00:00I'm supposed to say how do I stay invested, what sectors look like, what's momentum like,
00:05and then you stopped me cold three days ago on LinkedIn with a clearing call. What was the
00:09catalyst for you to say betting's a drug? How increasingly casino-like the market looks.
00:18You know, I was thinking about this the other day. It reminds me of one of the famous Benjamin
00:23Graham quotes about in the short term the market is a voting machine and the long term it's a
00:28weighing machine. But we now have this entire infrastructure associated with short term
00:32trading that now is the ecosystem in which these traders live. And it's geared to the voting machine.
00:40And many of them haven't even met the weighing machine. But the hallmark of your work over the
00:44decades, if you can bring it up right now, guys, give me the money mastery. This is terse Lizanne
00:50Saunders. This is different than talking about the markets. The gambler hopes the investor owns
00:56this distinction has never been more important to articulate clearly. Here's the key line for me
01:02and Scarlett, the youngest generation of investors inundated with a message that investing and gambling
01:08are essentially the same thing. Every single mail I get, people are furious. Who's the regulator?
01:17That's a good question. It's not being terribly regulated right now. Not in the betting markets,
01:24not even in sports betting. Although states do regulation to a large degree in sports betting
01:29at the outset, clearly just the legalization thereof, which increasing number of states are
01:34doing that. But I think we're going to have to see some self-regulation here and an emphasis on the
01:41part of firms like ours that have been around for, you know, five and a half decades doing what we
01:48do
01:48for purely the individual investor and making sure that the financial literacy component is front and
01:54center. And I think that's what's lacking in some of the marketing associated with this is that
01:59financial literacy, that education component. So I'm happy to be one of the voices alongside even our
02:06founder, Chuck, who has just passion about this subject.
02:09Let's talk about some of the investors in the market, because more people right now own stocks
02:13than at any time in history. The pros who are seen as a smart money used to belittle individual
02:18investors as a dumb money. Yet it's often the so-called dumb money that's leading the way here.
02:23So is that a false distinction now?
02:25I think it is. And I think that the labeling has always been unfortunate. Smart money, dumb money.
02:31I've often quipped that maybe sometimes it's considered the dumb money because they tend to be
02:38the contrarian indicators, not with or leaving aside the Schwab client base who are all the smart
02:44money. But you're right that that contrarian indicator nature of what retail investors used
02:51to be seen as, they've been more right than not. Right.
02:56What's interesting right now is they just represent one. And now I'm speaking specifically of retail
03:02traders, not long term individual investors. Very important distinction between those two.
03:08But now you have other short attention span money that's dominating day to day trading,
03:12the commodity trading advisers and the systematic funds and the long short hedge fund community.
03:17And they're keying off each other and the positioning associated with it. That's why there's so much
03:23more research out there now on how everybody is positioned. And then social media has
03:30added volume to that kind of conversation. And then you add prediction markets to the mix.
03:35I know that Schwab, along with other firms, is considering launching prediction markets tied to
03:39financial events as opposed to sports of pop culture. Right. Staying away from that part of it.
03:43How is that different? How is that? Exactly. Help me. I'm the dumbest one in the room.
03:48Oh, no. Cortland's the dumbest one in the room. Help me on this. This is important stuff.
03:53How how do we separate what you call them? Prediction markets? Prediction markets for
04:00betting on GameStop. It's a good question. I can't weigh in on what we eventually will do
04:06with prediction markets because it's still early in the thought process. And that's not something
04:11I'm involved in on a daily basis. But I will say that as a market strategist,
04:17I am often interested in what the prediction markets are saying about certain types of
04:25events. The wisdom of the crowds. Yeah, because it's a way to gauge sentiment in a unique way
04:31relative to many of the classic ways to to gauge sentiment. So I don't I don't dismiss that as
04:39something purely on the dangerous side of things. I think there as a market observer, I think there's
04:45some value in it. But people say that they can play a role in hedging. Do you see that being
04:49used?
04:50You know, I think that requires a level of sophistication that I think you you probably
04:55want to have some help trying to do that as an individual investor. The first family member to go
04:59down in flames on this was on the Doge. Doge coins? The Doge. Oh, they called it just the Doge.
05:05They were shocked. This. Let's be optimistic. Are our children in this stuff, the laptops on the
05:12couch and all the jokes. Are they going to learn from losing money after they lose money the third
05:18time? Maybe all of a sudden. What was the ETF you called earlier? The VOU? The VOU? All of a
05:27sudden a
05:27basic ETF looks better. Well, they're already losing. It's about a 95 percent loss rate and a 5 percent
05:33win rate across the betting markets, particularly in sports betting. And the reason is that when you
05:40are betting, even if it's something that reads investment like you're just a you're just a
05:47spectator. You're not a participant. You're not a participant at wealth creation. You're not.
05:51The odds are automatically against you. You step back. You're just you're observing. You hope that
05:57you're going to have a windfall more. Most of the time you lose the entire bet. That's unfortunate that
06:03it may be the pain associated with those losses accumulating that finally says maybe this isn't the
06:09way I should approach investing. A lifetime ago, I knew a couple wandering down the street and they
06:14were retiring because they made it big. And I think it was Oracle. Do we have a whole cadre of
06:19people out there planning retirements right now because AI has gone up? Sure. And it's going to
06:25evaporate. But what I fear is that our minds and our emotions maybe play tricks on us. I had a
06:31very
06:31interesting conversation about a year ago with a former NVIDIA employee that had a ton of that
06:37stock. And I was in earshot to a conversation he was having with his Schwab financial consultant.
06:43And he was ruling the fact that he agreed to trim five percent of the position, even though the
06:49financial consultant had said trim back 10 as he's planning for retirement and lessening that
06:54concentrated position. And he said, and I, so I split the difference. I sold 5% of it and the
07:00stock went up 20% and I'm mad.
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