Richard Bernstein on the State of Markets Today

Barry speaks with Richard Bernstein, CEO and Chief Investment Officer of Richard Bernstein Advisors. Rich has over 35 years′ experience on Wall Street, most recently as the Chief Investment Strategist at Merrill Lynch. Prior to joining Merrill Lynch in 1988, he held positions at E. F. Hutton and Chase Econometrics. They discuss the growth in his firm, the overall macro investment environment, and state of markets today. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:31Speaker 01

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  This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

• 2:43Barry Ritholtz?

  This week on the podcast, what can I say? Rich Bernstein, rock star, former chief strategist at Merrill Lynch, just an incredibly storied career, who has managed to put together such a straightforward and intelligent way to approach asset management. Rather than me babble, I'm just going to say, this is a fascinating conversation. With no further ado, my discussion with Rich Bernstein Advisors, Rich Bernstein.

• 3:12Speaker 05

  Thanks, Barry. Great to be here. Thanks for the invitation.

• 3:14Barry Ritholtz?

  Well, I'm thrilled to have you. I thought you would be the perfect person to talk about what's been going on these days. But before we get to that, let's start with bachelors in economics from Hamilton, MBA from NYU. What was the career plan?

• 3:32Speaker 05

  So, the career plan was was kind of foiled, I would say, six months after graduation. So oddly enough, when I graduated Hamilton, I wanted to be a labor economist. And people say like today, they go, labor economist, like, what's that all about?

• 3:49Barry Ritholtz?

  That was a big thing at one point, right?

• 3:50Speaker 05

  It was a big deal. And so it was, you've got to remember, labor unions were very powerful in the late 70s, early 80s. There was rampant inflation, and every company had a labor relations department. It was a growth industry. And so I decided I wanted to be a labor economist and got myself a job with a prestigious economic consulting firm in their labor economics department. Doing all kinds of government-related work, private sector, but government-related work. And we were consultants, which is very critical, because consultants bill by the hour. And literally, the day after, so Election Day is Tuesday in 1980, November 1980, Wednesday, 50% of our business basically went away.

• 4:34Barry Ritholtz?

  Because Ronald Reagan was elected president?

• 4:37Speaker 05

  Because Ronald Reagan took over. Everybody called up and said, "Stop billing. We want to see what's going to happen under the Reagan administration."

• 4:42Barry Ritholtz?

  Wow.

• 4:43Speaker 05

  Now, I wasn't the smartest guy in the room, but it was pretty clear to me that this was no longer a growth industry. I had taught myself Fortran, dating myself here quite a bit. I taught myself Fortran and was a pretty good computer programmer. And a friend of mine, who had gotten fired from this economic consulting firm, got a job at Chase Economics, IDC, and said, "You have to come over here. You're a great programmer. You're going to love this stuff." They had the largest set of economic and financial databases in the world at the time, because you have to come here. I said, "I don't, what do I want to go to Wall Street for? I mean, like, I have no interest in Wall Street. Why would I go to Wall Street?" And he said, "Well, let's be honest here. The salary is twice what you're making."

• 5:21Barry Ritholtz?

  Wow.

• 5:22Speaker 05

  I said, "Well, I'll go for the interview. I'll see what happens." Well, I went for the interview. I got the job. My biggest client turned out to be the Merrill Lynch Investment Strategy Group.

• 5:30Barry Ritholtz?

  Huh.

• 5:31Speaker 05

  And that's how I got involved in Wall Street. And I found, through time, that I really liked it, went back and got my MBA. And after a while, without sounding stupid about this, realized I was, I knew more about this stuff than many of my clients did. And so, I just worked my way through Wall Street and, and eventually, you know. But if you had said to me, when I graduated at Hamilton, that I was going to end up being the chief investment strategist at Merrill Lynch, I would have said, "You're crazy."

• 5:56Barry Ritholtz?

  You would have laughed.

• 5:57Speaker 05

  I'd say, "Crazy."

• 5:58Barry Ritholtz?

  So, I have to ask about Fortran. You're undergraduate, your focus is economics, you get an MBA in finance. Where did the computer programming skills come from?

• 6:09Speaker 05

  So, I am the poster child for the liberal arts education. So, I almost double-majored in philosophy. I didn't, I was too lazy, to be perfectly frank, and didn't want to take one of the intro courses. But I took, like, I don't know, five, six, seven philosophy courses, something like that. And for all the philosophy majors out there, I'm sure they know that a good part of philosophy is symbolic logic. And symbolic logic, what is computer programming? What is computer languages? It's just symbolic logic. So when I got introduced to FORTRAN, the first day, I realized I could actually read a lot of the code because it was just symbolic logic.

• 6:42Barry Ritholtz?

  So it's so funny you say that. Philosophy is symbolic logic. Study of law is a lot of symbolic logic.

• 6:48Speaker 05

  Absolutely.

• 6:49Barry Ritholtz?

  Obviously math, there's a ton of symbolic logic. Wherever you look, that classic syllogism, right? Here is the fact pattern and here is the applicable

• 7:00Speaker 05

  Absolutely.

• 7:01Barry Ritholtz?

  Set of rules, programs, parameters. Like, this seems to be a very constant thread in a lot of areas.

• 7:07Speaker 05

  Right.

• 7:08Barry Ritholtz?

  How surprising was it to you that, hey, philosophy has been really helpful on Wall Street?

• 7:14Speaker 05

  It's been amazing. In fact, in one of the books I wrote many, many moons ago, I specifically thanked one of my philosophy professors for, you know, I took symbolic logic with him. I think I took a course in relativism with him. You know, all these different things which have definitely been influential in my career, without a doubt.

• 7:32Barry Ritholtz?

  All right, so you end up at what could be my favorite advertisement, which was the EF Hutton ads back in the, was that the 1980s? When EF Hutton talks.

• 7:44Speaker 05

  I think it was actually the 70s into the 80s.

• 7:45Barry Ritholtz?

  When EF Hutton talks, people listen.

• 7:48Speaker 05

  Yes.

• 7:49Barry Ritholtz?

  Like, you can find these ads all over YouTube. They're seminal.

• 7:52Speaker 05

  Fantastic, yeah.

• 7:52Barry Ritholtz?

  How did you make your way to EF Hutton from Chase Econometric?

• 7:57Speaker 05

  So what happened was that, at the time, a lot of people at Chase IDC were in very high demand. We were the beginning of the quant movement on Wall Street, right? And so there were a lot of people were getting hired away. One of my friends, who was more an economist as opposed to a quant guy, got hired by the chief economist at EF Hutton at the time. And there was an opening in the Investment Strategy Group. And he said, similar, like, why don't you come and interview?

• 8:25Barry Ritholtz?

  Come double your salary again.

• 8:26Speaker 05

  Well, I didn't do that, but it was, it was an opportunity. So I grabbed the opportunity. I worked at the time with a wonderful guy named Jeff Applegate, who unfortunately passed away recently. But Jeff was a great role model in terms of how to make Wall Street understandable to non-Wall Street people.

• 8:48Barry Ritholtz?

  Huh, really, really interesting. And then we get the 87 crash.

• 8:52Speaker 05

  Right.

• 8:52Barry Ritholtz?

  And then the following year, you join Mother Merrill.

• 8:56Speaker 05

  Right.

• 8:56Barry Ritholtz?

  Tell us how you found your way to Merrill Lynch.

• 8:59Speaker 05

  So Merrill, you know, Hutton went out of business on basically end of 87, I think it was December of 87.

• 9:05Barry Ritholtz?

  Was that, did they go out a bit, wasn't it Shearson Lehman, Hutton, American Express or something like that?

• 9:10Speaker 05

  It became Shearson Lehman Hutton. The irony of which, I once worked at Shearson when they merged with Lehman Brothers and I lost my job there. And now Shearson Lehman was merging with Hutton and I lost my job again. So I was on the losing end of many, many mergers in the 1980s. But it was getting to Merrill was, you know, I was out of work for a while after Hutton went out of business. I had met with a headhunter and the headhunter had set me up with an interview with Merrill. And Merrill kind of passed on me, but then called me back about four months later.

• 9:41Barry Ritholtz?

  So their first choice turned them down, is that what you're saying?

• 9:44Speaker 05

  What actually happened, what actually happened, I found my personnel file years later.

• 9:48Barry Ritholtz?

  Yeah.

• 9:48Speaker 05

  I found my personnel file and this is actually kind of funny. And in it was the headhunter letter to the hiring manager. And it described me as being the cheapest of the lot with the most potential. That was the way the guy described me.

• 10:03Barry Ritholtz?

  You're a value stock.

• 10:04Speaker 05

  I was a value stock. And so I think what happened was the, everybody else they were talking to wanted too much money. And they worked their way down and they found they got me.

• 10:11Barry Ritholtz?

  That's, that's unbelievable. How did you get access to your personnel file?

• 10:15Speaker 05

  It was by accident. It was, I was, I was, it was like switching managers type thing. And somehow it got, it got put into the wrong file, the wrong set of files. And there was mine, so of course I read it.

• 10:25Barry Ritholtz?

  So you were at Merrill for 20 years, is that right?

• 10:29Speaker 05

  Almost 20 plus, yeah.

• 10:31Barry Ritholtz?

  Wow, that's amazing. You were there right up into the financial crisis.

• 10:35Speaker 05

  I was.

• 10:35Barry Ritholtz?

  What was Merrill Lynch like right in the middle of that storm?

• 10:39Speaker 05

  So it was, you know, I think it was, it was, it was an interesting time. And, and, you know, I should say, first of all, the Merrill was a fantastic place to work.

• 10:47Barry Ritholtz?

  Totally.

