Michael Edesess Exposes the Conspiracies in Common Financial Practices


Michael Edesess Exposes the Conspiracies in Common Financial Practices

Do you think there are conspiracies in common financial practices? I do. Michael Edesess thinks so too. He thinks there may be some conspiracies with pensions as well. He explains why strategies like rebalancing, diversification, mean variance optimization, and tax loss harvesting might not be as beneficial as they seem. Michael sheds light on how institutions like Ivy League endowments and public pension funds waste billions on active management that underperforms simple market indices, driven by the industry's profit motives rather than investors' best interests. Today we discuss...

  • Michael's unexpected entry into the finance world, influenced by a classmate's suggestion to explore a brokerage firm using mathematics.
  • Why the finance industry and its practices, such as rebalancing and tax loss harvesting, fundamentally flawed.
  • Michael's perspective on rebalancing, challenging the belief that it improves investment returns, and why he believes this advice is often misguided.
  • The misconception of diversification in mutual funds and clarify the real benefits of diversification according to Harry Markowitz's theory.
  • Modern portfolio theory (MPT) and Michael's critique of its practical application, especially concerning mean variance optimization.
  • Why tax loss harvesting is not as beneficial as commonly perceived and the costs associated with it.
  • Robo advisors, their cost efficiency, and why Michael believes they still don't offer significant value over simple index funds.
  • The inefficiency and high costs of investment management for Ivy League endowment funds and public pension funds, labeling the industry as a conspiracy of inefficiency.

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Today's Guest: Michael Edesess

Michael Edesess, PhD, is a mathematician and economist with a doctorate in pure mathematics, specializing in stochastic processes, and expertise in the finance, energy, and sustainable development fields. He is currently an adjunct professor in the Division of Environment and Sustainability at The Hong Kong University of Science and Technology. His background includes co-founder of three financial firms, one of which was sold to a large U.S. bank, and board chair of three major non-governmental organizations. He is author or coauthor of two books and more than 200 articles. 

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