My guest this week for the third time is Michael Mauboussin.
If there is a major question about markets and investing, Michael has usually
written one of the best pieces of research on that topic. Today’s conversation
is a mix of several of his research pieces, but focuses on the sources of
The framing of the conversation is the brilliant question “who is on the other side” of a given trade. If you are buying, who is selling, and why? Knowing the answer to this question is one key to understanding where excess return comes from. As is usual with Michael, we also explore tons of other interesting ideas that will serve as food for thought. Please enjoy.
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1:23 – (First Question) – An outline of the syllabus for the course he teaches
4:02 – What are smart people missing when it comes to decision making
5:33 – Why Michael went down the path of defining major investing concepts
9:14 – Beware behavioral finance
12:03 – What are the behavioral errors that people can take advantage of in a trade
15:14 – Timing opportunities
17:25 – Modest Proposal Podcast Episode
17:47 – Where the analytical edge comes from
21:16 – Is there an advantage to exhibit time arbitrage
23:53 – Technical arbitrage
29:34 – What impact do flows into ETFs play on the market
32:25 – Informational edge and how you source that edge
36:39 – Biggest changes that he has seen on the buy side
43:18 – How would Michael apply this as a sports GM
48:35 – His views on stock buybacks
52:55 – EBIT to EBITDA paper
54:43 – What Does a PE Multiple Mean?
59:28 – The concept of benign myths
1:02:06 – What the future holds of Michael