• 10:47Speaker 05

  It was, you know, anybody out there who has worked at Merrill, you know, knows, knows the feeling that I have for the firm. And, because they feel it too. And, and it was a great place to work. The corporate culture began to change in the few years before the financial crisis. And we got a little bit of ways from our roots. You know, our roots were very much as a private client oriented firm that also had great trading and investment banking and everything else. But the heart of the firm was still on the private client side. For any number of strategic reasons, the firm decided that we wanted to change that emphasis. And I think, you know, it's kind of dangerous to take a lot of risk when you don't really have the experience doing it.

• 11:29Barry Ritholtz?

  Sure.

• 11:30Speaker 05

  And so I think that's kind of what happened to Merrill.

• 11:33Barry Ritholtz?

  You know, I mentioned the E.F. Hutton ads, but for the people who are listening who are younger, I want to say in the 1970s, maybe even in the 1960s, Merrill Lynch ran a series of television ads. Merrill Lynch is bullish on America.

• 11:49Speaker 05

  Absolutely.

• 11:50Barry Ritholtz?

  With the Thundering Herd and the Big Bull.

• 11:53Speaker 05

  Right.

• 11:54Barry Ritholtz?

  And it was pretty amazing when we talk about the democratization of investing, that Merrill is arguably the, one of the first companies that dove into that headfirst.

• 12:05Speaker 05

  Yeah, if I'm not mistaken, Charlie Merrill was, his whole philosophy was bringing Wall Street to Main Street. I think he actually coined that phrase.

• 12:12Barry Ritholtz?

  I think that's right. And later on, we had a number of the discount brokers had come out in places like Schwab and Muriel Seibert. But I always felt they had followed Merrill's lead to, we're going to push into Main Street. So you start out essentially as an analyst? How do you, how do you work your way up to market strategist and then chief investment strategist for the Thundering Herd?

• 12:39Speaker 05

  It's, you know, it's funny. One of the things I always tell recent graduates of colleges is, don't try to plan out your future. Because when you're 21 or 22, you have no idea what you're going to do when you're 25 or 27 or 30. You know, you really don't know. And my example of, you know, the changes after the Reagan-Carter election are pretty clear on that one. But the same thing was at Merrill. You know, I kind of, I came in as a quant analyst. I was there not for any other reason, to be perfectly frank, and I think the people involved at the time would agree with this, that in Institutional Investor, there was a quantitative analysis slot. Merrill had nobody who was there. They thought, well, let's get somebody who can maybe run for this slot. We'll get another II vote and we'll

• 13:21Speaker 05

  see what happens. And I was their choice to just kind of become this quant guy. I don't think they knew what to do with me. I don't think they were thinking anything else other than like, you know, go do your thing and, you know, hopefully this will all work out.

• 13:35Barry Ritholtz?

  Here's an empty desk, Rich. See what you can do with this.

• 13:37Speaker 05

  Exactly right. And it was actually quite a funny, truth be told, now I can tell this. I lied about my age to get the job.

• 13:45Barry Ritholtz?

  Saying you were younger or saying you were older?

• 13:47Speaker 05

  Older, because I was 29 when I was interviewing for this position.

• 13:51Barry Ritholtz?

  Yeah.

• 13:52Speaker 05

  And I knew that, and everybody, and back then you could ask people how old you were.

• 13:56Barry Ritholtz?

  Right. And they couldn't Google you and find out.

• 13:58Speaker 05

  Right. And they couldn't find out. Yeah. So there was all kinds of, all kinds of stuff that they could do back then that you can't do now, or can do now.

• 14:04Barry Ritholtz?

  Did you really get an MBA from NYU?

• 14:06Speaker 05

  I did.

• 14:07Barry Ritholtz?

  Did you just pad your resume?

• 14:08Speaker 05

  No, that's legit. That's 100% legit. But, so what was happening was I knew that if I went to these interviews and I told people I was 29, they would think I was a kid.

• 14:17Barry Ritholtz?

  But 30 sounds older.

• 14:18Speaker 05

  30. It's like $29.99, right? Like you just round up, you know?

• 14:22Barry Ritholtz?

  It's a six-month fib. That's all it was.

• 14:24Speaker 05

  Well, by the time I actually got the job and showed up at Merrill, I was 30.

• 14:27Barry Ritholtz?

  Uh huh.

• 14:28Speaker 05

  So I didn't feel, I've never felt bad about it because I was asked in every single, like, why would they ask? They wouldn't ask unless they thought maybe I was too young. That would be the impetus for asking. Nobody's going to ask the question.

• 14:39Barry Ritholtz?

  Well, how much, how much experience in seasoning do you have?

• 14:42Speaker 05

  I don't think that was the root of the question because they had my resume. They knew exactly. And so it was really like, how old is this guy? You know, can he really do this? And so I lied. So I told everybody I was 30. And so, but, you know.

• 14:55Barry Ritholtz?

  That's hilarious.

• 14:56Speaker 05

  Yeah, it is, it is kind of funny.

• 14:57Barry Ritholtz?

  And, and nobody ever figured out? Don't, don't they, when you're filling out your paperwork and?

• 15:01Speaker 05

  Nobody took the time.

• 15:02Barry Ritholtz?

  Nobody cared. Nobody, if you're a W2 employee.

• 15:06Speaker 05

  Yeah.

• 15:07Barry Ritholtz?

  They get your date of birth and your social security number.

• 15:09Speaker 05

  Absolutely.

• 15:10Barry Ritholtz?

  It's, it's not like the data isn't there.

• 15:11Speaker 05

  But by the time I got to Merrill, I was 30.

• 15:13Barry Ritholtz?

  Oh, so nobody thought twice about it?

• 15:15Speaker 05

  Nobody thought twice about it, yeah.

• 15:16Barry Ritholtz?

  That's, that's really funny. So you're at Merrill for 20-plus years. We have the financial crisis and you decide to launch Rich Bernstein Advisors in 2009.

• 15:32Barry Ritholtz?

  So in hindsight, it turns out to be perfect timing.

• 15:35Speaker 05

  Right.

• 15:36Barry Ritholtz?

  What sort of pushback did you get when you're like, I think I'm going to stand up my own shop into this mess?

• 15:41Speaker 05

  Yeah, you know, I left Merrill because I'd gotten burned out. I mean, one of the things that people don't realize is as a sell-side analyst, the better you get at your job, the demands on your time grow exponentially. And so I was traveling all over the world. I was, I was non-stop writing. I mean, it was, I had burned out. And I tried to leave Merrill several years before and they had, they convinced me to stay. They said, you know, like, no, it's okay. You know, we'll, you know, we'll, we'll take care of you. Everything will be fine. Don't worry about it. But in 2008, in the financial crisis, I turned 50. And so not lying about my age, I actually did turn 50. And I was pretty burned out and then the financial crisis hit and I thought,

• 16:25Speaker 05

  you know, it's the wrong time to leave. It'd be irresponsible for the chief strategist of Merrill Lynch to leave in the midst of a crisis. That's, that's just very unfair to our clients, very unfair to the firm. You know, I rose to this level. I have a certain amount of responsibility. I can't be selfish on this. So I stuck it out for a while. And then Bank of America bought, bought Merrill and, and they were great and, you know, everything was good. But it was clear to me I wasn't going to have more fun. Right. The, the burned out nature was going to continue and potentially get worse.

• 16:53Barry Ritholtz?

  This was only going to get worse.

• 16:54Speaker 05

  It was going to get worse. So I just figured like, why do this? So I decided I was leaving. Again, Merrill was fantastic. They encouraged me to stay. I just said, no, no, no, thanks, but I'm, I'm done. You know, stick a fork in me. I'm done.

• 17:06Barry Ritholtz?

  Hey, 20 years is a long time being a road warrior.

• 17:09Speaker 05

  Yeah, exactly. And so then the question was, what was I going to do? I had toyed with the idea of opening an independent research shop and that sort of thing. But that was going to be equal amount of travel all around the world. And I had just done that for 20 years. Didn't sound like a lot of fun. But then the idea came to me, well, maybe we should put some of these things that we've, we've developed through the year, put it into practice and see if we can manage money doing it. And we were kind of forming the firm and we were like really in its infancy. And then all of a sudden, I remember exactly where I was. I was in our, our den. Weekly initial jobless claims had just come out. This is like in July of 2009. And the number came out and it was a blowout good number.

• 17:54Barry Ritholtz?

  Right.

• 17:55Speaker 05

  And I said to myself, this This is a rogue number. And then I said to myself, well, wait a minute. Why is it a rogue number? Maybe things are just getting better because I was listening to all the talking heads.

• 18:07Barry Ritholtz?

  Who were all still.

• 18:08Speaker 05

  And they were all negative as all get out. And I said.

• 18:11Barry Ritholtz?

  Let me stop you right there because my next question is, I very vividly remember March 09 and saying, hey, US equities down 50%. Usually pretty good entry point. I think we finished down 56, down 57%. And but the bearishness, the negativity persisted. And it felt like people were really suffering from a little post-traumatic stress disorder.

• 18:38Speaker 05

  100%.

• 18:39Barry Ritholtz?

  I'm curious exactly how, as you were starting to tell us, how you were thinking around that because everybody was so negative and yet the data was clearly improving.

• 18:51Speaker 05

  It was definitely improving. And so, you know, the way I described to people, they said like, you know, markets don't move on the absolutes of good or bad. Markets move on better or worse. And things were horrible in an absolute sense, but they were getting better.

• 19:05Barry Ritholtz?

  And certainly better than consensus felt like it was.

• 19:07Speaker 05

  Absolutely. And so, you know, I just, I remember exactly where I was and I said, well, gee, you know, this could be like a big bull market. And, and, you know, I actually at one point said to potential investors, I thought that we were entering the biggest bull market of our careers. And.

• 19:25Barry Ritholtz?

  You were only off by a tiny little bit. It was, it was, oh, of our careers?

