In this segment of The Motley Fool's financials-focused show, Where the Money Is, banking analyst David Hanson is joined by Motley Fool One analyst Morgan Housel to search Twitter for some hidden insights. Morgan tells viewers why pundits make so many predictions.
Full segment transcript below.
David Hanson: All right, moving on to the final segment, on the Twittersphere. Closing it out with our first tweet here, it's about Buffett from Shane Parrish at @farnamstreet: "It's a terrible mistake to think you have to have an opinion on everything." That is, of course, from Warren Buffett. Do you have an opinion on everything?
Morgan Housel: I don't. I have an opinion on very, very few things, and I think the way the media works today, with Twitter, where we got that from, the 24/7 news cycle, analysts and journalists and pundits are expected to have immediate reaction and analysis on everything regardless of how trivial the news is, and I just think that does a big disservice to viewers and readers. I think it's not only OK, but it's a good thing to say, "I don't know. I don't have enough information on this. It's not you, it's not relevant to me, it's not a valid to me."
There's so much more news today than there was 20 years ago. So I always talk about, 20 years ago, you had The Wall Street Journal, you had Louis Rukeyser, and that was pretty much it. You had some obscure newsletters, but today, you have CNBC and Business Insider and Twitter and CNN Money, and there's so many different news outlets. But what's changed the last 20 years is not the volume of meaningful stuff going on -- it's just the volume of news coming out of it because that you really need to push a lot of it to the side.
David: Yeah, I agree, and we mentioned Janet Yellen at the beginning of the show before we started filming said, "I wish -- we have to mention it because it's news -- but I don't want to have an opinion on it." It's kind of, she's a smart woman, she has great experiences, that's my opinion, I don't think it's good or bad.
Morgan: My analysis is. Let's see what happens. We really don't know what's going to happen.
David: Exactly. All right, moving on to the next tweet, we've got... it's about some hedge funds from Stanley Pignal, he says "95% of hedge funds have underperformed the S&P 500 so far this year (Source: Goldman Sachs)." Interesting.
Not that surprising to me.
Morgan: One rebuttal here could be that not every hedge fund should be benchmarked to the S&P 500, but it's a pretty good benchmark and we know that a lot of them should basically be benchmarked to the S&P, and the fact that so many are underperforming shows two things. One is that, I think I mentioned this in a show of several weeks ago, there are now more hedge funds in the United States than there are Taco Bells. It's just a very, very crowded space. Whereas 30 years ago, there were 200 or 300. And back then, you could really exploit opportunities if you're a good professional investor and you could really go out and earn some good returns.