Rule #1 Finance Blog

With Investor Phil Town

InvestED: Ep. 232- Next Big Crisis

“Realize that if you don’t know what you’re investing in, you’re gambling.” – Phil Town

This week on InvestED, Danielle and I discuss investing circumstances that have created economic downturn in the past, as well as what we think could potentially result in the next big crisis.

The fundamentals of what we teach in Rule #1 investing is to know exactly what you are buying. Especially right now, passive investing is its own disaster on the rise.

Michael Burry is a well-known investor and hedge fund manager. He says he has found the next market bubble and believes that passive investments are inflating stock and bond prices.

Burry claims that they are doing so in a similar way as collateralized debt obligations did for subprime mortgages, leading up to the last stock market crash over 10 years ago.

More and more people are being encouraged to invest in index funds. What people do not realize is that whoever is managing the index funds has no obligation to figure out the value of the thing it’s borrowing.

Since there is no price discovery in the credit markets at all, risk doesn’t have an accurate pricing mechanism in interest rates anymore and therefore interest rates are not matching the choices of actual investors.

If you don’t know what you are investing in, or the actual value of your investment, you are taking a gamble.

If you want to learn more about current investing topics, join us on the podcast today!

Show Notes:

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On the InvestED podcast, Phil and his daughter Danielle shine a light on the successful investing strategies that gurus like Warren Buffett have used for 80 years. Listen in for a great stock market education on basics, learn how to invest on your own, and follow along with real-time examples and investing tips from week to week.