“I believe in evidence. I believe in observation, measurement, and reasoning, confirmed by independent observers. I’ll believe anything, no matter how wild and ridiculous, if there is evidence for it. The wilder and more ridiculous something is, however, the firmer and more solid the evidence will have to be.” – Issac Asimov

Last year around this time I wrote something about annual Wall Street predictions, which even the people making them know are nothing more than a coin flip.  I was reminded of that again last month, when I had the pleasure to attend the first annual Evidence Based Investing conference in New York, put on by the folks at Ritholtz Wealth Management.  If you have any passive interest in investing, the conference would have been interesting.  If you’re a finance nerd like me?  It was akin to taking a 4-year-old on his first trip to Disneyland.

At several moments I was simply stunned by the raw depth of investment knowledge and experience, in speakers and attendees alike.  I had many idols and mentors in the room, most had no idea what they meant to my continual learning.  I started my business and chose a new path by following their collective lead.  It took all I had not to hug people and ask for autographs.

Now I’ve been to countless investment conferences over the years, with extremely bright presenters and industry experts.  Impressive as the resumes may be, this time I was struck by something for the first time, something different…  There was a collective sense of humility and thoughtfulness in the room that I’ve never experienced at a finance gathering.  Extremely accomplished people, all with wildly successful careers and deep education on Wall Street…yet everyone was willing to sit back and admit they didn’t have all the answers and reflect on each other’s thoughts and disagreements.  There were no predictions, no S&P 500 year-end targets, no interest rate prognostications.  It was a subtle, yet forceful, acknowledgement – this group of people, this amazing group of intellectual investors who manage billions of dollars, has no idea what the market is going to do.

That’s so boring.  That doesn’t sell.

So what sells?  What sounds cool at a party?  As a quick interlude before I heap further praise and credit on my colleagues from the conference, let’s paint with a different brush…


10 questions will tell your survival chances in 2016 bear market

100% risk of a 50% stock crash if Donald Trump wins nomination

One big question: Will stocks lose $10 trillion in 2015 or in 2016?

Countdown to the stock-market Crash of 2016 is ticking louder

60% of the time, it works every time

Alarming headlines!  Also not even close to accurate!  (Ok, that last one is a quote from Anchorman, but could you really tell the difference?)

These are the work of noted soothsayer Paul B. Farrell, who writes these outlandish predictions for Marketwatch.  Here’s Paul’s bio…

He’s the author of nine books on personal finance, economics and psychology, including “The Millionaire Code,” “The Winning Portfolio,” “The Lazy Person’s Guide to Investing.” Farrell was an investment banker with Morgan Stanley; executive vice president of the Financial News Network; executive vice president of Mercury Entertainment Corp; and associate editor of the Los Angeles Herald Examiner.

Pretty impressive, right?  If you have money in the market and you’re browsing a reputable Wall Street site like Marketwatch (a Dow Jones company, the publisher of the Wall St Journal and Barron’s), you’d be inclined to read and maybe even take seriously his wild predictions.  Despite being a punchline to any serious person in the business, his columns are there to view by millions of typical investors.

How about another bio…this one in the first person so you can really feel the humility…

My name is Harry Dent. For the past 30 years, I’ve used the Science of Demographics to predict major economic and market shifts with uncanny accuracy… including the Tech Wreck of 2000…the 2000’s real estate bubble…and the market crash of 2008.  More recently, I called oil’s shocking crash, the dollar’s surprising rise and the mid-2014 gold rally followed by its dramatic collapse again toward the end of the year. And I understand that we are about to go through a very difficult few years, but I also know there are INCREDIBLE opportunities that could help build you a personal fortune that will last the rest of your life!

Harry switches from selling fear to greed in the same sentence, that’s hard to do!  Here is a sampling of Harry’s ‘uncanny accuracy’…

December 30th, 2011 – Dent was interviewed on Bloomberg TV and recommended that investors sell all their stocks, predicting that the S&P 500 would fall 30% to 50%

January 8th, 2013 – Dent told CNBC, “We’ll see one more correction into this second fiscal cliff. I think we’ll see another rally into March, April, May, or something. By the summer, we get another crash.”

