15 Ways to Lose Money in Markets | Ben Carlson

[00:00:00] It makes no sense to take what these people are saying on CNBC or Bloomberg as gospel of what you should be doing for your portfolio.

[00:00:06] I think the hard part for a lot of people is that investors want to assume that we're always at an extreme, right?

[00:00:11] This is either the bottom and it's a buying opportunity, it's the top and it's a selling opportunity.

[00:00:15] Whereas most of the time we're actually somewhere in the middle.

[00:00:18] I could give you the headlines for two months from now about what's going on in the economy and it still might not help you as an investor.

[00:00:23] You have $3 million and you live on the beach in Florida.

[00:00:26] Did you beat the S&P 500? And one of the guys says, I don't know, maybe, maybe not.

[00:00:31] But either way, I ended up in Boca on the beach. So I obviously did something right.

[00:00:35] I think we've learned this market cycle that the Fed doesn't matter nearly as much as some people would have you believe.

[00:00:40] Now interest rates are rising, but the market actually thinks that it's a good thing because it's doing so because the economy remains strong.

[00:00:46] And so sometimes you can't just look at a number in a vacuum and say, this is good or bad.

[00:00:50] Welcome to Excess Returns, where we focus on what works over the long term in the markets.

[00:00:54] Join us as we talk about the strategies and tactics that can help you become a better long term investor.

[00:01:00] Matt Siegler is Managing Director at Sunpoint Investments.

[00:01:02] The opinions expressed in this podcast do not necessarily reflect the opinions of Sunpoint Investments.

[00:01:07] No information on this podcast should be construed as investment advice.

[00:01:11] Securities discussed in the podcast may be holdings of clients of Sunpoint Investments.

[00:01:15] In this episode of Excess Returns, we sit down with Ben Carlson, Director of Institutional Asset Management at Ritholtz Wealth and author of the popular investing blog, A Wealth of Common Sense.

[00:01:23] Ben wrote a really interesting post, 15 ways to lose money in the markets, where he outlined many of the major mistakes investors made.

[00:01:29] We work through each of them with him and discuss how investors can avoid them.

[00:01:32] We discussed market timing, how to think about advice from billionaires, the Fed, bear markets, and a lot more.

[00:01:37] Ben has a unique ability to take challenging investing concepts and break them down in ways we can all understand.

[00:01:42] And that is definitely something that shines through in this interview.

[00:01:45] As always, thank you for listening.

[00:01:46] Please enjoy this discussion with Ben Carlson of Ritholtz Wealth.

[00:01:49] Ben, good morning.

[00:01:50] Thank you for coming back on Excess Returns.

[00:01:52] Glad to be here, guys.

[00:01:53] We are big fans of the writing that you do, that you've done for a very long time.

[00:01:59] And you have a treasure trove of content we can pull from.

[00:02:02] But what we wanted to do today is you wrote an article in August, 15 ways to lose money in the markets.

[00:02:08] And I think kind of a setup is important because like you introed in the article, you know, we get a lot of advice or there's a lot of people out there telling you the things that you should be doing to be a successful investor.

[00:02:21] But a lot of times people aren't talking about the mistakes that people or investors can make.

[00:02:26] And it's sort of the mistakes.

[00:02:28] When I read the article, I was it kind of brought me back to like Munger and Buffett have talked a lot about, you know, sort of avoiding those big mistakes in the market and staying in the game.

[00:02:39] And so I thought a lot of these points are sort of, I think, relate to that.

[00:02:43] And what we want to do is just have you on and kind of hash through these and see what we can pull out.

[00:02:48] So that's the premise of today's discussion.

[00:02:52] Two minutes in and we've already talked about Buffett and Munger.

[00:02:55] So I might as well say this is kind of a Munger line thinking of like inverting, right?

[00:02:59] You always had to invert everything.

[00:03:01] And I think that's that's the idea for people, for investors.

[00:03:03] It's like if you just take away the bad stuff, all that's left, hopefully, is is successful investing in a good financial plan.

[00:03:11] That's the idea.

[00:03:13] That's right.

[00:03:13] Why do you think, you know, a lot of times as investors, we think that we're smarter than the market.

[00:03:20] And what we kind of forget is that there's millions or billions of people that we're competing against.

[00:03:26] I mean, why do you think we think that was?

[00:03:27] I think a lot of it is a lot of people think that trans that success in one area of life translates into another one.

[00:03:34] So I'll give you an example.

[00:03:36] We often hear in my line of work and wealth management that like some of the worst investors of all time are engineers and doctors.

[00:03:44] And I'm not trying to disparage people in those lines of work.

[00:03:47] But what you get is those people have gone through a lot of education, a lot of school.

[00:03:52] They're very intelligent.

[00:03:53] They've worked really hard to get what they have.

[00:03:55] And they assume that that success that they have in their current career will automatically translate into the markets.

[00:04:02] And they don't realize, like you said, that there's almost always going to be someone smarter than you.

[00:04:07] And the hard part about the markets is that I think sometimes you can be too smart for your own good and try to assume that you can outthink the market and that you're smarter than the market.

[00:04:18] And it's just it's not as easy as you think.

[00:04:21] And I think people see crazy stories in the market about stocks going nuts and going up 30 percent one day or down 30 percent.

[00:04:28] And there's all these pieces of the market that are that are pretty wildly inefficient.

[00:04:33] And they assume that must mean it's easy to beat then without understanding that the market is still a very difficult place to beat, especially because you have to make these decisions ahead of time.

[00:04:43] It's easy to look back at the past and say, oh, well, that was easy to see that this was going to happen.

[00:04:48] That was going to happen.

[00:04:48] But, yeah, it's very difficult, I think, for even intelligent people because you get really overconfident in your own in your own abilities.

[00:04:57] One of the things I was reading was just yesterday was talking about the ETF flows and how flows and ETFs are really strong this year.

[00:05:02] But then I was also talking about how there's been a lot more active ETFs coming on the market.

[00:05:08] How do you think in the context of this, how do you think investors should think about like active funds or active strategies trying to beat the market?

[00:05:17] I think actually a lot of the new active strategies, especially in the ETF space, are more of the niche variety there.

[00:05:23] They're not necessarily just people who are picking stocks and saying, I'm going to I'm going to pick better stocks than the S&P 500.

[00:05:29] It's a niche category where it's a certain theme that people are investing in.

[00:05:33] And I don't know, that actually makes more sense to me.

[00:05:35] If you're going to be active, you might as well be really active, right, and make a decision.

[00:05:40] So obviously, the market is still very hard to beat.

[00:05:43] And I don't know what's harder, picking the stocks that are going to outperform or picking the sectors or strategies or themes that are going to outperform.

