The author and Wall Street Journal columnist on Ben Graham’s enduring wisdom, Jonathan Clements’ impact, and more.
On this week’s episode, we’re pleased to welcome back returning guest, Jason Zweig. Jason writes the “Intelligent Investor” column in The Wall Street Journal and has published a number of popular and critically acclaimed books on investing and finance, including Your Money and Your Brain and The Devil’s Financial Dictionary. In his most recent project, Jason published an update of Ben Graham’s classic book, The Intelligent Investor. And we’ve devoted a portion of today’s episode to delving into Graham and the Intelligent Investor with Jason. Please note that we recorded this interview on April 8, 2025.
Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make Your Rich
The Devil’s Financial Dictionary
“Trump Just Shredded the Economic Playbook. Here Are Your Next Investing Moves,” by Jason Zweig, wsj.com, April 4, 2025.
“The Mistake You’re Making in Today’s Stock Market—Without Even Knowing It,” by Jason Zweig, wsj.com, April 25, 2025.
“Four Questions You Should Ask to Combat the Market Chaos,” by Jason Zweig, wsj.com, April 10, 2025.
“Inflation Isn’t Going Away? Some Tips on How to Buy TIPS,” by Jason Zweig, wsj.com, Feb. 14, 2025.
The Intelligent Investor: The Definitive Book on Value Investing, by Benjamin Graham
The Intelligent Investor Third Edition: The Definition on Value Investing, by Benjamin Graham and updated with new commentary by Jason Zweig.
“The WSJ’s Jonathan Clements Wants to Leave a Living Legacy,” by Jason Zweig, wsj.com, May 8, 2025.
“Jonathan Clements: ‘Humility Is a Hallmark of People Who Are Financially Successful,’” The Long View podcast, Morningstar.com, Dec. 26, 2023.
“Jonathan Clements: ‘Life Is Full of Small Pleasures,’” The Long View podcast, Morningstar.com, Oct. 15, 2024.
“Private Markets Seem Out of Reach for Individual Investors. BlackRock Thinks It Has an Answer,” by Jason Zweig, wsj.com, Sept. 12, 2024.
“You’re Invited to Wall Street’s Private Party. Say You’re Busy,” by Jason Zweig, wsj.com, Dec. 20, 2024.
“Don’t Buy Into This Easy Fix for Stock-Market Craziness,” by Jason Zweig, wsj.com, April 18, 2025.
“SEC, States Investigate Firm Holding Couple’s $763,094 Retirement Fund,” by Jason Zweig, wsj.com, Dec. 4, 2024.
“David Swensen’s Coda,” Yale News, news.yale.edu, Oct. 22, 2021.
(Please stay tuned for important disclosure information at the conclusion of this episode.)
Jeff Ptak: Hi and welcome to The Long View. I’m Jeff Ptak, managing director for Morningstar Research Services.
Christine Benz: And I’m Christine Benz, director of personal finance and retirement planning for Morningstar.
Ptak: On this week’s episode, we’re pleased to welcome back returning guest, Jason Zweig. Jason writes the “Intelligent Investor” column in The Wall Street Journal and has published a number of popular and critically acclaimed books on investing and finance, including Your Money and Your Brain and The Devil’s Financial Dictionary. In his most recent project, Jason published an update of Ben Graham’s classic book, The Intelligent Investor. And we’ve devoted a portion of today’s episode to delving into Graham and the Intelligent Investor with Jason. Please note that we recorded this interview on April 8, 2025.
Jason Zweig: Great to be with you guys. Thanks for having me back.
Ptak: It’s our pleasure. So, Jason, as we record this, the market is in the midst of a sharp selloff with investors recoiling from President Trump’s sweeping tariff plan. What does history teach us about episodes like these? And do you have any advice for listeners unnerved by what they’re experiencing at the moment?
Zweig: Wow. Well, we’re not starting with the easy questions, are we? So, to some extent, every big setback in the market is unprecedented, but this one feels more unprecedented than usual, right? I mean, certainly with covid, you’d have to go back to, oh, I guess 1918 and the influenza pandemic, but then you’d have to disentangle that from World War I. Here you have to go back roughly almost a century, maybe to 1930 in the Smoot-Hawley Tariffs, but you have to disentangle that from the Great Depression. The unprecedented nature of this, the unilateral sort of out-of-the-blue, enormous magnitude of these tariffs and the reversal of 80 years of global trade policy doesn’t really give us any past reference points, nor is it easy to project what will happen in the future because there’s so many different ways this could unfold from a total retraction by the Trump administration to wide negotiation by other countries to intransigence on every side.
