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Hello and welcome to another episode of the AdLots podcast. I'm Joe Weisenthal.
And I'm Tracy Alloway. Tracy, you know what topic we'd never really talk about or really do?
We never really do anything related to personal finance. What to actually do with all the information
that we talk about on a biweekly basis? What it means for making money? It's like a huge part of
finance and media, but it's like, you know, I like to talk. Usually like, let's get in
habit with quantitative tightening. It's a tough one because I feel like you can talk about it
generally, but also there's the temptation. A lot of people end up doing this to give specific
recommendations. Right. Like get this credit card or either buy this stock, get this credit card,
don't buy avocado toast, like all this stuff or like, you know, move your money. But like,
it's kind of like cliche topic, but like on the other hand, I do think it's interesting right now
because we've just had this like a sort of extraordinary like three years of like inflation.
Many people have never really experienced in their lives. And so to my mind that raises some
interesting questions like, how does this kind of like change people's behavior and what should,
what have people done in the past during periods of inflation? Like there are really interesting
sort of like personal finance spending and investing questions that like will come out of this era.
Well, absolutely. And also the prospect of just finally actually earning some interest on a
basic savings account. I know it's still below the level of inflation, but for people who've been
earning zero percent for most of their professional lives, I think it's very exciting. I think now
it's kind of positive, right? Because you could point to like five percent in the CD and maybe
inflation, we three and a half. Right. You know, I asked my dad recently about his memory of the
1970s. I was like, what was it like? You know, the first thing he said was like, I could really get
a lot of money out of bank account. Oh, there we go. Yeah. So you know, there's all kinds of
interesting things about like how people actually deal with. Right. And also what happens when we
have a sort of regime change? Yes. And how do people react to it? And how much of things actually
changed? Well, you know, and we've been talking about some, you know, some of the real estate episodes
like that, like how much people like anchor to the zirp era, they're like, you know, as if like that
was normal. Yes. So like when have people adjusted? Is there still a big adjustment left to go?
Like there's just some really interesting questions. Absolutely. Okay. Well, I think we should talk
about them. And we really do have the perfect guest. We are going to be speaking with Morgan House
also a long time writer, the author of the best selling book, the psychology of money is more books
coming out hugely popular in this area. Morgan, thank you so much for coming out.
A lot. Well, Joe and Tracy, happy to be here. Thanks for having me. Can I just say, all right,
I'm going to just say something just to set this scene a little bit. Like I said in the beginning
of the conversation, like personal finances, genres, the little hackney, this kind of cliche.
But Morgan does it while years ago, like 2011, 2012, I was a business insider. Morgan was at
the Motley Fool. And I said to my former colleague at BI, Sam Rowe, Morgan is the first personal
finance writer that I like. And now here's this huge. That's high praise. High praise from Joe.
I mean, I was, I was, I was long Morgan House. Very early on. I was, I was long Joe during that
period as well as well. So this is, this is an up to since then. I've always, I feel like I've
always done the same thing since 2008 when I started this, which was, you know, you mentioned
most personal finance writing kind of falls into two buckets. It's either here's the credit card
you should, you should use or here's the hot stock you should buy. The credit card part, you
know, I was never just, I was never that interested in it. And the here's the stock you should buy
always felt almost immoral to me because you don't know who's reading your stuff. Is this an 18-year-old
day trader or a 90-year-old widow? Like, who are you recommending this to? So because of that,
I always, I just kind of naturally fell into this bucket of like, what's going through people's
heads? I don't want to give anybody advice. I don't want to tell anybody what to do because I don't
know you, but I'm really curious what's going on inside your head, particularly I started as a writer
in 2008. So the world was falling to pieces. And it was just this idea of like, well, what the heck
just happened here? Yeah. And I think once I kind of realized that you could not explain 2008
through the lens of a finance or an economics textbook. It's just not in there to explain the bubble,
the bust, the bailouts, not an economics textbook. But psychology had a lot to say about it.
Sociology, like keeping up the Joneses, that perfectly explained the housing bubble. So there are
all these other fields outside of finance that filled in the gaps. So that to me was like,
I'm just really interested in how you can connect psychology and sociology and political science
to try to explain what people are thinking rather than what they should do.
Yeah, both Joe and I, uh, we sort of started our financial journalism careers around 2008.
We're all the same class as 2008. And it was a great time to do it because you were sort of on
the same level as everyone else. No one knew really what was going on. But talk to us a little bit
more than about your approach. How does taking that sociological or psychological angle actually
inform the way you think about personal finance investing? Well, I'd say there's two elements
to this. One is I'm a writer and then the other is I'm interested in behavioral finance.
