October 9, 2025 • 12 mins
LISTEN and SUBSCRIBE on:
Apple Podcasts: https://podcasts.apple.com/us/podcast/watchdog-on-wall-street-with-chris-markowski/id570687608
Spotify: https://open.spotify.com/show/2PtgPvJvqc2gkpGIkNMR5i
WATCH and SUBSCRIBE on:
https://www.youtube.com/@WatchdogOnWallstreet/featured
Behavioral economics explains why smart people make dumb money decisions—and it’s all right here. In this episode:
The re-release of Richard Thaler’s classic The Winner’s Curse and why it still matters
What behavioral finance legends like Daniel Kahneman and Terrence Odean teach about investor psychology
How apps like Robinhood manipulate you into overtrading—and how they really make billions
Why investors cling to losers, chase gains, and ignore compounding
The key to smarter investing: slow down, zoom out, and think long-term
Markets reward patience, not speed. The faster you trade, the faster Wall Street wins.
Apple Podcasts: https://podcasts.apple.com/us/podcast/watchdog-on-wall-street-with-chris-markowski/id570687608
Spotify: https://open.spotify.com/show/2PtgPvJvqc2gkpGIkNMR5i
WATCH and SUBSCRIBE on:
https://www.youtube.com/@WatchdogOnWallstreet/featured
Behavioral economics explains why smart people make dumb money decisions—and it’s all right here. In this episode:
The re-release of Richard Thaler’s classic The Winner’s Curse and why it still matters
What behavioral finance legends like Daniel Kahneman and Terrence Odean teach about investor psychology
How apps like Robinhood manipulate you into overtrading—and how they really make billions
Why investors cling to losers, chase gains, and ignore compounding
The key to smarter investing: slow down, zoom out, and think long-term
Markets reward patience, not speed. The faster you trade, the faster Wall Street wins.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.
Speaker 2 (00:16):
Headshrink into Markets. Yeah, people have been reading our stuff
and following this program for some time. Know that I
talk a lot about behavioral economics, talk about Daniel Konoman
here on the program. I've talked about the work that
Terrence Odean Professor Terrence Odine has done, and Richard Thaylor
(00:39):
as well. And I wasn't aware of this. I just
found this out, very important book that came out early
in the infancy of my career entitled The Winner's Curse.
Richard Thaylor the author of this, he actually won the
Nobel Prize. Nobel Prize this in two thousand, Sets and
(01:00):
Team and again. It's a look at why why people
do dumb things with their money. I didn't know it
was that the reissuing the book. He's re issuing the
book with alex Imus. They're kind of like doing a
redo on it. I highly recommend it to everybody out there.
Jason's Why from the Wall Street Journal. He has these
(01:22):
intelligent Investor column recently interviewed them and the re release
of the book. Again, it's all about trying to figure
out why people do stupid things with their money. Anyway, Okay,
(01:43):
the questions that is why put to them, and you
talk to Tailor as well, why investors like to buy investments? Again,
more often than not, he talks about this ill advise
and I'm a big believer in compounding being the royal
road to riches. However, however, when you see outsized yields
(02:10):
in various different products, you need to take a step
back and pause and say to yourself, why is this
yield so high? Again, you also take a look at
the power of compounding, which is great, but also when
you're in an environment when you have the currency you
(02:35):
want to call it being debased, the value of the
currency coming down, meaning guess what, the returns that you're
seeing are just not going to add up the way
you expect to. And Taylor talks about this, and he says, yeah,
not only do a lot of people do this, but
foundations universities took them a long time to learn this lesson.
