The Voices in Your Head

And welcome to another edition of Mr. Stillman's Opus, the podcast that helps you learn more about financial happenings and your financial life, perhaps.

We love to take different subjects and ideas and apply them to everyday situations. Walter Storholdt here with you this week alongside Jon Stillman. Hey, Jon. Your beard is coming back. It's starting.

Slowly creep back in. Yeah. We go through many phases in this facial hair thing.

Yeah. Well, we just we need to get you a beard trimmer that works. So you don't have to go from like full blown terrorist look to baby face and then grow a little bit.

If you could just keep it trimmed at a nice reasonable level. My wife Connie says I look like I'm 12 when I don't have the beard. How old would you say I look like when I do have the full blown beard? 97 97.

That's our range. No gray for a 97 year old beard. I mean, that's impressive. Clearly a 97 year old who dies his beard using the just for men. Yeah. Yeah.

Not the what is the one where you'd leave just a little bit of gray, a touch of gray or whatever they call it. Anyway, enough about beards. Yes, it's I've got the couple day stubble going on now, which I think is a good length. But if you're still listening to the podcast after all this beard talk, here's what we've got coming up for you today. We're gonna be talking about the voices in your head and not just John and I as the voices in your head today. I think everyone kind of whenever you would mention like voices in people's head, it's easy to picture the old cartoons where you have the good and evil or I guess it's the devil and the angel on your shoulder, right? The good and the bad talking to you trying to convince you of what to do.

Anytime you're faced with a moral dilemma. Right, exactly. So in the investing world, it's not just John and I on your shoulder. That'd be a very comical two voices to have in your head would necessarily be a good and evil kind of thing. In the investing world, most popularly, it's the voice of wisdom versus the voice of greed we find. Or in some cases, the voice of fear.

Could be the bad voice. Fear and greed maybe kind of go hand in hand, right? So we kind of would imagine or at least hope that you can recognize when the voice of wisdom is telling you something.

Hopefully that's pretty obvious. Sometimes it can be a little harder to discern the voice of greed because sometimes the things the voice of greed says actually sound like good ideas on the face. And so what we're going to do is give you some statements. You might hear the voice of greed say so that you can be aware of it. And then, John, you give us maybe some ideas of how we can talk back to that voice or handle that information. All right.

All right. So one statement we could hear the voice of greed say is the market is doing great right now. This is a good time to invest a little more aggressively so you can take advantage of the growth. Well, I believe it was Warren Buffett.

Well, I don't believe. I know it was Warren Buffett who said, be fearful when others are greedy and greedy when others are fearful. That is to say, contrarian investing has its benefits. So when everybody else thinks it's a great time to really pour gas on the fire from an investment standpoint, that's when you dial back and vice versa. When everybody else is scared, you go out and you buy. This is why bookies drive beamers.

Right? Because if the average person could pick a football game, well then, you know, the bookies wouldn't be making as much money as they are. So there's something to be said for contrarian betting in the gambling world. If the NFL lines come out before the game and you see that the Patriots are seven point favorites over the Dolphins, then the next day the Patriots are only six point favorites over the Dolphins.

What does that mean? That means that too many people were betting on the Dolphins, thinking that the Dolphins would lose by less than seven. So when too many people put money on the Dolphins, the bookies say, uh-oh, we have imbalanced betting here. If the Dolphins cover the spread, we're in trouble. So they have to change the line to try to entice more people to put money on the Patriots.

Right? So that's how the spread gets set by Vegas and football or any sort of sports gambling. So if the line comes out and you see that the Patriots are seven point favorites, then you see that they're only five point favorites a couple days later. Well, that means a lot of people are putting money on the Dolphins, which means you should put money on the Patriots because the idea is the average person can't make the right call. So same thing with your investing. When people are thinking it's a great time to put money in the market, often the opposite is true. Nobody is saying, sell, sell, sell.

Things are bad. That's often your opportunity to swoop in and buy stuff on sale. The difference between the two is that no matter what age you are, your bet on the Patriots or the Dolphins would be an equal decision, whether you're 20 or 55. However, in the investing world, whether to continue to put money in, whether to buy or sell is going to be largely dependent on whether it's a good idea or not based on if you are 20 or 55, there's a difference. Right. And it could be that maybe you shouldn't be betting on football at all. You should be betting on baseball. You know, I mean, it could be that you're not even in the right arena. Yeah. Or field in this example.

I guess they have arenas too. Don't bet on baseball because then like Pete Rose, they won't let you in the Hall of Fame. So don't bet on baseball. Don't take that advice. Yeah.

Don't take the advice of sports betting at all. Fair enough. I don't want to get any compliance issues here. All right. So that's good. That's the voice of greed maybe saying one little thing to you there. Here's another statement, John. That guy on CNBC seems to know what he's talking about. You should follow his advice quickly before everybody else figures it out too. Well, if it's already made it to CNBC, it's a little too late for you to be ahead of the curve. But I'm blown away by the number of people who think that because Jim Cramer said something, if they'll go out and, you know, follow his advice, get in ahead of the crowd, that they have some kind of insider information that they can take advantage of. Yeah.

The fact of the matter is before Jim Cramer even knew it, it was already too late. Yeah. So many people already had that information.

Yeah. I mean, the idea is that any information like that is already priced in to whatever stock you're talking about. So there are different theories on just how far ahead of the curve the market actually is in terms of the pricing of stock. Here's the idea that anything you could possibly hear, good news or bad news, is already priced into the stock. If you hear something that's good news, the stock price has already gone up.

You're already too late. There's even a theory, it's called efficient markets, whether you have a strong or a weak view of efficient markets. But there's actually a theory that says even insider trading doesn't matter because even that stuff is already priced in to the stock price. So it's foolish to think that because you heard something on TV that you're going to get some kind of good deal because you're ahead of the curve. The other thing to understand is that a lot of that stuff isn't, it's not investment advice. Okay. It's entertainment. Right. And when you think that you're getting investment advice from the people on TV, that's when you get in trouble because it truly is meant to entertain and engage you, not to tell you what to invest in. Or maybe a chance to learn some broader topics. Maybe there's a little bit of education that's going on, but it's not, don't take it as specific guidance for individual stocks. Yeah, that's well said.