Krishna Memani on Wall Street's Very Expensive "Free Lunch"
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Hello, Odd Lots listeners. I'm Joe Weisenthal. And I'm Tracy Alloway. Tracy, we're doing another live show and it's right here in New York City. Yeah, this one should be our biggest yet. And we're going to have a bunch of Odd Lots favorites and do something maybe a little different to some of our previous live podcast recordings.

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Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wiesenthal. And I'm Tracy Allaway. Tracy, this has come up a few times on the podcast over the years, but you know, you really feel dumb. You could really feel dumb as an investor over the last, I don't know, 15, 20 years if you literally bought anything else besides big tech stocks. Big U.S. tech stocks. Yeah, big U.S. tech stocks. Yeah, that's exactly right. And the funny thing is, investors have been encouraged to diversify, right?

Right. Like this is the mantra of markets is that you shouldn't put all your eggs in one basket, et cetera, et cetera. And so you've heard for the past 10 or 15 years that you should diversify into international stocks. You should diversify into small caps. 60-40. Yeah, 60-40. Yeah.

And a lot of those things have turned out to be duds or at least 60-40 was a dud for like a couple of years. Kind of. Kind of. I mean, it mostly did well, but like it had some rough years, particularly out of the pandemic. But certainly you would have been missing out on big gains if you put money into small caps or international stocks versus the big U.S. tech stocks. Right. And, you know, we've gotten a little bit.

You know, when DeepSeat came out, that raised some questions about big tech stocks. Obviously, with the policy volatility in the U.S., which is one way to put it, there have been some questions about, OK, is now the time to diversify abroad? Yeah, OK, you could have bought money buying Rheinmetall or one of the beneficiaries of German defense spending. But so far, you know, it's still not obvious.

that there's some other big moneymaker out there for investors besides big tech. But we may be at a juncture. Well, I think the other unappreciated aspect is the importance of the benchmarks in all of this. And I think investors tend to think of benchmark index providers as these very neutral entities that are holding out a mirror to the market and just reflecting what's already there. But actually,

But actually, a lot of their decisions are very active and have very, very big implications for investors. So, you know, if MSCI says that the all world index is going to have small caps and big caps in it, then investors are, you know, they're forced to buy small cap exposure.

That's totally correct. And this is core finance theory, that the optimal portfolio is more or less the global portfolio. We've talked about that with the dimensional guys. You really should have a weighted allocation somehow, if possible, to every bond, stock and piece of real estate out there. And that's the best you can do. And that clearly has not been the best you can do for a long time. And so we want to talk about the tortured pain of the poor diversified allocator situation.

And the tyranny of the benchmark index providers. Yeah, very Shakespearean. Anyway, I'm really excited. I think we do, in fact, have the perfect guest, someone who I've been a big fan of for a long time, someone I've wanted to have on the show for a long time. He's probably one of my top five favorite posters on Twitter, although he's quieted down a little bit lately, but I think he's addicted like the rest of us. We're going to be speaking with Krishna Mamani. He is currently the chief investment officer of the Lafayette College Endowments.

Previously, he was the CIO at the Oppenheimer Funds, which was bought by Invesco. So a long storied career, someone who knows about all of this stuff. So Krishna, thank you so much for coming on the podcast. Thrilled we can finally make it happen. Thank you. Thanks for having me. Absolutely. What do they teach you in school about diversification? What is when they, you know, when you're training to be an investor, an asset allocator, what do they actually, what do they tell you?

Diversification is the biggest free lunch available in the investment world. And I think from a longer term perspective, that is absolutely true and probably something that we ought to think about. But as you mentioned, the results over the last, it's not just last 15, 20 years, the results over the last 30 years, 40 years have been very, very, very, very different than what you would have expected if you had gone down this path.

Doesn't mean that the basic principle is invalidated. It just simply means that you have to think about it and acknowledge the fact that it hasn't worked out according to plan. Where did the diversification thesis actually come from?