[00:05:50] But I think at least the ETFs these days allow you to invest in a basket of stocks or in a diversified way if you're going to play some sort of theme.

[00:05:59] So I think that at least makes more sense than the way that people used to do it.

[00:06:03] You know, it was kind of funny.

[00:06:04] At the end of the summer in August, all we were hearing about was how, I don't know, September is like one of the worst months for the market.

[00:06:11] And September ended up being a pretty good month for the market.

[00:06:14] And so it kind of lends itself to this idea of people trying to time the market.

[00:06:22] And there's, you know, so much evidence that shows that investors shouldn't be doing that.

[00:06:27] And yet, you know, we hear all the time, investors do it all the time.

[00:06:31] And it's just, you know, what are your thoughts on marketing?

[00:06:35] I think the hard part for a lot of people is that investors want to assume that we're always at an extreme, right?

[00:06:41] This is either the bottom and it's a buying opportunity, it's the top and it's a selling opportunity.

[00:06:45] Whereas most of the time, we're actually somewhere in the middle, right?

[00:06:48] Then the market is just doing its thing.

[00:06:50] And we can still have corrections and we still have setbacks.

[00:06:53] But most of the time, the market is kind of just, you know, chugging along.

[00:06:56] And it's not at the extremes.

[00:06:59] That's why being a contrarian is such a hard strategy to take part in because it really works.

[00:07:07] It works really well if you do it at the extremes.

[00:07:09] But those extremes don't happen very often.

[00:07:10] One of my favorite examples of this is after the 2008 crisis and people read the greatest trade ever about John Paulson shorting subprime mortgage bonds, right?

[00:07:20] People watch the big short and they assumed, oh, I'll just do that all the time and I'll get rich.

[00:07:24] Where it's called the once in a lifetime trade for a reason.

[00:07:27] These extreme situations don't happen that often.

[00:07:30] And I think people, especially following the 2008 crisis, decided to spend 90% of their time worrying about stuff that happens maybe 5% or 10% of the time, right?

[00:07:39] We don't get these crashes all the time.

[00:07:41] We don't get financial crises or recessions.

[00:07:43] That stuff can and will happen, but it doesn't happen as much as you think.

[00:07:46] And I think that's the problem where people think they're going to outsmart the market is, oh, I'll just get out now and I'll wait till the dust settles and then I'll get back in.

[00:07:53] And it usually doesn't work that easily.

[00:07:55] Do you have any thoughts on trend following?

[00:07:57] Do you think that's, I guess, good or bad?

[00:08:01] Or where do you fall on that?

[00:08:03] Well, no, I think trend following is a rules-based way of thinking about it.

[00:08:07] Because I think most people who try market timing are trying to be like value investors, but with a momentum or momentum investors with a value time horizon, right?

[00:08:16] They look at the past three and five years or something and try to make a decision where trend followers, at least if you have a rules-based trend following strategy in place, at least you are deciding which kind of markets you want to be in.

[00:08:27] And I'm going to be in an uptrends, I'm going to be out in downtrends.

[00:08:30] And if you have some sort of rules to guide your actions, I think that if you're going to do this kind of thing, that makes a lot more sense to me than people who are just trying to figure out what's going on with the macroeconomy or earnings or something like that and just guess.

[00:08:43] One of the other things that we know investors do a lot is chase performance.

[00:08:47] But where I wanted to go on that is how do you, when you guys look at active strategies or any strategy, how do you assess those strategies based on their historical track record?

[00:08:59] Like what do you look for?

[00:09:00] What do you look at?

[00:09:01] And how would you suggest investors don't chase performance?

[00:09:04] Well, unfortunately, the persistence of outperformance is the hardest thing in active management strategies, right?

[00:09:09] Standard & Poor's have done a lot of studies on this showing that the amount of funds that outperform over three years for them to go and outperform in the next three days is a very low percentage of funds that actually do that.

[00:09:18] So that's the hard part.

[00:09:19] I think the other hard part about active strategies, especially when you're dealing with someone who's just thinking through a discretionary based strategy as opposed to a rules based, is that it's very hard to know when you should lean into the pain, right?

[00:09:30] If you invest in an asset class or a rules based strategy, you know that it's going to come in and out of favor.

[00:09:36] And I think if you have that as part of your allocation, you say I have a 10% allocation to this rules based factor strategy that's active, but I kind of know it has this history of over and under performance.

[00:09:48] And then when it does underperform, I can lean into the pain and I'm going to rebalance.

[00:09:52] But with an active strategy, it's much harder to know is now the time to lean into the pain.

[00:09:56] And that's one of the things I always tell people.

[00:09:59] I've dealt with a lot of institutions in the past and they have these color coding systems of like red, yellow, and green for their active managers they have, right?

[00:10:07] Green is, hey, everything's fine.

[00:10:09] We're going to stay in it.

[00:10:09] And that means performance is good.

[00:10:11] Yellow is, yeah, performance is pretty bad right now, but it's been good in the past.

[00:10:14] They're on the watch list.

[00:10:16] And then red is, okay, this manager is awful.

[00:10:18] Let's get rid of them.

[00:10:19] And my question to them is always, you know, when you got into this manager in the first place, you knew a period of underperformance was going to come.

[00:10:26] So would you be willing to lean into the pain and double down on that manager or not?

[00:10:29] And if it's not, then that's time to get rid of them.

[00:10:31] But that's the hard part is you don't know which ones are going to come back and which ones are just down forever.

[00:10:38] The next point is fighting the last war.

[00:10:40] And I think as investors, and it's almost like the setup is always, it's when we go through a bear market or a specific type of bad market environment, you know, the media tends to put on the people that are going to talk about what we just went through and maybe be more fearful than they should be or whatever.

[00:10:58] But as investors, we're sort of always thinking about that last period we've went through.

[00:11:03] And that can be, I think, problematic for a lot of investors.

[00:11:06] Yeah, you see the stories of the black swan funds after a huge crash or huge volatility increase that the black swan fund is up 600% over the last week.

[00:11:16] And you don't look back at the track record and see what was down in the previous five years or whatever before this happened.

[00:11:21] And I do think this is a hard part is that, and I saw this a lot at 2008 of everyone deciding, okay, after that crash happened, now it's time to get into black swan funds.

[00:11:31] And now it's time to get into hedge funds.

[00:11:33] And now it's time to check our downside volatility.

[00:11:37] You do so at the wrong time because driving in the rearview mirror is really easy because you think, okay, now that I know these risks can happen, here's how I'm going to build my portfolio to withstand that.

[00:11:46] But the future risks are never like the past risks.