So it’s very difficult to find any historical precedent that is a clear pattern for what we can expect. So I think investors need to rely on really basic questions as they try to put this in context in historical and psychological and investing perspective. And I think you have to ask yourself questions like, what do I own and why do I own it? Which is the famous question that Peter Lynch popularized. If you have most of your portfolio in stocks, you should ask why? Why do I have most of my money in stocks? And the answer probably isn’t contingent on economic policy. I think you also have to be very careful to evaluate what you mean when you say or feel that you have losses in your portfolio because if you’re a longtime investor, you surely paid much less for your holdings than they’re worth today, even after a 15% or 20% decline. So, what we all need to do is go back to basics but also pause to think and not shoot from the hip because it’s very easy to get panicky at a time like this. And the one thing history does show is that that is not conducive to good decision-making.
Benz: It seems like some investors might be inclined to say so, it seems like everything we’ve assumed about markets and global commerce can be undone with the stroke of a pen. And they might conclude that there are no guiding principles or rules that we can confidently follow as investors and maybe no real guardrails. Can you discuss how a person who’s thinking those thoughts can overcome those doubts?
Zweig: Well, let’s be honest, Christine. We don’t know that that’s wrong. When all is said and done and we have some sort of resolution or visibility on how this has turned out in the end, whether that’s a week from now, a month from now, a year, or a decade, I don’t feel that I can say with 100% certainty that nothing fundamental has changed. It’s entirely possible that this new policy of the Trump administration may have a lasting negative effect on global trade and on economies around the world, including that of the US. I don’t think that’s the most likely scenario. I think human beings and businesses and national economies are incredibly resilient. And people will find ways to make this work, even if they have to use workarounds. But we can’t completely rule out that things will go quite badly.
So having said all that, I think if you are worried that something has broken and it can’t be repaired, the first thing you have to ask yourself is how often do I have to be right if I’m going to act on this? So, you have to be right on your timing and arguably you’re already wrong because if this is how you feel, you should have sold at the end of March when all of this started to become clear. You have to be right about your analysis, how things will unfold. And then you’ll also have to be right down the road about when or whether things will get better. You have to be right about what other assets you plan to put your money in. And you have to be right about the ultimate timing of when you move your money back. So that’s an awful lot of things to be right about. And I know that I can’t be right about, well, I can’t be right about any of those. So in my case, I’m standing pat, and I want to see what happens and how it unfolds before I take any action.
Ptak: That’s a very interesting way to put it. How often do I have to be right? That’s very wise. I do want to ask you about one—maybe you can call it a tactic—that someone could take. We don’t want to be tactical per se, but I think you’ve written recently about inflation protection and how TIPS can come in handy. Do you think the tariff plan bolsters the case for TIPS? Or do you think the potential slowdown of trade and economic growth is more disinflationary than inflationary?
Zweig: I will say that I am a lot more nervous about TIPS and any US government debt than I used to be, not primarily as a result of the tariff plan, but more because of what some people are calling the “Mar-a-Lago Accord,” which is this notion that the US could effectively wipe out a large portion of the national debt by renegotiating terms with foreign creditors, which I personally think is a very dangerous precedent and would not bode well for the price and value of Treasury securities. I still think on balance TIPS are safe and my hunch is that if the tariff program goes through in the worst-case scenario or anything but the best-case scenario, I think we’re more likely to get rise in inflation than we are in disinflation, and I think that would be positive for TIPS.
Benz: Jason, I wanted to ask about—and we don’t want to hog this whole conversation by talking about current events—but derisking I think is probably top of mind for people getting close to retirement or in retirement. We hope they’ve done a little bit of that work already, but I guess a question would be in someone’s mind at that life stage is, am I too late? If I’m selling stocks now to buy safer assets, am I making a mistake here? Can you address that person?
