Barry Ritholtz

Episode Transcript
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Speaker 1 (00:08):
Welcome, Welcome back to the Bob Left Starts podcasts. My
guest today is very Rich Books. You know him as
the host of Bloomberg's Master's in Business. You also know
them as a financial guru investor. He's got a new book,
How Not to Invest?

Speaker 2 (00:27):
Barry? Why this book? Why now?

Speaker 3 (00:30):
First of all, let me start out by saying I
hate the word guru. Bill Bernstein, who is a neurologist
I reference in the book and a money manager, says
we use the word guru because people don't know how
to spell the word charlatan. So let's start out. I

(00:52):
think I have some insights. Guru is not the first
word that leaps to mind. Why this book? Why now?
I had some friends in some public usures kind of
harangue me, Hey, it's been fifteen years since your last book.
How about another book? And I was kind of reluctant,
and when pressed why, I gave a really honest answer.

(01:14):
For the past century, there have been literally tens of
thousands of books telling people how to invest, and after
all that time, effort and wasted inc people are still
pretty mediocre investors. So do we really need yet another
tome saying buy this sell that do this, do that.

(01:36):
I kind of was very much on the fence. I
came back from vacation in the Caribbean. You ever get
home in between Christmas and New Year's you have a
few days before January twod when the world sort of
starts up again. And I just started thumbing through some
old research notes I had put together. I had been
a columnist for the Washington Post after the financial crisis,

(02:00):
and then for Bloomberg for the past decade, and I
just started sifting through my history. We do a I
do a quarterly call for clients. I started looking at
some of my notes from that, and goddamn if every
other thing I had written wasn't debunking some sort of

(02:21):
financial bullshit or another. And so one of the publishers,
Harriman House, I kind of reached out. I liked their
editor and their publisher, and I reached out and said,
how do you feel about a book debunking financial bullshit?
And their answer was, well, Harry Frankfurt wrote a book
called on Bullshit and that's sold well. And ever since then,

(02:43):
everybody who's used bullshit in a title hasn't done very well.
And besides, it's a little broad it's a little crude.
You know, the Brits are very proper, but they said
keep working so in my office and your listeners won't
be able to see this. But I have a giant
bulletin board, and I started going through all of the

(03:07):
ideas and that I was coming across and revisiting, and
I just started putting them on three by five index
cards and putting them up on the bulletin board. And
you know, I recently learned I wish I would have
known about this when I started it. There's a program
called Scrivener that allows you to do this virtually. I

(03:28):
was using a I was using MindMeister, which is like
an organizational chart sort of thing, but you know, more
or less did the same thing. And the book didn't
exactly self organize. But I started to recognize, well, this,
this is a whole bunch of bad ideas. Let me
put them together. Look these people are getting the math wrong,

(03:51):
they're not understanding this. Let me put that together. And oh,
look at this behavior. Really dumb things. And so those
three broad category ended up organizing themselves into ninety percent
of the book, each category with three subcategories. And you know,
the simplest way to break it down is we believe

(04:14):
things that are not true. We don't understand the math
that underlies so much stuff, but especially investing, and that
combination leads us to make bad decisions and engage in
bad behavior, and all the above lead to bad outcomes.
So I have been fortunate enough to have a gentleman

(04:35):
named Charlie Ellis on my podcast multiple times. Ellis is
a legend in the industry. He was the chairman of
the Yale Endowment, and for a long period of time,
the Yell Endowment just beat every other endowment out there.
He was on the board of directors of Vanguard Group,
now managing nine trillion dollars and the reason indexing has

(04:58):
become so popular. He ran Greenwich Associates. He's just a legend.
And he wrote a paper in the seventies I want
to say the Journal of Portfolio Management, but I can't
swear by it called winning the Losers Game, and he
likens investing to tennis. By the way, that later gets

(05:19):
expanded to a full buck like twenty years later. But
you know, tennis is two games and one It's a
winner's game and a loser's game. What does that mean, well,
if you're part of the zero point one percent who
are professional tennis players, you win by scoring points. You

(05:39):
hit with power, you hit with accuracy, you serve aces,
you hit the ball to where your opponent isn't, you
kiss the line. You're able to do things because of
your skill set. That's the winners game, and very very
few people get to play that game. Most of us hackers,
myself included, I've been playing tennis since my fifties. We

(06:03):
play the losers game. We don't win by scoring points.
We lose through unforced errors. We double fault on a serve,
we hit it wide, we hit it into the net,
it goes long. We hit the ball right into our
opponent's sweet spot, and they're able to put it where
we aren't. And so Ellis, who in his brilliance, says,

(06:27):
if investors would be more like amateur tennis players and
stop having all these unforced errors, just stay within yourself,
return the ball, let the other guy beat himself. You're
ahead of ninety percent of your peers as investors. And
that was really the idea of to take that concept

(06:49):
even further than Charlie Ellis did and say, let's rather
than tell people what to do. If we could just
get them to stop shooting themselves in the foot, they're
so much better off than there would have been otherwise.

Speaker 2 (07:03):
Okay, I'm reading the book and it reminds me of
my father's philosophy. My father used to say, you know,
when someone's driving expensive car or boasting about where they've been,
he goes, there's no miracles. What's the real story? Okay?
He had a skepticism, and I find that same skepticism

(07:24):
in your book. About two thirds of the book is
off a fucked up shit that people are telling people
to do, or falling prey before. Ultimately it says, really
kind of invest in index funds. To what degree is
this skeptical philosophy? You're known as a contrarian. I don't
want to go deep into people's perception of you, but

(07:45):
to what degree is that result of your upbringing?

Speaker 3 (07:51):
That's a really interesting question. My dad was a small
business owner who became a small business owner because the
company he worked for when the founder unexpectedly dropped dead,
like right right out of Bill Burr's Dropped Dead Years.
The brother in law took over, the place went to hell.

(08:13):
He went out and launched his own business, and my
mom was a real estate agent, and so I sort
of short commerce at a you know, rough and tumble level,
and it always felt that you know, you trust would verify,
is what Reagan said. Here's the throughout the book, there's

(08:34):
all this reference to behavioral economics and academic research. I've
always been fascinated by the fact that, you know, early
in my career, I would listen to quarterly conference calls
and you know, CEOs would talk about how great everything was,
and then the stock would go on and get shell
act because everything wasn't great. So I think my natural

(08:59):
tension and how I was raised is on the one hand,
I'm an idiot. I tend to believe when someone looks
me in the eye or says to a group of
investors things are going great, couldn't be better, Like I
believe that shit on the one hand. On the other hands,
I've been around the block enough to kind of notice that, hey,
a lot of these people say stuff and it turns

(09:22):
out not to be true. So you know, the word
contrarian gets kicked around a lot. I think investors would
be well served if you don't want to just say
no to everything but you have to not be gullible.
You have to be a little skeptical and less naive.

(09:42):
And you know, I peppered the book with lots of
quotes from some of my favorite authors, and one of
them is Theodore Sturgeon, who is a science fiction writer
in the forties and fifties, and he got tired of
defending sci fi to accusations that, hey, all the science
fiction writing, it's just cheap garbage. And Sturgeon's response now

(10:06):
known as Sturgeon's law. Sturgeon's rule is, hey, ninety percent
of everything is crap, literally what he said. And in
the fields of investing, that's really true. You look at
the most hedge funds, most mutual funds, you look at
most of the new products that come out, most of
the stocks that are out there. However, you want to

(10:29):
invest your dollars, you have to recognize that, hey, the
odds are I'm being generous one in ten, that you're
picking a winner. It's it's you know, it's really challenging
to find the needle in the haystack, gets really challenging
to identify. We all know who the legendary traders are

(10:49):
and who the great investors over time. But that's not
helpful knowing that. Hey, you know, if you were to
put money with one and Buffing in nineteen seventy, you
would have done great or Peter Lynch in nineteen eighty,
or will Donoff in eighteen. Like, these guys in the
world of finance are no names because there's a couple

(11:12):
of dozen of them out of hundreds of thousands, if
not millions, of investors, fund managers, traders, et cetera. So
they're really the uh, they're really the outlawers. And so
my background, my upbringing was having seen my mom go
through real estate transactions for decades. It was always like

(11:36):
she would tell me, no one, by the way, no
one's ever asked me this question. She would say to me,
my mom had no filter, and when she was young,
she had no filter. When she got older, it was
all bets are off. But she would say, everybody in
my industry is full of shit, Ma, what do you
mean by that. The clients who are looking to buy
the house are lying because they don't tell you how

(11:58):
much money they really have to spend. The agent on
the other side of the transaction is lying because they
want to keep the deal for themselves. They want to
get both sides of the commission as opposed to sharing
it with a buying and selling offer. The sellers are
full of crap because they're saying, we can't take a
penny less than this, and then you find out it
goes for way below it. So you kind of pick

(12:20):
up a little bit of all right, if someone's telling
you that, look at their motivations, look at what they
really want, And that kind of leads me to say.
That kind of leads me to say, what are they selling?
Find out what's in it for them, and then at
least you have a frame of reference to put context

(12:41):
for whatever they're saying to you. All Right, The agent
wants the bigger commission, the seller wants as much money
as they can get for the house, the buyer wants
to spend as little as they can, and everybody is
playing their cards close to the vest. So look past
what they're saying and figure out what are they really doing.
By the way, I think that's a Wadsworth quote. My

(13:04):
dad used to say to me all the time, I
can't hear what you're saying because what you're doing is
speaking so loudly. That really applies as well.

Speaker 2 (13:13):
Okay, since we're this deep, what was your father's business?

Speaker 3 (13:17):
So he worked initially as a placement hiring officer for
a personnel agency specializing in engineers and scientists. So, like
I was told from a young age, you're going to
be an engineer, I had no idea why. When the

(13:39):
business blew up, he ended up opening a local sneaker
shop and sporting good shop, and I occasionally worked in
there as a kid, and people I have a vivid
recollection of people bringing shoe boxes back to return and
I would open the box and say, we can't take
these back. There's a warrant. No, they're not one you'd

(14:01):
hold the bottom of the shoe. Ma'am, don't take this
the wrong way. But here's what a new shoe looks like.
Here's what your shoe looks like once you wear them outside.
They're yours. And my dad, who had lots of repeat
customers and everybody loved him. My father would often take
stuff back that dad, what the hell you're doing. He's like,

(14:23):
she's bought a thousand pair of shoes from us. I'll
take this one back. I never understood. I couldn't wrap
my head around I was like so offended by the bullshit,
like no, you can't return this. So I think that
contributed a little bit to me. You know, I just
never would have the balls to walk into a store

(14:46):
with a pair of shoes that were obviously used and
return them. My sister worked in a dress shop in
high school. She would tell me, She's like, I know
the people coming in buying a dress on a fry
and returning it on a Monday. They were it over
the weekend. I'm like, what do they do with the
this is before the days of the you know, in

(15:07):
the magnetic tags and the like, what do they do
with the tags? She's like, they tuck it in under
the collar and no one sees like that seems to
be like really a form of minor theft and kind
of egregious. If you can't afford the dress, why are
you pretending that you can afford this dress? She's like,

(15:27):
that's just how some people are. Some people aren't honest,
don't have a good ethical background, and very often are
pretending to be something they're not. The related part in
finances most of finance, this doesn't exist as much as
it used to, but most of the big brokera shops

(15:48):
and warehouses had a training program. It was, you know,
ostensibly all about markets and inflation and interest rates and bonds,
but really it was about a week of modern portfolio
theory and fifty one weeks of sales training. And this
sort of cocky attitude, this fake it till you make

(16:09):
it permeated that sales culture and kind of led a
lot of people in the industry to be really full
of shit at least during their faked phase. Some of
them eventually grow out of it and become legit people,
and the industry has very much changed over the past

(16:30):
thirty forty years. But that whole thing, that whole attitude,
always kind of pissed me off. And so a lot
of this shows up in the book.

Speaker 2 (16:48):
Okay, your father had an independent sporting good shoes store.
That business changed dramatically in that sporting good stores became
changed towards independence, either sold out or went out of business.
In addition, the shoe business became very competitive with Nike

(17:08):
and a million other brands. What happened to your father's store.

