Transcript: Segment 4
Paul Winkler: Okay. Now we’re back here on the Investor Coaching Show. I think we’ve got Ira Work. Well, one of the things that you’ve heard me talk about, you know, forever, and one of the things we talk about with investing, you’ve got to be super, super careful that the information you get on investing is typically to get you to do things that are not necessarily terribly prudent.
What is Investment Advice?
And I’ll talk more about that in a second, but I want to play a clip right here for you and you know, let’s talk a little bit about what typically passes as investment advice. What typically passes as investment advice is which areas of the market should you be in which asset classes should you hold. What, how much money should you have in a large company, small company, value companies at this point in time because of what’s going on in the economy, which stocks should you own, that is, it’s a really important thing for investors.
You’ve got to know which stocks, it sounds important, doesn’t it? Well, the reality of it is it’s nonsense. So there was a guy on CNBC and here is basically what he had to say:
Interviewer: I, I just, you know, in your recent appearances, I mean, how many S&P points would you say that you have been surprised at? And I don’t remember you ever getting bullish at all. I have some, I have April lows. I mean, you’ve missed this entire 50% move. So I, I don’t, I mean, maybe out of, are you better now at digital stuff? Or how do you account for that? Listen, you know, it’s funny. I, you know, our stock raises up trouble. I don’t alot of big one out on a goal.
Interviewee: And so no one should be crying for me right now. I did this guy about 2,800 week and he hasn’t, he was overdone and that’s 500, 600 points that I’ve sat in watch. But you know, I look at the company like we stop, which is nothing but straight up. We don’t know Jangles Briley. And so, you know, when you’re a wealthy guy, your portfolio does well in a bull market. Even if you’re spot trading, I’m not worried about your porcelain, I’m not worried about you. I’m not worried about you. I know how much money you got.
Interviewer: I’m just worried about people that are watching you. And, you know, you gave me advice. Number one, what’s really funny about that.
Predictions are a game
Paul Winkler: Hey, this here is the host of the show taking this guy to task and saying, you know, you’re telling us, here’s, what’s going to happen in the market next. Then you missed all of the market upside. The S&P 500 is up to as much. And you missed all of it. And what makes you come up? And then what does he do?
Jim Wood: This might have been really bad advice for all you folks, but Hey, I’m doing great. So it’s all good.
Paul Winkler: The audacity to say I’m wealthy after I’ve given advice to that maybe somebody listened to and they got hosed by that advice. And I just had to give great credit to the host of the show. Now you have to wonder why are they inviting the guy back on? I don’t know, maybe it was just to Lambo him. I’m not sure, But he basically took him to task, you know, regarding his previous advice and then just destroyed him.
But he comes back and, and, and what does he say, I’m not worried about you, which is, that’s what it ought to be. I’m worried about the people that listen to you.
Jim Wood: And so often that doesn’t happen that these guys go on, they give picks, they give advice, they talk, Oh, the economy’s going to do this.This is what you should do. And they are never held accountable. It just, you know, if they’re, if something they say, something real extreme, and it happens, they’re held up as heroes and prophets, but they can say that same extreme stuff all the time. And it doesn’t happen. And rarely if ever do they get called on the carpet for it.
Paul Winkler: No, it’s just, well, you know, let’s move right on right here. And they don’t even point it out. So you have to ask yourself, why do they make these predictions? If so rarely are they actually right. And the answer would be because sometimes they are right. And if they are right, they do get that hero status that Jim was talking about. And they do get put on a pedestal and people will buy their mutual fund. They will listen to their next pick.
And that is why this whole game continues. Well, they continue to get like, you predicted this, you predicted that, you predict this, but the problem is, there are so many people that you’re hearing from that you don’t remember all the people that made all the bad recommendations, shows that guy got lucky. So now they’re going to tout on him until he gets unlucky, next time. Yeah. And that’s what sells mutual funds. That’s what sells investments.
Don’t listen to predictions
Jim Wood: Well, a lot of times too, these people, even if their predictions are consistently bad, they still get invited back. There’s a person who’s written several books that, and they’ve, you know, guy that went around speaking at financial conferences and he was just down consistently.
But they’re still invited back. They’re still invited on TV, and it’s just because they’re always, you know, good for a quote. And it’s the way it works is just you get the most extreme positions. The one person says, Hey, the market’s just going to skyrocket. You’re going to all have wheel wheelbarrows of money, if you listen to me. or it’s the other thing that, run for the hills, sell cause it’s all coming down.
