Episode summary
Ben Carlson: The Most Dangerous Investing Myth We All Love
The Meb Faber Show
· · 56 min · Hosts: Meb Faber · Guests: Ben Carlson
Summary
Ben Carlson argues that investing is less about finding a secret formula than about accepting that no strategy works all the time. He says the real edge comes from rules, time horizon, and staying invested, even when you start at bad prices or endure ugly headlines. The discussion uses examples like the “world’s worst market timer,” who still compounded wealth by buying only at all-time highs, to show how forgiving equities can be over long periods.
A major theme is how volatility and inflation shape investor behavior. Ben says the average up year in stocks is far larger than many people expect, while long-horizon stock returns become less volatile relative to bonds. He also argues that the 1970s remain the clearest modern example of inflation crushing most assets, and that rising inflation is especially damaging because it changes both earnings multiples and investor psychology.
The conversation also turns to practical portfolio management: tax management as a source of “alpha,” the dangers of discretionary decision-making, and the importance of knowing what not to own. Ben is especially skeptical of hyperactive trading and products that tempt investors into constant tinkering. He closes by stressing that the hardest part of modern investing may be patience itself, because the menu of investable products keeps getting larger while discipline does not get easier.
Key takeaways
- Ben Carlson says there is no holy grail in markets; the edge comes from rules-based investing and a long enough time horizon.
- He says even the “worst” market timer who only buys at all-time highs can still end up wealthy if he stays invested.
- Ben says the average up year in stocks is about 21%, and the stock market’s long-term volatility falls sharply versus bonds over time.
- He argues the 1970s were uniquely brutal because cash, bonds, and stocks all lost to inflation, making inflation volatility a major risk.
- Ben says tax management has become a new source of alpha for wealthy investors facing large embedded gains.
- He warns that hyperactive trading and discretionary managers often destroy value because investors abandon them at the wrong time.
Notable quotes
“If you pick the exact wrong asset every year, you don't lose money. You get it wrong every single year, you pick the worst choice, and you still make money”
“the stock market is the greatest casino ever created”
“winning over time doesn't mean winning all the time”
“the biggest problem people have these days for wealth as far as wealth management clients go is, "Hey, my capital gains are too big”
How the episode opens
We all extrapolate our own lived experience. How do these stupid bubbles happen over and over again? Because there's no natural immunity. Then you have an entire generation 17 years later that have never really experienced pain and then rinse repeat. Same story over and over throughout time. If you pick the exact wrong asset every year, you don't lose money. You get it wrong every single year, you pick the worst choice, and you still make money,
And yet people find a way. — This guy saves all his money in a checking account and he only puts it in all-time highs, right? Did it in 1973, 74 bear market, and then he does it for the 1987 crash. Stocks fall 30% in in a week.com bubble right before it bust, and then the great financial crisis. Like how did he do? He still end up a millionaire.
Welcome to a special series of the Meb Faber Show on the past, present, and future of America. I'm sitting down with some of the most notable historians, thinkers, and investors in US financial history. All tied to my new coffee table book, Investing in America, The Rise of a 250-Year Bull Market, out July 4th.
Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
This episode is brought to you by Ivy Invest. You know I've talked a lot on the show about endowment style investing, the Yale model, the Swensen playbook, public markets, private equity, private credit, real estate, all blended together into a portfolio built for the long game.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- long-term investing math
- market returns
- asset volatility stocks vs bonds
- tax management alpha
- inflation impact on assets
Companies and tickers mentioned
- Ritholtz Wealth Management
- Ritholtz Wealth Management (Animal Spirits podcast)
Watch the episode
Watch “Ben Carlson: The Most Dangerous Investing Myth We All Love” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Meb Faber Show, this episode and its artwork belong to The Idea Farm. Octagon is not affiliated with the show; this page is an independent summary.
