The 2 Big Questions Barry Ritholtz Is Hearing Now

What Ritholtz Is Watching

"I'm waiting to see if the pandemic is really over," he says. "Hopefully we're getting past this. Some flareups are concerning, like in India and South America, no doubt. Variants are concerning because it's so important to get herd immunity. It's scary but not a problem — yet."

As for the markets, Ritholtz is watching revenues. "I'm looking at where company revenues have been going. Are we at a point where profits are what people think they should be …There are some negatives — there's no way to argue that this isn't a somewhat expensive market …. Pretty fully valued. There's not a lot of room for error. I want to see revenues and if profits make sense relative to that.

"The market was looking past pandemic through the recovery and reopening early on and probably got ahead of itself."

As for where the stock market goes from here, Ritholtz says he's not trying to guess but "it could go up based on earnings, trade sideways or sell off. It could be all or one of those."

He likened the 2020 stock market during the pandemic to one focused on "non-market externalities" like the Pearl Harbor attack, 9/11, and the John F. Kennedy assassination. "Historically you get a wobble and markets go back to do what they did before the hit."

 What He's Telling, Asking Clients

"Our process begins with a conversation that turns into a financial plan … a conversation, about risk, what they want to do with the money — save for college … or something lofty like eradicate a disease and everything in between. The key is purposeful capital. If you invest for a purpose you can assert clearly and into action.

"Once investing toward a purpose, what happens next month doesn't matter. It's about accomplishing these goals over next year or over a lifetime. And about how much risk do they want to take relative to what they want to accomplish. Do they want to have a little more long term? Don't need it for 5 to 10 years? Or need it for grandkids 40 years from now?"

He continued, "Clients have said to us. I love the idea of sailing and have an eye on a 50-foot boat. It costs $200,000 … There are a lot of spending nags. That don't drink lattes, only buy used cars. Pennywise stuff is ridiculous. If you can afford a sailboat, buy it. If you can't, don't buy it. Don't overleverage or borrow too much. Live within your means and understand how borrowing and spending fit into your plan. "

On Direct Indexing

"Over 60% to 70% of assets under management for the average person tends to be tax-deferred," Ritholtz says.

For assets in taxable accounts, Ritholtz sees the advantages of using direct indexing, which allows investors to own the individual stocks within an index but harvest the losses of individual shares as they become available.  The 30%-plus loss in the stock market during 2020 provided a "huge amount of losses" to harvest to offset gains, Ritholtz says. His firm uses Canvas, a custom indexing platform from O'Shaughnessy Asset Management, for direct indexing.

On Digital Assets

"Crypto assets have been around for 13-14 years," he says. "They are not brand new. I don't agree with the philosophy that fiat  currencies will disappear."

Ritholtz said the narrative for very wealthy investors to hedge 1%-2% of their assets in crypto  makes sense, but at a certain point the "hypsters" are selling cryptocurrencies. He's concerned about "any asset class that explodes suddenly in value, attracting all sorts of shysters, separating fools from their money."

But he's not considering crypto assets for clients now, noting studies that have reported 20% to 30% of those crypto assets for individuals missing and lost forever.

"I can't call up a client, saying you had $20 million, now you have about $15 million …" he says.  Once there's an ETF from a trusted third party, insured against such losses, at that point there's an investment vehicle."

Blockchain is different, according to Ritholtz, who understands the value of its use as an "interesting new technology," for example, in smart contracts for artists like Taylor Swift, who control the resale price of tickets for her concerts, which "gets the middleman out of the way and rewards artists."