Latest / Reasonably Happy with Paul Ollinger / Jared Dillian on ‘The Awesome Portfolio’

Transcript

Jared Dillian on ‘The Awesome Portfolio’ · Reasonably Happy with Paul Ollinger

• 0:00
  SPEAKER_00: Hey, everybody.
• 0:01
  SPEAKER_00: Welcome back to Reasonably Happy.
• 0:03
  SPEAKER_00: I am your host, Paul Ollinger.
• 0:05
  SPEAKER_00: My guest today is Jared Dillion.
• 0:07
  SPEAKER_00: He is the author of Street Freak, No Worries, and his new book, The Awesome Portfolio.
• 0:13
  SPEAKER_00: Let me ask you a question.
• 0:15
  SPEAKER_00: Can you make Make money investing or lose money investing without losing sleep
• 0:19
  SPEAKER_00: or checking your portfolio every 11 minutes?
• 0:22
  SPEAKER_00: Well, Jared has an answer for you.
• 0:24
  SPEAKER_00: In The Awesome Portfolio,
• 0:25
  SPEAKER_00: Jared explains why owning one fund
• 0:27
  SPEAKER_00: with 500 different stocks doesn't necessarily make you diversified.
• 0:31
  SPEAKER_00: Instead,
• 0:32
  SPEAKER_00: Jared argues that you should be invested across five different asset classes,
• 0:36
  SPEAKER_00: equities, bonds, commodities like gold, real estate, and cash.
• 0:41
  SPEAKER_00: This mix will give you almost as good returns as the old 80 to 20 equities
• 0:45
  SPEAKER_00: to bonds mix with a hell of a lot less volatility.
• 0:48
  SPEAKER_00: Jared will tell you why in just a moment.
• 0:51
  SPEAKER_00: We also discuss the trouble in the bond market,
• 0:53
  SPEAKER_00: political risk,
• 0:54
  SPEAKER_00: financial advisor incentives,
• 0:56
  SPEAKER_00: and investor psychology,
• 0:58
  SPEAKER_00: including how our emotions can wreck even the smartest investment plan.
• 1:02
  SPEAKER_00: By the way, this recording is from a Substack live stream that we did yesterday.
• 1:06
  SPEAKER_00: I've done a bunch of them recently with great guests like Dylan, Dave Barry, and Andy Borowitz.
• 1:11
  SPEAKER_00: So if you want to be invited to the next one, click on the link in the show notes and subscribe.
• 1:16
  SPEAKER_00: I've had about 75 People joined mySubstack in the past month, so join the party.
• 1:21
  SPEAKER_00: Oh, also in the notes is a link to an article I published this morning on thehill.com.
• 1:26
  SPEAKER_00: It's called, Nicole Hannah-Jones just ran headfirst into the great dumbing down.
• 1:30
  SPEAKER_00: It's in response to the huge article that Hannah-Jones had in
• 1:33
  SPEAKER_00: the New York Times last week,
• 1:35
  SPEAKER_00: and it's about how public school districts across the country are burying evidence
• 1:39
  SPEAKER_00: of students' poor performance.
• 1:41
  SPEAKER_00: It's actually nonpartisan and pretty damn fair, so check it out and share it with your friends.
• 1:46
  SPEAKER_00: All right, that's it for the self-promotion for now.
• 1:48
  SPEAKER_00: In the meantime, enjoy this conversation with Jared Dillian.
• 1:52
  SPEAKER_00: Jared appreciates it.
• 1:53
  SPEAKER_00: My name is Paul Ollinger.
• 1:54
  SPEAKER_00: I'm a writer and podcaster from New York City.
• 1:57
  SPEAKER_00: I also do some stand-up comedy.
• 1:58
  SPEAKER_00: I've been doing a podcast for about seven years around the topic of money,
• 2:02
  SPEAKER_00: happiness, and doing a little bit more politics these days, too.
• 2:07
  SPEAKER_00: Anyway, I'm here with Jared.
• 2:09
  SPEAKER_00: Jared, I think this is your third time we've done a podcast together.
• 2:12
  SPEAKER_01: Yeah, we did one for Street Freak in the beginning.
• 2:15
  SPEAKER_01: I think that's when you first started your Crazy Money podcast.
• 2:19
  SPEAKER_01: And then we did one for No Worries a couple of years ago.
• 2:23
  SPEAKER_01: Yeah.
• 2:24
  SPEAKER_00: It's crazy that seven years have gone by like that.
