Logo
    Search

    Morgan Housel on the New Way We Think About Money

    enSeptember 21, 2023

    Podcast Summary

    • Understanding Personal Finance in Inflationary TimesCombine local insights and global expertise for compelling investing opportunities during inflation. Psychological aspects of money play a crucial role in adjusting to economic changes.

      During periods of inflation, understanding personal finance becomes crucial for individuals. Principal Asset Management, a real estate manager, emphasizes the importance of a 360-degree perspective, combining local insights and global expertise to identify compelling investing opportunities. As inflation continues to impact savings accounts, people are reevaluating their financial strategies. Morgan Housel, a renowned personal finance writer and author, joins the conversation to discuss the psychological aspects of money and how individuals have historically adjusted to economic changes. Personal finance, though often cliched, is a vital topic as we navigate this new economic landscape. Listen to the full episode for more insights from Morgan Housel on The Psychology of Money.

    • Exploring the Psychology and Sociology of Financial DecisionsUnderstanding people's motivations and behaviors in finance and investing can be gained from fields like psychology, sociology, and political science. Compelling storytelling can make these topics more interesting and accessible.

      Understanding the psychological and sociological factors behind people's financial decisions can provide valuable insights into personal finance and investing. The speaker, who started writing about personal finance during the 2008 financial crisis, found that traditional finance and economics textbooks couldn't fully explain the events of the time. Instead, she turned to fields like psychology, sociology, and political science to understand people's motivations and behaviors. As a writer, she believes that telling compelling stories from various fields can make finance and investing more interesting and accessible to readers. She shares an example of a wealthy man she encountered while working as a valet, who spent money recklessly and fascinated her with his behavior. By combining her writing skills with her interest in behavioral finance, she aims to provide a unique perspective on personal finance and investing.

    • Financial success isn't guaranteed by intelligence or incomeExperiences with economic instability shape long-term financial behaviors. Individuals who lived through major downturns may develop aversion to debt and reluctance to invest, while those from stable periods may be more optimistic and speculative.

      Intelligence or high income does not guarantee financial success. The story of the entrepreneur who went bankrupt despite his technical genius serves as a reminder that financial literacy and healthy money habits are crucial. Furthermore, personal experiences with economic instability during formative years can shape individuals' financial behaviors long-term. Each generation experiences the economy differently, and those experiences can leave lasting impacts. For instance, individuals who lived through the Great Depression or major economic downturns like 2008 and 2020 may develop a strong aversion to debt and reluctance to invest in the stock market. Conversely, those who grew up during more stable economic periods may be more optimistic and speculative in their financial decisions. The current generation, having experienced multiple economic downturns, may hold a more pessimistic view that the world breaks every 5 to 10 years. This nihilistic yet bullish attitude can manifest in various ways, such as investing in risky assets like NFTs or Dogecoin.

    • Pessimism fuels market speculationDespite economic uncertainty, long-term perspective and staying informed can uncover opportunities for wealth accumulation

      The current era of speculation in markets, such as NFTs and crypto, may stem from a pessimistic mindset rather than optimism. This pessimism can lead individuals to make extreme investments, like betting on a rock (NFTs) instead of people or the economy. However, history has shown that even during periods of economic uncertainty and market downturns, there can be opportunities to accumulate wealth. For instance, the aftermath of the 2008 financial crisis saw the S&P 500 increase by 20-25% between 2009 and 2012, despite widespread beliefs that the economy was in shambles and the market was declining. It's important to remember that hindsight can be deceiving, and it can be challenging to maintain a bullish outlook during times of economic turmoil. However, staying informed and maintaining a long-term perspective can help investors uncover compelling opportunities and give them an edge in the market.

    • People's perception of normal interest rates influenced by past experiencesPeople's perception of normal interest rates can change based on past experiences and economic conditions, but adjustment may take time. Current low debt payments as a percentage of income suggest less concern over rising rates.

      People's perception of normal interest rates can be influenced by their past experiences and the length of interest rate cycles. While it may take some time for individuals and corporations to adjust to significant changes in interest rates, history shows that people can get accustomed to new conditions relatively quickly. For instance, the rapid decrease in mortgage rates during the late 1990s led to the housing bubble. Conversely, the high interest rates after World War 2 took decades to decline. Regarding the current situation, household debt payments as a percentage of income are historically low, despite the nominal amount of debt appearing alarming. The seventies, with their high inflation and social unrest, present a unique case and may not be an accurate analogy for the current economic climate. Optimism is not solely determined by economic factors, but also by political stability and other societal conditions.

