Barry Ritholtz: Use Your Disillusion II

to walk away. I know I had a hard stop. You like to stay, that's your favorite term, and I had to go. But Barry was just in it. Well, he wasn't done, you could tell, and so you took one for the team. You stayed with him and talk for another forty five minutes. It was it was longer.

We had to edit it down. Uh. And you know the best part about talking with Barry is just that he's he's a fabulous interview and of you were so that was we just kept It was like we brought out a couch and he laid down on the couch and we just kept going. Yeah, you can tell talking to him that he's thought about most everything. So here's this equel use your disillusions too with Barry Ridthholtz. So you've done twos interviews for Masters of Business. What do

you think are that things that you've really learned? That the things that made you go ah ha, what are those? There's a handful of things that continue to surprise me. Um and I think at this point I'm a pretty good read it when people are just b SNG for spin. So first, the role of luck in successful people's lives. This isn't false humility. This is when you have people like Leon Kooperman and Howard Marks and Ray Dalio say, you know, it helps to be smart, but you gotta

get lucky. I've heard that over and over and over again from people. But how do you how do you think people get lucky? Well, there's an old line about luck is what preparation meets opportunity, and there's a lot of that that's absolutely true. And I think if you're born to middle class parents in the United States and the latter half post war era, you're lucky. You're ahead of you guess what you were born on third base? You got your your head of eighty or maybe the

rest of the world's population. I was born in Brooklyn, I lived outside either in New York or outside of New York my whole life. That's a huge bit of luck for me, and somehow I wander into finance. That's tremendously lucky. When you when you when when Ray Dalio talks about that, when, um, I'm just going down the list. When Cliff Astenest talks about serendipity, When when people like that say, hey, you know, I know I did well in school. Um, well, sometimes there's there's just fortuity. I

don't know how you make yourself lucky. But but when and when Nobel Laureates say that, When when Richard Faylor or Danny Kahneman or Robert Schiller says it helps to be lucky, you don't dismiss. So that's that's one thing. The second thing is is how many people are willing to say I was wrong. I got this wrong, and I realized I had to make a change otherwise I

was I was in trouble. The ability to be have some humility and put your ego aside and recognize the real world um is another theme that comes up over and over again. I'm impressed how often And I've added that as a standard question on the podcast. Hey tell us about a time you failed and what you learned from it? Oh god, Um, so I have a lot of failures. Um I uh, I'm I tend to be dismissive of of people. I I sometimes get frustrated when I'm trying to explain something that's obvious to me. How

do you not understand this? Mark Andreas, and I'm dropping names left and right, keep going. Mark and Reason tells the story that their favorite investors are the guys who they like peppering with questions, peppering with question and these guys are getting frustrated. Hey man, you're supposed to be smart, You're Marked and Reason. How do you not understand this? He tells that story like you could see. These guys are just they've thought it out so well, and it's

such a deep part of who they are. They're frustrated that that he the venture capitalist, doesn't get it. And he tells the story. It's very charming. He speaks even faster than I do. Um. I love that story because I totally relate to that, And sometimes I'm frustrated this is obvious how do you not get that? So that's a really terrible, UM personal habit. I think that's a

big failure that I've been working on. UM. There have been decisions I've made over the years that I look back and I just, oh, my god, how did I make that decision that was so terrible? UM. I think a strength is your ability to recognize error and reverse yourself. So I'm pretty agnostic. As as much UM as this room can barely contain my my oversized sense of self, I am very comfortable admitting error and saying we have

to fix this, this is a mistake. There are a bunch of of errors that are just way too embarrassing to even bring up. But trust me when I say I've made lots of errors. I've made lots of failures. That my my favorite part about failing is new ones, Like I try not to repeat the same errors. I'll let all right, we've done that. Let's make a different mistake and see what we can learn from that. I think that's a healthy philosophy. What's a challenge that you're

wrestling with right now? That's an interesting question. So anytime you're looking at the future, anytime you're trying to figure out, UM, what you want to be in what your company wants to be. You're kind of projecting and extrapolating out, but really beyond a quarter or two, everything gets really really fuzzy. And so you don't know what the economy is going to do. You don't know what the mark is gonna do.

