So we're back to the old "active is stupid, passive is smart" argument again which, in my opinion, is rooted in the reality that active requires smarts that few people have, whereas anybody with the IQ of a turnip can do quite well using passive strategies.  This is not to say that smart people can't do very well being passive as well but it is saying without any doubt that if you're going to be an active trader, you'd better know what you're doing.

Of course, passive traders will also argue that no matter how smart you are, all the data suggests active traders will almost certainly not do as well as a passive investor.  They will argue that history proves that even the smartest fund managers fail to consistently do as well as the market.  Therefore, it is more or less a fudiciary requirement for any financial advisor (and certainly any financial columnist) to exhort the virtues of passive management and warn vigorously against the pitfalls of active strategies.

As active traders who are also firmly committed to keeping risk low, we believe that there are an abundance of effective technical tools available that, once mastered, make it very possible to not only significantly generate greater yields than passive strategies but actually do so with quite a lot less risk.  That is what we preach but, if we were fiduciaries, we would not be allowed to practice what we preach, at least not for clients.

That is why Friday's column was so fascinating, a 48 minute podcast discussing an extremely in-depth study Freakonomics made about passive vs active.  A brief introduction is included below.  However, before that I am including three links.  The first link will take you not only to the podcast but also to the written transcript of the entire program.  I've included two additional links that vigorously argue both sides of the controversy.  The first, "Bernstein: Passive Investing Is Worse for Society Than Marxism - Bloomberg," makes the case for activism, something you don't see often in the financial media.  The final link, "Wall Street’s “Do-Nothing” Investing Revolution - WSJ.com," is the Wall Street Journal itself taking the lead in championing the passive approach.  These are two articles that, in a nutshell, explains our whole financial universe.

Hope everyone is enjoying this wonderful weather this weekend.

The Stupidest Thing You Can Do With Your Money - Freakonomics Freakonomics

Bernstein: Passive Investing Is Worse for Society Than Marxism - Bloomberg

Wall Street’s “Do-Nothing” Investing Revolution - WSJ.com





Freakonomics: The Stupidest Thing You Can Do With Your Money - The Big Picture

Freakonomics: The Stupidest Thing You Can Do With Your Money

July 28, 2017 9:00am by Barry Ritholtz

  

Bogle. Fama. French. Ritholtz? Yes, on this huge, special edition of Freakonomics on index/investing. Its chock filled of great commentary and observations from numerous legends of investing + me. (Look for an end of podcast cameo from WHCommDir Anthony Scaramucci !) 

Gene Fama discusses market efficiency, Ken French talks factors, Jack Bogle on why low cost simplicity beats everything else over time + I kinda wisecrack my way thru the process, giving a practitioner’s perspective on why these things are so important. It really is a brief survey of the most important changes in investing over the past few decades.  

It’s a seriously awesome podcast –the Freakonomics crew must have recorded hours and hours of tape to pull this together (I recorded an hour or so back in March). For you non-listeners, the full transcript is here(warning: sarcasm/snark don’t necessarily translate into print from the spoken word). It is a privilege to be in such august company — now I need to get Fama & French as MiB guests.