    • Economic Discrepancies: Prosperity vs. HardshipDespite conflicting economic data, the economy presents a complex picture with unique challenges driven by politics, recent events, and historical trends. Adjusting to changing economic realities may take time.

      The current economy can present a confusing picture, with hard data suggesting relative prosperity but survey data and everyday experiences painting a different, often more dire, picture. This discrepancy may be driven in part by politics and partisanship, as well as the unique impact of recent events like the COVID-19 pandemic, which left half of America financially thriving while the other half suffered from historic levels of hardship. The resulting malaise and distrust in statistics and institutions can make it difficult to implement effective, bipartisan economic policies. Additionally, the ability to earn higher wages on savings accounts is a bright spot in this economic climate, but it's important to remember that historically low interest rates were not the norm and adjustment to this change may take time.

    • Considering Higher-Yielding Savings Options During Stable Interest RatesIndividuals should consider moving their savings into higher-yielding accounts like money market funds during stable interest rates for decent returns, but a lack of awareness or 'why bother' mentality might be hindering this decision.

      During periods of stable interest rates, it's healthier for individuals to have options for earning decent returns on their savings beyond speculative investments. However, the recent trend of not seeing many people moving their money into higher-yielding accounts, such as money market funds, despite the slight increase in interest rates, might be due to a lack of awareness or a "why bother" mentality for those with lower savings. Historically, returns on the stock market have been around 6-7%, and with money market accounts offering 5.5% or more, it's becoming a significant consideration. Despite this, there seems to still be a speculative fervor in the markets, as evidenced by meme stocks and cryptocurrencies, which is not solely dependent on interest rates. Social media might be adding fuel to this dynamic, creating a tribal mentality where individuals' identities are tied to their investments, leading to potentially dangerous ways of investing. There is no easy solution to deprogram this mentality, but being aware of it and considering a balanced approach to investing is a good start.

    • The Challenges of Changing One's Mind in InvestingSuccessful investors like George Soros understand the importance of being open-minded and adaptable in the face of changing market conditions. However, knowing when to change course and having the ability to do so before the market can be difficult.

      Changing one's mind, especially in the context of investing, can be challenging. People tend to cling to their beliefs and biases, even in the face of new information. This phenomenon, known as groupthink, can lead investors to make suboptimal decisions and miss out on opportunities. Social media exacerbates this issue by making it easier for people to seek out information that confirms their existing beliefs and ignore contradictory evidence. However, successful investors like George Soros have recognized the importance of being open-minded and willing to adapt to changing market conditions. The challenge lies in knowing when to change course and having the ability to do so before the market does. The recent market volatility may lead to changes in consumer behavior, with a greater focus on long-term investment strategies and a more skeptical approach to financial advice and recommendations.

    • Comparing ourselves to a curated highlight reel of people's livesSocial media can lead to unrealistic expectations and dissatisfaction, focus on personal happiness instead of external comparisons.

      The last 10 years of social media have drastically changed our perception of wealth and success, leading to inflated expectations and a never-ending comparison game. Social media has shifted our focus from comparing ourselves to our neighbors to comparing ourselves to a curated highlight reel of people's lives from around the world. This can result in dissatisfaction and unhappiness, even during periods of economic growth. It's important to recognize that our expectations of happiness and success can outpace reality, and it's a natural human tendency to compare ourselves to our peers. However, it's crucial to focus on what makes us happy and not let external influences dictate our sense of worth. Remember, no one is thinking about you as much as you think they are, and everyone is preoccupied with their own lives. It's a challenging mindset to break free from, but being aware of this trend can help us make more intentional choices about how we consume media and define success for ourselves.

    • Understanding constant human responses to risk, greed, and fearFocusing on human emotions and behaviors towards risk, greed, and fear in markets is a valuable investment.

      Focusing on what never changes in life, such as human emotions and behaviors towards risk, greed, and fear, is a more productive approach than trying to predict the unpredictable. Morgan Housel, an author and financial columnist, emphasized this during a conversation on the Odd Laws podcast. He shared that despite the vast amount of economic and stock market predictions being inaccurate, understanding the constant human responses to these factors is a valuable investment. Housel also highlighted that markets serve as a unique window into these emotions and behaviors, making them an essential topic of study. His upcoming book further explores this concept. Ultimately, rather than focusing on the ups and downs of the market or economic trends, it's crucial to recognize the underlying human dynamics that remain consistent.

