolio outcomes, allowing for smarter, goal-oriented investment decisions.Dive into the complexities of stress testing and learn how it can complement Monte Carlo simulations to give a comprehensive view of your portfolio's resilience. Edward guides you through real-world scenarios, from the dot-com crash to the post-financial crisis landscape, to illustrate the importance of understanding market dynamics on your investment journey. This discussion places a strong emphasis on personal risk tolerance and the necessity of strategic asset allocation, preparing you to withstand even the most severe economic downturns.Edward explains how to evaluate the role of active risk in your tactical allocation and its impact on long-term investment goals.  And he delves into the significance of liquidity profiles, providing invaluable insights into achieving financial objectives.As we wrap up season one, anticipate season two's engaging interviews with market leaders. Thank you for your loyalty, and continue to spread the word about the insights and knowledge shared here!Episode Notes:  https://1drv.ms/p/s!AqjfuX3WVgp8uwEkTm1rQxc8Qod-Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a Text Message.Have you ever wondered how a seemingly straightforward investment strategy can spiral into unexpected risk over time? Join Edward Finley, a veteran Wall Street investor and occasional professor at the University of Virginia, as he unpacks the complexities of dynamic asset allocation. We challenge the status quo by illustrating how a typical strategic asset allocation, like one with a 75% equity and 25% credit risk, can morph into a much riskier portfolio if left unadjusted, potentially ballooning to 94% equity risk after 30 years. Learn why adaptability and periodic adjustments are crucial for maintaining a consistent risk profile and ensuring long-term investment success.But that's not all—we also dive deep into the mechanics and psychology of portfolio rebalancing. Discover the merits of counter-cyclical strategies that compel you to sell winners and buy losers, despite the psychological hurdles. We dissect periodic and contingent rebalancing techniques to show how these approaches can stabilize your portfolio's risk levels, enhance returns, and minimize volatility.Then, we explore the realm of tactical tilting, where portfolio managers make calculated moves based on economic indicators or expecting returns to revert to their mean.  But as we will see, that is easier said than done.Finally, we discuss how portfolio managers can use active risk in portfolios to fine-tune their risk allocations.  Bringing into focus asset classes like hedge funds, private equity, real assets, and others, we see that active risk can be an equally important decision in asset allocation.Tune in to understand the potential rewards and pitfalls of these dynamic strategies, and join the debate on the efficiency of markets over shorter intervals. This episode is packed with insights that will elevate your investment game.Episode notes:  https://1drv.ms/p/s!AqjfuX3WVgp8un_-h7LOKuedrf1aThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Ever wondered why some investors seem to ride the waves of market volatility with grace, while others get swept away by the current? Our latest episode of Not Another Investment Podcast offers a lifeline to those floundering in the choppy waters of strategic asset allocation. I'm your host, Edward Finley, guiding you through the complexities of matching your risk appetite with your financial aspirations. We tackle the psychology of loss aversion, the tug-of-war between liquidity and potential gains, and the distinction between systematic and active risks that could make or break your portfolio's performance.Venture with us into the realm of portfolio optimization where the elegance of Markowitz's mean-variance curve meets the gritty reality of our financial markets. Together, we'll dissect the science of combining different assets to construct a portfolio that not only sings to your individual risk tolerance but also waltzes along the efficient frontier of returns. But the path to investment nirvana is strewn with estimation errors and the ever-present specter of diversification. So, we'll arm you with the knowledge to navigate these pitfalls and manage risk like a seasoned pro.To cap off, we peer into the Black-Litterman model's crystal ball, revealing how it draws from the CAPM's market efficiency theory to craft portfolios that resonate with current market sentiments. Comparing this approach with its mean-variance counterpart, we illustrate how it shapes conservative and growth-oriented investments. Finally, we shift into the gears of risk control strategies, from the equity-heavy Black-Litterman to the harmonious risk parity approach, promising to inform your next investment move. Tune in for an episode that doesn't just scratch the surface, but charts a map through the investment management labyrinth.Episode Notes:  https://1drv.ms/p/s!AqjfuX3WVgp8un20bLpr6Q2agiEmThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Ever wondered how the monoliths of commercial buildings and the serene stretches of farmland fit into the economic puzzle? Join me, Edward Finley, as I pull back the curtain on the real estate sector's impact on both the economy and personal wealth. We start by dissecting the intricacies of commercial real estate, diving into its diversity, location-specific risks, and investment returns with the aid of NCREIF data. While exploring the ins and outs of this market, I'll also unveil