The Compound and Friends - The Intelligent Investor

Episode Date: October 25, 2024

On episode 163 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Jason Zweig of the Wall Street Journal to discuss: the best investing book ever written, what Ben Graham would think about today's market, buffered ETFs, Jason's last conversation with Charlie Munger, and much more! Thanks to Public for sponsoring this episode! Visit: https://public.com/compound to lock in a 6% or higher yield with a Bond Account. Sign up for The Compound Newsletter and never miss out! Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Public Disclosure: A Bond Account is a self-directed brokerage account with Public Investing, member FINRA/SIPC. Deposits into this account are used to purchase 10 investment-grade and high-yield bonds. As of 9/26/24, the average, annualized yield to worst (YTW) across the Bond Account is greater than 6%. A bond’s yield is a function of its market price, which can fluctuate; therefore, a bond’s YTW is not “locked in” until the bond is purchased, and your yield at time of purchase may be different from the yield shown here. The “locked in” YTW is not guaranteed; you may receive less than the YTW of the bonds in the Bond Account if you sell any of the bonds before maturity or if the issuer defaults on the bond. Public Investing charges a markup on each bond trade. See our Fee Schedule. Bond Accounts are not recommendations of individual bonds or default allocations. The bonds in the Bond Account have not been selected based on your needs or risk profile. See https://public.com/disclosures/bond-account to learn more. Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

We have an addition to our family. Four-legged. Oh, you? Four-legged. You got a puppy? We got a puppy. What type? She's great. She's a Cocker Spaniel.

Oh, beautiful. Yeah, she's awesome. Did you grow up with dogs or did you have dogs with kids growing up? Yeah, yeah. Both my wife and I did. And she's a replacement for our Cocker who died three years ago. But she's fabulous. I'm getting a Boxer in January. They're the greatest dogs. I'm getting a boxer in January. They're the greatest dogs.

My boxer passed away in April. And this is not intentional. But over the years, I cried a lot. Just thinking about when she was going to die. So that I like pre-grieved. When she died, I was okay. I can't believe it. Because I had really cried a lot just randomly.

If I was drunk with my wife She and I'd start crying. She said you got to be kidding me. But so when she died, I was like Shockingly, okay, but I miss her a lot. So she passed in April and I'm home a lot Yeah, you know and my kids miss her and so right I There's nothing like it. Have you identified the dog or I was on the phone with a breeder So we'll only get a boxer because they're all the same dogs, personality-wise. They're all the same. So I was on the phone with a breeder and she said, well, I have a white bitch right now.

Obviously, she's not trying to be funny. But I said, we're looking for a fawn bitch. So she said, so I got in touch with somebody else and there's a litter coming in November. So I can't wait. I'm really excited. Yeah. They're, they're, they're the greatest dogs. In fact, our dog played with one, I think that was yesterday morning and no, it was

today actually. And she's got so much energy. She's like a maniac. And I said to her, not that she speaks English, you're going to be sorry. Because she's like this big, right? Yeah. And this was- Oh, she's a baby. Yeah, she's a baby.

She's four months old. Oh. And the boxer was full grown. And I said, you're going to be sorry. And like 30 seconds later, the boxer went like, boom. Yeah. But no harm, no foul. Yeah. Yeah, I, boom. Yeah. Yeah. But no harm, no foul. Yeah, yeah.

Yeah, I miss having a dog. So this was, I don't know if this is the first investment book I ever read. I tell myself that it is. I can't quite remember. I really do think it was, because I do vividly remember Googling. This is probably 2009, 2008.

Googling the best investment book I ever read. Yeah. And like some of the other people, I read chapter eight and I felt like I saw the light. And I remember reading that passage to my mother who could not care less, but I was so taken with the words. I felt like I had finally somebody showed me. And I said, oh, this is going to be easy. And then he closed the book and he started buying F-A-Z.

Yeah. That's the irony is that's not entirely untruth. Yeah. And F-A-S with reckless abandon. Right. So I'm going to scoot a little because I'm not seeing you, Josh. I'm going to just do this. Yes.

That all right? Yeah, totally. But then do I need to adjust? So we got the full beauty, the full glory. We've got people here that know what they're doing. They'll fit. They'll, uh, it's a good thing that they asked you to do the intelligent investor, not security analysis.

Well, no, they actually did. After, after the 2003 edition, the last one, they did ask me to do security analysis and I said no thanks It's a textbook. Yeah, it's too. Yeah, and I was just like I'm not Spending a year of my life doing that, you know Is that is that what it is that what it takes to do this? Is it was it a full year? No, this was seven months seven very intense months, but seven, but security analysis would have been over a year. And it also wouldn't have been.

It's not fun. No, it wouldn't have been satisfying. Did you have a chance to meet him or did he pass before? Graham? No, before my time. I was in high school when he died, not to date myself. But.

Is that the 70s? Yeah, it could be. You once shared the last interview he ever gave, which was in the 70s. Yeah. Where he said explicitly... Stop. No. What I did in the depression doesn't apply now. Yeah.

And, you know, he was like, he was one of these people that didn't like, just say this is how it works, and then it'll always be this way. I remember I wrote a couple of his pieces in Fortune and Depression, and there were so many stocks that were trading below cash value. Right, in Forbes.

Forbes, okay. And obviously that condition did not persist. But God. Yeah, that's right, thank goodness. You know, you never know. It might come back. Do you think that we could have another depression like period for stocks? No, that's not even... What was the question you asked? So somebody asked you, you said definitively no and I agreed with you. I don't think we could have a 90% decline again. No, you said, will the stock market ever sell at 10 times earnings

And I said no way I don't think so if it does there's a huge problem in this country Yeah, we might even be coming apart. Yeah. Yeah it I Mean, I don't think you can ever say never of course stipulate that but of course I Would say the odds are Pretty close to zero. Right, because there's too much money that needs equity exposure. It would never get that bad. It could get bad. Yeah, it could get very bad, but I don't think it would get that bad.

But you know, the difference between 50 and 90 is massive. I mean, it's not the same universe. What, a 90% drawdown? Also impossible. It's death. It's over. Yeah, it's a huge difference. I mean, we shouldn't forget though, that from the peak in 2007 to the trough in 2009, talking about minus 56%. And that was about, hopefully,

as bad as it will get, hopefully. So we hope, although, you know, minus 55 plus is a lot. It's not nothing. It's not nothing. So here's how we structured the show. So we hope, although, you know, minus 55 plus is a lot. It's not nothing. It's not nothing. So here's how we structured the show. We're going to do some of your recent stuff. Star picks. Yeah, we're going to do a lightning round

and then we're going to go into the book and we're going to go old school a little bit. And then there'll be a musical number. Yeah, no, but I want to talk about some of your recent and then there'll be a musical number. And then we'll... Yeah. No, but I want to talk about some of your recent columns and then I really want to go into the Gram thing because our listeners and our viewers, I don't know how much you think about this,

I think about this all the time, our viewership on YouTube, when you look at the demographics, it's an incredible audience because they haven't heard any of these things. We sound like geniuses talking about things that you wrote on a blog 15 years ago.

It's brand new material. These people are 27, 32, and it's so important for them to hear this stuff. So I definitely want to make sure that we do that justice as well. I'm so excited for this, Jason. Not to embarrass you, because I don't need a lot of praise, but you are the greatest financial writer in my lifetime. Before other people came along. No, I think for real.

No, I think for me, you're the goat. I don't think it's, I don't think anyone would dispute it. Yeah, well, can we change the subject now? No, fine. Fine. I think like you and Morgan Housel right now like living Nice I beg to do it So alright, how we looking Johnny good. All right, it's a very important man. He doesn't do small talk Did enough kibitzing? Are we good? We're good. All right. He's a very important man. He doesn't do small talk. Three claps.