Well, the diversification thesis basically says that if you have security specific risks in individual securities, if you can find a way of diversifying that away, then that is something that you should do because it reduces your overall risk profile without sacrificing too much in return terms.

So that's where the theory comes from. No, no, but who propagated it? It must have had an endorser or it must have made its way into the market in one way or another. I think it came from CapM and William Sharp and that cordiality of academicians who basically did the pioneering research in this field in the, let's say, 70s, 80s and early 90s. In my 401k, I have a very conservative definition

diversified fund it has not kept up with the s&p 500 i don't think but every once in a while such as the first couple weeks of april 2025 or the first couple of weeks of march 2020 i take a look at it and i'm like oh i pat myself on the back for those moments of diversification

Is it worthwhile just for those reasons? Every once in a while, you're like, okay, you know what? This makes me feel good. I'm not going to panic less. Actually, my port, you know, that 401k, it actually stays close to all-time highs. I keep, you know, allocating it a little bit. How much is that worth in terms of that comfort that I get for like five minutes every 20 years relative to the cost of underperforming a simple S&P 500? Paying a price for peace of mind. Yeah. Yeah.

Well, so again, my argument isn't that diversification is a bad thing. I think from economic principles, from financial principles, diversification is a good thing. And if you can find a way of diverse or mitigating your overall security specific risk, you are to do that. The point I'm trying to, I would like to make is the fact that it hasn't worked. And therefore, kind of relying on

30 years or 40 years or 100 years of history to come to some sort of investment principles that people follow very religiously, you know, hasn't worked. So shouldn't we kind of think about that and try to delve into what are the drivers? And it opens up a new research field because...

I would argue that the overall research in financial kind of investing is basically hasn't evolved a lot since the 90s. It's basically redoing the same papers with a little bit of changes here and there. But the core thinking, CAPM-related core thinking, really has not changed. So I think...

The right way to use this period of underperformance, whether it will sustain itself or whether 2025 changes the paradigm altogether or not, is kind of irrelevant. The key point is, let's kind of look at this period. Let's look at it in a little bit more detail rather than being extraordinarily doctrinaire about things.

which is, you know, anytime you post on Twitter that, well, my international funds haven't really worked for me, I get schooled by all sorts of people. But the fact is, they haven't worked for me. And I continue to do that. You know, I have a very diversified portfolio and I will probably stick with it. But I think it is also fair to recognize that it hasn't worked. And therefore, we should look at it in a little bit more detail and kind of

Not take the mantra of diversification as religion, which is what it is right now. So in your opinion, what are the drivers or the reasons why it hasn't worked? Because I imagine, you know, you could tell a story that the big tech stocks in the U.S. have just been phenomenal companies that continue to throw off cash. You could maybe...

tell a story about the benchmark indices, which we spoke about in the intro. You could tell a story about flows and investors crowding into stocks. Why hasn't diversification worked? Well, so again, let's just kind of narrow it down. When we are talking about this level of diversification, what we are talking about is U.S. stocks not working or U.S. stocks doing better than international stocks. So that's what we are talking about.

I think there are several drivers. I think the kind of the tech supremacy of S&P 500 is certainly one of them. The profitability of the tech franchise is another one. Low interest rates in the U.S. where growth was higher than interest rates certainly was a factor in driving returns.

and kind of the existence of private equity, which got multiples high. So there are a plethora of reasons as to why things haven't performed. And therefore, it is worthwhile spending a little bit, these are speculations on my part, but this is worthwhile spending a little bit of time figuring this out in a little bit more rigorous way than we have done so far, because it's,

Right now, again, if anybody puts up a notion that diversification is bad, they'll get schooled. But I think given the length of time that it hasn't worked and given the magnitude of how it hasn't worked, I think it is worthwhile spending a little bit of research focus to analyze what the drivers were, as you say, and see if there are some other things that we can divine out of this 30-year episode.