Speaker 3 (17:13):
He passed away a long time ago. The the he
had partners, the insurance brought him out and it was
pretty standard succession planning. Although you know, the really funny
thing about to me, the funny thing about that store
is he would bring home. So he had Nike, he
had New Balance before anyone knew what the hell New

(17:34):
Balance was. He had Pony Sak, and he had all
these brands that eventually became really big. He said, hey,
I want you to try these new Nikes. They're kind
of crazy, and they were the Kobe Poison Dart Frog
and they're like incredibly collectible now and they go for

(17:55):
thousands of dollars. And you know I would. I would
occasionally get a new pair of shoes and wear them
and never think twice, never forget. It's got to be
like twenty years ago. I don't even know how long ago.
I'm on the subway and I'm a jeans and sneaker
kind of guy, and I'm wearing the Kobe's and I

(18:16):
see a young kid looking at my sneakers, and then
he looks up at me. He's like, dude, what are
you doing? Like just a young you know, a young
brother heading to wherever he's having Like, who is this
middle aged white guy in a pair of fucking, you know,

(18:36):
poison blue darts? Kobe's and I'm like, I go you
and shit, if you saw in my closet I had
Jordan Ones. I had this like that they were sneakers
and you're war them and it's like, I've had these
for I don't know since they came out. I never
thought twice about it. And he's just hand you know,

(18:58):
po facebomb. He was just like ugh, like you could
see him thinking what is wrong with these people? And
I'm like, you understand it was they were just around, like, Dad,
how about can I take a pair of these? Sure,
go ahead and knock yourself out. It wasn't like I'm
gonna take these and put them away for thirty years.
It's like I'm gonna take these and put them on

(19:19):
my feet and walk around town. And they were great
for that. They were like every now and then my
nephews are now big enough that I give them some
of my old sneakers and I'll pull something out and
I'll say, all right, here's a pair of Lebrons. They're
brand new in the box. I don't care if they're

(19:39):
worth anything. I'm gonna give these to you, but you
have to wear them. And like three days later, you
can't imagine the ruck as I caused the school wearing
the purple and yellow lebrons. It's just, you know, to me,
it's funny that a lot of stuff I've done throughout
my life when and suddenly rentiers middlemen jump in because oh,

(20:04):
there's money to be made speculating. It doesn't matter if
it's sneakers, if it's fixing up old cars, if it's
whatever it happens to be. It's really annoying when people
find my favorite hobbies and turn it into a money
producing enterprise. The sneakers are kind of laughable, Okay.

Speaker 2 (20:27):
A great percentage of the book is calling out bullshit.
Don't trust the people on CNBC or Fox Business or
even the Wall Street Journal. And you have an amazing
number of quotes that turned out to be one hundred
percent wrong. There's a teen spirit in finance. There's a brotherhood.
As you said, a lot of these people started out

(20:50):
as salespeople. Of course, Michael Lewis, you know lifted the uh,
whatever your veil.

Speaker 3 (20:55):
He lifted the veil with liars poker for sure.

Speaker 2 (20:58):
Right, But how easy is it for you or difficult
for you to have an opinion or have a flow
that is different from the majority of the people.

Speaker 3 (21:13):
It's been. It's so, first of all, I will admit
to being, you know, a little atypical. I never went
through the machinery that most people go through, meaning I
was never I didn't go to an ivy school. I
went to a state school. I didn't go to business school.

(21:35):
I went to law school. Did well in law school,
cumloudy law of you passed the bar first time out,
hated the practice of law, and was kind of.

Speaker 2 (21:45):
Well, since you know, since I sort of followed the
same routine, maybe not for the same reasons. How long
did you actually practice law?

Speaker 3 (21:53):
Graduated eighty nine, started in finance late ninety five, so
less than by the way, the rule of thumb that
I learned in law school seven years post bar exam.
Fifty percent of lawyers are not practicing law, so I
was a year or two early. So I just just
managed to miss that. And you know, the fascinating thing

(22:15):
is law school is fascinating. I mean, if you go,
if you're a rabbit hole type of guy, and I
am learning about the legal doctrine and structure of the
United States and what made it so unique and why
it was so special. And really just a fascinating all right,

(22:37):
does it really need to be three years? It could
have been two years. The third years kind of a
tuition grab waste of time. That said, it was just fascinating.
And then you start practicing and you quickly find out
talk about bullshit. You quickly find out everybody's full of
shit if you're doing criminal stuff. The person who swears

(22:58):
up and down, I don't know where those drugs came from.
I didn't have any drugs on me. How do you
have fourteen prior arrest? The prosecutors they don't care. They're
just looking at their batting average. They want to have
a good number. The rest of the defense bar, it's
like they're just especially if you're looking at public defenders
that wildly overworked, they don't have the time to put
into this. I will never forget doing a criminal appeal.

(23:21):
And it's on bank. There are five judges, and you know,
ninety seconds in, one of the judges, who obviously had
already decided, just spins his chair round like it's like
it's you know, America's Got Talent or one of those shows.
They just turned the chair round and I'm like, hey,
this son of a bitch is going to jail over here,

(23:42):
And like it became really clear. So long before the
current environment came along, I knew the legal system was broken.
The Supreme Court was corrupt. Everybody was partisan, even though
they take an oath swearing to faithfully up hold the
Constitution and not be partisan. And it was like, I

(24:03):
can't be in the system because because of my own pathologies,
I will lose my mind with this. I have a
very heightened awareness of unfairness. And the whole system was just.
And then once you if you go into the civil side,
that's even worse because litigation is a cudgel that we

(24:26):
could use to beat up people with less money than ourselves,
and we could torture them and basically get what we
want because we can outlet we're a big company. We
can you know, we are theoretically perpetual and infinite. They
have a fire, at the very least, we'll outlast them,
we'll certainly outspend them, and we'll get what we want.

(24:48):
And so you come to realize, you know, I once
had a judge, I once had a senior attorney say
something very insightful to me, which is I was talking
about a contract, And he says, Hey, the question isn't
what's in the contract. The question is do you want
to do business with that guy? What do you mean, Well,

(25:09):
a contract is only what a judge will enforce if
you make everybody stand up and pay attention to the contract.
After a lot of time and a lot of costs,
he goes, so that's not that what's in the contract
isn't the question? The question is do you want to
get into bed with this person? Do you want to
have a very significant relationship where if it works out,

(25:33):
it's great, but if it doesn't work out, you're going
to spend a long time untying this. And are they
going to be graceful in saying it didn't work out,
Let's figure out an exbra way to cut our losses
and move on, or are they going to make you
take them to court? Like it's not what you can enforce,

(25:53):
it's is the other person going to make you enforce it? All?

Speaker 2 (25:58):
Right?

Speaker 1 (25:58):
Like?

Speaker 3 (25:58):
Really, the turn he was saying to me, is that
a decent person? Are you getting into bed with someone
who you know? The old joke about the two partners
are out to lunch and one says, oh my god,
I left the safe open, and the other one says,
what do you care? We're both here, like very funny.
My dad told me that joke, very funny joke about
partners stealing from each other. So the question is, and

(26:21):
again it's there was a lot of cynicism, but always
with a sense of humor. That's the household I grew
up in, So a little skepticism. Try not to be
so gullible and naive, and make sure you know what
the other guy is selling, because it seems like everybody

(26:42):
is selling something.

Speaker 2 (26:44):
Just to wrap this up again, yes, your philosophy in
your book is atypical in this field. To what degree
do you get blown back that you're not one of them?
And how do you cope with that?

Speaker 3 (27:00):
So I'm sure I get blowback. I don't really notice it.
I kinda don't really give a fuck what other people think.
I know, you're not supposed to say that, so that's
only half true. Everybody wants likes. Everybody wants people to
buy their product. I disclose in the book what I'm selling,

(27:22):
but you know, so here's the fascinating thing. I have
this conversation with the younger guys in my office. I've
been like you, I've been writing in public for Jesus,
it's almost thirty years. I started on GeoCities in the nineties,
so in ninety eight, so we're three years away from

(27:43):
thirty years. Then I moved to WordPress because in two
thousand and one my office was headquartered in two World Trade.
During nine to eleven, I got my head trader on
the phone and he just gave me a running that
ration of everything was going on until the tower collapsed
and the cell connection dropped, and I wrote it up,

(28:04):
sent it to him and said, what do you think
You're okay if I just throw this up on the
side to let all our clients know we're okay. He's like, yeah, sure,
do it, and I wake up the next morning there's
one thousand emails from people. It was one of the
earlier first hand reports. I'm convinced that is why typead

(28:25):
offered me a beta test with their newfangled Wizzywig blogging software.
From there, I eventually ended up at WordPress. But I've
been writing publicly for let's call it twenty five years,
twenty seven years. And one of the things you learn
when we were younger is if somebody is kind of

(28:45):
upset at your writing. Well, they have to take a
sheet of paper and a pen and they have to
scribble a note and type it up and send it
into the editor. Then the editors review all these mail
that comes in, and three weeks later, on page c seventeen,
Deer ad that Ridoltz is a schmuck and here's why,
and blah blah blah. There were gatekeepers, There were guardrails.

(29:06):
It wasn't just hey, I have an Internet connection and
therefore I'm entitled to shit all over whatever you did.
And I'll give you. I'll give you example. You mentioned
Michael Lewis. One of Michael Lewis's books came out. I
don't remember if it was Flash Boys. I was just
talking to him Friday. He has a new book out

(29:29):
now also, so one of his books come out and
for whatever reason, not controlled by him. This is strictly
between the publisher and Amazon. The Kindle version doesn't come
out for thirty days, and a whole bunch of people

(29:50):
are giving the book one star reviews because the Kindle
and I just want to slap these people upside their heads.
And it's like, first of all, most of you are
not qualified to write reviews. Let's just start there. Most
of you are bad writers. You're terrible readers, like I'm
amazed at reading comprehension, a broad indictment of the American

(30:13):
education system. But then you're winding me up. I'm going
on a rant. But then it's like, what do you
have any idea? How much this is my second book,
like the last one was fifteen years ago. That's how
much work goes into it. Look look to the sequel
for this coming in twenty forty. It's a pain in

(30:33):
the ass to write a book. It's a lot of time,
it's a lot of effort. It's a lot of work.
You submit the manuscript and then the editing process starts coming,
and then you're back. And then once the book has published,
the promotion and someone some I'm going to curse again.
Some asshole says I have to wait four weeks for
the kindle version. Ooh, I'm gonna give it one star.

(30:56):
It's like I had I had comments on my blog
during the Golden Age of blogging. At a certain point,
I just kind of got to reach it. So here's
the answer to the contrarianism, long winded way. At a
certain point, I'm like, yeah, this is no longer worth it.
It's trolls, It's people trying to promote their own bullshit.

(31:17):
It's spam. It's before we knew what bots were, it
was bots. I'm like, hey, and I wrote like a
two thousand word missive here's why I'm shutting the comments down.
It's a shame, but it's the tragedy of the commons.
Anytime you have a public space. Most of most people,
this is the funny takeaway. Most people are kind, decent

(31:39):
human beings. So if only one percent of the world
are assholes, hey, there's eight billion people in the world.
Guess what you know, eight billion people, that's still eighty
million assholes. That's a lot of assholes. And because they're assholes,
they spend a lot of time online. And it's you know,

(32:01):
you saw it happen with Twitter. Twitter. This is long
before Elmo bought it. Twitter started circling the drain a
while ago. It just got worse and worse and worse.

Speaker 2 (32:10):
I gotta stop here for one second. You referred to
mis Elmo.

Speaker 3 (32:16):
Yeah, because I don't like to use his name, because
I'm convinced somewhere on Twitter, if you mentioned Elon he
seems to be insecure and vindictive enough that it'll pull
up something. And I've had a bunch of friends suddenly
their entire account is downgraded. They could do one post

(32:38):
to day. Everything is is the free speech talk about
selling bullshit, free speech absolutist unless you disagree with me,
and then you're screwed. So it just I used to
type it, and it's just become. And you know, he's
kind of like a sesame Street muppet. You know, if
you know his history, if you know that he didn't

(33:01):
found PayPal, he didn't found Tesla. He's really good at
finding a parade and hopping in the front of it.
He didn't find found Twitter. I'm trying to remember if
he even found its space sex. He may have been
there at the beginning. I don't really remember, but you know,
he And this is to get back to the question

(33:24):
how you deal with the slings and arrows of other
people in the industry. The reality is that back in
the day, listen, when we were growing up, every library
had that crazy guy outside, whether he had the aluminum
on his head or not. What the Internet has allowed
is all the crazies to link up and actually form

(33:46):
a movement solo kind of wacky people who believed in
things that weren't true. You know, they they've found each
other through the Internet. So I've kinda I've kind of
become quick to dismiss nonsense. I got into a Twitter

(34:07):
spat with the founder of Chewy who said something very
ignorant about short sellers. There have been a lot of fraud,
and his shop is perfectly legitimate, but there have been
like Overstock and all these companies that had accounting fraud.
And why is it that everywhere there's fraud. You know,
short sellers ferret out fraud and identify a mispricing. Hey,

(34:31):
the market hasn't figured this out. This shouldn't be one hundred,
this should be twenty. And why is it that every
time someone complains about short sellers you find out that
there's some sort of terrible garbage going on in the company.
So I just think he didn't know better and said something,
and I kind of mocked it, and he sicked his

(34:51):
three million, you know, followers on me, and so I
don't know if I don't think he didn't intentionally. It's
just that you know, young dumb on the internet. Hey,
they're entitled to slag me because they paid twenty seven
dollars a month for an Internet connection. They're experts now,

(35:12):
and like some of the younger guys, it's like, dude,
what's going on. I'm like, oh yeah, let me just
mute that conversation. All right, it doesn't exist guys like us.
The internet is a room in the house. We go
into the younger generation. The Internet in real life are
the same thing. So like you could you could be

(35:33):
very online, or you could be two online. So I
think that something happened. Oh so I've been doing a
bunch of pods and videos and I started going through
the comments on one of the YouTube videos and I
started laughing out loud. It's like, this is why I
think it's like twelve years ago, I turned off comments

(35:55):
and I had comments off on my Bloomberg and my
Washington Post column. Not because I don't want to engage
in spirited debate, but there are rules for debate, and
there's got to be like a basic fundamental understanding of
here's what the topic is, here's how you can debate it.