• 2:28
  SPEAKER_00: Street Freak,
• 2:28
  SPEAKER_00: if you got... Now, Jared,
• 2:30
  SPEAKER_00: you're probably best known for the Dirtnap newsletter and your writing
• 2:35
  SPEAKER_00: about investing, but Street Freak...
• 2:38
  SPEAKER_00: is one of my favorite Wall Street memoirs that I've ever read.
• 2:41
  SPEAKER_00: And I put it up there with Liar's Poker.
• 2:44
  SPEAKER_00: I mean, it is such an entertaining and vulnerable read.
• 2:47
  SPEAKER_00: When did you write that?
• 2:49
  SPEAKER_01: I wrote that.
• 2:52
  SPEAKER_01: So the story, I'll give you the whole story.
• 2:54
  SPEAKER_01: You know, when I was at Lehman, I was writing Bloomberg messages to like thousands of people.
• 3:01
  SPEAKER_01: And there was this young guy that was getting my Bloomberg messages
• 3:04
  SPEAKER_01: that was forwarding them to a literary agent.
• 3:08
  SPEAKER_01: Um, and he loved the writing.
• 3:11
  SPEAKER_01: And then when Lehman went bankrupt,
• 3:13
  SPEAKER_01: uh, the literary agent came to me and said, you got to write a book about Lehman.
• 3:17
  SPEAKER_01: And I said, no fricking way.
• 3:19
  SPEAKER_01: Am I doing that?
• 3:20
  SPEAKER_01: I don't need the drama.
• 3:21
  SPEAKER_00: So that's after, that's after 2008.
• 3:24
  SPEAKER_01: Yeah, it was like early 2009 and I told him no.
• 3:28
  SPEAKER_01: Uh, and he went away for like six months and then after six months he came back.
• 3:33
  SPEAKER_01: He's like, dude, you really got to do this.
• 3:35
  SPEAKER_01: And I was like, okay.
• 3:37
  SPEAKER_01: So did a proposal and all that stuff.
• 3:39
  SPEAKER_01: Um, but, uh, yeah,
• 3:42
  SPEAKER_01: that book was written in an office that was like 75 square feet with no windows.
• 3:49
  SPEAKER_01: I rented this cheap office for the dirt nap on third Avenue.
• 3:53
  SPEAKER_01: And I would write the dirt nap in the morning and then I would literally write
• 3:56
  SPEAKER_01: the book for like four hours at a time.
• 3:59
  SPEAKER_01: And I was dipping.
• 4:00
  SPEAKER_01: I had like apple skull and I was like, it was like a can a day habit.
• 4:05
  SPEAKER_01: I was like, I was like cramming all this dip in my face.
• 4:08
  SPEAKER_00: This is pre-zen.
• 4:10
  SPEAKER_00: Yeah.
• 4:11
  SPEAKER_00: Pre-zen.
• 4:11
  SPEAKER_00: Yep.
• 4:14
  SPEAKER_00: How's your life changed since, since that novel came out?
• 4:18
  SPEAKER_00: Uh, my life or my wife?
• 4:20
  SPEAKER_00: Well, you're just, you know, it's funny.
• 4:21
  SPEAKER_00: You think about like where you were,
• 4:23
  SPEAKER_00: uh, you know, and a lot happens to you in that book personally.
• 4:27
  SPEAKER_00: I mean, you go through major life changes and the Lehman one is only one of several.
• 4:33
  SPEAKER_00: And then, you know, here you are, whatever, you know, uh, 17 years later, whatever it is.
• 4:39
  SPEAKER_00: And, you know, you're in a whole different place.
• 4:42
  SPEAKER_01: Yeah, I mean,
• 4:42
  SPEAKER_01: the funny thing about that,
• 4:43
  SPEAKER_01: I really have mixed feelings about that book because it wasn't published very well.
• 4:49
  SPEAKER_01: You know,
• 4:49
  SPEAKER_01: as you know,
• 4:50
  SPEAKER_01: a book can be published well or not well, and it wasn't published very well.
• 4:54
  SPEAKER_01: And I don't think it realized its potential.
• 4:57
  SPEAKER_01: I think it could have done a lot better.
• 4:59
  SPEAKER_01: But at the same time,
• 5:00
  SPEAKER_01: that book opened up a lot of doors for me that never would have been opened
• 5:05
  SPEAKER_01: if I had never written it.
• 5:07
  SPEAKER_01: Um, I mean, it really launched, it launched the newsletter, uh, gave me notoriety.
