Trust Only The Chefs Who Eat Their Own Cooking


Is there anything more off-putting than the sight of a chef, clad in his whites and houndstooth trousers, looking emaciated and sickly thin?  If he’s even an adequate cook or at least a lover of food, should the chef be anything but well-fed?

I would say that investment professionals should be held to a similar standard.  If someone holds themselves out to the public as a brilliant stock picker, a steward of capital, or a talented manager of money and assets, should we not inquire as to how much of their own capital is at risk in the same investments or strategies that they are propounding or endorsing?

Further, should anyone without any scratch in the game ever appear in the media making recommendations to others that they themselves are not following?

Of course, just because someone is in the same boat as you, that doesn’t mean that this boat isn’t going to sink.  Plenty of unsuccessful hedge fund managers have plowed millions of their earnings back into their own vehicles before they ultimately failed.  There are also myriad instances of corporate insiders who have publicly bought their own stock into a selloff.

That being said, we’re not talking about expecting people in the investment world to be right all the time, but accountability for one’s recommendations should begin with some type of alignment of risk.

When sell-side analysts make appearances on television, the network will often flash a disclosure screen indicating whether or not that analyst owns shares personally.  We are meant to be satisfied when the answer is no, he or she does not hold shares in the company they are recommending, because this would remove the potential for conflict of interest.  This is foolish, and I would say the opposite should be the case;  if someone’s own capital is not on the line, yet they want yours to be, what are we not being told?

I understand that the firm the analyst represents often has safeguards and rules prohibiting stock ownership, but again, imagine if this worked in reverse;  what if the analyst or commentator was forced to own shares in companies they endorse?  What percentage of stocks would your average Wall Street research department then be bullish on?  I don’t know empirically what the percentage is currently, but I guarantee it would be significantly lower.

In short, I am more interested to hear the opinions of mutual fund managers or hedge fund managers.  Generally speaking, not only do these managers publicly praise or bury companies, they also have the guts to put their own compensation and reputation on the line based on these opinions.  These are the chefs with the meat on their bones who have eaten their own cooking, for better or worse.

Tags: , , ,

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Blue Coaster33 commented on Apr 30

    The Birch of the Shadow

    I feel there could become a couple duplicates, but an exceedingly helpful listing! I’ve tweeted this. Quite a few thanks for sharing!

  2. seo plan for website commented on Sep 12

    seo plan for website

    dwvmthzmr hniwk aubkhjt btwf egcvtsfjzcemqzw

  3. online tutors commented on Sep 20

    … [Trackback]

    […] Find More on that Topic: […]

  4. bitcoin loophole commented on Sep 25

    … [Trackback]

    […] Find More Information here on that Topic: […]

  5. cuanto cuesta un bitcoin hoy commented on Sep 30

    … [Trackback]

    […] Info to that Topic: […]

  6. bitcoin blazing trader commented on Sep 30

    … [Trackback]

    […] Read More on on that Topic: […]

  7. 안전공원 commented on Oct 17

    … [Trackback]

    […] Find More Info here to that Topic: […]

  8. porn movie commented on Oct 18

    … [Trackback]

    […] Read More Information here to that Topic: […]

  9. td online login commented on Nov 26

    … [Trackback]

    […] Find More on that Topic: […]

  10. hydrocodone 10mg for sale overnight delivery commented on Dec 10

    … [Trackback]

    […] Here you will find 36411 more Information to that Topic: […]

  11. cheap wigs commented on Dec 17

    … [Trackback]

    […] Find More on that Topic: […]

  12. Engineering commented on Dec 28

    … [Trackback]

    […] Read More Information here to that Topic: […]

  13. Software regression testing commented on Jan 17

    … [Trackback]

    […] Read More Info here to that Topic: […]

  14. Digital Transformation commented on Feb 05

    … [Trackback]

    […] Read More on to that Topic: […]

  15. best dumps shop commented on Feb 06

    … [Trackback]

    […] There you can find 68281 additional Info on that Topic: […]