What do you know about finance journalism? There are millions of words produced every day about stock markets, business, investments, economics, and all of their related implications and suppositions.
Lou Carlozo is one of America's leading investment/finance writers. The editor-in-chief at Qwoted, a source platform for finance journalists. The creator and host of the Bankadelic podcast, investment contributor to U.S News and World Report, a contributor to AICPA and Forbes Media, and lots of others in his portfolio.
"I would tell any young journalist, whether they're in the arts or interested in technology - money is connected to everything and that is profound. If we explore the discipline of behavioral finance, what we learn is that people do some of the most bizarre things. They'll invest in companies closer to the letter A in the alphabet than Z. And why do they do that? Well, we don't know why, but we do know that people are irrational and illogical and they do things based on prejudices that they don't even know that they have.
Lou had no prior interest whatsoever in finance. He backed into it by accident, it's been 12 years and he's never backed out. He's having a great time in the industry.
It takes a great journalist who has an insatiable curiosity in writing about different topics to know that there's no such thing as a boring topic. Also, you need to have the heart, soul, talent, and mindset to go for it.
He talked about why finance journalism is so important. Money is connected to everything and that it is why it is so profound. It's like marriage where there is tension and that the top two inevitable subjects of the tension are sex and money.
Lou enjoys teaching people about their finances, and how he changed his attitude towards money after realising that his finances were wreck. He doesn't want people to experience the same. Here's a link to his Bankadelic Podcast.
He spoke about how investors need to be careful about the ETFs and how some are much safer than others
"You have to be careful, look at the companies that are in there, try to learn a little bit about them. I think the great thing about ETFs is they're passive, and we live in a day and age where people are just waking up to the fact that active managers of investment portfolios take fees and percentages, and that might not seem like much until you look 20 years down the line and realize this guy took a hundred thousand dollars in retirement income from you because of the little amounts that we're pulling here and there."
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Hi, and welcome back to stocks for beginners. I'm Phil Muscatello. What does it take to be a top-of-the-line journalist in finance? There are millions of words produced every day about stock markets, business, investments, economics, and all of the related implications and suppositions. Talking to me today about this world of what Lou believes it's serious fun. It's Lou Carlozo. Hello, Lou.
Lou (1m 4s):
Hello Phil, great to be here, and greetings from Chicago.
Phil (1m 8s):
Lou Carlozo is one of America's leading investment/finance writers. Now I've got a little bit of a list here. I mightn't go through everything, but you're the editor-in-chief at Qwoted, a source platform for finance journalists. You're the creator and host of the Bankadelic podcast, investment contributor to U.S News and World Report, a contributor to AICPA and Forbes Media, managing editor, bank administration Institute, AOL's walletPop, a full-time contributor to Reuters money, and a lead contributor to Tribune content agency, which services I believe the L. A Times, Chicago Tribune, Orlando Sentinel, and also the Chicago Sun-Times content agency. Have I covered everything?
Lou (1m 51s):
Phil (1m 52s):
I know, this is just a brief part of your LinkedIn profile.
Lou (1m 56s):
How about the spread too thin society?
Phil (2m 1s):
Wearing too many hats society?
Lou (2m 2s):
I used to be in that until they kicked me out for wearing too many hats.
Phil (2m 7s):
So tell us, Lou, about how you got started in this business?
Lou (2m 13s):
Very unusual story. I had worked at the Chicago Tribune for 16 years, and right at the height of the great recession here in America, I was laid off and just a few months prior to that, I was given the task of writing a weekly column called "The recession diaries". Now, a little bit of background. I come from an arts background. I had, up until very recently, been a music writer. I was a movies co-editor, I'd done movies reviewing, I had a weekly DVD column where I interviewed all sorts of people from the movie and television industry. This assignment was very new and I knew nothing about finance.
Lou (2m 56s):
And I tried to tell my editors that I said, I can't even balance my checkbook. They were like, well, "That's great because you'll learn and you'll teach people as you go". So that was a personal finance assignment. And when I got laid off, I wish this were an exaggeration. It's not, there were headlines and news stories that started to pop up and said, how bad is the great recession? Well, it's this bad. The Chicago Tribune's recession writer has been laid off. So, the flip side of that was that I got a lot of media attention and immediately got a call from AOL saying, why don't you come and move your recession diaries column here.
Lou (3m 39s):
And immediately started writing personal finance for them. And that lasted a while. And then from there, went to Reuters and did the same and so on, and so forth. So I’m really an example of someone who backed into something totally by accident. I had no interest whatsoever in finance before I started doing this. And it is now 12 years later, and I'm having a great time.
