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Understanding Behavioral Economics: How to Beat the Market with Jeff Henriksen
Episode 10917th August 2022 • The Capital Club • Brian Adams
00:00:00 00:42:56

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Jeff Henriksen is the Founder and CEO of Thorpe Abbotts Capital, a behavioral-focused hedge fund focused on exploiting systematic biases in public markets.

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Key Highlights:

[00:01 - 13:24]  Behavioral Finance and the Stock Market

  • Human beings are influenced by biases and these can lead to mistakes in investment decisions
  • The efficient market hypothesis and why individual investors cannot outperform the market
  • Crowd wisdom on making accurate predictions based on the collective knowledge
  • How the measure of free cash flow and the discount rate of an evaluation are affected

.[13:25 - 39:06] Beware of Systematic Investor Bias

  • The levels of happiness based on gains and losses relative to a reference point
  • Risk-seeking behavior has profound implications on markets and security prices
  • How revenues and debt levels do not become indicative of distress
  • Beware of value trap companies - looking promising but may be eroding rapidly

[39:07 - 41:29]  The Importance of Disproving Your Own Views

  • Markets are a lot more efficient than a lot of active managers realize
  • Start out most investment thesis from a bearish perspective and disprove the bearish thesis
  • To not be overly optimistic that the market's just throwing out great opportunities all the time

[41:30 - 42:57] Closing Segment

Email Jeff via and check out his website for more information!

Key Quotes:

“If your job as an investor is to go out and try to beat the market, you know, our view has always been well, I want to find out what parts of the market have a lot of correlated errors, then I can exploit or have a higher probability of having higher correlated errors because those were the mistakes exist. And that's where we can find an opportunity.” - Jeff Henriksen

“What I've learned is to be very critical of our own views. And to not take the market's judgment lightly.” - Jeff Henriksen

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Resources Mentioned

Thinking, Fast and Slow by Daniel Kahneman

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