Speaker 1:

Welcome to ETF Central, recorded here at the New York Stock Exchange, the home of ETFs. We're diving deep with the people shaping the space, the technologies driving innovation and the stories behind the tickers. Whether you're an investor, issuer or industry insider, welcome home.

Bilal Little:

Welcome to another edition of ETF Central. My name is Bilal Little, and I'm your host. I've got to tell you, today, we are joined by a legend. He's the financial journalism king, he is known as Bob Pisani. And I've got to tell you, this one is personal for me, because I started watching markets 20 years ago, and you ever just find somebody who told the stories the way that you wanted to hear them? But more importantly, he connected, he built truths during market ups and market downs, and now is the time where people need guidance. And I'm fortunate, because we get an opportunity to unpack his journey in finance, what led him to become a financial journalist, but more importantly, what is he seeing on the horizon. He's covered ETFs for 20 years, who better to ask questions about what's next on ETFs than Bob Pisani? Welcome to the show.

Bob Pisani:

Bilal, it's been great to be here and great to be back. I lived in this building for almost 30 years, and every time I come back, it takes me an half an hour to get into the building because I have to say hello to the guards and to all the people on the floor. So this is a very large part of my entire adult life here in this building, so thank you for having me.

Bilal Little:

Absolutely. You know, it's funny, so we took an over-under every time the elevator opened up and we said, "Hey, is that Bob or no?" And look, we just bought Polymarket.

Bob Pisani:

Yeah, there you go. Prediction market on that?

Bilal Little:

Prediction market, right, yeah, exactly. So me and the team, we were actually doing that, so it's so funny. Look, Bob, you spent 35 years, I just want to start wide, you spent 35 years at CNBC, and literally, you have been the source of truth for a lot of people in both up and down-markets for most of your career. What are some of your most memorable moments about that 35-year career?

Bob Pisani:

Well, I spent 28 of the 35 here at the New York Stock Exchange, that's an extraordinarily long time. And the most common question I got from people was, "Why?" Most of the time, people move on in their careers and they do other things. But when I got here in 1995, '96, there were 4,000 people on the floor of the New York Stock Exchange. I can't tell you how exciting it was. It was the greatest thing I'd ever seen in my life. There was not only all these people screaming at each other, but there was an opening and closing bell, and the most famous people in the world go through it. So you sit here and say to yourself, "Oh my God, this is like heaven for a journalist." This was where everybody comes.

So I stayed because I couldn't think of anything more exciting. People say, "Why don't you move on and go do something else?" I say, "Why would I?" I always tell people, "What would you give to meet all of your heroes, every rock star, every king and queen, every CEO you ever wanted to meet?" 28 years at the NYSE is about 14,000 bell ringings, that's how many I saw. Now, I didn't do interviews for everybody, but most of the time, I got to at least shake the guy's hand or the woman's hand.

And there you are, it's 4:15 and there's the CEO of Chevron, he's standing right there. I'm the floor reporter, I can walk over, they know who I am, I can walk over and say hello. I don't need to stick a microphone in the guy's face, I might just say, "How's business? What's going on? How's the oil business?" And I may not say anything, but it will help inform my reporting, and that's eventually what I became, I just became someone to casually say hello. What's five minutes worth with the CEO of Chevron, for crying out loud? It's worth everything. Let alone all the celebrities that you might turn around and meet.

So the fun part was occasionally people would say something that you totally didn't expect, just interesting and informative, not often, but enough to give you reasons to keep staying on. So I'll give you an example. A lot of celebrities come and ring the bell. One day, Barry Manilow came. Now, I'm not a Barry Manilow fan. I'm a Led Zeppelin guy, I'm a '60s guy, I never bought a Barry Manilow album. But there he is. He's coming to promote an album, I don't know, this is 12 or 13 years ago. And what you discover about most of these people is that they're there to promote a product, but it's really not what truly motivates them. And people ask me, "How do you get people to talk to you? How do you get people interested in talking to you, or how do you make an impression on people?" And the way to do it, I discovered years ago, was find out what they really want to talk about. Most of the time, it's not what they're there for.

So Barry Manilow is here to promote an album, and he rings the closing bell, and we do a very brief interview. I actually didn't do it. My colleague, Bill Griffith, did the interview. Very brief, five minutes, just, "Hello, Barry Manilow's here. Barry, how are you doing?"

"I'm here to talk about my album."

And he comes off and he walks off, and he's looking around, he's by himself, and I'm 10 feet away from him because I'm the floor reporter. And I walk over to him and say, "Mr. Manilow, nice to meet you. Bob Pisani from CNBC. First off," you want to lead with a question that's easy, I said, "I understand you were a jingle writer." He said, "Oh yeah, yeah, I was an ad guy." And I said, "So I understand you wrote that State Farm jingle, 'Like a good neighbor, State Farm is here.'" He said, "Oh yeah, I wrote that, $500, that was it, and I never regretted it, it's famous. I wrote a lot of stuff. I wrote the Band-Aid jingle. You know that? 'Band-Aid's stuck on me, I'm stuck on Band-Aid.'" He starts singing all these jingles that he wrote, it's just me and him standing there, and I'm thinking, this is cool, Barry Manilow is now singing jingles for me.

And I said, "Listen, one thing I really have to ask you, you just sold 20,000 seats out in Long Island at the Nassau Coliseum. I don't understand this, you haven't had a huge hit in years, and yet you had this enormous sellout." I said, "Tell me about that, how do you view that?" And he said, "I'm going to tell you something, Bob, I know you think I didn't have a hit for a long time, and it's true. I had big hits in the '70s and '80s, and maybe the big hits stopped coming, but I kept producing albums.

