Jim Grant, Bill Ackman, and the Bubbles No One Wants to See
Welcome to The Smart Portfolio, where each week, we share ultra-wealthy strategies, high-earner survey data, and real investment case studies.
In this issue:
The Wealth Ladder: wealth building strategies for each stage of financial life
Jim Grant's t ignore the warning signs either
Bill Ackman on the balance every investor needs: confidence without arrogance
Three simultaneous t buy its debt?
Are you having too many private investments in your portfolio? "It's only a bubble if you panic"
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The Wealth Ladder: wealth building strategies for each stage of financial life
The Rational Reminder podcast, Ep. 376: Climbing The Wealth Ladder (Sept. 25, 2025)
Building wealth isn't one strategy repeated over and over. It's a series of distinct stages, each requiring its own playbook.
Why Most Wealth Advice Fails
Most financial advice treats wealth-building like climbing a ladder with all the rungs the same height. Save 15%, invest in index funds, repeat for 40 years. That's not wrong, exactly. But it's incomplete.
Someone making $60,000 a year needs to focus almost entirely on increasing their income. No amount of clever investing or tax optimization will move the needle as much as earning more.
But tell that same advice to someone making $500,000 with $3 million saved, and you're missing the point entirely. They need to focus on asset allocation, tax efficiency, and capital preservation.
The Ladder Framework in Practice
Each rung has its own primary focus, its own risks, and its own winning strategies.
The early rungs are about earning
Middle rungs shift toward saving rates and investment returns.
Upper rungs become about tax strategy, estate planning, and not losing what you've built.
This framework gives you a diagnostic tool. Figuring out which rung of the ladder you’re on tells you what matters most right now.
Wealth building is dynamic, not static
You don't use the same tools forever. A strategy that's perfect at one stage becomes counterproductive at the next.
Someone who's spent years maximizing income might struggle to shift their focus to preservation. They're used to taking risks, chasing growth, pushing harder. But at a certain wealth level, the game changes. You can't earn your way out of a 40% market crash when you have $10 million invested. You have to think differently.
Understanding which rung you're on prevents costly mistakes. It stops people from playing defense when they should be on offense, and vice versa.
Jim Grant's advice: you can’t time the market but don’t ignore the warning signs either
Richer, Wiser, Happier podcast, Ep. 62: Bubble Warning for Stocks, Bitcoin & Gold w/ Jim Grant (Oct. 25, 2025)
TLDR
Legendary investor Jim Grant sees multiple symptoms of euphoria, recklessness, and folly in current markets – potential signs of a major top
His advice isn't about perfect timing (which he calls impossible) but about asking if you're overexposed to risks you can't afford
Historical lesson: reckless excess and overconfidence are eventually punished, so prudence matters most when everyone else is euphoric
Jim Grant has been watching markets long enough to know what excess looks like. And right now, in October 2025, he's seeing a lot of it.
Grant, who founded Grant's Interest Rate Observer in 1983, called the dotcom bubble in 1999, warned about dangerous mortgage securities before the 2008 crisis, and predicted inflation would return when the Fed was printing money after the financial crisis.
What Grant Sees Now
Grant describes the current environment as showing "symptoms of euphoria, recklessness, folly, and corruption." That's not casual language. He's pointing to specific behaviors that historically appear near market tops: excessive speculation, casual disregard for risk, investors assuming good times will continue indefinitely.
However, he's explicit that timing is impossible. As Howard Marks told the podcast host, "It's very hard to do the right thing, and it's impossible to do the right thing at the right time."
It’s impossible to predict when things will break. But Grant argues that it doesn't mean you ignore warning signs. It means you adjust your risk exposure to match reality, not hope.
The Real Question to Ask
Grant's framework is simple: Don't try to predict the top. Don't try to sell everything at exactly the right moment.
Instead, ask yourself three questions:
Do you have too much debt or leverage? When markets are good, debt feels free. When markets turn, debt becomes a prison. It forces you to sell at the worst possible time or ride losses you can't afford.
Is too much of your money tied up in speculative assets that might be dangerously overvalued? Grant isn't against speculation entirely – he's against having so much in speculative bets that a correction wipes you out.
Are you being honest about your risk tolerance? It's easy to say you can handle volatility when stocks only go up. It's different when you're watching your portfolio drop 30% and wondering if it will keep falling.
What History Teaches
Grant draws heavily on financial history, and the lesson is consistent: markets punish overconfidence. Every major bubble – tulips, South Sea, 1929, dot-com, housing – felt rational at the time. People had reasons for why "this time was different." It never was.
The pattern is always the same. Prices rise, attracting more buyers. Success breeds confidence. Confidence breeds complacency. Complacency breeds recklessness. Then something breaks, and the rush for the exits overwhelms the system.