[00:11:49] And I think that's the problem that a lot of people get themselves into is just assuming, okay, now I got, now I have the playbook.

[00:11:55] I'm going to follow this the next time.

[00:11:57] And it rarely works like that.

[00:12:00] It's weird.

[00:12:00] It also reminds me of like the Berkshire Hathaway thing of when they go out and sell those insurance premiums.

[00:12:07] Right.

[00:12:07] You want to do risk insurance after the hurricane.

[00:12:10] And there's stories all the time.

[00:12:12] We're taping this now and there's hurricanes coming down.

[00:12:15] There's stories like this all the time when there's hurricanes or earthquakes.

[00:12:17] People go out to their insurers and get a ton of insurance right after those things happen.

[00:12:23] And then when you have some time in between these natural disasters, people start letting their insurance lapse and they don't get it as much.

[00:12:29] And it's the same exact thing with investors is that they want to get that protection after the crash has already happened or after the volatility spike is already here.

[00:12:37] There's this like meta point inside of that.

[00:12:39] And it goes back to the market timing piece where you can't really time the markets, but you can kind of like time light.

[00:12:45] Like if you own a house and you live in a hurricane zone or like I live in a flood zone, it's just part of the reality.

[00:12:51] If you're going to live in a place where you have these problems and you go, well, I plan to own this thing for this next period of time, then you could think about that.

[00:12:58] And you should think about in that lull.

[00:13:00] That's the time when it's like, oh, let's re up on the extended policy.

[00:13:03] And if something just happened, hopefully you don't have to, you know, up and move.

[00:13:06] Well, that's the other way to get out of the market timing temptation is just to own a portfolio that you think is durable enough to withstand a bull market or a bear market.

[00:13:16] And you think you're going to be OK holding whatever percentage of stocks you want in your portfolio.

[00:13:20] You're going to be good with that, whether stocks are going up or down.

[00:13:22] And, you know, to your analogy that the flood is going to happen at some point, you know, stocks are going to go down.

[00:13:26] You just don't know when you don't know what the magnitude is going to be.

[00:13:29] So what about billionaires?

[00:13:30] Last I checked, they're just like us.

[00:13:32] They're just regular people.

[00:13:34] Should I not be taking advice from them?

[00:13:36] Advice from billionaires.

[00:13:38] This one always gets me.

[00:13:38] You see the, you know, the headlines.

[00:13:40] George Sturlus buys a billion dollars and puts on the market or Michael Burry says to sell everything or this billionaire just bought this stock.

[00:13:47] So you should get all into it.

[00:13:49] Bill Ackman says the world is coming to an end.

[00:13:51] Any of this stuff.

[00:13:53] And I just think it's such a fool's errand because, A, a lot of times these people, you have to watch what they do, not what they say.

[00:14:00] Right.

[00:14:00] If you listen to Stanley Druckenmiller talk any time over the past 15 years, you would assume this guy is shorting the market to,

[00:14:06] you know, he thinks it's coming to an end because of the way he's talking about the macro.

[00:14:09] But if you look at his portfolio, his performance in his trades, he doesn't invest like that.

[00:14:13] He's constantly moving in on positions and he's more bullish than he makes it sound like because his the stuff that he says does not necessarily match his portfolio.

[00:14:20] And the other part is these people don't know your time horizon and risk profile.

[00:14:25] They don't they don't they have a completely different you know, they can they can take the risk and be wrong.

[00:14:30] And it's not going to impact them as much as someone who just has a 401k or an IRA and is investing for their kids college fund or whatever.

[00:14:37] It's completely different risk profiles and time horizons.

[00:14:40] And and it just it makes no sense to take what these people are saying on CNBC or Bloomberg as gospel of what you should be doing for your portfolio.

[00:14:48] That's a good lesson inside of that, too, of the what's going on at the margin, which is the most interesting thing to talk about, is probably not what's going on in the core portfolio, even for these people.

[00:14:58] But if they're going to go on TV and market themselves, that's what's interesting to talk about.

[00:15:02] Yes. And the marketing piece is a big part of it is if you hear a lot of bond fund managers are almost always bearish.

[00:15:09] And why is that? Because they want you to invest in bonds because bonds are a pretty good hedge when things get bad.

[00:15:15] And that's why they they bring bond fund managers on CNBC and they talk about the stock market and stocks of the shorting in in the economy.

[00:15:22] And it almost always sounds bad because guess what? That's a good selling point for their strategy.

[00:15:26] They're talking their own book. The bond guys are always smarter than the stock guys.

[00:15:32] Yes, I've still tried to figure that out. The bond market is smarter than the stock market, but you never know.

[00:15:38] You never know. Maybe they're doctors and engineers.

[00:15:40] What about worry more about being right than making money? Unpack this one for me.

[00:15:45] This is this is kind of a.

[00:15:46] Well, there's a difference between pundits and investors and pundits really want to be right.

[00:15:53] Right. And they and it's funny because you can get famous for being right once in a row, once in a row in this industry.

[00:15:58] Right. The people who call the 2008 crisis and I take called in quotes because a lot of them just call for a crisis all the time.

[00:16:04] But some people legitimately did call for the 2008 crisis.

[00:16:07] And they've been living on that that accolades ever since.

[00:16:10] They haven't they you know, they haven't been read about anything since.

[00:16:11] But it still says every headline guy who called the 2008 crisis is worried again.

[00:16:17] And I think there are people who their takes matter more to them than their portfolios.

[00:16:22] And a lot of them, again, that what they what they say doesn't necessarily match what they do.

[00:16:26] But I think if you get into this game where I'm going to outwit the market and I'm going to be smarter than the market.

[00:16:31] And I'm going to guess which way the interest rates are going to go or inflation.

[00:16:34] The funny thing is, I could give you the headlines for two months from now about what's going on in the economy.

[00:16:38] And it still might not help you as an investor. Right.

[00:16:41] Because of all the weird things that can happen in the market before looking and pricing things in.

[00:16:46] Sometimes the economy and the data doesn't necessarily match up with what the market is doing.

[00:16:51] So it's not always the same thing that the stock market bottomed when inflation was at nine percent still.

[00:16:56] Right. In October 2022, it didn't look like things were getting much better than then.

[00:17:00] The stock market took off without any warning and out any data actually getting better.

[00:17:04] It's because the stock market was for looking and kind of saw things coming.

[00:17:09] So, yeah, this whole idea that you have to be right to make money just doesn't always line up with reality.

[00:17:14] There's that fun exercise. I don't know if you guys do this at like the end of the year.

[00:17:19] It's kind of here's all the things that weren't on your bingo card.

[00:17:22] And sometimes before the next year, look ahead.

[00:17:25] You just need to remind yourself to how many of those things you didn't anticipate whatsoever.