"I had a very dedicated fan base for a long, long time, and you get into the middle of your career, and what I realized was I really love what I'm doing and I decided not to change. I stuck with what I really love to do, I kept producing big albums, I had good sales, I had a very dedicated fan base. And what happens, Bob, is if you stay at this long enough, and I was doing this now almost 40 years, people start saying, 'Oh my gosh, look at him, look how long he's been in this business.' And they start using words like legend, and all of a sudden, you have a new lease on life."

And he was absolutely right, because at this time, this is 2012, '13, '14, people like Billy Joel and Elton John, they were being called legends, the same thing was happening. And this paralleled my own career. It really resonated, what he said to me, because I'd been already 25, almost 30 years at CNBC, and the bottom line was I stayed with it at the NYSE because I loved it, I didn't want to go anywhere either. So here's this guy, Barry Manilow, who I really wasn't expecting much from, very sage and intelligent comments about the arc of his career that was basic advice to people on if you really love what you're doing, stay with it. And I came away really, really impressed with the guy. I didn't go out and buy a Barry Manilow album, but I was very impressed with him. And every once in a while, that kind of thing happens to you and it makes it all worthwhile, all the ones where you forget and it doesn't really go anywhere.

Bilal Little:

You know, it's so funny, I'm glad you brought that story up, because look, when I started my career, it was in 2006, and I wasn't a finance major, and one of the reasons actually that I started watching CNBC is because you spoke in terms that didn't complicate the message, and I think that's why people gravitated towards you. So this is a very special moment for me, and because of that, I want to pick up on three of your most significant moments here at the New York Stock Exchange over that 28-year period. What sticks out to you? Because you said in your book, hey, you loved the bell ringing. What stuck out to you?

Bob Pisani:

I can tell you dozens of celebrity stories. One of my favorite moments was Walter Cronkite in December 1999, probably the greatest year of my life, it was a peak year for the New York Stock Exchange. We didn't know it, but the world was going to change. The dot-com bus was going to change things, 9/11 was going to change things, electronification of trading was going to change things. But the NYSE, under Dick Grasso, had engineered a whole series of big bell ringings in 1999.

Walter Cronkite was the legendary journalist of my generation, 1950, '60s, '70s, had retired in the 1980s, number one broadcaster, and he had been doing editorials about what was going on in the broadcast business, in the cable TV business, about punditry, saying reporters and anchors were being too opinionated and they should go back to just reporting the news. And I was terrified of meeting him because I was afraid he was going to lay into me about this. He rang the bell, came down, and I went over to him and I said, "Thank you, you're one of the reasons I wanted to be a journalist."

And he looked at me and said, "Bob, can you explain something? I don't understand the success of CNBC, because we never covered the stock market, it was never a big issue for us, and I'm kind of astonished at your success. You're the biggest thing on television. Can you explain this to me?" And I'm thinking to myself, oh my God, Walter Cronkite is interviewing me, this is the greatest thing ever. And I have a picture of me with him, it's one of my cherished possessions, and those kinds of things really matter.

If you want to talk about the ETF space-

Bilal Little:

No, no, no, not yet, not yet. I'm coming there, I'm coming there.

Bob Pisani:

Okay.

Bilal Little:

I want to know two other monumental moments for you, as you just recall, that thing happened while I was at the New York Stock Exchange.

Bob Pisani:

One more celebrity interview, this is about the idea of how do you get people to talk to you. Aretha Franklin came on the floor in 2008. It was a terrible year, 2008. We were in the middle of what we later called the Great Financial Crisis. She comes to promote a Christmas album. Now, again, remember my thesis, most of these people, what they really care about is not what they're there for. She was there to promote a gospel album. I got the interview with her. She's notoriously difficult to interview, can be very prickly. Of course, you lead with what they want to promote, she talked about the gospel album. And then, I took a stab, because I think I knew what she cared about, what she cared about was her legacy. Of course, this is the Queen of Soul.

The biopic, Ray, had just come out, Ray Charles' life, and this movie was an educational movie about how Ray Charles invented soul music. Soul is the cross between gospel and pop music. There's a famous scene in there where he's playing on the piano with his girlfriend. The girlfriend says, "That's a gospel song, but why are you playing that way? You're playing it like a pop song." He said, "I know." And that was the Invention of soul right there. That's an educational movie in the form of a popcorn picture. And I took a stab and I said, "Have you seen the movie Ray?" And she said, "Oh yes, I love that movie."

"Now, you are very important in the history of soul. How do you feel about biopics? Are you thinking about anything?"

She said, "Thank you for asking that. Yes, we're working on one now. I'm really excited about it. I thought the movie was great, and I have my own ideas about doing a movie as well."

So she just started talking and talking, and we finished the interview, and her manager came over and said, "I don't know what you said to her, but you got her going and she doesn't normally act like that." So there goes to my point, what she really cared about was that. That biopic took 14 years to come out.

Bilal Little:

Wow.

Bob Pisani:

She died before it actually came out.

Bilal Little:

Yeah, I remember, yeah.

Bob Pisani:

It went through many rewrites. Unfortunately, it's a shame she didn't get to see it, it's terrific. It's out, I encourage everyone to go see it. But again, find out. Robert Downey Jr. comes on the floor, he's promoting Iron Man 3. Iron Man 2 had made a billion dollars. And he was coming on the floor, and they were very worried about these stars making comments that might hurt the brand name, so they didn't want me to talk to him. The PR people came up to his PR people the day before, "Robert Downey's ringing the bell tomorrow." I said, "I know, I'm very excited. I love Robert Downey." He said, "He's not going to talk to you." I said, "Well, I'm going to just be here on the floor and he's going to walk by, maybe he'll come over and say hello."