The Practical Approach
Grant isn't predicting that specific sequence will happen next month or next year. His advice is about positioning, not prophecy. Make sure you're not overextended. Make sure you can survive if things get ugly.
This doesn't mean sell everything and go to cash. That has its own risks, especially if the bull market continues for months or years. It means being thoughtful about exposure. It means having dry powder if opportunities emerge.
Bill Ackman on the balance every investor needs: confidence without arrogance
Value Investing with Legends podcast, Episode: Bill Ackman - Evolving Investment Playbook, From MBIA to Moats (Oct. 10, 2025)
TLDR
Bill Ackman learned early that you must listen carefully but make your own decisions – even when authority figures tell you otherwise
Successful investing requires balancing supreme confidence in your analysis with the humility to admit when you're wrong
Writing is critical: if you can't clearly articulate an investment thesis on paper, you don't understand it well enough
Bill Ackman built Pershing Square into a $30 billion fund by making concentrated bets on high-quality companies. In a recent podcast with Columbia Business School, he discussed the mental framework that makes those investments possible, a psychological balance that most people struggle to achieve.
The tire story
Ackman shared a story from when he was 16. His father's car had a flat tire. Dad handed him the manual and told him to change it. The manual said to put the car on level ground. Their driveway had a slight grade.
Ackman said, "Dad, we should move the car." His father said it was fine. Ackman obeyed, jacked up the car, removed the bolts, and started pulling on the tire. The car began tipping off the jack. He barely got his legs out before it collapsed.
The lesson stuck with him: "I'm always going to listen, but I'm going to make my own decisions because it's my life on the line."
That's the confidence part. But Ackman is quick to add that confidence alone will kill you.
The humility requirement
Ackman describes the essential tension in investing: you need enough confidence to make big bets when everyone thinks you're wrong. But you also need enough humility to recognize when new information invalidates your thesis.
He gave an example. Pershing Square might buy stock in a company, filing public disclosures every three days as they accumulate shares. The whole world can see what they're doing. Media writes articles questioning the strategy. Other investors bet against them.
In those moments, you have to have conviction. You have to believe your analysis is better than the crowd's. Otherwise, you'll never pull the trigger on contrarian positions.
But – and this is crucial – you also have to stay intellectually nimble. If you learn something that contradicts your thesis, you have to be willing to change your mind. Even if it means publicly reversing course. Even if it's embarrassing.
Ackman admits this is harder when you're a high-profile fund and everything you do gets media scrutiny. Changing your mind looks like you were wrong. But holding a losing position because you're too proud to admit error is worse.
The writing test
Ackman emphasized something that doesn't get enough attention: writing as a thinking tool. He learned to write at Harvard, and he considers it one of his most important skills as an investor.
His logic is simple. An investment idea might seem clear in your head. You can talk yourself into it. You can explain it verbally and it sounds convincing.
But when you sit down to write it out clearly, with logical flow and supporting evidence, the gaps appear. If you can't articulate why a stock is undervalued in clear, written prose, you probably don't understand it as well as you think.
Lessons from rowing
Ackman spent four years on Harvard's rowing team. He stroked the third boat, which isn't the glamorous varsity crew but still required intense training.
What he took from rowing isn't about teamwork (though that matters). It's about learning that your physical and mental limits are much further than you believe. Rowing teaches you to push through pain, to keep going when everything in your body says stop.
Investing and business are endurance contests. You face failure. You take criticism. Markets move against you. If you haven't developed the capacity to endure discomfort, you'll quit at exactly the wrong time.
Three simultaneous bubbles: the government will intervene, but what if investors don’t buy its debt?
Thoughtful Money podcast, Episode: Michael Pento: A Coming Credit Crisis Is The Most Likely Trigger For A Market Plunge (Oct. 23, 2025)
TLDR
Money manager Michael Pento warns of three record-breaking asset bubbles – credit, real estate, and stocks – all expanding at the same time
He predicts a credit crisis will trigger a market cascade, forcing the Fed into another massive round of intervention
The key question: will bond market sellers overpower the central bank's ability to control rates?
Michael Pento has been warning about these bubbles since July, and since then, they've only gotten bigger. Credit markets, real estate, and stocks are all at record-breaking levels. Not just high – unprecedented. The kind of extremes that historically end badly.
How the Crisis Unfolds
Here's Pento's scenario, and it's worth walking through step by step because it's more nuanced than "everything crashes."
First, a credit crisis erupts. Interest rates spike as bond buyers demand higher yields to compensate for risk. Maybe it's a wave of corporate defaults, maybe it's concern about government debt levels, maybe it's something else entirely. The trigger matters less than what happens next.
Stock markets start to cascade downward. Not a gentle correction – a plunge. The wealth effect reverses. Consumer confidence craters. Credit markets freeze up as lenders get scared.
