These Are The Most Useless Phrases In Finance: Barry Ritholtz

this year. Barry is a founder of Rodholts Wealth managed maniage of Bloomberg opinion columnss and host of Masters of Business. And he has a fascinating new column out which I just read the ten most useless phrases in finance. That's the good news. The bad news is I have been guilty of uttering all ten of them. Barry Ridholts, Where did you come up with this list? Because it hit me right between the eyes, so I wrote. I wrote a similar column a year ago, and I wanted to

come up with a different run of terrible phrases. And I just keep on running tally of them. But to see if I was wildly off base, I went to Twitter and said, hey, what do your least face of financial phrases? And I was shocked to get a thousand responses, um, many of which I had already written down. We were suggested by the uh the twitterati, and and it's pretty clear that there are a lot of pet peeves amongst financial types about phrases that they really really despise. People

are very enthusiastic about critiquing really dumb language. Yeah, but Barry, it's very very important to not get complacent, as they say, don't guess you tell me what's that means? So I'm an investor, I have a portfolio. What does not get complacent means? Should I move to cash? Should I not move to cash? The phrase that you always hear is actionable advice? What is actionable in that other than hey, be on the lookout for something that might be dangerous.

But shouldn't investors always be on the lookout for things that might be dangerous? That that that phrases, Hey, hey, you know what, It's great in a in a college graduation speech, but as an investment advice, it's kind of meaningless. The easy money has been made. Boy, I've heard I've uttered that many times. Yeah, that that's classic hindsight by it. If only I knew then what I knew now think about how easy it is look. Investing is never easy.

It's always hard. It might look easy after the fact, but you know, hey, go back to March O nine. If only you bought with both fists, go back to March, you should have been a buyer. Well, you say that today, but when everybody was panicking in March, you know, it was much harder to pull the trigger then than it than it is now. With that, we're up sevent higher since then. Barry, there's one that I have I'm not a problem with. I mean, I'm fine with throwing it

out and never using it again. But it's already in the price. Why is that such a PV phrase for people? I mean, you know, if you're talking about, say, I don't know election uncertainty or a key man risk or whatever it may be, what's wrong with saying, well, we think it's already priced in, right, so we get to

uncertainty later, because that's another peeve. But you know the problem with it's in the price is that, as Eugene Fama has told us, yes, what is known is in the price, and that is reflected by the buys and cells of of traders. When you see a big move in a stock or a market when the market is up three percent or down three or like we saw the other day when when Niccolo was down, what was that?

How do you say it's in the price? It's in the price is accurate except when genuinely new information comes out, and that big surge or that big sell off is how the it gets into the price. So you have to be careful. Everything that's known is more or less in the price. What's not in the price are the

is the genuine new information, the genuine surprises. So, Barry, if I look at cash in money market funds, in uninvested cash and pension funds, isn't it a fair statement to say cash is on the sidelines, and that's perhaps a bullish call for stocks. So pull you buy it. You buy a thousand shares of Apple from from me and across you you know whatever, whatever the toll. I don't know where Apple is trading today, but you have cash and you give it to me, and I have

the stock and I give it to you. So the cash that was on your sideline is now on my sideline. There is always and I'm choosing my words carefully here trillions with the t trillions of dollars in cash in motion. It takes either one or three days T plus one or T plus three to a trade settlement. Uh, there's money in in s m A s and separately managed accounts in prime brokerages. There is cash all over the place.