"No, he's not going to talk to you, he's not going to talk to anybody. He's going to ring the bell, he's going to come down the stairs, he's going to wave, he's going right out the door, not a word to anybody."

Now, I didn't particularly like this attitude, because it sounded a little pushy to me, and I understood why these people don't want these stars, because the movies had become bigger than the stars. They didn't want the stars saying anything that might affect the movie. So I went home, I collected comic books in the '60s, I have the first Iron Man comic, Tales of Suspense 39, I have the first Avengers comic.

Bilal Little:

This is important.

Bob Pisani:

And I made a bet that Robert Downey wanted to demonstrate that he knew a lot about Iron Man. I didn't want to get into some other kind of thing, I made a concentrated bet, and I also had the first Iron Man. So he rings the bell, and of course, you know, Bilal, but people may not know, when you ring the bell, you come down the stairs and you can go two ways. If you go right, you go down to a corridor that takes you out onto Broad Street and you can go out and get in a car and leave, or if you make a left, you come down on the floor of the stock exchange.

So I'm standing there right where you come down off of the stairs with my microphone and my cameraman next to me waiting for Robert Downey Jr., and his PR people had put a guard in front of, literally to stop me from sticking a microphone in his face as he's walking by, which really annoyed me, because now I've got to... This big guy, I've got to look around him. So Robert rings the bell, comes down, waves to the crowd as he walks out, and I go right around the guard in front of me and I say, "Hey, Robert, do you know what this is?" I held out the first Iron Man comic, he's 10 feet away, and he stopped and said, "That's the first Iron Man comic."

I knew that he knew that, I made the assumption. And he comes over immediately and said, "Hey, how are you doing?" I said, "Hi, Robert, say hello to the CNBC crowd," and I got the interview. Now, it wasn't anything amazing, but he wanted to demonstrate, like, "This is really cool. I knew this comic book, I studied this as part of..." It was fun. The PR people, after the interview, came over to me and said, "We told you not to talk to him." I said, "Oh, you told me not to talk to him, you didn't tell him not to talk to me."

Bilal Little:

Right, right, right.

Bob Pisani:

"Sorry."

Bilal Little:

So you were a catalyst in that though.

Bob Pisani:

Again, find out what people want to talk about.

Bilal Little:

Let's make a transition, because this is important for this particular conversation. One of the things that we always try to cover on ETF Central is what's the proper art of storytelling, and I want to ask you this in the context of last week I was on a panel for ETFs and ETF issuers were trying to tell their stories so it actually resonates with their audience. For you, financial journalism and being able to tell a story is important, because this is going to lead into how do we actually give advice and insight into ETF issuers, how they can better tell their story when it comes to marketing. Give me a takeaway as far as what do you think?

Bob Pisani:

Look, just broadly on the whole art of storytelling, the most important thing is to find out what the viewer or the person coming really wants. What do they want? The biggest mistake people make is all they want to do is tell them about what they have to sell. That's the wrong approach, completely the wrong approach. And I do this with people who are on TV who I'm interviewing.

So let's take we're talking about ETFs. There's a new ETF out, and I'm interviewing them because I have an ETF show, I had ETF Edge for years. And if this person is new and they don't know what they're doing, I say, "Let me tell you right now, I know you have something to sell, don't sell it. I'll put it up, we'll explain what it is. But what you have to do is tell people why they need it. Stop being you, become the viewer. You don't have to be a marketing machine. What you have to do is say to the viewer, 'You have a problem, you have something you want to solve for, I have a way to help you do that.'

"And when you become a solution provider, the word solutions is a little overused in marketing, but it really is true, when you stop trying to sell yourself and start saying, 'I have a product that is a solution to the concerns you have. You're worried about income? I have a product that will provide you with additional income, even above and beyond dividends, this is how it works. You want more income when you're retired? I have a bond laddering ETF. Let me explain how these things work.'" Be a solutions provider, it's the most important thing that I can explain to people.

Bilal Little:

I love that, thank you. So given that, what are some of the big trends that you're seeing in ETFs, or that you've seen, because you've covered the market for a very long time?

Bob Pisani:

Well, I would say, first off, this ocean of money coming in is really amazing. What are we getting, 100 billion a month, 1.2 billion, a trillion this year, we're going to do 13, 14 trillion total AUM? It's pretty amazing.

Bilal Little:

And over a thousand launches this year.

Bob Pisani:

Is it a thousand?

Bilal Little:

It will be over a thousand.

Bob Pisani:

Okay, so we've got this prolific growth in ETFs. So there's three big trends. First is the growth in active, second would be the overall attempt by the community to get involved in ETFs around private equity and private credit, and the third would be crypto, so I can tackle each one briefly.

Active is a really interesting subject. The problem I have is it's not active the way the average person thinks, and I like to speak English. The active community likes to think that it's dominating everything. In fact, it's a very specific subset. When you and I think active in the old school way, we're talking about active stock picking, guys who pick stocks. That's not what's going on here. There are a few successful active stock picking ETFs. My old friend, Dan Ives at Wedbush, has a very successful one, it's basically 30 stocks.

Bilal Little:

And it just crossed a billion dollars.

Bob Pisani:

Yeah. Tom Lee, also a stock picker, he's done well, but they're the minority. Most of the time, when we talk about stock picking, this is not your grandfather's stock picking. You have so-called active ETFs that are what they call systematic. We used to call them smart beta. So Dimensional, for example, Avantis, these are companies that own indexes and then they overlay some kind of smart beta on top of it. They have a tilt towards value, they have a tilt towards earnings, they have a tilt towards momentum, but they're systematic. It's not really active in the sense that you and I understand it.