[00:17:29] And every year is like that. Even this year we came in and we thought the Fed was going to cut six times.

[00:17:34] And they've cut months, maybe the public cut a couple more times.

[00:17:36] But the funny thing is that they're not some people would have said, oh, they're not cutting because inflation is still here.

[00:17:42] But the reason they're not cutting is because the economy remains strong.

[00:17:44] And so even the reasons for the action sometimes might not mesh with what you would have thought ahead of time.

[00:17:50] What about like just the directionality of this stuff, too?

[00:17:53] I think this plays in, especially from the wealth manager perspective, where it's kind of like just get the general direction of the idea right.

[00:18:00] Like if you need stocks for the quote unquote long haul, not to invoke that, but it's just kind of like, OK, decide on what you need, have the allocation and then accept the range of outcomes that you're inevitably going to get.

[00:18:13] How do you feel about that inside of this?

[00:18:14] Well, there's kind of the old joke about how can you tell that an economist forecast is crap?

[00:18:18] How do you know you throw out one of they go out two decimal places? Right.

[00:18:20] And I think that's the whole to your point, the whole the precision thing is is probably where a lot of people get hung up and just like you said, riding those trends and getting in the right direction.

[00:18:30] That's why people have been arguing about economic data for the past few months.

[00:18:35] How good is it really? We get these revisions and things change.

[00:18:38] But it's the trend that matters more than the actual, you know, individual numbers themselves, plus or minus whatever it is.

[00:18:44] So, yeah, I think that that matters more and just, yeah, be on the right side of things as opposed to getting things exactly right.

[00:18:53] So instead of benchmarking my portfolio against the NVIDIA only ETF, why should I also not benchmark my portfolio to the best performing asset classes?

[00:19:03] Well, I think this has been one of the harder things for diversified investors to do for the past 10, 12, 15 years is either the S&P 500 or the NASDAQ 100 because the U.S. has been the only game in town, really, as far as stock markets go.

[00:19:16] And it's been mostly those index funds or growth stocks that have been doing well.

[00:19:20] And I think it's really difficult for investors to not look at those and say, why don't I just have everything in there?

[00:19:25] And why would I bother investing in anything else? Why would I have value stocks or quality stocks or dividends or foreign stocks or emerging markets or any of these other asset clashes?

[00:19:34] And why would I not just put all of my money into these one areas?

[00:19:38] And if you did that, you made a ton of money, right? You did really, really well.

[00:19:44] But I think we all know that these cycles don't last forever.

[00:19:49] Trees don't grow to the sky. Mean reversion still is a thing in the marketplace.

[00:19:53] Unfortunately, I think we've been shown that the timing on that mean reversion is a lot harder than it seems.

[00:20:00] So, yeah, so I mean, people with a 60-40 portfolio in retirement can't be judging their portfolio against the S&P 500 or the NASDAQ 100

[00:20:09] and assuming that that risk profile matches what they're investing in and going, why don't I own that?

[00:20:15] And I think the hard part these days is there's so much access to so many different strategies these days that it's never been easier to be tempted to say,

[00:20:23] why don't I have more than this? Why don't I have more than that? I should own some more of this strategy.

[00:20:27] Why didn't I invest in this stock?

[00:20:29] And I think if you're constantly tempted and you're benchmarking against the wrong things,

[00:20:34] it can make it really hard to stick with your own strategy and just be content with it.

[00:20:37] From the wealth management perspective, how do you think about benchmarking for individuals?

[00:20:42] So you make the choice to not go, I'm just going to look at the S&P app on my phone and still quote things in the DAO.

[00:20:48] But I actually want some type of customized benchmarking. How do you think about that for people?

[00:20:52] Well, for the clients we're talking to, the biggest financial benchmark for them is their goals.

[00:20:57] Are you untrapped to reach your goals?

[00:20:58] Obviously, we want to make sure that they're earning enough returns and financial returns and performance are a piece of that.

[00:21:05] But the whole thing for them is how do I reach my goals with as little risk as possible?

[00:21:10] Right. And so there's this idea.

[00:21:12] I think I learned this in the CFA. There's the willingness, need and ability to take risk.

[00:21:15] That's kind of how you set your risk profile and your asset allocation.

[00:21:19] And sometimes those different pieces of the risk profile can be in conflict with one another.

[00:21:23] Right. You could have a ton of money and have the ability to take a lot of risk because you have a lot of money.

[00:21:29] Right. But you might not be willing to take a lot of risk because, hey, I've already won the game.

[00:21:33] What's the point of continuing to play?

[00:21:34] So sometimes it's more about balance.

[00:21:37] But but I think that the financial goal piece is, am I on track with my spending goals?

[00:21:42] Can I reach can I take it three trips a year?

[00:21:45] Can I buy that vacation home?

[00:21:46] Can I continue to spend money like I'm doing and increase it by the rate of inflation?

[00:21:49] Those are the things that matter for for our wealth management clients.

[00:21:52] This is not necessarily is there alpha.

[00:21:55] Jason Zweig had this great piece a number of years ago where he went down to Florida and interviewed people who retired on the beach.

[00:22:01] And he asked them to get to retirement and build this nest egg.

[00:22:06] You know, you have three million bucks and you live on the beach in Florida.

[00:22:10] Did you beat the S&P 500?

[00:22:11] And one of the guys says, I don't know, maybe, maybe not.

[00:22:15] But either way, I ended up in Boca on the beach.

[00:22:17] So I obviously did something right.

[00:22:19] So that's all that matters.

[00:22:19] And that's that's the whole point is, can you can you make it to Boca with with your performance that you get?

[00:22:24] What we really need is more Jason Zweig man on the street or he is like that for all of our sake might save the world.

[00:22:30] What about blaming the Fed?

[00:22:31] I love blaming the Fed.

[00:22:33] How could you possibly take away this from the hedge fund managers and smart pundits of the world?

[00:22:38] Well, yes, that unfortunately that that's kind of what the pundit class does.

[00:22:42] It's three of the words that you never want to admit when you're a pundit is I don't know or I was wrong.

[00:22:48] It's really hard to say because that kind of takes the mystique away from you being this this all knowing source of power.

[00:22:54] And I do think there's this whole thing where, you know, I would have been right about the financial system completely coming to an end if it wasn't for X, Y and Z.

[00:23:02] It's almost like Scooby Doo. Right.

[00:23:03] I would have got away with it if it wasn't for you kids.

[00:23:05] And I think there's a lot of that, too, when you make a bad prediction and you want to look for, well, geez, if just if just A, B and C would have happened, I would have been right.

[00:23:15] And now I'm going to double down on it.