And you really have to mix both of those because in writing, particularly as a finance writer,
if you're just writing about data and charts, like a lot of people even in the industry,
it's like it's, it's boring. You're not going to catch new. So you got to tell a good story.
And so I'm always trying to find examples from fields that have nothing to do with finance
that explain how people think about greed and fear and risk. Because not only do I think that
gets you closer to the truth that what's happening in finance, if you can really get like why are
people thinking the way they are? But from a writing standpoint, I think it's more interesting.
If you can be like, oh, here's a story from World War II that explains how people think about risk.
And let me tell you how that bleeds into finance. I think it's more interesting as a writer to catch
people's attention that way. So we're recording this at an event in Huntington Beach at Future Proof.
Isn't one of your most famous stories about parking cars in Los Angeles at one point being a valet?
So yes, it was a hotel here in Los Angeles that I was a valet during college. And it was a high-end,
five-star hotel, a lot of rich people coming through. And there was one member who was just an absolute
animal with money. He was very, very wealthy. I think he was worth hundreds of millions of dollars.
And money has never burnt a hole in someone's pocket so fast. He wandered around. He was,
he was always drunk and he wandered around with a stack of hundred dollar bills. I swear,
six inches thick. And he would just flash money like no other. And we did a lot of errands for
this guy as a valet. He'd tip very well. And one day he came to one of my colleagues and he
peeled off a thick stack of hundred dollar bills. And he said, go down to the jewelry store down the
street and buy me some gold coins. I mean, there are a thousand dollar gold coins. And he came
back all these gold coins. And this guy with a group of friends sat there at the Pacific Ocean
skipping gold coins to see how far they could go. Oh my god. And I remember thinking I was
21 at the time. And I remember watching this thinking like, how long can this last? And it was
probably 10 years later that I said, what's this guy up to? And I googled his name and sure enough,
he went bankrupt. He went his company when I visited. And he was like, when I saw the headline,
he was like, of course, of course, this guy. So to me, it was always so interesting that he was
so smart. He was an entrepreneur who made a lot of his companies built parts for satellites.
And he had a patent that's in every Wi-Fi device. Like, he was such a genius technically.
But his relationship with money was so broken and so bad. So that was like, it doesn't matter how
smart you are. It's not about like what your IQ is. If your behavior with money is wrong, you're
done. It's out. And there's a flip side of that. It's true too, which is that some people who are not
that intelligent by their test scores or whatever, but they have a great behavior with money can
do spectacular over time. I'm probably taking the wrong lesson away from the Sanctote. But
did anyone go after the coins? For all I know, they're still there. All right. Later today, Joe.
This is this is this is good to know. So this is, you know, obviously, there are going to be
individuals who maybe don't have a high income, but are do a good job of accumulating savings
over years or people with massive incomes and blow it all kinds of things. You know, you always
hear these other stories about like cohorts of people who went through something together, like
people who came out of the Great Depression. And then they like, you know, we're like
hoarders or something like that. Or people who came out of whatever it is. Is that true? People
say that all the time. Or people experience like the inflation in Walmart, Germany and support.
Like when you in your research, when you read I take you read a ton of history, like does that
seem to be a real thing? Yeah, definitely. I think every generation experiences the economy in
their own unique way. And those experiences, particularly what you experience in your teens and
twenties, like your formative years where you're starting to pay attention to the economy,
really sticks with you. Everyone is seen or probably heard of the studies about the generation
that went through the Great Depression. And then right after that was World War Two. So that was
15 years of hell. And those people coming out of it, like that stayed with them forever. And
there have been academics who've measured how that impacted them. They're very scared of debt.
Didn't want to invest in the stock market way more. So even when you talk about people in
Walmart, Germany, or the people went through World War Two in Germany or in France or in Russia,
those people were completely scarred economically for the rest of their lives. And more recently,
all three of us became young adults in the early 2000s. So for me, 9-11 was the first like adult
big event. Right. And then so that was massive. And I think for our parents generation
who were adults in the 1990s, when things were so at least in relative terms calm, stable,
prosperous, not just economically, but politically and geopolitically. We're like so solid. And
there's a recession, you know, or, you know, there's a hiccup at 94 and 98. But for most people,
that was like, unless you were a bond trader, it didn't matter. The 90s were great. 9-11 was like,
oh, wow, like we really got knocked down here. But that was a one-time event. Like America's
still as strong as it's ever been. And then in 2008, it was like, oh, we got knocked down again.