Phil (4m 2s):
So, you started out as an art bum, and like you say, 'back into it', and which great recession are we talking about here?. So I'm assuming it's the post-GFC recession?
Lou (4m 14s):
It is 2008 to about 2010, a great recession in America. The one that was triggered by all of the toxic mortgage pools, and IAG, which is one of the largest companies and insurance almost went under. It took some intervention from people in the United States government, including Ben Bernanke. And that, I think also had ripples worldwide. If I'm not mistaken, it was just a really terrible, terrible time economically. One of the things that I have written about and tried to use as a descriptor for why millennia’s may come off as seeming very suspicious of people in finance is that they saw their parents' pensions, and 401ks, and retirement savings, and bank accounts, and stock portfolios wiped out.
Lou (5m 7s):
It was that bad. And the real tragedies that a lot of people, who perpetrated the irresponsibility, never went on trial. They never got the opportunity where they were told to face a judge and account for all of the terrible things that they did. So, that was the great recession. In a nutshell, it really was a miniature depression, recession. I think they just wanted to give a name to it at the time because it looked like it would be temporary. It wasn't, and it caused a lot of great financial harm.
Phil (5m 41s):
That we're trying to roll it in glitter, it seems. So, you weren't working in finance, you weren't writing about finance, but the skills that you'd gained in the arts presumably gave you the skills to write about anything and to write well about finances as well. And this is something that I've been exploring. I'm a light refugee into the finance industry myself, and I realized that it's a great place to work. What's the sort of advice that you would give to say a young arts graduate or writer or journalist about working in finance?
Lou (6m 17s):
That is a fantastic question. I think we start with what makes a great journalist? and I think it is insatiable curiosity to a journalist who has the heart, and soul, and talent, and mindset for it. There's no such thing as a boring topic. And I taught at university here for a number of years and I would challenge my students. I would say, give me the most boring topic you could think of. And I would stand back and give myself about a minute and then proceed to wax eloquent about it, or ineloquent if you'd prefer. But the point was, it could be a stone, it could be a brick, it could be a rind of food and the trash people tried everything.
Lou (7m 1s):
And I always found that that was an entry point into a deeper story. I mean, if it's a stone, for example, well, you know, was it from the paleolithic age or what might have the planet been like when that stone was born and you go around and around and there you go. With finance, I think it is a topic that appears to many people to be boring. If you're an art person as I was, and we both are right, I assumed it was much more glamorous to be talking to rock stars and getting a tour of the Fender factory to see how guitars are made, then writing anything, having to do with money.
Lou (7m 42s):
But here's the key. And what I would tell any young journalists, whether they're in the arts or interested in technology, what have you? Money is connected to everything and that is profound. When you think about it, if there is tension in a marriage, inevitably the top two subjects that are causing that tension are sex and money. And sometimes, the money piece is more important than the sex piece for a lot of couples. If you look at what is fueling the current movement in ESG, we just had the huge Cop 26 conference and people are arguing and debating and talking about how are we going to save the planet?
Lou (8m 30s):
So much money is behind that because people who are investing in sustainable companies are driving the change much faster than the politicians to look at behavior. If we explore the discipline of behavioral finance, what we learn is that people do some of the most bizarre things. And I'm sure you've talked about this on your podcast before. They'll invest in companies closer to the letter A in the alphabet than Z. And why do they do that? Well, we don't know why, but we do know that people are irrational and illogical and they do things based on prejudices that they don't even know that they have.
Lou (9m 12s):
So, behavioral finance explores that. I just find it an endlessly fascinating topic. And I don't think by the way, if you're a young artist listening that you abandon your background to go there. In fact, you may, as I did, learn a lot about how to manage your career financially and turn what you're doing into a profit center, as opposed to the stereotype of the starving artist.
Phil (9m 42s):
So what was that, like that transition when you first started writing about finance? what was one of the first stories that you tackled, and how did you approach it?
Lou (9m 51s):
The transition itself was Lou kicking, and screaming, and whining, and complaining. I am the quintessential example of a human being who does not like change. And that first story I did really convinced me that I had to rethink my whiny baby-like response. And it was a survival guide to repairing your finances. I talked to all sorts of experts. I employed all the reportorial skills I would use in any other piece. And what emerged was this thing that I was so proud of. And on top of that said, I can use this to repair my finances because what's the cliché.