He did enough kibitzing. I have an impromptu. That's a one, 63. Whoa, whoa, whoa. Stop the clock. John, before you clap, here's a word from our sponsor. Listen up, folks. Time could be running out to lock in a historic yield

at public.com. But you could lock in a 6% or higher yield with the bond account, Josh. But here's the thing. The Federal Reserve just announced the big rate cut and the plan is for more rate cuts. Not so sure about that. We're gonna see at least one more, I think.

We'll see. Okay. But look, if you're looking to buy a home, that's good news. It might not be so great for the interest you're currently earning on your cash. So if you wanna lock in a 6% or higher yield with a diversified portfolio of high yield

and investment grade corporate bonds, we're talking Apple, Microsoft, you know who they are, you might want to act fast. And the best news is it's fast, it's easy to set up an account and sign up at public.com. Once you lock in your yield, you can earn regular interest payments even as weights decline. This has been brought to you by public investing

member FINRA and SIPC. As of 9-26-24, the average annualized yield to worst across the bond account is greater than 6%. Yield to worst is not guaranteed. Not an investment recommendation. All investing involves risk. Visit public.com slash disclosures slash bond dash account for more info. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of

Ridholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholtz Wealth Management may maintain positions in the securities discussed in this podcast. Ladies and gentlemen, welcome to literally the best Ladies and gentlemen, welcome to literally the best investing podcast in the universe. I'm so excited for this show. If this is your first time listening, this is Downtown Josh Brown.

I'm here with Michael Batnick as always. John is here, Nicole Duncan's here, Rob Graham is here. You excited for this? It's a good week. All right. And we have a living living legend emphasis on the living part, but the legendary let me do I'm going to do the full bio for you Jason. Okay. Jason writes the intelligent investor column for the wall street journal. He also writes back in business and occasional column about financial history. Jason is the author of Your Money and Your Brain

on the neuroscience of investing, and is the editor of the revised edition of Benjamin Graham's The Intelligent Investor. Before joining the journal, Jason helped Daniel Kahneman write the book Thinking Fast and Slow. He was a senior writer for Money Magazine, a guest columnist for Time Magazine, and CNN.com, and a senior editor at Forbes, almost

done, I swear. Jason won the 2013 Gerald Loeb Award for personal finance and personal service for his column, The Irrelevant Investor. No, that's me. So who put that in there? I know that's not him. And received the 40th Elliot V. Bell Award from the New York Financial Writers Association in 2020.

Jason Zweig, you are in our eyes. You're our idol. You're somebody that we've learned so much from. We could not be more excited to have you here on the show. Thank you so much for coming. Yeah, thanks for having me, guys. And you should get your eyes checked, Josh. No, I don't.

I'm going to stop at the sound effects very shortly, but I have to tell you, this is a huge show for me. And I've interviewed you before, which we'll talk about later, but this thing has been on our calendar. Even before you said yes, I put it on the calendar anyway. I almost, I think I willed this into existence. You don't do a ton of media. You like to let what you've written stand for itself.

And I've always appreciated that about you. I don't have that problem. I am literally, I'm opening an Arby's down the street after this. What is it about your persona, your standing in the industry that sets you so far apart from so many people who have opinions on investing or opinions about markets?

You seem very comfortable to just do the writing, let it speak for itself, move on to the next topic. You're not promotional at all. You don't love being praised and I get that. I understand that, believe me. No, but you seem to just have this way about you where it's about the work. Tell us about, like, is that something deliberate

or is it just your personality? Wow, that's a, nobody's ever asked me that before, Josh. I'm very good at this. Yes, yes you are. I'm humble. Yeah, no, I have to think about it for a minute. I guess the way I would answer it is I would say that I've learned that I should take my work seriously,

but I shouldn't take myself seriously. Okay. And another way sometimes I express that is that I... there's a lot of my ego in my work, but I don't have any ego for my work. I'm not... like, I don't get swell headed about something I did. You get something right two years later, everybody comes to the same conclusion that you already had that doesn't do anything for you. It doesn't. And that's because I constantly remind myself that I've gotten a lot of stuff wrong. Okay. And part of that is because, you know, what's my role?

I mean, I mean, it's like you guys, you have to call a lot of shots, right? Yeah. And the more shots you call. Yeah, well, of course. The more shots are gonna go wrong. And fortunately, I only do it once a week. Yeah.

Or, well, I guess six times a month more accurately, but if you think a lot about your mistakes like Charlie Munger always advised and Michael wrote a book about that, you know, I would never use the word humble. I hate that word. I wouldn't say it keeps you humble, it just keeps you honest. Yeah. Which is better than humble because humble is kind of fake. Whenever you meet somebody who talks about humility, you know it's really bragging, right? Yeah. Oh, I have so much humility because of how great I am. Therefore, I need to be extra humble.

Yes. Absolutely. I hate all the LinkedIn posts that start with, I have so much humility because of how great I am. Therefore, I need to be extra humble. Yes. Absolutely. I hate on the LinkedIn posts that start with, I am humble to announce. Are you though? Yes. Are you really humble to announce? No, I'm proud to announce.

Proud to announce. In my view, and I think most people would agree with this, you have spent the better part of, is it 40 years? 36 years? 30 some. Okay. Let's not count. You have spent the better part of 36 years serving as an advocate for the rational individual

investor and professional investor, but you don't wave a flag saying that you're doing that. That's what I mean by the work standing for itself. If somebody had spent the last couple of decades reading your stuff, they have probably done pretty well. And you don't earn a lot of plaudits necessarily for every call that you make or every scam that you unravel. But I think the body of work itself really speaks volumes. And I'm just curious, how have you resisted the temptation

all these years to not get to a point where you're just like, I need to make some more money, you know, doing what I do, or I need to do a subscription product or I need to do my own newsletter. Like you kind of just have always been you. And I think that's like a really special thing over this long period of time. I guess, I guess the way I would think about that, Josh, is like for somebody who does what I do, I'm like the luckiest person alive, right? I mean, I've got, look, Wall Street is the greatest show on earth.

I've got a front row seat at the circus. Yes. I mean, you know, not everybody is old enough to remember like Barnum and Bailey, but it's like that was their slogan, right? The greatest show on earth. And Wall Street is the greatest show on earth. You've got clowns, you've got animals. You've got what's the French Wed quote, quote, that he opens where the customers yachts he says, he says, he says Wall Street has a graveyard at one at one end and a river at the other. And a kindergarten in the middle.

And that ignores the kindergarten in the middle. Right, right, right. Jason, were you ever tempted to be an advisor? Yes, occasionally. We have an opening. So... But I'm sure you've had either thoughts and I'm sure plenty of opportunities over the

years. Why did you never try your hand at getting more intimate with your readers? I guess I like having a big, big audience, right? And you know, the fabulous thing about working at the Wall Street Journal is, you know, I get to call my own shots and I get to have the chips fall where they may. I mean, nobody tells me, oh, those people are big advertisers or you can't say that because you'll offend somebody or other. Battleshares.

Yeah. Or whoever. I mean, it's like, and- By the way, this show is sponsored by Battleshares. No, Yieldmax. The is sponsored by Battleshares. No, Yieldmax. Good folks at Battleshares. They are good folks. But so when you're in that position and you can call your own shots, part of that is because you chose the right publication. Think about all the publications that have come and gone.

Do you think you got lucky going to the journal and staying there? Think about how many people were at Fortune and Forbes and Smart Money and Kiplinger's and like everything seems to have come apart. The journal is still the journal. And I think that's in part because you're there. They've got amazing reporters covering every segment of finance. But you kind of got lucky that you didn't have to bounce around that much. Did you know that that was, was that part of why you chose to go there in the first

place and part of why you stayed all these years? Is that stability? No, it was luck likeahneman with his book. I went on book leave from Time Inc. where I was working then. And that's when you lost your hair. And that's when I lost the last of my hair. And you should talk. Man, that was well timed.