There is always cash on the sidelines, and yet academia has never convincingly demonstrated that you could show when there's x amount of cash on the sidelines, markets do y in the future. There's always cash on the sidelines. Every trade has a buyer and seller, even with margin, even with borrowed money, it's still cash changing hands. So when is there not cash on the side? Yeah, that that's

actually quite a brilliant and incisive points. Barry, what were the phrases that stuck out to you that were maybe some people don't like them, but you still find a lot of wisdom in them, because I know you've done a lot of work as well on you know, cognitive and behavioral types of investing. So so there's a handful of things that I find really fascinating. One is everybody wants to be a contrarian, which is kind of amazing because by definition contrarians other people outside of the her,

outside of the crowd. But there's a certain romanticism to being that person who who makes makes the big short bet, who who, or who buys when everybody else is selling. It's much harder to do than it appears. That That always cracks me up. And then the simple truth, sort of the flip side to that, The simple truth of the trend is your friends. You know, crowds are mostly right. Markets get it right most of the time. It's only

yet extremes. You know, go to March two thousand when trees grow to the sky and and we're not buying discounted cash flow but clicks and eyeballs. Hey, the crowd was totally wrong. They're just as the crowd was wrong in in March of two thousand and nine with the markets down fifty and people forecasting the end of the world. Hey, at a certain point, um, the you know, the trend is your friend, except for the bend at the end.

Traders have rhyming, rhyming aphorisms for every circumstance. You need to write a picture of book Barry, I think, um, I think I should get a five year old to do it. They have the insight that very often we in a crowd, Miss Barry, you don't miss much. I'll get it that. Who's on Masters and Business next this week is Pedro rp is the chief marketing officer for a b in Bev. They are a giant beer company with everybody from bud Wiser, Stella, Michaelobe Corona go down

a list of beers. They they are typically the largest beer um producer and seller in every market. They're looking forward to that. It should be an interesting conversation for pandemic times. Barry Rittles, thank you, founder of Rittles Wealth Managements, Bloomberg opinion columnist and of course host of Masters in Business. What's time turned to the market once again and we're seeing continue improvement really for the indusease after hitting that

low right after the open. The nastac is actually of eight tenths of a percent now. But for a bigger picture look at things, let's bring in Lisa Shallow, Chi's chief investment officer for wealth management at Morgan Stanley. Lisa, what do you make of these these moves? We're seeing quite a bit of volatility even though the vix is below thirty. But you know, we hit the bottom today and now we're suddenly up more than half a percent

in the sp Uh. Yeah. So look, I I'm in the campus says we are definitely, you know, still in correction territory. I think we're getting a bounced today off of the phenomenal housing data, uh, you know, which is you know, clearly a high point um for the for the VHA recovery and and for you know, the overall

economy and for the jobs market. But if you think about, you know, why these markets are in correction, I really think we've had uh kind of a triple play here where we've had to simultaneous delay of the much anticipated US fiscal stimulus, which now looks like it may not happen until one and I think from the job snumbers

we saw this morning that could be problematic. Um, we had disappointing FED guidance last week just in terms of you know, the Fed not really providing um any additional clarity on on their tools or their policy or metrics around average inflation targeting. And last, but not least, we just have these intensifying odds of a chaotic and contentious US presidential election, and you put all that stuff together and we're just going to have wider risk premiums in

the short term. So I'm not surprised that that we kind of touched, you know, correction territory in the SP five this morning. I think we may revisit this before. So at least us over Yeah, so at least if in fact, you know, we're not going to get fiscal stimulus. Um. You know, the FED has done pretty much the majority of what it can do to stimulate the economy. Does that suggest from a portfolio perspective that I just kind of focus my portfolio and what's worked, the proven tech

growth winners. I don't try to rotate into some more cyclical names. I don't buy into that at all, because what what what we're seeing in the marketplace is because to your point, uh, FED guidance, UM, you know, didn't really add to the debate. We're seeing, uh the treasury market not really act as a diversifier anymore. UM. And you know, while we've had markets down ten percent, we mean, you know, treasuries trading in a super tight range on

yields of you know, ten to fifteen basis points. Maybe we've got move volatility at all time lows UM. And so uh, you know, if this is as low as rates get, uh, the valuation on my tech trade is vulnerable because so munch of my high pe s were premised on ever lower and lower and lower rates than we're not getting lower rates. We're not getting higher rates, but we're not getting lower rates zero How much lower