Like two times in the last eight years. That's pretty bad. And then COVID in 2020, it's like,
the world broke again. Like three times in 20 years, the world has broken in the United States.
And I think that is like, what's the quote, fool me once, shame on you, fool me twice.
Now that people have been fooled, so to speak, three times in 20 years, I think we now,
our generation believes that the world breaks every five to 10 years. And I think that's a good,
that I think that's the truth. I think the previous generation that was America strong and stable
and nothing bad happens. That was the anomaly. And I think we're a more pessimistic
generation because of it. So I was kind of going to go into that. You know, the one thing
that I've been really fascinated by over the last few years is what sort of strikes me. And
particularly in markets and investing, is this sort of like, I almost call it like a sort of like
nihilistic bullishness. Like you saw it like buying NFTs or dogecoin or whatever. Where it's like,
on some level, it looks like optimistic speculative activity. Like maybe we saw in the late 90s.
But it also has this sort of like edge of like, none of this really means anything.
Well, you're knowingly chasing a bubble or buying a lottery ticket because there's no other way
to money. That's right. The Wall Street bets like bragging about going broke in your Robinhood
thing. Like it seems like we're in this era of like speculation, but not coming out of a
place of optimism. Yeah, I almost think like the the yolo mentality of trading NFTs or whatever
would be is actually like comes from a very pessimistic place. If you're optimistic, then you're like,
I want to own the S&P 500 for the next 50 years. That's optimism. Pessimism is, it's all going to
go to hell anyways. Let's just throw it all on an NFT. Yeah. So it looks from the outset like a very
like bullish like I'm so bullish on crypto. No, I think it comes from a very pessimistic place.
You made this point years ago that stuck with me during the gold bubble if we call it that
around 2011 that there's nothing more pessimistic than betting on a rock versus betting against,
whereas like if you're optimistic, you bet on people and how pessimistic you have to be to say a
rock is going to outperform humans. It's like the most pessimistic thing and I think there's a very
like there's an analogy in there with NFTs. Yeah. Wait, I take the point about people being pessimistic
about these big sort of sociological breaks breaks in society. But if you look at the legacy of
the 2008 financial crisis, it wasn't necessarily a terrible time to start accumulating wealth
and money. If you bought the S&P 500 in 2009, right up until 2020, you'd be doing reasonably
well. What do you think the legacy is of that particular era where we're still sifting through
the wreckage of 2008? We have ultra low interest rates. Everyone's worried about deflation
and subpar growth. I don't know if it was 2011. So if I'm getting this date wrong, I'm sorry,
but I remember I think it was 2011 and the market went up substantially. Does that sound right to
you in 2011? I think so. 20, 25%. It was maybe it was 2010. Maybe it was 2010. We bought a minute
October. Maybe it was 2010. Maybe it was 2010. Maybe it was 2012. I forget the year. But the market
went up 2012, I think it was 2012. Maybe it was 2012. The market went up 20 or 25% and I think it
was Gallup who pulled Americans and said, did the stock market go up or down this year? And it was
like 60% of Americans thought the market went down during a year when it went up 25%. Actually,
I think this was 2009, which makes sense. It makes more sense. I think this explains the question
of like in hindsight, it was a great time to accumulate assets. But during the time even a year
when the market went up 25%, people were so sure that the economy was bad that they assumed the market
went down. And Joe, both of you will remember this. From basically 2009 to 2016, if you were a
bullish on the stock market, you look kind of like a fool and you got dragged on Twitter. This was
like, oh, the Cape ratios too high and there was all this. So in hindsight, it was a generational
buying opportunity, but it was, that's all hindsight. It was very hard to be bullish during that
era. And a lot of it was 2011 was double dip recession right around the corner. And the idea that
the financial crisis of 2008 was just a prelude to what was to the big crash that was coming.
That was a very popular view during those years. And I think it was, it was really hard to be a long
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This is Barry Rittles here to tell you about another podcast we think you'll love
listening to. Masters in Business. Join each week for an enlightening conversation with some of
the smartest people in investing and business. Doing business in Europe, it's all about being
local. Stocks are way too cheap. This is where you want to be. I think life and markets are
intertwined. Subscribe to Masters in Business today on Apple, Spotify or wherever you get your favorite
podcast. We talked about this in the intro. This phenomenon of people anchoring to what they know,
and I feel like for a lot of people, Zurp really low nominal interest rates is like,
oh, that's normal. What we have right now, we're the 10 years yielding 4%, and a mortgage is over
7%, that feels like aberrationally high. Again, going back to the past, does it take a while?