(36:16):
My I love mixing it up with people now. Moot
court was my favorite part of law school. I'm very
happy to debate anything in the book, anything, But then,
you know, as a friend once said, you know, when
people are wrapped in a glass and steel vehicle and
they're protected by five thousand pounds of you know, a

(36:40):
vehicle moving fifty miles an hour, they'll flip you off,
they'll give you the finger, they'll tell you to go
fuck yourself, they'll yell whatever they want out the car.
You would never do that as a pedestrian or in
an elevator, probably because you get your ass kicked, but
also because that sort of screen of safety disappears. The Internet, unfortunately,

(37:03):
has a tendency to encourage people's very worst behavior. And
you know, it's not social media. Everybody complains about social media.
It's algorithmic social media that is designed to reward attention
and outrage, and they do it by tickling your emotions

(37:23):
and getting you frustrated and getting you angry. John Stewart
calls Fox News bullshit Mountain. Algorithmic social media is the
same way, and the fascinating thing you mentioned Fox News
and CNBC. It's not all of them. You just have
to pick what's worthwhile and useful and ignore the rest.

(37:47):
By the way, CNN MSNBC, Bloomberg TV, Forbes, The Wall
Street Journal, The New York Times, The Atlantic, go through
all of them. Some writers are better than others, some
ideas they're better than others. It would be really, really
helpful to us as individuals to be better critical thinking

(38:10):
thinkers have an ability to understand framing and context. The
world is complicated and filled with shades of gray. Anybody
who reduces these things to a black and white thumbs
up or thumbs down binary outcome, they're doing a great
disservice to themselves and to everybody else. And so why

(38:33):
why don't I care what other people say? Either they
don't understand the whole framework, they don't understand the math inside.
They're not picking up the nuance. More often than not,
they read the headline and that's what they form their
opinion on.

Speaker 2 (39:01):
Okay to great Greek except for one company you mentioned, Chewy.
That's the public. Yeah. I don't know enough about the finance,
not really my world, but you know there are certain events, Robinhood,
I don't really know where everybody shows up. Are you
a pariah? Are you not a member of the group?

(39:21):
Where do you fit in?

Speaker 3 (39:25):
So I know I'm definitely not a pariah. And you
could tell by the blurbs in the beginning of the
book that there are a lot of big hitters who
seem to put up with me and gave me a nice,
a nice blurb. I will say the two real, two

(39:46):
or three things that I did that kind of allowed
me to throw them out of cocktails but still get
invited to the parties is first heading into the financial crisis.
Not a lot of peopleeople were jumping up and down
and saying, hey, guys, this is a Remember the three
D posters. You look at them out of focus and

(40:08):
the dolphin jumps out. That's what was going on in
the mid two thousands. If you looked at what was
going on in the economy and the market correctly, it
was pretty clear shit's about to hit the fan, right
and it's at the time I was very public about this.
I went on Cudlow's show after the I don't believe

(40:30):
in forecasts, but I got into a debate with the
editor way back then of BusinessWeek, Hey, you're doing your
big annual forecast issue. Why don't we run a little
counter programming and talk about how no one's won this
two years in a row. The outcome is random. You
move the end date forward or back twenty four hours
the whole number, order show the whole thing is and

(40:52):
that the editor says, it's a double issue. We sell
a shit ton of advertising. Do you want to participate
or not? So I put in I had written rein
Hart and Rogoff wrote a piece to academics that Harvard
and I don't remember whether they're married. I don't remember where.
Maybe it's Harvard, MIT or Harvard and Boston College, but

(41:15):
they're married. And they write this piece that looks at
five financial crises. It's Helsinki, Mexico, the US, Japan. I
always forget the fifth one, whatever it is. And it
turns out that if you have a leveraged base financial crisis,
too much debt and it blows up, real estate has

(41:39):
a tendency to drop twenty five to thirty five percent.
By the way, that later that that paper later gets
expanded into this time is different. Eight hundred years of
financial folly by them. So I take that, let's take
thirty percent as the average. What would happen to the
dow if real estate fell thirty So I write up

(42:01):
the series Forthstreet dot Com I did it with the
Dow because the S and P five hundreds, five hundred companies,
it would have taken forever to do. Hey, I could
kind of spit all my way through thirty companies. Long
story short, I come up with a number at the
time when the Dow is like thirteen thousand and change
of sixty eight hundred, like down fifty percent or so,

(42:23):
and so I dutifully. After I hang up the phone,
I go back to that piece. I pull out those numbers.
I put it into the Business Week forecast, and Dow
sixty eight hundred. I don't remember. The SMP was like
six eighty or six ninety something like that. The NASDAK,
I can't even remember the numbers. They were so low.

(42:43):
Cudlow brings me on, and I've been doing his show
pretty regularly, and he brings me on and basically mocks
me for twenty minutes, and I'm like, Larry, this is
a thought experiment, and here's here's what nobody is thinking about.
This has been a backward real estate driven economy. Normally,
people get jobs, they get raises, they go buy houses.

(43:06):
Not Hey, we're cunning rates to zero. Everybody borrow money.
Anybody who could fog a mier borrow money go buy
houses and then that stimulates that's backwards. That's not how
this is supposed to work. And look over here at
we're selling all these subprime mortgages and collateralizing them. That's
the poison, that's the toxin getting into the bloodstream. All
of this ends badly. And he's like, but look, everybody

(43:28):
else is up here and you're all the way down here.
I'm like, so for about a year I looked like
a fucking idiot. And I remember going on CNBC with
my friend Peter Buchfar, He's a market strategist. Elsewhere I'm
talking about housing and the impact on markets. He's talking
about rates and the impact on profits, and the anchors literally,

(43:50):
I want to say. This was like late seven. Our
offices were downtown forty fourth Street and forty sixth Street.
We were near each other and Madison and like fifty
something was the remote CNBC studios, and the anchors laughed
at us on the air. Peter bookvar please reach out
to Bob and confirm this, and we kind of we

(44:11):
were walking back to our offices down Madison and just
kind of hey, either we're really right or we're really wrong,
because they just laughed us off the air, like we
really look like idiots. And I'm like, I don't know
how much longer this goes. And you kind of see
it in the movie The Big Short, even though Michael

(44:32):
Burry makes his clients hundreds of millions of dollars, like,
the two years heading into the collapse is just torturous
for him. So I had nothing like that experience, but
I understood, gee, you know this doesn't make sense. I
know markets go longer and higher than anyone could expect.
So the funny part about that was, as soon as

(44:54):
the shit starts hitting the fan, Larry starts having me
on every week twice a week, I'm getting called constantly.
So the fact that I more or less got that right,
and then on by dumb luck, Henry Blodgett of Business
Insider and Yahoo invites me on on I had I
had said to a friend, Hey, the sixty eight hundred

(45:15):
thing is, you know, a little embarrassing but starting to turn.
If please, if we get anywhere near that, don't let
me be that jerk that doubles down and says thirty
four hundred. So I'm on vacation when we cross sixty
eight hundred and I get a phone call, So what
are you doing. I'm like, I'm literally writing the note
right now. I send it out Henry Blodgett immediately, Hey

(45:38):
you want to come on Yahoo TV? Sure? So the
biggest baron Wall Street, the guy who warned you about
sixty eight hundred, seven thousand points ago. What are you
seeing now? Hey? Everything we're looking at is this pinned
negative as it gets. Cover your shorts and go along.

Speaker 2 (45:54):
Here.

Speaker 3 (45:54):
It's it. And this is not how I run money.
I was at an institutional I had planted a flag
and it's like, all right, we're down fifty percent. Maybe
we fall more. I don't know. I'm just going to
take the win and go home. And by the dumbest
of dumb luck, the next morning was the bottom and
markets took off. So I think people in the industry,

(46:18):
all right, he got that one right, So he's not
a total idiot. Will will tolerate some of his nonsense
because anyone who listened to him saved a bunch of money.
And then, not only had I been blogging for forever,
but when I moved over to Bloomberg, I told them
I wanted to fool around with this new fangled podcast thing.

(46:41):
They're like, what do you mean, Well, I want to
speak to intelligent, accomplished people and have long form conversations.
What do you mean long form like ten minutes? No,
like two hours? And everybody laughed at the time. The
way I the way I pitched it was Mark Maren's
WTF meets Charlie Rose And then a few years later

(47:01):
I had to amend that, but with pants on. So
Bloomberg came back to me and said, tell you what
if you get us thirty two minutes, thirty two minutes
of your content traffic, news, sports, weather, commercials, that's an
hour of radio. Have at it. Whatever is longer than
thirty two minutes will put online. No one's going to listen.
But what the hell? And that was eleven years ago,

(47:24):
five hundred and fifty episodes ago. And I've kind of
gotten to meet everybody in the industry. And I'll never
make someone who's terrible look good. I will give somebody
an opportunity to say, who are you, how did you
get that way? What's your investment philosophy? What can we

(47:46):
learn from you? And so I think I've kind of
earned my way into a pass, even though I kind
of you know, let's be honest. For most of its history,
Wall Street was not Mom and Pop's friends. Wall Street
existed for the wealthy, by the wealthy. I grew up
a really middle class kid. I mean, when I was younger,

(48:10):
my dad was the business he was working for imploded.
By the time my younger brother was in high school.
Well by then he had switched careers, launched the store,
and they were doing well. But I grew up very,
very middle class. Went to a state school, paid for
it myself, went to a local law school, paid for

(48:32):
it myself, working my way through both, and so I
never intended to go into finance. It was never like,
there was never a plan here other than that kind
of looks interesting. I got a tour of my buddy's
trading room. He's like, why don't you do this? You're
good with computers, you're good with numbers. You would be

(48:54):
a natural at this. I'm like, really, do you like
being a lawyer. No, I hate being a lawyer. Well,
then try this, and I did, and you know, thirty
years later, here we are.

Speaker 2 (49:05):
Okay. You mentioned short sellers Hindenburgh, which got the most
ink and was right shut down. So you say in
the book there should be word short sellers, even though
the trend is the Dow and the S and P
continue to go up, So tell me more about that.

Speaker 3 (49:23):
So you know, we come out of the financial crisis
in nine and a good rule of thumb, anytime markets
are cut in half by equities like it's it's you
shouldn't be market timing, you shouldn't be jumping in and out.
But down fifty percent on US equities has turned out
to be a pretty good entry point, all right. If

(49:44):
you bought in twenty nine down fifty percent, there was
still another down thirty percent to go. But five years
later you'll find and ever since then, you won't rarely
get down fifty percent. We've had we've had the financial
crime sis, even the dot com implosion where the Nasdaq
was down where all the technology companies were listed, was

(50:06):
down eighty one percent, But I want to say the
S and P five hundred was down something like thirty
eight or forty per didn't quite get that low. So
it's really really rare. And yet coming out of the
financial crisis, all I heard for a long time was
the FED is repressing assets they've the manipulating markets. They've

(50:28):
cut rates to zero, they're forcing people into the market.
And I frequently found myself speaking to people saying, you know,
over at NYU Start School of Business, around the corner
on McDougal is Cafe Reggio, and if you're a grad student,
you can go get some cappuccino, smoke clothes, cigarettes, stroke

(50:50):
your beard or your goatee, and philosophically debate the propriety
of what the Fed's doing. But you're an asset manager.
Your job is to manage your client's assets. If you
want to fight the FED, well knock yourself out. But
that's a different job than the one you were hired for.
And people don't like hearing that, and they especially don't

(51:14):
like hearing how come everybody who's anti FED has wildly
underperformed their benchmark for the past fill in a blank one, three, five,
seven years. It's almost as if whining against the central
bank is an excuse for poor performance. So stuff like
that doesn't really win you friends, but it's, you know,

(51:36):
more or less true. It's uh. I know people who
are former bank regulators and former Federal Reserve researchers, and
they've gone into academia. Those are the right people that
should be debating FED policy, and you know they have
because that's what they were hired to do. But if
you're hired to manage someone's bond portfolio, well then shut

(52:01):
the fuck up and manage the bond portfolio. Whining about
the FED isn't gonna help your your numbers. So I
am occasionally a fly in the ointment. I am occasionally
somebody that can piss people off, But for the most part,
I have tried to make finance smarter, make it fairer,

(52:24):
focus people on what matters, Debunk a lot of nonsense,
and just keep mom and pop investors focused on, you know,
purposeful investing. What are you saving for and why? Right?
What's the like money money, more money for money, More
money's sake doesn't really get you anywhere. But if you're

(52:45):
saving for a purpose, it could be five point twenty
nine for kids college, for one K for retirement. Maybe
you have enough money you're saving for philanthropy or generational
wealth trener, whatever it is. Once you figure out the
purpose that you're aiming your investments towards, well then you
can figure out the best route there. With the least

(53:05):
taking you know, returns or a function of risk. You
have to assume some level of risk risk free returns
or what you get from the ten year treasury because
you're guaranteed to get your money back now. Yielding four
percent not a great return when inflation's two and a
half three percent. Stocks tend to be eight ten percent
of a long term better return. But as we saw

(53:28):
last month, they don't just go up. They go up
and down, and so you have to be prepared for that.
So if you, you know, if I can get people
focused on here's how to do this, here's how to
not shoot yourself in the foot, and here's how to
manage towards a goal. You know, more for more's sake,
is not a goal more because I want to leave