The third problem I have, it's really not the third problem, is that the real activity in active is in options and buffer strategies and leverage and inverse ETFs, and is that really active in the sense we understand it? No, but it's perfectly legitimate business to be in. I'm getting a little semantic here, but I just have a problem with them claiming suddenly active. What's really going on here is we have a new way to charge more money than basic three or six or nine basis points, and I think this is really a good idea. But understand that the ETF industry really needs these higher fees to keep going, because even though the AUM is going up, there's constant fee pressure here, and so active is a little bit of a solution to a major problem of how do we get more fees in the system. I just want to talk a little bit about-

Bilal Little:

It's still a revenue-based business, right?

Bob Pisani:

Oh yeah.

Bilal Little:

And because the industry started on the beta side of the conversation, just pure exposure, now you're seeing the ETF wrapper adopt and be the innovation to the mutual fund wrapper.

Bob Pisani:

That's absolutely true. I'm only pointing out that the semantics of this don't quite jive with what the public actually thinks.

Bilal Little:

Oh, for sure, for sure, for sure.

Bob Pisani:

I want to talk about private credit and private equity. I have a long-standing problem with the alt community that goes back 25 years to hedge funds.

Bilal Little:

Is this something I should know?

Bob Pisani:

Well, the hedge fund community came out 25, 30 years ago, and this is part of the alt community, so what's the game here? The game here is, look, what we want... The whole point of private equity was we'll give you access to stuff that the public doesn't have, but you have to be able to handle illiquidity, you have to be able to handle lockups and valuations that are pretty hard to figure out, let's call them questionable. So they bought into this, and somehow they have managed to convince a very large part of the investing public, particularly pension funds, where about 30% is involved, that it is worth this kind of money, 2 and 20, and I have a problem with that. I have a problem with the opacity of it, I have a problem with the fees, I have a problem that it's hard to value, I have a problem with the lockup. The biggest problem I have is this idea that-

Bilal Little:

The facade.

Bob Pisani:

... we know more than you do, we have some special sauce. Now, you and I know, because we've been market historians, that in the equity business, that is generally not true, that there is very little informational advantage that anyone in the equity business has. Private credit, same thing, but it's possible. For example, on a real estate deal, somebody might have some inside information that is useful when you're setting up a private fund there. There, I would agree. But that doesn't happen that often. So I have a problem with the whole way it's set up and the way it looks. Now, we have a situation, since the Great Financial Crisis, where middle-level banking has withdrawn. That's why private credit has grown so much.

Bilal Little:

Stepped in, yeah.

Bob Pisani:

And I understand that. The country needs credit, small businesses need credit, and a lot of these small private banks pull back. So what do you do? Private credit steps in.

Bilal Little:

Opportunistic.

Bob Pisani:

That's a good thing. However, we are now at the point where this thing has become a real behemoth, and there is an awful lot of money that is set to be offloaded onto the general public. And this is where I come in, because I'm not on the sell-side, I'm not on the buy-side, but remember who I was, I was a reporter who talked to CNBC viewers for 35 years. Those viewers are basically slightly high private net worth people who are self-directed investors. They're what we call the buy-side. So I sort of represent them, because I got the emails from them when they were furious when their investments went south.

Bilal Little:

You're the source of truth.

Bob Pisani:

So my concern here is whenever you see an industry poised to offload a lot of stuff onto the public, check your wallet, be really, really careful. That's what I'm concerned about right now on the private equity side of this.

Bilal Little:

So let me just throw you a curveball.

Bob Pisani:

Not that it's illegitimate. There's a very legitimate reason why they exist.

Bilal Little:

Oh, for sure. But also, Bob, to your point, the dispersion between performance, top and bottom, is drastic in the private space. And most of them actually don't perform that well, so that's the other component as well, but they're selling this strategy that costs a lot. Here's the other part though, the administration today is extremely supportive of private assets going into [inaudible 00:24:14] plans and retirement accounts. You think that's a major problem?

Bob Pisani:

I think there is a problem with that. I'm just concerned about the transfer of the money. It all gets down to how much am I paying for this? You know as well as I do, let's look at the IPO business, we know there is a very wide gap between public valuations and private valuations. We have seen this in the post-IPO performance, we know the studies about it. Those of you who don't know, you get a first-day pop, and it is typical to start underperforming after the first day or even the first week. I got the emails for 30 years from people that say, "Hey, Bob, thank you for standing on the floor for the IPO for XYZ and waving at the CEO and doing the interview and look at the bell ringing and all that, and why did I lose money three months later, why is it down?"

And the answer is because Wall Street, the job of an underwriter is to get the highest price and to be able to transfer as much money as possible from them to the underwriter and then to the public. And the problem is Wall Street, the private community, values most of this stuff too high, and this is a major problem now. One of the reasons the market has been very happy recently is stuff isn't blowing up immediately. All I'm saying is I think of myself as somebody out there who thinks for the little guy who's buying all this stuff, and when you see private credit with these kinds of prices right now, you know that this is second-tier stuff here, you want to call it high-yield, whatever you want to call it, but in a downturn, this stuff goes south very, very fast.

Bilal Little:

So I want you to lean in right here before we transition, because you speak for the little guy, what's your sentiment on the market right now?

