Rob Arnott & Cam Harvey on Passive Investing Risks, The AI Boom & Stimulus That Doesn’t Stimulate | #587
Today’s guests are Rob Arnott, founder and Chairman of the board of Research Affiliates, and Campbell Harvey, Head of Research at Research Affiliates and Professor of Finance at the Fuqua School of Business at Duke University. In today’s episode, Rob and Cam touch on the state of value investing in a megacap dominated market, emphasizing the potential consequences of large scale passive investing. They also touch on the rapid change presented by AI, what it may be capable of, and its impacts on how we should view investing. Finally, they address the global investing environment and macro trends, instability, and the role of government in changing world markets.
Key Points
- The flow of money into indexation is creating a valuation wedge between index members and non-members, potentially sowing the seeds for a new value opportunity.
- The over-reliance on passive investing and the increasing role of retail traders are damaging market efficiency and heightening systemic risk, suggesting a potential resurgence for active investing.
- Government spending, particularly when it exceeds certain thresholds, tends to crowd out private investment and hamper economic growth, challenging the conventional wisdom that fiscal stimulus is always beneficial.
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Resources: Passive Aggressive: The Increasing Risks of Passive Dominance [June 2025]
Stimulus Does Not Stimulate [May 2025] The AI Boom vs. the Dot-Com Bubble: Have We Seen This Movie Before? [March 2025] The EV Shakeout [March 2025]
Ferguson’s Law: Debt Service, Military Spending, and the Fiscal Limits of Power German Workers Work Fewer Hours
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Transcript
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