Zweig: Yeah, well, I guess the advice I like to give people is you should try to avoid panicking, but if you can’t and you feel you must panic, then at least panic gradually, and I’m a big advocate of what I call baby steps. If you want to reduce your risk, there’s a lot of ways you can do that. In your taxable accounts, you can of course do tax-loss harvesting, which can be a very powerful way to derisk. You would sell whatever you have the biggest loss on, which is probably whatever stocks you bought most recently. Try to take those as short-term losses if you can because they’re probably more valuable on your tax return. You can also do really simple things like if you are reinvesting your dividends on your mutual funds, your ETFs, your individual stocks, you could switch that off at your brokerage or fund company or your financial advisor and take those income distributions as cash and build up a bit more of a cash reserve and that would certainly give you a level of comfort.
If you’re within a retirement account where you have a tax advantage, then you could make some marginal moves to derisk your portfolio, but what I would say to people is if you feel you’re 50% overexposed to stocks, then maybe reduce it 5% a month for the next 10 months. Of course, I’m slightly oversimplifying the math, but do whatever you do gradually because the thing is, changes that we make when we’re under emotional stress are almost always changes we regret later. And if there’s one thing I can guarantee people, it’s that if you make big changes when you’re under emotional stress, you will regret them later.
Ptak: I want to switch gears and talk about the book, The Intelligent Investor, which you recently published an updated version of. Before we go into Graham’s key tenants and how they still apply today, can you talk about Graham, the person who he was and what made him so remarkable in your opinion?
Zweig: Yeah, so Benjamin Graham was not just one of the greatest asset managers of the past century, but he was one of the smartest and he surely was one of the very few wisest professional investors I would say Wall Street has ever seen. Graham was born in London. His family came here when he was very young. He was born in 1894, and his family was upper middle class and then his father died, and in the panic of 1907, his mother’s stock portfolio was basically wiped out and Graham, he and his brothers, all had to go to work as very young teenagers to help support their widowed mother. He worked a night job throughout his two and a half years in college. He graduated from Columbia as salutatorian of his class at the age of 19, and he published an article on the proper method to teach differential calculus in the American Mathematical Journal when he was 23. Before he graduated, he was offered faculty positions in three different departments, philosophy, English, and math.
And in those days, it was not only highly unusual for an Ivy League university to offer faculty positions in three different departments to an undergraduate, but of course Graham was also Jewish at a time when almost no one on Columbia’s faculty was anything but probably an Episcopalian. So he was just an extraordinary intellect, and Graham was a brilliant investor. He outperformed the S&P 500 by a substantial margin over a long career and if you include the investment that his fund made in Geico, the insurance company, which was distributed out to his fund’s investors in 1948, as Warren Buffett told me when I was working on the book, Graham’s record was even better than it looked. So on almost every level, he was just an absolutely remarkable intellect and investment authority.
Benz: In the book, you summarize Graham’s four great principles, which I’ll paraphrase quickly. The first is that you can’t invest without trading, but you can trade without investing. The second is a stock is an ownership interest in a firm that has an intrinsic value. The third is prices are usually right but can sometimes be very wrong. And the last is that investors focus too much on the upside and too little on the risks of being wrong. These principles seem like received wisdom. They’re very much inculcated in all of us who think about these matters, but were they unorthodox in their day?
Zweig: Yeah, I think they were. In Graham’s time, just as in ours, speculation was rife. In the early 1900s, bucket shops were everywhere in towns and villages all across the United States and much of the developed world, for that matter. And if you think about the movie, The Sting, the classic movie, a large part of that movie is actually set in a bucket shop where people were doing speculative trading in stocks. So Graham drew this distinction between investing and speculating that people didn’t recognize in his day and unfortunately have forgotten in our time as well. And in Graham’s day, there was a belief that if you were an investor, that meant you owned bonds. But if you owned stocks, you were a speculator. And Graham really wanted people to understand that it wasn’t investing in stocks that made you a speculator. It was how you chose to own them that made you a speculator.
And if you bought stocks just because everybody else was buying them or because you had a hunch that they would go up, then you were speculating. But if you did serious, careful, thorough original research, that qualified you to be an investor. So I think he hammered these principles home because in his own experience during the crash of 1929 and the Great Depression that followed, Graham had learned that there’s a fine line between understanding the right way to invest and actually doing it and that people really need simple rules and principles and policies and guidelines that they can follow that will keep them out of trouble rather than relying on willpower or folklore to get them through the course of an investing lifetime.
Ptak: Maybe the book’s most famous passage is, and I’m quoting here, “The investor’s chief problem and even his worst enemy is likely to be himself.” And so building off of that, you list seven virtues of great investors. Maybe you can talk about what those seven virtues are briefly, if you don’t mind.
