I hit this same :invalid_arg error and got some help from the guys in the Elixir Slack (@LostKobrakai included 
).
I needed to change the args to a list of char lists like so:
defp peer_args do
[~c"-loader", ~c"inet", ~c"-hosts", ~c"127.0.0.1", ~c"-setcookie", ~c"#{:erlang.get_cookie()}"]
end