    • Fractured experiences during global eventsPeople's experiences and reactions to global events can greatly differ, leading to distrust in collective information and speculative behavior.

      Our experiences, even during global events, can vary greatly and shape our perspectives and reactions. Morgan Housel, a guest on the Odd Thoughts podcast, discussed how the COVID-19 pandemic led to a fracturing of experiences, with some people losing jobs and savings while others saw wealth increase. This disparity has contributed to a growing distrust in collective information and a rise in speculative behavior. The podcast also touched on the impact of significant global events in recent history, such as 9/11, the Great Financial Crisis, and COVID-19, and how they have influenced individual financial behaviors. The discussion highlighted the importance of understanding that people's experiences and reactions to events can be vastly different.

    Recent Episodes from Odd Lots

    Joseph Stiglitz on How to Build Shock-Proof Supply Chains

    Joseph Stiglitz on How to Build Shock-Proof Supply Chains

    Joseph Stiglitz is a Nobel Prize-winning economist known for his groundbreaking work on information gaps and risk-taking in markets. But he's recently turned his attention to supply chains and how to make them more resilient in the face of shocks like the 2020 pandemic. In this episode, we discuss why companies often hesitate to maintain extra inventories — and why this tends to be the case even during stable economic periods. We talk about possible solutions to incentivize firms to invest in larger capacity buffers and promote better long-term economic practices. The conversation also touches on industrial policy, the role of international institutions in the global economy, and strategies to ensure that economic growth benefits everyone more fairly. 

    See omnystudio.com/listener for privacy information.

    Odd Lots
    enJuly 11, 2024

    MMT's Godfather Says the US Government Is Spending Like a Drunken Sailor

    MMT's Godfather Says the US Government Is Spending Like a Drunken Sailor

    Modern Monetary Theory has gained prominence over the last several years by offering an alternative view on the constraints to fiscal policy. The basic gist is that the size of the deficit is not per se problematic. What matters are real resource constraints, and that if government spending gets too high — or is spent in unproductive ways — then inflation can materialize as too much money collides with insufficient supply. Another argument that some MMT adherents make is that the conventional path to fighting inflation (higher interest rates by the Federal Reserve) can actually be inflationary, because the coupon payments made by the government to Treasury holders constitute a form of government spending or fiscal expansion. In this episode of the Odd Lots podcast, we speak with Warren Mosler, the intellectual godfather of MMT, to explain the mechanisms at play and assess the current macro environment. Perhaps surprisingly, Mosler is concerned with the combination of high government debt loads, high deficits (which he characterizes as spending like a drunken sailor), and the orthodox approach the Fed is taking to fighting inflation. With debt as high as it is, the annual interest payments due to these rate hikes has gone up significantly, creating a situation that mainstream economists might call Fiscal Dominance. He explains how this environment is a recipe for consistently higher and sustained inflation in the years ahead.

    See omnystudio.com/listener for privacy information.

    Odd Lots
    enJuly 08, 2024

    Lots More With Stinson Dean on Crashing Lumber Prices

    Lots More With Stinson Dean on Crashing Lumber Prices

    Lumber prices have tumbled dramatically in recent weeks, with benchmark futures falling about 20% in the past four months alone. What's more, this is happening at the height of the summer homebuilding season, when there should theoretically be lots of demand for construction materials. In this episode of Lots More, we speak to one of our favorite guests about what's going on in the lumber market right now, and what falling prices might say about this important part of the US economy. Stinson Dean is the founder and owner of Deacon Lumber and he talks to us about why prices are crashing, what he's seeing in the market right now, and how the current environment differs from 2020 and 2021, when lumber prices went parabolic and mills couldn't keep up with demand.

    See omnystudio.com/listener for privacy information.

    Odd Lots
    enJuly 05, 2024

    How Brazil Gave Birth to One of the World's Greatest Jet Makers

    How Brazil Gave Birth to One of the World's Greatest Jet Makers

    There aren't many advanced manufacturing success stories in Latin America. And globally, there aren't many companies that can build commercial planes at scale. Yet somehow, one of the world's leading jet makers is Brazilian. Embraer is the third largest maker of commercial planes worldwide after Boeing and Airbus. On this episode, we talk about how the company came to be, what its opportunities are, and what lessons in economic development we can learn from its rise. We speak with two guests for the show. First, is Richard Aboulafia, a managing director at AeroDynamic Advisory, to understand the company's role in the aviation ecosystem. Then we speak with Juan David Rojas, a writer on Latin America, to understand the political conditions in Brazilian history that allowed the company to emerge and thrive.