So I totally appreciate the need for additional research, and I would agree with you on that. But is saying that diversification hasn't worked the same as saying that investors should only buy winners and avoid all the losers?

Well, so I think there's an element of that for sure. That is, international markets have done poorly relative to U.S. markets. One anecdote here. I used to be the spokesperson for Oppenheimer Funds with respect to globalize your thinking in 2011 when the campaign came out. Yeah.

So you were a messenger. I was the messenger of this thing. And I kind of diversified my portfolio based on that thinking. The idea about portfolio construction with respect to diversification isn't that diversification is a bad thing. I think that's a right approach. I think...

Given the history over the last 30, 40 years, we ought to think a bit more about are there other drivers rather than just simply believing in the historical track record and the volatility context of that historical track record. And here we have a specimen from the early 2000s, a legacy investing platform.

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So I am very partial to the idea that a big part of the story is the unique

profitability of large tech companies in the US. But that is clearly not the only story, because it's not just that global stocks have underperformed. In many instances, they've just performed badly against anything. I'm looking at a chart of EWZ, a popular ETF to exposure to Brazil. It's basically flat for 20 years. I assume the Brazilian economy has grown quite a bit in the last 20 years, but it has not

redounded apparently to the benefit of an American shareholder investing in Brazilian stocks at all. So obviously, this can't be the entire story that it's just about US outperformance. It's actually that global stocks have done bad. What's going on? Why in a world in which the economy is generally more or less growing elsewhere, have international equities actually just done bad on an objective basis?

The old adage is the economy is not the equity market. Yeah, yeah. And that is absolutely true. I think the period from, let's say, 2010 onwards in the U.S. is especially galling. And I think if I had to come up with a reason as to why that has kind of worked out the way it has worked out is basically because of

dollar-related global flows. That is, I think, the profitability basically attracted a whole lot of things that were going to come to, or a whole lot of flows that were going to come to the U.S. because of the perceived strength of the dollar during that period. As I said before, growth

growth was higher than interest rates in the US. So it was a natural kind of place for those flows to kind of arrive at. But like, again, another one, Mexico, it's just flat for 20 years. So in your story, it's not quite flat for, yeah, where was it? 2007. So like flat for like 18 years.

The flows are a big part of the story for the fact that these stocks can't deliver anything over a decade's time horizon? Well, so I think domestic flows relative to international flows are really very important in determining the state of the equity market. Okay. And the best example counterpoint to what you're talking about that I can give you is really India. Okay. Yeah.

So India used to be a market that was supported entirely by foreign flows. And foreign flows, and when there was a panic in New York, all sorts of money would leave India and come here and the stock market would crater.

Over the last, let's say 10 years, as the Indian economy took off and financialization and the saving vehicles in India changed and the equity market, as opposed to land and property, became the primary source of savings and deployment of those savings.

I think the characteristics- So capital depth. Yes, capital depth, financialization of the economy. And right now, the drivers in the Indian equity market, at least for the last five years, really has been the domestic investors as opposed to foreign investors. So I think that is really, from a flow standpoint, that is the difference. Yeah. And if you look at the MSCI India index, it's like the exact opposite- That actually looks like it's done well. Of Mexico and Brazil. Joe, you know what I always say?

I do, but I'll let you say it. Are you going to say it? No, I want you to say it. Flows before pros. Yeah, he did it. All right, that makes me happy. By the way, I stole Tracy's joke in the intro. She's not happy about that. I said that thing about how Shakespearean. Tracy said that right before...

we went on air. I want to give her credit. Oh, thank you, Joe. But now I feel petty. I didn't expect you to do that. Okay. Going back to the conversation. I'm trying to make you feel petty. You made me feel bad. So now I'm trying to make you feel petty. All right. All right. Fair. Going back to the conversation. Can you talk a little bit more about the role of the benchmark index providers in all of this? The thinking in this world is always benchmarks are terrible.