Zweig: Yeah, for sure. Thanks, Jeff. So let’s make Graham’s great quote, gender neutral and say that for investors, our worst enemy is likely to be ourselves. And I’ve thought quite a bit over the past few years and of course, spoken with a lot of great investors about what they think the indispensable personality attributes are to be a great investor. And some of them Graham alludes to and others, I guess we have to infer them from between the lines. So the first, I think, is curiosity. If you aren’t curious about the way the world works and determined to figure out what’s behind and beneath the surfaces of things, I don’t think you can really make the most of yourself as an investor. You really have to have that instinct to dig and figure things out. And that feeds naturally into the second virtue, which is skepticism. And I think you, Jeff, and Christine, and I, and anybody who’s in the business of analyzing or writing about investments has had the experience of looking at something that just about everybody else believes is wonderful. But we have a little pebble in our shoe. There’s something bothering us. And we can’t quite put our finger on it. We don’t really know what it is, but there’s something that doesn’t quite seem to add up. And so we start to probe and ask questions and keep asking questions.
And the more questions we ask, the less satisfied we become with the answers. And that’s really where skepticism is so valuable. And not taking anything on faith is a really important virtue for investors. And the next virtue is independence, thinking for yourselves, not following the crowd, not going along with the herd. And that too flows naturally from the virtue underneath it, because skepticism enables you to think independently. Graham has this wonderful line in the book. He says, you are neither right nor wrong because the crowd agrees or disagrees with you. You are right because your data and your reasoning are right. And that’s very important, because what we saw, for example, during the meme stock craze is hundreds of thousands of people forming kind of an echo chamber or amen corner for each other, egging each other on, saying that this was going to the moon or addressing their critics and saying have fun staying poor.
And of course, none of that is sustainable in the long run, because a crowd of people whose analysis is superficial cannot make an asset go up in price indefinitely. Sooner or later, the market will reprice it to what it’s actually worth. So then the next virtue is discipline, which is just having a plan and sticking to it and making sure that as many of your decisions as is humanly possible are the result of plans and policies and rules and procedures rather than flying by the seat of your pants. The next virtue is patience, just giving yourself the time, giving your assets the time for the power of compounding to work for you. And then the last two virtues are the hardest ones of all. The sixth one is humility, which everyone claims to have. I think it’s a universal human trait that people talk about being humble. And how often have we attended some awards dinner where somebody is standing at the podium behind the microphone glowing and practically jumping up and down with excitement about the award they just won. And the first thing they say is, “I’m humbled to receive this award.”
And that’s actually the opposite of what they mean, right? So humility is a very difficult virtue to cultivate because it’s the one virtue, at least I can think of, that you can possess only by believing that you haven’t achieved it yet. And it’s a lifelong struggle, I think, to sustain that proper balance of humility. You really have to rub your nose in your own ignorance and try to surround yourself with people who are smarter than you as a way of sustaining your humility and cultivating it. And then the last virtue, which we’re all going to need, I think, in the weeks and months to come, is courage. You can’t be a successful long-term investor without courage. Most of the time during bull markets, we don’t really think that we need to be courageous because we’re making money while we sleep, we’re making money while we pay no attention to our portfolio. But at times like these, ever since April 2, investors need a lot of courage and it’s going to be tested. And many people who thought of themselves as long-term investors will turn out to be short-term investors. And I hope in the end they’ll end up wiser.
Benz: Yeah, that’s a wonderful overview of the virtues, Jason. I wanted to follow up on one of them, independence. The book’s most famous and widely cited chapter addresses how an investor can use their independence to their advantage. Can you talk about how leverage and trend-chasing impinge on that?
Zweig: Yeah, so chapter eight of the Intelligent Investor is called “The Investor and Market Fluctuations.” And in it, Graham talks about what he calls the investor’s basic advantage. And the basic advantage of the individual investor is that you don’t have to sell because other people are. You don’t have to sell because professional portfolio managers are selling. You don’t have to sell because your peers are selling. You can pick and choose the time and the price at which you want to sell. And that’s your basic advantage as an investor. You should control that decision. The problem with leverage in particular, and for simplicity’s sake, I’m going to include trend-following as a subset of that, although I’m not sure that’s totally fair. The problem with leverage is when you’re using borrowed money in one form or another, whether it’s margin in your brokerage account, or whether it’s a leveraged or inverse ETF, where you aren’t doing the borrowing, but the fund is magnifying returns internally and passing those through to you. Regardless of where the leverage is generated, it takes some of the power of the decision away from you.