(53:50):
all my money to the Humane Society because I don't
like how we're treating cats and dogs. Hey, now you
have a goal, you know how to we know how
to map a path to that, and you can assume
the right amount of risk relative to that purpose. And
so I think I'm sincere about that. Maybe that buys

(54:13):
me a little bit of goodwill. I've had enough people
call me an asshole, so I'm clearly pissing some people off.
And I think as you read the book, you could
tell so my wife got me this. She's like, now
you have some fucks to give, because previously I had
no fucks to give. Oh, you don't, dude, this was

(54:36):
the cover story you wrote on the cover of Fortune magazine.
Here's why Cisco is the one stock to own. You
have to own this. Don't own Microsoft, they say in
the magazine. Own this one. Don't own Ge they say.
They turn out to be right about that, but Microsoft,
they were wildly wrong. And ever since that cover came

(54:57):
out in May of two thousand, we're twenty five years
later and that trade is still a loser. It's still
below where they recommended it. I feel someone should be
calling out people that put bad ideas out into the ether,
and people will, unfortunately put money to work based on

(55:21):
what they're reading, what they're seeing, what they're hearing. And
so I admittedly cherry picked the most egregious examples, and
some of the examples in the book are just really
horrifyingly egregious, But the lesson within the each is still
the same. Whether it's the idiots who paid their asset

(55:44):
managers a billion dollars. Two asset managers manage a family
office for one family and managed to squeeze a billion
each in fees out. That's egregious. Recip's a locutor. The
thing speaks for itself. I'm sorry, but I don't care
how good you are. You shouldn't be getting a billion

(56:05):
dollars for giving anyone advice, and so I thought that
was worth calling out. The best selling personal finance book
of all time is Rich Dad, Poor Dad. Robert Koyasaki
always mispronounced his name. Thirty two million copies of that
book sold. I haven't read it, but I've seen him

(56:28):
on Twitter. In every week he's four care or every
year he's forecasting an economic crisis and a market crash.
Literally since two thousand and nine. Somebody else on Twitter
found all of his tweets stacked him together, and it's like,
oh my god, this guy has just never recovered from

(56:48):
eight oh nine. He's been negative and bearish and has
like two million Twitter followers, which is unfortunate because those
poor bastards, if they listened to him, they missed what
was one of the greatest decades in market history. Every
year he forecasted a crash My favorite forecast of his
was twenty eighteen, sell residential real estate in the US,

(57:11):
big housing crash coming. I'm hard pressed to find a
better time to buy residential real estate in the United
States than twenty eighteen, even with the dumb luck of
the pandemic. But here we are. Housing topped out in
five oh six, we underbuilt single family homes for a decade,

(57:31):
and by twenty eighteen, forget the pandemic, we were Depending
on who you listen to, the Architects Association, National Association,
and Realtors National Builders wear two three four million homes
short as of twenty eighteen. Because we underbuilt homes for
a decade. And this guy is telling people sell the

(57:52):
US real estate. So nobody calls these people out. I
kind of feel somewhat obligate. That's my neuropathy, is that
I just can't let the shit go. I have to
call it out.

Speaker 2 (58:13):
Okay, just to go back what should be happening with
short selling.

Speaker 3 (58:20):
I'm tough to wrestle into submission, aren't I. So short
sellers serve a really important purpose. They identify fraud that
the SEC misses. They're the first ones to buy in
a market crash because they sold up here the market crashes,
they're a buyer. Hey, free money. And it's become really

(58:40):
challenging to do, in part because the modern world has
become so much more efficient markets are. They used to
be kind of sort of eventually efficient. Now they're pretty efficient,
meaning that if there's fraud out there, if there's something
wrong with a company, forget fraud. If a business model

(59:01):
is crapping out, short sellers are usually the first ones
to figure that out. They tend to be negative because
they're betting on things going down. They tend to see
the glasses half full. But they serve a useful purpose.
They are the eyes and ears you know. Short Sellers
are the one who identified and run as a fraud.

(59:24):
Short Sellers are the one who identified world com overstuck.
Go through the list of all the big frauds of
the past ten twenty thirty years, It wasn't the SEC
that uncovered most of these. It was typically short sellers.
In fact, as much as you want to believe the
SEC is the one who found out about Bernie Madoff,

(59:47):
a handful of short sellers looked at that and said,
none of the strategy makes sense. This is clearly a fraud.
I know three or four people quants that looked at
that looked Renaissance Technologies. Is a quant that did that.
I'm drawn a blank on the guy's name. A former

(01:00:09):
MIT professor who wrote Beat the Dealer Right. He was
one of the people there. There were a handful of
folks who looked at who ed Thorpe, who looked at
at made off and said, something doesn't smell right with this.
It wasn't. And he managed to skate through the dot

(01:00:32):
com implosion, but he couldn't skate through the financial crisis.
The SEC didn't figure it out. It was the market
crash that you know, the tide went out and he
was naked and everybody saw what was going on. So
short sellers serve a really important purpose. It's become really
challenging to do. People have been abusive with litigation. The SEC.

(01:00:56):
You know, they don't like being shown up. You would
think they would work with short sellers to reveal to
uncover fraud, but instead it's that they haven't been especially nice.
And the way to make money, there's two ways to
make money as a short seller. So the way it
works is I borrow stock from you and then I

(01:01:19):
sell it, and when I buy it back lower, I
return the shares to you. Right, That's how and I
pay you a fee for that. That's how short selling works.
So that's one way to make money as a short seller.
The other way is to write up research reports. But
that whole business, that side of the business. You know,
back in the old days, when you would trade, it

(01:01:39):
would cost you fifteen to twenty cents a share. Then
it was ten cents a share, then it was five cents.
And the way research shops would make money is, Hey,
run all your trading through us. We'll give you all
our research for free, soft dollar. And so at five
cents a share, people doing tens of millions of shares
trading a day. Hey, it adds up to you know,

(01:02:01):
ten million here, ten million there. Pretty soon it's real money.
That business is really shrunk dramatically, so the you know,
there is a need for newspapers that business says, and
local reporting that's shrunk. The fascinating thing about the Internet
and digital and modern technology is a lot of the

(01:02:23):
institutional building block blocks of our society have had their
legs cut out from on them. Between Craigslist and eBay
and then all the dating apps, and then all the
bring a trailer and cars and bids like and Zillow.
Each of these were giant real estate, giant newspaper advertising sections,

(01:02:43):
the classifieds, garage sales, used cars, house listings. That's all gone,
and you know, you lose newspapers and democracy suffers. Well,
the same thing happens in the market. The business of
short selling has becomeing recently difficult. Trading is essentially free
these days, so it's really hard. It's one thing to say,

(01:03:06):
we have to trade, all right, run it, give some
to him and some to her and some to them,
and you know, well, that's how we'll pay for our research,
as opposed to, oh, trading's free. I got to write
a check for a quarter million dollars. I don't think
I want to do that. And so that business has
become really, really challenging. And it's unfortunate because they served
an important purpose in the market.

Speaker 2 (01:03:28):
Okay, you take down Susie Orman and Dave Ramsey. Dave,
of course, is really all over TikTok and Instagram wheels.
Can you go into that a little bit.

Speaker 3 (01:03:41):
So, look, they both serve a purpose, and I every
now and then they just kind of cross the line
and it makes me a little crazy. So if you
and Dave Ramsey, bless him. He's built a great business.
Good for him. Susie Orman. Also, finally, now there's a
woman or there has a woman on that saying the

(01:04:01):
same thing, telling people how to deploy fundamental budgeting. Right,
there's a need for that. I'm not like anti Susie
Orman or anti Dave Ramsey. It's when they start saying
stuff that's just clickbait kind of nonsense. It pisses me off,
all right, so I get so let me sum up,

(01:04:23):
Dave Ramsey, Hey, get your personal budget together. Spend less
than you earn, don't run up credit card debt, invest
in yourself via education or whatever. Invest in your long
term by saving for the future. This is really, you know,
the sort of stuff we should be teaching in high school,
you know, back in the day when there was home ech,

(01:04:47):
family budgeting. A lot of this stuff is pretty basic,
and some people really need to hear this over and
over again. Where it starts to get a little crazy
is what I call the spending skolds, and it's never
buy a sports car, don't spend a lot of money
on a boat, don't do this, and they leave out

(01:05:07):
the last part of the sentence, which is if you
can't afford it. Right, I'm a boater. My first boat
was like a forty dollars row boat, and then a kayak,
and then eventually a little thing with a little outboard,
and now I have During the financial crisis, I bought

(01:05:29):
a boat that was a short sale. The guy was
about to lose it to the bank, and you can negotiate.
So I've had that c Ray for twenty years. But
the takeaway is I could afford it. If you're buying
something as a flex, well, you're wasting your money, nobody.
And that's the flip side of Instagram and TikTok. You know,

(01:05:51):
you just see the tip of the iceberg. You don't
see the two thirds that are below the waterline. You
see a big house or a fancy car, or jewelry
or watch whatever. You're only seeing the asset. You're not
seeing the liability on the other side of that. You're
not seeing Hey, it's nice that you have a two
million dollar house. How much is your mortgage? Two million dollars?

(01:06:11):
All right, so you have nothing. Here's the asset, here's
the mortgage. They offset right, that's a very different experience.
And when I see people flexing and buying things that
they can't afford, that's where D Dave Ramsey and Stusie
Orman one hundred percent right, where I kind of get
a little pissed. Is you know, if you buy a latte,

(01:06:32):
you're pissing away millions of dollars. Hey, not for nothing.
I don't want to be a top ten percent or
a top one percenter. If a five dollars latte is
the difference between a comfortable retirement or not. You're doing
something else wrong. You're just doing something else wrong, no matter.
And there's a concept called denominator blindness where you just

(01:06:54):
see the numerator but not the denominator. All right, So
five dollars, I guess over thirty years, you could say
it extrapolates out to hundreds of thousands of dollars. That's
before you inflation adjusted. But hey, over that same thirty
year period, how much is your earning going to go

(01:07:14):
up if you're not buying a latte for the next
thirty years because you're only making one hundred grand now, well,
thirty years from now, you're not still making one hundred grand.
You're probably making closer to eight hundred grand. And again,
who cares about a five dollars latte? When the funny
thing is, when when all the latte crap came out,

(01:07:35):
we were looking at about thirty years of no increase
in wages for the bottom sixty percent of earners in America.
And to me, rather than waste my time scolding people
not to buy a latte, I think you should look
at Hey, how come nobody's income in the bottom on

(01:07:55):
a half of society is keeping up with inflation. We're
watching hell health care go up nine percent a year
for the past twenty five years. We're watching education go
up that much. Wages are badly lagging for pick a number,
bottom forty fifty sixty percent of society. I don't think
lecturing those people about five dollars lattes is going to

(01:08:16):
help them. What would really help them is trying to
figure out why we are not keeping up wages. And
that was the great irony of the pandemic is suddenly,
not only was there a giant fiscal stimulus that made
its way into everybody's pockets, but a lot of companies

(01:08:37):
quickly realized, oh, we're competing for a modest pool of workers,
and the only way we're going to be able to
keep find the people we need is by giving them
a salary increase. I know a lot of folks aren't
thrilled with Amazon and Bezos and the crapification of the site,
but I think it was around twenty sixteen they realized, hey,

(01:09:01):
we have a shit ton of money. We don't pay
taxes because we don't show a profit. So they raised
their minimum wage to fifteen dollars nationwide and scooped up
all these people. And for a couple of years you
would go through a Walmart and it looked like crap.
They couldn't hire enough people and their incentives were really misaligned.

(01:09:22):
So over the past let's call it ten years, there's
been a pretty big catchup for a lot of people.
I think medium wage is up to like eighty thousand
dollars now in the United States from like forty three.
Not that much. That not that far. I'll go. Let's
just take a quick look to see where we are.

(01:09:45):
I mean, eleven ninety two per week, that's that's not bad.
So when I see people complaining about five dollar lattes
or don't buy a sports car. Yeah, if you can't
afford it, don't buy it. But if that's something that
floats your boat and you want to go do it,
and you're going to hang out with friends, you're gonna
have fun going on road trips. And you know the

(01:10:07):
thing about the I had a conversation with one of
the people I work with who has a lake house.
He lives in Michigan, and he, you know, is debating
getting a small boat and he could easily afford it
and kind of was hesitant because of the scolding. And
I'm like, the problem isn't never buy a boat. By
the way, the boat is the least expensive part of boating.

(01:10:31):
Then there's repairs and gas and maintenance and dock fees
and winter storage and beer, and like, the boat is
the cheapest part of boating. If you can afford this
and you want to spend time with your family and
your kids will go out and you'll you know, have
great experiences and create memories, knock yourself out. And he
bought the boat and it's been a blast. It's not

(01:10:53):
about it's just too lazy and easy to always say no.
I don't think you should just say no. I think
you have to think these things through and put it
into some context and find some nuance, and hey, if
you can't buy it, afford a boat or a latte.
If you can't afford it, don't buy it. But if
you understand the costs and what goes into it, like

(01:11:15):
someone did, someone did something, Never buy a beach house.
Why don't you want to go to the beach and
relax over the summer. The most fun I have had
is hanging out reading a book, listening to the ocean.
Why should I not buy a beach house? Well, it's expensive,
and there are maintenance costs and this and that. Listen,

(01:11:37):
you could buy a two hundred thousand dollars shack, you
could buy a forty million dollar mansion and everything in between.
Just saying no kind of seems lazy.