Lou (10m 34s):
Those who cannot do teach? I'm trying to teach people about their finances. And my finances were freaking wreck. I mean, I was in debt, My checking account was not balanced, I didn't have any savings, I had no investments. And I'm reading what these people have told me, you and I are really lucky, right? We get to talk to some of the most brilliant people in the field and learn that way. And that was what started to happen. And that first story about how to survive a financial crisis, right at the height of the recession too, is still something I'm very proud of and it was what changed my mind about the value of financial reporting.
Phil (11m 12s):
Who are some of these people that you spoke with, and interviewed, who impressed you the most?
Lou (11m 17s):
Of some of the people that have impressed me the most over the years, Bob Johnson, who was a former professor at the American college of financial services, which is based just outside of Philadelphia. He always had some fantastic observations about markets and the way they work. And he was a Warren Buffet groupie and introduced me to the concept of value investing, which is something I hold dear. Sometimes, it was someone that really just had a very unorthodox approach to investing. So, I think about this one person who was a total contrarian and his name escapes me, I know he is based in San Rafael, California.
Lou (12m 5s):
And he taught me the idea that if somebody is investing this way, and the herd is going this way, you might not only want to go the opposite way, but you want to look at the things that they have left behind and trampled in the dust. So that was a very valuable experience. I have talked to bankers at the Fed. I have interviewed people within the banking industry, T.T Cole, who is running a lot of global operations at the city, was a fantastic person to talk to because she taught me a lot about fraud and why fraud is pervasive in financial services. Wow. I mean, I could just go on and on and on.
Lou (12m 48s):
I think one of the most fascinating interviews I did was with a guy who was a hacker. He was actually maybe a gray hacker. He wasn't quite a black hacker, but IBM hired him to start this group called Force red. And you meet this guy, and he's got like tattoos, and he's dressed like somebody at a Motor-head concert, and then, he produces his card, and he works for IBM. And his whole thing was to show them how to think like a hacker, and then reverse engineer what the hackers were doing to try to make a defense. And that was an incredible conversation.
Lou (13m 30s):
I really, really enjoyed that as well.
Phil (13m 31s):
It's interesting what you say about fraud, that the finance industry is fraught with fraud. Tell us about that.
Lou (13m 39s):
It's whack-a-mole right. And it's an endless game of whack-a-mole because people in North Korea where there is government-sponsored hacking. By the way, people in Russia, in certain portions of Eastern Europe, and anywhere in Australia, the United States where they've got an attic, a powerful computer, and little to no social contact. These people are thinking two to three steps ahead. And unfortunately, even some of the smart people who run I.T Operations at banks and other places aren't aware of some of the bonehead simple things they could be doing.
Lou (14m 25s):
So for example, an entirely redundant system that backs up all of the data twice, not once. So, when some ransomware person comes along and says, 'we've locked your data up, give us a billion dollars in Bitcoin. You can turn around and say, 'screw you' cut the data off, make it worthless when they seize it, and just put up your redundant system. Redundancy is everything in the fraud world. Some of it is a little more insidious and almost impossible to stop. There is this portion of the fraud underworld called synthetic fraud, right? So, what I would do is a synthetic fraudster is cook, which is the term that they use a false ID.
Lou (15m 13s):
I nurture this false ID with identifiers through the government. So in America, a social security number, and then go out and get a credit card for this fake person and establish a credit rating. And you can do this for less than $100 USD. And if you do it correctly and bake it correctly, you can make hundreds of thousands of dollars. Now here's the thing for a major bank, like a Wells Fargo, or a city, or chase. It's just not worth it. The chase after pun intended these fraudsters. So they regard them as pesky flies, they write off the losses, if anything.
Lou (15m 57s):
And so synthetic fraud is very popular because frankly, it's easy to get away with.
Phil (16m 1s):
If you are comfortable talking about your own investing. Now, how has your investing changed and how are you investing? Is it through mutual funds, or ETFs, or direct investments in stock markets, other asset classes what's going on there?
Lou (16m 13s):
I think one of the things you and I agree on Phil is that we love ETFs. I think they are fabulous. I think any index fund that is attached to a market that continually goes up over time has proven the test of time. I mean, in the United States, Wall Street, and the S&P have proven profitable, reliably, and annually when you take the long curve since the great depression of the 1930s. So why wouldn't you let super smart people who are driving one of the world's most major markets do the hard work for you?