can they go exactly? And so so you know, I'm not convinced that this idea of just you know, go back, hide out and what works, which is certainly today's trade, I don't know that that's really got got legs. Our advice to two clients in this environment is look in the short term over the next two to three months, in this this period of uncertainty, gold tips cash uh, and then for for truly long term opportunistic buyers who like to buy dips, we're looking at a quality cyclicals,

high yield credit. You know, some of the things that have come off a little bit here, but we that do our leverage to to a pro cyclical rotation at some point. It's pretty interesting because gold is also also about a hundred bucks in the a couple of weeks, So I guess now would be the time to get in if you're going to get in right at eighteen fifty announce I I am, and and that's certainly what we're recommending to our clients. Yes, what are your clients

most concerned about macro wise? Is it the election and uncertainty that maybe might follow it. Uh, it is. Look, so you know, as as you know, portfolio strategists and investment officers, we typically uh you know, always take these these periods of time around a presidential election to remind, you know, our clients are the facts, and to remind them that that typically it's not presidential elections that that

determine things. It's policy. Uh, and policy tends to be driven by the composition of Congress and things of that nature. I at this time is different. And what's different is this idea that somehow we're not going to have clarity on those issues, um whatever, and maybe back for a punt until December race that and some are saying, you know, if this gets contested by a Supreme Court that has just recently you know been changed, uh you know, not

until January. So this is different. And so what we're just saying is, look, we don't know what it means. I know that this is a level of uncertainty. Uh, that does wrought widened risk premiums in a very short term. So this is very different than than what we typically say, which is, hey, this this doesn't matter, try to look through it. Lisa Salad, thank you so much for joining us. Lisa is chief investment officer the Wealth management group at

Morgan Stanley. They have about two and a half a trillion dollars in assets on their management and we always love chatting with Lisa to get her view of the market here and uh, this time is different, Vannie. I think as we think about some of this election uncertainty that I think a lot of investors are starting to

really get concerned with. Yeah, I mean we love to see the president doesn't help things by making comments on on a daily basis, which you have to sift through and decide, you know, do I take this headline seriously? Do I take this headline seriously? And you know, if you have a lot of cash at stake, you really want to be parsing that pretty carefully. Yeah, exactly right.

And I think a lot of folks are saying, let me just get a little bit conservative here, gold tips things like that as we head into the election, and we'll recalibrate afterwards. Income inequality. Wealth inequality is an issue that has been growing in stature for Americans are really for many years now. Certainly the election became very important. Ben Steverman Personal Finance, Edward Bloomberg News joins us here Ben, really interesting story here Harvard talking about economic carnage in

the wealthiest zip codes. What did you find? So this is about Ross Chetti, who as he's he's been one of the driving forces behind the inequality converse issue comes. What he does. He's an economist at Harvard. He has a staff of about forty people. UM. Philanthropists have been really um supporting him for years and um. He uses these giant data sets of tax data and UM census data that really track Americans um individually, over over over time. And he studied inequality and race and and um uh.

He basically has diagnosed the American dream as dead because Americans now aren't earning as much as their parents do did or their great grandparents. UM and UM. So what he's did when COVID hit was he kind of just stopped everything and he built an economics tracker using private data from companies like MasterCard into it that really shows day by day, week by week, state by state, neighborhood

by neighborhood. You can really see how the economy has been playing out and and see what's happened with small businesses and consumer spending and jobless things and all sorts of metrics. Really shows the devastation that's happened since March. You can see it by the way at track the Recovery dot org and there's a button on their saying explore the data, and you can literally go into the smallest of neighborhoods and figure out who's been suffering the most.

And it turns out that his charge shows that by April, the bottom quarter of way journers, so those making less than twenty seven thou dollars a year, had lost more than three times the number lost by the top quarter, defined as those who are in more than sixty annually. It's it's pretty phenomenal how it shows income inequality. What will be done with this, Ben Well, it's a really

good question. I mean, as you mentioned that data, it racially shows the recession is over, or at least it ended in July for the top who are and a lot of those people are just staying home and they're not spending money, and that has sort of been a It's clear from his data that that's been the driving force of the problem. It's not the it's not the lockdowns, it's not the shutdowns ordered by the government governors. It's the fact that people who have means are not spending.