• 19:30Speaker 05

  Of our careers, yeah.

• 19:31Barry Ritholtz?

  So if you look at rolling, look at rolling.

• 19:34Speaker 05

  2009 to today.

• 19:35Barry Ritholtz?

  Rolling 15-year periods from 09 to 04 was 16% a year.

• 19:41Speaker 05

  Yep.

• 19:41Barry Ritholtz?

  From the 15-year period ending in 99 was 17% a year. And you go to the 15 years after World War II was 18% a year. But one of the best periods in modern history for sure.

• 19:55Speaker 05

  Absolutely.

• 19:55Barry Ritholtz?

  So you're, you're like, hey, this is going to be good.

• 19:58Speaker 05

  If you're going to start.

• 19:58Barry Ritholtz?

  Dead on.

• 19:59Speaker 05

  If you're going to start a firm, this is the time to start.

• 20:01Barry Ritholtz?

  For sure.

• 20:02Speaker 05

  So that, that's kind of how it began. And, and, you know, I don't want to say that everything went swimmingly at the beginning. No, you're starting a firm, you have, you know, like any, any startup, you have, you have pluses and minuses and you hem and haw and you do different things. But through time, it's worked out pretty well.

• 20:19Barry Ritholtz?

  So what was, you know, we stood up a firm in 2013. I'm curious, and that experience was kind of surprising. I'm curious, what was the most surprising things about launching your own firm? What was like, I didn't expect to be doing this?

• 20:35Speaker 05

  So, two things. One was that I was getting into an area that I didn't know. And I knew I didn't know the buy side, the way I knew the sell side. I knew that. And what I didn't know was how much I didn't know. And so the early fits and starts were trying to hire the right people. I didn't even know enough to hire the right people. Eventually, that did happen. And we hired a guy named John McCombe, who's still the president of the firm. But it was, it was kind of, you know, off and on, we were not doing all that well at the beginning. Because, largely because I didn't even know who to hire or who not to hire, because I was so inexperienced on the buy side. So that was surprise number one.

• 21:17Speaker 05

  Surprise number two was that people would not invest with us at the time, because we were too bullish. And that was fascinating.

• 21:27Barry Ritholtz?

  That just makes you more bullish, doesn't it?

• 21:29Speaker 05

  Oh, it did, without a doubt. I mean, but if, it was, it was incredible. We were, you know, at the time, people were very cautious on the United States. If they wanted growth, whatever they determined that was, it had to be in the emerging markets. It could not be in the United States. And we were bullish, and we wanted to invest in the United States. And people just couldn't deal with that.

• 21:48Barry Ritholtz?

  I'm going to put a little flash on what you're describing. I vividly recall writing a market commentary, I want to say September, but maybe it was October 09. And the title was "The Most Hated Bull Rally in Market History." Same experience?

• 22:04Speaker 05

  Absolutely. It was, it was very frustrating. If you look at our early marketing materials, you will find the comments about what we called "fire extinguishers."

• 22:14Barry Ritholtz?

  Right.

• 22:14Speaker 05

  And fire extinguishers were positions we would take in the portfolio that we could pull off the wall and put out the fire in the portfolio. Right, like having, you know, cash or gold or all these different things that we would include in our multi-asset portfolios so that people would feel more confident what was going on. It worked, but it didn't really work.

• 22:33Barry Ritholtz?

  It worked psychologically, but it didn't work performance-wise.

• 22:36Speaker 05

  No, it worked for us, fine, but it didn't get people across the goal line. They would not, they were too scared.

• 22:43Barry Ritholtz?

  How long did it take before people started to say, "Oh, maybe this Bernstein guy is on to something."

• 22:49Speaker 05

  Yeah, well, you know, everybody talks about it being like a hockey stick. You know, the raising assets is sort of like a hockey stick where you're like, if it's a turbocharger, where you're kind of going along and all of a sudden the turbocharger kicks in, you start really accelerating. That was the experience that we had in the firm. We had, we had people who knew us as a group, were reasonably willing to invest with us, but to the broader audience, it was, it was much more difficult. And then as they got more confident, yeah, of course, the, the turbocharger started, started revving up.

• 23:17Barry Ritholtz?

  So was that six months, 12 months?

• 23:20Speaker 05

  I would measure it in years.

• 23:23Barry Ritholtz?

  Really?

• 23:24Speaker 05

  Yeah, I think, I don't remember the date of when we hit 5 billion, but I'm going to say it probably took us five or six years at least to get to 5 billion.

• 23:33Barry Ritholtz?

  And now you're over, well over 15 billion.

• 23:36Speaker 05

  Yeah, we're about, almost 16.

• 23:37Barry Ritholtz?

  Wow, so that, that's amazing. And, and this is now 15 years later.

• 23:42Speaker 05

  Correct.

• 23:42Barry Ritholtz?

  Right? So it took you 15 years to get to 15 billion dollars. So a billion a year, not, not too shabby, right?

• 23:49Speaker 05

  Not too bad.

• 23:50Barry Ritholtz?

  Not, not, not bad at all.

• 24:23Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume, so writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 25:05Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 25:46Barry Ritholtz?

  So, we were talking about launching the firm in '09, and there's a quote of yours that has always stayed with me, which is, quote, "When the sell-side indicator turns positive, leaving the firm is preferable to going on the call and telling everybody about it." Explain that, because we were talking earlier about the sort of bearish PTSD pushback to anything remotely positive. Your indicator, this sell-side indicator, has a pretty long and storied track record at Merrill.

• 26:23Speaker 05

  It does.

• 26:24Barry Ritholtz?

  Hey, this turned positive, you guys have to change your views. That carries no weight?

• 26:29Speaker 05

  So, let me explain what it is. The sell-side indicator is a sentiment indicator that's based on Wall Street's consensus recommended asset allocation. So, stocks bonds cash, how much has you put in stocks at any point in time? I started that all the way back at E.F. Hutton. You mentioned Hutton before, and we continued it through Merrill, and Merrill still runs it today. It really just looks at the equity allocation and puts basically standard deviation bands around that. And as you might expect, when Wall Street gets really bullish, that's a bearish sign. Wall Street gets really bearish, that's a bullish sign.

• 27:01Barry Ritholtz?

  So when you said this turned positive, it was because the street was so dashed?

• 27:05Speaker 05

  The street got incredibly negative, incredibly negative. And so from my point of view, and what you're referring to was that, do I stay at Merrill and try to convince everybody to be more bullish, or do I go off and start my own firm? And I just thought it'd be better, given all the other things we've discussed, it was better to start my own firm.

• 27:23Barry Ritholtz?

  Preferable to going on the call and telling everyone about it. Like, I could just imagine the sort of pushback. Bernstein is, he's now a permable, he's crazy. We just are in the middle of this crisis. How on earth can we recommend clients buying equities?

• 27:41Speaker 05

  Yeah, right.

• 27:42Barry Ritholtz?

  That's the sort of stuff you're...

• 27:43Speaker 05

  And it was the kind of thing where, certainly on the private client side, for those of you to remember, in 2008, 19, 11, 12, the story was all about bonds, bonds, bonds, bonds, and nobody wanted the risk of equities. And if you twisted their arm, maybe they would invest in large-cap, high-quality, dividend-paying stocks. But there was no way that they were going to take any kind of beta risk with the market.

• 28:07Barry Ritholtz?

  So no technology, no growth firms, nothing?

• 28:10Speaker 05

  Nothing.

• 28:11Barry Ritholtz?

  With any amount of potential volatility?

• 28:13Speaker 05

  No, no. Volatility was terrible. Risk-taking was terrible. They were under their desks in the fetal position.

• 28:18Barry Ritholtz?

  And in hindsight, was there a better time ever to put money into those sort of stocks?

• 28:24Speaker 05

  I'm not sure in our careers there has been. Maybe 82, right? If you think back to 82.

• 28:28Barry Ritholtz?

  Right, right in the beginning of...

• 28:29Speaker 05

  Maybe 82 was a time. And I do remember that. I'm old enough where I do remember, you know, what the sentiment was like. And certainly, I had very little experience on Wall Street. I know what my sentiment was like in 82. I couldn't believe that the market would be going up. And...

• 28:45Barry Ritholtz?

  Well, you just had a 16-year bear market.

• 28:48Speaker 05

  Yeah.

• 28:49Barry Ritholtz?

  You finally got over 1,000 on the Dow, which I want to say we first kissed in 66.

• 28:53Speaker 05

  Something like that.

• 28:54Barry Ritholtz?

  Right? And so it's 16 years later.

• 28:56Speaker 05

  Yeah.

• 28:57Barry Ritholtz?

  Again, everybody seems to always be looking backwards, not forwards.

• 29:01Speaker 05

  Absolutely. And so the lesson, the lesson from that, you know, when I was a young pup, was, you know, gee, I really didn't know what I was talking about. And, you know, I learned that from various people working on Wall Street. And, you know, so when it came to '09, I was kind of determined not to make the same mistake again.

• 29:19Barry Ritholtz?

  So, it's funny because another quote of yours kind of cracked me up that I always found this intriguing. You suggest always have a 10% annual target for the S&P 500 despite being bearish. I love that optimism, but how can you maintain that bullishness when you're bearish?

• 29:40Speaker 05

  Yeah, so what Barry, as I'm sure you know, sell-side strategists are always pestered for their target.

• 29:47Barry Ritholtz?

  Right.

• 29:47Speaker 05

  What's your target on the S&P? And I used to think that was the most watched, least important thing I ever did.

• 29:53Barry Ritholtz?

  Right.

• 29:54Speaker 05

  And so, I would never put a number out. I would never give people a firm number. But I would always answer the question by saying, well, we don't really have an official target, but we have a 10% expected return. And nobody ever noticed that 10% is roughly the long-term average return of the S&P.