[00:23:17] And it's much easier than having some introspection and realizing like, OK, maybe I was just wrong.

[00:23:21] And sometimes you got to move on.

[00:23:22] Anytime when I used to track active managers a lot in my institutional investing days, that was always a great sign for me when it when an investor would just admit, listen, our strategy is simply out of favor right now.

[00:23:34] Not trying to blame the Fed or rates or inflation or the White House and who's in political power.

[00:23:39] Just, you know, we made the wrong.

[00:23:42] We went in on this sector or this stack or this whatever, and it just didn't work out.

[00:23:47] That was always a very good sign to me when someone was open and honest and transparent about it.

[00:23:50] Unfortunately, that sometimes it's hard to find in this industry.

[00:23:53] Yeah, we we love wealth.

[00:23:55] I don't want to say we love playing victim, but there's plenty of victimhood in this.

[00:23:59] And what about just second level of this?

[00:24:01] How do you think about the Fed actually even caring about the stock market?

[00:24:06] They have to care up to a point.

[00:24:08] But where do you think about that point when people ask this question?

[00:24:12] I mean, the Fed is obviously very important when it comes to the economy because they said short term rates and there's a lot of stuff that benchmarks to that.

[00:24:20] You know, our saving and our borrowing rates are impacted by that.

[00:24:23] I do think the Fed probably doesn't matter as much as some people would assume.

[00:24:28] It's kind of hard to believe.

[00:24:29] The Fed raised rates from 0% to 5%.

[00:24:32] And if you go from the start of that cycle, so from the moment the Fed raised rates off of 0 to when they decided to cut rates for the first time, the S&P 500 was up 35% in total.

[00:24:41] So you would think if you had told me three years ago the Fed's going from 0 to 5, inflation's going from 0 to 9, I would have said there's no way the stock market is going to be up.

[00:24:51] And obviously there was a bear market in there, so it's not like the stock market went up the whole time.

[00:24:55] But if you fought the Fed this time around in the stock market, you won.

[00:25:01] And I think there's also this idea that, you know, in the 2010s the idea was, well, the only reason the stock market is going up is because of the Fed.

[00:25:08] The Fed is keeping rates on the floor and the Fed put us in.

[00:25:12] And I think we've learned this market cycle that the Fed doesn't matter nearly as much as some people would have you believe.

[00:25:18] Because they were even saying in some of their correspondence, we want the stock market to fall.

[00:25:22] Right. Neil Kashkari was saying we're happy with pain in the stock market.

[00:25:25] We want it to go down. I was kind of surprised when they said some of that stuff.

[00:25:28] But I think when it comes to the market, obviously the Fed being more accommodative should be helpful to the stock market.

[00:25:34] But it's not a necessary precondition for stocks to go up just because the Fed says they should or thinks they should.

[00:25:38] Is part of that just the nested reality of it all?

[00:25:41] Like if the Fed's thinking about liquidity or they're thinking about inputs or whatever else, you can connect all the dots to valuation and where the stock is.

[00:25:49] But that doesn't mean that the priority stacks can be off.

[00:25:53] Yes. And at the end of the day, it still comes down to companies making money and earnings growing.

[00:25:58] And I think that's where the disconnect happens for a lot of people is the fact that if you look at earnings, earnings have continued to go up.

[00:26:03] And that's one of the main reasons the stock market has gone up as well is because companies are making more money.

[00:26:07] So, yeah, if you rewind the clock 12 months ago, you know, everyone and their brother was saying, you know, the Fed is going to cut in early 2024.

[00:26:16] And that's going to drive the market higher.

[00:26:18] And to your point, Dan, that you may, you know, the market was up 20 percent before the Fed didn't cut any rates.

[00:26:23] So gains were being driven by fundamentals mostly, not anticipating Fed break cuts.

[00:26:28] Yes. And sometimes you have to think about the reasoning for something happening.

[00:26:33] So when interest rates were rising in 2022, that was a bad thing because the economy was weakening and inflation was was shooting higher.

[00:26:41] Right. So that was a bad thing. Now interest rates are rising.

[00:26:44] But the market actually thinks that it's a good thing because it's doing so because the economy remains strong.

[00:26:48] And so sometimes you can't just look at a number in a vacuum and say this is good or bad.

[00:26:53] You have to provide some context around it.

[00:26:56] What about don't live and die by the short run?

[00:27:00] Well, I mean, I'm unfortunately, it seems like no one has time for the long run anymore these days because everything is just now, now, now it's alerts.

[00:27:07] It's, you know, the same thing is in our life.

[00:27:10] Like if I don't respond to a text message from my wife in five minutes, I'm going to get a question mark, question mark, question mark.

[00:27:15] Shh. Right. Blame the Fed. That's a trick.

[00:27:18] Yes. The Fed maybe keep looking at the market.

[00:27:21] So I think it's probably harder than ever to just people say ignore the noise.

[00:27:26] I think it's impossible to ignore the noise these days.

[00:27:29] I think you have to be immune to the noise because no one can can get away from the information on social media and all the opinions and analysis and in information.

[00:27:39] And we're drinking out of a fire hose of it.

[00:27:42] Howard Linsen always says, like, there's no such thing as information overload.

[00:27:45] It's just filter failure.

[00:27:46] So I think you just have to have the ability to not be impacted by everything that goes on in a short run and constantly change your narrative or what you think or your portfolio based on what's going on in the short run.

[00:27:59] And I think it's honestly never been harder to avoid those temptations.

[00:28:03] Do you think that's what's showing up in things like speculation and extra howey on this one, like the DGN kind of stuff?

[00:28:11] Well, it's weird because we have the extremes.

[00:28:13] If you look at the data from a company like Vanguard, the people that invest at Vanguard are basically never doing anything.

[00:28:20] They looked at what was the date when we had the Japanese scare?

[00:28:24] Whatever date that was when Japan fell 12% a day and remember everyone thought we were going to recession that one single day because the stock market rolled over 3%.

[00:28:32] Those are the days.

[00:28:35] But Vanguard looked at it and I think they said something like 98% of their constituents did nothing, did no trading.

[00:28:42] And then the 2% of people who did trade, 4 of every 5 of them were buying stocks because they were down.

[00:28:48] And so I think you have this cohort that's almost always going to be long term and it's the 401k people and IRA people and they're every paycheck they're putting money in.

[00:28:57] And they're buying target date funds and they're letting that money ride.

[00:29:00] And then I think also there's a subset of people who are taking, name a number, 5%, 10%, 20% of their portfolio.

[00:29:07] And they're also speculating with it in a Robinhood account.

[00:29:10] And they're buying options and they're buying crypto and they're buying penny stocks and they're day trading.