insights into why commercial real estate may just be the versatile inflation hedge your portfolio craves.But our journey doesn't stop at city skylines. We venture into the fields of farmland and forests of timberland, examining their investment allure and uncovering the complexities of these assets. From addressing farmland's surprising performance metrics to timberland's role in the productive economy, we tackle the convolutions of classification and investment potential.Later, we pivot to residential real estate, analyzing the S&P's Case-Schiller National Home Price Index and thinking about your home as a part of your investment portfolio. Whether you're a seasoned investor or real estate rookie, this episode promises to equip you with valuable knowledge to navigate the vast terrain of real assets.Episode Notes:  https://1drv.ms/p/s!AqjfuX3WVgp8untrU1lj57PT-_dyThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Unlock the mysteries of real assets and their touted powers as inflation hedges with me, Edward Finley, on Not Another Investment Podcast. Together we explore the role of real assets in a portfolio.  We develop three categories of real assets, like commodities, production means, and infrastructure. By breaking down these complex relationships, we find that some "real" assets are more real than others.  You'll gain insight into not only the potential safeguards against inflation they offer but also the intricacies of investing in assets with their unique risks and liquidity challenges.Venture into the fascinating realm of commodity futures, there typical way investors gain exposure to commodities, and understand how the dance between futures prices and spot prices reveals much about the health of our economy. We'll clarify the concepts of backwardation and contango, where the roles of hedgers and speculators pull the strings behind the scenes, crafting the market's momentum and influencing the all-important roll yield. This nuanced understanding is key for those looking to tap into commodity spot returns without the hassle of physical inventories, and I promise, it's a topic that will sharpen your investment acumen.We'll put theory into practice by analyzing how commodity futures, particularly corn and oil, have performed through the lens of historical data. From the shockwaves sent through oil markets during COVID-19 to the long-term perspective on its efficacy as an inflation hedge from 1997 to 2023, this episode is a goldmine for enthusiasts and experts alike. And remember, for more in-depth resources, charts, and a chance to continue the conversation, visit Not-Another-Investment-Podcast.com. Your engagement is not just welcomed—it's essential in fueling our journey to demystify the investment world.Episode Notes:  https://1drv.ms/p/s!AqjfuX3WVgp8unnB8BqkHQD1_6HGThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Unlock the secrets of hedge fund arbitrage strategies with me, Edward Finley, as we navigate through the thrilling intersections of finance and probability. Prepare to have your perceptions challenged as we dissect the complex mechanics behind the high-octane world of merger arbitrage, distressed arbitrage, and event-driven arbitrage. Through this episode, you're bound to gain a deeper understanding of how hedge fund managers play the odds in a market where knowledge of financial intricacies, legal frameworks, and regulatory landscapes can make or break multi-million-dollar deals.Venture further into the labyrinth of hedge fund tactics as we scrutinize the enigmatic performance of distressed arbitrage strategies and their deceptive volatility. We'll dissect this high-risk investment game, revealing how it thrives on the brink of bankruptcy, drawing in astute investors with the allure of high returns amidst the smoke and mirrors of market fluctuations. With an analytical lens, we'll break down the statistics that lay bare the true nature of these strategies, from their negative skew to the high kurtosis that defines their risk profile.Finally, we cast a spotlight on the allure of multi-strategy funds as we probe the delicate balance they strike in pursuit of portfolio diversification and efficiency. The episode culminates with a critical analysis of their performance, peeling back the layers to determine whether these funds truly deliver on their promise of attractive returns for the savvy investor. Join me for this riveting journey through the risk-laden terrain of hedge funds, and arm yourself with the insights needed to navigate these complex investment strategies.Episode Notes:  https://1drv.ms/p/s!AqjfuX3WVgp8uwOODPqoWCYdwAFzThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Uncover the opaque world of hedge fund arbitrage strategies where the stakes are high, and the strategies complex. I'm Edward Finley, your guide through the maze of these strategies that seek to earn return by uncovering mispricing of risks but really do so by taking on much more hard-to-understand risks.In this episode, we'll start with the two main bond arbitrage strategies:  convertible arbitrage and fixed income arbitrage. We'll discover the role of convertible arbitrage in providing liquidity to the very important convertible bond market. Learn why certain companies lean towards issuing convertible bonds in the first place, and how important convertible arbitrage strategies are in making this market function well.  But gain an understanding of what risks investors take in providing that liquidity.Then join me as we explore the two primary fixed income arbitrage strategies:  interest rate arbitrages and credit arbitrages.  