You don't know what sort of scandal is going to come along that either helps or hurts your underlying business or news event or whatever. And so I'm I'm wrestling with So we've been growing really rapidly. We started with with five people and ninety million dollars. It's now ten x on the assets and five x on the people, and I wonder at what point do we like have

to throttle back? Uh. I did an interview with Ken Fisher, who who's fascinating guy runs a hundred billion dollars probably the most successful r i A in the contrary and UM, and our farm is also on our I A. When when Eric says you're an advisor, I interpret that as you you manage a registered investment advisory. So when we UM when I had a conversation with him, he's like, you guys are about to be a billion dollars. You're

about to be five years old. Suddenly everybody who has those restrictions they come off, and there's a different group of people who are waiting in the wings to talk to you, but have been unable to buy their own by laws. What are you talking about, Kenna, I know of no such thing like that, So I hope he's right, But that's going to be an interesting challenge when when we get to that. So I have like an imaginary pool of water that you just kind of like eventually

wait into. You know, institutional is a very different business than high net worth and families and or even you know, UM modest net worth on the on the robo side, on the on the lift off is are are automated UM investor. It's a very different arc of conversation. When most people come to us, they know who I am,

they know Josh, they know Ben. You know, it's always one of the guys in the office was telling a story that they're they're speaking to somebody and the person says, you know, I was reading bat Nick the other day and it's like, wait, we call him Batnick? How are you calling him Batnick? So it's it's it's that's a very different interaction than writing up responding to an RFP for an uh an investing statement and what does the portfolio look like and what does the cost structure look like? Bloah.

So I think that's a really interesting side of the business that I don't want to say we've neglected. We just haven't focused our attentions on it because we've been busy with everything else. I'm kind of fascinated by that and somewhat concerned, Hey, is this something we could bite off? Do we have the skill set, do we have the personnel? Do we have the intellectual child ups to play in those waters? I think we do, or can easily shore

them up with one or two highers. But to me, if if Eric is right about hey, is this active to passive transition taking place on the institutional side. I think it is. And whether we can and swim in the that ponds time will tell. But that's something I'm I'm really thinking about and kind of fascinated by. What do you think you need to swim in it? I

think you need a multi year Gibbs track record. I think you need a number of I hate the word products, but a number of institutionally focused products that are more than simply plane jane Um indices. We never want to try and sell performance to people because then I think that's the worst side of the business. Because every you look at the turn rate at a lot of active shops, and I don't mean giant active shops, I mean any decent, well regarded shop with a relatively good track record that

is the least sticky money that money moves. I'll give you a perfect example. I won't mention the name because I don't want to embarrass anybody, because I think they're right. Also, that's why I don't want to embrass them. So value has significantly underperformed growth for most of the past decade. Value typically goes through these long periods of time where it underperforms growth, but over over longer periods of time, value actually significantly outperforms growth, not by a small margin,

by a nice junk of of performance. So if you're a value shop with a great long term track record and your past five years you've you've lagged by a percent or three, I'm amazed how money flies out of there um and and when you see these outflows, you know that's the net outflow. You're not seeing the full churn. A lot of these firms are adding ten billion dollars as they lose eleven billion dollars, so they're seeing a billion in and and outflows, but really it's a multiple of

that because of that gurn rate. And I'm I'm just astonished at you know, what have you done for me? Lately? Seems to be the institutional active theme And what a surprise that there is a move too passive, because you know, West Gray at Alpha Architect wrote a wonderful piece. I think Jack Vogel or one of his other guys um

was on this. Even God would get fired as an active manager because God, with a perfect knowledge and omniscience of what various factors, what various attributes of a portfolio are Gonnau perform still means you go through an occasional down draft when you When you look at Amazon and Netflix and Apple, all of them have suffered, and Google for that matter, draw downs multiple times in their history. So it doesn't matter how good a manager you are.