(02:56):
Sometimes you know what, it's not just about five. I
got high yield right here. Yeah, but what about the
principle is your investment growing again, focusing more not just
just on yield, but on total return as well. The
traders out there, we get all the apps that are
(03:19):
out there. We'll get into that a bit. We talked
about how short term losses, short term losses can distract
from long term gains. Again, you take a look at
the apps out there, the robin Hoods and the other
brokerage apps that are out there that are perpetually pinging
(03:41):
people with continuous pricing updates, value updates, streaming alerts, push notifications,
all of that crap. They're designed that way. Imus replied
to this. He said, these apps seem to exploit a
host of behavioral biases. Might hope you have self control problems,
(04:02):
lost chasing, preference for lottery like stocks, to get people
to invest in very sophisticated financial products. They did homework
on this, studies on this. One of the most popular
financial products on robinhood are weekly options. They have lottery
(04:24):
like characteristics. These options also happen to have the biggest
bid to ask spread. They're like penny stocks for crying
out loud retail traders have lost upwards of two billion
dollars on these options over the past two years. You
(04:45):
know where the real winners were robin Hood, Yeah, robin
Hood and Citadel. They made six point four billion dollars
in trading cost Like, how they do that? Are charge
and anything for trades? How do you think they can
the lights on? It's the spread between the bid and
the ask the same how shall I put it? Same
(05:08):
bullshit that the boiler rooms engaged in, same exact thing anyway,
Um talked about as well, meme stocks, crypto leverage, single
stock ETFs is this new? Has this been around forever?
(05:30):
And I must talked about speculation. We've all heard about
tulip mania. They also got the seven to twenty Salt
Sea speculation bubble. And the reality is everyone at that
point in time knew it was a bubble too. Everyone
knew it was a bubble. But you know what they
also thought. They thought they were smarter than everybody else
(05:51):
and they would win in that demonic game of musical
chairs that we talk about all the time. Again, because
of the because of the way that we're able to
communicate today, there's going to be more bubbles. It's easier
to put things together. You get those groups out there
like Wall Street bets getting everybody to do same thing
(06:11):
at the same time, and diamond hands and all of
this stuff. Another great question by his whines, why are
investors so reluctant to sell until they get back to
break even or what they paid for in the first place?
Again behavioral headshrinking. Here, people react differently to realized outcomes
(06:33):
compared to paper gains and losses, which leads to all
sorts of interesting or odd patterns, including the disposition effect,
the greater willingness to sell winners and losers. Again, how
often have we talked about that? Terrence Odin. Professor Odeine
has studied this as well. Ano, there is the motivation
(06:55):
to chase losses. I'm in a hole and I want
to avoid realizing a loss. I could just take on
more risks in the hope of getting it back again.
When you're in a hole, you might want to just
stop digging. How can investors improve their procedures for cutting
losses and letting winners ride slow down the entire process,
(07:22):
speeding up the process Again, we're told, oh, it's just
a way to go, and high speed training and algorithms,
and we got rid of We basically got rid of
the exchanges is really in a real exchange. It's all computerized.
We've got rid of the specialists. It's got to be fast, fast, fast.
We're told how quickly these trades can be executed, and
it's all for our benefit. I tell this to people sometimes.
(07:43):
I mentioned this before on the show, and people sometimes
blown away when I tell them. I think the longest
I've gone without looking at my account, not even looking
at it, maybe a year and a half. I maybe
if I look at my accounts personal if I look
(08:07):
at them once a year, it's a lot. Gonna be
honest with you, I know what I'm doing, I know
where everything is going. I know what my time frame is.
I'm good. I'm good. We speed everything up. Everyone's got
(08:31):
that short term time frame. Another way that I've described
this to people, how many times over the years have
I been asked by Radio Steel, radio station or Chris,
you want to do the market wrap at four o'clock?
You do that for a station, give us a rundown? No, No,
I'm not going to do that. Why because I personally
(08:57):
do not look at four o'clock to see where the
market's closed. Not that it even matters anymore because twenty
four hours and we were about into playable time. But
we will be all the twenty wheurs. And you gotta
do it all the time home training this market. Do
you understand who wins and loses there? Did you think
(09:19):
you win as an individual investor in that way? You don't,
You don't. I don't do that stuff because it's not necessary.
It's dumb. Short term fluctuations in the market don't matter.
You can't time it, don't get involved with it. Well,
(09:43):
last thing, that's why I guess he asked this to
you know, professor Thayler, is there a better way to
get people to commit to long term buy and hold investing?