I mean, it must. It seems to take a while for it to sink in that it's like, no, that was the end,
and it wasn't necessarily normal or abnormal, but that was a different time. I think that does make
sense, but the counter to that would be in the other direction. In the late 90s, a mortgage was
7%, and by 2003, it was 3 or 4%, and I think people got used to that really quickly. That was
kind of the basis of the housing bubble that peaked in 2006, is that by 2006, people were already
completely used to low interest rates, that didn't exist four years prior. That's wild.
So I do think people get accustomed to it fairly quickly, and a lot of that mean at the corporate
level, a lot of that debt rolls over every five years, so there's going to be like that credit
cycle is going to wash out in a fairly quick period of time, but interest rate cycles are also
pretty long, like interest rates bottomed after World War II in the early 50s, and then peaked in the
late or the early 80s. It was a really long cycle for them to go from 3% to 15%.
What sort of different behavioral patterns do you observe between
errors of low interest rates versus errors of high interest rates?
I think because the interest rate cycles are so long, and there's only been a couple cycles
in the post-World War II era. It was like they went. What were people in the 1960s doing? Tell us.
So much of that debt, though, didn't really exist. At the end of World War II and 45,
consumer credit barely existed at all. In fact, a lot of the GI Bill was introducing new forms
of consumer credit to make sure the economy didn't collapse after World War II. It was like we
want you to be spenders. So like credit cards and installment loans, a lot of that just exploded
after World War II. But then the rates were so high during that period that it really wasn't
until the 90s that consumer credit just like exploded. So we don't have that much history about
what it is. And so I don't think there's a ton of precedent for what we're dealing with in terms
of like the consumer credit. But there's also a thing where you've seen, I know Joe, you've seen
this chart. I think you've tweeted this chart of as a percentage of income household debt payments
right now are actually very low, like historically near the bottom that they've been in the last 40
years. So if you just look at the nominal amount of household debt, it looks scary. But actually
as like a percentage of income, it's actually very low right now. You know, obviously economists,
like macro economists, the last real inflationary period that anyone remembers was the 70s. And
interestingly, like sort of the grandiose of economics, many of them came a big matter during
the 70s. So like looms very large. But setting aside like how academic economists think from the
from your perspective, we're looking at sociology and history, etc. Like does this remind you of the 70s
or is that just sort of like a fake analogy because inflation was high then too? I think the 70s
were really unique too because in addition to inflation that was so crippling, there was so much
social unrest between Vietnam, all of that blended together to just an era of pessimism. So a lot
of the pessimism wasn't just because of inflation or just because of fed policy. Like there's all
these other things boiling up that made people just really upset about the state of America that
all falls in it. And I think that was true in the 90s as well. It wasn't just economic prosperity,
it was economic prosperity mixed with political stability, mixed with Soviet Union was gone,
so America is untouchable. It was just like all these things mixed together. And I think if you view
optimism solely through an economic lens, like 90% of households don't read the Wall Street Journal,
don't know what the Dow did yesterday. They're putting all these things together. It's not just
is economy strong. It's is Washington in good shape. Is it their political fights or am I
giving my kids school in good shape? It's like all these things mixed in one. I think a lot of
financial economists and journalists only view it through one narrow lens. But that's not how most
households think. All right. So just on this point, I mean one of the oddities of our current economic
environment is that the hard data says we're doing relatively well. But if you look at the survey
based data, if you just look at what people are talking about on a daily basis, it's like we're
already in a depression. Yeah. Basically, how do you explain that discrepancy? I remember years
ago someone saying that consumer confidence like the statistic that's released is fueled by three
things. The stock market, gas prices and politics. And to the extent that that's true, then I think it's
politics is probably what's why that's being in the way it is partisanship. Yeah. And I almost
think it's it's so extreme that no matter the Dow could double and the unemployment I could collapse
to 1%. I mean, someone brought up reason. I think it was Josh Brown, who was like, you guys,
the stock market's near an all-time high, unemployment's three and a half percent. You can earn
5% on your cash. Yeah. Why are you not? Why are you not happy here? Yeah. And I think for a lot of
people, the answer is is politics. Hopefully inflation is soon going to be back at target or
you know, defense target. But we don't know for sure. But we obviously, you know, we had the highest
recently had the highest inflation in 40 years, something we haven't seen. We talked a little bit
about like some of the sort of like nihilistic speculation. What do you see as some other knock-on
effects from the last few years, whether it's the inflation or just the COVID disruption or anything
else that we've experienced since March 2020? COVID was so interesting because it was so binary
in terms of if you were a tech worker in 2020, it would never have been better. Whereas if you
own a laundromat, it's worse than the Great Depression. And the actual Great Depression, in fact,
did virtually everyone at the same worst. COVID was so different. And so you have is probably half
of America for whom 2020 was a great year financially and half for whom it was the worst it's ever
been by an order of magnitude. And because of that, I think when you have half the country that
doesn't understand what the other half went through, that also leads to an era of like, I don't
trust the numbers. I don't trust the statistics. I don't trust the politicians because what this guy
is saying is so counter to what I experienced in either direction. And I think that also just leads
to an era of hyper partisanship of like, if you're saying that about the economy, how disconnected are
you in a way that we really haven't dealt with? And a lot of the reason that a lot of the policies
during the Great Depression and the New Deal got through in a semi-bipar person way is because
the Great Depression impacted everybody. 2008 was, I think, similar to that as well. Like everyone
was going to be screwed if the banks went down. So it makes it easier to push through policy.