• 30:11Barry Ritholtz?

  With dividend reinvesting, 10, 10 and change.

• 30:13Speaker 05

  10%. So I used to always say 10% and that would make everybody happy. And so regardless whether it was bullish or bearish, I always answered the question saying, I don't know, we have a 10% expected return. And that kept people satisfied. But I really don't think that the notion of what is your target is an appropriate thing to discuss as an investor. Look, if you want to be a trader and you want to, you know, do a lot of short-term trading, I get that and I understand that. For a true investor, I think it's kind of a silly discussion.

• 30:44Barry Ritholtz?

  Really, really amusing. On your website and elsewhere, I've seen the phrase from you, "Pactive investing."

• 30:53Speaker 05

  Yes.

• 30:53Barry Ritholtz?

  Define what "pactive investing."

• 30:56Speaker 05

  Right, so "pactive," which is a trademark term of RBA.

• 30:59Barry Ritholtz?

  So, literally my next question, I saw the registered trademark.

• 31:02Speaker 05

  It is a trademark term of RBA.

• 31:04Barry Ritholtz?

  You literally did that, that's great.

• 31:05Speaker 05

  We did that. And so "pactive" stands for the active use of passive investments. And what we're really referring to here are a lot of ETFs. And, you know, we're a macro firm. We claim to know nothing about Coke versus Pepsi. But rather, you know, we look at size, style, geography, and, you know, asset allocation, things like that. And ETFs are right in our wheelhouse. It's been a great invention and... We're very big users of ETFs. Jack Bogle, I met many times when he was alive and I always thought he was one of the smartest guys I ever met in my career. But one of the things that, and Jack would always say, "Don't, don't talk to an active manager, just go buy an index." Okay, fine.

• 31:46Speaker 05

  But what Jack would, and that's an interesting discussion, we can have the discussion all day long, is the why that happens or doesn't happen, whether he's right or wrong. But the one thing that Jack would never tell anybody is what index to buy and when.

• 31:56Barry Ritholtz?

  Right.

• 31:57Speaker 05

  And, you know, one may say, "Well, that sounds silly." But there's been many times in the past where if you had bought the wrong index at the wrong time, your portfolio suffered dramatically for an extended period of time. For instance, if you had bought NASDAQ or even the S and P ETF in March of 2000.

• 32:17Barry Ritholtz?

  For sure.

• 32:18Speaker 05

  Right? You then entered the lost decade in equities.

• 32:20Barry Ritholtz?

  Right.

• 32:21Speaker 05

  And your return for a decade was slightly negative. If you had been in other things, like emerging markets, or energy, or, you know, all kinds of small caps, all these different things, you would have done fabulously well. You know, if you bought small caps at the peak of the small cap bull market in 1983, it took you 17 years to catch up to the S and P. So you would have been neutral. So, you know, everybody says, "Oh, I'm a, I'm a long-term investor, I'm just gonna buy an index." If you buy the wrong index at the wrong time, it, it can have a real detrimental effect. And that's what passive investing is supposed to be all about, is the active decision-making around these passive investments.

• 33:01Barry Ritholtz?

  So, so let's delve into that decision-making. How do you decide which index is the one that you wanna own? What data are you looking at? How, how are you crunching numbers for this?

• 33:13Speaker 05

  Right. So Barry, I, I mentioned that we are macro investors. You know, we're not, we're not looking at individual stocks. So, everything we do is gonna fall into some macro umbrella of one form or another. And the way to think about it is, it's gonna fall into three categories. Everything we'll look at is gonna fall into three categories. Number one, Would be corporate profits. One of the things that I wrote about extensively, even when I was at Merrill and through my entire careers, I've argued that equity investors spend too much time worrying about the economy and not enough time worrying about corporate profits. The stock market doesn't really care about GDP. The stock market cares about corporate profits.

• 33:46Barry Ritholtz?

  Because GDP is reflected in profits if it's trending the right way.

• 33:50Speaker 05

  Yeah, GDP is going to be a contributor, but a lot of other things contribute

• 33:53Barry Ritholtz?

  Right.

• 33:54Speaker 05

  to corporate profits. We're looking at corporate profits and profit cycles, not economic cycles. Number two category is going to be what we call liquidity. And liquidity is going to be anything from central banks, central bank actions, to lending standards from banks, anything that's going to allow more leverage and greater liquidity and investable assets in the, in a stock market. And then number three is going to be sentiment and valuation. Now, sometimes people say, well, sentiment and valuation, why are they together? And my answer to that is

• 34:29Barry Ritholtz?

  One drive the other, right?

• 34:29Speaker 05

  Yeah, my answer is that valuation is a reflection of sentiment.

• 34:32Barry Ritholtz?

  Has to be.

• 34:33Speaker 05

  Yeah, you can't have an overvalued asset that people hate, or an undervalued asset that people love. That, that doesn't make any sense.

• 34:39Barry Ritholtz?

  Right.

• 34:40Speaker 05

  So, so valuation is going to reflect sentiment. And so, what we're basically looking for, if you think about those three categories I just mentioned, we're looking for situations where fundamentals are improving, liquidity is, is adequate or getting better, and everybody hates it. Or vice versa, where fundamentals are deteriorating, liquidity is drawing up and everybody loves it. We're going to try and stay away from that. That's, that's a, maybe a gross simplification of what we do, but, but that's kind of what we do.

• 35:07Barry Ritholtz?

  But, but that's passive. That's how you're selecting from broad indexes, just the right index at the right time and avoiding the wrong index at the wrong time.

• 35:15Speaker 05

  Correct. That's exactly what we're trying to do.

• 35:17Barry Ritholtz?

  Really interesting. One of the things that comes up when we're talking about various style investing, comes right from one of your books. And it's about media noise.

• 35:31Barry Ritholtz?

  How do you focus on the right index when there's so much noise and so much stuff going on and it's especially with algorithmic social media, it's just a fire hose of nonsense. How do you separate the signal from the noise?

• 35:47Speaker 05

  Yeah, so I wrote a book in 2000, so 25 years ago. I wrote a book that was called Navigate the Noise.

• 35:54Barry Ritholtz?

  I remember that.

• 35:55Speaker 05

  Investing in the New Age of Media and Hype. 25 years ago, I wrote about the new age of media and hype.

• 36:01Barry Ritholtz?

  You were ahead of the curve.

• 36:02Speaker 05

  You think it's gotten a bit worse since in the last 25 years.

• 36:06Barry Ritholtz?

  Just as a reminder, this is pre Twitter, pre Facebook, pre LinkedIn. Forget Instagram, TikTok. Like, this was just like message boards and websites.

• 36:19Speaker 05

  Yeah, I mean, you're just beginning to get websites in depth, but we're really still talking about a period of hard copy research reports and television.

• 36:30Barry Ritholtz?

  Wow.

• 36:31Speaker 05

  That's really what, you know, the mainstay of what people were looking at. The point of the book was to say that building wealth for an individual investor is actually not that difficult. Why don't people do it? Why don't people do this is kind of silly.

• 36:44Barry Ritholtz?

  Well, wait, when you say it's not that difficult, we intellectually understand. My friend Dave Noddick loves to say investing is a problem that's been solved, but the problem that has been solved is the human behavior around it.

• 37:00Speaker 05

  Exactly, exactly. And so what the book tries to argue is that there's some very sound principles that everybody should be following to build wealth, but yet there's a siren song, if you will, if you're into Greek mythology, there's a siren song of things telling you, of noise telling you that there's something newer, better, get rich quick, you know, all these kind of things that are going on. And to continue with that, your portfolio follows that sound and crashes on the rocks, if you want to use the mythology example. And so what the book says is the way to solve this problem of this incessant noise is to hardcore follow a process. And come hell or high water, you're going to stick to that process.

• 37:42Barry Ritholtz?

  That's the mask you tie yourself to.

• 37:44Speaker 05

  That, exactly right. And put the wax in your ears, the whole routine. Right? And, and that's, that's what we do as a firm. We have a very hardcore process. It's macro-driven, but we're going to follow that process come hell or high water. You know, it's, it's funny. People understand that. And they understand what we do. We understand why they do. They understand the, the notion of the book. But yet they get very angry when we're not following the siren song of what's the newest, baddest, you know?

• 38:13Barry Ritholtz?

  Shiniest object that's out there. So, so walk us through the process. I know you have a couple of core beliefs in your process. Tell us about it.

• 38:22Speaker 05

  So, I mentioned profit cycles. I think for us, that is, that is the most important part of our process. And as I said before, people spend too much time worrying about economic cycles and not enough time worrying about profit cycles.

• 38:35Barry Ritholtz?

  Define profit cycle. And, and because we are all familiar with the business cycle and the economic cycle. What is a profit cycle?

• 38:43Speaker 05

  So, so you know, whereas people look at GDP growth or, or industrial production growth, and they say, this is the economic cycle. What we're looking at is corporate profits growth. Now, let's just, as an example, we look at profit cycles all around the world, but let's take, for example, the S and P 500, the US profit cycle. What happens is the, the difference between an economic cycle and a profit cycle, number one, is that profit cycles tend to boom and bust. Fortunately, the overall economy does not do that on a regular basis. And secondly, profit cycles have a shorter periodicity. So you can get multiple profit cycles in one economic cycle.

• 39:16Barry Ritholtz?

  Periodicity, meaning?

• 39:18Speaker 05

  The amount of time.

• 39:19Barry Ritholtz?

  Right. Got it.

• 39:21Speaker 05

  Right. So whereas an economic cycle, maybe it's going to take four or eight years, you could have multiple profit cycles in that four or eight year period.

• 39:28Barry Ritholtz?

  So, so how do you define the peak and the trough of a profit cycle?