But they are terrible, but better than anything else that we have. So I think there is a role for benchmarks and benchmark providers are important participants in the market. And, you know, the market capitalization of companies like MSCI and S&P Global kind of tell you as to how valuable those franchises are.

The way, as an investor, if you are an asset manager or if you are kind of an asset allocator, how you are doing has to be evaluated in some sort of a rigorous framework. And that's where benchmarks come in. And that's why we need benchmarks, because otherwise it'll be free for all. I can, as an asset allocator, I can, if my returns were

10%, let's say, I can always claim that I did a fabulous job and my benchmark outperformed by, you know, 1000 basis points. So it's a, you know, there is tyranny of benchmark, but this is a necessary tool that we need.

I think a separate question is the extent of the diversification of the benchmark. So you talked about MSCI Acqui and even things like Russell 3000 or things like that. So there are issues with diversification.

S&P 500, on the other hand, for the large cap U.S. market is a very, very solid benchmark. I mean, there are peculiarities with respect to additions and taking out of the index, but I think that is to be expected in a dynamic market. And I think for...

for the most part, it has worked out reasonably well. You are an employed person. You have had a career. Despite imbibing the gospel of diversification, you have had a successful career in the markets. Talk to us, though, about your peers and career risk, et cetera, because at some point, you keep making less money than you could have by buying

What does that do? And what have you seen? You know, when you look across the industry, do you see an evolution whereby people who were taught the same thing as you about diversification have increasingly felt pressured to not be diversification or to disguise their diversity?

in some way that they could tell their investment committee, we're diversified, but actually, like, we just found a way to, like, go extra long in video? I think in the institutional world as opposed to retail world, I think diversification is still the matter. And again...

to emphasize it is the right thing to do. But why do you keep saying that? If you think about it in statistical terms, there is a way to diversify the tail risk. But what I'm saying is we need to evaluate that and see or re-evaluate that and see if there are some other techniques and methodologies that we can use where this doesn't become the only way for you to mitigate your overall risk in the portfolio.

So what would be another technique or methodology? Evaluating from a track record standpoint, let's say, or from a performance standpoint, let's say, does adding emerging markets to a globally diversified portfolio, does that really add a lot of value to the process?

Does just, let's say, a developed market index, both US and Europe and perhaps Japan, can that deliver some level of correlation to the overall index without you being stuck in places like China for a long period of time or Brazil or Mexico for that matter? So,

I haven't found the solution. If I had found the solution, I would have implemented that in my personal portfolio. My point is we ought to think about that, and we don't really think about it because diversification on a global basis has been the mantra and the accepted doctrine forever.

But say more about the career risk. Okay, at the institutional level, they're fine. It's like, oh, yeah, diversification. But, you know, for example, I'm always a big fan of reading the Bank of America fund manager survey every month. And these are discretionary fund managers that could do everything. And for like 10 years,

with a few exceptions in there. They say long tech stocks is the most crowded trade, but also it's the trade that continues to work. Talk about this effect, this sort of the anti-diversification success on the sort of thinking of a fund manager who probably doesn't love being in a crowded trade, but also doesn't want to underperform. Well, so I think an active manager is kind of caught in a way, right?

On the one hand, you know, you have to outperform your peers. On the other, you have to outperform the benchmark. Okay. And that is a challenge. And that challenge leads to the sort of things that you are talking about. That is, uh,

Well, they may do very well relative to the benchmark without crowding into the most crowded trades. But if their competitors are crowded in there and do much better than them, that's an issue for them. So, you know, that's their way of solving that particular challenge. I think the...

The crowded trades have been there for a long period of time, but I think the way I would evaluate that is how much of a portfolio manager's performance is really driven by the performance

core views that they express as to what their edge is. Right? I don't understand the explanation. So every portfolio manager would tell you that their strategy is we look at ROIC and that's what we focus on. And therefore, that's how we kind of structure our portfolio to pick companies individually. Yeah.