This is also my theory of why people care more about inflation than the unemployment rate. Because
if you personally haven't lost your job, it's hard for you to sort of envision, oh, unemployment is
a multi-decade low. But you can definitely see egg prices at your local grocery. Everyone can see
those. And so it seems like it becomes a much bigger talking point. But okay, let's talk about
a bright spot, which is I guess we can now earn four or five percent on a bank account or a
certificate of deposit. That seems great. Yeah, and it's weird. There's almost a point when
if you're buying a one-year CD right now, you get five and a half percent. It almost feels like
you're robbing the bank. You're like, really? You're going to pay me that. When you've had
15 or 10 years, whatever, observe, it's a wild thing to deal with. But you both, you know, this
historically weird, this is normal. Yeah. I think that's what's hard to wrap your head around.
Is that historically this is what we're dealing with is not the anomaly. This is the completely
normal part. And I think you would, I think everything would be better if we live in an era,
if we never go back to serve, everything would be better. If you have an era where there is
some sort of anchor on speculation and people can earn a decent return on their cash with some
level of risk, I think that that's so much healthier in every aspect. So one of the weird things,
though, just on that point was, you know, earlier this year, when interest rates on bank accounts
were starting to creep up, we actually didn't see that many people who seemed to actually be moving
their money into higher yielding bank accounts or money market funds. It didn't really happen,
I guess, until March when we had the SVB drama. But what do you think accounts for that?
Is it just, it takes people a while to realize this is something available to them?
I mean, I think there, there has been quite a bit that have moved into money market accounts.
I mean, what are money market accounts? Now, $5 trillion or something. So there has been money
that's, that's moved over. I think the average American just doesn't think about it that much.
And maybe if you don't have a very high level of savings, there's kind of a why bother mentality.
Whereas most, I imagine most of the high dollar amount accounts have moved pretty quickly.
And it's a wild thing if you think about, you know, anyone's guess of future stock market returns,
is as good as anyone else's. But if you think at valuations, stocks return like maybe six to seven
percent, something like that, then my guess is as good as anyone else's. So let's say stocks
return six and you can earn five and a half percent in a money market account. All of a sudden,
like, for the first time in 20 years, it's a really, it's not an easy decision to make.
Yeah, I have to say, so I think like, you know, this has come up a few times, you know,
on the show. And the first couple of times I can discuss that, I'm like, I have five percent.
Like, that's not bad. So how do you finally been rate pilled, Joe?
Yeah, it's like, it's like, it's like, it's not really seem worth it to like move it over.
But now like after like a few months, it's like, actually, yeah, that is like,
maybe it's like meaningful. And as you say, like if historical returns on the stock market
are like maybe six to half percent or something like that. And now you can get five percent,
like truly, on a lot of money market account. Yeah. That's like, that's like pretty good,
isn't it? But that's, I think that's a world you should live in. There should be some anchor
against speculation. There should be some temptation for your money. That is not just a
yellow mentality. Do you think, like, it doesn't feel right now in September, 2023 that at,
that the speculative fervor that we saw that really peaked in 2021. Like, it still feels like
there's still like some embers of that, right? Like you still see meme stocks, like it's not much,
but like it still exists. Bitcoin's still 25,000. And I think it's, I think it's wrong to just
associate speculative frenzies with interest rates. Yeah. You got to remember the 1999,
like the peak of the dot com bubble interest rates were higher than they are today. So you can
have a crazy bubble with interest rates. Yeah. It's, I'm sure it plays a role. But I think just
explaining it as like every 10 to 20 years, people collectively lose their minds financially,
like irrespective of what interest rates make it easier to do it. But you could have a giant
speculative bubble with interest rates where they are today. So it wouldn't surprise me even with
the hikes that we've had. If there's a new crypto bubble, a new meme bubble, like whatever it would be,
I think all that is detached from interest rates. It feels to me like social media is also the,
I don't want to say new because we had message boards in 1999 and 2000 where people were
talking up stocks, but it feels like that sort of added fuel to that dynamic where people are
chasing bubbles rather than running away from them. Yeah. And it turns into like a tribal mentality,
particularly in the crypto space where your willingness and your ability to buy certain kinds of
crypto is your identity. And I think that also existed in the 1990s, like I'm a tech stock trader,
that's your identity. And I think anytime in finance where you say I'm a blank, whatever it is,
even I'm a value investor. Anytime you get that kind of tribal identity, you're like outsourcing
your thinking to the madness of crowds. And I think it's a really dangerous way to invest.