January 14th, 2014 – Dent tells an Australian audience (while promoting his new book), that “house prices are unsustainable and will fall by at least 27% in Sydney and Melbourne over the next several years.”

You get the idea….Harry has been making outrageous calls on the market for decades.  Harry’s a smart guy and his data is intriguing, he certainly does research.  The problem is his predictions are outright terrible.  He has, indeed, gotten some correct.  He has also missed in spectacular fashion on most.

A few weeks ago, Harry went on CNBC and said “I think it [the Dow] is going to end up between 3000 and 5000 a couple years from now.”  If you’re keeping track, the Dow is at 20,000.  That means Harry is predicting the market will lose between 75-85% of its value in the next 2-3 years.  When a few of the CNBC commentators pointed out some of his awful track record, Harry replied “I make bold forecasts, and especially with things like [quantitative easing] and massive government intervention — yes, I’m going to miss some things. But, I have the guts to make these bold calls.”

Then just 10 days later…wait for it…Harry decided instead you should stay in the market!  “No matter how irrational this market is, I admit I’ve gotten the timing wrong,” said Dent.

Here’s one more…

August 25th, 2016 – Citigroup:  A Trump presidency would trigger a financial crisis

November 4th, 2016 – Citigroup: Trump win would cause immediate stock drop

December 22nd, 2016 – Citi raises its 2017 S&P 500 forecast, citing the ‘Trump jump and pump’

Citigroup is an enormous, reputable, established Wall Street powerhouse.  You know what happened between November and December?  The market went up and proved them completely wrong.  So they simply changed their forecast and acted like nothing happened.  That’s why their clients pay the big bucks, for terrific content like that.


Do you know what Paul and Harry and Citigroup research have in common?  They’re not paid to be correct, they’re paid to pump out content.  Be it columns, books, or research papers, they’re paid to generate a headline and get you to click.  If it’s boring, you probably won’t click.  If they admit they have no idea what’s going to happen?  Well, what kind of investing guru are they, anyway?!?!

See studies have shown that people are more likely to believe something if it’s told to them with extreme confidence.  Wall Street knows if they trot out a series of impressively educated people to say something is definitely going to happen, you’ll believe that something is definitely going to happen and buy whatever they’re selling.

As I said at this time last year, clients have been trained to ask ‘what do you think the market is going to do’ because we have trained them we’ll answer!  People desperately want the crystal ball, the fast money, the big score.  They never want the truth – you get wealthy by earning a good salary, living below your means, investing in a diversified portfolio, behaving well…and saving.  Then saving some more.  That’s so boring!  How are you supposed to brag about that to your friends at the Club!

Let’s move on from Paul and Harry and Citigroup.  In fact forget I ever mentioned them, lest anyone be tempted to click on their next prediction.  Back to my conference…


Evidence Based Investing is the simple concept of using data to invest for the long-term rather than stories or emotions.  One of the most recommended and widely read books for new financial advisors is ‘Storyselling for Financial Advisors:  How Top Producers Sell.”  This book was put in my hands not long after I was hired by UBS in 2006, it was considered a basic handbook for the industry.  Its contents are exactly what it says, it teaches you how to sell people stuff by spinning them rich yarns that will play on their emotions, thus buying whatever crap you’re selling.  A ‘big producer’ is somebody that generates tons of revenue for the firm.  It doesn’t mean he’s good at investing, or tell you anything about how he works with clients, or even if he’s any good at his job.  It just tells you he sells.  A lot.

Instead of a ‘big producer’ calling you to sell you the product of the minute, there is an undercurrent in the business that is emphasizing investments based on facts, data, and without products.  You can finally have your money managed by someone who doesn’t take a commission when they sell, who doesn’t worry about ‘producing’ for the big firm, and who invests based on data rather than a hunch.  The guys (and gals) at this conference are leading the way.