Paul Winkler: It’s a good point, Jim. Yeah. So we tell both of them, both of them, when they’re predicting, what’s going to happen. Just stick your fingers in yours, because they don’t have a clue what is going to happen next. And if they did know what was going to happen next, would they tell you? Nope. Not on your life. Why would they tell you that?
Jim Wood: Cause they’d act on it. They leverage up, they do everything they can and they’d have all the money. Yeah. Yeah.
Paul Winkler: So, so it’s absolutely just epic that this person did that.
Ira Work: Actually make it very clear that people will understand. Why will they not tell you? Simply because if the listeners knew what the six winning lottery numbers were tonight, they wouldn’t tell him. I like that. That’s a good one. Yeah. And they wouldn’t tell you what the lottery now, because it’s going to water down the return that the people can make.
Jim Wood: And just the thing, and not only these people on TV, but the people selling the newsletters and stuff like that, they promise this and that. But if they really knew what stocks to buy, again, it all comes back to why would they share this valuable information?
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Paul Winkler: Yeah. And that’s just it. So when you’re watching these programs and somebody is telling you that they think this is going to be, this is what’s going to happen based on what China’s doing right now, what North Korea is doing right now. Oh, speaking of China guys, squirrel moment. I have got to tell you about something regarding there was something on China and it was, it was about Hong Kong. And have you guys been watching anything about Hong Kong lately?
Jim Wood: Stay abreast of the news relatively well, plus you showed me this article.
Paul Winkler: That’s right. I didn’t show you this article. That’s right. Ira has not seen this. So Ira, I gave this to Jim yesterday. I said, “This is probably one of the saddest things I’ve ever seen. This is why you really watch how you invest.” You know, when you’re investing in emerging markets like Hong Kong or, or, you know, Indonesia, Brazil, Chile, and India or Israel is even in emerging markets.
South Korea is an emerging market. You’ve got to watch this kind of stuff. Senior Chinese official called it the birthday gift, the birthday gift for Hong Kong. It was a chilling choice of words for the biggest blow to the territory’s freedom since Britain handed it back to China in 1997, I won’t read the whole thing, but it has a few lines that I just have to tell you about what’s going on over there. It just saddened me.
“New law relates to crimes involving succession, subversion, terrorism, and collusion with foreign forces. Hong Kong is post-handover constitution. Basic law required the territory to pass its own legislation concerning such offenses. They were going to be self-governing but the local opposition stymied the government’s efforts do so. Unrest in the past year. And Chinese officials call an attempted “color revolution” as they called it because the communist party lost patience.” That’s it. You guys, aren’t getting this stuff done on a fast enough we’re coming down on you. And they announced that they would do the job themselves. That to me is chilling. And then basically what happened is they have this liaison office.
They called it and in the things they were doing during the unrest, they had all kinds of, they call them all crimes and they called for Hong Kong’s independence. These people that were calling for Hong Kong to independence could invoke the charge of succession and this could result in prosecution for collusion and put them in prison for life. Or basically they said execution was the other thing. And this is it. At the end of the article, “Hong Kong is already feeling the chill.”
And that was it. It’s over. The revolution is done. And I thought that is how freedom dies. And I think that’s a message that we have to remember that freedom can die. You know, it’s something to be fought for and unfortunate in my mind, you know, as a person from the outside, looking in that, what can you do?
What can you do? And as an investor, one thing that you gotta be really wary of, I saw people do this. They were putting a ton of money in emerging market stocks. You know, back when emerging markets was running hot. And right now emerging markets are doing pretty well, don’t fall for it. You never know when a small emerging country can have freedoms, just taken away, just like that. As an investor, you have to stay diversified all over the place. And that’s the point maybe I’ll make on that too is of course it definitely makes sense own emerging markets.
Jim Wood: But don’t, because some country is hot for a while or something, don’t go chasing that. There have even been great academics that have talked about, Oh, this one country is really developing and you should put a bunch of extra money there.
Paul Winkler: Even academics can fall for this stuff. And that’s the thing it’s not about not emerging markets by any means. It’s about staying diversified and not chasing based on some countries doing really, really well, throw a bunch of money at it, or maybe it stumbles for a short while you pull out, unless they go, then you don’t invest there at all, but all right, that’s it for the Investor Coaching Show today.
Hope you enjoyed it with my friends Ira Work and Jim Wood. I am Paul Winkler.
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