    See omnystudio.com/listener for privacy information.

    Odd Lots
    enJuly 04, 2024

    How Brad Jacobs Will Invest $4.5 Billion to Reshape Building Supplies

    How Brad Jacobs Will Invest $4.5 Billion to Reshape Building Supplies

    Brad Jacobs has made a career of starting, consolidating, and growing whole industries. He did a trucking company. He did a warehouse company. He has a freight brokerage. He created an equipment rental company. His new venture, dubbed QXO, aims to reshape the big and sprawling market for building supplies, which can encompass residential, infrastructure and commercial real estate. And he has $4.5 billion of his and his investors' money to go out and buy and build. In this special episode of the Odd Lots podcast, recorded live at the Bloomberg Invest conference in New York City, he talks about where he is in the new process, and what he plans to do once he's made his acquisitions.

    See omnystudio.com/listener for privacy information.

    Odd Lots
    enJuly 02, 2024

    The Theory That Explains Why Everyone Went Crazy

    The Theory That Explains Why Everyone Went Crazy

    Does it feel to you like society has gone crazy? Well, you're not alone. There's a general view that all around the world, in the realms of politics, culture, business, and so forth, a lot of people are losing their minds. So if this is true, what's the reason for it? On this episode we speak with Dan Davies, the author of the new book The Unaccountability Machine: Why Big Systems Make Terrible Decisions - And How The World Lost Its Mind. Dan talks about the field of study known as cybernetics, and the inevitable outcomes of systems that grow more and more complex. This complexity -- which describes many things in the modern world, and leads to what Dan calls "accountability sinks," or entities that basically exist just to be blamed for things that have gone wrong. Dan walks us through how these emerged in the modern world, where things are headed, and how the trend could theoretically be reversed.

    See omnystudio.com/listener for privacy information.

    Odd Lots
    enJuly 01, 2024

    Lots More With Neil Dutta on a Looming Fed Policy Error

    Lots More With Neil Dutta on a Looming Fed Policy Error

    Neil Dutta, the top economist over at Renaissance Macro, has generally been sunny and optimistic about the economy over the last four years or so. But now he's warning of a possible mistake by the Federal Reserve. In his view, the central bank is waiting too long to get confirmation that inflation is coming back to target. Meanwhile, unemployment is starting to creep up in a meaningful way. As he sees it, if you're still worried about upside risk to inflation at this point, you need to have a theory about where that inflation is going to come from — and it's really hard to come up with an answer for that right now, given the general downward momentum in hiring and the overall economy. In this episode of Lots More, we catch up with Neil to talk about the risk that the Fed will blow the soft landing.

    See omnystudio.com/listener for privacy information.

    Odd Lots
    enJune 28, 2024

    The American Entrepreneurs Who First Opened The Chinese Market

    The American Entrepreneurs Who First Opened The Chinese Market

     From cars to toys to clothes, we're just used to seeing the label "Made In China" on all sorts of things. But how did China become a go-to destination for manufactured goods in the first place? Who actually recognized that there was a huge opportunity to tap the abundant, low-cost labor to sell goods to Western consumers? On this episode of the podcast we speak with Elizabeth Ingleson, a professor at the London School of Economics and the author of the book Made in China: When US-China Interests Converged to Transform Global Trade. Ingleson traces the roots of the US-China trade relationship to a handful of US entrepreneurs in the early 1970s who first went into the country and recognized its opportunity as an export powerhouse. We discuss who these individuals were, the obstacles they had to overcome, and how they reshaped the entire global economy.

    See omnystudio.com/listener for privacy information.

    Odd Lots
    enJune 27, 2024

    Why Tom Lee Thinks We Could See S&P 15,000 by 2030

    Why Tom Lee Thinks We Could See S&P 15,000 by 2030

    The stock market has had a torrid run in 2024 despite the fact that interest rate cuts haven't materialized in the way people had expected at the start of the year. In fact, outside of a few blips here and there (like spring 2020), US stocks have been phenomenal performers for years. Tom Lee, the founder of Fundstrat and FS Insight has been bullish for a long time, having caught the correct side of this lengthy trend. On this episode, we speak to the former JPMorgan strategist about how he thinks about the market, what he sees happening right now in macro and demographic trends, and why he thinks it’s plausible that the market could roughly triple in the next six years.

    See omnystudio.com/listener for privacy information.