They don't feel it's safe to go out and spend their money. And so what can be done. There's a lot of small policies we could we could be doing, and that's part of Chetty's work is to look at, you know, what can we do for the education system to help low income people, what can we do for um housing. But but I think the thing about this recession that's weird is that we're kind of well off people are confronted with it because it's the people we used to interact with on a day to day basis.

And I think he's hoping that that changes the conversation about this stuff going forward, that we put more effort into helping the bottom of the population advanced economically going forward, and that could be a range of policies. So Ben is the certain, however, that this pandemic and the economic impacts could in fact not only widen the gap, but

make it perhaps even more permanent. Absolutely, I mean, I think we've already seen the gap widen up until you know, up until July UM that stimulus was really helping low income workers and in fact, a lot of them were making more than they had made before before they were

working because of the unemployment benefits were so generous. But now that that's expired, and now that we have these major changes happening in the economy automation, more online shopping, less in person services, um, there's a real concern that first of all, this becomes a little bit more of a normal recession and the the economic damage really starts to spread to new sectors. And secondly that um, these a lot of these people could be left behind for

for a generation. Here we could have a real permanent problem with some of these workers basically becoming outmounded. And again you can see all of this data at track the Recovery dot org. It is Raje Chetty's project at Harvard, and of course he's got you know, funding from hedgehund managers and so on as well, and it's in their interests to figure this stuff out too, because you know, there's a lot more concern over the social conditions of

this country and what might actually happen if it gets worse. Right, So there's there's there's also, you know, an element to the richest wanting to solve this in some way. I mean, what does it say about the large inner cities in the biggest cities. I'm talking about San Francisco for example, and Manhattan. So this is the thing. So we've been able to show he's able to show that there was a there was a substantial recovery in in April and

May as businesses open back up. But if you look at those wealthy neighborhoods where wealthy people weren't spending, businesses were losing seventy of their revenue. And not only is that devastating for those businesses in the short term, a lot of those businesses have very high rents as well. So that's that's that's why you see all these businesses.

If you look at the Upper east Side, if you look at Midtown Manhattan, if you look at um wealthy parts of San Francisco, those are the worst hit neighborhoods in terms of the small businesses and the workers in those businesses are obviously coming in from other places. Um, a lot of them are low income, and um, you know now with unemployment expiring, they're really in a desperate situation. Alright. I would urge everybody to try and find this story

by Ben Steuperman. It is called Harvard's Chetty h E. T. T Y finds economic carnage and wealthiest zip codes. But also do have a look at that data tracker, which is that track the recovery dot org. And also just generally it's good to know about RAJ Chetty's project there at Harvard University. Lots of volatility with futures, equity futures very low. This morning we opened up a little bit in the green and now we're giving it back here. So we had it just a kind of a strange

morning here with volatility back and forth. Uh, you know, not much big movement, but again some plus some minus, some greens, some reds. Gotta handle on what's going on in the markets. We welcome Sarah Conteck bloom Brick Cross Asset Reporters. Sarah, thanks so much for joining us here. Kind of a strange day in terms of economic data as well. We had the jobs those claims came in the weaker than expected, yet housing very very strong. Yet again,

what do you make of it? Right? This has kind of been the story all along for COVID nineteen and what it has caused in the economy. You look at the labor market and sure, while we have seen immense approvement from March, still very very downtrodden, and the pace of the pickup from here, it seemed as though the improvement in the labor market has topped out a bit. However, the housing market has just been booming, and we saw

that once again this morning with the housing data. And as your prior guests Lisa did say, we did see the markets turn around the same time that the housing data came out, but at the same time we also saw it turn right as the SMP five hundred was hitting its one day moving average, which is around thirty. That's also just about the level that demarkets that ten percent correction. So we do see some support levels swooping in, but the benchmarks just turning from green to red to

green to red once again. Uh. Certainly of all tile morning, Yeah, I feel like m Life team hardly has a chance to get a piece out when they have to sort of undo it because the last piece there it was about the US stocks finding their footing in the early going and recouping the loss. It really is pretty phenomenal. I mean, our retail investors driving this market in any

way anymore. Look the move these moves that we have seen are very quick, and there have been uh some signs that the retail market is still very, very heavily involved. Sundale Capital Research they compiled data for the o c C options data and they actually found that last week, while we did see market selling off, many short term small options traders actually increased their bets on a market increase.