Learn about the two most common interest rate arbitrages that focus on preferences of bond investors and peculiarities in how Treasury futures settle to create opportunities for investors.  And uncover the three typical credit arbitrage strategies and their approach to earning returns when markets misprice a firm's risks.  And in both cases, observe with me the complexities of owning these kinds of risks.In the next episode, we'll close-out hedge fund arbitrage strategies by exploring the equity-focused arbitrage strategies:  merger arbitrage, distressed investing, and event-driven arbitrage.Join us as we embark on this exciting expedition into the hedge funds' arbitrage playbook and their ripple effects across the financial markets.Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Embark on a journey with me, Edward Finley, to crack the code of absolute return strategies, the hedge funds aiming for consistent returns no matter the market mood swings. We're tossing aside the economic weather vane and zeroing in on how these strategies skillfully balance the scales between long and short stock positions and more complex trading strategies. By dissecting equity market neutral and managed futures strategies, you'll grasp the art of maintaining an even keel in the tumultuous seas of the stock market, where every wave of volatility is a test of precision and foresight.As we chart the course for future episodes on arbitrage strategies, prepare for an education that's not just about surviving the market's storms, but thriving within them.Episode Slides:  https://1drv.ms/p/s!AqjfuX3WVgp8ukNZD4f14GAW6CNVThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Unlock the enigma of hedge funds with me, Edward Finley, as we explore these complicated (and controversial) investment strategies.  We will see that they are not really an asset class but instead are a universe of diverse trading strategies, from directional plays to arbitrage opportunities. In this episode, we dissect the perception and reality of these complex instruments, developing a taxonomy of hedge fund categories based on their myriad risks. We navigate the murky waters of data biases that can obscure the true performance of hedge fund strategies, and we lay the groundwork for a deeper comprehension of the pivotal alternative risks employed by hedge fund managers.We will look at the universe of securities that a manager trades in, the types of trades she engages, as well as the leverage and illiquidity in order to categorize hedge funds by their risks.  We will learn that common risks, like equity risk and interest rate risk, play a relatively small roll in hedge fund performance.  Instead, hedge funds deliver a mix of alternative risks that will help us categorize them into three main categories:  Dynamic Market Strategies, Absolute Return Strategies, and Arbitrage Strategies.We will start our exploration of hedge funds with the largest category, Dynamic Market Strategies, including equity long-short and macro.The largest hedge fund strategy, equity long-short, is an intricate web of systematic risk and nonlinear relationships to broader market returns that are the result of how these managers trade. Through examples, we clarify the often-misunderstood mechanisms of gross and net exposure, leverage, and beta-adjusted market exposure, providing a masterclass on how equity long-short funds balance the scales of risk and reward.Finally, our analysis of Dynamic Market Strategies is not complete without a foray into the performance and intricacies of macro trading strategies. We unearth insights into the performance macro strategies by revisiting George Soros's legendary bet against the British pound, offering a thrilling case study of macroeconomic speculation and its potential for astonishing profits. This tactic serves as a testament to the high-octane intellectual analysis that underpins successful macro trading but also the huge uncertainties in making those bets.You will leave this episode enriched with a profound understanding of the complex machinations of these two hedge fund strategies.  Future episodes will explore the strategies that comprise the other two categories.Episode Slides:  https://1drv.ms/p/s!AqjfuX3WVgp8ukFS322alTE4tvCtThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

In this episode, we will build on what we learned about equities and bonds to uncover the principles behind constructing a resilient investment portfolio. Delve into the interaction of stock and bond returns with with me, Edward Finley, as I demystify the economic forces shaping their historical correlation. We're not just talking theory; I will share some practical wisdom on how to mix and match assets with varying expected returns and volatilities to either boost your gains for a given risk or trim the risk for your target return. Take a front-row seat as we use the quintessential 60-40 stock-bond allocation to demonstrate how a keen understanding of these assets' synchronicity can supercharge portfolio efficiency.This episode is more than just a lecture – it's a journey through the shifting tides of stocks versus bonds, pinpointing the eras in which one asset class eclipsed the other and what that means for your money. I will dissect historical performances, from the tech bubble frenzy to the somber 'lost decade,' laying bare the wisdom in upholding a balanced approach amidst the capriciousness of markets.By challenging the conventional notion that bonds are safer than stocks, I will invite you