Because by magnifying returns both on the upside, and especially on the downside, leverage can really magnify your panic and distress in a down market. Micro strategy was down, I think, today about 9%. Well, if you own a 2x ETF that delivers twice the return of the stock, you’re down almost 18% in a day. If you, heaven help you, own a 3-times leveraged fund, then you’re down almost 27%. And the human mind just is not built to withstand that kind of volatility without responding to it. And I think the investors who take on leverage must have an investment policy in place before they do it that says we will never leverage more than X% of our portfolio, and we will never put more than Y% of our wealth at risk using a leveraged strategy because the emotional impact when leverage goes the wrong way against you is something that you have to plan for when markets are calm because when markets are turbulent, you will not be able to believe the damage that that can deal to you.
Ptak: Before we move on to the next topic that we wanted to cover with you, Jason, I wonder maybe if you could reflect a bit on some of the conversations you’ve had about the update you made to the book, and what do you think are perhaps the biggest misconceptions still out there about Graham’s legacy and impact? For instance, some investors, maybe think his approaches outmoded by current standards. And so are there other things that you’ve heard as you’ve had some of these conversations, perceptions that maybe people had about Graham that weren’t evident to you previously?
Zweig: Yeah, well, certainly nothing new. It’s kind of the same old, same old, what people always say about Graham, and I think this goes back at least to 1999 or 2000 and probably farther back than that, is that his methods for evaluating stocks are obsolete. And what I know with a high degree of confidence is if Graham were still alive—and he died in 1976—if he were still with us, he would say, of course they are, of course they’re obsolete. Because every few years during his lifetime, he revised the book. And each time he revised the book, he revised his valuation standards to keep pace with the changes in the marketplace. And if he were around today, he would certainly have done the same thing. So it’s not fair to criticize him for sort of outmoded math, when he hasn’t had a chance to update it in quite a while. What I think people miss is that that never was the real contribution that Graham made with the Intelligent Investor. What the book is really about, and what readers should use it for, is what Buffett has called the emotional framework of the book.
And it’s those four principles that Christine alluded to earlier. It’s that there’s a critical difference between investing and speculating, and you need to know which one you’re doing before you do it. You have to understand that a stock is not a piece of paper or an electronic blip on your computer screen, a red or green dot or line. It’s a share in an underlying business enterprise that has real value that you should assess independently of the stock price. And the third principle is Graham’s beautiful metaphor of Mr. Market, this guy who lives next door to you. You run a small business, maybe you make water bottles or screen protectors for cellphones. And every day Mr. Market shows up at the fence between your two properties and he leans over, and he says, “Hey, Jeff, hey, Christine, I want to buy your business.”
And most days he offers you sort of a reasonable price, but it’s not really tempting for you to sell your business at that price. And then some days, like in April 2025, he offers you a much lower price than you know it’s worth. And then on other days, like late in 2024, he offers you more than you think it’s worth. And it’s up to you to decide whether you’re going to transact with him. You’re not under any obligation to take the market price just because it’s out there. And then the final principle people should take away from Graham is the margin of safety. It’s very simple. It comes from engineering. If civil engineers are building a bridge across a river, and they want it to be able to carry trucks that weigh 10,000 pounds, they build it so that it can carry trucks that weigh 20,000 pounds so that there’s no risk that a 10,000-pound truck will collapse the bridge. And by the same principle, if you think a stock is worth $100 a share, you certainly shouldn’t pay more than 100. And you should try to pay much less whenever you possibly can because you might be wrong. And you need that margin of safety. So those are the reasons people should read the book and take Graham to heart, not some mathematical formulas that he never intended to be permanently binding.
Benz: We wanted to shift gears, Jason, and discuss a side project that you’ve been involved in. You’ve coedited a book of Jonathan Clements’ Wall Street Journal columns. It’s called The Best of Jonathan Clements Classic Columns on Money and Life, and it should be available fairly soon. Jonathan, as our listeners may know, announced in 2024 that he was dealing with a terminal cancer diagnosis. I’m hoping you can talk about Jonathan’s impact on your career.
