ChatGPT, AI, Systemic Risk & The Case for Dividends
Release Date: 04/12/2023
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Vanguard's Mario Cianfarani: Three Challenges for 2024
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This episode with guest Mario Cianfarani, Head of Distribution at Vanguard Canada kicks off delving into 2024's First Challenge: Bond yields and the importance of re-positioning cash for the long term given the likelihood of central banks shifting towards rate cuts in 2024.
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Fidelity's Ilan Kolet – 11 Questions for 2024
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Ilan Kolet, Institutional Portfolio manager in Fidelity's Global Asset Allocation Team, joins us to discuss the most important questions he and his team mates, David Wolf and David Tulk have been fielding at the start of 2024. We delve into the unexpected shifts in monetary policy led by the Federal Reserve and mull over the repercussions of potential rate cuts on inflation volatility, weaving through the intricacies of the Fed's data-driven stance and 'pivot' toward a less restrictive monetary environment.
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Deep Dive into Global Economic and Market Outlook, and AI's Role with Joaquin Kritz Lara
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Join us in conversation with Joaquin Kritz Lara, Chief Economist at Numera Analytics, as we explore the intricate world of global economics and financial markets. Hosted by Pierre Daillie and Richard Laterman, the discussion delves into the nuances of macroeconometrics, the dynamics of inflation, and the complexities of investment strategies in today's volatile market.
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Michael Robbins: Ever seen a bad backtest?
Insight is Capital™ Podcast
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In this episode, Sri Iyer, Head of i3 (i-cubed) Investments™, and Portfolio Manager at Guardian Capital LP, joined us for a provocative conversation about the banking crisis, the Fed, monetary policy, ChatGPT and AI, and the case for dividends as a core and resilient equity allocation for all portfolios.
We discussed the current state of regional bank stocks in the US, which took a hit due to the uncertainty surrounding the Silicon Valley Bank meltdown/collapse. However, Federal Reserve Chair Janet Yellen's statement guaranteed all deposits, implying that the US government will guarantee 100% of deposits, providing some relief.
Turbulent Times
In a turbulent period, investors are seeking companies with wider moats and stable or growing dividends, as well as companies whose moats have shrunk. Depositors may pull their money out of lower-tier banks and shift them into tier one banks, while investors default back to high-quality, dividend-paying stocks. So, it's essential to focus on consistent companies with a proven track record of growing dividends during uncertain times.
Stagflation?
We also discussed the concept of 'stagflation', which is a recession amid high inflation. The market believes that the Fed can engineer a soft landing, but this is a mistake. The main components of inflation are supply chain problems and persistent high labor costs due to labor force participation issues.
More Market Volatility Ahead
Geopolitical issues, such as the Ukrainian war and China's impact on supply chains, are structural issues that cannot be solved by mere rate increases. These structural issues will lead to market volatility and turbulence, making it essential to separate beta and alpha. As a result, many experts believe that active management may be better than passive management right now.
Democratization of AI
We discussed the democratization of AI through open source tools such as Pytorch, which is making AI accessible to a wider audience. Chat GPT is one such AI tool that can be used for making decisions. It has the potential to revolutionize several industries such as software development, big data storage, cybersecurity, search engines, media content generation, music, legal sector, healthcare, pharmaceuticals, predictive analysis, and aerospace engineering.
Dividend Investing
Lastly, we talked about how dividends can provide a good conduit to capture duration visibility and have a mid space between safe deposits and risky duration, playing a vital role in this market. Also, we discussed how the Fed's response to the market cycle is measured, and it's more concerned about protecting the average investor than bailing out failing institutions.
Thank you for listening to our podcast. Stay tuned for more exciting episodes!
Timestamped Highlights:
[00:01:46] The Fed is responding to the market in a measured way, balancing inflation and protecting the average investor; not bailing out failing institutions.
[00:06:06] ChatGPT revolutionized the average person's interaction with AI, leading to new levels of "humans and bots merging" and the emergence of new forms of AI like regenerative AI.
[00:09:00] AI processing data and training has been drastically changed with the introduction of ChatGPT, leading to democratization of AI.
[00:15:30] ChatGPT is a revolutionary AI that can change software development, data centers, cybersecurity, search engines, communication, media content, healthcare, pharmaceuticals, banks, and aerospace engineering.
[00:26:32] Dividend paying stocks help investors in turbulent markets with low volatility, downside capture, cash flow visibility and increased yield at cost.
[00:31:35] Secular cash flow/dividend growth gives consistency to company/cash flow, allowing for cleaner valuation and better market mismatch detection.
[00:39:51] Fed guarantees bank deposits to protect against cascading credit risk and inflation. Dividends provide mid-space between deposits and risky duration.
[00:51:59] Recession and high inflation due to labor costs and geopolitical issues, leading to market volatility and the need for active management.
[00:55:35] Dividend strategy has no cuts since inception; trained model on COVID data to recognize behavior and infer future trends.
[00:59:24] AI using transformers to create abstract data and learn from predictions of other models.
Guardian Capital LP is a sub-advisor on numerous funds for BMO Global Asset Management, BMO Exchange Traded Funds, and Horizons Exchange Traded Funds, in addition to managing its own suite of investment funds, and assets for large institutional clients.
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