The Man Who Beat Goldman Sachs at Stock Picking — From a Trading Desk in Memphis

What does it actually take to consistently beat the market when 90% of professional fund managers can't, and what is a Wall Street veteran seeing right now that has him warning ordinary investors to get off margin immediately?

Steve Laffey has lived several lives in one. Raised in genuine poverty in Cranston, Rhode Island, he earned his way to Bowdoin College and Harvard Business School, landed on a trading desk at PaineWebber surrounded by guys with names ending in vowels, survived the crash of '87 up close, built Morgan Keegan into the most respected stock picking shop in the country according to the Wall Street Journal, returned to Cranston to become a two-term Republican mayor of a Democrat city, ran for president in the last election, and has spent the intervening years quietly running what he calls "the hedge fund I never started."

In this episode, Professor Kotlikoff sits down with Laffey for a wide-ranging, story-driven conversation on how great investing actually works. The gut instincts, the discipline, the hard lessons, and the very specific warning signs he is watching right now in the current market.

This is not theory. Every lesson in this episode comes with a story.

What You'll Learn:

• [00:11:22] Lesson 1: "Eat like an elephant, poop like an ant" — ride your winners hard, but cut losers immediately and without emotion, no matter how right you think you are
• [00:13:08] Lesson 2: Never use margin — margin debt in the U.S. stock market has just hit an all-time high, and Laffey's single most urgent message is: get off margin now
• [00:29:36] Lesson 3: Crashes don't happen from all-time highs — they happen after a selloff has already begun and people panic, a pattern Laffey has watched repeat across four decades
• [00:43:36] Why Laffey doesn't own ETFs — when every stock moves together because of passive fund flows, being right about a company doesn't protect you from the market going down
• [00:51:54] The 15-stock rule that beat Goldman Sachs — why concentration and personal accountability beat committee-driven diversification every time, and why past 15 stocks you're just buying noise
• [00:45:00] The A2 Milk story — how a cattle show in Colorado, a book called "The Devil's in the Milk," and a hunch about Chinese baby formula led to buying a New Zealand stock at 20 cents and selling it at $9
• [01:00:32] The Galaxy Digital play — how Laffey found a Bitcoin company trading at 60 cents with $1.20 of Bitcoin on its balance sheet, on an exchange most U.S. institutions legally couldn't access
• [01:02:10] Why you should never watch CNBC — and what it means when a network that hated Bitcoin suddenly loves it
• [01:06:09] The Jim Cramer contrarian indicator — when Cramer declared oil "uninvestable," energy was at 3% of the S&P, its all-time low. Laffey bought. He made a lot of money.
• [01:16:33] The single most important thing to do with your portfolio right now — get off leverage, know your age, and never put yourself in a position where a 50% drawdown changes how you live

Featured Guest:

Steve Laffey is a former Wall Street trader and investment banker, one-time head of Morgan Keegan's nationally ranked stock research operation, two-term Republican mayor of Cranston, Rhode Island, author of Primary Mistake, and 2024 Republican presidential primary candidate. He has been a practicing private investor since leaving institutional finance and is a frequent public speaker on fiscal reform, investing, and American economic policy.

Economics Matters: The Podcast is hosted by Larry Kotlikoff, Professor of Economics at Boston University.

Disclaimer: Any opinions expressed on Economics Matters’ episodes are those of the authors and guests. These are not the opinions of Boston University or Economic Security Planning, Inc.