If you're long Apple, if you're long Google, if you're along Netflix and it's down, your clients are screaming at you. Despite the fact that Hey, I'm omniscient. I'm telling you Apple is going to be the biggest market cap in the world. Google is going to be right behind it. Netflix, Flixes, and Amazon are gonna grow. Just ride it out. You're fired. Would you pick that guy up? Oh? God, as a portfolio manager? Um, as long as we get a fair few negotiation, I'll put him on stamp. What's that top

line of his resume? It looks like it just says God. It's one word resume, God, God? Do you really need more than that created the heavens in the earth? No, you don't need a what's this little thing about the flood? Can we have a conversation refined print on that one? I I don't think so. But it's called the Bible. So another kind of meta question for you. When you look at what you do, how you use et f s, how you manage people's money, what do you think could

disrupt you? Well, you know, there's an inevitable market crash out there. It's somewhere off in the future, and hopefully the day before we don't say something like I don't see your market crash coming for years and let's let's we're gonna introduce leveraging options. We want we want everybody fully right fully taking a vent. So other than like an unforced, really stupid error like that. Uh, you know,

the next recession is going to be a challenge. Trump is continually a challenge, not just because our clients are left of center or right of center, whatever. It's just a random element that people have a hard time dealing with. I am constantly having the argument that you have to separate the you know, the hand waving noise, the old cap tweets, anything that doesn't impact discounted cash flow, profits and revenue, um, you have to ignore. So now we're

not going to war with I ran that's a Russia distraction. No, we're not. He not well, if he fires Mueller or not, he'll have to deal with the repercussions of it. But none of that impacts profits. Trade war and tariffs, even though we've been told they're easy to win, it turns out that may not actually be true. And my worst case scenario is, and I'm on record saying ignore the president until he does something really stupid, because most of this is noise that doesn't matter. This is the first

you know, the camel's nose under the tent. This is the first entry to all Right, you've said and done a number of things that are sort of shocking and unprecedented. Let's just say it's not business as usual in d C. Because you're draining the swamp and all that other fun stuff. This is the first thing that you look at, even the tax cuts, which every analysis of them have said, this is not a well crafted tax reform, but hey, it's a couple of trillion dollars. And by the way,

clients hate one. I say this. I know you may not be the biggest fan of especially if you live in a blue state and you lost your state and local taxes. So we have a lot of clients in California and New York and and Oregon and and um uh, Connecticut. We don't you know, people in debt Texas and people in Florida. They don't have to worry about that. But

it's just still a couple of trillion dollars. And yeah, it's bad for the deficit, blah blah blah, but give me a trillion dollars, I'll throw you a hell of a party. Someone much smarter than me once said, this is the first thing that this administration has done that you could see the immediate effect in the economic data. We're starting to see the push through for inflation, and that could lead to a series of dominoes that has a very negative consequence for the stock mark. Can we

talk more about that inflation? Like, I mean, that has been such a theme for so long, Like, I mean, that's basically what hedge funds have lost their low INFLA as lower for longer has been. I've been in that camp. And yet you know, as interest rates start to end up a little bit, we start to maybe enter a world where that debt that we're all looking at gets a lot more expensive. Because sure, that's a big issue. So although I don't think it's the apocalyptic issue that

the the the faux deficit hawks have have pretended. So play this out with me, like, what how much longer can it stay low? And what does that end game look like for us as investors? So to me, the biggest two variables in inflation are commodities highly dependent on the dollar, and wages. We've started to see wages tick up on the endpoints of the wage distribution curve. So we've seen a number of states and cities raise the minimum wage that's ticked up if you're a Walmart, a Starbucks,

a Target. You've raised wages at a number of other companies just because there aren't enough bodies and people who used to get hired who were perhaps not here fully illegally, that that labor pool has gone away. So that's a very sort of um that tends the non legal immigrants tend to be a cash business, so we're not seeing that in the data, and they tend to be low age workers taking jobs that Americans Americans don't want to wash dishes or pick tomatoes or any of the other

or working Trump's kitchens. Right, So so you end up with that hasn't had a wage and impact, hasn't an inflation impact, either officially or unofficially. But when we look at the tariffs and we look at so we've seen some wages go up. On the low end, we've seen, uh, the unemployment rate went up, but for the right reasons, more people coming back into the labor force. We like that. On the high end, you've seen the STEM jobs science, technology, engineering, math,

