Fix It Friday - Illusions and Collusions: How Big Wall Street and Financial Media Collude to Profit at the Investors Expense

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A copy of Fusion's current written disclosure brochure discussing our advisory [00:00:15] services and fees is available upon request or at www.fusionfamilywealth.com.

h is the financial media and [: 00:00:30

How both of those entities I. Which many investors view as, uh, entities that are out there to help them make better decisions about their planning, about their investments, [00:00:45] uh, rely on, uh, almost daily by tuning in the CNBC to kind of figure out what, what's going on in the financial world and what maybe the investors should do about it.

we dig deep into those, uh, [: 00:01:00

They're not qualified to help the investor. So what they're really doing is they're looking to increase ad [00:01:30] revenues for the media company. And the way they do that is they make stories that are as sensational as possible, come out as often as possible, uh, on almost a 24 7 news cycle. And in in, in the general [00:01:45] media industry, there's an old saying that says if it leads, it leads.

m that, uh, reporting on our [: 00:02:00

Voiceover: Welcome to The Crazy Wealthy Podcast with your host, Jonathan Blau. Whether you're just starting out or are an experienced [00:02:15] investor, join Jonathan as he seeks to illuminate and demystify the complexities of making consistently rational financial decisions. Under conditions of uncertainty, he'll chat with professionals from the advice world, entrepreneurs, [00:02:30] executives.

And more to share fresh perspectives on making sound decisions that maximize your wealth. And now here's your host.

ally journalism. It's really [: 00:02:45

Now the trouble is they're in a collusion. With Big Wall Street. So when you see, um, all of the big Wall [00:03:00] Street firms, uh, managing directors, for example, big titles, they'll appear regularly on CNBC. And sometimes you'll have, uh, often you'll have two of them on, on the left, one on the left side of the screen, one on the right, and they'll come [00:03:15] at them with this unanswerable question.

% decline [: 00:03:30

But the reason they ask that question is Big Wall Street firms have an incentive to get the [00:03:45] investor concerned because if, if you're not concerned and you just stay still with your portfolio, you're not buying their expensive products designed to quote unquote protect you against the risk. Of the market, which is broadly defined in our industry [00:04:00] as, uh, up and down movements, temporary of the, uh, price of the investments that we own.

what, uh, what my firm does, [: 00:04:15

Only change the portfolio or the plan in response to your objectives changing the media. And the [00:04:30] big firms do the opposite because again, their goal on the media side is to increase clicks and add revenues and increase your fears to do all of that. And their partners in crime on the Big Wall Street side, uh, are are looking for the same effect to get [00:04:45] you to react.

s, Daniel Kahneman, who, uh, [: 00:05:00

And that that ability to [00:05:15] explain the past by listening to expert forecasters on CNBC, we think we have the ability to explain the past, which we do after it happened, and that gives us the illusion that the world and the future will be more understandable, and that's the problem. The world is not [00:05:30] more understandable because someone explains to you why what just happened happened.

called Super Forecasting. So [: 00:05:45

Here's what the problem is. What Tetlock found in his seminal work on Expert [00:06:00] Forecast is in general expert forecast is have about a 49% accuracy rate in general. So he looked at all the forecasts and that's what he came up with. So basically it's the same as a coin toss. It gets worse. What he also found is, is [00:06:15] that the smarter and, and the more famous the for the smarter sounding and the more famous the forecaster, the managing director from, from Goldman Sachs, who used to be the famous author, the smarter uh sounding and the more famous [00:06:30] they are, the least accurate, their forecast.

sters. And that's who we are [: 00:06:45

As we learn all of this, we have to say to ourselves, when fame is the only predictor of [00:07:00] accuracy, not level of education, right, just fame, the more famous they are, the least accurate they're gonna be. Now that I'm teaching you this, you'll know, don't listen to experts, quote unquote expert forecasters, but understand that this is the game they play.[00:07:15]

desired outcome that they're [: 00:07:30

The person with the highest level PhD in [00:07:45] finance or economics, the person who never went to college or the person who inherited money or built their own business successfully, none of those people have one more fact about the future than anyone who's listening to this podcast or than the podcast or me, myself, has [00:08:00] so understand that just because they sound smart.

