Thomas Coleman, an economics professor at the University of Chicago, discusses a novel theory of money and inflation, inequality, and risk management with the CFA Institute Research Foundation’s Larry Siegel.

The “money” referred to in monetary economics is a thing of the past, says Tom, because nobody has any “money” (cash, checking accounts, savings accounts). They have marketable assets instead. So monetarism is outdated as a theory of inflation. Instead, Tom argues inflation is better explained by the Fiscal Theory of the Price Level (FTPL), which relates the price level to the value of government-issued securities (bonds and cash) as determined by the cash flows backing them. These cash flows are taxes minus government spending.

The FTPL explains the low inflation of 2008 and high inflation of 2022 better than any other theory.

Coleman also discusses inequality. While conventional measures of inequality look at taxable incomes, he takes a broader view, including transfer payments and other items not reported on tax returns as income. When you do this, inequality – while still worse than in the 1980s – is less severe than it appears. In fact, households in the bottom half of the income distribution face a tax rate that is negative!

Tom concludes with thoughts on risk, a topic on which he has written two excellent books.

In this second episode segment, Larry Speidell, founder and CIO of Frontier Global Partners focuses on personal stories, travel experiences, and deeper insights into frontier markets.

For example, Speidell praises Botswana’s development, aided by diamond discoveries, but also discusses the “resource curse,” where reliance on natural resources can hinder broader economic growth.

Speidell’s firm does not shy away from politically unstable countries such as Peru and Georgia. In such environments, he says, strong companies can thrive, and investors must be patient.

Larry describes the transformative impact of mobile technology in frontier markets, such as Kenya’s M-PESA, a banking app that greatly helps the previously “unbanked” to make a living.

The episode blends investment insights with cultural reflections, emphasizing patience, optimism, and the human side of global investing.

In this two-part episode, Lawrence Speidell, founder and CIO of Frontier Global Partners, discusses his Indiana Jones-like foray into frontier markets in search of stocks to buy for his firm’s clients. Frontier markets are countries that are less developed than those in emerging market indexes.

Larry’s interest in frontier markets began during a lecture trip to China in the 1980s.
Frontier markets include Vietnam, Bangladesh, Romania, Colombia, and many countries in Africa. Speidell argues that, despite political instability, such markets are not necessarily riskier than developed ones, which have also seen increasing volatility. Frontier markets, he says, are highly varied with a low correlation to developed markets, so they are a good diversifier.
While frontier-market economies are a significant share of global GDP, their stock markets remain underdeveloped. Speidell believes this gap will close over time, offering long-term investment opportunities. Progress in frontier markets is slow, however, and requires patience, which Speidell argues is a good approach to investing generally.

In Part 2, David Booth reflects on how Dimensional Fund Advisors expanded by partnering with fee-only financial advisors, helping to bring academic investing principles to individual clients. He emphasizes the importance of low fees both in appealing to personal investors and in delivering superior results to them. Booth discusses how his collaboration with leading finance professors led him to regard the University of Chicago as a business partner and describes his gift to the school as a “partnership distribution.”

David Booth, one of the best-known investors in the world, founded Dimensional Fund Advisors (DFA) along with Rex Sinquefield and brought asset-class investing, a description that embraces both index funds and the index-based but value-added strategy that DFA pursues, to individual investors as well as institutions. David, who received a PhD from the University of Chicago’s Graduate School of Business, also made the largest donation in the University of Chicago’s history and, in recognition of that gift, the university renamed its business school the Booth School of Business.

In building DFA, David pioneered the use of finance academics as advisors and board members. Eugene Fama, the Nobel Prize-winning economist associated with the efficient market hypothesis, was his dissertation chairman, an early investor in DFA, and a current director of the firm. Other noted academics associated with the firm include Robert Merton, Roger Ibbotson, and Kenneth French.

In Part 1 of his interview, Booth joins Larry Siegel to reflect on the academic revolution that reshaped investing, the launch of Dimensional’s first small-cap strategies, and the challenges of selling a new idea to skeptical markets at a time when index and index-like funds were in its infancy. He shares stories from the University of Chicago’s golden age of financial economics and explains why investing in an index with an eye to adding value through trading and inventory management – not strictly passive indexing – became Dimensional’s guiding philosophy.

In this episode of the Financial Thought Exchange podcast, host Lotta Moberg, CFA, and Marty Fridson, CIO at Lehman Livian Friedson Advisors, delve into the complexities of financial statements and corporate reporting. They discuss how companies often present financial health to their advantage, using Fridson's book, "Financial Statements," as a guide. The conversation covers regulatory impacts, the role of goodwill in valuation, and the challenges of assessing acquisitions. Fridson emphasizes the importance of critical analysis and cash flow generation in valuing companies, providing insights into navigating financial reporting pitfalls.

In this episode of the Financial Thought Exchange podcast, host Lotta Moberg, CFA, and Marty Fridson, CIO at Lehman Livian Friedson Advisors, delve into the complexities of financial statements and corporate reporting. They discuss how companies often present financial health to their advantage, using Fridson's book, "Financial Statements," as a guide. The conversation covers regulatory impacts, the role of goodwill in valuation, and the challenges of assessing acquisitions. Fridson emphasizes the importance of critical analysis and cash flow generation in valuing companies, providing insights into navigating financial reporting pitfalls.

Jim Simons, the late founder of Renaissance Technologies, achieved a track record that surpasses Warren Buffett and all the other great investment managers – by a lot. In a beautifully written account, The Man Who Solved the Market, Gregory Zuckerman, the Wall Street Journal who previously profiled John Paulson in The Greatest Trade Ever, talks about Renaissance’s unique culture. The firm brought geniuses from far outside the investment world – mathematicians, computer scientists, linguists – together into an effort that, surprisingly, beat the investment community’s best analysts and traders at generating returns and catapulted “quant” investing to the forefront.