Economic lessons learned from Investopedia (and Ferris Bueller)

Summary

The Indicator from Planet Money Episode: Economic Lessons Learned from Investopedia (and Ferris Bueller) Release Date: April 17, 2025

Hosted by Darian Woods and Waylon Wong

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Introduction

In this engaging episode of The Indicator from Planet Money, hosts Darian Woods and Waylon Wong delve into the intricate world of economics, drawing insights from Investopedia and an unexpected nod to the classic film Ferris Bueller's Day Off. The episode, titled "Economic Lessons Learned from Investopedia (and Ferris Bueller)," explores current economic trends, historical tariff policies, and sophisticated investment strategies, all while making the complex subject matter accessible and entertaining for listeners.

Smoot-Hawley Tariffs: A Historical Cautionary Tale

The discussion kicks off with a deep dive into the Smoot-Hawley Tariff Act of 1930, a pivotal moment in U.S. economic history. Caleb Silver, the editor-in-chief of Investopedia, provides expert commentary on this significant legislation.

Caleb Silver [03:57]: "Despite a thousand economists who are urging him against it, the Tariff Act was added additional 20% tariffs on already highly tariffed goods to protect U.S. prices. It had the opposite effect."

Darian Woods highlights the enduring relevance of the Smoot-Hawley tariffs as a lesson in economic policy:

Darian Woods [04:16]: "The Smoot-Hawley tariffs have become a historical cautionary tale."

The hosts incorporate a humorous yet poignant reference to Ferris Bueller's Day Off, where a scene featuring Ben Stein's teacher lecture on the Tariff Act underscores its historical impact.

Waylon Wong [04:43]: "A high school teacher... is lecturing about these tariffs to a bunch of slack-jawed, unresponsive students."

This blend of historical analysis and pop culture serves to illustrate the recurring themes in economic policy and their long-term consequences.

Investing Aphorisms: "Don't Catch a Falling Knife" vs. "Buy the Dip"

Transitioning from historical tariffs to modern investment strategies, Woods and Woods explore two contrasting philosophies prevalent among investors today.

Caleb Silver [05:35]: "Don't catch the falling knife. You don't know when the sell-off is gonna be over. You may miss some of the upside if it rebounds, but at least you're not gonna cut yourself if it keeps falling."

The phrase "Don't catch a falling knife" serves as a warning against buying stocks during a rapid decline, emphasizing caution in volatile markets. In contrast, "Buy the dip" encourages investors to purchase assets during price drops to capitalize on potential rebounds.

Waylon Wong [06:35]: "Don't try to catch a falling knife is one of these investing tips you might hear, especially when the stock market is volatile like it's been lately."

The hosts discuss the conflicting advice these aphorisms present, highlighting the current market's unpredictability and the challenges investors face in making informed decisions.

Presidential Influence on Market Sentiment

A noteworthy moment in the episode is President Trump's provocative statement on Truth Social, declaring:

Waylon Wong [07:06]: "This is a great time to buy."

This declaration, made amidst ongoing tariff negotiations, sparked a surge in stock prices and triggered a wave of searches for "insider trading" on Investopedia. Caleb Silver reflects on the impact of such statements on market behavior:

Caleb Silver [07:37]: "This has just been one of those times of intense volatility and uncertainty. The good side is that people are trying to get smarter about it and figure out what exactly is happening."

The episode underscores the significant influence that presidential rhetoric can have on investor psychology and market dynamics.

Navigating Volatility: Inverse Volatility ETFs

The final segment of the episode addresses the complex topic of Inverse Volatility ETFs, a trending subject among Investopedia's readership.

Darian Woods [07:51]: "Inverse Volatility ETFs are a mouthful, but we'll break it down."

Inverse Volatility ETFs are sophisticated financial instruments designed to profit when market volatility decreases. The hosts explain the components and risks associated with these investments:

Caleb Silver [09:00]: "You profit when all the chaos subsides. For every crisis or madness in the stock market, people are betting on it through these ETFs."

Waylon Wong draws a parallel between these ETFs and the earlier discussion on "catching falling knives," emphasizing the high-risk nature of such investment strategies:

Waylon Wong [09:13]: "Trying to profit from volatility seems like trying to catch a bucket of falling knives. It's a very scary strategy."

Caleb Silver advises that Inverse Volatility ETFs are best suited for advanced investors who understand the inherent risks:

Caleb Silver [09:38]: "Those that know how to trade volatility ETFs, hopefully, they know what they're doing. This is for advanced investors and advanced traders."

The segment concludes with a humorous reflection on historical tariffs, suggesting that economic policies should come with warnings about their potential impacts:

Darian Woods [10:06]: "Maybe the Smoot Hawley Tariff article should come with a warning."

Conclusion

In this episode, Darian Woods and Waylon Wong adeptly navigate through a spectrum of economic topics, from historical tariff policies to contemporary investment strategies, all enriched by insights from Caleb Silver of Investopedia. By intertwining humor, historical context, and expert analysis, the hosts provide listeners with a comprehensive understanding of current economic challenges and the lessons they impart.