So, you know, the book project was ending, my role in the book project was ending, and it was, I could tell that I had a decision to make, like, am I going to go back to Time Inc. full-time? Or am I going to try to find something else and if so, what? Okay. Time Inc. was CNN. CNN.com? No, I was at Money Magazine. You had money. Okay. And I did like some guest writing for Time and for Fortune. But my base was Money Magazine.

I had like a periodic guest column in time, and I wrote a little bit for Fortune as well, but mostly for at Money. And I wasn't sure I wanted to go back there full time. And then by happenstance, my dear friend Jonathan Jonathan Clements, said, I'm leaving the journal. Do you want to interview for my job? And I said, yeah, I want to interview for your job. And that's it.

If he had not left to go to city where he went, I don't know where I would be today. Probably not at the journal. I don't know. So that's the personal investing column? Okay. And you've been doing that ever since and it's a long time now. Yeah. Thanks for asking. It's 16 years. Okay. So I first met you. I had a meeting at the Wall Street Journal in 2010. They were trying to solve for what do we do with all this blogging? They had great reporters, but reporters as you know are not bloggers.

That's right. Two different disciplines, two different skill sets. Now over time, a lot of their best reporters learned to blog because that became the people, the way people receive their news. So anyway, they called me, they said, would you like to write a blog for the financial advisor column? And I said, yeah, who am I going to write it with? Like, I'm not going to do it every day. They said, well, it's daily blog, but you're going to have help. We're going to bring in James Altucher.

I said, oh, that makes perfect sense. Famous financial advisor, James Altucher. Anyway, I had the meeting and the guy goes, all right, so you'll do it? I'm like, of course I'll do it. He said, anything else? I said, yes. Can I meet Jason Zweig?

Or when can I meet Jason Zweig? He goes, he's over there by the coffee machine. You can meet him right now. So that was a big moment for me. And then I remember starting my book like a year later and you sent me all your tips on how to write a book. Like exercising in between and so all that stuff was like obviously super impactful for me and I just wanted to mention it. But I want to get to some of the stuff that you've been writing recently. So in no particular order

but it's a really interesting time to be an investor or a trader or a regulator. Yes. I feel as though this is as Wild West as I've ever seen it outside of 99 and 2021. Other than those two like very obvious carnivals, this one's getting pretty close from a lot of perspectives. Is that how you see the world right now? Yeah, I think it's I think it's getting a little it's getting a little of perspectives. Is that how you see the world right now? Yeah, I think it's getting a little kooky. I see it kind of at the margins,

which is where I think you first pick it up. The question in my mind is, are we seeing the beginning of the trajectory or are we seeing what with hindsight might just be a blip. Okay. And I- Of a mania. Yeah, exactly.

But I mean, there's a few, there's like straws in the wind, right? We're in the foothills of a mania. Yeah. If this meltdown goes another six months, it'll happen. Well, hold on. Are we talking about stock prices or products or both? It's always both. Yeah, it's always.

But I thought you're talking about products. The only thing missing right now is IPOs, which are coming. Right. Next year. That'll be it. That's the only thing. That's the one thing you can say to discourage people from believing we're in some sort of a wild bull market,

like one of the greatest ones, is there is no new supply coming to drown us with. And eventually it only shows up. I think it's important to keep everything on our dashboard, right? On our visual dashboard. Okay, options, volumes, and innovation and options. Check. The race to do alternatives, anything but stocks or bonds. The race to sell alternatives, which is its own carnival.

And package them in liquid products. The drop in price to launch an ETF, it's effectively almost free at this point. Zero free trading. So the idea is coming along as a result. No free trading. Like, a lot of the, on the dashboard, a lot of this stuff is already right.

But I'll take, maybe not the other side I don't think this is going away and I've been I said this in 2021 people don't get unaddicted To habits that they develop even in a bear market and they were washed out and they didn't go away So the one silver lining that I would maybe I'm grasping at straws here. I'd love to hear your take Are people being responsibly reckless? In other words, are they? Yes. Jason says yes, they're being responsible. They're doing what they do in their 401k. And hopefully a lot of what we would call the circus is

really gambling and nobody's under any illusion that it's anything else but that. And for the bulk of their money, they're being they're eating their fruits and their vegetables and whatever, and for this, they're partying. That's a good question. Yeah, it's a really good question, and I've actually sort of tinkered with trying to answer it, and I can't find anybody out there who really knows how to measure it.

But my hunch is you're probably right, Michael, and I hope so. You know, let's pretend financial markets didn't exist. And let's just think about how American society has changed in the past decade, 15 years, I'm not sure. You can't drive down a highway without seeing signs for casinos, fan duel, you know, you can't watch a football game, a baseball game. They completely co-opted professional sports.

It went from a ban to, oh, these are bigger sponsors than beer companies. Right. It happened three years. Yeah. And poor Pete Rose. I mean, the guy dies, like, in a state of lifelong shame for doing what every person in America does now when they watch a game. And it's like, now we're going to be gambling on the presidential election. It's like it's everything. One more option. If you come up with a product like zero days to exploration options, there's no part of you that's bringing that into the world thinking that that's for any legitimate investing purpose.

You know you've just invented something for people to do recreationally. If you're the user, you also know you're not investing. You have to know. So it's Michael's question, I think it's a really good point, or his statement. If people are investing ironically, or if people are saying, this isn't investing, my investing is in my corporate 401k, this is what I do for fun, I'm like kind of okay with it.

One more optimistic take on this, and I'm really trying to remain, this is not the dumbest shit ever, which of course it is, but is that how long does it take people before they figure it out? We're like, oh, this is just dumb, I'm not gonna do this any longer.

And I think that the earlier you learn how dumb speculation is, and I love to speculate, I love to gamble, but the earlier you learn how fruitless it is, the sooner you'll forget about it. Yeah, so we hope, right? You know, there's a wonderful anecdote in one of the Richard Feynman books, The Great Physicist. I forget which book it's in.

Let's go with Shirley, You Must Be Joking. I think it is in Shirley, You Must Be Joking, Mr. Feynman. He talks about how he went, must have been, he went to a conference in Las Vegas or something, and he goes to the craps table, and he like watches for a few minutes, and he's like, oh, I know how to, you know, I got it. And then he like bets all the money he has, and he craps out, literally, right?

And then he says, I can't believe how lucky I was that the first time I ever gambled, I lost all my money. I said this during the GameStop phenomenon. So I would go on TV and of course, like the professionals, everyone's in their suits and they look down on this activity. But I think I'm still, I was still young enough to remember at the time what things were like when I first started investing.

And we weren't any smarter. We might have thought that we were taking ourselves more, taking it more seriously, but we were in chat rooms talking about iOmega. And we were buying IPOs like Pets.com and Etoys and all these. And we all blew ourselves up. So then 20 years go by and our children are doing this. We weren't any better. We just didn't have the same speed of communications that they had.

So every generation learns by starting out doing dumb shit. Every one of them I feel like. So let me agree and then let me disagree. So I did the same thing, right? When I was a baby financial reporter, first at Time Magazine and then at Forbes Magazine, I bought all these actively managed mutual funds because what else could you do in the 1980s, which is I'm dating myself, um, late 1980s. Jerry's eye and those.

No, I'm not, I'm not that old. Dreyfus. No, it was like, uh, American century Vista, uh, fidelity select gold. I mean, you know, whatever, uh, the, um, the Lindner fund, all these mutual funds that basically don't exist anymore, right? And those were the Cathie Woods of the day. Exactly. Yeah.