Speaker 2 (01:11:47):
Okay, I want to go a little bit deeper into
the latte because you talk about the enumenterator and denominated
be very specific that the latte. I think it's Susie
Orman extra lates to this incredible payment in the future,
And you dig down and say, she's assuming a rate
of return that's actually twice of what one might expect.

Speaker 3 (01:12:12):
So first it's non inflation adjusted so that's number one.
That's where you end up with a part of it. Second,
if I'm remembering it correctly, I'm doing this for memory,
it was either twelve percent or fourteen percent. You know,
you should really look for about ten percent over long periods,
So that that was a believe it or not, two
percent after thirty years adds up to about thirty five

(01:12:34):
percent of the total returns. It's a huge, huge, outsized impact.
And then it also ignored the other side of the equation.
If you're also seeing your income go up and you're
seeing you know, you're every time you bump up your salary,
you put more money into your four oh one k.

(01:12:56):
It worked out to be net of everything about what
a car would cost, assuming there's still cars thirty years
from now. So here's your choice. Never have another Starbucks
or Blue Bottle or whatever your favorite local coffee brewer is.
Never have another one of their four five six dollars lattes,

(01:13:16):
and thirty years from now it'll pay for a car
or so right not, I'm going to bet thirty years
from now they're probably not selling cars, or they're selling
self driving cars and everybody is ubering everywhere, or not
I have no idea, but it's not millions of dollars.
You're not retiring. And I use the example of hey,

(01:13:38):
the median income thirty years ago was twenty three thousand dollars.
Now it's twenty six thousand dollars. Now it's eighty something thousand.
And the median home price was like forty five thousand,
and now it's four hundred thousand. So now that's thirty
years ago. So extrapola thirty years forward, and these hundreds
of thousands of dollars in Latte save, it's really insignificant

(01:14:01):
to homes that are going to be ten twenty million
dollars in the future, and relative to salaries that are
going to be half a million a million just for
the meeting and salary thirty forty years from now. So
by just showing you half of the equation, you really
miss it. I'll give you another example that I love

(01:14:23):
and you by the way, there is a Twitter feed
called TikTok Investors, and this guy goes out and picks
out the dumbest, most ridiculous investment advice and financial advice
on TikTok. You know, how do we maintain our lifestyle?

(01:14:45):
We day traded Home says this handsome couple, what's their secret?
We only buy stocks that go up. If they don't
go up, we don't buy them. And I'm like, are
they purposefully channeling Will Rogers? Do they have any idea
ps pandemic crash happens in twenty twenty two, they move
into real estate. They're done with done with stocks. Hey,

(01:15:07):
if you're on a boat on April fifteenth, you don't
know any taxes, really, the IRS will beg to diff
with you. In fact, the IRS had to put out
a fact sheet forty two things that are on social
media that are not true being in international waters. If
you're a US citizen, you still owe taxes. It's not

(01:15:27):
a So one of the memes that he identified cracked
me up. Somebody took the bag of groceries that Kevin
from Home Alone bought, and way back then it was
like twenty dollars and ninety cents. I think Home Alone
was nineteen ninety or nineteen ninety three, something like that,

(01:15:48):
so it was twenty dollars. The same bag of groceries
today is fifty seven dollars. Oh my god, look at
how much worse the American dollar is done. It's like,
wait a second. When I go to buy groceries today,
I'm not using money I put aside in nineteen ninety.
I'm using money I earned in twenty twenty five. So

(01:16:08):
let's compare the groceries went up this much, how much
have salaries gone up? And it turns out that salaries
have gone up about ten percent more than the groceries
went up. So in reality, the groceries are a little
bit cheaper. But that's if you're just using your wages.

(01:16:29):
If Kevin would have taken the money he spent on
groceries and invested in the market, well from nineteen ninety
today it's worth two thousand dollars or some crazy number.
I detail it in the book. He could have bought
the groceries and still had, you know, ten x left over.

(01:16:49):
The purpose of money is not a store of value.
It's amazing people don't understand this. The purpose of money
is a median medium of exchange change. You get paid
in dollars. You use those dollars to pay your rent
or your mortgage, to buy the basic necessities of life, food, medicine, clothing,

(01:17:11):
to pay your taxes, to occasionally buy entertainment, travel, movies, whatever, music, whatever,
and to invest. You can start a business, you can
put in the market. That's it. And when you look
at money ten twenty thirty years later that's been invested,
it's gone up appreciably. I always cracked up every time
someone says, you know, the dollar has lost ninety six

(01:17:34):
percent of its value over the past hundred years. Why
the fuck would you hold on to a dollar bill
for one hundred years. Money only has value when it's
in motion, when it's being put to work. If you
want to sit on a dollar bill or one hundred
dollars or one thousand dollars for a century and miss

(01:17:57):
the opportunity to let it compound over time, time, that's on. You.
Don't blame the dollar. My job is to get the
dollars out of my hands as fast as I can.
The money comes in, I pay all my bills, and
I put money into my four oh one k anything
that's left and I pay my taxes anything that's left over.
After that, now I have to figure out what am

(01:18:18):
I going to do with this dollar that's going to
either bring me or my family joy or bring someone
else joy, or keep up with inflation and off that's
the purpose of a dollar not sitting in a mason
jar in someone's backyard for a hundred years. But that's
kind of and coming back to the original question, you know,

(01:18:38):
what are they selling? Well, they're selling gold bullion, they're
selling bitcoin, They're selling something. And the only way the story,
the narrative works is if you realize dollars are not valuable.
You know, I speak at a lot of public events
and we open it up for Q and A, and

(01:18:59):
in variably someone says, you know, what's your views on
the collapse of the dollar? But by the way, the
dollar over the past six months has been pretty close
to all time highs relative to other currencies. Remembered currency
is always relative. Where else are you gonna go? You're
gonna go to the Japanese yen? No, the Euro they
have structural problems, the Chinese wand please don't make me

(01:19:23):
laugh that we are the cleanest shirt in the hamper.
There's no other way to describe it. So whenever and
I get that question, I'm like, yes, you're right, dollars
are worthless. Their fiat currency has collapsed. My office, my firm,
offers a very free service. Send me all your worthless dollars,
and we will dispose of them properly. You don't have

(01:19:45):
to worry about being weighted down by all that useless
Fiat currency. And everybody kind of snickers. But the point
is you get paid in dollars, You spend your dollars,
you pay your taxes, and invest in dollars. That's all
it's supposed to do. It was never supposed to be
a store of value. And it's shocking how obvious it

(01:20:09):
is if you just think about it for a second.
And these guys have been getting away with this bullshit
for decades. I've heard that that was one of the
things in the book. That man that was like I
stubbed my toe on that twenty five years ago, and
it's just slowly festered, and finally it all came out
in the book.

Speaker 2 (01:20:34):
Let's back up, and let's look at it from a distance.
If you look at the book in general, you say,
everybody's full of shit. Nobody can forecast, whether it be CNBC,
any other outlet, anybody. You said earlier, of course that
they're selling something, they're getting paid in some way, right,

(01:20:55):
do not trust them. Two, do not believe that you
can pick stocks if for no other reason. Only a
very small number of stocks actually are profitable. Three have
a plan, which you referenced earlier, You want to go.
Four put your money in index funds. So if we

(01:21:18):
look at that from the beginning, let's start with the forecast.
The advice are you used to in even research? Are
you saying, really we should ignore all of that?

Speaker 3 (01:21:30):
No? No, And I talk about in the book you
need to find people who are worthy of your time
and attention. Right I create, I listed my personal all
star team and a few names off the top of
my head. Jason Zwig of The Wall Street Journal edited
Danny Konneman's book Thinking Fast and Slow just has great

(01:21:53):
insights into how people behave around money and the bad
things they do and what we can learn from them.
Sam Row writes about market structure and super insight insightful.
My friend Jonathan Miller, my go to guy about real estate.
Everything he writes about real estate is data driven, is

(01:22:13):
based in reality, and he's been studying real estate for forty years,
and on and on. I go through through the list
of people who I find have some things in common.
First of all, they've all they're all little seasons. They've
been through cycles before, they know how the movie ends.

(01:22:34):
They know you know this too, shell pass, So that's helpful.
They have a defendable process. They're not just throwing darts.
They're not just getting lucky. They think about markets from
a broad perspective, and their insights and way of analyzing
things and sharing that information is incredibly useful. But like

(01:22:56):
Sturgeon's law, you know, ninety percent of the stuff coming
out really isn't isn't useful. So the people on my
All Star list, and you know I had a limited
to ten. Who's writing about music, it's Bob left Sets
and Ted Goya. Those are the people that I can

(01:23:18):
rely on that I'm getting somebody who knows their industry,
who knows the ups and downs, who's seen all the
wartz in it, and basically can give you some insight
into that, you know the fact that something's on TV
on CNBC. I'm a big fan of Bob Pasani and

(01:23:40):
Carl Kantonia. They're rational, they make sense. They could take,
you know, what could be very emotional challenging things and
put it into context. My partner Josh Brown is on
CNBC two or three times a week, and I could
always rely on him to be a voice of reason
when everybody's running around with their hair on fire. But

(01:24:02):
there's a bunch of people I could give you more
people from CNBC. Santoli used to be over at Barons.
He's at CNBC. Very very Mike Santoli, very rational guy.
I like the way he thinks about the world. It's historical,
it's analytical, and you know, you could go through sector

(01:24:24):
bi sector. Dana Telsey has been covering retail for forever.
Nobody understands the retail world better than her. So my
advice to people is not to just say, hey, it
all sucks, turn it off, because again, the world isn't
black and white, it's nuanced. You have to be a
little selective. You have to choose people who you know

(01:24:45):
have a good track record. It's not just dumb luck.
They're thoughtful, they're experienced, and they add value. There are
lots of things out there. I had to stop my
list at ten. I probably could have made it one hundred.
There are so many great substacks out there. There's so
many great sources. You'll as you go through the book,

(01:25:07):
you'll find I'm coding everybody from Derek Thompson to trunk
fan to on and on people with an expertise in
a specific area that I've been watching them for years
and realizing, oh, these guys are or girls are onto something.
They're consistently more right than wrong. So I don't when

(01:25:31):
it comes to you know, I don't want to just
say turn off the TV, never open a newspaper, magazine again,
just read nonfiction and books and novels. I think that's overstating,
and I think you just have to be a little skeptical,
be critical, and when you do decide to read someone

(01:25:54):
on a regular basis and trust what they're saying, make
sure they're worthy of your trust. I don't want to say, hey,
everybody's full of shit and everybody's wrong, because I know
that's not true, but enough people are full of shit
and so many people have been wrong. You have to
really be a little selective into who you're following, who

(01:26:14):
you're taking advice from, and TikTok and Instagram Are you
are you kidding me? Every It's not just the irs.
I just got something from a friend. One of the
journals of psychology has said had a whole article that
all of this advice on how to manage ADHD on

(01:26:38):
Twitter and TikTok. It's mostly wrong. It's not quite vaccine denial,
but it's mostly wrong. And if you listen to this,
you will it will not serve you well. And so
this comes up on a regular basis. I talk about
the Dunning Kruger effect in the book, which is our
ability to evovaluate our own skill set, and we end up,

(01:27:04):
as it turns out, that is a discrete skill, separate
from the underlying skill. And so we have a tendency
to think we have an ability to do something when
often we don't. And then the next adjacent step to
that is something called epistemic trespass when somebody is an

(01:27:25):
expert in this area and they're like, what the hell,
I'm an expert in this, I'm going to try my
expertise in that field adjacent field When all right, you
spent thirty years researching, writing, studying about this. You have
a point of view, and you have a good track record.
That's great in field A field B is wholly unrelated.
Why would you imagine you have an expertise in that?

(01:27:46):
But that's how us humans are. We step over the line,
and you know, I give a lot of examples of
people who are great real estate investors but terrible economic forecasters,
and so epistemic trespasses is just another one of those examples.
So if you find people who know what their skills are,
stay within that, like the tennis, operate within their own

(01:28:10):
abilities by all means, subscribe to their substracts, watch them
on TV. But you have to go through that, you know,
information hygiene process, that filtering process to get to the
good stuff, because there's so much let's just call it
noise that's distraction and doesn't help you get to where

(01:28:30):
you have to go.

Speaker 2 (01:28:31):
Okay, let's go to the other end. So what I've
learned is don't invest in pull my money out or
put my money down on a whim. Put my money
in index funds forgetting the super wealthy, forgetting people who
have complicated income in the States and other things. Is
that generally the advice and how does one do it?