Then comes the – direct stimulus, asset purchases, whatever it takes to stop the bleeding.
The Stagflation Trap
Here's where it gets interesting. Pento thinks this intervention will work to reflate asset prices. Stocks might bounce back, real estate might stabilize. But he doesn't think it fixes anything for the real economy. Instead, he sees stagflation on steroids – asset bubbles re-inflate while economic growth remains weak and inflation stays elevated.
The critical question Pento keeps coming back to: what happens if the bond market rebels? If sellers overpower the central bank's attempts at interest rate repression, if they simply refuse to buy government debt at artificially low rates, then all bets are off.
At that point, there's no safety net. Markets would undergo what Pento calls a "vicious reversion to the mean." Prices that have climbed far above historical averages would crash below them. The charts wouldn't just come down – they'd overshoot dramatically to the downside.
What Makes This Different
We've seen market scares before. We've seen the Fed step in before. What makes Pento's warning worth paying attention to is the scale of current distortions and the question of whether traditional policy tools still work.
Central banks have already used emergency measures as standard operating procedure. Interest rates have been suppressed for years. Asset purchases have been massive. Balance sheets are enormous. What happens when the tools that used to be reserved for crises become ineffective because they've been used too much?
Pento isn't making a precise timing prediction – he's clear that nobody can do that reliably. What he's saying is that the conditions are extraordinarily dangerous, and the path of least resistance is toward a credit crisis that forces difficult choices.
Are you having too many private investments in your portfolio? "It's only a bubble if you panic"
The Compound and Friends podcast, Ep. 214: It’s Only a Bubble If You Panic (Oct. 24, 2025)
TLDR
Private markets offer real benefits, but many investors don't understand the liquidity risks until it's too late
Many portfolios are overallocated to illiquid assets that could create forced selling in a downturn
In a downturn, larger private investment funds can be safer because they have access to capital and relationships to weather the storm; smaller funds may struggle and have to liquidate at the wrong time
The Compound and Friends had a debate about private markets: how much exposure to private equity, private credit, and venture capital is too much?
The conversation wasn't about whether private markets belong in portfolios. Everyone agreed they can play a valuable role. The question was about the gap between what investors think they're getting and what they might actually experience when things get rough.
The illiquidity trap
Here's the core issue: private markets are designed to be illiquid. That's not a bug, it's a feature. The whole point is to invest in assets that can't be quickly sold, which theoretically lets you capture an illiquidity premium – extra returns for tying up your money.
That works great until you need the money. Or until enough investors want their money back at the same time.
We haven't had a real market cycle – a serious stress test – since 2008. That means an entire generation of investors, fund managers, and financial advisors has come into the industry without experiencing what happens when private markets freeze up.
In 2008, hedge funds with private market exposure had to "side pocket" those assets. People were furious. They'd assumed they had liquidity and discovered they didn't when they needed it most.
Manager selection is a bigger challenge in private vs public markets
Manager selection matters in private markets far more than in public markets (because typically they make much more concentrated bets). If you invest in the S&P 500, you get the S&P 500. If you invest in private equity, your returns depend almost entirely on which firm you chose.
During the 2021 mega growth fund frenzy, very few people were calling out the insane valuations. Howard Marks was one exception – he famously said he was holding cash because "prices are stupid, and when they stop being stupid, I'll start investing again."
Most didn't have that discipline. Companies were getting funded at valuations that made no sense. The money flowed anyway. Now many of those investments are underwater, stuck in funds that can't sell them without taking massive losses.
The valuation challenge
When public market valuations are high, people naturally ask, "Why overpay in public markets?" The
Just because something is private doesn't mean it's cheap. In fact, the lack of daily price quotes can hide overvaluation. Your statement might show stable values while the underlying business deteriorates. Then comes the writedown, all at once, and it's worse than if you'd watched it decline gradually in public markets.
What this means for portfolio construction
So what happens if the economy hits a recession and private market loans start going bad? Many investors have significant allocations to private credit because it's been marketed as offering higher yields than public bonds with similar safety.
If defaults spike, where does that leave investors who can't sell? Public market investors can exit (at a loss, but they can exit). Private market investors are stuck until the fund decides to let them out or until investments mature. That asymmetry matters.
The largest private equity and credit firms will probably be fine because they have scale, access to capital, and relationships. It's the second-tier managers and the investors in those funds who might face real problems.
Disclaimer
This newsletter is for informational and educational purposes only and should not be construed as personalized financial, tax, legal, or investment advice. The strategies and opinions discussed may not be suitable for your individual circumstances. Always consult a qualified financial advisor, tax professional, or attorney before making any decisions that could affect your finances. While we strive for accuracy, we make no representations or warranties about the completeness or reliability of the information provided. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. The publisher, authors, and affiliated parties expressly disclaim any liability for actions taken or not taken based on the contents of this publication.