• 5:13
  SPEAKER_01: Um, and in terms of like how my life has changed,
• 5:15
  SPEAKER_01: I mean, I have, I have the best life in the world.
• 5:19
  SPEAKER_01: I just have an incredible amount of gratitude,
• 5:21
  SPEAKER_01: you know,
• 5:22
  SPEAKER_01: 20 years later compared to where I was in 2006,
• 5:24
  SPEAKER_01: uh, in a psych ward looking for my shoelaces.
• 5:29
  SPEAKER_01: Like that was like, that was like the, I mean, that was the low point of my life, you know?
• 5:34
  SPEAKER_01: So things, things are great.
• 5:37
  SPEAKER_00: Well, cool, man.
• 5:38
  SPEAKER_00: I know several people on here,
• 5:40
  SPEAKER_00: somebody who's just saying they're looking for your opining on gold,
• 5:45
  SPEAKER_00: and I look forward to that.
• 5:46
  SPEAKER_00: But before we jump into the awesome portfolio,
• 5:49
  SPEAKER_00: one of the things that struck me,
• 5:50
  SPEAKER_00: one of the main messages you have is this notion of diversification.
• 5:56
  SPEAKER_00: So how do you define diversification?
• 6:00
  SPEAKER_01: Well...
• 6:01
  SPEAKER_01: Most people think that if they buy an S&P 500 fund like SPY,
• 6:08
  SPEAKER_01: they have 500 stocks and they're diversified.
• 6:11
  SPEAKER_01: And I think that used to be true.
• 6:12
  SPEAKER_01: I think 30 years ago that was true.
• 6:16
  SPEAKER_01: But now when everybody is doing the same thing, it's not really diversification.
• 6:21
  SPEAKER_01: And I think we saw that during the pandemic.
• 6:25
  SPEAKER_01: During the pandemic, the market was down 35% in a month.
• 6:29
  SPEAKER_01: And what you were seeing was people liquidating their index funds as fast
• 6:34
  SPEAKER_01: as they possibly could, which drove correlations to one very quickly.
• 6:41
  SPEAKER_01: And the trap door opened up, and that's what happened.
• 6:46
  SPEAKER_00: So you might own 500 stocks, but you own one index fund.
• 6:49
  SPEAKER_01: Yeah, yeah.
• 6:50
  SPEAKER_01: So you're not really diversified.
• 6:51
  SPEAKER_01: And then people say...
• 6:53
  SPEAKER_01: Well, add some bonds to your stocks and now you're diversified.
• 6:56
  SPEAKER_01: Well, not really,
• 6:58
  SPEAKER_01: as we found out in 2022,
• 7:00
  SPEAKER_01: because bonds and stocks are both financial assets, not hard assets.
• 7:05
  SPEAKER_01: They're financial assets.
• 7:06
  SPEAKER_01: So they respond to some of the same macro factors.
• 7:10
  SPEAKER_01: So when interest rates went up a lot in 2022,
• 7:13
  SPEAKER_01: both bonds and stocks got hurt and everybody said, oh, the 60-40 portfolio is dead.
• 7:19
  SPEAKER_01: Like it doesn't work anymore, right?
• 7:21
  SPEAKER_01: So in addition to having stocks and bonds,
• 7:25
  SPEAKER_01: you need to have some real assets as well, like real estate and commodities.
• 7:30
  SPEAKER_01: And for commodities, we use gold just as a proxy for all commodities.
• 7:35
  SPEAKER_01: And basically the way portfolio theory works is if you take an asset
• 7:40
  SPEAKER_01: that is not correlated to this bucket of other assets and you add it to that bucket,
• 7:46
  SPEAKER_01: it brings the volatility of the portfolio down, right?
• 7:50
  SPEAKER_01: So gold has a correlation of zero to stocks.
• 7:55
  SPEAKER_01: So it's the best diversifier in the world.
• 7:59
  SPEAKER_01: If you can find something that has a zero correlation or negative correlation
• 8:03
  SPEAKER_01: to something, when you add it to that portfolio, it brings the volatility down.
• 8:08
  SPEAKER_01: That's what we're looking for.
• 8:09
  SPEAKER_00: But of course,
• 8:10
  SPEAKER_00: the first thing anybody's going to say is,
• 8:12
  SPEAKER_00: okay, well, volatility is one thing, but I need to see performance.
• 8:15
  SPEAKER_00: I need to see growth.
• 8:17
  SPEAKER_01: Well, I mean, look,
• 8:19
  SPEAKER_01: I think one of the reasons,
• 8:21
  SPEAKER_01: um, this book has not been as successful, successful as I wanted.