Is there a way like to deprogram that from your deprogram someone or deprogram yourself because
like that lock-in effect where like some way that you invest, you know, I think if it's like
professional, like professionals have this all the time, like it seems really hard just changing
your mind. It's really tough. Is there like, like in your research, are there tools or like ideas
that actually work to like get better at changing our mind? I don't know if there's tools or ideas,
but I think some people are just much better at being independent thinkers than others.
Even like I said, if you said I'm a value investor, it seems so conservative and so so benign.
Yeah. But Josh Brown has made this joke that a lot of value investors just end up owning like
typewriter companies for 20 years. And it's like, even if you lock yourself into that tribe,
it's not safe. But even like, you know, I was thinking to like, you know, in the beginning,
like, and just still have this fight. It's like setting aside even investment to like team
transitory or like team person. Like when you're debating inflation, it's hard to change your mind.
Really? And with new data. And I think social media makes that really hard too because now there's
like a timestamp on every call that you made in a way that there wasn't before. And people would
much rather be consistent than be right. And the reason that is is because I think when most people
are looking at a pundit online, they want their pundit to be consistent. And most people, like if you
tell people what they want to hear, you can be wrong forever without penalty. So if you want to be
pessimistic and you listen to Peter Schiff for 10 years saying the dollar's going to collapse next
month, even if it doesn't, he told you what you want to hear. And you're going to buy his newsletters
and keep on going. So in the punditry business, that's the right way to do it. Even if it's like
from an economic point of view, it's terrible. Well, we're very good at avoiding consistency
on this podcast. Yeah. We don't have that problem. We don't ever change our minds all the time.
No, wait, you mentioned value investing. And it does feel like at least up until 2020 and maybe
even beyond it, the big money was in chasing momentum. Yeah. What does that mean? Because we're
talking about the fallacy of group thing. But on the other hand, if you have a really good handle
on a certain narrative or what's going to attract people to a particular investment, it feels like
an advantage. Yeah. There's a great George Soros quote where he says, whenever I see a bubble,
I rush in to buy it. And it seems so counterintuitive. Like, why would you want to buy a bubble?
I think his, I don't want to put words in his mouth, but I think his thinking is he understands
that a bubble is very likely to grow bigger than you think. Just because everyone else is going to
watch their neighbor get rich and they're going to come in, which is exactly what happens every
single bubble. So I think that like the the chasing of momentum, yeah, it has a huge behavioral
component behind it. Now, the hard thing is like getting out before everyone else, someone like
George Soros can do, but virtually no one else can. So it's like that has no appeal to me whatsoever
because the idea that you're going to get out before everyone else when you're chasing their
behavior to begin with this is. On public.com, you may earn a 5.5%
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This is Barry Rittles here to tell you about another podcast we think you'll love
listening to, Masters in Business. Join each week for an enlightening conversation with some
of the smartest people in investing and business. Doing business in Euro, it's all about being
local. Stocks are way too cheap, this is where you want to be. The things life and markets are
intertwined. Subscribe to Masters in Business today on Apple, Spotify or wherever you get your
favorite podcast. We talked about in the beginning, this talk about how personal finance,
personal money is like, there's two kinds. They're both not that great. One is giving
people stock picks and let's be honest. The other one is this, here's what credit card to get,
to maximize miles. Is something inside the speculative frenzy or investing or meme stock?
Do you think what we've experienced over the last three years will mean,
meaningfully change how people consume going forward in some ways? Just general consumption
patterns. I think it's not necessarily the last three years in terms of COVID being the last
three years. I think it's the last 10 years of social media that just massively changes it.