[00:29:15] And I actually think it's okay to have those two competing ideas in your portfolio as long as the speculation piece is sized correctly.

[00:29:23] And as long as the speculation piece is along the long term piece of your portfolio to stay untouched and leave it alone.

[00:29:30] So I think some people just need to scratch that itch.

[00:29:33] There are certain people who are just, listen, I'm a bobblehead through and through and I'm long term and I'm putting my money in index funds and I'm not going to touch it.

[00:29:40] And that's it.

[00:29:41] I think other people just don't have the ability to do that and they need to pick stocks and they need to speculate and they need to make changes.

[00:29:49] And I think that's okay if you need that sort of behavioral release valve.

[00:29:53] Again, as long as you size it correctly, I don't have a problem with it.

[00:29:56] Having this sort of fun, entertaining, scratch that itch side of your portfolio.

[00:30:00] I love this idea because it's basically permission to be the hedge fund guy on CNBC talking smack in your speculative portfolio.

[00:30:10] So long as you're that now debunked dead fidelity investor thing.

[00:30:15] And some people need to have those conversations with their friends and peers and their coworkers like, hey, I just bought Apple last week.

[00:30:21] Some people love being in the game and I don't think that that is necessarily a bad thing.

[00:30:26] Again, as long as you have the other piece of your portfolio locked down and you aren't touching it and tinkering with it all the time.

[00:30:32] Yeah. Don't think you're a genius.

[00:30:33] Like back to that idea.

[00:30:35] Just, yeah, it's okay to have fun with friends.

[00:30:37] Daniel Kahneman, when he won the Nobel Prize, had this thing where in his speech he talked about, you know, if people just behave better over the long run.

[00:30:44] And he said, unfortunately, life has not lived in the long run, right?

[00:30:48] We have the long run is a series of short runs.

[00:30:50] So you do have to survive those somehow.

[00:30:51] I don't think it's as easy as it was in the past to just say, just ignore the noise and you'll be fine.

[00:30:56] It's too hard these days to do that.

[00:30:58] You have to have an actual strategy where you can.

[00:31:01] And I think technology helps in that where you can now automate so much of your investment decisions and you can take yourself out of it.

[00:31:07] You can make good decisions ahead of time and take yourself out of the equation completely.

[00:31:12] So what about selling all of your stocks in a bear market or selling any stocks in a bear market for that matter?

[00:31:17] I do think the biggest thing for investors is just avoiding the big mistake at the worst possible time.

[00:31:26] And I know this is especially true in 2008 and 2009 where people finally cried uncle and said, all right, that's it.

[00:31:31] Get me out.

[00:31:31] I've had enough.

[00:31:32] It just things seem to be going down every single day.

[00:31:35] I can't stand it anymore.

[00:31:37] And I think that is a hard thing for people.

[00:31:40] And the problem is getting back to the market timing piece.

[00:31:42] People assume that there's this this like all clear signal that like, OK, things are fine.

[00:31:48] And if you think back, even the pandemic, when we had that 35 percent crash and happened in six weeks, the stock market was already back to all time highs by the time the vaccines were rolled out.

[00:31:58] Right. So if you waited for the good news to happen from the pandemic, remember when that selling was happening in March and April, people were saying, OK, sure, the stock market bounced a little bit.

[00:32:07] But this is a dead cat bounce.

[00:32:08] We're going right back down because the news didn't really get much better.

[00:32:12] But the markets kind of saw over that valley.

[00:32:14] And by the time things get better, it doesn't the I think the unemployment rate in 2009 was still 10 percent by like the fall of 2009.

[00:32:22] And by that point, the stock market had already rocketed 60 or 7 percent higher.

[00:32:26] Like the market doesn't wait for an all clear signal or coast to clear.

[00:32:29] And I think that's the mistake people make when they think I'll sell in the bear market.

[00:32:33] We're down 20 percent.

[00:32:33] I'll sell now and I'll just get back in.

[00:32:35] And to your point earlier, Justin, about trend following, I think that's the good thing about trend following is is the rules force you to get back in.

[00:32:42] So you don't have to just think about it on your own.

[00:32:45] Or trust the billionaire on CNBC to tell you exactly what to do.

[00:32:48] And they're probably a good contrarian indicator, if anything, in those cases.

[00:32:50] But that's it.

[00:32:51] You know, the getting back in is a very interesting point.

[00:32:53] I almost feel like when you if you move out of stocks and then, you know, you're sort of waiting and then stocks melt up.

[00:33:02] So you're sort of waiting for them to pull back.

[00:33:04] And then, you know, people find it's two years later and they're still not back in.

[00:33:09] And then it's like, oh, now I got to, you know, the S&P's up at whatever, a thousand points or however much since I got out.

[00:33:14] I can't I can't stomach to get back in.

[00:33:17] And it's just they find themselves sort of stuck.

[00:33:19] And then you're addicted to cash at that point.

[00:33:20] We talked to so many people in our line of business that got out in 2008 and we're talking to them in 2015.

[00:33:26] They said I never got back in.

[00:33:27] I couldn't I couldn't force myself to do it because I was waiting for the other shoe to drop and come back down.

[00:33:31] And it never happened.

[00:33:32] So I'm stuck.

[00:33:34] In a money market or saving his account, earning zero to in that period, which is just heartbreaking over and over and over again.

[00:33:41] What about like and this is a.

[00:33:44] There's a good function inside of this, too, which is where, you know, companies get flushed out of indexes.

[00:33:50] There's reconstitutions and other things.

[00:33:52] That's not you selling stock, but just understanding like stuff goes to zero.

[00:33:55] Stuff gets pushed out of index funds.

[00:33:56] You might have something that went all the way down.

[00:33:58] And like there's there are good things to let go of.

[00:34:01] There's good reasons to clean house, too, in a bear market.

[00:34:04] Yes.

[00:34:05] Oh, yeah.

[00:34:05] No, I think I think and that's why I think one of the things we've seen in a lot of the bear markets lately is that anytime stocks go down by a meaningful amount, we see this really big shift.

[00:34:16] And this shift has been happening slowly over time, but from active to passive.

[00:34:19] And I think people use that as an excuse to, OK, my stock's down.

[00:34:22] Now I'm going to make the switch.

[00:34:23] And I think that's that that's actually probably bad for the active community.

[00:34:26] I think a lot of people assume like, well, when stocks are down, people will get rid of their index funds.

[00:34:31] But no, it's the other way around.

[00:34:32] People are waiting to sell these active strategies.

[00:34:35] And yeah, maybe it's a good time for people to reassess.

[00:34:37] Like if I was starting my portfolio today in all cash, what would I actually be invested in?