Bob Pisani:

Look, the general theory is the S&P is 23 times forward earnings is overvalued. That's true, but not interesting. You can stay overvalued for years and years. Here's the problem I have with that statement, it's true but not interesting. So what should I do with this information, 23 times forward earnings? What should I do if, oh my gosh, there's 10 companies that are 35% of the S&P 500, what am I supposed to do? Am I supposed to sell on this information? Am I supposed to go into equal weight ETFs? Am I supposed to start trading stocks? Am I supposed to do market timing? Well, what kind of things do we stand for?

So here's what I stand for. I stand for long-term investing, I stand for get rich slow. What is the principles of long-term investing? First off, understand your risk profile. A 35-year-old has a different risk profile than an 85-year-old. I met a 35-year-old the other day, he said, "Do you think the S&P is going to go down this year?" I said, "Let me just tell you something, you should stop worrying about the S&P going down."

Bilal Little:

That's the wrong thought process, yeah, yeah, for sure.

Bob Pisani:

"You're going to be alive in 60 years," I told him. "Believe me, you are not going to remember what happened this year three years from now, you're not going to remember." Understand how much you want to risk in the market, that's the first thing. Understand how long you're going to live. Understand that market timing doesn't work. That you have absolutely no idea when to go in and out. Therefore, staying in is the logical choice to do that. Understanding diversification, you're not putting all your eggs in one basket. Don't tell me that you want to put 50% of your money in Bitcoin, I don't want to hear it, that is a stupid idea. When you understand these principles, then you can work from some other points of view. But that's the most important thing is understanding what kind of strategy and what kind of business. We can talk about what kind of business we all want to be in, but the most important thing is the get rich slow concept.

Bilal Little:

Yeah. So you talked about this briefly just now, you mentioned, okay, we've got concentration risks, obviously there's so much focus on the MAG-7 within the S&P 500, and that's expanded a little bit. But in your opinion, just looking at the ETF space, do you think there are too many ETFs? Because right now, the velocity hasn't changed [inaudible 00:28:24].

Bob Pisani:

Of course there's too many ETFs, but let me just talk about the concentration issue. Again, go back to first principles, what do I do with this information? By the way, this happened before. If you go back to the late '60s with the NIFTY 50, we had similar concentration problems. Is that a sell signal? The answer is no, it is not. For better or worse, we live in a market cap-weighted world. We do not live in an equal weight world. Those of us who are investors, now, if we went out and all had a hundred stocks that were all equal, the same amount of money in each of them, yes. But most of us aren't exactly like that. I believe in market capitalization because market capitalization makes the most sense, it's the market betting on who should be what. We don't talk about CSX as much as we talk about NVIDIA, duh. That's the market voting, saying NVIDIA is more important than CSX. Well, if that's really true, I want to own more NVIDIA than CSX, duh.

Bilal Little:

Absolutely, that's where the capital's going, yeah.

Bob Pisani:

So that's what the market cap weighting. So I am not at war with market cap-weighted indexes. I can agree with the point that on a historical basis, 23 times forward earnings is a very high number. Can I tell you there is historical evidence that three months from now, nine out of 12 times, no, that it's down three months later? No, you can stay overvalued for very long periods of time. The probability will have some kind of correction of 10% or more, it gets higher every month. But even then, I say to the guy who's 35, "Why would you care? Why are you worried about that? Do you think you're going to market time your way out of this? You can't."

Bilal Little:

So Bob, to that point though, you seem like the capitalism in the business makes the decision.

Bob Pisani:

The capitalism, the investing principle, start from first principles there and work from there, including the diversification. And so, we can talk about other things. This is where the whole question about what should your portfolio do comes in, this is where crypto and Bitcoin intersects with private equity and private credit. These are conversations I have in airports with people.

Bilal Little:

I like these conversations.

Bob Pisani:

They come up to me, "Bob, Bob, Bitcoin, I've got 3% in Bitcoin, but my friend says I should be 5%. In fact, I've got another buddy, he's at 10%. And I heard people saying they should have 40% in Bitcoin." Or, "Bob, private credit, I'm thinking I'm buying much more into private credit. What do you think right now?" So there's an answer to all of this, and the answer is going back to first principles. So what do we own? First off, we understand our risk profile. So I am an investor, I own stocks. I own mostly ETFs, by the way. And by the way, I'm one of the only people that publish what I own, and we can talk about what I own if you want, but-

Bilal Little:

I'm going to go there.

Bob Pisani:

Hold on for a minute, let me just finish this point here. So first principles, I own stocks, I own bonds, I'm real estate, and I have some rock posters that I own, collectibles, so there's my little portfolio. So now, somebody comes rushing up to me, "Bob, 3% in Bitcoin, should I have more in Bitcoin?" Or, "Private equity, Bob, should I invest in private equity?" So I ask very simple questions. Under first principles, we are diversified, so I have stocks and bonds, I've got some real estate, I've got some collectibles, maybe I own some gold. You want me to tell you to buy Bitcoin? You want me to tell you to buy private credit or private equity? And I ask you, "What does this do for your portfolio?"

So you want to ask yourself, what's the purpose? Is it a hedge against inflation? Does it improve returns? I want to ask, "Does it provide diversification for you?" Which would be very critical under first principles. "Does it change your risk profile? Does it make your portfolio more or less volatile? Does it add or subtract liquidity?" Meaning is it easy to trade or not trade, if you're tying up in timber is a big thing versus being tied up in something that's more liquid, like Bitcoin. And finally, it's the cost, how much you're paying for all this. "What are your fees like?" Because we know fees significantly eat into overall returns. And when you ask these questions, and this is standard portfolio questions that a professional advisor would say, most people stare at it because they don't think about it. Most people say, "Bob, I don't care, I just want to know. I want to make a lot of money really fast, so should I put 40% in Bitcoin?"