So they're very much well involved. They're still pretty bullish on these markets, which makes some think that maybe the froth that was really built up in the month of August has not been completely shaved off. And you also just look at what's going on the likes of Snowflake, for example, with its I p O. You had a stock yesterday took her sp I that announced that they were going to be an electrical vehicle company, and it absolutely just surged. And those are really the hallmarks of

what retail traders do. If you look at some of these online forums, you'll see them discussing this. So we do still do see the footprints of retail very very much in these markets. Sarah, interesting story on the Bloomberg insiders selling stock at the fastest pace. Since I typically don't to see those types of stories, that doesn't suggest a healthy upward bias in the market. It doesn't, and

especially coming from corporate insiders. When you think about what is going to go forwards with a company with their profits, with their revenues, what the economy is going to look like going forwards, I mean, it's typically the insiders at these companies that have the best sense of what's going on at these companies. So when you see a sign like this, The data actually also came from Sundale Capital Research that corporate insiders are selling their own stock at

a very fast pace. I mean, that doesn't give you a very encouraging tone on the markets when those who lead these companies themselves are trying to get out and meanwhile getting out in the middle of a sell off. I mean, we've really seen a sell off this entire month, and they haven't been buying the debt. I mean, in some ways, it says more about the economy than their own companies right, or than the market in general, because

they're obviously selling into the downturn in the market. But perhaps it's because they've extended themselves or who knows, right, who knows how how executive shape their lives, let's put it that way. So there, what what about the back story today? That's also getting my attention this idea that there isn't enough transparency for investors and SPACs with the incentive process. I mean, investors and SPACs are they're they're

pretty sophisticated. Now, uh, not necessarily you would think that some are, but SPACs have also been a very big area for retail investors, and retail investors have really been flocking to likes of SPACs. I remember it was a couple of months ago when we actually had the spack called Spack was one of the most popular stocks or

SPACs on Robin Hood. Um. So, whether or not you want to call them sophisticated, maybe not, because when you think about a SPACK, you don't necessarily know what it's going to look like in the next couple of years. I mean, you're writing a blank check essentially, So there could be some worries surrounding that, but I do want to hide like this morning, the one thing that really stands out to me, and something that's really been driving markets recently, is the real rates and inflation story and

that still holds today. For example, if you look at ten year reel yields, we actually see them ticking a little bit higher once again. We see inflation break even coming off once again. And that wraps into this story of if fiscal stimulus isn't coming through, if we are worried about COVID once again, you have an upcoming election, what does that mean for growth? What does that mean for election? And maybe these inflationary bets that investors had placed just a month or two ago, maybe they went

too far with that. Sarah plans I thank you so much for joining us. We appreciate that, Sara Pans a cross asset reporter, giving us thoughts on what's going on the market again, Vani, you know, wh when you look at the equity markets, it is has been a morning of you know, not big moves per se, interpret percentages, but just kind of back and forth between red and green on the screen. I think the market is trying to get a sense of you know, is it the

the economy? Where are we in economy? Does you take a look at some of that data that came out this morning. Yeah, And interestingly, the VIX is now above thirty, so it seems like the big is reacting obviously to the volatility that investors are, you know, engaging in in this market. It's going to be an interesting why this afternoon. The dollar index as well is above ninety four. It's actually at ninety four and a half full, which is you know, phenomenal turnaround from earlier on in the week

when we saw it below ninety three. So that's a pretty huge move. Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever a podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.