[00:34:41] And maybe I wouldn't hold some of these holdings anymore.

[00:34:44] Now, what about assuming and go with me here?

[00:34:47] What if you're the next Warren Buffett?

[00:34:50] I think we all probably went through this phase.

[00:34:52] I did, of course, one of the first books I read because, you know, when you're young, you type in 10 best investing books and intelligent investor invariably comes up and you think, oh, I'll just be the next Ben Graham or Warren Buffett.

[00:35:03] It's just it's just a lot harder than it seems.

[00:35:05] And to his credit, Buffett makes it seem like it's so simple based on his his quotes and the way he thinks.

[00:35:13] I don't think people give Buffett enough credit for being such a like smart supercomputer.

[00:35:18] Some of those books talk about how he can he can do compounding exponential like in his head, basically, thinking through this stuff.

[00:35:24] And I think the fact that he is just this like Nebraska folksy kind of guy makes it seem like, oh, I'll just be the next.

[00:35:30] You know, I went through a phase like that.

[00:35:31] I'll just pick stops like Buffett.

[00:35:32] It's easy.

[00:35:33] I'll concentrate my portfolio.

[00:35:36] It's it's just it's so much.

[00:35:38] And even he takes credit.

[00:35:39] He says, you know, this stuff is simple, but not easy at all.

[00:35:42] It's it's it's very hard.

[00:35:44] And even Munger before he died said, you know, someone asked him in an interview, if you if you were starting now in today's day and age and the way markets are and the way technology is, could you replicate and do what you did?

[00:35:56] And he said, no, there's no way we could do it.

[00:35:58] We were kind of ahead of the game.

[00:36:00] It's so we still have good results, but we couldn't outperform as much as we did from when we started.

[00:36:05] How important is it to have that?

[00:36:07] And like, I'm sure I can speak for myself.

[00:36:09] Absolutely.

[00:36:10] Justin, I bet you did, too.

[00:36:11] Like, I think going through that, that formative experience of doing it and being proven wrong sometime early is tremendously valuable.

[00:36:19] Yeah.

[00:36:19] You pay your tuition to the market gods a little bit.

[00:36:22] I think that that is the time to make your mistakes when you're young.

[00:36:25] I've never one who thinks that there's only one path to investment success.

[00:36:28] I think there's a lot of different strategies that can work.

[00:36:30] And a lot of it is personality driven.

[00:36:33] And again, I always say that the good strategy you can stick with is superior to the perfect strategy you can stick with.

[00:36:39] So for some people, they just have to figure out what works for them.

[00:36:43] But part of that is also figuring out what doesn't work for you.

[00:36:46] And I think thinking through some of those things and learning it, especially when you're young, that's the time to do it when you don't have as much capital at stake.

[00:36:52] And to Buffett's credit, he's pretty much telling most people should just buy the S&T and forget about it.

[00:36:58] Yeah, exactly.

[00:37:01] What about this point of overreacting to market volatility?

[00:37:04] And you guys, correct me if I'm wrong here.

[00:37:06] I sort of think my feeling is now you can take 2022.

[00:37:11] Yes, we had a bear market, but and things like the Nasdaq were down a lot and bro stocks were down a lot.

[00:37:16] The value kind of held up.

[00:37:18] So to me, it didn't feel like as painful as a bear market.

[00:37:23] Like most bear markets should feel.

[00:37:26] But again, it's kind of probably how I was investing.

[00:37:28] But I'm just wondering on this market volatility point, do you feel like the market in the last few years has been maybe less volatile?

[00:37:35] And we're sort of being a little bit blinded by what, you know, the real volatility of stocks over most periods of time?

[00:37:45] I don't know.

[00:37:45] I feel like the short term volatility in the markets is probably we're at a higher risk for like something like a flash crash happening than we've been in the past.

[00:37:53] Where like the thing that happened in Japan that day, where you get this like just liquidity dries up.

[00:38:00] And I think there's so many different moving pieces these days and word and information travels so fast.

[00:38:06] I think that kind of short term spike in volatility can happen.

[00:38:09] I think I said it was like the fastest three day spike in the VIX ever.

[00:38:12] Like the VIX got to like 2008 levels, which was insane for how quickly it happened.

[00:38:17] So I think it's different kinds of volatility that I think I think things happen faster.

[00:38:23] We get a lot of these V-shaped recoveries like that.

[00:38:25] But the COVID period of we went from all time highs and down 30 percent the fastest ever.

[00:38:31] I think since Great Depression, right?

[00:38:33] So I think the speed of the volatility is is faster.

[00:38:37] So I don't know if that's a good thing or a bad thing, but that's just kind of what it is.

[00:38:41] I guess to your point, you're talking more about like this drawn out longer term bear market.

[00:38:45] Yeah, yeah.

[00:38:47] Yeah.

[00:38:48] I guess never say never.

[00:38:50] I do wonder how much of that has been taken out of the equation a little bit just by the fact that we have more.

[00:38:55] A more willing government and Fed to step in to these things and help out.

[00:39:00] So, I mean, maybe these things happen more frequently, but they don't last as long.

[00:39:04] That's a thesis.

[00:39:05] I couldn't I wouldn't, you know, bet my life on it.

[00:39:09] So in some ways, I think you could you could say that volatility has changed.

[00:39:12] Just in the past, people had more time to think through the changing dynamics in the market.

[00:39:17] What's going to happen?

[00:39:17] And now the computers act before, you know, computers act immediately right when the data hits.

[00:39:22] You don't have as much time to think about these things, you know, anymore and consume it a little bit.

[00:39:28] It just happens.

[00:39:29] Yeah.

[00:39:29] I also wonder if maybe the business cycle, I think like recessions were more frequent.

[00:39:36] You know, 40, 50 years ago, then maybe we're seeing now.

[00:39:39] So that may play.

[00:39:40] We've had two months of a recession in the past 15 years.

[00:39:43] Think about that.

[00:39:44] Two months.

[00:39:44] And it was essentially a forced recession that we put on ourselves because of the pandemic.

[00:39:49] So, yeah, I think that screws things up a little bit to your point that we don't have as many recessions as we did in the past.

[00:39:54] And the thing with that recession is I don't even think most investors were so concerned about COVID that they weren't even really looking at their like by the time they opened their statements.

[00:40:05] It was like June and things were bouncing back.

[00:40:08] So, yeah, you didn't get the investor behavior reaction.

[00:40:11] We saw that with our clients that they weren't nearly as worried about their portfolios and their finances because there's so much else to worry about at the time.

[00:40:17] It wasn't the yeah, you're right.

[00:40:19] It wasn't the normal course of action for market crash.

[00:40:23] But what about and this is the next point you brought up.

