YouSaid · the spoken record

William Bernstein

lines on the record: 114
first: 2019-04-18
most recent: 2019-04-18
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Well, by observing the mistakes that people make, and I found that people made four basic mistakes. Number one is they didn't understand market theory, financial theory. They didn't understand that there's a correlation between risk in return. It's almost like the law of gravity in investing. And they didn't understand the theory of diversification. And they didn't understand basic portfolio theory, how you mix assets. Secondly, they didn't understand the history. And that came home during the tech bubble of the late 1990s when people had absolutely no idea that they were living through something that had happened many times before. There was a script to the movie. And if you read the script, you knew how the movie ended. And of course, 95% of the people who invested in the 90s did not know.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“The same sort of subject. It's a serious endeavor. And just like in order to do medicine, you have to start with the basics, anatomy, physiology, pathology, pharmacology, so too when you approach investing, you should exert a similar amount of effort. You should learn about the theory of investing. You should learn about the history of finance and of investing. You should learn about its psychology. And lastly, you have to learn about the business aspects of investing, the people who are selling you the products.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you've hit two of the high points, but the major reason, I think, is that they don't take investing seriously. A physician, and I think most physicians who are properly trained will not treat so much as a cold without a detailed review of the peer-reviewed literature, discussing things with their colleagues, and a thorough review of the database that's available to them. On the other hand, physicians, when they approach investing will do it by reading the Wall Street Journal or USA today or Kiplinger's. And the way I explain that to them is, you know, when you have to treat someone with a serious disease, you don't get your information from psychology today or USA today. You go and you look at the most authoritative sources. Investing is exactly...”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“That's correct. Yeah, yeah. Duration, I'm sort of neutral about. You can make the case, as you well know, that duration is certainly a risk, particularly in an inflationary environment. But when the excrement really hits the ventilating system, duration is generally a good thing.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there are risky assets and there are riskless assets. You know, Tobin's separation theorem, and that's how I view portfolios. You've got the stuff that helps you sleep at night, and you want to keep that as safe as possible, things with a government guarantee. That's next month's grocery money. And then there's the stuff which you're really not going to be touching or shouldn't be touching for decades. And that's the risky stuff. And that's really all there is to it. And I think it is a bit of a mistake, not a serious mistake, but a bit of a mistake to mix the two. So junk bonds, for example, corporate bonds in general, I think, are a mistake.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, yeah. And there are people who've got probably far less detailed databases than Rogers. And of course, you can go, you know, you can look at English stocks and you can at least get monthly and annual returns all the way back to the mid-17th century.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, I think it was Bernard Baruch who said that something that everyone knows isn't worth knowing so that if everybody has these data and can operate on them, then they become nearly, nearly worthless. Gene Fama makes the point that everybody is basically working off the same database, you know, going back to basically 1926. And you have to be very cautious about different studies that are still using based on the same database because I think it was Samuelson who said we only have 200 years of history. And that's not the complete sample.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. And he hit his sort of made a show of mock putting his face in his hands, shaking his head. And then six weeks later, I got an offer from McGraw-Hill. He swears he has nothing to do with it. But of course, I had...”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, the story is that a man by the name of Robert Barker, who was a reporter for Business Week, actually came to interview me in about 1998. And I told him the story, and I can still see the look on his face as I told him the story about the 30 publishers. And he said, Dear God, please tell me that one of them wasn't McGraw-Hill. And I said, well, yes, it was.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll give credit to a man by the name of Frank Armstrong, who is a financial advisor in Florida. And he had done pretty much the same thing. He hadn't collected the data, but he was on the web before with financial writing, before anybody else was. And this goes back to well before 1995. And he encouraged me to do it. I had, you know, 1995 after I... Completed the exercise, I wrote a book called The Intelligent Asset Allocator, my first book, and I approached a bunch of publishers with it, and of course being someone with no experience and no credentials, you know, just a manuscript coming in over the transom, it got rejected by 30 publishers. And Frank told me, hey, just put the book on the web. And that's basically how it took off.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a fool's errand because the output of a mean variance optimizer, that is what are the most efficient portfolios, giving you the most return for the least amount of risk or vice versa giving you the least risk for a given amount of return is extremely sensitive to the data that you put into it. So change the return of an asset class by a percent or two in either direction and it might completely dominate a portfolio or it might completely fall out of the portfolio. These things started to come onto people's desktops in the early 1990s and when they tossed in historical data, what did they find? Well, they found the most efficient portfolios were heavy in Japanese stocks and precious metal stocks case closed. That's all you have to know.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“I basically begged people for data. And I just collected as many data series as I could, and I wanted to basically create what's called a mean variance optimizer, which is something that trades off return and risk measured as standard deviation or variance. And as much data as you can throw into that is good. And so that was why I collected all of those data. Now, it turns out that that sort of exercise is a fool's errand as I very quickly figured out, but it's still a useful skill, and it was a useful thing to do for small investors.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“I miss the camaraderie. I miss dealing the personal interaction with patients, which is golden. And, you know, I miss the knowledge base and the competence that you exert. But the day-to-day practice of medicine does wear on you after a while. And there comes a point, I think, in every doctor's career when, or at least most physicians' careers, when they decide to call it quits.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I did it more or less for a third of a century, and I transitioned into finance and nonfiction writing by virtue of the fact that I live in a country that doesn't have a functioning social welfare system. And so I had to save and invest on my own. And I approached the problem in a way that I thought that any person with scientific training would do, which is that you examine the peer-reviewed literature, you read the basic texts, you collect data, you built models, and this got me to about the mid-1990s. And by that point, I realized that I had created something that was actually of use to small investors. And so I began writing finance. And as I'm sure we'll get into later in the interview, one of the essential skills that any investor should have is a working knowledge of financial history. And I discovered that I enjoyed writing history.”
2019-04-18 · Masters in Business · William Bernstein Discusses Neurology and Investment · IDENTIFIED FROM THE TRANSCRIPT · source