Now, if they say that thing and they are kind of focused on, and that's how I hired them. Yeah. And instead they focus on getting into, let's say, crowded trades because they are going up, then that's really a red flag from an allocator perspective. Got it. Got it.

So Joe alluded to this in the intro, but if you were diversified into international stocks, there were a couple moments this year where you actually looked really smart and you did get a little bit of peace of mind as the S&P 500 was selling off. European equities were surging earlier in the year. But what do you need to see for a durable change in international versus U.S. stocks and specifically U.S. tech stocks?

So I think the underlying economic environment

has to change for that dynamic. Actually, underlying economic and industrial environment has to change dramatically for that to kind of play out. So if you look at the world from a capitalization standpoint, what we are talking about is U.S. on one side and Europe, Japan, India, China, Brazil. Those are really the places that we are talking about. So structurally,

U.S. economy has done better. The dollar is the reserve currency. And the growth outlook over the last 10 years have been much better in the U.S. than it has been. So flows coming into the U.S. ought not to be a surprise in that environment. And for flows to go the other way, basically the fiscal expansion in Europe has to get going in a massive way.

And that fiscal expansion has to lead to companies and institutions that can take advantage of that fiscal expansion and therefore deliver superior returns to their shareholders. And therefore, I'd be interested in buying those companies. You know what's great about your investment account with the big guys? It's actually a time machine. Log in and Zoom. Welcome back to 1999.

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with owners and retailers posting photos and videos of people snuggling with their snakes and lizards. The Crusted Geckos Facebook group has more than 37,000 members. Bearded Dragons lovers, 137,000. And Snakes with Hats community, 150,000.

Although the boom has prompted concerns from animal rights groups about the ethics of reptile e-commerce and captive breeding, they haven't impeded growth. And hundreds of species can be found in pet shops, trade fairs, and online stores. That's the Bloomberg Businessweek Minute brought to you by Amazon Business, your partner for smart business buying. Running a business, it's a lot, right? Orders to place, expenses to track, procurements to manage –

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Tracy, do you know how much, without looking the DAX, Germany's benchmark index, do you know how much it's up in dollar terms this year? I do not. Although I will confess I have a chart of the MSCI All World versus the S&P 500 on my screen right now. Yeah, but just take a guess. Take a guess. I have no idea. Tell me.

32%. Wow. The German stocks in dollar terms are up 32% this year. France, up 17.5% in dollar terms. The Euro stocks, 50, up 22%. I mean, this is serious. And this is like, these are numbers that we're really not used to seeing in me and Tracy's entire career, this kind of divergence. Because as of the time we're talking about, the U.S. benchmarks are actually flat on the year, which is pretty impressive, actually, given where they were a month ago.

Like at what point do you're like, uh, this is a sea change. What would it take? Not from a economic standpoint, but like, you know, what does it take for the other fund managers around the world to like, oh, I believe in, I mean, I don't know, start with, is this the sea change here or not in your view? Well, so, uh, you know, again, these are spectacular returns and definitely spectacular relative returns. Yeah. Uh,

It looks like there's some spectacular objective returns. It's only May. Yes. But anyway, keep going. And a lot of these returns are dollar-driven as well. Yeah, right. So a significant portion is really this thing. And a lot of it is because of the upcoming fiscal expansion in Germany. Yeah.

Okay. So for this to be sustainable in the long run, I think the economic picture for the continent has to change many things. You know, by the way, just...

The Bovespa, the Brazilian stock market, is up 25% in dollar terms. Chilean stocks, which I've never looked at, but it's right here when I go to the WEI page on the terminal, that's up 32%. It's not even, I actually hadn't quite realized this, it's not even just a Europe story. LATAM too is actually in dollar terms having a phenomenal year. The confluence of

Dollar weakness, tariffs, you know, those are really the things that have kind of had an impact on dollarized returns. If they remain sustainable, then it will be worthwhile looking into those markets and the thesis would be proven.