And, you know, I bought them, I'd hang on to them for a few weeks, a few months. If they went up, I sold them. If they went down, I sold them. If they went down, I kept them. You know? And I, you know, what I, of course I concluded I knew what I was doing, right? Right. And I didn't. And was it educational? Yeah, it certainly was.

But let me take the flip side. You know, I think all of this is true, but up to a point, right? You know, I think all of this is true but up to a point, right? Which is when products and also when user interfaces are designed to exploit the pitfalls and the shortcomings of the human mind and to literally addict people. The confetti at Robin Hood. It's not just Robin Hood. Although it is Robin Hood, but The confetti at Robin Hood. It's not just Robin Hood, although it is Robin Hood, but it's not just Robin Hood. Well, they took it to a fun house level,

but every brokerage app wants you to do more trades. It's not just Robin Hood. I mean, open any of them, Weeble, whatever it might be. And when it's designed to exploit people and basically to turn them upside down and shake them for change and get all the money to fall out of their pockets and clink onto the floor, that's a problem. And the analogy I use in the new edition of the Intelligent Investor is we don't teach kids how to drive by having them crash cars into brick walls.

We don't teach teenagers how to drink responsibly. Here's a funnel of vodka. By saying here's 50 bottles of whiskey, drink them. And we don't teach gun safety by giving people, by giving people AK-47 and saying, shoot at your foot. You do have a point. Well, and then there's a layer on top of, on top of the building, building the user interface in such a way that it would be really easy to transact. It would encourage you to do more. And then there's this disingenuous layer on top, which I think nobody cares about anymore,

where, oh, but it's free. Oh, it's free trades. And now at this point, everyone understands, it's not really free, it's subsidized, but it doesn't really matter that much. Okay, fine. But I think though, you have to to say somebody was going to do it. Of course.

So they came along and did it. Right. But somebody was going to, instead of creeping along very like conservatively, um, they were already using celebrities in the ads as early as 1998, 99 Jackie Chan and Shaq and Al Monacova. Yeah. Phil Jackson. So that was already, so somebody was going to go all the way and just say, Hey, this is a game. And that's, that's what they did. And now they're getting, ironically, they're getting more serious. But this is, I agree with you, Josh, this is not new. I mean, I remember when I like

the first conference I ever went to for individual investors, which was decades ago. I would meet these people in the hallway and they were like these, you know, 80 year old like, Velcro shoes. Yeah, exactly. And they would say, oh, I play the market. And that was the phrase people use. I play the market. Yes. It's been viewed as a game for... Well, the money game.

What did he write? What did George Comey write? The 60s? Yes. 1968. What would Ben Graham think of the market today? If he were to be dropped and he could see the shenanigans. I think he would hate it, but you have to realize that Graham,

he had a puritanical streak, but he also was very realistic. But you have to realize that Graham, he had a puritanical streak, but he also was very realistic. So he would hate it in the sense that he would never participate in the manic aspects that we're talking about, but he would understand why people do it. And he wrote extensively in The Intelligent Investor about like the people have to let off steam. Yeah. You know and the example I always give is

like if you're in a casino even if you're just there as an observer, a spectator, I mean if you look at the person next to you that person has insurance. They're not like a risk seeking maniac. I mean, they're not riverboat gamblers. Yes. That's right. They're there for fun. And in the other aspects of their life,

they might be very conservative. I like hearing you say that you believe the two things can coexist. You can have people responsibly investing and then on the side doing some Batnik-esque stuff. Right. I think I want to... So I want to... The key is you have to contain it and you have to structure it.

And you have to not believe in your own bullshit. Exactly. When you have a big win, you really have to memento mori yourself into not, you know, think, oh, I'm going to start a hedge fund now, which I've seen people do. Solving the mystery of an investment that's too good to be true. You did a column on September 20th. It was a promise of a 17.1% return. And when you peeled back the onion,

I know you'd spent part of the summer doing this, you came to find out that there were a lot of things being promised in the way of yield that just aren't too good to be true. I feel as though this is one of the hallmarks of the modern era is not just the chase for yield, which is always, but these insane promises that you would think like adults would know better,

but they seem to have to relearn it over and over again. When I was coming up, there were things that were like 12%. Now, people don't even get out of bed for that. They want to hear 17, 18, 25. Tell us about this column and how you first came to start covering yieldwealthmanagement.com and these types of things and what the resolution was. Yeah, so, you know So I heard about this outfit.

It was called Yield Wealth, which was an RIA, registered investment advisor. And it was offering these private placements that it called term deposits. And from the various websites associated with it, it really sounded like a bank product. Yeah, term deposit sounds official. Yeah, exactly, the term deposits

makes you think it's a bank. And it was offering other products that were FDIC insured, and then it said these particular products had millions of dollars of private insurance, including from Lloyd's of London. And none of it really passed any sniff test. Here's an example of the advertisements.

Colossal yields without the risk. Colossal is probably a telp. Fully insured guaranteed. That's a double guarantee, it sounds like. So they were saying these things everywhere on the internet. Right. But look, you know, people, part of being human is to, you want to believe in magic. What did your dad say about that famous line? Oh, about lying to people? Yeah.

So if I can remember it right, he said, if you- Tell people the truth who want to hear the truth, you'll make money. If you- Lie to people. Lie to people who want to be lied to, you'll get rich. Yeah.

And if you tell the truth to people who want to be lied to, you get rich. Yeah. And if you tell the truth to people who want to be lied to, you'll go broke. You'll go broke. Yep. So all right, in this case, these people know exactly what they're doing. They're pressing the greed button. Yeah.

And enough people respond to it. Yeah. Okay. Yeah. So, you know, I'm still looking into this. I don't know if there'll be a follow-up, but, you know, they raised tens of millions of dollars from people. And, you know, the story changed.

Initially, it was sort of like arbitrage trading in gold and other trade. Like how they're able to make that yield. Yeah, exactly. Where did the yield come from? And then it ended up something along the lines of we buy Obamacare policies at a discount from the federal government and hold them for a month and then resell them evidently back to the government. So stories that are plausible enough for an investor that doesn't know anything.

Right, or for a lot of the people selling it in the field. So certainly Graham would not be surprised by this behavior. He'd see it every scant back in the day. That's right. Uh, the Fed made its move. Why didn't I? Let me read this quote from Jason's article that I was nodding my head in solidarity. Ignore the shouting. Instead, use this month's half percentage point cut in rates as a quiet pretext for the simplest possible fix.

Moving money out of cash that you never intended to leave there in the first place. I'm telling you this largely to shame myself into doing it too. Tell us what this column was about. Yeah. So, you know, when the Fed cut rates half a percentage point in September, it occurred to me that, you know, there was going to be a lot of coverage of like, what does this mean for your bond portfolio? And how are, how's the stock market going to respond? Yeah. And I said, isn't there something like even more obvious, which is, you know, holding cash just got more lucrative, less lucrative. Right. Because overnight. Literally. And do people know how much cash they have? Like, a lot of people don't have enough cash.

Some people maybe have more cash than they intended. And then I said, yeah, like me. Because what triggered this for me was, first of all, I got a study from Vanguard saying that, basically millions of Americans have rolled over IRA money and then rolled over 401k money into IRAs and just left it sitting in cash. Well, here's your number. A Vanguard analysis of approximately 279,000 direct contributions made by its clients to IRAs in 2022 found that at more than 55% of these accounts,

the new money stayed in cash for at least 12 months. So for most people, they're not using that cash that's in an IRA. They can't. So it didn't hurt them in 22 to be in cash. In 23, it didn't hurt them. It didn't help them. But now those 5.5% yields are off the table. Yeah, and you know, the point I wanted to make with people is it's fine to have money in cash.