Zweig: Yeah, so I’ll try to do it without crying, Christine. Thank you. So Jonathan and I have been friends since March 26, 1987, but who’s counting? And we worked together at Forbes for several years, seven years, actually, I think. And we became very good friends. We used to have lunch almost every day with other friends sometimes. Always at exactly 12:30, Jonathan’s stomach is like an atomic clock. It keeps incredibly precise time. Jonathan wasn’t my mentor when we worked at Forbes. He was just my friend, but we learned from each other. We both were young. He’s slightly younger than I am. And we grew up together learning about investing and how to communicate good investing principles to the public. And then we stayed in touch over the years. He eventually left and went to The Wall Street Journal. I worked at Time Inc. for many years. And then in 2008, he got in touch with me and said, I’m going to be leaving the Journal. Would you be interested in my job? And I said, yes, I certainly would. And so he recommended me as his replacement, which is a term I don’t endorse. I didn’t replace him.
I simply stepped into a different role after he left because Jonathan wasn’t and isn’t replaceable. And Jonathan wrote a 1,009 columns. And never once, to the best of my knowledge, wrote anything that was flagrantly wrong. He never misled or fibbed or lied to his readers. He constantly filtered out the nonsense and the noise in Wall Street propaganda. And he just always conducted himself with honor and integrity. And he’s a role model for any financial journalist, any investing commentator, and anyone who wants the general public to stand a better chance of being able to achieve their financial goals. So I’m proud to have been Jonathan’s friend for so long. And I’m thrilled to be able to participate in this project.
Ptak: If I can ask, what are a couple of your favorite columns of Jonathan’s?
Zweig: So I really like the columns Jonathan did where he would deconstruct Wall Street jargon and kind of cut through the fog and poke gentle fun at the lingo that people throw around to confuse and obfuscate people. And in 2015, when I wrote a little glossary of Wall Street terms called The Devil’s Financial Dictionary, when I was working on that book, I had a bunch of Jonathan’s columns in the back of my mind. I tried to be a little tattier and maybe a little meaner than Jonathan was. But I think those columns were wonderful. I also love the columns that Jonathan wrote about educating his own kids about money, which in my family, we wish I had taken more to heart and imitated in my family.
Benz: So the proceeds from the book will go to help young people get started in investing, possibly, which is something that Jonathan feels passionately about. Can you share more about that part of the book project and the related project?
Zweig: Yeah, so we’ve teamed up with some behavioral economics researchers who, with Jonathan’s blessing, want to run some experiments to figure out how we can best motivate young people who don’t come from families with investing experience, how to take those young people and turn them into long-term lifelong investors. And the idea is to give them $1,000 a piece to open Roth IRAs and then to track them over time to see whether they sustain those accounts and add to them as the years pass. And it’s a very complicated project. As you can attest, Christine, it’s had way more obstacles and wrinkles than I think any of us ever expected. But we are optimistic that we’ve got them all ironed out, but we can proceed with this. And we’re hopeful that we can really accomplish something and maybe even blaze a trail for other researchers and policymakers to follow.
Ptak: I’ll enjoy seeing some of that come to fruition. Again, if I may, I want to shift and maybe touch briefly on some of your other work. Jason, you’d written in your column about an investment scheme involving several advisors that were promising investors misleadingly high returns and subsequently those firms ceased their operations. This is after I think you published the second article in your series of articles. But in the process, they shut out a number of investors from their assets. In fact, you profiled one such couple. I think their name was Kimberly and Richard Whitaker, who’d been frozen out of more than $760,000 by these firms. I was wondering if you can talk about whether the Whitakers were able to get their money out, and where the case against these firms stand.
Zweig: So this is a very sad situation. So to summarize, in 2023 and early 2024, two related firms called Next Level Holdings and Yield Wealth were promoting what they described as guaranteed fixed-rate returns of 10% annually and up. And the “and up” went as high as 15% and sometimes even more. And a lot of Wall Street Journal readers said, well, of course, you can’t get 10% or 15% annual returns guaranteed risk-free. That’s not possible. But these firms seem to have specifically identified investors who were struggling, people who had had health problems, people who had lost a job. And they seem to have used some data-harvesting techniques to identify populations of vulnerable investors. And my response was, if you get thrown out of work and you have cancer, let’s see if you become a lot more prone to somebody coming along and saying, hey, I can get you 10% or 15% for sure. And I think it’s just human nature. I mean, desperate people do desperate things.