But we have also had episodes where we have had these types of moves. False dogs. And pretty soon, in six months, a couple years, you give back all of these spectacular relative returns. But if the argument is diversification is good for protecting you from tail risks, then what's been happening this year, and specifically in April, seems like a pretty big tail risk and diversification worked.

In this case, absolutely. Diversification worked. The question is, is the diversification or the relative performance of European markets and the rest of the world, is it all concentrated in a very short period of time?

What do I mean by that? I think if the expectation is that the U.S., because of tariffs and all sorts of policy responses, the things that drove the dollar and the flows into the U.S. go away on a sustained basis, the trend will probably persist. I would posit that that probably isn't

Or at least that probably isn't a very realistic scenario at this point. What timeframe should you be judging diversification success on? Actually, that's a really good question. So success of diversification, from my mind, has to be evaluated over a reasonably long period of time.

So, five, 10 years, even 20, 30 years, I think those are the timeframes that you have to evaluate it on so that everything economically has had an opportunity to play itself out. And all we are talking about is the security-specific volatility for individual securities that benefits from this diversification.

So I think it has to be evaluated over a long period of time. And that's why when it hasn't really performed for as long period as it has not, despite their recent performance, the point I would make is let's kind of think about that a little bit and look at why that has been the case. Wait, I want to make a counter argument. Why shouldn't we evaluate a tail risk hedge, which implicitly is what diversification seems to offer?

in just very short term. Because in March 2020, there was a possibility the economy could have unraveled further. I could have lost my job. I would have been on the hook for paying for my own health insurance and so forth. I was very excited in that moment that rates went to zero and the bond portion of my 401k or whatever shot up. That actually helped me in an acute moment

There is obvious, you know, we haven't hit a recession yet in the U.S. In those acute moments where there's suddenly a risk and you're sort of your career is correlated to your portfolio. Can it be enough for diversification just to pay off in the short term? OK, so let's kind of make sure that we are talking about the same diversification. OK.

So, you know, diversification between equities and bonds. Yeah, yeah. I think that from a risk management perspective, because of different volatility characteristics of the two instruments, that is still very much valid. Okay.

One has double-digit volatility, the other has 5%, 6%, and they react in different economic environments very, very differently. So that is valid. I think what we are talking about is really international diversification. And if you look at the correlations of international equities relative to U.S. domestic equities correlations,

is very, very high. So it's giving you some diversification benefit, but it is not giving you the level of diversification benefit that you think you are getting.

Have you done anything in your own portfolios to take into account some of these thoughts over diversification? I have been a victim of this diversification because I constructed my portfolio and I have posted this on Twitter for everyone to see, which is, you know, I have a

I have bought international small cap and I bought U.S. small cap and I bought developing markets. And so I have constructed a portfolio in a very diversified way. It has worked out fine, but it could have worked out a lot better for that. Am I doing something relative to that? I think the thinking with respect to that has to be about

Some valuation context in the environment. So if you were going after sticking with it for 30 years, if you were going to flip that switch, doing it when U.S. markets are the most expensive probably isn't the right thing to do. But that doesn't take away us thinking about what the drivers of that when that is not the case. I see. Yeah.

So, so that when the opportunity comes back, we are kind of thinking about it the right way, rather than just sticking to the mantra that we have thought about for the last 30 years. If you flip and suddenly you're like, you know what, everything I was taught, I was wrong.

And I'm going to lean more heavily into the U.S. Will you let everyone know so that then we can then diversify exposure? Like, will you put out that alert? I've finally caved. I've finally caved. I finally don't believe anything I learned in school because maybe the rest of us can use that as an opportunity to go heavy into EEM.

Sounds like a good idea. I'll be, again, as I said, schooled on whichever platform I kind of put that out. As an investor who has kind of stuck with this for almost 40 years, it has been a challenge. And what I am doing is acknowledging that challenge. That is the lack of correlation that we were expecting from international equities. Yeah.

hasn't worked out. That's it. But just on this point, and you've been in a few different seats.