to redefine 'investment safety' with a long-term vision. So, buckle up and prepare for a masterclass in investment strategy, where empirical data meets economic theory to arm you with the knowledge to navigate the financial landscape's constant evolution.Episode Slides:  https://1drv.ms/p/s!AqjfuX3WVgp8uj9zHsJs3oRQ6lx4Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Unlock the mysteries of investing in the bond market with us! Your financial landscape is about to get a whole lot clearer as we guide you through the nuances of bond investments, from deciphering the difference between coupon and yields to delving into the depths of default risks. Whether you're a keen investor or an inquisitive citizen, this episode is your ticket to understanding the subtle dance between bond prices, interest rates, and the economy's future outlook.This time on Not Another Investment podcast, we're setting sail on the choppy seas of bond investing. Grab your life vests as we navigate the intricacies of the yield curve and term risk, shining a spotlight on the pivotal role of inflation expectations and growth forecasts in your bond yields and ultimately returns. As we analyze the inverted yield curve's warnings and the Federal Reserve's monetary maneuvers, you'll gain invaluable insights, arming you with the foresight to bolster your investment strategy in the face of an ever-changing market.And for those who thrive on the thrill of credit risk, this episode is nothing short of a masterclass. Watch the fog lift as we examine credit premiums, expected loss rates, and Merton's theory with a critical eye. By scrutinizing empirical data alongside the theoretical explanations, we'll challenge assumptions and redefine your understanding of the premium you're owed for shouldering the risk of default. Don't miss out on this journey through the real-world ebb and flow of the bond market—tune in and transform your approach to bond investing.Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uXghGAOm1ZzfqJwF?e=UDRvMFThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Discover the hidden complexities of private equity and the factors that can make or break your investment portfolio. Edward Finley guides you through the labyrinth of risk factors inherent in private equity, drawing on the analytical work of the economists L'Her, Jenkinson, Kaplan, and many others to dissect the performance of buyout, venture capital and growth equity strategy under the microscope of risk.We unravel the myth that larger firms are always the prime targets for buyouts, exposing a surprising tilt toward smaller companies and their associated size premiums. As we navigate the murky waters of measuring value in private equity, where market prices don't exist, we find that buyout almost certainly buys value firms but it's impossible to observe; while venture capital and growth equity likely have the opposite.  We also shed light on the impact of leverage in the strategies and its double-edged sword in shaping returns.Come further into the realm of private equity with me as we evaluate the performance of buyout and venture capital. Through the lens of recent scholarly work by luminaries like Harris, Jenkinson, and Kaplan, we uncover that the modest outperformance of buyout since the turn of the century is really the result of only top quartile managers...and, sadly, there seems to be no way to know which managers will be at the top.  In contrast, we discover that the top quartile venture capital managers earn whopping excess return, even more than the already impressive median manager.  What's more, it seems like top managers tend to be top managers.  So what's the catch?  Listen and fined out!!Our conversation is a clarion call to investors, emphasizing the pitfalls of investing in the private equity landscape. Stay tuned as we pivot from equity to the world of bonds in our next episode, promising to enrich your finance knowledge journey with each step we take together.Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uXbQAMablbPWeFl6?e=hhPBhcThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Start down the road to unlocking the secrets of private equity investment with me, Edward Finley, your guide through the opaque world of non-public company ownership. As you tune into this episode, you're guaranteed an insider's perspective on how private equity stands in contrast to public markets, where the real opportunities for enhancing a company's value lie, and what it means to navigate the complex structures that are private equity funds. Learn about the distinct roles that limited and general partners play, their compensation, and the intricate dance of capital commitment and distribution that makes private equity a unique beast in the financial jungle.We'll tackle the thorny issue of evaluating private equity returns, breaking down the limitations of conventional metrics like internal rate of return (IRR) and offering alternative methods for a more accurate assessment of financial performance. Join me for a masterclass in private equity that demystifies the jargon and lays bare the strategies used by the pros.Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uXJNaOZnGwR8KNz7?e=ASqZBqThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Buckle up for a thrilling foray into the world of equities, where we try to understand the risks we own when we invest in equities.We dissect the mean-variance theory, which predicts that greater volatility should fetch higher rewards, and we scrutinize the empirical data that puts this financial cornerstone to the test.We navigate the intricacies of the Capital Asset Pricing Model (CAPM), an alternative framework for evaluating equity investments. However, it's not just a love story; we also cast a critical eye on the CAPM, exposing its shortcomings amidst real-world complexity.Then, we shift gears to dissect the Arbitrage Pricing Theory (APT), decoding the nuance of factors like size and value in stock returns. As we peel back the layers of these financial models, we reveal how they can both enlighten investors and, at times, lead them astray.The final act of our financial drama puts passive and active investment strategies center stage. Witness the tug-of-war between the two as we scrutinize Warren Buffett's legendary tactics with Berkshire Hathaway through the lens of APT. Does Buffett's alchemy in outmaneuvering market expectations prove the superiority of active management? Or does it highlight an anomaly in an otherwise efficient market? Join us for a riveting dialogue that not only challenges what you think you know about investing but also aims to elevate your market acumen to the next level.Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uWo1lG57LUc15OlX?e=jnZf77Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Dive headfirst into the unpredictable currents of finance with me, Edward Finley, as we chart a course through the complex seas of probability theory and its indispensable role in understanding capital markets. Venture into the treacherous waters where historical price data is both a beacon and a riddle.We'll begin by navigating some of the basic assumptions of probability theory, uncovering the meaning of the basic statistical properties in easy-to-understand language and applying them to real world data to give them life.The seas can get pretty rough, and we'll measure that market volatility, as we dissect the patterns that shape our understanding of investment risk through the lens of variance and standard deviation. Learn how volatility clustering makes it simpler to forecast than return, and why the long-term view of market returns may be clearer than the short-term blur.  We'll navigate the stormy spells that rocked the markets in the past and glean insights for weathering future financial squalls.Wrapping up our odyssey, we confront the harsh truths about the limitations of statistical tools in understanding markets fraught with uncertainty. Join us for a candid discussion on the perils of relying too heavily on statistics in predicting market behavior, illustrated with cautionary tales like the "lost decade." By journey's end, you'll emerge with a fortified understanding of how probability theory can—and cannot—guide your investment decisions in the tumultuous tides of finance.Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uSLfASdaN8dlmtfE?e=XDpWKXThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Unlock the mysteries of the capital markets as we navigate the Efficient Markets Hypothesis with compelling insights from from the financial literature. This episode is your golden ticket to understanding why asset prices aren't just a roll of the dice. We're dissecting the bedrock of market behavior, from the long-term accuracy of pricing information to the inevitable influence of uncertainty on capital allocation. Join me, Edward Finley, as we scrutinize the traditional beliefs in market efficiency and invite skepticism into the conversation, revealing how the unpredictability of new information and the human element behind market movements challenge established financial doctrines.Prepare to have your perspective on finance revolutionized as we contrast the trajectories of Amazon and IBM, demystifying the market's heartbeat through the lens of human behavior. The episode sheds light on how even the most rational investors fall prey to cognitive biases, weaving in personal anecdotes and empirical evidence that underscore the powerful sway these biases hold over financial decisions. Our engaging dialogue will be supported by academic studies that peel back the layers of overconfidence, conservatism, and representativeness, offering a fresh narrative understanding that goes beyond the numbers.We wrap up with a potent discussion on the premiums and risks of diverse asset classes, diving into the behavioral finance theories that shape investor behavior in profound and often irrational ways. Unravel the enigma behind the higher historical premiums for small cap and value stocks, and explore the influence of loss aversion on equity risk premiums. As we pave the way for future conversations on the limitations of probability theory in market risk and return, you're left with profound insights into the complexity of financial markets that will keep you ahead of the curve.Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uGqU5kV1Yj937her?e=JXxNWQThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Embark on a financial journey with me, Edward Finley, as we decode the complex world of market trading, from executing spot, margin and short trades, to managing risks and speculating with derivatives. As we explore different types of trading, you'll grasp whether a trade is a bull or bear trade and the roles they play in the operation of an efficient market.Discover the nuances of spot trading, the backbone of financial transactions where price represents collective market sentiment. Then, we crank up the intensity with margin trading; a double-edged sword that magnifies profits but can just as swiftly amplify losses. History repeats itself, and the stock market is no exception. We'll dissect the infamous crash of 1929, revealing how margin trading and overzealous investors set the stage for disaster.Flip the script with short selling, where betting on a stock's decline becomes a way to make money and counteract market optimism. Yet, beware the short squeeze, a scenario where the tables can turn dramatically. Through real-world applications, the risks and mechanics of short selling come to life, painting a picture of a market that's as much about anticipation as it is about actual numbers.As our expedition through financial landscapes continues, we delve into the pivotal role of derivatives. Futures and options are more than just complex terms—they're instrumental in price discovery and risk management. We'll dissect how you can use options to hedge against volatility or speculate for outsized gains, taking cues from historical events like the 1987 market crash. By the end of our dialogue, you'll understand how these sophisticated tools have transformed investor participation and honed the process of setting prices in our modern markets. Prepare to have your perspective on investments broadened, as we lay the foundation for a deeper dive into finance theory and probability theory in upcoming episodes.Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uGgZod_X3rGcdah9?e=qgqOuVThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Prepare to have your perspective on the U.S. capital markets revolutionized as I, Edward Finley, sometime professor and Wall Street investor, unveil the misconceptions and truths behind our economic engine and those who drive it.  In addition to the three common participants in our economy, we'll add financial intermediaries, who play a key role in how markets work.In understanding the role of firms in the economy, we'll challenge the notion that small businesses are the bedrock of the US economy, and instead, shine a light on the might of large firms—the real heroes in job creation and business revenue. As we dissect the life cycles of firms, you'll understand why young startups bet on equity to drive growth, but as they mature, they pivot to using retained earnings or debt to fuel growth. The fierce competition among firms doesn't stop when they reach that level of maturity, and we'll discuss the risks to mature firms.You'll also gain insights into perhaps the most important participant in our economy: households.  The odyssey of that journey -- from borrowing in our youth to saving for the golden years -- we'll see how our spending habits ultimately fuel capital markets.Government, the third player in the economy, ever the voracious consumer of capital, orchestrates funding for ambitious long-term goals, and uses capital markets to skillfully redistributing resources for the public good.Finally, we'll explore the fourth participant in financial markets -- intermediaries -- and discuss the important distinction between the buy-side and sell-side.It's a thrilling expedition into the intricate ecosystem of our financial markets, and you're invited to join the voyage.Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uGa7L0VEg_eXnxlG?e=yvfnshThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Ever questioned the very existence of capital markets? Why do we allocate capital for risky uses through them? Join us as we dive into these mysteries with Edward Finley, a seasoned Wall Street investor and sometime Professor at the University of Virginia. Together, we'll decipher what constitutes the public good and explore how capital markets, through promoting risk taking, serve this greater cause. We'll unravel the concept of national wealth and the role it plays in the allocation of capital among productive uses. By the end of our chat, we promise you'll have a fresh perspective on the role of capital markets.In the second half, we'll discuss how a blend of speculation, the separation of ownership and management, limited liability, and democratic institutions make it possible for capital markets to live up to their promise. We'll shed light on how speculation aids decision-making under uncertainty and fosters healthy innovation. Finally, we'll discuss how the interplay of economic efficiency, social justice, and individual liberty can lead to a better society, reflecting on the core economic theory by Keynes. So strap in and get ready for a thought-provoking journey into the world of capital markets!Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Are you ready to unlock the secrets of equity markets? Join us on a fascinating tour where we break down the complexities of public and private markets, the indispensable role of shareholders, and the nuances of common and preferred stock. Drawing from my years of Wall Street experience, I will guide you through the importance of limited liability for shareholders and the hierarchy of a firm during liquidation.Venturing into the realm of private equity markets, we will unravel its pivotal role in raising long-term capital for companies. I walk you through the process, teaching you how companies privately secure funds.  From venture capital to growth equity, equity buyouts, and late-stage funding, we illuminate the different stages of a company's life cycle and the corresponding funding they receive.Switching gears, we traverse into the landscape of public markets. We untangle the process of initial public offerings (IPOs) and follow-on offerings, and even touch upon the benefits of choosing a SPAC for raising capital. As we journey further, we delve into the world of national exchanges that facilitate trading of securities and discuss the different categories of US stock markets. We promise that this episode will not only enrich your understanding of equity markets but also equip you with a new perspective on securities. Don't miss out on this enlightening journey. Buckle up, and let's get started!Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uGQy9X_KZ6p85xzc?e=T2OBrMThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Ready to unravel the mysteries of the largest long-term capital market? Join us on an enriching journey as we decode the world of bonds with Edward Finley, a sometime Professor at the University of Virginia and an experienced Wall Street investor. Offering a deep-dive into the intricate workings of the $51 trillion bond market, Edward will shed light on the various types of bonds including Treasuries, corporate, and municipal, providing an invaluable insight into the dynamics of this, the largest long-term capital market.The episode takes a closer look at the differences between different types of bonds, breaking down their distinctive features. Edward's expertise also opens up the complex world of collateralized debt obligations (CDOs), providing a clear understanding of the $12 trillion mortgage-backed securities market and their different risk levels. As we navigate through the intricacies of conforming and subprime mortgages, we'll also journey back in time to explore the historical development of mortgages leading up to the great depression.The discussion culminates by exploring the aftermath of mortgage market innovation, shedding light on how subprime mortgages and adjustable-rate mortgages in the early 2000s played a role in the liquidity crisis that shook the banking system. Get ready to gain a comprehensive understanding of credit default swaps and how they contributed to the impression of these mortgages as less risky than they actually were. With Edward's expert guidance, this episode offers a golden opportunity to expand your knowledge of the bond market and how its evolution has shaped the existing financial landscape. Tune in for an enlightening discussion that promises to deepen your understanding of long-term capital markets.Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uGKeNH2vSx0yuR85?e=TBpx9yThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

In this episode we begin our journey into the world of financial markets. With the guidance of our host, Edward Finley, a seasoned Wall Street investor and sometime Professor at the University of Virginia, we'll unlock the complexities of how capital markets provide vital capital for households, firms, and  governments. We will decode the rich tapestry of the US capital market, from the bond market, the equity market, to the often overlooked money market, with its unique short-term debt securities.What if we told you everyone uses the money market to provide or secure short-term financing? You'll be amazed as Edward unpacks the mysterious world of the Money Market in this episode.  We will explore the many uses firms, households and governments make of this very important market, including  how the Federal Reserve Bank uses the Money Market to execute monetary policy. But we don't stop there. Edward takes us back to the 1970s to revisit the innovation of Money Market funds, shedding light on how these funds gave average investors a chance to play in the big leagues but introduced unanticipated risks. Hold on tight as we catapult into one of the most turbulent periods in financial history—the 2008 liquidity crisis. Edward dissects the role that Money Market funds played in events leading up to the crisis, triggered by the dramatic bankruptcy of Lehman Brothers.  We'll explore the government's response, from the Treasury's insurance scheme to protect investors to the Securities and Exchange Commission's preventative measures for future crises. The knowledge and insights gained from this episode are sure to leave you with a comprehensive understanding of the money market and its pivotal role in our economy. Don't miss it!Notes -  https://1drv.ms/p/s!AqjfuX3WVgp8uF5CUoKiEyOusNwO?e=cj4cTIThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Ever wondered how the seemingly complex world of financial markets and investing works? Brace yourself as we, led by yours truly, Edward Finley, seasoned Wall Street investor and sometime Professor at the University of Virginia, embark on an enlightening journey together to unravel these mysteries. Drawing from my popular course taught at the McIntire School of Commerce, we'll begin by stripping down the complex veneer of financial markets, exploring their origins, their functionality and participants, and the role of trading and innovation therein.Venturing forward, we'll simplify the daunting elements of finance theory such as the efficient market hypothesis and the role heuristics play in market behavior. We'll traverse through the world of equities, private equity, bonds, hedge funds, and real assets while juxtaposing theories with observed data. You'll gain insights into the art of portfolio construction and how investors amalgamate risks to meet their goals. As we go along, expect riveting interviews, deep dives into current events, and comprehensible reviews of scholarly papers. By the end, you'll be well-equipped to discern what the press talks about, making finance less intimidating. So, buckle up and join me on this exciting venture into the world of finance!Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!