and of course anything involving technology, coding, software, whatever. But those have consistently been well paying jobs with good benefits. And stock options and what have you. But those continue to rise. When you see the rent costs in places like San Francisco, that's just telling you the tech world is booming. And until the tech world stops booming, those rents are going to continue to stay high. Uh So,

it's very regional. It depends on the industry, it depends on the region, It depends on your education level, how much your wages are going up. But now we're starting to see um so that's not a big inflationary issue wages. But when we look at commodities, what is half the cost of car cars medals? What was selling sixteen seventeen million cars a year and exporting a bunch and importing

a bunch. That's potentially problematic. You look at what happened with Harley Davidson, You look at some of the appliance companies, so Whirlpool and who else said something. Uh GM GM basically had decent numbers, but said perspectively, we see this is right. We see this as a problem. This is gonna affect our our sales, this is gonna affect our profits. The tariffs are really problematic for us. So you end up with you know, if you want to call it

self inflicted wounds or unforced there. That's before we get to this insanity of using a depression era um, a depression era a law to send twelve billion dollars to farmers. How about this, let's not have a trade war. I know it's I know that's a radical view. I know that's crazy, but it seems ridiculous to say, all right, we're gonna have an eighteen billion dollar export tariff and

we're gonna give you twelve billion dollars of it. Why are the taxpayers funding tariffs for one sector just farms? What about the manufacturers? What about the people who who are are writing software? What about Apple and and that sector that's gonna suffer from from these tariffs. It just seems that, you know, if it ain't broke, don't fix it. I know everybody in the White House seems to think that the United States is on the losing ends of

of the world trade. When you break that down in specific details, that's true for people with less education, less skills, in certain geographies in the country, in certain industries. So maybe rather than take twelve billion dollars and give it to farmers, which essentially is you're giving it to China.

Why don't we do what smart countries around the world, like Germany have done, and say for the people that global international trade which has helped keep global peace and helped boost the economy around the world, Let's do what they do and train these people to get the skills to get into better paying jobs. If you were if you used to make socks at a mill in North Carolina, I'm sorry, but that's a very low cost industry that's moved elsewhere. Yet Americans are not very good at having

that conversation. Um, well, it depends do we want to be realistic and do we want to be adults or do we just want to yell at our perceived enemies. Yeah, but the it's easy to do that until inflation comes up and the Fed titans and we have a recession wholly unforced error. And the unforced error, I'm guessing if you went to masters of business, that would be one of the things that they would say that they would try to avoid our unforced airs. You know I have

I don't ask that question. I asked you know who your mentors? What are you reading? Tell us your favorite books? Um, what what's the you know, what's the thing that most people don't know about you but should like questions like that, this is such a specific question to such a specific set of policy things that it's shocking. And you know, the outraged cycle has just exhausted everybody, so you're not

getting the intelligent debate. You know. I used to call myself a Jacob Javits Republican growing up in New York. Here's a guy who was against the war in Vietnam, was against unfunded spending, and that includes um, that includes entitlements and tax cuts. But believe the government shouldn't be in the bedroom. The government had nothing, no business saying who could get married, whether you can use birth control, abortion rights, etcetera. And I thought, oh, that makes a

lot of sense. And around twenty years ago, the Republicans just made a hard tack to the right and left rationality behind. And it took a long time for a lot of mainstream Republicans to sort of bolts. You look at guys like uh Rick Wilson or Bill Crystal at the end, r oh, they are a National Review, They're

not They're Reagan Republicans. They're not Trump Republicans. And under Bush you had people like Bruce Bartlett, who was in the Reagan administration on the Bush administration saying I don't recognize the Republican Party, and a lot of people thought, come on, Bruce, you're being a little you're exaggerating a little bit. Turns out he was right, and he identified a schism before the cracks were visible and the House

started to fall apart. The adults in charge of the Republican Party just can't seem to bring themselves about to saying we're the party of free trade, We're the party of non government intervention. What is right that it's so, I don't recognize this Republican Party and their affiliation. The party affiliation was pre Trump. I don't know what what happens post Trump, or maybe I'm wrong, Maybe the entire former Reagan Democrats moved to UM moved to the Republican Party.