Maybe you should have more in cash. Right. But it's not fine to have it there if you didn't mean to have it there. And in my case, part of this was an inherited IRA. And after my mom died, I said, I'm going to take this money, and I'm eventually going to put it into individual tips, inflation-protected treasuries. And I'm busy handling my mom's estate right now and as soon as I get that all settled I'll do that and then like a year went

by and then a year and a half and then I forgot about it. And you're being paid to not do anything. Yes. The irony of it is how much did stock, how much did the S&P 500 go up from the time overnight rates hit five and a half percent. I'm making it up. Is it 40%? Yeah, like the market is very cruel. Yeah, exactly. So what's this one? Buffer funds. You know what, Jason, very often when I'm thinking through markets, I think a lot about what you would think about this and I'm really really curious to hear your take on buffered ETFs.

I think we might... Can you define what this is for the listeners? Yes. So, buffered ETFs are ETFs that have options embedded in the vehicle. And they're basically guardrails. So you don't get all the upside, you don't get all the downside. But you have exposure. But you have exposure. And I spoke to Bruce Bond in 2018, and I remember saying to him,

this is one of the best calls of my career, it was so obvious to me that this is going to be a massive category, because the idea that you could define your risk is supremely attractive. Now, when you have a 60-40 portfolio, 70-30, 50-50, whatever it is, you know like a range of outcomes, but you're still beholden to where the market goes. With this, you could say, okay, 10% upside,

8% downside, nah, I don't like that. Oh, okay, how about 15% cap, then 20% downside. Like, whatever it is, the fact that you can define your outcome, not everybody wants all the smoke. And I don't hate it. I kind of like it as- For wealth management, especially. Assuming that it's used correctly, of course,

I think it's a product that has a place for people that need it. Now let them have it. Yep. Yeah, no. I guess what I would say is I don't totally disagree, right? I think it's super important for people to understand the trade-offs, right? And the key thing here is because I

imagine, and I don't know this for a fact, but I imagine that most of the purchases in these buffered funds are intermediated. A financial advisor is putting a client into these funds. I think that's true. And if you're doing it yourself, if you're self-directed and you're making this decision yourself, you gotta really do your homework. But if your financial advisor is doing it for you, you'd better be damn sure,

and I don't swear a lot in public, you better be damn sure that your financial advisor understands how these products work. Because they are not simple. No they're not. I want to go a little bit deeper into this. If you're a financial advisor and you make this and you have a category of clients who are risk averse,

not just temperamentally, but because of the stage they are at in life. And you want them to have equity exposure, especially if rates come down, because you still want them to grow, but you want them to have equity exposure, especially if rates come down, because you still want them to grow, but you want to give them, I don't want to use the term certainty, but to Michael's point,

you want to give them some guidelines of how this goes wrong, how this goes well, it's asymmetric, and you give them that, and they say, I really appreciate you giving me a little bit more certainty

than I would get in just a 60-40 mix. I think you could say that you're doing your job well because you're matching the strategy with the type of client that needs it. Here's the problem. The S&P triples and that client only got capped at 15% upside a year, so they compounded significantly below, and you kept on with the strategy, and the market kept outperforming it. We know this is what's gonna happen in the long run anyway.

Is that actionable if you're an attorney representing that client? Is that an arbitration? Could be. You put my client in equity risk and left all of the upside on the table for your other clients. Why did you do that?

It's hard. The opportunity cost potentially is huge. That's the risk. And it all depends on what the slope of the stock market looks like in the future. I mean, if we get the 1966 to 1982 period all over again, then you look great. You look like a genius. But if we get the 1980s, the 1990s, or the past, or most of the past decade. Well, goodness, you're fired if that happens. Eventually you're fired. But here's what actually does happen, and I'm in this business a long time. What ends up happening is that client who was 75, 10 years go by, they're 85.

They're now opening up the kimono of their finances to their family members. And there's a son who's 45 and he's at MBA or he's very bright. And he says, surely my dad made a ton of money He's been invested all these years he opens the statements And he says what the fuck is this where's all the money right look at what the market just did right and then he says What is this buffer? Explain what you did and you said well I wanted to take less risk for your dad Like you get into a situation where the hindsight is the problem.

This is what you said. I like to call them armored funds. You like armored better than buffer. I do too. More evocative. Like medieval knights, these ETFs wear shining armor that can protect against the slings and arrows of outrageous market fortune. Like the 18.1% loss on stocks in 2022. But armor is a clunky hindrance. To buy that buffer or protection against loss,

you relinquish your right to participate fully in the potential gains, you return your cap. So yeah, it's armor until the market rallies. And then it's like dragging an anvil. Exactly. There's no doubt, we'll never know, there's no doubt that advisors are selling this inappropriately, lying to their clients, of course that's happening. However, for the intelligent advisor who knows their clients are skittish, who knows that

they would have no shot at staying invested, even in a 60-40 portfolio, I think there's a place for this to be a sensible solution, but of course context matters and the story that they tell matters a lot. I think there's a simple test. If I were the client and my financial advisor were telling me that I should be in one of these buffer funds, I would say I want you to open on your on your computer, I want you to open the page from this buffer fund you're recommending where it shows all the potential outcomes because all the sponsors of these funds as a very healthy public service model, how these funds will perform under various scenarios.

But the models are not intuitive because it's- Intuitive to the reader. Exactly, it's options math. It's complicated. It's all options math. It's like if, it's a series of dynamic, if then propositions and it's all driven by option math. And I would say to the advisor, explain what's on your screen.

Well, I'm out. And if the advisor can do it, I'm in. But if the advisor can't explain what's on the screen, then screw it. Can I ask you an advisor question before we jump to the intelligent investor? I think you must approve of the evolution of the industry where we have less and less rep as PM running around.

We don't really have as many, you can call them brokers or financial advisors, regardless, we don't have as many of them running their own client portfolios and doing different things in different ... It's a much more centralized CIO industry now. So the largest funds, they either use an external tamp or they have a global CIO, they have model portfolios. The advisors are spending a lot more of their time on the planning side and a lot less of their time

picking stocks, picking mutual funds. Thank God. I'm assuming you must approve of that evolution in broad strokes at least. Yeah, I do. And there was, not to sound critical, Josh, there was a lot of jargon in there. So for like our younger listeners,

what we're really talking about is that, you know, as the industry evolved, financial advisors used to be, first they were mutual fund pickers. Right, mutual fund experts. Right. Then they became ETF pickers. And now they're kind of, then they became asset allocators. Now they're unlicensed psychologists. That's better, right? Exactly. Right. Okay. And yes, that's a healthy evolution. I think there's one thing we have to be careful of, right? Which is in the financial industry, you, my general rule is that all the problems are not in your visual field. You need really good peripheral vision to see where the trouble is, because the stuff

that's in front of you is probably no big deal, right? And what's happened is there's enormous hydraulic pressure in the industry to like minimize lawsuits, you know, keep arbitrations to a minimum, stay out of trouble, keep your nose clean. And that doesn't mean that there's no bad actors. It just means they're not in the mainstream anymore. So the guy who used to be a shyster working for a brokerage firm is now a shyster working for himself. And he's probably selling harder and pitching even worse garbage than ever. He's just not doing it through a brokerage firm or a registered

investment advisor. He's still out there and people are still getting victimized. He's selling private investments. Yeah. Yeah. And because that's the last thing left. Exactly. He can't be platformed any longer at a custodian or at an independent broker dealer. Right. They don't want the reputation risk. It's not worth it. Yep. So that guy's out there doing a, doing a full blown Ponzi. Right. Yeah. Uh, I think by and large though, getting rid of probably 2000 former NASD

regulated firms or former FINRA regulated broker dealers probably cleaned up a lot of it, at least in the mainstream. In the mainstream. I agree with you. It's cleaner for sure. Um, you wrote about, uh, you You wrote about, you're not paranoid. The market is out to get you. I love the premise and this is to talk about the new book, which we're going to get to

now. Investing isn't about mastering the markets. It's about mastering yourself. That was the central tenet of Benjamin Graham's The Intelligent Investor and in part, why Warren Buffett has called it the best book about investing ever written. First question is, do you agree with Warren Buffett? Not just because you're involved in editing the new edition. Do you think it's the best book about investing ever written?