Speaker 3 (01:28:55):
So that's the advice from Larren Buffett. He said, Hey,
if you're not in, if you didn't participate in Berkshire
Hathaway way back when, just buy the broad index. So
you can do this with the S and P five hundred.
You could do it with a broader index like the
Vanguard Total Market, which is a little more diverse and

(01:29:15):
a little less volatile, and that should be the core
of your investment portfolio. I don't care if it's fifty
sixty percent. Having some broad index, so you're at least
going to get what the market gives you. That's your
starting point if you are compelled, if this is the
sort of thing that you really want to do, and

(01:29:37):
you want to decorate the tree, says two Jews talking
about finance, Well, the index is the tree, The ornaments,
the lights, the garland, those were all the little seasonings.
If you want to buy a tech fund, or if
you want to add a shareholder yield fund or something
like that, sure you could put whatever stink you on

(01:30:00):
it knock yourself out, as long as you're starting from
a core point of I'm not market timing, I'm not stockpicking.
I'm just gonna buy the whole market and let it
do its thing. History has told us that's the best
way to accumulate wealth. When we look at the data,
and there's there are a number of The SPIVA, which

(01:30:22):
is the SNP Investor Analysis. Each year they do an
annual report and they tell you how many mutual fund
managers beat the index, beat their benchmark, and in any
given year about half of them, a little more than
half of them fail to beat the benchmark. So you're
not even a fifty percent in year one, you go

(01:30:44):
five years out net A fees, it's eighty three percent
of them fail to beat the Plane Jain Boring index.
You go ten years and you're in ninetieth percentile, and
by the time you're twenty years out, it's essentially no,
oh buddy. A handful of people, the Warren Buffets, the
Peter Lynches of the world their household names because there's

(01:31:08):
so few of them. But for those couple of guys,
and even Warren Buffett will tell you the bulk of
his outperformance was in the early part of his career.
The latter part, you probably would have been better off
in an index than Berkshire Hathaway. That's just the academic research,
that's just the math. Start out, and you know, our

(01:31:30):
whole business is so asked backwards. I started attracting capital
from people because I would say, here's how you should invest.
You could do it yourself. Buy a broad index. You
want to diversify a little bit. Okay, you can own
a little overseas assets, you can own some momentum, you
can own shareholder yield India and Japan, look interest, whatever

(01:31:52):
you wanna tag onto that. Knock yourself out, but start
with this. Rebalance it every three years to whatever you're
starting numbers are supposed to be. You know, if it's
supposed to be sixty percent, it's run away, and it's
now eighty percent of your portfolio. Right, cut a little back,
put some of that into other the other holdings you have,
and that's it. You're good for the next thirty forty years.

(01:32:16):
Our whole business really grew from that because enough people said, yeah,
that makes sense, but I don't trust myself, and I
don't have the time or the interest. You do it,
and so we started managing money for people kind of
that way. The core is a broad index. Some of
it's US, some of its overseas. We add certain flavors

(01:32:38):
to it. Here's a little here's a little momentum, here's
a little emerging market small cap value. Ultimately, ten twenty
years down the road, you kind of end up in
the same place. Anyway, we want to reduce a little
volatility for our clients. We want to get to the
same place, but without the crazy swings like we've seen

(01:32:58):
the past few weeks. But it almost doesn't matter what
the portfolio is. What matters is your behavior, because we
see time and time again, if you just whatever that
portfolio is, if you just let it do its thing
for a few decades, it'll compound and add up to
a shock shockingly large amount of money over the decades. Instead,

(01:33:22):
we try and get in the way. I don't like
this president, I don't like the way this market looks.
I don't like I mean, I use the examples of
Bush and Obama and Biden and Trump, and you know,
there are some studies that have shown when a president
of one party gets elected and you're looking at zip

(01:33:43):
codes by how that zip code voted, if they didn't
vote for that president, they end up selling a lot
of equities by zip code and missing the ongoing rally.
And it happened with Bush, it happened with Obama, it
happened with Trump one, it happens with Biden, and it

(01:34:04):
happened again with Trump two. That the fact that you
don't like this guy's politics leads you to sell stocks.
And you know, you go back to I think it's
nineteen fifty, right. If you invest a dollar when Democrats
were president, it turns into something like fifty two dollars.

(01:34:25):
If you only invested when Republicans were president, it turns
out to be forty eight dollars, And if you invested
the whole time, it's two thousand dollars. So markets don't
really give a crap about presidents. Now, if you're retiring
next year and you're unhappy about all this volatility, Monday,
there are tariffs Tuesday, they're off Wednesday. This we're recording

(01:34:45):
on a day where a market scream hire because over
the weekend Trump said, you know, maybe we'll reduce some
of the tariffs and we'll make it more focused and
it won't be as crazy, and like it was an
offhand remark, and the next thing, you know, the markets
to the races. So if you sold last week, you
missed all of this. It's impossible to time his sort

(01:35:09):
of crazy, erratic comments. And so I understand if you
need the money in the next year or two, this
is really disconcerting. But if you don't need the money
for ten years, you have to look past the other
side of this. Presidency, just as you had to look
past the Biden presidency where stocks did really well, and

(01:35:30):
you had to look past the first Trump presidency where
stocks actually did even better despite the pandemic and everything.
Trump had one of the best stop market returns from
when he took office from twenty seventeen until when he
left in a cloud from January sixth. It's not whose president.

(01:35:50):
The presidents get way too much credit when the markets
are doing well, and they get way too much blame
when the economy and the markets are doing poorly. It's
not just who's in the White House. It's a whole
lot of moving parts. Politics is really just a teeny
part of it.

Speaker 2 (01:36:15):
Okay, leaving finance out. Sure, there's a thought that, well,
you know, the Democrats is going to be election in
twenty twenty six, going to be election in twenty twenty eight,
and you know, we'll see what happens, will roll the dice.
Then there's a contrary thought that, well, no, we're moving
into autocracy. This is a whole new error. W we're
in a constitutional crisis. Two things, are you saying that

(01:36:40):
the market exists outside of all of this, or you
choose not to pay attention, or is it possible that
we're entering a new era? You know.

Speaker 3 (01:36:54):
A little bit of all the above, and let me
unpack each of those. So first I tell people tune
out the noise. Right. I wrote a blog post a
couple of weeks ago, Hey, listen, if you don't need
your money for the next four years, you have to
look through the Trump presidency to the other side. And
regardless of what you think of him and the markets,

(01:37:18):
you can't make investments based on what he's doing. You
just can't. It's unpredictable, it's unforeseeable, and you can't just
assume that whatever he does goes to hell. Now the
narrative has changed in a couple of ways, because initially
it was hey, tax cuts, Hey deregulation, business friendly environment.

(01:37:38):
Markets ran up in anticipation of that, right up until
February twenty twenty five, where oh, this guy's serious about
these twenty five percent tariffs? What the hell? Then they
were on again, off again, on again, off again, And
the sentiment today seems to be, all right, this is
all you know what, China hasn't treated us fairly. Maybe

(01:37:59):
this should be more tariffs, but we're gonna definitely take
it down a couple of notches. So those two things
are right. I am not comfortable with a lot of
the autocratic things we're reading about. And you know, if
you read jv. Last and the Bulwark, he's pretty negative

(01:38:21):
about the outcome of all this. The debate is will
or won't Trump follow what court's rule? Is the rule
of loss still in effect. After January sixth, I wrote
up an analysis and kind of came to the conclusion
that how is it possible that the US is four

(01:38:41):
percent of the world's population, Right, we're about twenty percent
of global GDP, but we're like fifty something percent of
the total market cap of all the publicly traded stocks
in the world. And the answer was three things, so
sanctity of personal property, sanctity of contracts, and rule of law.

(01:39:06):
And I kind of spitballed. That's worth about twenty five
trillion dollars, right, And so that was the problem with
January sixth was there's a whole political and partisan issue.
There's a whole debate about the pardons. I don't really
think there should be any debate there. There's a whole

(01:39:26):
lot of stuff that's going on that a lot of
thoughtful people are really unhappy with, regardless of party affiliation.
But the real question is, hey, is there is there
still going to be a rule of law? And some
people are very negative and think that a lot of
these things. We've seen some deportations and some issues. You

(01:39:50):
had John Roberts, Chief Justice of the Supreme Court, who
had an embarrassingly laughable, you know, dread Scott type of
a opinion about the personal exemption from criminal liability for presidents,
even if they're not quite doing their jobs, if they're

(01:40:13):
sort of operating outside of that, Like law students centuries
from now are gonna mock every jackass justice that signed that.
Their whatever reputation they had flushed down the toilet. But
now you have John Roberts coming out and rebooking, rebuking
Trump for implying that courts don't apply to him, judges

(01:40:38):
don't apply to him. I am not thrilled with how
many you know, the Camelot and the Kennedy's were the
best and the brightest. I'm not all that keen about uh,
the worst and the dumbest that he surrounded himself with.
And I can't disagree with friends who say he's doing

(01:40:58):
permanent damage to a man in society, to the government.
Michael Loui we talked about Michael Lewis's new book, Who
Is Government. The stories in the book about what functions
governments perform, the US government performs, and how crucial it
is for the successful functioning of the US society is

(01:41:20):
so perfectly timed. He just has a knack for skating
to where the puck is. And it's really disheartening to
see a lot of these things that what this is
really a mass rapid privatization of the public commons. Here
we are back to the tragedy of the commons. Somebody

(01:41:40):
has figured out how to capture a lot of the
value of the US government and bring for the private site.
So that's the negative, that's the downside risk the positive,
and it's always hard to be positive. You go back
through history and you had the Red Scare and McCarthy,
and you had, you know, the Japanese internment during World

(01:42:01):
War Two, and then you had prohibition, and you had
you know, to say nothing of the Civil War, and
then all of the parts of the South that you know,
never quite got over the Civil War and put a
lot of laws into place that were just overtly unfair
and overtly racist. And so we've come through a whole

(01:42:26):
lot of problems in the United States, and it always
feels terrible, it always looks terrible. I want to be
a glass half full and not a glass half empty
sort of guy and say, on the one hand, the
United States has survived all these things. And then the
second part of that is, and there's so much money

(01:42:46):
at risk that I can't imagine that, you know, all right,
a couple, a couple of the big law firms have
knuckled under, and that's always disappointing to see. Paul Weiss
in particular, is getting slagged these days for really whimping out.
But they are part of the judicial system. They're part

(01:43:07):
of the legal system, I think, and I'm hopeful that
the financial system. You know, you saw what happened. He
was acting erradically and saying wacky things and doing crazy
shit with tariffs, and the market said, hold my beer,
we don't want anything to do with this, and it

(01:43:27):
started selling off. I don't think in my entire thirty
years in finance, I have heard so much angst and
anguish and complaints about a ten percent drop, you know,
ten percent happens twice every three years, about once every
eighteen months. It's not clockwork, but you look over a century,
that's about the average. And so I think the takeaway

(01:43:52):
is and I think, what the reason we had those
constructive comments from him? He tweeted, once the Dow is
down a thousand points in two days. Any president that
has that should be impeached. Well, bad news. Don the
Dow has been down a lot more than that on
a short number of days. Your own standard is, hey,

(01:44:15):
you're screwing up. If the market is your measure, and
I know he looks at the market, it's pretty well understood.
So I think that's a little bit of a check
on his worst impulses, because if he does stuff and
the market says, oh no, this won't stand that scene.
I don't know if the courts are going to be
a check on him. Certainly, unlike he's the president forty seven.

(01:44:41):
When he was president forty five, there were pe adults
around him that kind of restrained his worst impulses. He
does not have that now. Now he's surrounded by people
who were of the same ILKs and gold, to say
nothing of the unelected Elmo doing his thing. So that's

(01:45:03):
a real risk. It's a genuine risk. The follow up
post to Lose the Noise was seven potential errors, and
I named recession, market crash, dollars, geopolitical chaos. I went
through like seven things and said, hey, four months ago,
these were really low. Now they're still kind of low,

(01:45:27):
but they're somewhat higher than where they were before January twentieth,
and so I don't see a recession imminent. I don't
see a market crash imminent. I don't see a collapse
of the US dollar happening anytime soon. But all of
those things are now higher probabilities of occurring than they

(01:45:48):
were before the noise. I don't you know, people think
they know my politics, They really don't. My favorite thing
about Biden was I didn't have to hear from him
every day, and the constant noise out of this White
House will see if it kind of fades. So if

(01:46:10):
you remember in twenty sixteen, when Trump was elected but
not inaugurated until January twenty of twenty seventeen, he was
tweeting at people, he was calling them names. I love
Tim Apple, Tim Cook of Apple was Tim Apple, And
the first couple of months of him doing this. Every
time he would single out a company, the stock would

(01:46:33):
get shellacked. For a couple of days, it would get whacked,
and then people kind of figured out, oh, this is
just paper tiger stuff. He's not going off after any
of these companies, unlike China where they're unhappy with a
couple of companies and they disappear the CEOs for a
few years. We still have contract rights, property rights, rule

(01:46:54):
of law, and it's worth tens of trillions of dollars.
So he hasn't been doing as much of that nonsense
as he did last time. I think he's been focused
on a different agenda. So I don't again it's nuanced.
I don't want to just say tune it out, because
you really can't, but you have to put it into context. Then,

(01:47:15):
one of the things I wrote in Tune out the
Noise was, Hey, it's been three weeks of tariff stuff.
Tariff stuff. Tariffs were on, tarafts were off, tariffs with
Canada and Mexico, and then Canada and Mexico agreed to
do shit they were already doing. Then the tarafts were off,
Then the taraffs came back, and then this taffs for
Europe and taraffs for China. China is a much savvy,

(01:47:42):
savvyer geopolitical player than I think a lot of people
give them credit for. And so China turned around and said,
what are the reddest of the red districts? Great, we're
not buying your soybeans. You're gonna put tariffs on us.
We're not buying your soy beans, We're not buying your cars,
we're not buying your liths. And they're going to say,

(01:48:04):
you want to tarif us, We're going to tarify you back.
Same thing kind of with Canada. What are you talking
about Canada? Like when you build a car in North America.
By the way, forty five negotiated the More North American
Trade Agreement, which forty seven criticized. It's like, dude, that

(01:48:26):
was yours. What do you mean? So parts are made
in some places, they're shipped to other places, they're assembled,
they get chipped into other places. The tariffs that were
proposed would have raised the cost of US cars. I
think it was something like twelve grand, and Japanese cars
something like eight grand. Even the Japanese cars made in

(01:48:48):
all the plants. There's Honda plants here there's Tiota plants here,
just as there's Mercedes and BMW plants. They didn't go
to the Midwest. They went to the union free places
like Alabama, and you look at all these different places
where these cars are made. I'm this is wishful thinking
on my part. I don't know how this plays out.