But it looks like poorly thought out economic policies could lead to a very very significant damage. I still think that's a low probability event. I still think the adults are gonna are gonna take charge, but it's a non zero event. It's I don't know, possibility that this gets bad and spirals out of control and gets worse. That's

a happy note. Happy note. Back to portfolio management, how do you see that changing the rise of quantz has been a huge, huge element that evidence based investing, rules driven portfolios, things along those lines where it's not I'm scratching my chin and saying I think we need a little more semiconductor in this. That that stuff has gone uh to a large degree the way of the DODO.

And now we're you know the fact that you can make an argument and say here's what the data shows, here's what the evidence shows, and and here's what we think takes place over long periods of time. The fascinating aspect of the reflexivity of markets is whatever works currently is likely to eventually stop working, Because isn't that a wonderful thing? Yeah? It never ends, right, it's constantly So you have to do, Yeah, you have to be aware

of what used to work that's not working anymore. And is this temporary like value temporary being out of favor or do the steam belt and leather steam steam engine and leather belt companies? Is this a permanent uh? Sayonara? And so that's that's a judge McColl and you have to be pretty reasonable to figure that out. So that's a that's a big change the concept of are you really active or you really pass of are they mutually exclusive?

Can you be you know, two thirds passive one third active. Um. I think that's an interesting discussion, And you know, I'm fond of saying if if you can come up with a defendable thesis for why you want to have some percentage of your portfolio in an actively managed, non representative holding,

I don't have a problem with it. We we have certain clients who are young and want a very aggressive active strategy and we don't like paying hedge fund fees and uh Sam with venture capital, so we found the only outside manager we use has a micro cap funds that seems to parallel venture capital investing without the lock up, without the two and twenty uh James o'shanna see oh Sam, So that that might. Now the problem is it doesn't scale.

You can't put a billion dollars into it. But if you have someone right, but if somebody wants, well, you can't because there's only so many micro caps. More. On the other hand, if someone has you know, five million dollars and wants to put half a million into something that is wildly volatile and but is gonna scream when the market goes higher. It's one of those. Uh, we work with an outside manager from municipal bonds. We work

with an outside manager for just that. And it's a certain kind of drug, right, We don't have the expertise in that. O'shannessy stuff is great. Go read What Works on Wall Street is one of those seminal books that really is amazing. Um. So I'm not like a proselytizer. I'm not one of these people says no, never own anything active. Hey, our tactical portfolio has to be considered active. It's evidence based, its rules driven, it's it's done well.

But it's not passive. You can't say that's a passive holding. But there has to be to us. If that's the emotional the valve that allows people to leave their main portfolio alone during a market crash, then it served this purpose. But you know, we don't want to find ourselves rationalizing things constantly. We don't want to find ourselves making excuses. We try and think it through beforehand, and that's when

you you add that sort of holding. I think that there's going to be more of that in portfolio management. I think rather than just saying this is the mad pursuit of alpha, it's gonna be something closer to how does this particular holding help you reach your long term goals. That's a very different conversation than I think X funds is going to outperform the SMP five. Well, what's your what's your track record and picking X funds? How has it done? Why should I think you have the ability

to do that. So there's a funny story about this. Most people can't pick stocks, so they hire somebody to be their stock picker. But most stock pickers can't pick stocks an octopus, So you're you're right, you're hiring somebody else to hire the person who's gonna pick stocks. And and you get that like recursive um fractal, So you're hiring a person to hire the person to hire the person to pick the stuff. And it simply doesn't work. And when once you build in the cost structure over

long periods of time, it's a losing bet. A you can't find those people, be finding the people who are worth it um beyond their their fee structure. I'll give you another active fund that I think is kind of fascinating. Um Joel Greenblatt who ran Gatham Capital and put up insane numbers in the nineties a year for ten years. That's just insane. So he came up with a quantitative way to look at the SMP five hundred. You want

to own an index, here's what we're gonna do. We're gonna own the SMP five hundred that We're gonna run around quantitative screen through this and I'm gonna add a big slug of the best stocks in this index long. So now we're like a hundred and I'm making up the number long. Now we're going to run a similar screen and we're gonna find the worst stocks and we're gonna be short that. So you're long the SMP five hundred and then balanced long short long the best, short

the worst. In theory, if that works, the next time the market crashes, you'll do much better than the average INDEP. So you could you could rationalize that a little. We can package that right, Yeah, And he has a three year track record now, which is which is so? So that's the sort of I don't remember the g I N d X. I think it's called index plus UM. I may be getting the ticker wrong, but it's Joel