• 39:31Speaker 05

  So what happens is, you know, if you look at the growth rate of corporate profits, you will see it follows a pretty normal cycle through time. And our challenge as investors is to find

• 39:43Speaker 05

  Indicators that will allow us to effectively forecast that profit cycle. Now, we don't really care whether the profit cycle, whether earnings growth is going to be 7% or 8% or 10%, which is a very common question people get asked, or minus 5 or minus 6 or minus 7. We kind of want to know, is it getting better or is it getting worse?

• 40:03Barry Ritholtz?

  Trending up or down?

• 40:03Speaker 05

  Exactly. So if profits grow this 5%, what's the probability of it going to 10% as opposed to going to zero? And so we spend an awful lot of time with a lot of indicators that look at that. What do the indicators look at? Well, look, profitability is a pretty simple formula. It's how many, how much stuff are you selling and what's your margin per item? I mean, that's really all profitability is.

• 40:26Barry Ritholtz?

  Well, but there's a couple of factors that go in. What is the cost of capital and credit and the inflation rates?

• 40:32Speaker 05

  But that would be in your margin, right? I mean, and, and so...

• 40:35Barry Ritholtz?

  Which affects profits.

• 40:36Speaker 05

  Which affects profits. So all our indicators are either going to try to figure out how much stuff is, let's take the S and P 500, our S and P 500 company is going to sell and what's going to be their margin per product. So margin, as you point out, could be interest rates, it could be labor costs, it could be pricing power because of inflation. People forget inflation isn't bad for a lot of corporate profits.

• 40:57Barry Ritholtz?

  For equities, for sure. We certainly learned that during the pandemic.

• 41:00Speaker 05

  Exactly. So, so those are the type of things that we're looking at in terms of profit cycle. And as I said, we look at profit cycles all around the world. We look at them by region, by country. We look at by sectors, you know, we look at profit cycles for, say, the tech sector, for the consumer staple sector or something like that as well.

• 41:17Barry Ritholtz?

  So, so profit cycle is one of the triad?

• 41:22Speaker 05

  It's the key.

• 41:23Barry Ritholtz?

  All right. What, what are the other elements that you're considering in addition to the profit cycle?

• 41:27Speaker 05

  So next would be liquidity, okay? And liquidity is a function of several different things. It's obviously a function of monetary policy. We follow monetary policy in 43 countries around the world. I know that sounds silly and, and obviously in the G7 or G10, you get a lot more information than you would in, you know, some weird emerging market country, but we do follow central bank policy. We follow yield curves, the slope of the yield curves, right? Whether you've got a bullish steepening of the curve. In other words, are interest rates coming down, but the curve is steepening? Interest rates going up, but the curve is steepening? Or is the curve inverting? I mean, we look at all these different things. They have different implications for sector rotation and things like that as well.

• 42:11Speaker 05

  So, and then we follow things like bank lending standards. Now, that's obviously you can only get that in the most developed countries.

• 42:16Barry Ritholtz?

  Right.

• 42:17Speaker 05

  But that's an important consideration as well. Are banks tightening credit or easing credit? People say, well, doesn't, doesn't the central bank control that? Well, not really. You can kind of lead a horse to water, but you can't make it lend. And, and so, so you want to look at both central bank policies and the willingness of banks to lend.

• 42:37Barry Ritholtz?

  How, how does the role of fiscal stimulus and spending play into liquidity issues?

• 42:43Speaker 05

  Yeah, so to some extent it does. And it's going to affect more, it's going to feed into ours more through the corporate profit side in terms of how much stuff are you going to sell? Right? Because fiscal stimulus is trying to stimulate consumption or aggregate demand, if you prefer to be a real economist here. It's going to try and stimulate aggregate demand. And that'll show up in our stuff type.

• 43:08Barry Ritholtz?

  All right, so, so we have the profit cycle. We have liquidity. And what's the third?

• 43:13Speaker 05

  The third is sentiment and valuation.

• 43:15Barry Ritholtz?

  Right.

• 43:15Speaker 05

  Okay, so obviously we want, we prefer to look at more undervalued situations. Sentiment, we're trying to look for basically assets that people hate. Valuation will reflect that. You know, if something's really undervalued, something's really cheap. It reflects that people don't like it. You know, and, and it's just like any other good in any other market. If something's really expensive, it means people like it.

• 43:42Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 44:25Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 45:04Speaker 02

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• 45:58Barry Ritholtz?

  So, two questions from that. The first is, how do you distinguish, and I already know the answer to this, but how do you distinguish between a stock that is disliked and cheap? And a stock that's cheap because it's in trouble?

• 46:14Speaker 05

  Yeah, so what you're referring to, and we wouldn't do this for individual stocks, but we would do it for regions or sectors or whatever. You know, commonly called the value trap.

• 46:22Barry Ritholtz?

  Yes.

• 46:22Speaker 05

  The value trap is something that's cheap for good reason. And so what we do, we have models that try to look at various industry, sectors, countries, whatever, that are trying to look for not only cheapness, but some acceleration in corporate profits. Right? And we won't invest in anything just because it's cheap. That doesn't mean anything to us.

• 46:42Barry Ritholtz?

  It's cheap plus some other indicator.

• 46:44Speaker 05

  Correct.

• 46:44Barry Ritholtz?

  And then, and then the other question is... Consumer sentiment seems to have gone off the rails post pandemic. If you look at where, and I suspect this is a measurement problem, but I want to get your sense. So if you look at the University of Michigan consumer sentiment data for the better part of the past five years, it's worse than the worst part of the pandemic, worse than the financial crisis, the 87 crash, like on and on. It's shocking, worse than 9/11 and the dot com implosion. Like, wait, things aren't that bad.

• 47:19Speaker 05

  No, they're not that bad at all.

• 47:20Barry Ritholtz?

  What's going on with that sort of sentiment? And what, how do you use sentiment when you're trying to manage around this?

• 47:28Speaker 05

  You're asking, I think, a more complicated question, maybe even you think you're asking. But, you know, everybody knows that we're in a very uncertain environment. And I think that those consumer sentiment readings right now reflect that immense uncertainty. If you were to ask normal people, they might not use the word uncertainty, they might use the word chaos, they might use, there's all kinds of different words that people would use. I think that's what's being reflected in those consumer sentiment numbers right now is, is the uncertainty, the impact that's having. You know, there's other surveys out there that are showing similar type levels of uncertainty or concern that aren't related to consumer, but, but I think it's a reflection of this, it's become a hackneyed word, uncertainty.

• 48:13Speaker 05

  I think that's what you're seeing.

• 48:14Barry Ritholtz?

  I prefer the lack of clarity to uncertainty, but let me bring this back to your book, Navigate the Noise. How much of this is a function of algorithmic social media? Which, there was recently a study, I want to say it was Oxford Reuters, that said Americans now get more of their news from social media than anywhere else. Big, big issue. And then secondly, it seems like in, in the world of clickbait, crazy headlines, the media itself, if, if not the news stories or columns, but the headlines certainly seem to be more and more extreme.

• 48:53Speaker 05

  Unbelievable. So, you know, I, I don't, I don't know how to answer that from a societal point of view, but I can answer it from my point of view as sort of a fiduciary and, and an investor of other people's money. I think it is my obligation, two things, is my obligation, number one, To be as dispassionate about my politics as I possibly can. I mean, if you want to go have a beer, we can talk politics, that's fine. But I'm saying when I'm investing, you have to be as dispassionate as you can possibly be. And number two, I think it's incumbent of all of us who manage money to search for truly unbiased sources. Not who's going to give us the most frequent news, but who's going to give us news that is unbiased.

• 49:38Speaker 05

  And I think it's incumbent on all of us to do that. And I have found that in the last year or so, that my choices of news media and what I read and what I pay attention to has changed because of that. Flesh that out a little bit, feel free to name names. You know, a lot of people, I think one of the questions you would plan to ask me was, what are you reading these days? And my answer is, I don't read an awful lot. Really? Of these days, because there's so much going on. But what I have begun to do is listen to podcasts. Go on, tell me about this podcast thingy. No, but I'm buttering you up here. All right. But. Go on, more sucking up, sure.

• 50:23Speaker 05

  There's three that I would recommend to everybody. Uh huh. One is actually right here, Bloomberg, Bloomberg Law. And you'd say like, why? June Grasso? Yeah, yeah, yeah, exactly. Why would you listen? Why would you listen to Bloomberg Law? It's fascinating. And my answer is, because everything these days is ending up in the courts. Right. Have we ever had more issues with government in the courts than ever before? I'm not a lawyer. I don't know squat about, you know, constitutional theory and everything else. And I'm sure most people don't either, but they're going to listen to some wackadoodle guy talk about this. I'd rather listen to people who have our well-grounded opinions and understand the history of law. In terms of doing that.

• 51:05Barry Ritholtz?

  I'm so, I'm so glad you brought that up because we went through a run, starting in 2020, where every talking pundit yahoo, first they were an epidemiologist.

• 51:17Speaker 05

  Yeah, exactly.

• 51:18Barry Ritholtz?

  Then they were a virologist, then they were a constitutional scholar, then they were a military strategist. You know, when someone asks you, was COVID from the wet lab, or wet market or escaped from the lab? It's okay to say, how the hell do I know? I have no expertise in that. Why are you asking me?

• 51:37Speaker 05

  Right, but everybody had an opinion.

• 51:39Barry Ritholtz?

  So it seemed, right?

• 51:40Speaker 05

  Exactly, exactly. And so, yeah, the other thing along with that, that I love is that well-known epidemiologists are idiots, but the guy down at GNC who sells me protein powder, he's a genius and he knows my health better than anybody. I mean, it's just like, come on.

• 51:55Barry Ritholtz?