And people who are vulnerable emotionally are vulnerable from an investing point of view as well. And these are highly intelligent people, even if they don’t all have college degrees. And many of them do, by the way. Some of them have graduate degrees. And the investing pitch was very emotional, focusing on safety and lots of upside. And the upshot is that we don’t really know whether all the assets exist. I’ve reported that this investing scheme is being investigated by federal authorities. That, of course, can take quite a bit of time to resolve. The principles of the firm are somewhere in South America, maybe Colombia, maybe some neighboring countries. It’s going to take some time to untangle. And the Whitakers, the couple you were asking about, no, they have not recovered all their money, only a very small piece. And like many of the investors in this investing scheme, they ended up with a huge tax bill, even though they invested through a tax-advantaged account.
Benz: It’s appalling. I wanted to ask about private assets, because there’s currently a big push on, as you know, to bring them to the masses. Larry Fink at BlackRock has written at length about the so-called convergence of public and private investments. And BlackRock has made several moves to beef up its presence in the private markets. You’ve written extensively about this trend. Can you summarize how investors should consider private assets, how they should weigh the pros and cons? And are there things they should be mindful of or wary as they do so?
Zweig: Well, yeah, it really all boils down to fees and liquidity, Christine, and time horizon. David Swensen, the great investor who ran the Yale Endowment until he died a few years ago, was the pioneer in this whole field of alternative or private assets. And the principle he operated under was that private assets had the potential to offer superior returns because they were illiquid, that nobody would invest in them because they lack liquidity, unless you could earn a premium return, unless they would offer an excess return over what was available in the public markets. The problem is that alternative assets have become so popular with multitrillions of dollars flowing into them over the past few years that I think an objective observer would say that there’s now a liquidity, instead of there being an illiquidity premium, there’s an illiquidity discount. It’s hard to imagine that these assets are now cheaper than the assets in the public markets.
They may be more expensive. And if you’re paying 2%, 3%, 4%, maybe even 7% a year to invest in them, and you have to lock your money up for years at a time, or you can only take a small piece of your money out once a quarter or once a month, I think you should be very, very skeptical of the claims that you’re getting superior returns or a sizable diversification benefit. I think in rare cases where you have access to managers with a superior record who charge a fair price for their services, investing in private assets can make sense. But for the typical investor who’s committing a relatively small amount of capital, the hurdle that you have to overcome to get over the problems of the high fees, the low liquidity, and the long holding period, I would be extremely skeptical.
Ptak: I wanted to see if we could sneak in one last question before we let you go, knowing that you’re an omnivorous sort besides the work you do on markets. What’s something you’ve been doing lately that you’re really passionate about, like returning to a book you love or pursuing some other pastime that’s dear to you?
Zweig: Well, I guess in my case, it’s just my enthusiasm for the visual arts. I was raised in a family of people who really, really cared about art, and I’m a hugely enthusiastic museum goer and art viewer. And I think my favorite few hours over the past couple of months have been at a couple of art exhibits that my wife and I went to see. One was at the Peabody Essex Museum in Salem, Massachusetts, which was a show of fabulous Dutch and Flemish paintings from primarily the 17th century. And I took a special delight in the paintings illustrating images of fools and jesters because they reminded me of the sometimes less than perfectly rational markets that we have today. And then the second exhibit I loved was at the Metropolitan Museum in New York, the paintings of Caspar David Friedrich, who was the greatest German painter of the 18th century, whose paintings of nature are absolutely spectacular. He was the painter of the sublime, and when you stand in front of his paintings, it’s almost a religious experience. And I absolutely loved that. So I’m enthusiastic about art from all cultures. And in the newsletter that I do for the Wall Street Journal, I try to integrate art and finance. And twice a month, that might be one of the favorite times of my work life every time I work on the newsletter and try to figure out which paintings or sculptures or other artwork I’m going to include this time.
Ptak: I think we’ll leave things on that inspiring note. Jason, congratulations on the book and thanks so much for coming back to The Long View and sharing your insights. We’ve really enjoyed speaking with you.
Zweig: My pleasure. Thanks to you guys, Jeff and Christine. I really appreciate it.
Benz: Thanks so much, Jason.
Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts. You can follow me on social media @Christine_Benz on X.
Ptak: And @SYOUTH1 which is S-Y-O-U-T-H and the number one.
Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week. Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at thelongview@morningstar.com. Until next time, thanks for joining us.
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