It's most influential, for sure. Yeah. And have you read my new book yet? Because I want you to have all the information. Yes, I have read your excellent new book Josh. And as you know, I quoted it extensively in an issue of the newsletter. Well, first of all, let's quote Ben Graham, who said that my book has been read and disregarded by more people than any other investment book ever written.

And I think that's a pretty accurate description. So the book, you know, over the years has been a massive best seller for, you know, 75 years. It's still front page. If you type in investing on amazon.com, you get the first book. Yeah. It's, it's the, that's the one.

Yeah. I mean, yeah. Yeah. It's the... That's the one. Yeah, I mean, I don't know. I guess the best anything always makes me a little squidgy, you know? Like, when people say, what's the best movie ever made? I'm always like, the best movie ever made? It's on the Mount Rushmore. Well, if... Yeah.

So, Buffett would say that, and most people would defer to Buffett. I think if you approach Wall Street more as more of a trader, you would probably say reminiscences. Like Paul Tudor Jones would say, Livermore. Because he doesn't do what Ben Graham did. So I think some of this is just a difference in like, in discipline. But anyone who's a long-term investor would have to have this as a top three. Yeah, I would think so. You wouldn't take them seriously if they didn't.

Yeah. So, okay. So you wrote this column, I think it was an excerpt from the book, and I love this part, I just want you to riff on it. We spoke about this earlier. You said, there are no barriers to entry, no way to authenticate claims of expertise,

and no registry of how accurate the opinions are. That can degenerate the wisdom of crowds into madness. The weight of an ox doesn't change with people's estimates of it. However, if thousands of speculators decide a stock or cryptocurrency is worth $100,000, it will skyrocket at least temporarily, even if it's worthless. And to me, this you called it the gamification of the markets. To me, this is the biggest difference between how markets used to behave prior to the internet and how they behave today and there's no going back.

There's no going back. No, I, you know, as we talked about earlier, I think, yeah, this is the permanent state and I think it's never been easier to invest and it's never been harder to invest intelligently. That's a really great way to put it. And you know, when investors, what are most investors pressured into doing? They're pressured into getting better at things that make them worse. Say more, say more.

It's like, do I really need to trade zero data options? Do I really need? Where is that pressure coming from? Because I don't do that shit. No, I don't. I don't trade crypto. Like, I invested some in it, I just leave it. I don't feel that pressure.

So I don't think everyone feels like they have to do these things. Well, it's coming from, I mean, it's coming from your phone. It's coming from your friends. The news. It's coming from, I mean, it's coming from your phone, it's coming from your friends, it's coming from the news, it's coming from the billboards on the highway. I think you're talking about the new investor who comes into the market and they see, oh, it's a casino. Yeah. Right.

Right. And the thing is, it's like, it is a casino, but you have to think about it two different ways, right? A casino, if you're a customer, is a place where you go to lose money. A casino, if you own it, is a place where you mint money, unless you're Donald Trump. Nevermind. I didn't say that. So yeah, the longer you stay in a casino, you're sure to lose money.

With the stock market, it's the exact opposite. But if you own the casino, you're sure to lose money. With the stock market, it's the exact opposite. Right. But if you own the casino, you're sure to make money. And the thing is, it is a casino, but the question you should be asking yourself as a new investor is, do I want to play in the casino or do I want to own the casino? And you know, look, you buy, but how do you own the casino? You buy a handful of index funds and you hold them the rest of your life. And that makes you a casino owner because you are reaping the end result of the bets that hundreds of millions of people are making each day. You get to free ride.

So therefore you de facto own the casino. But wait, it's not just bets. These are businesses. That's right. These are, we forget about that all the time, but these are actual companies. Exactly. So you said handful of indexes, and I'm glad you said that because I'm curious to hear your take.

Does the concentration of the market worry you? Or are you like, this is actually good? Actually, Mobusen wrote a piece recently, and he said that, no, no, no, no. Concentration is a feature of bull markets, and in fact, the broadening out of the rally or when equate outperformances, it's like not necessarily, be careful what you wish for

but have we gone to the point where it's all right Torsen stock had a stat to that Nvidia is larger than like is it too much? Me too. Well so it's like asking the frog in the pot of boiling water how hot is the pot? I mean eventually the frog will die and and that'll be your answer, right? I wanted to ask you in that same vein, would Benjamin Graham have learned to love the Magnificent Seven stocks

if he were investing from 2015 to 2025? Because he was adaptable, he was wickedly bright, he surely would have respected network effects, legalized monopolies, companies growing 20% a year top line revenue with 40% profit margins, the consumer lock in that Apple has, the brilliance of Jeff Bezos. He would not have been immune to these things, regardless of the fact that they sell at high multiples, always have. Well, wait a minute.

We have an example. How many Max 7 stocks does his protege own? So I probably think Graham would have said, this is probably not sustainable. What do you think? You've won, Apple. Right. Exactly, won.

Do you think a modern version of Ben Graham, he would have been in these names? I think he would have. But you would know better than anybody. Yeah, I mean, it's just now we're really speculating in the other sense of the word speculating. Well, welcome to the compound. And it's worth remembering that the word speculate means both to look out from a watchtower and

to look in a mirror. So maybe we're just looking in the mirror. But I don't know for sure. Looking at what Warren Buffett does is probably a pretty good guide to what Ben Graham might do. You think so after all these years? Yeah. Even with the modifications that Munger had made in Buffett's mindset.

And the thing is, if Charlie Munger were here, bless his heart, I think he would say that Graham would not have invested in any of the Magnificent Seven stars. Really? What Charlie told me, you know, quite a few times is Ben Graham was afraid of the future because, you know, in 1929, he saw what it could do to you. And Graham wrote, In 1929, he saw what it could do to you.

And Graham wrote, the future is something to be guarded against. He was very conservative. But he, toward the end of his life, what he did was he effectively invented what today we call smart beta or factor investing. And he bought dozens of stocks that all passed a statistical screen. He built a screen. He built a screen that identified basic value. And that's the last thing we know about his approach.

And he did that after the last edition of the book came out in his lifetime. So it's like his final testament almost. And it does not indicate that he would have bought something like the Memphis. He was not return stacking toward the end? No, he was not. And also, Buffett didn't even buy Apple in the first place.

Right, it was the other two guys that did it. That's right. Although he let them do it. And then he became very enthusiastic. You have a concept from Ben Graham about the basic advantage of investors. Can you lay that out for the people listening? What is that basic advantage?

Yeah, so this is the single most important part of the book. basic advantage. Yeah. So this is a single most important part of the book. And it's in my opinion, it's the single most concentrated nugget of wisdom about investing anyone has ever devised. Hold on, turn on the TikTok camera. That's a big buildup, Jason. Lay it on, Lay it on us.

Yeah, you got it there, Michael? Go ahead. We want you to do it. So I don't have the passage quite memorized, although. We'll correct you, don't worry. Yeah, you can correct me. But so what Graham said is that, the individual investor has an incredible advantage

over professionals, which is, you know, if you're a professional investor, your performance is measured, you know, annually, quarterly, monthly, weekly, daily, hourly, moment to moment in a lot of cases. And if you're beating the S&P 500, you're good. And if you're not, you suck. And it's binary. And if you're beating it, then you keep doing what you're doing.

And if you suck, then you stop doing what you're doing. And all you care about is whether you're above or below that line. And it's relentless. And it's relentless and it never stops. And it's why Peter Lynch it's relentless and it never stops. And you know, it's why Peter Lynch quit. It's why. And it's not, wait, and it's not just about your standing as a professional.