And so, when you put it down this way, it becomes a lot harder to justify. The short answer on the Bitcoin question is the most important reason is to improve returns, and recently, a small allotment to Bitcoin has helped improve a diversified portfolio, which doesn't mean a hell of a lot because the volatility is much higher, for example. So you have to balance this all out. What I'm pointing out is something any standard RIA, any advisor, will walk you through. When you get through this discussion, at the end of it, you might say, "Okay, so if I would've had 5% in Bitcoin in a diversified portfolio, I would've made a little more money over the last," pick a number, "two years, but the portfolio would've been a lot more volatile, and I understand. Thank you for explaining, Bilal, what volatility does to your portfolio. I think I'll stick where I'm at right now."

So this is my point, and it's the same with private equity and private credit. So when you look at things from first principles, including what does adding this thing do to your portfolio-

Bilal Little:

I agree with you.

Bob Pisani:

... you may or may not decide to do it. And what's beautiful is I don't necessarily have to sit here and say, "I don't like Bitcoin, I don't think you should be buying Bitcoin." I have intellectual problems with Bitcoin, but I don't tell people not to buy Bitcoin. I have some issues with gold too, but I understand why people want to own gold under some circumstances. But you have to answer these questions first.

Bilal Little:

They're coming-

Bob Pisani:

Not just, "I want to get rich quick, Bob."

Bilal Little:

They're coming to you for psychological safety because you're Bob Pisani, that's why.

Bob Pisani:

You know the problem? Here's the problem. We are in an up-market. In an up-market, the only value people see is explaining to them how to get rich quick. There is no value that people perceive in an up-market in explaining them how not to lose money.

Bilal Little:

I agree.

Bob Pisani:

And so, when a guy stops you in the airport, "This has happened to me," these are real conversations, like, "Bob, 3% in Bitcoin," and you walk them through the, "What does it do?" They just look at you like, "I don't know. I just want to know, Bob, should I stay? It sounds like I should just stay here." And they look at you disappointed, like, gosh, get with the program, Bob, I wanted you to tell me to put 10%.

Bilal Little:

I'm going to give you an opportunity actually to address that audience really quickly before we transition. If you had to say, what does a healthy diversified portfolio look like today for the next five years or 10 years, how would you start to build that portfolio? Most people hold the S&P 500 and you talk about concentration risk.

Bob Pisani:

Yes. I am one of the few people that publish what I own. It is shocking to me... The most common question I have gotten in 30 years is always, 70% of the time, the first question is, "What do you think of the markets?" And when I ask, "What do you mean? Be more specific."

"Well, what do you think is going to happen in the S&P 500 in the next three months?" That's what they mean, short-term performance in the broad market is the number one question.

A long time ago, the second most common question was asked about what somebody at CNBC is really like, "Explain to me what XYZ is like. How are they? Are they really cool or are they awful people?" Almost nobody ever asks what I own, and it's shocking to me, because to me, if people say, "What do you think the single most important thing to know is?" I say, "You should know what I own." Because I want to know, because I don't care what you think NVIDIA is going to do and you're Mr. Stock-Punditry on CNBC. You're so smart, they put your ugly face on TV, so what do you own? I don't want to hear what you're telling me to buy, tell me what you own. You own NVIDIA, or are you just talking about it?

So when I was trying to write the book, I decided to write a whole chapter on what I own. Not only did I write a chapter on what I own, I wrote a chapter on the history of my investing and the disastrously stupid things that I did in the 1990s, disastrously stupid things. So one quick example. I had a chapter on behavioral economics and the stupid things people do, and behavioral economics, for those of you who don't know, purports to show how people really behave, not how they're supposed to behave.

Bilal Little:

100%.

Bob Pisani:

So people are supposed to buy low and sell high. It turns out they don't, they buy high and sell low.

Bilal Little:

[inaudible 00:37:33]

Bob Pisani:

Why do they do this? Behavioral economics purports to examine people's triggers, and one of the things that happens in behavioral economics, one of the biases, there's dozens of them, as you know, the classic one is overconfidence. So in the 1990s, CNBC was owned by NBC, which was owned by General Electric. My boss was Jack Welch, the CEO of General Electric, he was my big boss. Jack was a friend of mine. And because I was the floor reporter, I had access to Jack, and I had many pictures with him coming down on the floor. And he was a man I looked up to, really looked up to Jack. It's hard to describe the impact Jack Welch had on my generation. He was like God, he was like the CEO God, everyone wanted to emulate him. And I came under his spell, and I was able to get him on the phone and talk to him, and I came to believe Jack Welch was invincible.

So this is what happened to me. I kept investing. The only stock I could own was General Electric stock because it was our company. I could own mutual funds, but not any other individual stocks. And by the end of 1999, 50% of my 401(k) was in GE stock. Now, anybody will tell you that is a stupid thing to do because it's too risky, it defies the diversification principle. Yet, I did. And I knew this was stupid, I was the stocks correspondent for CNBC. It wasn't like, "Oh God, nobody told me." Hell, I'm on TV talking about this stuff. Why did I do this? I did this because I had such complete faith in Jack Welch, my opinion was I'm investing with Jack, Jack can't do any wrong.

Turns out, in 2000, Jack suddenly comes down on the floor and announces his retirement, we're all a little shocked. Then, of course, the dot-com thing happens, and then 9/11, and it turns out a whole series of horrible things happens to GE stock and I got clobbered, really clobbered. 50% of my portfolio was in GE stock, and crater. So you can imagine what I'm thinking here. The Wall Street community then later would not give GE the multiple it wanted because it was a conglomerate, and it turned out people didn't want conglomerates, and GE was the great conglomerate.