Green Black Index Plus. So what's what's incredible to me about how ETFs have sort of changed investing is that that thing that you just described that is out there and the dude who used to put up massive returns like that guy can't do that anymore because there's this other et F that can do it for well, I don't know if he can't do that anymore, I think

he after you've run a fund like that. By the way, Gotham at fifty a year, I want to say, about halfway through its run, like Renaissance Technology said to the outside investors, Hey, thanks for everything, but you're all a pain in the ass. I'm going to just manage my own money and continue to put up killer numbers. Okay, So, speaking of managing your own money, how do you deal

with that? I eat my own cooking, my own four oh one, my own portfolio, and all your wife, everybody in the firm invest in our own four o one, our four oh one case are in our portfolio, our personal investments on our own portfolio. Anybody who doesn't do that, I would never even remotely consider giving my money to. And when someone says to me, Well, I want to remain objective. You still have market exposure. You're not trading individual stocks. It's a broad allocation. What do you care?

So A hundred every single person in our firm, our entire four O one k um. Although I think it was Rick Edelman said in My Pantheon of name Dropping said, um, I'm deeply invested in in speculative small cap company, meaning his own company. So there's that. Also, if I had to pick my single biggest holding, it would have to be me and my partners own the firm, were employee owns. Uh So eventually everybody in the firm will have an opportunity to be to be an owner. But we all

eat our own cooking. I don't see how you can run an asset management shop and not. So I'm gonna retitle the conversations with you the world according to Bury rid Holes. But I'm gonna ask a question, okay, which is, having talked about a lot of things, what is the world of investing? According to Bury Dholes, I think investing

is really misunderstood. It's weird. I was such a critic of Wall Street in Bailout Nation that I find myself defending Wall Street, Bogel recently said wall finance subtracts value, and I don't think that that's true. We all carry these powerful little computers in our pockets called mobile phones. That company doesn't come public without Wall Street. When you look at the financing of bridges and tunnels and highways back when America used to build bridges and tunnels and highways,

Wall Street has has done that. The problem is that we took was was essentially a support industry for the rest of the country and turned it into a main industry. Wall Street should exist to service everybody else. It should provide the ability for small companies to go public. It should provide the ability provide the ability for um, mom and pop to make investments in the long term, be it their kids, college or retirement or what have you.

And the entire universe of complexity and opaqueness and high expense should really be replaced. And by the way, complexity and packness the it's not a bug, it's a feature that it's high cost. Opaqueness and complexity hides the cost. It should be much more simple and much more transparent and much more lower cost. That process, while long overdue, is finally happening, Vanguard occupied the niche of low cost.

The impact of Vanguard has affected everybody. And I think that finance or fifty years from now, is going to go back to that service industry that supports the rest of the economy as opposed to the tail wagging the dog. And so there's still lots of things that I think finance does wrong, and there are lots of of UH products that shouldn't be sold, and there are lots of

behaviors and lots of rules right. But overall, it turns out that this capitalism thing works that when Vanguard rolls out a cheaper product that does the same thing, only it's better. Eventually the market place, you know I've described um Gene Fama and E. M. H. I have an OH five post called the mostly kind of sort of eventually efficient market, and eventually markets get it right. It's wrong for long, could be wrong for long periods of time.

Eventually competition drives price down. Eventually, Look, we we had a a wrongly regulated market until the early seventies when the constraints on commissions dropped. Stop and think about Wait, you could do a trade for seventy five and that's considered cheap. That was forty years ago. Now it's free or or insignificant eight dollars. That competitive factor is driving things towards the benefit for investors. We're not there yet.

