> One thing I've learned about professional investors is that no matter what, at the end of the day they're talking their book.
That doesn't make them wrong. It's basically just a tautology. If you believe X is a great investment, and you aren't investing in it, that would be a far stranger situation.
He has tremendous respect for professional investors that understand risk, which is a small minority. He speaks very highly of Soros's investment record.
Only if it going to actually hurt to lose it... when did these guys every really get hurt... they hedge their bets exactly so they never put themselves in a position to literally loose their house(s).
Unfortunately, there's a catch. People can say things they don't believe, especially if there is a large amount of money to be made. If I'm holding a large amount of X, and can convince enough other people to buy X that the price rises (hopefully by a lot), I can sell my shares of X for a (large) profit. Pump and dump schemes have been common forever, popularized in the the 2000 movie Boiler Room as well as Wolf of Wall St.
Far stranger schemes exist, the most recently to hit popular culture is gamma squeeze. Just because a scheme is strange has little bearing on whether or not it'll end up working out with them having your money.
At the end of the day, the point is they're trying to sell their book, which is not the same as trying to sell investment X (although they may be very closely related).
> Unfortunately, there's a catch. People can say things they don't believe, especially if there is a large amount of money to be made. If I'm holding a large amount of X, and can convince enough other people to buy X that the price rises (hopefully by a lot), I can sell my shares of X for a (large) profit. Pump and dump schemes have been common forever, popularized in the the 2000 movie Boiler Room as well as Wolf of Wall St.
Or most recently Gamestop investors.
> At the end of the day, the point is they're trying to sell their book, which is not the same as trying to sell investment X (although they may be very closely related).
My point it is almost never going to be possible to distinguish between good investment advice and self-serving investment advice. Sure, there is some fungibility there for people with different investment needs, like pension funds vs young income earners. But! we should think about what we would think if the reverse was true. If investors were advocating for investments that they weren't personally invested in, then I would be far more skeptical than if they did.
Investors are subject to the sunk cost fallacy, whereby they hold a stock they currently believe is a bad investment, because to sell it is to admit it was a bad choice.
Sure, are they also subject to a lost profits fallacy, where if they believe an investment is good but don't invest in it, they would be entirely rational? I don't see it.
It doesn't make them wrong, but nothing can exclude the possibility that an investor believes that they have the ability to convince others via their media platform that X is a great investment without actually believing X is /otherwise/ a great investment. In which case the investment thesis could be purely "access to greater fools"...
Ok, but how should we treat someone's investment advice if they are advising for investments that they are not personally committed to? I find far more reasons for skepticism there. If you see an opportunity to make money for yourself or your clients, and aren't doing it, then... what are you doing?
We should be skeptical of all investment advice. For a specific fact to make us more skeptical of investment advice, we need to consider the alternative where that was not true. I don't see situations where large investors advising people to put money not where their mouth is gives someone more confidence in their advice.
> If you see an opportunity to make money for yourself or your clients, and aren't doing it, then... what are you doing?
Most other industries have a clear separation between the people who make and sell the product, and the people who publicly opine on the product.
Film journalists aren't film makers, car journalists aren't car makers, games journalists aren't game makers. And if the CEO of EA Games announces the next Madden game is their best ever, you'd take that with a pinch of salt.
Of course, conflict-of-interest-free journalism ain't exactly a growth industry these days, so this probably isn't the model of future stock tips.
Mostly agree, but that logic breaks down when investments are not just liquid entries on a spreadsheet.
One example: I recommended real estate rentals through the 2008-2015 range to several friends despite having none myself. Why? Because it was possible for them to generate significant leverage otherwise unavailable to them and they were in a much better position than me to work the second job of being a landlord.
That doesn't make them wrong. It's basically just a tautology. If you believe X is a great investment, and you aren't investing in it, that would be a far stranger situation.