Lou (16m 55s):
One of the things I've learned in the last couple of years, I used to be strictly a value investor. And then I changed, and I don't want to say my method is proprietary, but I do think it's a bit creative and somebody else has to be doing it somewhere. So I don't claim to be any genius, but you don't look at where the ball is. You look at where the ball is going to be, right? I would say that my field of vision tends to be five years into the future, right? What do we know? Petroleum is going down, down, down, down coal, down, down, down. So why on earth would I invest in a marathon oil or an Exxon?
Lou (17m 37s):
To me, if you give that timeline, some consideration that's dumb. But a Chinese automaker like NIO, you check the statistics and every month they are selling more and more cars, every quarter, they are breaking records. That's been one of my big bets, is NIO because that's where the future is. It's electric cars, and then the only issue within that, is how healthy is this company because we have had some super high-profile failures in the electric vehicle market. We had Canoe, we of course had Nikola; we had Lordstown Motors. So, you don't just throw money there. You really got to pay attention to the health of the company. But in the case of NIO, it's got the support of the Chinese government and they do not like high-profile failures of any sort.
Lou (18m 22s):
So I thought this is a good place to put the money and that's worked out. I think another thing too is to really pay attention to reading the tea leaves of what's going on around us. I probably lost a huge, huge, huge opportunity by not investing in Bitcoin, for example, right? But to me, anything where there's no there, there, makes me extremely nervous because I am doing Dutch, tulip, mania investing. I am counting on people to be fanatics over Bitcoin.
Lou (19m 1s):
And yet there's nothing to back that up except for irrational exuberance. Now, maybe Bitcoin becomes so mainstream and it probably is becoming that way that I did miss the boat, but I would much rather put my money behind something tangible. One thing I suggest that every person does is, the Wall Street Journal has charts that fall under WSJ markets. It's free to access and you can take a look at graphs that show exactly how many by recommendations or overweight recommendations for those listening, who don't know what overweight means, it's that you don't hold the stock and you don't go out and buy as much as you can, but you might want to consider putting part of your portfolio there.
Lou (19m 49s):
So if you look at Amazon, for example, the last time I checked, it was 48 out of 51 Wall Street analysts considered a strong buy and the other three were just overweight. No sells, no holds, no anything. And so, I look at that five-year timeline. They're only going to get bigger. They're heading towards being the most massive employer on earth. They've got a trillion-dollar market cap. You couldn't spend all that money if you tried. So these companies aren't going anywhere. Even if they have a scandal, they'll probably be safe.
Lou (20m 30s):
So it's growth, but also value investing. It's looking ahead to see where society and where things are going. And then it's also trying to dig into what people much smarter than me are saying about the company. Is it a good buy combined with? What is the relative health of the company? Are they really doing what they're saying? Or are they lying? I mean, people who bet on Nicola, I feel very sorry for them because Trevor Milton was an evil individual. He filmed one of his trucks in motion. That truck didn't even have a freaking engine in it. They pushed it to the top of a hill and they let it go.
Lou (21m 11s):
And, you know, for my dollar, Hindenburg research and Citron research, which are short-sellers and people regard them as evil, but I'll tell you what, those two companies were the ones that related us to these Nicolas, and these Lordstown Motors, and Theranos, by the way, do a lot of good by doing their own digging and investigating. So you've really got to stay informed and read too, but not too much. And for God's sake, turn off the TV and turn off the blubbering talking heads, just pay attention to the big picture.
Phil (21m the 50s):
The general thing about short-sellers just wanted me to go off on another tangent, but we'll forget about that for a sec because that is another story in and of itself because they do some good sometimes. You know, uncovering these fraudsters. But however, what we'll talk about is we're both fans of ETFs and you're looking forward at trends and tailwinds for the future. What are your thoughts on thematic ETFs that try and capture and package them up for consumers, say electric vehicle ETFs, or solar energy ETFs, and the like?
Lou (22m 23s):
Wonderful question. I think the best answer I can come up with now, because it's where I'm really coming from is just because there are a ton of apples in a basket that look promisingly delicious that does not automatically exclude one bad apple from being in there. So let's go back to the example of Nicola. If Nicola is in that basket of electric vehicle ETFs and it wipes out, well, you could say their safety within the portfolio, and if you've got Tesla or you've got some of the more reputable electric vehicle makers in their Neo is one I really, really like.