  There was a New Yorker cartoon that I vividly remember, right in the middle of pandemic. It's the body of an airplane and there's a guy standing up in row 17B, right? Saying, ah, we're tired of these pilots telling us what to do. Who's with me? And it was like that just sort of let the pilots fly the plane and just sit down.

• 52:16Speaker 05

  So Bloomberg Law is one that I listen to, I'm not gonna say regularly, because I don't have the time to listen to every single one all the time.

• 52:24Barry Ritholtz?

  Yeah, I think that's.

• 52:25Speaker 05

  But if I get a chance, I listen to it.

• 52:27Barry Ritholtz?

  That's a fascinating show. Like, you're surprising me because I do the same as you. I listen to a lot of them. Tell us the other two.

• 52:35Speaker 05

  Yeah, so the other two are actually on NPR, which I realize people have now suddenly decided I'm a wide-eyed liberal or something.

• 52:42Barry Ritholtz?

  Can I tell you, my wife, every time I get into the car, and she's been driving my car, it's on NPR, on Satellite Radio, and I had the same thought until you listened to a few of them. And they're fascinating.

• 52:56Speaker 05

  They are, and there's two shows in particular that I would recommend, two podcasts in particular that I would recommend from NPR. One is called Left, Right and Center. Which is the name implies, you have three people talking about issues, one from the left, one to the right, one from the center.

• 53:09Barry Ritholtz?

  Wait, they're gonna give us all views? Who could have imagined such a thing?

• 53:13Speaker 05

  Who could have imagined that, exactly. And they pick a topic, and sometimes I'm really interested in topics, sometimes I'm not, but whatever. The fact that you've got Left, Right and Center in the same podcast is extraordinarily rare. You don't get that a lot. So that's number one. And the other one is another NPR podcast called Open to Debate. Which is very similar. They pick a topic and, and this is more like a traditional debate, where they have debating rules and all kinds of things, but it's a, it's a debate and, and you're going to hear two sides of, of an issue. Now, look, sometimes the issues you don't care about. Sometimes they're very important. Sometimes they're really cool. Sometimes they're not. I

• 53:50Speaker 05

  get that. But I, I think it's incumbent on, on us as a class of money managers and fiduciaries to search out those kind of shows. I, I would argue if you are a fiduciary and you are constantly listening to MSNBC or Fox or Newsmax or whatever, right? You're, you're doing a disservice to your clients.

• 54:13Barry Ritholtz?

  For sure. So, so there are two things I have to share with you because you're, you're right, right in my favorite space. One is Planet Money on NPR is something that they take this obscure, fascinating little topic and will do a whole, like way down the rabbit hole, deep dive. Um, I don't know if you recall during the Clinton administration, hey, we're having problems with wealth inequality. And so we're going to cap how much we can pay CEOs in cash. If you want to give them risky stock options, you can. And the unintended consequences is it 10x'd the wealth gap. And just stories like that that are fascinating. The other

• 54:58Barry Ritholtz?

  thing is you, you raise a, a point. I know you're not a lawyer, but I'm a recovering attorney. And the most applicable thing to investing you learn in law school is you have to be able to not just argue your case. You need to know the other side's case better than they do. And that translates into equities as you can't be bullish unless you can really state the bearish case and vice versa. You want to be bearish? You better know what, what are the best arguments for being bullish here. And I can't tell you how many people fail that test. And I bet

• 55:38Barry Ritholtz?

  you see it back to post oh nine. If you're super bearish, the only question I have for those people. Give me what the bull case is.

• 55:47Speaker 05

  Mm hmm.

• 55:47Barry Ritholtz?

  And if they can't even imagine it, well, now I'm going leveraged long.

• 55:51Speaker 05

  Yes.

• 55:52Barry Ritholtz?

  That failure of imagination.

• 55:53Speaker 05

  Yeah, yeah.

• 55:54Barry Ritholtz?

  Means everybody's too bearish.

• 55:55Speaker 05

  Yep, yep. And it's interesting you said that. There are times, we don't do this regularly, but there are times that we do point counterpoint in our investment committee meetings exactly for that reason.

• 56:06Barry Ritholtz?

  Just so you're making both sides of the...

• 56:08Speaker 05

  We're being seen.

• 56:09Barry Ritholtz?

  It's, it's one of these things that until you go through the exercise.

• 56:14Speaker 05

  Yeah.

• 56:14Barry Ritholtz?

  It, like, if you have an extreme position and you come out the other side of that discussion and you still have that extreme position, either someone wasn't making the argument well.

• 56:26Speaker 05

  Mm hmm.

• 56:27Barry Ritholtz?

  Or, hey, maybe the world really is coming to an end.

• 56:29Speaker 05

  Yeah.

• 56:30Barry Ritholtz?

  But most so far, that's been the losing, the losing bet.

• 56:33Speaker 05

  Yeah, yeah.

• 56:34Barry Ritholtz?

  So, given what's going on with technology and AI and automation and all the latest, greatest, new fangled things, is anybody today a better investor than they were 10, 20, 30 years ago, 50 years ago? Has the bar since Charles Dow

• 56:54Speaker 05

  Hmm.

• 56:55Barry Ritholtz?

  launched Barron's in 1890, has anything improved for the average investor?

• 57:00Speaker 05

  I think, I think the amount, the amount of information that an investor can get obviously has gotten greater, right? I mean, even if you think prior...

• 57:08Barry Ritholtz?

  But it's all public. It's Reg FD, so does it help them?

• 57:11Speaker 05

  No, I don't think it does. And I think, I think that, um, you know, the notion that somehow we have evolved and we are smarter, better investors than ever before, I think that's hogwash. I think that's complete hogwash. People are still underperforming like they always did.

• 57:28Barry Ritholtz?

  So it, it's not, it's not the strategies, it's not the vehicles, although we get great tax and cost benefits with ETFs. Um, how much of this is just simply comes down to human behavior and human nature?

• 57:41Speaker 05

  Right.

• 57:42Barry Ritholtz?

  And people are still people and we're still making the same mistakes over and over and over again.

• 57:46Speaker 05

  Yeah, I mean, there is something to be said for behavioral finance.

• 57:48Barry Ritholtz?

  Right.

• 57:49Speaker 05

  And the biases that we bring to the table, it's pretty hard to not be human.

• 57:54Barry Ritholtz?

  It, it very much is. Um, so let's bring this back to, you know, where we are in the market today and what's going on. We just made new all-time highs in the S and P and in the NASDAQ. I always learned that all-time highs are the most bullish thing you can see. Perhaps not the very last one, but the 100 before it are super bullish. How do you look at the market and say, "Everybody seems to dislike this market," and yet we made fresh all-time highs?

• 58:25Speaker 05

  Yeah, so I think, Barry, I think that we've said a number of times that we think it is a mistake right now to think of "the market," sort of in quotes, that that's what people are very focused on right now, and we think that's a mistake. Why is it a mistake? Because the market is dominated by seven or 10 or 15 companies. And we really have an extraordinarily bifurcated market in that respect. And I'm not saying anything that people don't know. Of course, everybody knows about the magnificent seven. Who doesn't?

• 58:56Barry Ritholtz?

  Although they've, the Mag 7 have been the lag 7 for most of this year.

• 59:02Speaker 05

  Correct, correct. Now, that's where I was going. Exactly right. But the enthusiasm surrounding those seven stocks is not changing. And our view has been that, "Okay, you want to go play those seven stocks? Go play the seven stocks. You don't need us." We're looking at everything else in the world. And I've said to our investors many times, "Are there really only seven growth stories in the entire global equity market?" Of course not. There's tons of them. And we've shown people how many companies are actually growing earnings 25% or more, and how the Mag 7 doesn't really even fit into that group, that there are companies that are growing much faster and with similar consistency.

• 59:45Speaker 05

  So I think if you're invested in an S&P index fund, or you are invested solely in the Mag 7, or solely in Nasdaq, I think the next three, five, 10 years might be very disappointing. I think if you're in everything else and we could define, you know, that's I'll leave it to everybody else to define how they define everything else. But, but I think if you're in everything else, I think you're going to do just fine. I think you're going to have a great time.

• 1:00:13Barry Ritholtz?

  So, so let's talk about not everything else, but one of the else things, which has been international stocks. When we look at either developed ex U.S. or emerging markets, these are areas that have underperformed the U.S. for 10, 15 years.

• 1:00:32Speaker 05

  Absolutely.

• 1:00:32Barry Ritholtz?

  And over the past year, we've started to see signs that, hey, maybe this underperformance isn't going to persist. Ex U.S. stocks have been doing much better than U.S., certainly year to date in 2025. And we're recording this late June, maybe it's been about a year or more of outperformance. How do you look at the world of international stocks? What parts of the world look interesting to you?

• 1:00:57Speaker 05

  So I will, I will twist your question a little bit, and I will say that one of the thing, one of the aspects, one of the segments of the global equity markets that we are very bullish on is what I will call international quality, non-U.S. quality stocks.

• 1:01:12Barry Ritholtz?

  That's not a twist. That's

• 1:01:14Speaker 05

  Well, I'm just saying as opposed to a country.

• 1:01:15Barry Ritholtz?

  Right.

• 1:01:16Speaker 05

  Something people like to talk about countries. But, but I think, the reason I say this is that the median projected growth rate among high-quality, non-U.S. stocks is actually equal, maybe even a touch higher than the median growth rate among the Magnificent Seven.

• 1:01:30Barry Ritholtz?

  Wow.

• 1:01:31Speaker 05

  So we'll talk basically similar type growth. They offer dividend yields of 3%, 4%, maybe a little percent, maybe even 4.5%, depending on how you look at this. But let's say 3% to 4% dividend yield. And they sell for a third to a half of the valuation of the Magnificent Seven. So the way I describe it to people is, if somebody came to you and offered you a Maserati for the price of a Chevy, or to be fair here, if somebody offered you Manolo Blahniks for the price of Hush Puppies, I think we would all say, yes, I will do that. By the way, can I have two?