(01:49:11):
I don't imagine it goes on forever. I don't even
think it goes on for four years. I think two.
I'm hopeful that two years from now, you know, Obama
got elected, big swing to the left. What happens during
the midterm elections, swings back and now you have to
reach a course the isle and negotiate the way every

(01:49:32):
president is done for for forever. Hopefully we see a
little more of that, a little more negotiation. A lot
of Republican congressmen have been afraid of getting primaried from
the right, and what we've been seeing in these deep
red states. And this isn't Antifa showing up, this isn't

(01:49:53):
Democrats showing up. These are Republicans showing up and booing
their congressmen. I think they should start to get worried
about being primaried from the middle right. They're not going
to be primaried from the left and the far right.
People are unhappy about Wait, my social security is getting cut.
I have to call the Social Security office. You fired

(01:50:14):
all the people to answer the phones. Like. It's kind
of fascinating watching all these groups suddenly realize, Hey, we
should have been a little more skeptical, we should have
been a little less gullible, we should have thought about
this a little more critically before we cast our vote,
because this isn't what we were voting for. And so

(01:50:37):
I don't care if it's politics or investing or what
have you. You really have to think about things intelligently,
not just make emotional decisions off the seat of your pants,
because you end up either with a portfolio you're unhappy
with or a Congress you're unhappy with. And you know

(01:50:58):
what is today, we're recording the towards the end of March,
so we're barely two months into this presidency. I can't
imagine the sort of mayhem is going to keep up forever.
I kinda I'm hoping that they settle into a groove,
the noise level comes down and some of the volatility

(01:51:20):
goes away. But truth be told, that's wishful thinking I
have no idea what's going to happen.

Speaker 2 (01:51:26):
Okay, let's go back. Let's say I'm just an individual
and I buy an index. Fun is it set it
and forget it like wrong for Peal? Or do I
have to like anybody else three, four or five years ago,
I have to do my own rebalancing.

Speaker 3 (01:51:46):
You know, it depends on how much money you're starting with,
and how what your age is. If you're a twenty
something thirty something and you're throwing a couple of hundred
bucks into the market every month, one hundred bucks every
other paycheck, whatver it is, you don't really have to
pay a lot of attention to it. You can let
it do its thing. If you're coming up on retirement,

(01:52:08):
well then you probably want to have a mix of
stocks and bonds. You probably don't want to be pure equity.
We used to talk about the sixty forty portfolio. You
run into a longevity problem with that because when social
security was set up, Hey, you'd retire at sixty five,
you'd play a few rounds of golf, you drop dead.

Speaker 2 (01:52:30):
That's it.

Speaker 3 (01:52:30):
You're done. If you make it today, the odds are
if you make it to sixty five today, and I
just saw with the Bill Burr Special, so drop dead
years just kind of is stuck in my head. But
if you make it to sixty five, the odds are
you're going to make it to eighty eighty five, maybe
even ninety, And so your money has to last that

(01:52:51):
much longer than it used to, and so sixty forty
might not be enough equity to cover that. So maybe
you stay with a seventy thirty portfolio until you're pick
a number seventy five, and then you can throttle back
the equity and have a little less volatility. But when

(01:53:11):
I say rebalance, what I mean is if your portfolio
is sixty percent Vanguard Total Market and five percent whatever
the next eight things, over the course of time, those
numbers will get out of whack, and every couple of
years you should. By the way, the software, I don't

(01:53:31):
care if you're with Fidelity or Schwab or Think or
Swim or what or Morgansteen, whatever e Trade, whatever online
broker you're using. There you push your button and it
automatically you can set your portfolio up to say here's
my portfolio. I want to rebalance this every three years,
or I want a notification when it gets more than

(01:53:54):
five percent away from my starting percentages. The technology has
made it really simple to do that. It's not eight
guys in green visors in the basement working around the clock,
it's the software just makes it fast and easy to do.

Speaker 2 (01:54:09):
Okay, generally speaking, should I buy the dip? I'm talking
about significant when the market is off ten percent and
we've already established the average person doesn't know what to
buy and there was only a few stocks that will
pay them a long difference. But if you say, well,
you know, stock down ten percent, I should buy Microsoft
and Apple and a Nvidia.

Speaker 3 (01:54:32):
So here's the way I look at the world. And
by the way, I love this question. Here's the way
I look at the world. You go back, you look
at the math. How often are we down ten percent? Hey,
twice every three years? Are you better off buying the dip?
Are you better off making regular contributions come hell or
high water every month dollar cost averaging? We've done studies

(01:54:54):
about this. If you have a windfall and a lump
sum of money, are you better off putting the money
all and it wants? You're better off spreading it out.
So there are a lot of variations on this But
the first thing is I have to ask the question,
do you really want to pay that close attention to
the market? Do you want to buy every ten, twenty percent,

(01:55:16):
thirty percent down? Is that something? Is that how you
want to spend your time. If the answer is yes,
I really like tracking the market in the economy, and
I could manage my own behavior and I feel comfortable
doing this, then here's what I would say to people. Hey,
you should be putting money into your four to oh
one K or your portfolio every month. The little money

(01:55:36):
comes out of your paycheck every month to do this.
Anytime the market's down ten percent, you want to double
up and throw a little more money in. Great, the
odds are that's going to work out in your favor.
Anytime the market is down twenty percent, guess what. Well,
Now that happens even less frequently we get down twenty percent,

(01:55:59):
I want to say, once every four or five years,
step up, increase that cash flow even more into the market.
What about down thirty percent? Hey, we were down thirty
four percent in twenty twenty. We were down much more
than thirty percent in eight oh nine, we were down
thirty percent in two thousand. You go back to nineteen

(01:56:22):
eighty seven, the crash was just twenty two percent. For
the whole year, you were from peak to trough, you
were down over thirty percent. Anytime markets in the US
go back to nineteen twenty nine, anytime you're down thirty percent,
back up the truck. Buy as much as you can afford.
Don't borrow money to do this. But if you have
spare cash, absolutely down thirty percent, buy the caveat is under.

(01:56:48):
For the vast, vast majority of people, it will be
the most difficult thing in their life to fight the
negative hair headlines, to fight the panic, and actually be
a contral and do the opposite of what most of
the crowd is doing, which is panic selling ps. Down
thirty percent doesn't mean you're not gonna end up down

(01:57:09):
forty or fifty percent. Uh eight oh nine, you were
down fifty six percent, seventy three, seventy four, down fifty
seven percent. It happens all too frequently, and you just
have to be prepared. Hey, I'm gonna throw a little
more money in down ten percent, a little more down
twenty into broad index funds. If you're picking a stock,

(01:57:31):
you got to make sure that down forty percent you're
not buying a Lehman Brothers or Silicon Valley Bank or
you know, an en Run. So when you buy a
broad index, you don't have to worry about it going
to zero. You have to worry about it doing poorly
for a decade or so. And the if buying down

(01:57:52):
thirty percent is hard. You look at market history and
you see nineteen sixty six to nineteen eighty two the
Dow kissed one thousand and ninety sixty six. It didn't
get over that on a permanent basis till nineteen eighty two,
and that's before we start talking about inflation. So sixteen
years your return is effectively zero. Then you adjusted for inflation,

(01:58:13):
your turn is down sixty or seventy percent, and inflation
adjusted returns. But if you diligently put money in the
market every month over those miserable sixteen years, well from
eighty two to two thousand the market was up one
thousand percent, and that's where you know you really kill it.
So the fact that markets go through these long periods

(01:58:35):
of time where and I don't believe we're in one
of those periods. Now, they'll go through a secular bear
market where it's flat to negative for ten fifteen years.
That's an opportunity to save. It's going to feel terrible,
but when you're on the other side of it, it
feels great. So long answer cut down to short a

(01:58:55):
little at ten twenty thirty percent. But even buying down
thirty percent is no guarantee that the market bottoms and
turns around. Every generation we see a down fifty percent,
and that's an amazing buying opportunity. Nineteen twenty nine being
the exception. Down fifty percent. Hey, you still had a

(01:59:16):
whole lot way to go before the market's recovered. But
it's a different world. It's a different market than it
was a century ago.

Speaker 4 (01:59:33):
Okay, left Field, Steve Cone, the SEC cracks down, he
turns it into a family office. That period of time expires.
He says that he's getting these amazing returns. Is he
just brilliant lucky or is it fraud?

Speaker 3 (01:59:52):
So I don't think it's fraud. He's just been doing
it too long with too many employees. You know, if
you read the book by Ryan Holiday about conspiracy about
the Hulk Holgan thing, two people knew and they couldn't
keep it a secret. So the thing that always cracks

(02:00:14):
me up about the moon landing was faked. They're like
forty thousand people working at NASA, how on Earth? And
ten thousand worked on the lunar Apollo missions. How you
going to get ten thousand people to keep a secret
if you can't get three people to keep a secret.
So I don't think there's any fraud there. It would

(02:00:37):
have come out number one, number two. He is one
of those Michael Jordan type gifted mutants that does things
that the average person simply cannot do. And you can
name a bunch of them, Renaissance technologies in Jim Simon's
d E Shaw, David Shaw, there are Jane Street Tray.

(02:01:00):
There are a handful of these companies that have just
shot the lights out for decades. They don't want your money.
You don't have enough money to give them. And if
you have a billion dollars maybe they'll talk to you.
But and even then they don't want to put you
in their flagship funds because they tend not to do

(02:01:22):
as well. They tend to do really well, and they
don't do as well when too much money flows in.
So yeah, if you have the opportunity to be in
a top ten funds by all means. Jim Chano said this,
and I'm pretty sure I put this in the book,
but I'm in quoting it for forever. He was a

(02:01:42):
short seller and a hedge fund manager. He's semi retired
and ran Kinnekosa Associates, and he said, when I started
forty years ago in the nineteen eighties, there were one
hundred hedge fund managers, and all of them produced alpha,
all of them beat the market, They produced amazing returns.
Now there's ten thousand hedge funds, it's kind of the

(02:02:05):
same one hundred guys still producing great returns. The problem,
as we've expanded to three trillion dollars in hedge funds
and I think it's eleven thousand funds now, is you
dilute the talent. It makes the market more efficient. The
way a lot of these funds make their money is

(02:02:25):
they identify an inefficiency and they sort of, you know,
mine that vein until it's exhausted. And as an inefficient market,
as the price is closed, the inefficiency goes away. So
Renaissance Technologies, Jim Simon's just passed away a few years ago,

(02:02:45):
was head of He was a codebreaker for the NSA
disagreed with them about Vietnam and left. He eventually, I
think he started an MIT, ended up at Sonny Stonybrook
where I went to college, eventually led the math department,
and then he launched Renaissance. And they have like they
don't hire people from Wall Street. They have hundreds and

(02:03:07):
hundreds of applied physics and coders and math whizzes, and
they're using computer technology long before most other firms were
to identify these little anomalies to capture whatever the gap
is and to close the trade out quickly. They supposedly

(02:03:30):
I think it was Greg Zuckerman's book, The Man Who
Beat the Markets. It's really the man who figured out
how to trade on a very profitable basis. Nobody's even
close to them. They put up like sixty percent a
year for forty years. The numbers are just mind blowing.
And it's not anyone fund. It's an entire organization that

(02:03:52):
deploys hundreds and hundreds of different strategies, and as long
as each strategy generates enough return, they keep doing it,
and they keep tweaking this when they their core fund,
the medallion funds, when they opened it, so after a
few years they essentially kicked out all their outside investors,

(02:04:12):
returned their money and said, this is just for us
because it worked if it had, you know, a billion
dollars in it, When it had three or four billion,
you couldn't generate those sort of returns. It's the inefficiencies
are that small, all right. And when I say a
billion dollars is small, US equity markets are fifty sixty seven.
It depends on what we close today. Trillion dollars A

(02:04:35):
billion dollars is pocket change, but at sixty percent compounded,
it's just an astonishing amount of money. That was one
organizational approach to Shaw is a very specific quantitative approach.
Jane Street Trading has figured out Citadel Millennium. There's like,

(02:04:56):
like I know the names off the top of my
Head's cause year in, year out, these guys are at
the top of the league charts. They're putting out numbers.
They all have outside investors, they're all audited sacks. Steve
Cohen's original funds became a family office and now it's
point seventy two. They have, you know, mainstream auditors. People

(02:05:19):
are looking at the books. I would be stunned if
any of them were doing anything you know, way too
far off the reservation, and people figure out ways to
identify these little inefficiencies. Citadel Ken Griffin runs Citadel. They
were one of the earliest high frequency traders. They figured out,

(02:05:41):
as the Nasdaq and the NYC, we're moving to electronic trading,
how can we do this cheaper, faster, better than everybody
else and capture you know, the market does hundreds of
billions of shares a day. If you can find out
we want to buy buy this at a dollar fifty

(02:06:03):
seven and sell it at a dollar fifty eight to
make a market for somebody. If you could do that
billions and billions of time, it adds up. So that
was their genius high frequency training. Each one of these
giant funds, giant hedge funds that have been so successful,
they've all like the six blind men describing the elephant.