It's tied in with like your identity as a person. Correct. And are you going to keep or lose your job that your family is dependent upon? That's right. It's so much more than just am am I above or below the index? It's, will I earn a living next year? That's right. And the pressure that that puts professional investment

managers under is ferocious. And it's why this concept of closet indexing has become so powerful. And it's why index funds alone aren't just driving the market, but people imitating index funds is also driving the market. But the thing is, if you're an individual investor, you don't have to care. You don't have to buy what other people are buying.

You don't have to sell what other people are selling. You don't have to measure your performance on those same horizons. In fact, if you don't feel like it, you don't have to measure your performance on those same horizons. In fact, if you don't feel like it, you don't have to measure it at all. There's no committee. You're not reporting to anyone. And you can just say, here are my objectives. 10 years from now, 30 years from now.

I want to have peace of mind. I want to have a house in Tahiti, whatever it might be. And all you need to care about is whether on average over time, you're making progress toward those objectives. And that has nothing to do with how the market is performed. It'd be a good financial advisor. Yeah, maybe. Jason, so let me just, let me just finish the thought Michael. So this is what Graham defines as your basic

Advantage as an individual investor is that you don't have to think like a professional I think most people throw it out the window Yeah because I think so too going all too. Going all the way back to like Jim Kramer's days at the street and a lot of other market commentators, all you hear as an individual investor is, now you have the tools so that you can compete with the pros and you can beat them at their own game.

Which they are losing at. Right, and that's my argument. It's like, you want me to play a game that the players lose at. Yeah. It's so ironic. It's never been harder, I think. Not on net, never. It's been a hard time to be a professional investor

for the last 15 years, because one basic advantage that the intelligent investor who just lives their life has is they don't know what the caper ratio is. And think about how much money has been lost Because one basic advantage that the intelligent investor who just lives their life has is they don't know what the CAPE ratio is. And think about how much money has been lost for the last 15 years worrying about how stocks were overvalued. And if you think about professionals leaning on the lessons of history, I think they often mislead you.

So you, I don't know if this is Peter Bernstein or William who wrote about this. I think it was Peter Bernstein that stocks used to have a higher dividend yield. Yeah, that was Peter. Than bonds forever, for 40 years. More than 40. And anytime they converged. Like 200 years. Okay.

You could set your watch by that. Yeah, so anytime they converge, stocks crashed because they were more expensive. And then it flipped and it never looked back. Meaning bonds always had a higher dividend yield than stocks from then on out. Correct. Right, and the fascinating thing about that is the 1950s Yeah, and it's right but the fascinating thing about that is if you think about it for a second, that's how

Basic logic would tell you it should be right stocks are riskier than bonds They they went down 90% in the Great Depression. They made sense. They went down 55% in the global financial crisis. Why should they pay you a higher income? You should earn more income to own stocks because they're riskier. And you did from 1792 until 1956, and then you didn't anymore. And you didn't know that that was the end of something, because how could you have in real time? And the lines crossed like this and they never looked back.

And everybody Peter Bernstein worked with in the late 1950s said, this is unsustainable. And they said it and they said it and they said it and it never reversed. Until they were unemployed. And then of course we had a kind of brief shining moment where it flipped again after the financial crisis. I forget when it was like 2000, whatever it was.

Maybe eight or nine. Yeah. Yeah. It's just this weird thing with investing where the average, the new investor will think I have to learn everything. And of course we know the opposite is true. The less you know, the better off you probably are. So people are going to buy this book.

How are they going to become more intelligent in the way that Graham would use that term? What do you think when they, so they're gonna read it, they're gonna close the book, they're gonna say that was incredible, I can't believe how much you just learned. And then what steps do you think they're gonna take? If you did your job right, and Graham's messages is resonating, which of course it still will, what do you think the reader of the book is going to walk away thinking? Well, I hope what they get from it, Josh, is that you have to have good decision hygiene, right?

You've got to clean up your environment. You know, starting with what Michael was talking about, I mean, we've touched on it quite a bit, like the gambling atmosphere, not just in the financial markets, but in American society. And, you know, I think people kind of get that, right? It's like, yeah, I'm gonna watch this playoff game,

and I guess I am gonna bet on it because everybody's betting on it, but, you know, I'm to bet 10 bucks or something. And a lot of people go into it with a limit in their heads, right? But then there's people who don't. And the next thing they know, they're in Gambler's Anonymous, or they're broke, or they're homeless. They don't see it coming. They don't see the onset of the addiction until they already have to fight it.

Until it's too late. And as Warren Buffett likes to say, the chains of habit are too light to be felt until they're too heavy to be broken. And that's what you need to avoid. So you need decision structures. And that's what the book is all about. So you want to gamble, then you create a mad money account And you decide maybe you put five percent of your assets

Maybe you put ten you put those you put that money in and you have a rule and you can't break the rule Which is I can't add to this account because if I add to it, I've become an addict and I can't add to this account. Because if I add to it, I've become an addict. And if I crap out and it goes to zero, I'm done. The rule is set in advance. If I make money, I keep going. What's the last conversation you had with Charlie Munger? So the last conversation I had with Charlie was in the fall.

I think it was at the end of October, so he died on the, I think it was the last day of November, last year, and so he was 99, his 100th birthday was coming up. What a life, incredible. Amazing life, and this is a guy who overcame incredible tragedy in his life. I mean, you know, he was blinded in a surgery that went badly. His son died when he was very young. You know, he was, had a bitter

divorce. He went through all kinds of adversity. And so he told me this incredible story because I said, you know, I, you know, whenever I talk to people in Silicon Valley especially, they really downplay the importance of luck and they because they think they're like, you know, they got there by working incredibly hard and being unbelievably smart, both of which are true. And he said, let me tell you about luck. So he said, I was seven years old, seven years old, I think it was. And I was playing on a swing in Omaha on the street.

I grew up on with my best friend, this girl, and he gave me her name, I won't mention it. And he said, we were just on the swings and she was like the brightest girl in my class. She would have been a superstar. And out of nowhere, this dog comes up and it was rabid and it attacked us and it bit her and she died of rabies. And he said, that dog was six inches from my face.

Why did that dog bite her instead of me when we were both fighting the dog off? It bit her instead of me. She died. If that dog had bit me, I wouldn't be here today. So don't talk to me about luck. Right. And, you know, Charlie had what I would call real humility. So he wasn't a humble person. Charlie Munger was one of the smartest people of the 20th century and he knew it. And he had no qualms. And a lot of opinions. And a lot of opinions and he had no qualms about letting you know that he knew how smart he was. But he also knew what he didn't know. And he also knew how lucky he was. And so that's epistemic humility.

That's like being able to admit when you're out of your depth. He and Buffett had this thing they called the too hard pile, which is when someone would bring them something for a decision, they would look at it and they would say, either we think we can figure this out or too hard. He said Amazon ended up in the too hard pile and it was one of his biggest regrets. Exactly. Yeah. Yeah, so So even toward the end he was still thinking about just how lucky he was and I think all of luck and all of his success I think more so than ever. I think the older you get

the more the role of luck looms in your life. I think if you, if you don't start to figure that out over time, uh, you, there's something really wrong with you. I just spent three days in Omaha. There's no, there are statues of pioneers. There are statues of, uh, soldier, uh, soldiers and, and, uh, there, there are statues of soldiers and there's tons of like public sculpture in Omaha. Omaha is beautiful. There's no buffet.

