Behavioral Investing - Interview with Jeff Henriksen (S2 E1)

Not Another Investment Podcast

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Join me as we kick off the exciting second season of Not Another Investment Podcast, featuring an in-depth conversation with Jeff Henriksen, the visionary founder of Thorpe Abbotts Capital. This episode offers a wealth of insights into the realm of behavioral investing and market dynamics, particularly within the US small-cap equity landscape. Jeff sheds light on market inefficiencies caused by behavioral mispricings and unravels how he uses those as a tool for seizing opportunities amidst market biases. Gain a fresh perspective on how crowd wisdom can enhance market efficiency and the intricate dance between investor preferences and market errors.
Listeners will be intrigued by our exploration of market extremes and valuation reversals, where we dissect the patterns of systematic behavioral mistakes that create windows for strategic investing. Using Keynes' analogy of newspaper beauty pageants, we unpack how collective biases can cloud intrinsic value assessments, especially under the influence of inflation and fluctuating interest rates. Dive into the concept of the "correction fulcrum" and discover how markets self-correct after overreactions. Our conversation also delves into Mandelbrot's fractal theories, highlighting the potential for arbitrage across market cycles.
The conversation provides a thought-provoking discussion of the interplay between passive investing and active strategies like Jeff's. Understand how passive funds can inadvertently intensify market cycles, presenting challenges for active managers while simultaneously offering strategic openings for those adept at navigating market momentum.
Whether you're a seasoned investor or new to the market, this episode promises to equip you with actionable insights and a deeper understanding of market behavior, enriching your investment journey.
Research links:

• Cochrane, Discount Rates (2011)
• Mandelbrot, The (Mis)behavior of Markets
• Damadoran, Narrative and Numbers: The Value of Stories in Business
• Soros, The Theory of Reflexivity
• Bhaskar & Suleyman, The Coming Wave: Technology, Power, and Twenty-first Century's Greatest Dilemma
• Bernanke, 21st Century Monetary Policy
• Gabaix & Koijen, In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis

Thanks for listening! Please be sure to review the podcast or send your comments to me by email at [e-mail]. And tell your friends!

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1. Behavioral Investing - Interview with Jeff Henriksen (S2 E1) (00:00:00)

2. Behavioral Investing at Thorpe Abbotts (00:01:36)

3. How to Define Behavioral Mispricing (00:02:56)

4. The Correction Fulcrum in Behavioral Mispricing (00:13:59)

5. What Factors Cause Preference Cycles to Switch? (00:18:58)

6. How a Behavioral Strategy Executes (and its pain points) (00:31:16)

7. A Behavioralist's Spin on Fama-French Factors (00:38:04)

8. Role of Passive Investing on Preference Cycles (00:43:10)

9. Jeff's Pearl of Wisdom (00:49:47)