    Odd Lots
    enJune 24, 2024

    CoreWeave's CSO on the Business of Building AI Datacenters

    CoreWeave's CSO on the Business of Building AI Datacenters

    Everyone knows that the AI boom is built upon the voracious consumption of chips (largely sold by Nvidia) and electricity. And while the legacy cloud operators, like Amazon or Microsoft, are in this space, the nature of the computing shift is opening up new space for new players in the market. One of the hottest companies is CoreWeave, a company backed in part by Nvidia, which has grown its datacenter business massively. So how does their business actually work? How do they get energy? Where do they locate operations? How are they financed? What's the difference between a cloud AI and a legacy cloud? On this episode, we speak with CoreWeave's Chief Strategy Officer Brian Venturo about what it takes to build out operations at this scale.

    See omnystudio.com/listener for privacy information.

    Odd Lots
    enJune 21, 2024

    Related Episodes

    The Price and Peril of a Low-Rate Regime with Edward Chancellor

    The Price and Peril of a Low-Rate Regime with Edward Chancellor

    The first experiment in quantitative easing ended in failure for 18th-century France. Is this a lesson for modern times? After years of ultra-low interest rates, central banks are tightening monetary policy to combat rampant inflation - a shift that has ignited volatility and depressed asset prices. With a sea change in interest rates underway, where can investors turn to bolster their portfolios?

    In this episode, PGIM Quantitative Solutions' Ed Campbell and financial historian and author Edward Chancellor discuss the pitfalls of low rates and the investment outlook for a new era.

    Rates To The Moon

    Rates To The Moon
    On this episode of The Rate Guy we discuss the upcoming Fed meeting, how quantitative tightening could effect asset pricing and our take on when the economy could break itself throw us into a recession.  

    To see the photo of J Powell as an astronaut check out the Pensford Newsletter! Pensford.com

    145: What is Economic 3D Reset? A Conversation With Johanna Kyrklund of Schroders

    145:  What is Economic 3D Reset? A Conversation With Johanna Kyrklund of Schroders

    In this episode of "The Patti Brennan Show," host Patti Brennan continues her conversation with Johanna Kyrklund, Chief Investment Officer at Schroders, who shares her insights on the economy and the paradigm shift known as the 3D Reset. This is part 2 of a two-part series.  Kyrklund discusses the three key trends shaping the economic landscape: demographics, decarbonization – focused on climate change, and deglobalization. She explains how these factors are leading to a new investment regime characterized by a shift in the trade-off between growth and inflation. Kyrklund points out that interest rates are fundamental to how everything is priced in the financial world, which results in big implications on how investors will manage their money.  Patti and Johanna also discuss proper asset allocations between US and International investment tools based on the 3D Reset.

    Why a Soft Landing for the Economy Could Be Hard

    Why a Soft Landing for the Economy Could Be Hard
    Federal Reserve officials voted to hold interest rates steady at a 22-year high but signaled they were prepared to raise rates once more this year to combat inflation. WSJ's Nick Timiraos explains the Fed’s “soft landing” goal of lowering inflation without crashing the economy. Further Reading: - Fed Holds Rates Steady but Pencils in One More Hike This Year  - Why a Soft Landing Could Prove Elusive  Further Listening: - Will the Fed Stop Raising Interest Rates  - Homeowners Don’t Want to Sell. So Builders Are Cashing In.  Learn more about your ad choices. Visit megaphone.fm/adchoices

    Runaway Inflation! What Now? | VectorVest

    Runaway Inflation! What Now? | VectorVest

    https://youtu.be/X0GmqVc4pOg

    Try VectorVest for only $0.99  ➥➥➥ https://www.vectorvest.com/YT

    CPI number came out today and Inflation reared its ugly head! What is the State of the Market? Well, still at 40-year highs for inflation, we have a Hawkish Fed that has warned us his actions may cause economic pain, and there is no good news to hold on to. The State of the Market is not good and we have the potential to continue to the downside for a while. Here at VectorVest, we have had you prepared for this, in real-time! We have indicators to help you through these times. So what do you do now? Watch this video to gain some crucial insight, keep your heads off the swivel, and remain focused!

    Runaway Inflation! What Now? | VectorVest

    Use this link for a FREE Stock Analysis Report ➥➥➥ http://bit.ly/2KsZlqz

    VectorVest mobile app ➥➥➥ http://bit.ly/2UjF6y6 

    SUBSCRIBE To The VectorVest Channel ➥➥➥ https://www.youtube.com/user/VectorVestMB/?sub_confirmation=1