Lou (23m 8s):
You're probably safe, but you have to be careful because what does happen sometimes is the rod of that one apple, spreads to the whole rest of them. And so, it's a little bit of extra homework. But if you're going into that type of thing, we need to realize that in any growth sector, it's just like the gold rush in San Francisco in the 1840s. It's going to be a lot of people trying to pass off land that is worthless or fool's gold as opposed to gold. And so, we have not heard or seen the last of bogus ETFs invested.
Lou (23m 49s):
I shouldn't say that the ETFs are bogus.
Phil (23m 52s):
Could we suggest perhaps that there're sometimes more marketing exercises rather than investing vehicles with the investor's best interest in mind?
Lou (24m 4s):
Absolutely. Does the ETF feel at the end of the day through the fund managers, that it has a fiduciary responsibility and it's there to protect the investors? Or is it there because it's a bright, shiny new toy next to all the bright, shiny new toys? So you have to be careful, look at the companies that are in there, try to learn a little bit about them. I think the great thing about ETFs is they're passive, and we live in a day and age where people are just waking up to the fact that active managers of investment portfolios take fees and percentages, and that might not seem like much until you look 20 years down the line and realize this guy took a hundred thousand dollars in retirement income from you because of the little amounts that we're pulling here and there.
Lou (24m 52s):
So I love ETFs. I think they're great, but yeah, I mean, it's like anything else in investing. Is something popping up as a fad, or is it there because someone at a very reputable company saw a need and is trying to answer it in a meaningful way? And the only way to figure that out is to study a little bit.
Phil (25m 13s):
If you could just tell us about some of the stories that you're most proud of, that you've covered in your time in finance Journalism.
Lou (25m 25s):
That really gives me pause because I think back over a long career, and like a lot of Journalists, I am, what have you done for me lately person? I tend not to bask in my so-called triumphs for very long. I'm moving on to the next thing. But I'm definitely proud of some stories I did when I was at U.S News on financial wellness. Because, when we are financially well, we are less stressed. When we are less stressed, our bodies and minds work better. When our bodies and minds work better, we're in a position to have better relationships, make better decisions about other things in our lives.
Lou (26m 7s):
And we can move forward into the future not dreading that dawn every day where we're deep in debt, accumulated too many credit cards, high-interest levels, we don't know where the next paycheck is coming from to pay the next bill. So, by stressing financial wellness and exposing people to companies who are doing things in that field, I really want to believe I'm making a difference. And it's maybe not the most brilliant writing I've done in terms of flashiness. But I really tried to make a point and talk about how it can change lives.
Lou (26m 48s):
And I know financial wellness changed my life. So it's something that I've been very proud to talk about. In terms of single-issue stories, I can point to when the Chicago Tribune as an investment entity changed its name to TRONC, which stood for Tribune online content. Immediately, people were saying things like Tronc is the noise that a mother camel makes when you come too close to its offspring. And I just really piled on. I took every comment that was out there and said, this is a smokescreen because really, what is this company doing that made it any more valuable than it was the day before?
Lou (27m 32s):
Sort of like Facebook rebranding as Meta. It was a super fun story to do where I went way overboard by reporting what the puns were and talk to a lot of experts about how this is the most ridiculous thing they could possibly do, it doesn't fix a company in trouble. And so, had a lot of fun doing that. I also believe that the stories that I have done on behavioral finance, where I mentioned earlier, people investing in stocks closer to the letter A than Z, that's based on an actual study that was done by a professor at Yeshiva University and his wife.
Lou (28m 13s):
Why did everyone want to buy Uber when it came out? And they really just feared missing the stampede. And it was one of the worst IPOs in history. So when I wrote about stuff like that, in the context of behavioral finance, had so much fun, I wasn't lampooning anyone, I was really lampooning and having fun with the behavior, and continues to be a topic I'm fascinated by.
Phil (29m 2s):
So tell us about your podcast Bankadelic.
Lou (29m 5s):
Sure, Phil, we're brothers in arms in terms of finance podcast. So I would really love it if the listeners can tune into my podcast at some point it's called Bankadelic, which is a pun on the early seventies, soul-funk band Funkadelic. So it's B-a-n-k-a-delic, and it's on SoundCloud and just look up Bankadelic and you'll find it there. And we do all sorts of great stuff, serious, and silly. So, I encourage your listeners to check that out. I know you will really, really like it.
Phil (29m 45s):
So, Lou Carlozo, thank you very much for joining me today. It's been a great pleasure speaking with another Arts Bum fellow finance, a refugee.
Lou (29m 55s):
And for me, the phrase Arts Bum, that emphasis is definitely on the word Bum.
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