And he says, the data And you're not getting an
argument from me here. Data suggests that very very few
you individual investors should be trading individual securities. If most
(10:09):
mutual funds cannot do better than their benchmark, why why
do you think you as an amateur? Why why do
you think that you're able to do it? Yeah, we've
got the baseball playoffs going on, right, and I'm a
Yankee fan. I'm glad they won yesterday. But listen, I
(10:31):
will show my frustration for two days ago, my frustration
with you know, the batting average of some of these
guys on the team, and they're the you know, some
of the best players in the world. You know, I
wish they could get more hits. However, I'm well aware that, yeah,
I played baseball when I was younger. I can't go
(10:53):
up there and do that. You just can't. And their
policy Failor's policy. The same thing as I tell people,
if you want to have a hobby and speculate a
little bit, but treat it as a hobby. The overwhelming
(11:14):
majority of what you do, what you're holding onto, yeah,
it better be well diversified and taken care of. You
want to play the market. You don't risk any more
than you would expect to lose intertality and have it
not bother you at all. It's like going out to
dinner or something like that. It's nothing you're going to
(11:36):
worry about. Again. Great book. I'm glad to see that
they're re releasing it. Fantastic. Richard Taylor with alex Ims
The Winner's Curse. Think it came out like nineteen ninety
ninety one something like that. Re releasing it and again.
It's another look at why people do dumb stuff with
(11:56):
their money. Watch Dog and Wall Street dot Com
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.
Speaker 2 (00:16):
Headshrink into Markets. Yeah, people have been reading our stuff
and following this program for some time. Know that I
talk a lot about behavioral economics, talk about Daniel Konoman
here on the program. I've talked about the work that
Terrence Odean Professor Terrence Odine has done, and Richard Thaylor
(00:39):
as well. And I wasn't aware of this. I just
found this out, very important book that came out early
in the infancy of my career entitled The Winner's Curse.
Richard Thaylor the author of this, he actually won the
Nobel Prize. Nobel Prize this in two thousand, Sets and
(01:00):
Team and again. It's a look at why why people
do dumb things with their money. I didn't know it
was that the reissuing the book. He's re issuing the
book with alex Imus. They're kind of like doing a
redo on it. I highly recommend it to everybody out there.
Jason's Why from the Wall Street Journal. He has these
(01:22):
intelligent Investor column recently interviewed them and the re release
of the book. Again, it's all about trying to figure
out why people do stupid things with their money. Anyway, Okay,
(01:43):
the questions that is why put to them, and you
talk to Tailor as well, why investors like to buy investments? Again,
more often than not, he talks about this ill advise
and I'm a big believer in compounding being the royal
road to riches. However, however, when you see outsized yields
(02:10):
in various different products, you need to take a step
back and pause and say to yourself, why is this
yield so high? Again, you also take a look at
the power of compounding, which is great, but also when
you're in an environment when you have the currency you
(02:35):
want to call it being debased, the value of the
currency coming down, meaning guess what, the returns that you're
seeing are just not going to add up the way
you expect to. And Taylor talks about this, and he says, yeah,
not only do a lot of people do this, but
foundations universities took them a long time to learn this lesson.
(02:56):
Sometimes you know what, it's not just about five. I
got high yield right here. Yeah, but what about the
principle is your investment growing again, focusing more not just
just on yield, but on total return as well. The
traders out there, we get all the apps that are
(03:19):
out there. We'll get into that a bit. We talked
about how short term losses, short term losses can distract
from long term gains. Again, you take a look at
the apps out there, the robin Hoods and the other
brokerage apps that are out there that are perpetually pinging
(03:41):
people with continuous pricing updates, value updates, streaming alerts, push notifications,
all of that crap. They're designed that way. Imus replied
to this. He said, these apps seem to exploit a
host of behavioral biases. Might hope you have self control problems,
(04:02):
lost chasing, preference for lottery like stocks, to get people
to invest in very sophisticated financial products. They did homework
on this, studies on this. One of the most popular
financial products on robinhood are weekly options. They have lottery
(04:24):
like characteristics. These options also happen to have the biggest
bid to ask spread. They're like penny stocks for crying
out loud retail traders have lost upwards of two billion
dollars on these options over the past two years. You
(04:45):
know where the real winners were robin Hood, Yeah, robin
Hood and Citadel. They made six point four billion dollars
in trading cost Like, how they do that? Are charge
and anything for trades? How do you think they can
the lights on? It's the spread between the bid and
the ask the same how shall I put it? Same
(05:08):
bullshit that the boiler rooms engaged in, same exact thing anyway,
Um talked about as well, meme stocks, crypto leverage, single
stock ETFs is this new? Has this been around forever?