the future. So, so there are [: 00:08:15

There are those who know, they don't know where the market is going. And then there are those who know, they don't know where the market is going, but they get paid a lot of money to [00:08:30] pretend that they do. And that's the other thing to understand about the media and the big Wall Street firms. Uh, who advertises on the media shows, uh, Goldman Sachs, JP Morgan, uh, the trading company's Fidelity.

So there's an incentive [: 00:08:45

So here in, in conclusion, what we need to do to, to fend off against the effects of all this one, is go back to basics when it comes to your [00:09:15] investment and your planning. Uh, you can listen to the one of the more recent fix at Fridays. It's called ten seven and three are the most important numbers in investing.

return for bonds, and three [: 00:09:30

And so stocks have made about two and a half times more than bonds. That's happened by the way, I was born in the sixties. Forever, but I'm just gonna go from my lifetime. So 1960, the s and p was 60. Today it's about [00:10:00] 6,000. So it's gone up a hundred times. The millions turned into a hundred million inflation maybe has gone up a little more than 10 times.

But it did that in the face [: 00:10:15

There have been interest rates as high as almost 20 and as low as [00:10:30] zero inflation, as high as almost 20 and as low as close to zero. There have been Democrats and Republicans, right? But anyone who's tried to react to any of these news items or current event fears, uh, who's president, what the pan, when the pandemic is [00:10:45] gonna do, or what the war in Russia and Ukraine is gonna do when they react by changing their portfolio, selling stocks, and then buying back One quote that does settles.

period I just mentioned since: 1960

And if, and if times are tough. One of the best solutions I have for everyone is change from [00:11:30] CNBC and tune in immediately to the Cartoon Network. I, I find that to be an effective strategy during, during tough times. Embrace the history of the markets that I just, uh, taught you and recognize what Barry Riol, [00:11:45] who's, who's another behavioral investment counselor who's very successful in our industry and very smart, he says the three most important words in investing are, I don't know, I.

f these Goldman Sachs or UBS [: 00:12:00

And, and lead to the goal of increasing fear, which increases their profits. So understand if you ever ask an advisor that question, is this the next payer market? What's gonna happen next year in the markets? If they tell you anything other than, I don't [00:12:30] know, get up and run the other way. So hopefully, um, this episode of Fixed It Friday has been, uh, helpful.

. That somebody with a fancy [: 00:12:45

Also when you get a chance, the illusion of predictive [00:13:00] value, I think it'll be helpful. I want to come back to one other thing. Um, the media, the industry right now, the financial industry, uh, is beginning to push what are called alternative investments. I. These are things like, uh, private equity [00:13:15] meaning, uh, investments in companies that don't trade on the public markets like an IBM or a Microsoft.

ey're pushing 'em is because [: 00:13:30

During the April decline, um, or, or a month or so ago during April decline from a firm trying to get me to [00:13:45] adopt alternative investments, private equity for a client. And what they pointed out is private equity's been very helpful during this 10% decline in two days, I. Because they say the private investments don't show the decrease in value until [00:14:00] sometime later.

same as it did two days ago. [: 00:14:15

They're not telling you to buy the private equity because it's a good investment. They're telling you buy it because it conceals the decline in the market. And, and, and so I leave you with that thought. It, it's very dangerous out there. Uh, so always go back to [00:14:30] basics. You need more tens. Stock returns than, than than sixes.

ews. Thanks again for tuning [: 00:14:45

Uh, you can access the podcast on all your favorite venues, but you can also access it [00:15:00] easily@crazywealthypodcast.com or on our website, fusion family wealth.com. Everybody. Uh. Hopefully we'll have a good summer. Until next time.

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