“The Joe Rogan Experience” is an immensely popular — albeit controversial — podcast, with 14.6 million subscribers as of April 2023.
While not particularly known for its investment advice, on one episode host Joe Rogan “accidentally” gave solid investment advice to his listeners in the course of relaying a personal story. A transcript of that podcast could have been mistaken for something out of the mouth of the “Oracle of Omaha” himself, billionaire CEO of Berkshire Hathaway Warren Buffett.
In the middle of one of Rogan’s podcasts, he began relaying the story of an investment tip he heard about someone who was going to “revolutionize a form of travel,” and that Rogan could get in on the ground floor. When he discussed this with his business manager, he brought up the failure of biotech company Theranos, which promised a revolutionary blood analysis machine that could identify a host of potential health problems with just a single prick of the finger. That company’s CEO, Elizabeth Holmes, was sentenced to 135 months in prison, or slightly over 11 years, for criminal fraud.
Rogan went on to explain to his listeners that he had no interest in any “groundbreaking” technology or products until they have proven themselves to be true. As Rogan sees it, there’s no point in investing in something that you don’t understand. If you have to go to school or read books to understand what someone is even trying to do with their innovation, Rogan says for him the answer will always be “no way, not worth it.”
Warren Buffett’s Version of the Advice
Although in a different format, Warren Buffett has long espoused the same idea that Rogan mentioned in his podcast. As Buffett once told Forbes magazine, “Investment must be rational; if you can’t understand it, don’t do it.” That is often colloquially translated to “never invest in something you don’t understand.”
Buffett himself acknowledges that he has missed many opportunities in the market by sticking to his mantra. For example, Buffett is famously averse to technology, not because he doesn’t like it, but because he doesn’t understand it. The Berkshire Hathaway CEO had admitted to missing out on big moves in companies like Alphabet and Amazon for this very reason.
But that doesn’t mean he was wrong. On the contrary, Berkshire Hathaway has vastly outperformed the S&P 500 by investing in things that Buffett understands, like banks, oil and railroads. From 1965 to 2022, Berkshire Hathaway actually doubled the return of the S&P 500, returning 19.8% annually, vs. the S&P 500’s 9.9%.
How You Can Apply This Investment Tip to Your Own Portfolio
While it’s true that billionaire investors such as Warren Buffett might have access to more information than the average investor, this doesn’t mean you can’t profit from the same techniques they use. In fact, you might even be able to outperform these investment giants by applying what you already know.
For example, if you work at a company, you might have firsthand knowledge of its efficiency and understand how that is going to translate into future profits. While you can’t trade on insider information that is not public, it’s not a crime to take note of how a company operates and whether or not it has what it takes to succeed.
Adopting a similar principle from famed investor Peter Lynch, if you shop a lot at a particular store, you might be able to note things that take time to decipher in an annual report that other investors might be reading. For example, you might note that the retailer rarely discounts its merchandise but it still has shoppers buying all the company has and coming back for more. While you’ll have to supplement your firsthand observations with actual data from company reports, you might have a leg up when it comes to investing by noting positive trends.
The point is that if you believe in investors like Warren Buffett — and on that given day, Joe Rogan — you shouldn’t waste your time gambling on hot stocks in industries you don’t understand. While you may luck out and bag a winner, that’s not a solid long-term investment strategy.
Just ask investors in the thousands of cryptocurrencies that have disappeared, or even in banks like Silicon Valley Bank, which due to its investment strategy went from Wall Street darling to the second-biggest bank failure in U.S. history virtually overnight. If you truly understand what you’re investing in, the likelihood of this happening to you is very low.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