• 1:02:07Barry Ritholtz?

  Right.

• 1:02:08Speaker 05

  But when we get to the stock market, this is like unimportant to people. They don't understand that there's a value assessment made in everything we do all the time. But for some reason, it's stocks, it doesn't appear. So the, the way I describe it is, you know, the Blahniks and the Maseratis are on sale. We think that's a great thing to do. We'll take two. Thank you.

• 1:02:27Barry Ritholtz?

  So, so you're naming, uh, two Italian companies.

• 1:02:32Speaker 05

  Well, I just chose them because everybody knows them.

• 1:02:36Barry Ritholtz?

  But the reason I bring that up is you're not stock pickers. You're geography sector, style selectors. So if someone says, "Hey, that Rich Bernstein is on to something. I want exposure to fast-growing, high-quality, inexpensive companies." What sectors are they looking at?

• 1:02:57Speaker 05

  So for us, I will, I will name the ETF that we hold with all due, uh, legal disclaimers here that we hold this ETF. We have held it. We still hold it. Blah, blah, blah. You know, however, I can, uh, alert people that we, I'm talking my book a little bit here. Um, the, it's, it's the, um, IQLT is the ticker symbol, the International Quality ETF. And, um, it's a great way. It's actually, uh, I believe EFA-based, so you're getting multiple countries. It's probably about...

• 1:03:28Barry Ritholtz?

  So that's Europe and the Far, Far East and Asia?

• 1:03:31Speaker 05

  Correct. It's probably going to be Australia. It's probably going to be about, um, 60 to 70% Europe. I don't have the stats in front of me, but something like that. So I think, you know, that's, that's an area that people aren't thinking about at all.

• 1:03:44Barry Ritholtz?

  So here's the macro pushback, and I'm not saying this is, let me just play devil's advocate. Europe has structural problems. Brexit is an issue. Now with the Trump administration, Europe's going to have to step up and fund more of their own military and defense. Uh, Europe is, has problems and they're not going to be clear of these for decades.

• 1:04:05Speaker 05

  And that could be true or that might not be true. Okay?

• 1:04:08Barry Ritholtz?

  But is it relevant?

• 1:04:09Speaker 05

  But notice, notice what I said was that they offer earnings growth that is comparable to that of the MAG7. And I think that's the point that I'm trying to make, that despite all these problems that everybody is well familiar with, somehow these companies are putting, you know, are have earnings growth, projected earnings growth that's roughly similar, a little bit more than the magnificent seven.

• 1:04:31Barry Ritholtz?

  And these are quality companies and they're ex-US.

• 1:04:35Speaker 05

  Ex-US all.

• 1:04:36Barry Ritholtz?

  And so if you have a huge home country bias and you want a little diversification, you can look overseas to reasonably priced quality companies.

• 1:04:45Speaker 05

  And if you think the dollar is going to weaken, it's all the better.

• 1:04:47Barry Ritholtz?

  Right. What are we down, eight, eight and a half percent year to date, something like that?

• 1:04:51Speaker 05

  Yeah.

• 1:04:52Barry Ritholtz?

  So I know you're not a currency analyst and you don't make those sort of calls. How do you look at what happens post-April 2nd, Liberation Day, and the ongoing weakness in the dollar? Does this come into your calculus or is this just more noise that nobody is?

• 1:05:11Speaker 05

  It does, not in terms of, you know, the short intermediate term, the way most people would think, but we think there are structural issues in the United States that transcend the current politics, transcend the current politics, and have been around for longer than people think and are detrimental to the US economy. And we find that very interesting, that, you know, you hear all the time about debt and deficits and there's some day of reckoning coming.

• 1:05:36Barry Ritholtz?

  My entire adult life I've been hearing.

• 1:05:38Speaker 05

  Yeah, and I love that because the speaker usually is saying, "I have some insight and for some reason the markets don't appreciate my insight."

• 1:05:47Barry Ritholtz?

  Right.

• 1:05:48Speaker 05

  And I love that, like, you know, we're all so smart and the market's stupid. No, it's actually the other way around. The markets have figured this out over the past 10 to 15 years. And what I'm talking about is if you look at the spread between treasuries and AAA-rated sovereign debt through time, what you will find is when the United States was rated AAA... Our yields were roughly in line with other AAA rated sovereign debt. Since the initial downgrade in 2011, and since then, nonstop, we have sold at a risk premium yield. In other words, we're trading more like a lower quality bond relative to AAA rated sovereigns.

• 1:06:25Barry Ritholtz?

  Meaning, all this negativity is in the price range?

• 1:06:28Speaker 05

  It's there. The markets have been well aware of it. There's no day of reckoning. It's like a slow bleed. And so, what's been, if you think about how everything in the United States priced off the 10-year, mortgages, munis, corporate bonds, everything's priced off the 10-year, the fact that we're paying it at, you know, right now, it's just under 200 basis points of extra yield because of our lack of fiscal discipline, that's translating through to higher interest costs throughout the entire economy. It's not just the government, it's through the entire economy. Why don't people, why aren't people aware of this? Well, because over the past five to 10 years, we've had low absolute rates of interest. The point I'm trying to make is, we've still been penalized relative to other countries

• 1:07:11Speaker 05

  despite that absolute low rate of interest, and people haven't realized that. So, we're already being penalized, and I think there's, there's a real, I think everybody should be concerned about that. It's clear that neither party has a real interest in fiscal discipline right now. So, we should assume that that penalty against the United States is going to continue to exist, if not expand.

• 1:07:36Barry Ritholtz?

  So, let me push back and play a little devil's advocate about that. Hey, Uncle Sam was borrowing at next to nothing. We've been running up deficits for 100 years. Covid happens, everybody's stuck at home. CARES Act 1 is the biggest fiscal stimulus, at least as a percentage of GDP, since World War II. Then you add the second CARES Act under Trump, the third CARES Act under Biden, to say nothing of the other 10-year fiscal stimulus plans passed under Biden.

• 1:08:08Barry Ritholtz?

  And that pig working its way through the python caused a giant spike in inflation, plus supply chains, blah, blah, blah. And now that that's come out the other end, and so the Fed had to respond. Whether, whether, whether the Fed brought inflation down, or it was simply unwinding naturally is another debate. But, um, once the Fed brings rates back down, this penalty will go away if and when the Fed finally does that.

• 1:08:36Speaker 05

  Well, the, that's important because remember in the period I'm talking about, which is almost 15 years now, you've got periods, you've got multiple, multiple presidents, you've got multiple Fed regimes, and the penalty doesn't go away. And I think that's

• 1:08:52Barry Ritholtz?

  So no matter, even at zero, we were paying a penalty because other, other countries had negative interest rates. So there was still the penalty.

• 1:08:59Speaker 05

  We were still being penalized. It's, it's crazy. And that, that I think is something that's lurking in the background that people are not paying attention to, especially people say that there, a day of reckoning is coming.

• 1:09:08Barry Ritholtz?

  You're saying it came and it's still here. It's ongoing.

• 1:09:12Speaker 05

  It's ongoing. It's just not big enough for anybody to notice. It's, it's like, it's, as I said, it's like water torture.

• 1:09:17Barry Ritholtz?

  Uh, the slow bleed. That's really, that's really fascinating.

• 1:09:23Speaker 01

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• 1:11:38Barry Ritholtz?

  Let's jump to our favorite questions, starting with, you mentioned some of the podcasts you're listening to. What else are you streaming? What's keeping you entertained these days?

• 1:11:48Speaker 05

  So, streaming, I'm in a little bit of a rut in streaming right now. Yeah, I'm having trouble. Everybody, you know, like, everybody's got their favorite, you know, streaming show that they like. And if you ask anybody, people come up with like four of them. Oh, you gotta watch this, you gotta watch this. And all of a sudden, it's like it all blends together and you can't keep it together. So I'm a touch lost right now in terms of streaming. I won't say give me suggestions, because I won't remember it as soon as I leave here.

• 1:12:15Barry Ritholtz?

  I'm just gonna give you one, because it's quirky and interesting.

• 1:12:18Speaker 05

  Okay.

• 1:12:18Barry Ritholtz?

  It's called Department Q.

• 1:12:20Speaker 05

  Department Q?

• 1:12:21Barry Ritholtz?

  Right, so this is...

• 1:12:24Barry Ritholtz?

  Unlimited nine episode series on Netflix.

• 1:12:29Barry Ritholtz?

  Detective is shot, his partner is injured. The third person is killed at the site. And he basically is appointed head of the cold case division.

• 1:12:46Speaker 05

  Interesting.

• 1:12:47Barry Ritholtz?

  Which they're just standing up.

• 1:12:48Speaker 05

  That's the kind of stuff I love.

• 1:12:49Barry Ritholtz?

  And it's in Scottish and I normally don't love police procedurals.

• 1:12:53Speaker 05

  Yeah, yeah, yeah.

• 1:12:54Barry Ritholtz?

  This is kind of fascinating.

• 1:12:55Speaker 05

  Department Q.

• 1:12:56Barry Ritholtz?

  It's, it's, it sort of builds slowly over time. Like I could give you a hundred others that you wouldn't care about. But I kind of know the sort of, of stuff.

• 1:13:07Speaker 05

  Good, that's a good one.

• 1:13:08Barry Ritholtz?

  You like, but it's quirky and weird, but really interesting.

• 1:13:12Speaker 05

  Good.

• 1:13:12Barry Ritholtz?

  If, if you're gonna have any complaint over it, and I don't think this is a complaint. But the complaints I can imagine are, well, this builds slowly. I'm like, yeah, it's not just. You know, if you want to open with a chase scene.

• 1:13:25Speaker 05

  Yeah, yeah, yeah.