Whether you're an economic enthusiast or a casual listener, this episode offers valuable takeaways on market volatility, the influence of political statements on economic behavior, and the nuanced strategies investors employ to navigate uncertain financial landscapes.

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Notable Quotes:

• Caleb Silver [03:57]: "Despite a thousand economists who are urging him against it, the Tariff Act was added additional 20% tariffs on already highly tariffed goods to protect U.S. prices. It had the opposite effect."

• Darian Woods [04:16]: "The Smoot-Hawley tariffs have become a historical cautionary tale."

• Caleb Silver [05:35]: "Don't catch the falling knife. You don't know when the sell-off is gonna be over..."

• Waylon Wong [07:06]: "This is a great time to buy."

• Caleb Silver [07:37]: "This has just been one of those times of intense volatility and uncertainty..."

• Waylon Wong [09:13]: "Trying to profit from volatility seems like trying to catch a bucket of falling knives."

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This comprehensive summary encapsulates the essence of the episode, providing a clear and detailed overview of the discussions, insights, and conclusions presented by the hosts and guest Caleb Silver. It offers a valuable resource for those seeking to understand the current economic climate and the various factors influencing it.

Transcript

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[Darian Woods]

This is the indicator from Planet Money. I'm Darian Woods.

[Waylon Wong]

And I'm Waylon Wong. Darian, how many browser tabs do you have open right now?

[Darian Woods]

Very personal question, But I have 15 open.

[Waylon Wong]

You have 15? That's more than me. I'm under 10 today.

[Darian Woods]

Should I feel bad?

[Waylon Wong]

No. That seems like a very reasonable number of tabs to me. I feel like these days every new headline has me running to open a new tab because there is so much to keep up with. I I'm reading like you are about trade deficits, the bond market value added taxes and when I'm doing this research, I often find myself on Investopedia. It's a website with around 40,000 articles on economics and finance topics.

[Darian Woods]

It's a really comprehensive website, takes the academic terms and distills it in this way that is super accessible. The articles are constantly getting updated. Amazing resource. Caleb Silver is the editor in chief of Investopedia and he's a friend of the show.

[Waylon Wong]

What have the last few weeks been like for you?

[Caleb Silver]

Extremely busy. We have had so many of our readers and people interested in learning or relearning how global trade works, how the stock market works. We're seeing people get educated or re educated on how everything works in our economy and how it's changing right now.

[Waylon Wong]

Trade wars like life, can come at you pretty fast. So today on the show, Caleb helps us make sense of our current economic moment. He'll walk us through three vocab terms that are spiking on Investopedia lately.

[Darian Woods]

Yeah, we have a little US Tariff history, plus two ways that describe how people are trying to play the stock market.

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[Darian Woods]

Caleb Silver of Investopedia has come on the indicator in the past to talk about the year's most popular terms. And with every everything going on in the news, we had to bring them on for a special first quarter look at what people are curious about right now.

[Waylon Wong]

We asked Caleb to compile a list of hot topics from the last couple of weeks. The lineup included things like countries with the highest tariffs and how to survive a recession. You know, just a little light reading.

[Darian Woods]

This is a recession indicator in and of itself.

[Waylon Wong]

Oh my gosh, it's so true. And we are going to look at three topics today. The first one goes out to all you economic history buffs is what were the Smoot Hawley tariffs, also known as the Tariff act of 1930 signed by.

[Caleb Silver]

The president Herbert Hoover, despite a thousand economists who are urging him against it. That Tariff act was added additional 20% tariffs on an already highly tariff goods and they wanted to protect prices here in the United States. It had the opposite effect.

[Darian Woods]

The Smoot Hawley tariffs have become a historical cautionary tale.

[Waylon Wong]

Of course, we can't talk about the Smoot Hawley tariffs without playing this famous clip from the 1986 teen comedy Ferris Bueller's Day Off. You know the scene oh yeah, tariff.

[Ben Stein]

Act which anyone raised or lowered raised tariffs in an effort to collect more revenue for the federal government.

[Waylon Wong]

A high school teacher played by the actor Ben Stein is lecturing about these tariffs to a bunch of slack jawed, unresponsive students.

[Ben Stein]

Did it work? Anyone? Anyone know the effects? It did not work and the United States sank deeper into the Great Depression.

[Waylon Wong]

And this clip has been making the rounds again online.

[Caleb Silver]

Fascinating that you have a 95 year old trade law resurfacing as part front and center in the conversation. What's happening with the tariff war and the negotiations today? And history doesn't repeat necessarily, but it does rhyme.

[Darian Woods]

If we're going to take him literally.

[Waylon Wong]

What actually rhymes of Great Depression, how about possible recession?

[Darian Woods]

That's very good. Caleb says Investopedia readers do have recession fears on their minds. He says they're also interested in how to navigate the big stock market swings of the last couple of weeks.

[Waylon Wong]

And that brings us to the next two topics. They're both related to investing. The first one is what does don't try to catch a falling Knife mean?

[Darian Woods]

Yeah, I know this one. It's a classic.

[Waylon Wong]

Yes, it means wait until a price has truly bottomed out before buying.