(05:30):
And I must talked about speculation. We've all heard about
tulip mania. They also got the seven to twenty Salt
Sea speculation bubble. And the reality is everyone at that
point in time knew it was a bubble too. Everyone
knew it was a bubble. But you know what they
also thought. They thought they were smarter than everybody else
(05:51):
and they would win in that demonic game of musical
chairs that we talk about all the time. Again, because
of the because of the way that we're able to
communicate today, there's going to be more bubbles. It's easier
to put things together. You get those groups out there
like Wall Street bets getting everybody to do same thing
(06:11):
at the same time, and diamond hands and all of
this stuff. Another great question by his whines, why are
investors so reluctant to sell until they get back to
break even or what they paid for in the first place?
Again behavioral headshrinking. Here, people react differently to realized outcomes
(06:33):
compared to paper gains and losses, which leads to all
sorts of interesting or odd patterns, including the disposition effect,
the greater willingness to sell winners and losers. Again, how
often have we talked about that? Terrence Odin. Professor Odeine
has studied this as well. Ano, there is the motivation
(06:55):
to chase losses. I'm in a hole and I want
to avoid realizing a loss. I could just take on
more risks in the hope of getting it back again.
When you're in a hole, you might want to just
stop digging. How can investors improve their procedures for cutting
losses and letting winners ride slow down the entire process,
(07:22):
speeding up the process Again, we're told, oh, it's just
a way to go, and high speed training and algorithms,
and we got rid of We basically got rid of
the exchanges is really in a real exchange. It's all computerized.
We've got rid of the specialists. It's got to be fast, fast, fast.
We're told how quickly these trades can be executed, and
it's all for our benefit. I tell this to people sometimes.
(07:43):
I mentioned this before on the show, and people sometimes
blown away when I tell them. I think the longest
I've gone without looking at my account, not even looking
at it, maybe a year and a half. I maybe
if I look at my accounts personal if I look
(08:07):
at them once a year, it's a lot. Gonna be
honest with you, I know what I'm doing, I know
where everything is going. I know what my time frame is.
I'm good. I'm good. We speed everything up. Everyone's got
(08:31):
that short term time frame. Another way that I've described
this to people, how many times over the years have
I been asked by Radio Steel, radio station or Chris,
you want to do the market wrap at four o'clock?
You do that for a station, give us a rundown? No, No,
I'm not going to do that. Why because I personally
(08:57):
do not look at four o'clock to see where the
market's closed. Not that it even matters anymore because twenty
four hours and we were about into playable time. But
we will be all the twenty wheurs. And you gotta
do it all the time home training this market. Do
you understand who wins and loses there? Did you think
(09:19):
you win as an individual investor in that way? You don't,
You don't. I don't do that stuff because it's not necessary.
It's dumb. Short term fluctuations in the market don't matter.
You can't time it, don't get involved with it. Well,
(09:43):
last thing, that's why I guess he asked this to
you know, professor Thayler, is there a better way to
get people to commit to long term buy and hold investing?
And he says, the data And you're not getting an
argument from me here. Data suggests that very very few
you individual investors should be trading individual securities. If most
(10:09):
mutual funds cannot do better than their benchmark, why why
do you think you as an amateur? Why why do
you think that you're able to do it? Yeah, we've
got the baseball playoffs going on, right, and I'm a
Yankee fan. I'm glad they won yesterday. But listen, I
(10:31):
will show my frustration for two days ago, my frustration
with you know, the batting average of some of these
guys on the team, and they're the you know, some
of the best players in the world. You know, I
wish they could get more hits. However, I'm well aware that, yeah,
I played baseball when I was younger. I can't go
(10:53):
up there and do that. You just can't. And their
policy Failor's policy. The same thing as I tell people,
if you want to have a hobby and speculate a
little bit, but treat it as a hobby. The overwhelming
(11:14):
majority of what you do, what you're holding onto, yeah,
it better be well diversified and taken care of. You
want to play the market. You don't risk any more
than you would expect to lose intertality and have it
not bother you at all. It's like going out to
dinner or something like that. It's nothing you're going to
(11:36):
worry about. Again. Great book. I'm glad to see that
they're re releasing it. Fantastic. Richard Taylor with alex Ims
The Winner's Curse. Think it came out like nineteen ninety
ninety one something like that. Re releasing it and again.
It's another look at why people do dumb stuff with
(11:56):
their money. Watch Dog and Wall Street dot Com
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