So you think, oh no, I dump within two days. Oh no, I held onto it for several years, years. And again, it's not like, "Oh, I didn't know what I was doing. Gee, I just saw it on CNBC." Hell, I am CNBC. Why? Because he had such a grip on me that I overrode the logic in my head that told me, "Bob, you're supposed to diversify. You're the goddamn stocks correspondent. You know this, right?" That overrode that internal logic. That's how powerful these biases are. So I wrote a whole chapter about this. Then I wrote a whole chapter also explaining where I ended up.

The important thing here is... I'll move on. In 1997, I met Jack Bogle, the founder of Vanguard, and I got him on the phone and said, "Mr. Bogle, I'm now the stocks correspondent for CNBC and I'd love to have a relationship." And he said, "Mr. Pisani, I'm glad you called. I'd be happy to chat with you. However, I have a problem with your television station." I said, "What's the problem?" He said, "Well, Mr. Pisani, to be honest with you, you have too many people on who you think are stock picking stars, and it's all a delusion. Do you understand that?" I said, "Well, you mean they don't always succeed?" He said, "No, Mr. Pisani, I mean that you picking a few that have had an outperformance in the last three years means very little. First, you've got a needle in a haystack with some of these people, nice people, but they don't last. Do you understand what persistence is, Mr. Pisani?" I said, "Does it mean they don't last?"

"That's exactly what it means, these people don't last for more than a few years. And by the way, you might find someone who's outperformed in the last five years, but they're not the same people who are going to outperform in the next five years, and that's what persistence is. There's no persistence in this business. And Mr. Pisani, what that means is the people who do outperform, it suggests their outperformance is largely due to luck, not skill. Do you understand that, Mr. Pisani?"

Bilal Little:

So he's lecturing you?

Bob Pisani:

Yeah. And at the end of it, he said, "I'm going to give you my personal phone number, and I would like to talk to you more about this and like to see more long-term investing. We have an S&P 500 fund. This is people buying the market." And I hung up that day, and I called my wife and I said, and I knew who Bogle was, but I'd never talked to him, "This guy makes a lot of sense, and honey, I think we should open an account at Vanguard." And my wife opened an account that day, that was September of '97, she still has that account and she now gets required minimum withdrawals from that account, mostly index funds. I own mostly the S&P 500 as a core portfolio holding, I own an international fund, I own a broad bond fund, I own a money market fund, I own a small-cap value fund, which has dramatically outperformed, but I've held onto it for many, many years, and I hold a mid-cap index fund. Now, that's 90% of the portfolio. The other 10% are two or three ETFs where I play around with.

So Bogle knew that people like to gamble a little bit, even the hardcore people he knew, and he said, "What you do is take 90%, put it in an index fund, and take the other 10% and do whatever you want. And," he said, "if you know how to do your P&L correctly, you're probably going to find out your stock picks, your ETF picks, are not going to outperform." But I have been doing that for the last 20 years.

Bilal Little:

So it sounds like he had a profound impact on you in the way that you shifted-

Bob Pisani:

It changed my whole life, yeah. And his book, Common Sense on Mutual Funds, that came out in 1999, enormous impact on me, that and Jeremy Siegel's Stocks for the Long Run. I list in the book the five books that changed my life. Winning The Loser's Game by Charles Ellis. Basically, all these books explain the same concept, that market timing does not work, that a long-term plan is better, and that diversification is really what matters.

Bilal Little:

I'm glad you said that. There's two questions that I have left that I just want you to hit for me. For young people who are in the business and they say, "Hey, Bob, you've had a successful career," the one trait for me that sticks out from you is you are probably the most authentic person that I've spoken to in general conversation, and being your true self to work, in many cases, allows you to separate yourself in a world full of copycats. What's a very strong insight that you would say that has helped with your career longevity?

Bob Pisani:

Well, you're bringing up this authenticity question, and I believe in authenticity, but I have a problem with the word. So what is authenticity? We know what's authenticity, it's honesty, it's directness, it's approachability, it's integrity, it's consistency. And so, in my book, Shut Up and Keep Talking, at the very end, my favorite section in the book is appendix three, it's called 57 Maxims on Life, Television and the Stock Market, and it took me 25 years to write these 57 maxims. Maxims are very short, pithy statements, usually humorous, that illustrate a particular point. And there's several maxims on authenticity.

So one of them is authenticity is always preferable, and of course it's preferable. The problem I have with authenticity is that it's become a marketing tool. The internet is now full of discussions about how marketers can become more authentic. So you have people who walk around filming themselves, walking down the street, all day long, who are about as authentic as a plug nickel, who are now being told, "This is what you need to do to be authentic so you can sell yourself as an influencer to other companies." So phony people are now being cued on how to be authentic. It essentially inverts the whole concept and it makes my head explode. Of course I believe in authenticity, of course you have to be that way, but not as a marketing tool, so I have a problem with that.

The other maxim that correlates to this is authenticity is always preferable, but if you're an authentic asshole, find another persona. And unfortunately, and I just wrote an essay on this on my Substack, Assholes and How to Deal with Them, there's a lot of them out there.

Bilal Little:

Oh, I need that.

Bob Pisani:

Yeah. I have 35 years-

Bilal Little:

I better check that out.

Bob Pisani:

... we don't have time to get into that. But I would encourage people to go to my Substack and take a look at it. Unfortunately, this intersection that I lived in between television and Wall Street, there are a lot of assholes in both of them. What are assholes? These are people who are narcissistic, they have no regard for you. You are largely an obstacle in their career path. Their only issue is how either they can use you to get ahead or go over you to get ahead. And unfortunately, it's shocking how many of them there are.