[00:40:26] There are people that are just pessimistic about everything.

[00:40:29] I think a lot of that grew out of the Internet and the 2008 crisis.

[00:40:33] That's at least where I saw it happen is we had this huge crash and the system was teetering.

[00:40:40] And I think there was a lot of anger coming out of that.

[00:40:44] I mean, that has to be one of those painful crashes well, just because of the fact that you not only had stocks falling, you had people, you had double digital unemployment, you had housing prices well, 25 percent.

[00:40:54] And I think there was almost this camaraderie in complaining and being pessimistic.

[00:40:59] And I think some people never really got out of that mindset either.

[00:41:02] And so I think the growth of like the perma bear from that period, which is kind of funny because we've been like a 15 year bull market since then.

[00:41:08] And people have been, you know, glasses half empty the entire way up.

[00:41:12] I just think if you're going to be a long term investor, you have to have a dose of optimism in you.

[00:41:16] And it's not to say you have to be, you know, rosy and Goldilocks at all times and things are great and never look at the downside.

[00:41:26] My my whole ethos for investing is the stock market usually goes up and sometimes it goes down.

[00:41:31] And I think you have to be realistic about these things.

[00:41:33] But I think if you're not optimistic, what's the point of that?

[00:41:35] You know, people are going to continue to get better and we're going to have progress and companies are going to make money and we're going to innovate.

[00:41:40] What's the point of investing in the first place?

[00:41:42] That's my whole line of thinking.

[00:41:43] Aren't those perma bears also just like like they're created by the crisis.

[00:41:46] And then it's just because it's such a good marketing story after there.

[00:41:49] The insurance salesman.

[00:41:50] Yeah.

[00:41:51] Negativity sells a lot better, unfortunately.

[00:41:53] And and I think a lot of people have learned that and doubled down into it.

[00:41:57] And I just think on that, one of the things that investors have to be very careful of is the way.

[00:42:02] Content is being fed to us and what we're seeing, you know, if you if you find yourself on a YouTube video about the market going down by 75 percent,

[00:42:11] then the likelihood is the algorithms that continue to feed you those.

[00:42:15] And then you're going to be stuck in this perma bear video spiral.

[00:42:19] It's hard to break away from.

[00:42:20] And in someone who says this, you know, the stock market goes up through it every four years on average.

[00:42:24] And most of the time it's up.

[00:42:27] Most people go, OK, that's obvious.

[00:42:28] That's not intelligent.

[00:42:29] That's obvious.

[00:42:30] The intelligent person is the one who's telling you the world's coming to an end and they give all these reasons why.

[00:42:36] This other point is, you know, investing is just boring.

[00:42:39] So why don't we just kind of speculate and have fun?

[00:42:43] It is.

[00:42:43] Unfortunately, that's the whole line of thinking of investing should be like watching paint dry.

[00:42:48] But it's it's it's very hard to do because you want that instant gratification.

[00:42:53] You want to you see these stories about people who make a ton of money in crypto overnight.

[00:42:58] I want to be that person.

[00:43:00] Why?

[00:43:00] Why don't I get to do that?

[00:43:01] And I think that's that's a really hard thing for people to to live through these days is that compound interest takes time for for it to work.

[00:43:10] It doesn't work overnight.

[00:43:12] And it's it's very hard in instant gratification society to do that.

[00:43:16] Yeah.

[00:43:17] And that's kind of the last point you made is, you know, trying to become rich overnight isn't really a good long term investment strategy.

[00:43:24] No, no, not at all.

[00:43:25] And again, you see these stories.

[00:43:27] The problem is you never see the other story of the person who lost it, who lost money trying to go get rich overnight.

[00:43:33] Right.

[00:43:33] You only see the one in a million long shot lottery winner who, hey, this person put ten thousand dollars into dog coin and they became a millionaire overnight.

[00:43:43] And you think that's not fair.

[00:43:46] I should be able to do that.

[00:43:47] And unfortunately, markets are are democratic like that, that the person who did that, that money still pays if they cash out there.

[00:43:56] You know, they made that money.

[00:43:58] But you you rarely see the other million people who tried to do it and failed and they tried to put their money in penny stocks or call options wherever it is.

[00:44:06] And nothing came of it.

[00:44:07] And they just lost their initial investment and they didn't become rich overnight.

[00:44:11] And it's kind of a survivorship bias thing where you only see the good stuff and not the bad stuff.

[00:44:16] What I love about this is, you know, these things just all kind of can be stacked on top of each other.

[00:44:21] You kind of take all these things and just stack them.

[00:44:24] Don't chase performance.

[00:44:26] Don't try to time the market.

[00:44:27] Think long term.

[00:44:28] Understand the power of compounding.

[00:44:29] You know, understand that there's people on the other side of those trades that are probably much smarter than you.

[00:44:34] And that's why I love this, Ben, because it's kind of it really is a great way to kind of think about how not to F off in the markets.

[00:44:43] Yes, it is.

[00:44:45] It is relatively boring and maybe not for everyone.

[00:44:47] But I think that's the whole point is get rid of the bad stuff and let the good stuff take care of itself.

[00:44:52] So we have just one more.

[00:44:56] It's a new standard closing question we're starting to ask people.

[00:44:59] And that is, what is the one thing that you believe about investing that you think the majority of your peers would disagree with?

[00:45:07] Oh, interesting.

[00:45:08] So what's my contrarian take on investing?

[00:45:11] E.D.?

[00:45:12] I think most investors these days are actually pretty well behaved.

[00:45:16] And I think a lot of people look at like mom and pop and retail investors and think, oh, they're the idiots, right?

[00:45:22] They're the ones making all the mistakes.

[00:45:23] And those people do exist.

[00:45:25] But I think investors are far more well behaved these days than they've ever been at any time in history of investing.

[00:45:30] Because I think we have all these different avenues.

[00:45:33] We have automatic investing in 401ks and IRAs and tax loss harvesting and robo-advisors and target date funds and all these things and index funds.

[00:45:41] And I think the general investing public is much has gotten better at investing than they were in the past.

[00:45:47] And I don't think a lot of pros actually believe that.

[00:45:52] It's great, Ben.

[00:45:52] Thank you very much.

[00:45:53] We really appreciate you coming on.

[00:45:54] Thanks for having me, guys.

[00:45:55] This is Justin again.

[00:45:56] Thanks so much for tuning in to this episode of XS Returns.

[00:45:59] You can follow Jack on Twitter at Practical Quant and follow me on Twitter at JJ Carbono.

[00:46:05] If you found this discussion interesting and valuable, please subscribe in either iTunes or on YouTube or leave a review or a comment.

[00:46:13] We appreciate it.