It's always been historically that there's no objective level of wealth. Everything is just
relative to the people around you, your neighbors, your coworkers, and you're like relative to that
person. Here's how much money I have. I always hear people say things like, oh, like compared to
like a king in the 1800s, you're so rich. It's like, great. But my neighbor has like
big screens. Everyone just looks at the people around you. But now it's the people around you is
Instagram. It's a curated highlight reel of everyone around the world. Someone said recently,
it went from keeping up with the Joneses to keeping up with the Kardashians. That's what social media
did. It went from now you're comparing yourself to the highlight reel of everyone's life. I think
expectations of what people's definition is of a good life just exploded over the last 10 years.
I can see it with my seven-year-old son who spends time on YouTube. And what his definition is
already at age seven of what success looks like. If you watch Mr. Beast all day, success is like
driving a Lamborghini and throwing $10,000 at strangers. And I think there's an element of that
in social media. It turns into that. But it used to be when you compared yourself to your
neighbors. There's much more mundane than comparing yourself to Instagram. So I think that's the
biggest change in consumption. It's just an inflated expectation. And it's the Louis CK joke of
everything's amazing and nobody's happy. If your expectations grow that much, then even when there
is great economic growth and the stock market's doing well, it never feels like it's enough because
you're comparing yourself to something crazy. I mean, listening to that, it sounds kind of
dire in the sense that I don't think social media is going away anytime soon. What does that mean?
Like for the long term, is there a way for people to break out of that mindset? I don't think there
is. And of course, social media is not going away. So it would not surprise. I'm not a forecast
kind of guy, but it would not surprise me of the next generation. We have very good economic
growth, very good stock market growth. And no one is even a morsel happier for it. I think that
it's already happened over the last generation. I mean, that's almost the whole history of economic
growth, like great growth, but everyone just gets accustomed to it. And there's parts of that
that's great. That's what keeps people wanting to push harder and innovate more is because it never
feels like it's enough. So a lot of that is a great thing. But if you're looking at, it's easy
today to think, oh, our grandkids, their real income is going to be double or triple of ours.
And that means their life is going to be so great. It's like the second part of that is where
people make mistakes. There's a good chance that our grandkids, their real income will be double
or triple of ours. And I would bet heavily that they will not be any happier for it. Right,
they'll be like, that guy over there has a bigger spaceship than I do. It's all exactly what it's
going to be. Yes. I guess you've been to Mars. Yeah. I only went to the moon. Yeah.
What do you do? Like in your personal life or with your family or how you like think about
these things, so like escape some of these traps that are very hard to fall into? It's not it's not
easy to do. I think my wife and I who's in the room right now are pretty good at just being like,
this is what makes us happy. And we're not going to we're not going to let a lot of external
influences let us in. But it's hard for everybody. No one can escape the comparison game. Yeah.
I think it's just a natural part of how humans behave is just compare yourself to your peers.
So it's not an easy thing to do. I think there's there is a something to say for
the idea that nobody is thinking about you as much as you are. So everyone is like, I got to get
the nicer clothes so that people will be impressed with me. They're not impressed with you and they're
not thinking they're thinking about themselves. No one's thinking about your car. Nobody's
thinking about the size of your house. They're all busy thinking about themselves. Once you
understand that, then I think your aspiration for showing off like plunges. And that's what you need
to be like, I'm just happy with this hanging out in my family going for a walk with my kids.
I don't need to show off to people who aren't paying any attention to me. But some people can do
that better than others. We've been talking a lot about how human beings respond to change and the
idea that maybe we're going from an environment of low interest rates to one of high interest rates.
You have a new book coming out. My understanding is it's all about change. Is that right?
It's about things that never change over time, which I think is more important. I got the idea
many years ago. There's a Jeff Bezos quote that I'll paraphrase. He said, people always ask me what's
going to change in technology. And a better question is what is never going to change. And he said,
you can never imagine a future at Amazon where customers don't want low prices and big selection.
So because you can't imagine that future, you can invest all of your money into that knowing it's
going to be just as important 50 years from now as it is today, which you can't say about most
other technologies. Most other technologies have a shelf life of a year or two and then they're
obsolete. So it was the idea that part of the started for me with just the observation that both
of you know most economic predictions and stock market predictions are very bad. Our ability to
predict what stockments not very good. So and I think part of that reason is because we focus,
we try to pay attention on what's going to change. And if we can instead pay attention on what we
know is not going to change, how people pay attention and respond to risk and greed and fear,
let's just focus on that knowing for certain that's going to be part of our future,
rather than pretending like we can predict what might change in the future.