I mean, I'm sure that'll happen after. I was just surprised by that. I was like thinking about maybe walking past his house because I know it's like right in the middle of town and people do that. But then I said, that's not me. That's like, that's weird stuff. Not going to do that. So instead I, that's like a batnik stuff. Instead I emailed Larry Cunningham and I said, Hey, can you, can you get me into Berkshire Hathaway? Larry's like, no. So I had like no Berkshire encounter whatsoever. It was a little bit anticlimactic,

but I love the city of Omaha. You didn't go to Garret's Steakhouse? I was told don't eat there. Yeah, it's not that good. I don't know, just don't tell Buffett I said that. Yeah, no, it's Mahogany Prime 1. That place is good. That place slaps.

The second one that everyone said to go to, which of course I did, was Omaha Prime. I don't know. Unbelievable. They have too many good steak houses. But I was just taken by the fact that Berkshire Hathaway is one of the most successful companies in all of the world. They don't have a giant skyscraper

with their name on the top of it. In fact, the newspaper has the biggest, the Omaha World Herald. Yes. Okay But like there's no like Buffett Plaza or anything Do you think that stuff comes eventually or do you think he told the mayor? Please don't do anything like that. I think it does come eventually. So there's a there's a great example That I'm sure Buffett is very well aware of, Josh, which is his really good friend Joe Rosenfield, who's a guy I wrote about, I don't know, 20 years ago, was the single

biggest benefactor of Grinnell College in Iowa, but also one of Buffett's closest friends. And Rosenfield gave easily $100 million to Grinnell during his lifetime. There wasn't a building, there wasn't a professorship, there wasn't a street. His name was nowhere. Wow. And he, that was a condition of all his giving. He also was head of the investment committee for decades and he died in, I think he was 97 when he died. And he said, I don't want my name on anything. And then when he died, they built this great big building and they called it the Joe Rosenfield

center. They couldn't help themselves. Right. Exactly. And I think that's probably what, you know, we'll see the Warren Buffett thing in Omaha. Yeah, I mean, it would be crazy if there wasn't, given the legacy. So are you surprised at how well that stock has done this year? Berkshire Hathaway?

Record highs, I think a trillion dollar market cap, which I'm glad Warren got to see that. How do you feel about the transition and the communication with the shareholder class about these people are up next, they know what they're doing, let them talk with us on stage. You think they've done a good job? Yeah, I think so. I think it took too long. I think like a lot of founders, his grip has probably been a little tighter than people would like. And I think they are going to have to carry him out of there, feet first, which is probably a good thing. But everybody I know at Berkshire is just like a complete class act. I mean, these

are people of extraordinary character and they really have their like their feet on the ground. And I'm sure the company is going to be in good hands. I mean, look, is anybody ever going to be able to duplicate Buffett's investing record from the 1960s and 70s? I don't think so. Never again. Probably not. Probably not. Yeah, there'll be a new Buffett every five years

in the media, but not in real life. Never again. Jason, we're going to end with, I want to show you something. John, can we get that first image up on screen? So this was one of the best moments of my professional career, and you were a part of it. In 2017, we had you come to an event we were doing,

you remember this? Yeah. Okay, we had you come to an event that we were doing called the Evidence-Based Investing Conference, which was in downtown Manhattan. And it was the 10th anniversary of your book. By the way, my tie was not tucked into my pants. I could see how it might look that way.

You look exactly the same, by the way. And that's eight years ago. Just as bad then. This was a huge thrill for me. I got to interview you in front of an audience of hundreds of professionals and I think we had a really good time and I just wanted to say thank you again for doing that because I know the last thing that you normally want is to sit on stages and be celebrated but here's one more we have. This is you with all these

copies of your book that we got. You had a line out the hotel of people that wanted you to sign. Yeah, I do remember. You didn't see the end of the line. Yeah, I do remember that. That's a lot of books. So you were sitting there, so you didn't see how far back this line stretched. I'm sure you felt it in your wrist.

But for me, that was really cool to see. You get your due. And I just, I thought that was awesome That's great. So I want to say and I'll keep this very brief We are out of time stop stop stop not to embarrass you But you're the second person that I said I love you to that's in that chair the first was Eli Manning and the second is you so Seriously, thank you. Just thank you for everything my pleasure

Give me a footfall and we can see what we can do. Uh, we're going to stop embarrassing you almost. We end the show every week with favorites. We like to give the audience something that we're reading or watching or music or anything that strikes your fancy that you think people should hear about. Mine is. Buffered ETFs. your fancy that you think people should hear about. Mine is... Buffer DTFs?

Yeah, mine is something that you wrote called To Be A New Fool In The World. Do you remember this? Yes. You wrote this on May 20th, 2018 and I thought it was one of the best things that you've ever written and I still revisit it and so much of what you're about can be distilled in, or has been distilled in this piece of writing. So for people listening, this is on jasonzweig.com. Look forward to be a new fool in the world. Do you remember the message of that piece?

I know you've written a million things. Okay. You still believe in that idea? Yeah. Okay. Yeah. in that idea. Yeah, yeah, yeah. It's like, just, you know,

you have to accept the uncertainty of the world and recognize that no matter how much you learn, it's, you're just scratching the surface. I send this to young people who ask me about investing or they might be interested in a career in investing. I like have a, I have a folder and there's 10 things in it and two of them I wrote which tells you about my humility. But this is in there. Anyway, that's my favorite and I want

people to go hunt it down. We will link to it in the show notes as well. Michael, do you have anything for this week? I know, I do. It's a coincidence. I just read this good book called The Intelligent Investor. It's the third edition and Jason Bravo, it's just as good as it was the first time I read it 15 years ago. So, thank you. Thank you. I might have to revisit this. I might have to revisit this.

What would you leave people with? What's your favorite investing book besides your own? Or what do you think people should hear about? Well, so I think I have to recommend the book we sort of alluded to earlier. Bailout Nation by Barry Woodholtz. That's one possibility. Fresh Shwed? But no, what I was going to say, and where is Barry?

He's probably like leering at us right now. Barry's in trading right now. He cannot beat this guy. Yeah, all right. So in addition to that, I would certainly recommend Where Are the Customers Yachts by Fred Schwede Jr. That book still hits. That book rocks. And it's 90 pages.

You could breeze through it. I mean, it was written in 1940. It could have been written last week. It's not just the funniest book about investing ever written. It's one of the best books on investing ever written. It's one of the best books on investing ever written. It's brilliant. It's hysterically funny. And it should have been a movie, although not enough people care about enough about investing. Yeah. But the cartoon, the cartoons are great. This premise of a guy sneaks into a Wall Street firm, basically, he's like,

can I just sit here and watch? They say yes, and then they carry on and just do exactly what you think professionals are doing. And he's there. And I mean, you can read it out loud in like a group of people who don't give a dang about investing, and you can stop the room cold. Not because people are saying why is a weirdo reading from a book out loud to me, but because it's that good.

The storytelling. The language, the prose is gorgeous and it's laugh out loud funny. Yeah, and I know you like Against the Gods by Peter Bernstein. That's one of your favorites. Any others that occurred? The Money Game is my favorite. The Money Game is great. So good. And, you know, it's a pretty short list. It's a pretty short list. But those books are eternal. So, we agree. Jason Zweig, ladies and gentlemen.

Alright, now you are still writing at The Journal, so we're going to tell people to follow you there. You are on LinkedIn, right? I guess. I mean, I guess. Is anybody on LinkedIn? Do you tweet anymore? We have some people following. A little.

All right, guys, scrape together some cash. Subscribe to the Wall Street Journal for Jason's column alone. You don't need social media. You need more Jason's Wives. And Fleet, where's the camera? We're going gonna get this? Okay, go to Amazon and buy this.

And I'm telling you, it will change the way you think about investing forever, in a good way. And Jason, thank you so much. All right, guys, thank you. Thank you so much for coming. All right, that's it from us this week. Thank you for listening. We'll see you soon.

All right. One more time. listening we'll see you soon