[Caleb Silver]

A lot of investors say, hey, maybe I should buy this or that stock because it's down 10% or 20%. Or maybe I can catch the bottom here. So we always say at Investopedia, don't catch the falling knife. You don't know when the sell off is gonna be over. And yeah, you may miss some of the upside if it rebounds, but at least you're not gonna cut yourself if it keeps falling in the process.

[Darian Woods]

You know what, Weylan? I actually saw some people juggling knives in the park yesterday.

[Waylon Wong]

Were they really jug. You really saw people juggling knives in the park?

[Darian Woods]

Would I lie to you, Waylon? No, it's true. You can't conceal these knives. They're just gigantic swords.

[Waylon Wong]

They were juggling swords.

[Darian Woods]

They were juggling swords.

[Waylon Wong]

Don't try to catch a falling samurai sword.

[Darian Woods]

I don't know how sharp they were. I'm hoping they were a little dull.

[Waylon Wong]

But were like when you catch them when you're juggling, you catch them by the handle or.

[Darian Woods]

Yes, I should be clear, they were catching the handles. But still, it was frightening to watch. That's a good metaphor for the stock market right now.

[Waylon Wong]

Wow. Don't catch a falling knife is one of these investing tips you might hear, especially when the stock market is volatile like it's been lately. On the contrary, another trading aphorism is buy the dip that argues you actually should take advantage of falling prices to buy a stock or an asset for cheap.

[Darian Woods]

So we don't want a dip that is actually a falling knife.

[Waylon Wong]

No, because in that case, you're going to have a jumbled metaphor and competing advice about how to behave when stocks are dropping.

[Darian Woods]

That's true.

[Waylon Wong]

Adding to the recent confusion, last week President Trump posted on Truth Social in all caps, this is a great time to buy.

[Darian Woods]

Once again with feeling, Waylon, this is.

[Waylon Wong]

A great time to buy. This was just hours before he paused, a bunch of the new tariffs and stocks went up.

[Darian Woods]

Caleb says Investopedia readers started searching for the term insider trading when this happened. And we actually did an episode on this yesterday that we'll link to on the show. Notes. The President was basically saying, there is no falling knife. It's time to buy. Buy the dip.

[Caleb Silver]

This has just been one of those times of just intense volatility and uncertainty. And the good side of that is that people are actually trying to get smarter about it and try to figure out what exactly is this? And how do I need to interpret it to take action in my own life?

[Darian Woods]

Speaking of volatility, we have arrived at our third and final trending investopedia topic. And this one's a little wonky. It's Inverse Volatility ETFs.

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Woo.

[Waylon Wong]

That is a mouthful. Don't worry, we will break it down. First we have ETFs or exchange traded funds. These are a kind of investment that represent a basket of securities. Those securities could be something like the S&P 500, but also things like gold or Bitcoin.

[Darian Woods]

Then you've got volatility. Financial markets use a measure of volatility called the vix. It's also known as the fear index. The index captures how certain investors are betting stocks will behave in the next month.

[Caleb Silver]

And lately the vix, or volatility index, has been very high. Screaming like a toddler in a toy store when it's time to go home. And when you see that happening, well, you typically see market declines and a lot of choppiness in the stock market. That's exactly what's been happening.

[Waylon Wong]

Combine volatility with ETF and you get an investment fund that tracks this volatility index. But remember, the term is inverse volatility etf. So with this kind of investment, you make money if the volatility index goes down.

[Darian Woods]

Right. So you profit when all the chaos subsides.

[Caleb Silver]

For every crisis in the stock market or for. For all the madness that we're seeing, we're seeing a lot of people trying to bet on it and express that bet through these ETFs.

[Waylon Wong]

Yeah, I mean, this is so interesting to me, given what we just talked about, which is this advice of don't try to catch a falling knife. I mean, trying to game out and profit from volatility seems like trying to catch, I don't know, a bucket of falling knives. This seems like. This seems very scary to me. This seems like a very scary strategy to try to do.

[Caleb Silver]

It's like trying to catch all the knives in the entire toolkit being thrown at you from above. But those that know how to trade volatility ETFs, hopefully they know what they're doing. This is for advanced investors and advanced traders that have experience with these financial products.

[Waylon Wong]

If you look up Inverse Volatility ETFs on Investopedia, you'll actually see some warnings about how risky they are compared with other investments. Not all Investopedia articles merit warnings, but Caleb says this one does.

[Darian Woods]

Maybe the Smoot Hawley Tariff article should come with a warning.

[Waylon Wong]

Yeah, like warning. These tariffs help push the US further into the Great Depression. Proceed with caution when using this economic policy today.

[Darian Woods]

Anyone? Anyone?

[Waylon Wong]

And once more with feeling.

[Darian Woods]

Anyone?

[Waylon Wong]

This episode was produced by Angel Carreras with engineering by Harrison Paul. It was fact checked by Sarah Juarez. Kicking Cannon is our show's editor and the Indicator is a production of npr. And just a heads up for Indicator listeners, we will not have a show tomorrow on Friday, but we will be back Monday with another Indicator quiz. Have a great weekend.

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