I couldn’t possibly summarize all the good ideas I heard that day, or while stuffing myself with everyone afterwards at happy hour.  Instead I went back through my notes – I thought I’d share some quotes that really stuck with me.  More importantly, I want to share some of the links to their writings and blogs and websites.  These are the guys that are doing the real work and hopefully represent the future of investing and money management.  They’re all thoughtful, humble, supportive of each other, and admit they don’t have all the answers.


“Evidence based investing is the best and most important defense against the marketing industrial complex that dominates the financial services industry” – Tony Isola (not said at the conference but soon after on Tony’s site, too good not to include!)

“It’s in a lot of people’s interest to complicate things” in the investment world – Greg Collett

“Right now low vol is expansive crap” – Wesley Gray (these funds were this year’s invention, meant to provide returns without volatility.  The flavor of the minute, probably sold by ‘big producers’ all over, until they got crushed in the last 2 months)

“Everything that works has to suck” – Wesley Gray (Wesley was on quite a roll…he’s referring to the idea that if something works well then everyone will buy it, and by definition drive up the price, in which case it sucks.  Conversely, if you’re going to make money something has to be hated when you buy it.)

“Excess return lives where you don’t want to go” – Mike Philbrick

“We need to build a culture that makes fewer, better decisions” – Tom Brakke

“We don’t manage stocks and bonds, we manage fear, greed, envy, regret” – Mike Philbrick

“Confusopoly” – Larry Swedroe (referring to Wall Street’s tendency to make things complex and confusing, thereby overwhelming you into buying what they’re selling)

“Far too many ETFs today designed by marketers, not investors” – Jim O’Shaughnessy

“Charisma premium” – Ben Carlson (discussing the storyselling referred to above.  The tendency of people to buy something expensive because the person selling it is just so darn charming and has such a nice suit)

“The best portfolio is the one they will stick to” – Larry Swedroe (referring to the tendency of people to feel comfortable with their portfolio until it goes down, then they want to switch)


“Perceived sophistication” – me

I use this often now that I’m on the outside of the big firm.  It’s what you’re paying for when you cut that big check to Citigroup for the research quoted above.  People believe big banks have some top-secret product or idea that will beat the market.  It makes them feel better, it makes them feel sophisticated.  After all, they’ve worked hard for their money, they’re wealthy, and they want and deserve ‘the best.’  They will pay a higher amount just for the perception that they are more sophisticated than another, less wealthy, investor.  It’s an ego purchase – buying what they think is the smartest idea but also the ability to avoid the ghastly embarrassment that comes when their peers don’t recognize the name of their investment guy.  I kept thinking of this over and over while listening to all of these presenters, how many clients are out there paying huge dollars to the huge banks so they can puff out their collective chest and feel like they’ve hired the smartest guys in the room.  Hopefully, with more conferences like this one, with more momentum and knowledge spread, that era will finally come to an end.

These are some of my favorites with links to their work…I can’t list all of them because there are hundreds, but this will be a great start.  I don’t want to comment for fear I undersell their stuff, it’s that good.  I just hope anyone that reads this will seek out their content and follow their work.  It will make you a better investor, it definitely has for me. The future of investing is bright!

Carl Richards – behaviorgap

Josh Brown – thereformedbroker

Patrick O’ Shaughnessy – investorfieldguide

Phil Huber – bpsandpieces

Ben Carlson – awealthofcommonsense

Michael Batnick – theirrelevantinvestor

Morgan Housel – collaborativefund.com/blog

David Schawel – economicmusings

James Osborne – basonasset

Dan Egan – dpegan

Tony Isola – tonyisola

Wesley Gray – alphaarchitect

Meb Faber – mebfaber

Corey Hoffstein – blog.thinknewfound

Barry Ritholtz – ritholtz

Tom Brakke – researchpuzzle

Jason Zweig – jasonzweig

Eddy Elfenbein – crossingwallstreet

Tadas Viskanta – abnormalreturns