We have a way to go, but you have to be unless you're losing half your revenue because of companies like Vanguard and black Rock and State Street and d f A and go down the list that are are providing a service at a lower cost at a higher quality. You have to like the direction this is moving towards the investors favor. What began as as Bogel's folly has has expanded and where I don't know, maybe we're in the third or fourth ending of that set of changes.

I could be completely wrong, but I like the direction it's going. So what haven't we asked you? That we should have asked you my favorite books? Who my mentors were. I don't want answering go down, so I I asked those questions every week. Um, I don't know you. We we have been really narrow and trying to stay and I know that's difficult. All with me. You've been great, man. It's a little bit like a river. You know. We're just gonna go with the current and go in to

the UH. To me, the the most interesting change that's taking place is how the millennial generation thinks about money. And I think my observation is working with a lot of young people in my office and just you can't help but rub shoulders with millennials in Manhattan. They're far less materialistic than previous generations. Although that whole concept of experiences versus materialism, um, they're they're brutally blunt and honest.

It's very different than you know, you have a conversation about money with a with a millennial and you say, well, here's a math about small cap and value, and and they're like, prove it, like they show me. They don't want to take your word for anything. They want to see it. Um. Like I walk around with a couple of bucks in cash in my pocket. They like, I pull money out and it's like, what's that paying for lunch?

Pull out of twenty Why wouldn't you use a card? Well, you know it's all right that that's even even the next generation. It's well, on my card, I get points. I get this, I get that I don't have to walk around with cash. I know I have a record of everything I've done, why would you use cash? And I had to stop and say, habit, there's no good

reason to use cash. So but one of the things that you know, everybody talks a lot about monials, but like one of the things that I don't think gets talked about that when nobody wants to do anything about it's like the weather. But here's the thing though, it's like, how are they gonna, how are they going to change? I don't know. I mean they were gonna they would delta bed hand, they would dealta bed hand. They graduated into a terrible recession, UM, a disproportionate numbers still living

at home to save money. Uh. That that's you know, those become seminal experiences that sometimes shape your views. So if you remember or read about the post depression generation, they never used debt, They paid cash for everything. There was no credit cards, there's no loans. Uh. Maybe they took a mortgage on the house and then had a mortgage burning party when they paid it off, usually early. UM. Very different headspace with with this generation. Yet that that

generation created the boomers. Yeah, again, they're every the pendulum swings this way and then it goes too far. In the opposite direction. It swings that way, and that's a continual set a headaches. There's no no getting away from that. Alright. Gonna wrap it up with my last question, Favorite E t F ticker, Favorite E t F ticker. UM. I don't believe weed is not a pot E t F that that has to be Uh. There was one I heard about some time ago, but it did not come

to fruition warm for global warming ticker um. And then there was she is kind of an interesting ticker, although although it hasn't attracted ascid outside of the Calister's fun you know, may that massive influ at the beginning and then it just kind of sat there. It's so you know, I mentioned in the beginning the behavioral economics and how important that is to not only manage your own emotions but your own behavior. There's something fascinating about either stocks

or funds that have a memorable ticker. And I hate to say this because it's so irrational, but if if you don't have a really good ticker like spy UM or q q Q which turned out to be a really good ticker, uh, you're starting as an et with uh.

You know, you got a thirty pound pack on your on your back and you're running up a mount because it's memorable if and you know, there's a whole narrative aspect that that humans love stories not data, and so if you could tell a really good story about something um, it resonates, it's memorable, it it rationalizes the decision. And a ticker that follows that narrative story is the cherry

on top of the Sunday. And it's I hate to say, we go through all this, all this math and all this thinking about diversification and how do we keep our costs low and how do we make sure people's behavior is good and blah blah blah, and then it's like, but if you could tell a good story and have a good ticker, all that stuff goes out the window. And that is really human investing in a nutshet. Thank you so much, Thank you guys for having me. This

has been directed. Thanks for listening to trillions. Until next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple podcasts, and wherever else you like to listen. We'd love to hear from you. We're on Twitter. He's at Ritholtz R I T h O L t Z, I'm at Joel Webber Show, Derek's at Eric Falchis. Trillions is produced by Magnus Hendrickson. Francesca Levy is the head of Bloomberg podcast Bye