How do you, you know, what do you have to do career wise to maintain that discipline? Because this is a big thing, right? Career risk in any seat. And there are different, you know, some people are on a very short leash at a big institution that has longevity of over a century. Maybe you have a long leash, et cetera. What is, you know, how does career risk and career longevity play into this type of thing?

So, again, you have to distinguish between the type of investor you are. So if you are an asset class investor and your mandate is international investing, international may not have done well relative to domestic investing, but somebody allocated money to you and they're looking for you to do better than international benchmarks and your peers in doing the same thing. So there, the career risk is really not direct. The career risk is in terms of flows.

That is, if you had a global mandate or an international mandate, you know, the... So it's not like you're getting fired for underperforming. It's just that no one allocates to you. No one allocates to you. Got it. If you are an allocator, then, you know, it's kind of the performance is relative to your benchmark and your benchmark. That's how you are evaluated. And your benchmark is for most institutional portfolios. It's still very much MSCI Acquies for the equity component.

Christian Mamani, that seems like a really key point. As long as that's the benchmark, some institutional allocation will survive. Really appreciate you coming on, Oddlots. We're all going to be looking out for that tweet when you decide to go into Mag7. Okay, sounds good. ♪ music playing ♪

You know what I really appreciate? Krishna is probably the only person on social media who will admit that they didn't time the market perfectly and weren't all in on tech stocks over the last 10 years. Everybody else timed them. Oh, I went to cash, you know, blah, blah, blah. Oh, you know, whatever. I'm glad someone admits the truth, which is that most people

have just been, at least in recent years, overly diversified. Well, it's also interesting to me to see a big institutional investor tweet at all. Yeah, that's true. All right. So that was really interesting. One thing I am coming to really appreciate is that peace of mind point and the idea that there is a price to pay for peace of mind. It's not necessarily free, but...

Every once in a while, maybe it does actually help you in acute moments of stress. Well, totally. And look, if the markets are going down, if you're let's say you're employed in America and you have a lot of this is something I think about a lot. If you're employed at an American company and you have a heavily exposed American index. Mm hmm.

When markets are tanking, that is often associated with recession. Right. And that is associated with an increased probability of losing your job. And an increased probability of losing your job is associated with having to sell your investments, maybe even take a tax hit at a time when you can least afford to pay it, sell your investments to literally continue your life, which is sort of like the worst correlation you could, you know, the worst confluence event.

So the idea that like, OK, like if you lose your job and you have to dig into your savings, at least you're not selling at a local bottom in the market. That seems like one benefit to diversified allocation. Yeah. So you're not so invested in basically America squared. And you won't panic. I mean, this is the other thing, right? Like people, we're all we're animals and you see the line go down and you sell and so forth.

Perhaps if the line is a little bit more stable than your overall top line, then you don't make rash emotional decisions as quickly, which I think there's a lot of benefit to not doing. Do you think there's a difference between how much diversification helps the retail investor versus big institutional investors? That's a really good question. I mean, the nice thing about the big institutions, right, is they have longevity themselves and

Yeah, it's a good question. But I don't think any American retail investors diversify anymore. I think that, you know, most, it seems like retail investors in America, like, you know, it's not enough to go long mag seven, you have to sell puts on mag seven, right? That's right. Like, like, hyper, hyper, whatever the opposite of diversification is.

Hyper concentration. Hyper concentration. Yeah. All right. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Jill Wiesenthal. You can follow me at The Stalwart. Follow our guest, Krishna Mamani. He's at Krishna Mamani. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashiell Bennett at Dashbot, and Kale Brooks at Kale Brooks.

For more Odd Lots content, go to Bloomberg.com slash Odd Lots. We have a daily newsletter and all of our episodes. And you can chat about all of these topics, including...

Thanks for listening.

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