10 Lessons Learned From Hyper Intelligent Finance People

Are you doing these things? 

By: Jennifer Schonberger

If you’re a finance geek, names like Bill Gross, David Einhorn and Robert Shiller carry great gravitas.  As a financial journalist over the past five and a half years, I’ve had the luxury of interviewing these great minds and many more.  And hey, after speaking with these hyper intelligent finance people you pick up a nugget or two.

If you get to interview them often, and maybe even not so often, you learn about the person behind the expert.   Sometimes there’s even a funny story or two to take away and keep in your back pocket, and share with friends working in the tech sector.   A great memory worth sharing: at the end of one of many interviews with former Congressman Paul Kanjorski, a major player in forming Dodd-Frank, he asked me, “How old are you? You’re obviously very mature and know your stuff, you just sound so young.”

Below is just a peek into the smorgasbord of financial wisdom that this sub-30 year old has learned.

Lesson #1

Find opportunity in uncertainty. Tune out market noise because inevitably you can find the fundamentals underneath.  Here are three examples: (1) rewind the clock to 2008 when everyone was selling fear of financial Armageddon…it proved to be the sale of the century for stocks; (2) when analyst Meredith Whitney predicted in December 2010 that legions of state and local governments would soon default on their debts, investors dumped municipal bonds in droves…it proved to be a great time to buy municipal bonds; and (3) it’s important to differentiate between countries and companies as they are tied, but not completely related.

Lesson #2

Sometimes there isn’t wisdom in crowds.  Hey, it can take a while before your investment thesis proves correct.

Lesson #3

Story stocks often seem to be losing stocks.  People get caught up in a company’s story and forget that the numbers aren’t keeping pace with the market’s expectations.

Lesson #4

Asset correlation matters.  Pay attention to correlations between asset classes – bonds, stocks, commodities and currencies.  It will tell you a lot about the current investing environment.  For instance, there’s been an inverse relationship between the U.S. dollar and stocks since the financial crisis, while stocks and commodities have moved in lockstep together.

Lesson #5

Diversification is no longer enough to mitigate risk.  Diversification is necessary, but not sufficient because sometimes stocks, bonds and commodities all move in the same direction and when that’s down you’re losing money across the board.

Lesson #6

The market is one big expectations game.  Perception is reality.

Lesson #7

Never underestimate the effects of the hidden. For example, never underestimate the effect of confidence, or lack thereof, both for consumers and businesses small and large.

Lesson #8

Value is relative and in the eye of the beholder.  You could have two people on the same interview with opposing views of the same stock.  That’s what makes a market.

Lesson #9

There are perma bulls and perma bears in the markets.  Pay attention when someone who has been so gloomy all of a sudden turns positive and vice versa.

Lesson #10

Learn the jargon (which Belus’ CEO & Chief Equities Strategist Brian Sozzi has been telling me for years!).  You have to learn to speak finance and use whatever terms are en vogue.  Some terms come in and out of fashion while others are classic.  For instance, if there’s “fat tail potential” that means there’s high risk.  If you look at a bell curve, the ends, or “tails,” are the outlier probability an event will occur, like a crisis in municipal bonds.

More fun stuff on the way…can’t share all my secret lessons from an entire career in one shot!

Editor’s Note: Be sure to catch Jennifer do her news-making thang here.