(02:06:25):
They've all figured out different ways to identify something that
the market doesn't understand. First, get in there, capture the profit,
and get out and then move on to the next thing.
And I mean that's really a gross oversimplification, but they've
been so consistent over you know, at least the top

(02:06:48):
twenty have been so consistent over time. It's kind of shocking.
Every now and then they have a bad year, they
have an off year. But and that's kind of makes
me hopeful because I don't imagine these guys are going
to allow the guys in DC to mess it up.
They just have too much money at risk. Steve Cohen

(02:07:11):
just bought the New York Knicks. What do you mean
You're gonna put tariffs on this stuff? Like, I'm hopeful that,
you know, I can't say I've been the world's biggest
fan of the point one percent. I'm hoping that for
a change, the point one percent's interest now aligns with
the rest of Americas. And Hey, we want a functioning economy,

(02:07:32):
we want to functioning market, we want the rule of law.
This is important. Please don't let this go to help.

Speaker 2 (02:07:38):
Okay, just to be clear, it's the Mets, not the Knicks.

Speaker 3 (02:07:42):
The Mets, the Mets. The Cohen bought the What did
I say? Did I say?

Speaker 2 (02:07:45):
You said the Knicks? I just want to be coming.

Speaker 3 (02:07:47):
I'm going to a Nick game tomorrow. But it was
the New York Mets.

Speaker 2 (02:07:50):
Oh, okay, you've done all of these interviews. Name two
people who you liked interviewing best. Either because their personalities
or the charisma or what they had to say. Two
most memorable.

Speaker 3 (02:08:05):
You want music people, I have.

Speaker 2 (02:08:07):
Some No no, no, no no no. I want to
flatten the landscape, just period the two that stick out.

Speaker 3 (02:08:14):
There's so many that stick out. So Ken Feinberg was
the special master for the nine to eleven Victims Fund
for the Gulf of Are we still calling it Golf
of Mexico? The Gulf of Mexico BP oil spill. He's
done so many of these, and for the most part,
Bloomberg lets me bring in whoever I want to interview,

(02:08:37):
Steve Miller, Lawrence Juber, Don Felder, like any John Pizarelli,
anytime I like meet somebody who's kind of interesting, Hey,
you want to come on Bloomberg. They kind of leave
me alone. But Ken Feinberg, what does he have to
do with finance? What's this about? And I'm like, well,
not for nothing, but the insurance industry. And nine to

(02:09:00):
eleven was focused on Wall Street and then what went
on in the Gulf, and like I had a fight
to get that on, not just Bloomberg, Like some of
the guys I work with, what are you doing? My
research assistant at the time was like, what the hell
does this have to do with what we do? And

(02:09:21):
of course he comes on and he's this thick New
York accent, soft spoken guy American hero, talk about a
thankless task, taking this giant victim's fund and having to
get everybody who lost someone in the nine to eleven
attacks to sign up for it, right, So that's every family,

(02:09:42):
every spouse, every whatever. And then explain, Hey, I don't
think it's right that the guy who jumped out of
the hundredth floor, the bond trader who landed on the
firemen and they both died. I don't think it's right
that his family is getting more money than the fireman's family.

(02:10:02):
But that's what Congress has forced me to do, is
to make these payments based on economic loss. My hands
are tied. If you want, you could go to court
and maybe in ten years you get something, or you
take the money now. And by the way, it was,
this was all like decent chunks of money. Put this,

(02:10:24):
start grief, wrap up the grieving process, put this behind you,
and start living your life instead of being stuck in court.
Like so, I the person who told me this is
a terrible idea. What are you doing on that much
So broadcast over the weekend. That Monday, I go into
the office and I get a hug and he's like,

(02:10:46):
you're a son of a bitch. First podcast that made
me cry. He's an American hero. I'm like, right, it's
by the way, you can't listen to that without having
the hair on the back of your next stand up.
I have a hundred, but I'm going to give you
a recent one that stands out because you know, most

(02:11:07):
of these people are successful and smart and accomplished, and like, wow,
that guy's really interesting. Every now and then you meet
someone and it's just like what the so I've been
kind of I was scheduled to have him on during
the pandemic. Then the pandemic hit, and so I finally
got him back, like years later, finally got to him.

(02:11:28):
David Rubinstein of the Carlisle Group is just one of
these human beings that everything he touches is better for
his involvement. And let me just give you and all
this stuff is you know, none of this is off
the record. All this stuff was sent on the air.
So I used to think he stole my gig at Bloomberg.

(02:11:51):
I'm like, God, damn chairman of founder of Carlisle Group.
It's doing my podcast stuff on. Like I used to
jokingly to someone who worked for him, your boss stole
my gig and I finally he had a book. So
it's always a great opportunity to get people when a
book comes out. So he comes on the show and

(02:12:11):
he just starts talking about, you know, I have a
we do deep dive a lot of research, and I
start asking him questions. So they started in DC and
it was a pretty successful business right from the out
of the gate forty years ago. And he started holding
these I don't even know what to call them, just conversations.

(02:12:36):
He would get somebody who was an expert in a
space and he would interview them. But the audience were
closed door. Senators and congressmen across the aisle, no party affiliation.
Everybody was there just to hear this conversation and becomes
smarter and better elected officials. He's just doing that. It's

(02:13:01):
there's no record, there's no broadcast, there's no book. It's
all on the side. And and that's what he did.
And then he like everything he touches. So the Washington
Monument in DC starting to crumble, they get occasional earthquakes.

(02:13:22):
Wasn't built to last forever. It's not an Egyptian pyramid,
but it's still an American, you know, part of American icography.
It's absolutely a landmark. He goes to Congress and says, hey,
you guys, this has falling apart. You know you're gonna
be embarrassed if the Washington Monument comes down on your

(02:13:42):
watch and the like. Nobody wants to do anything, so
he like they they the budgeting argument, whatever, it just
no one can get the shit together. And he turns
around and said, all right, I'm gonna start the ball rolling.
You guys will figure out a way to pay for it.
And he just goes a couple of buddies, Hey, I
need a couple of million dollars, and everybody throws money

(02:14:03):
in the kiddy, and he hires an architect and an
engineer and they figure out how to shore up the
Washington Monument, and eventually Congress comes through and does the bulk,
but he goes deep out of pocket. And then he
starts looking around the country and Monticello with Thomas Jefferson
and just all these monuments no one's taken care of,

(02:14:25):
and then all these the Constitution, the Declaration of Independence.
There are multiple copies of this. He buys them and
donates them to the Smithsonian. So it's not in Bill
Gates's layer. It's there for the American people. And he
grew up in Baltimore, a city that's kind of hard scrabble,
and he buys the Baltimore Orioles and essentially promises the town,

(02:14:49):
I'll build a new stadium, probably the best stadium in
Major League Baseball, and I'll keep the Orioles here, and
I'm gonna keep hot dogs two dollars and beer four dollars,
and this will be a core part of the waterfront revival.
Like wherever he goes, it's not I'm going to buy
a baseball team as a flex. It's all right. Someone

(02:15:11):
has to do something otherwise the Orioles are out of here.
You know, Baltimore is suffering. Let's see if we can
lock them here for ten or twenty years. And like,
as I'm having the interview, like, I don't know what
you think about me. As we're talking, hopefully you're saying, oh,
he seems to know what he's talking about. And he's
kind of amusing and Jesus Fucking this guy babbled. But

(02:15:33):
you know that's kind of the perspective you come away from.
I'm with him for an hour in change, and I'm like,
Jesus Christ, everything this guy touches is not just a
little better, it's so much better. And I'm just like
four or five things off the top of my head.
We spoke for like just that sort of stuff. We

(02:15:54):
spoke for twenty minutes, and that that's the most recent
one that has stood out with me, like, oh there
are You know, it's very easy to become when you're
looking at how not to invest that how bad a
lot of stuff is. It's easy to let yourself become cynical.
And that's why I really tried to say, don't just

(02:16:17):
say no to everything. Find the best in each and
that's your team. Like, you see a person like that,
and it's inspiring and it kind of gives you hope. Hey,
not everybody is an asshole out for themselves and running
rough shot and doesn't give a shit over what happens.

(02:16:37):
There are people, including some with assets and resources and
abilities that are making things better. So that kind of
makes me a little hopeful.

Speaker 2 (02:16:48):
Okay, finally, you hated practicing law forgetting the podcast and
the blogging and the column and the Washington Post. What
do you like about finance?

Speaker 3 (02:17:04):
It's this giant puzzle, It really is, so so I
have a tendency to go down the rabbit hole really
deep on anything I do, and sometimes it's something just
as as stupid as film or music or you know.
I still create. I can't help myself. I still create

(02:17:26):
playlists for different events. I included the scene the line
from a High Fidelity that there are rules in the book,
but I find finance to be this fascinating puzzle. And
I mentioned the six blind guys describing the elephant. But

(02:17:47):
there is no one black of white answer. There is
no one, you know, definitive response. It's a little art,
it's a little science. The reason I use bad ideas, numbers,
and behavior because those are three different ways to describe
how humans go through the world. We you know, we

(02:18:09):
grow up, we get jobs, we live our lives, and
we consume a lot of ideas and very often we
ignore the data and the numbers that either confirm or
deny those ideas, and that combination leads us to making
certain decisions and behaving in a certain way, and sometimes
if it's based on either a bad idea or not

(02:18:30):
understanding the numbers and data around it, the behavior leads
to a bad outcome. And so the concept of gee,
this is a giant wordle puzzle. How do I put
this together? How do I figure out? You know, how comes?
Sometimes stocks are cheap and other times stocks are expensive,
and in how come cheap stocks sometimes go down? It's

(02:18:54):
sort of the opposite word to od it. Oh, don't
buy expensive stocks. Expensive stocks keep going up. How can
we spend so much time on these aspects of investing
when really it's irrelevant. It doesn't matter. It really doesn't
matter if five percent of your portfolio is in shareholder

(02:19:16):
yield that's dividends and buybacks or momentum. In the long run,
it kind of all comes out in the wash. It
kind of all evens up. Yeah, maybe this portfolio will
outperform that portfolio a little bit. But when you run
the numbers and it's a you know, look at all
these different simulations or a rolling ten year returns, you

(02:19:40):
find out, Hey, you know, I was really lucky to
be born in a part of the world where whatever
skills I had, and certainly to quote Professor gall Scott
Galloway lucky to be born in the US as a
straight white male in the nineteen sixties. Like you, you

(02:20:00):
already won the lottery. When we look at how people's
portfolios return, there's an awful lot on randomness. There's an
awful lot of luck. If you start investing in a recession,
it feels terrible, but you're gonna end up doing really well.
You start investing in the late nineties, hey, you're gonna

(02:20:23):
feel it for a couple of years. And some of
the data shows that when people pan exel out of markets,
thirty one percent of them never you know, that's stock market.
It's not for me, and that's really hard to save
for retirement over long periods of time. So to me,
what's most interesting about the markets is trying to tease

(02:20:44):
out this. It's not just that it's a puzzle, but
it's a dynamic puzzle that constantly changes. This is never
a solution. You think you figured out the solution, and
then the market shifts and the market changes, and it's
a never ending thing. And it's kind of the most
to me of all the things I look at. And

(02:21:06):
I have a lot of different interests. It's the most
fascinating game in town. If your intellectual curiosity moves in
that direction, if you're good with numbers, if you understand
the human factors and the psychology of it, it's fascinating.

Speaker 2 (02:21:26):
Okay, we've come to the end of the feeling we've known.
I've been talking to Barry Ridtholts. You see them everywhere
Bloomberg Online. It's got a new book, How Not to Invest.
If you're the type of person who's playing in the market,
or you're the type of person who's afraid of the market,
you should definitely read it. Get your head set on straight. Barry.

(02:21:48):
I want to thank you so much for taking the
time with my audience.

Speaker 3 (02:21:52):
Bob, thank you so much. You know, full disclosure, I've
been reading you for a million years, and I've been
publishing you on my website. Yes, I want to say,
it's got to be like fifteen years about that's insane.
And I've I've had every time one of your pieces
come up, One's coming up Sunday, that just came up

(02:22:12):
Sunday Disruption. Someone always says to me, where'd you find
this guy? He's really interesting, And it's like, you know,
if you know a certain group of people. Bob is
a legend in that space.

Speaker 1 (02:22:26):
You know.

Speaker 2 (02:22:27):
Thank you very much. I'll leave it at that till
next time. This is Bob left set

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Host

Bob Lefsetz

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