I'm a glass-half-full guy. I get out of bed in the morning, I'm trying to figure out ways where I want to keep on living. I want to be happy that I'm alive, I want to find ways to help people and they'll help me. And glass-half-empty people don't have that position. I don't understand how these people get out of bed this morning thinking essentially, life sucks and it's not going to get much better, and I've got to get over you, around you or through you to get ahead. So it's essentially a zero-sum game for them. The zero-sum means in order for me to advance, I must have you fail, that's zero-sum. I believe in positive-sum, I believe that I can help you too and you can help me and we have a positive-sum, you see?

Bilal Little:

I agree, I agree.

Bob Pisani:

I don't have to kill you to help me.

Bilal Little:

I agree.

Bob Pisani:

But there are people who don't believe this. I've had conversations with people, look at me, say, "You know, Bob, that's really nice, but it's incredibly naive. You're a nice guy, Bob, but you don't understand how life really is." I say, "No, you don't understand how life really is." And I want to grab them by the throat, explain to them, "You're the kind of people that make life miserable for people. You're the kind of people that hurt people. You're the kind of people that detract people and put people down."

Bilal Little:

Bob, since you stepped away from CNBC, where can people find more about what you're doing and where you're at?

Bob Pisani:

Well, believe it or not, bobpisani.com. I know, that's ridiculous.

Bilal Little:

That was available?

Bob Pisani:

That is ridiculous. Isn't that crazy? One of the great things about doing stuff on your own is I never had to build a website before, CNBC did everything for me. If I wanted to do an ETF Edge website, they built it for me. All of a sudden, I had to do one. So I'm doing a lot of speaking and consulting and discussions with people and a little bit of MCing, I set up an LLC, it's a very interesting business. CNBC and the NYSE are very near and dear to my heart, so I hope to be able to continue in some capacity to do that. But I'll tell you, after 35 years of getting up at 5:15 in the morning, it's nice to sleep a little later. But I'm still very involved in the ETF business and very involved in what's going on.

I'll tell you what I really care about. People ask me about, "I worry about the S&P 500." I'm not worried about the S&P 500 at all. I'm worried about wealth inequality, I'm worried about financial literacy. I'll give you one stat, if this doesn't scare you, I don't know what does. 10% of the households in the United States control 67% of the household wealth, 90% control the bottom 33% of household networks. So think about this, the top 10% have two-thirds of all the household net worth, the bottom 90% have one-third. That includes most all of the stock wealth is in the top 10%. Well, this should scare the hell out of all of us who are investors, because the other 90% don't care.

Bilal Little:

Never do.

Bob Pisani:

That means the policies can come in very easily that are detrimental. What we need to do is spread investing culture. When the other 90% don't own any stocks, don't own any bonds, don't own any Bitcoin, don't even own their own home-

Bilal Little:

How do we do that? How do we do it?

Bob Pisani:

Well, we need to spread investing... We need to have, first off, policies that enable people to save easier. I was a big backer of the ability to automatically opt in in 401(k)s. This is a little complicated, but a few years ago, when you signed up to a new company, it used to be you had to voluntarily opt into the 401(k). Now, there is an automatic enrollment. That is one of the biggest changes in years.

Bilal Little:

Yeah, for savings.

Bob Pisani:

You have more tax policies, make it even easier to save for college retirements. President Trump has floated a thousand dollars for every baby. That kind of proposal, generally, I am in favor of. I know there's issues around that, but-

Bilal Little:

Also, expansion of market infrastructure, access, a lot of these things.

Bob Pisani:

Exactly. So the question goes back to what do we want to support here, and I think the important thing is, besides the first principles, besides get rich slow concept, is we need to expand the investing psychology in the world. We need to have people own their own homes, we need to have people own stocks and bonds, the products of capitalism.

For the financial services industry, I have a big message for them. I ask people, my friends, "What do you do?" And they say, "Well, I'm a salesman for an ETF," or, "I work on a trading desk." And all that's true, that that's true, but it's more important. What you do below is more important than just saying, "Well, I run an ETF podcast and I'm the ETF guy at the NYSE." No. The way I think you should look at yourself and the industry is we, all of us collectively, we are in the dreams business. We are in the business of helping people realize a happy and healthy retirement. We're in the business of putting their kids through college. We're in the business of helping transfer their money to the next generation, and we know there's a lot of money about to be transferred. We're in the business of relieving the anxiety about money.

And when you look at it that way, suddenly we become a lot more important. You're a really important guy, you can walk around with your head held high and say, "I'm helping this country out. I'm helping everybody. I'm pretty damn important. And in fact, I have a very important job and very high level of responsibility," which is why I get worried about some of this crazy meme stuff that's going on. So when you look at it that way, we're people who are helping people realize a better future, and that's what I want people to understand in this business. We're in the dreams business. That's why I've stayed all these years. People say, "What the hell? Why have you been there 28 years? You're in the basement of the New York Stock Exchange for 28 years." Because where else? We're in the heart of capitalism, we're in the heart of dreams business, right here at the New York Stock Exchange, that's why I stayed.

Bilal Little:

Well, Bob, I want you to know, you've got a friend and an ally in me, my friend.

Bob Pisani:

Thank you.

Bilal Little:

Thank you so much for joining ETF Central.

Bob Pisani:

Bilal, a pleasure. Thanks very much.

Speaker 1:

That's a wrap for today's conversation, but the ETF discussion doesn't stop here. For more insights, deep dives and voices shaping the market, stay connected on etfcentral.com. From the New York Stock Exchange, we'll see you next time.

Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties expressed or implied as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.