Well it's funny like even on the stock market, like our friend Sam Roe who has a great
newsletter tcare.com his whole thing is like stocks usually go up. Yes. And you know we could
talk all about oh what's going to happen with like you know the if the Fed doesn't hike you know
the Fed hikes in November and the Fed hikes twice etc. But like history seems pretty clear like
in the long term they just the line basically goes up. There's another version of that Derek
Thompson from the Atlantic. I think he wrote this in like 2015, 2016. He said you know since 2008
there have been hundreds of thousands of articles written about the economy and what's going to happen.
And you can summarize all of that period by just saying things got better slowly.
Yeah. That's that's all the economic news you needed to know during that 10 year period.
And so I think I think there's a lot of truth. I love talking about all this stuff whenever
it's in a while. I'm like it's just sort of fun but I don't know. I think that's an important
topic. I've been open about how I invest. I dollar cost average into index funds but I pay
attention to the stock market every day. I read all the economic news. I read the Wall Street Journal
every day because I think it's interesting. I think markets are interesting and you don't need to
take that news and become a day trader with that news. But I think markets are such a fascinating
window into human behavior. And there's no other window that shows like how people think about greed
and fear and risk which are such important topics in all areas of life. But you see it in finance
in a starker way than any other topic. Morgan Housel, so great to finally have you on on
a lot. Thank you so much. This is a really fun company. Yeah. That's a perfect person for our
first personal finance episode I think. This has been fun. Thanks. Yeah. This was great. Thank you so
much. Thanks guys. I'm so glad we finally had Morgan. That was great. That was fantastic and
I'm looking forward to the new book for sure. I also thought the summary of markets and economics
as like it's not really about the line going up or down but it's about the human beings involved
in it, the emotions, the sort of like intellectual rigor around these ideas. That's the perfect way
of summing it up. Yeah. I totally agree because I basically am of this view is like the economy will
probably over time grow and the stock market over time will go up. And I don't want to just leave it
at that because I do think all this stuff. That's your job. It's just my job. I want people to pay
attention. But everyone's so I'm like, okay, why do we pay attention? And I think that Morgan
captured it as you end as you said right there. It's like, it's interesting. We learned a lot
about how people think and how people behave. It doesn't necessarily mean like it makes sense to
like try to like trade to like Morgan Stanley or Goldman's like S&P year and price target or something.
Right. I also thought the point about like one of the things that happened in COVID was the
fracturing of people's experiences. I thought that was really interesting because I think the knee
jerk reaction to a global event like that is to think, oh, well, we all went through this big,
you know, history making thing. But actually, as Morgan said, individual experiences varied
widely. And I think it makes sense that that might be one reason why people now are much more
distrustful of what they're hearing on a sort of collective basis. That was such a good point.
That was like a light bulb because I guess on some level it's like maybe that seems obvious. But
like that was really well put in like I remember July 2020. And I was like, kind of things don't
seem very good. But then I did like, you know, I would like follow like these tech people. They're like,
I had like closed another deal today, like over zoom. And I was like, wow, like this is like,
yeah, I'm working from home and like my personal wealth just went up by 10% like this really,
that bifurcation is really striking. I also thought like this idea of like we had three in the
span of less than 20, 9, 11, 2000 was 2001, the great financial crew layman 2008 and then COVID. So
less than 20 or three, like pretty like sort of earth shattering moments of one way or another.
But you see like how like cumulative you we just begin to expect like, oh, this is the norm.
No, totally. And I think people also react to those in different ways because some people might
think, well, I need to save a ton of money because I never know when there's going to be a great
recession coming up next. And I'm going to lose my job. And other people might just think, you know,
screw it. None of this matters. Even if I accumulate all this wealth, put it in an index fund.
Maybe another 2008 happens tomorrow and it doesn't matter. So I'm going to buy an NFT instance.
Right. I'm going to be happy with the 5% on the CD. Or you know, like I always think, you know,
about the Chinese economy, which does seem to have this same phenomenon of high savings.
Yeah. But as you've written a lot about like some of the most intense speculative culture in the
world, like people like day trading, like iron ore futures and stuff like that. Yeah, exactly.
All right. Well, shall we leave it there? Let's leave it there.
Okay. This has been another episode of the All Thoughts podcast. I'm Tracy Alleyway. You can
follow me at Tracy Alleyway. And I'm Joe Wyzenthal. You can follow me at the stalwart.
Follow our guest, Morgan Housel at Morgan Housel. Follow our producers, Carmen Rodriguez at
Carmen Armin and Dash Bennett at Dashbot and check out all of our podcasts at Bloomberg
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