• 1:13:25Barry Ritholtz?

  James Bond in Mission Impossible.

• 1:13:27Speaker 05

  There you go.

• 1:13:27Barry Ritholtz?

  You know where to go find, this is a little, a little more.

• 1:13:31Speaker 05

  Okay.

• 1:13:31Barry Ritholtz?

  So, well, I'm curious to see.

• 1:13:33Speaker 05

  Department Q.

• 1:13:33Barry Ritholtz?

  Department Q, such a, such an odd. Um, let's talk about mentors. You referenced one of them. Who were the folks who helped shape your career?

• 1:13:42Speaker 05

  So I would say there were, there were several. Um, one that had an immense, uh, impact on me was the person who hired me at Merrill, Chuck Clow. Chuck Clow at the time was Merrill's chief strategist.

• 1:13:53Barry Ritholtz?

  I know that name from way back when.

• 1:13:55Speaker 05

  Yeah, yeah, yeah. He was the chief strategist at Merrill from eighty-seven to two thousand, something like that.

• 1:14:01Barry Ritholtz?

  Wow.

• 1:14:01Speaker 05

  And, um, Chuck gave me two pieces of advice, which, which, um, he, he claims he doesn't remember that he gave me, but I'm sure he does. The first was my first day when I walked in at Merrill. And I kind of said like, what do you think I should be focusing on? And he said to me, I don't really care, just don't make a fool of yourself.

• 1:14:22Barry Ritholtz?

  By the way, that's good advice for anybody, anywhere, anytime.

• 1:14:25Speaker 05

  It was, and at first I was very put off, like this guy doesn't care about me, like what is this all about, you know, but what he was saying was, you're a grown up.

• 1:14:33Barry Ritholtz?

  Right.

• 1:14:33Speaker 05

  Right?

• 1:14:34Barry Ritholtz?

  Act like it.

• 1:14:34Speaker 05

  You know, yeah, exactly. You don't need me to tell you what you should do, but be aware, don't make a fool of yourself. Don't, don't do stupid things. Second thing he told me, which I live by to this day, and I tell this to people all the time, he said, make sure you're a star and not a Roman candle.

• 1:14:53Speaker 05

  Which I thought, I still think to this day, is fantastic advice.

• 1:14:57Barry Ritholtz?

  So persistency, not, don't just flame out.

• 1:15:00Speaker 05

  Don't flame out. Don't be the 10 minute, you know, thing. Be, be the star. That to be a star is harder than you think. And, but be a star, don't be a Roman candle. That I still, to my day, live my professional career that way.

• 1:15:13Barry Ritholtz?

  I, I think, I think that's great. Um, you said you don't read a lot, but you've written several books. I know there are books that have influenced you. What are some of your favorites? Do you read anything on vacation?

• 1:15:26Speaker 05

  So I do, what I tend to read, um, I, I don't have any one book that I would give you, but I, I will tell you, I tend to read a lot of espionage, spy and espionage type stuff.

• 1:15:37Barry Ritholtz?

  Okay.

• 1:15:38Speaker 05

  And the reason why is that as these things progress, and as the stories progress, not, not like, as you said, not like James Bond type stuff.

• 1:15:46Barry Ritholtz?

  Right.

• 1:15:47Speaker 05

  But, but it's, it, it's almost like solving a puzzle.

• 1:15:50Barry Ritholtz?

  Mm-hmm.

• 1:15:50Speaker 05

  Or, or completing, you know, completing a puzzle in, in some way. And, and I find that fascinating. I find, you know, I was always, in high school, my favorite math was, was geometry, because everything was a puzzle to me. There was like, we had different tools, how do you solve the problem? And that's kind of the way I, I view spies and espionage, is that there's different tools, but how do you solve the problem? And how do you get where you want to go?

• 1:16:14Barry Ritholtz?

  I got, I have another recommendation for you.

• 1:16:18Speaker 05

  This is why I came today.

• 1:16:19Barry Ritholtz?

  It was a charming, it was one of these films that like, oh, this looks interesting. Netflix recommend, let's try this. Black Bag, also set in the UK, MI6, husband and wife, work together. And there's a mole somewhere in MI6. And people, somehow each of them are led, I want to say it's, is it Kate Winslet? It's one of the Kates. Um, and I forget who's the lead husb- the man, the husband. Um, but each of them begin to suspect the other.

• 1:16:55Speaker 05

  Oh, interesting.

• 1:16:56Barry Ritholtz?

  And shockingly interesting, like normally you go into a movie you have no idea about. And I don't know, let's see how this is. And we both were like, wow, this was surprisingly good. So again, I know your wheelhouse.

• 1:17:11Speaker 05

  Yeah.

• 1:17:11Barry Ritholtz?

  Black Bag and Department Q. You have now a film, a series and a book. I've taken care of your, your summer's entertainment. So anything else you, you want to mention that you're reading?

• 1:17:25Speaker 05

  Um, no, there's not, you know, I, no, I haven't, I haven't been reading a lot recently for fun. I have to admit. Um, but what I do read, you know, pretty religiously is, is getting back to the whole issue of, of being dispassionate. I, I do read the Financial Times, I do read The Economist. To me, that's, that's a must read for people.

• 1:17:43Barry Ritholtz?

  I have found the British papers.

• 1:17:46Speaker 05

  Yeah.

• 1:17:47Barry Ritholtz?

  Generally, like what we think of as, um, left of center is sort of dead middle to them. And they look, their right is kind of our middle. Like it's not, like our spectrum feels wider, our, our political range. And they, everybody seems to be clustered somewhere around, it's either center right or center left, not extreme right or extreme left.

• 1:18:11Speaker 05

  And I actually don't, I, I don't care, um, whether people are right or left, as long as I can figure that out. What I care for is factual content.

• 1:18:19Barry Ritholtz?

  Right.

• 1:18:19Speaker 05

  Right. Fact, fact checking has to be, has to be good these days.

• 1:18:24Barry Ritholtz?

  So our final two questions, what sort of advice would you give to a recent college grad interested in a career in either investing? Or asset management or, or? Quantitative strategy.

• 1:18:35Speaker 05

  Yeah, so I mentioned this briefly before. The advice I do give recent college graduates or seniors or whatever is not to pigeonhole yourself early in your career. Don't say, "This is what I have to do, and this is what I'm going to do." You know, if you're a doctor, if you want to be a doctor, if you want to be a lawyer, you have to, some of that you have to do. I get that, right? But if you want to go into the financial services industry in any format, you have to be, you have to enter that with an immense amount of flexibility. Our industry changes so dramatically and so quickly that what seems super interesting to you as a college graduate could be obsolete in two or three years.

• 1:19:20Barry Ritholtz?

  Right.

• 1:19:21Speaker 05

  And you don't want to paint yourself into a corner where that's all you know, and that's all you're willing to do, and you're unwilling to do other things, unwilling to learn other things. I think if you're coming into financial services, you should, you should be one who likes to learn and likes to morph through time.

• 1:19:37Barry Ritholtz?

  Really, really interesting. And our final question, what do you know about the world of investing today that might have been helpful to know 40 years or so ago when you were getting started?

• 1:19:47Speaker 05

  Oh, man. I mean, I will tell you, I have gone back and read reports that I wrote 20 years ago or 25 years ago, and I read them today and I say, like, what a moron. I'm amazed at my own stupidity, and, and so...

• 1:20:03Barry Ritholtz?

  Let me, I'm going to interrupt you right here to say, so Professor David Dunning of University of Michigan, he of the famous Dunning Kruger effect, said, "If you look at work that's five years old and you don't think it's awful, you're not progressing or growing."

• 1:20:19Speaker 05

  Is that right?

• 1:20:20Barry Ritholtz?

  I swear, I said it right, right, sitting where you were sitting.

• 1:20:23Speaker 05

  That's fascinating.

• 1:20:24Barry Ritholtz?

  And said, "If you're not, if you don't hate what you did 10 years ago, you haven't grown at all professionally."

• 1:20:29Speaker 05

  I cringe.

• 1:20:30Barry Ritholtz?

  How fantastic is that?

• 1:20:31Speaker 05

  I cringe. I mean, some of the, some of the ideas I wrote about, we still use, and they're, they're still the crux of what I, but I'm just saying, I look at my writing, I look at how I express myself, I looked at how I thought something was so important, that type of thing, and I cringe today. I absolutely cringe. And the moral of the story there is, I've come to grips with the fact that no matter how smart I think I am, I'm really not very smart, and there's a lot more to learn. And so, I think as I've gotten older, I've wanted to learn more.

• 1:21:01Speaker 05

  Through time, I kind of immerse myself. And it's funny, because my friends react to me down there, they say like, how did you know that? And it's only because I'm reading all kinds of different things and doing all kinds of different things and paying attention to everything, because I kind of think of myself as a perpetual moron. I don't know how else to describe it, but that's really how I view myself.

• 1:21:19Barry Ritholtz?

  All I know is that I know nothing. I will go back to philosophy. What is that? Aristotle? So we'll end where we began. Rich, thank you for being so generous with your time. We have been speaking with Rich Bernstein, founder, chief investment officer of Rich Bernstein Associates. If you enjoy this conversation, well, be sure and check out any of the 550 we've done over the past 11 years. You can find those at Bloomberg, iTunes, Spotify, YouTube, wherever you feed your podcast fix. Be sure and check out my new book, How Not to Invest: The Ideas, Numbers, and Behaviors That Destroy Wealth and How to Avoid Them, How Not to Invest, wherever you find your

• 1:22:04Barry Ritholtz?

  favorite books. I would be remiss if I did not thank our crack team that helps put these conversations together each week. Anna Luke is my producer. Sage Bauman is the head of podcasts at Bloomberg. Sean Russo is my researcher. Peter Nicolino is my engineer. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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