• 8:26
  SPEAKER_01: So I'm very honest about my intentions in this book, right?
• 8:29
  SPEAKER_01: I'm saying you are going to sacrifice some returns in the pursuit of lower volatility, right?
• 8:38
  SPEAKER_01: But the argument I'm making is you're not sacrificing very much.
• 8:43
  SPEAKER_01: And you really aren't.
• 8:44
  SPEAKER_01: So for the last 100 years, the stock market has returned 10% a year on average.
• 8:51
  SPEAKER_01: The awesome portfolio, since we started measuring it in 1972, has returned 9% a year.
• 8:59
  SPEAKER_01: So you give up 1% in returns and you get half the volatility and the drawdowns just disappear.
• 9:08
  SPEAKER_01: The worst year you've ever had with this portfolio is down 11.8%.
• 9:13
  SPEAKER_00: And you're not paying,
• 9:15
  SPEAKER_00: not that I don't love my financial manager friends,
• 9:18
  SPEAKER_00: but you're not paying advisor fees if you're running the playbook
• 9:22
  SPEAKER_00: the way you suggest.
• 9:23
  SPEAKER_01: Yeah, and that's why this is a very punk book and it's a very dangerous book
• 9:28
  SPEAKER_01: because literally if the whole country read this book,
• 9:32
  SPEAKER_01: they would say, gee whiz, I can do this on my own.
• 9:35
  SPEAKER_01: I don't have to pay money.
• 9:38
  SPEAKER_01: One percent to some primate to tell me not to sell stocks,
• 9:43
  SPEAKER_01: you know, like I, like I, I can do it myself and I don't need to pay one percent.
• 9:48
  SPEAKER_01: And that's really the difference in performance.
• 9:50
  SPEAKER_01: So you're no worse off, you know, so.
• 9:53
  SPEAKER_00: Right.
• 9:55
  SPEAKER_00: Should we do some, some disclaimers here?
• 9:59
  SPEAKER_00: I am not a financial professional.
• 10:02
  SPEAKER_00: I'm not giving any financial advice today.
• 10:04
  SPEAKER_00: Are you able to say the same thing, Jared?
• 10:06
  SPEAKER_00: I'm not sure what the legality is.
• 10:08
  SPEAKER_01: Um, no, I'm not giving,
• 10:09
  SPEAKER_01: I'm not giving any advice either, but, uh,
• 10:12
  SPEAKER_01: I think the book follow falls under free speech laws so we can talk about the book.
• 10:17
  SPEAKER_00: Good.
• 10:17
  SPEAKER_00: We still have free speech in America.
• 10:18
  SPEAKER_00: I'm glad, I'm glad here.
• 10:19
  SPEAKER_00: All right.
• 10:20
  SPEAKER_00: Well, let's just jump, jump to it.
• 10:21
  SPEAKER_00: So, so, you know,
• 10:22
  SPEAKER_00: if I go see a financial advisor,
• 10:24
  SPEAKER_00: he's going to tell me, okay, Paul, you're 57 years old.
• 10:27
  SPEAKER_00: You should have, uh, oh, I don't know, a 70, 30 equities to, to, to bonds mix in your portfolio.
• 10:34
  SPEAKER_00: What's the problem with, with that approach?
• 10:38
  SPEAKER_01: Um, I mean, literally that is not the worst thing in the world, right?
• 10:46
  SPEAKER_01: If you had a 70, 30 allocation, really you should, I know how old you are.
• 10:49
  SPEAKER_01: You're like 55, right?
• 10:51
  SPEAKER_01: So you should be 55% in bonds, right?
• 10:56
  SPEAKER_01: Um, but even if you had a 70, 30.
• 10:58
  SPEAKER_00: Nobody's going to, nobody's going to tell you that in today's market.
• 11:01
  SPEAKER_01: No, no, no, no.
• 11:02
  SPEAKER_01: Which is another problem.
• 11:04
  SPEAKER_01: But a 70-30 allocation is really not terrible.
• 11:08
  SPEAKER_01: A 60-40 portfolio has returned 9.44% a year, which is pretty good.
• 11:16
  SPEAKER_00: With what kind of swings in that time?
• 11:19
  SPEAKER_00: Pretty dramatic.
• 11:20
  SPEAKER_00: Pretty dramatic.
• 11:21
  SPEAKER_01: Yeah.
• 11:22
  SPEAKER_00: You still have a lot of volatility.
• 11:24
  SPEAKER_01: It's better than just all stocks, which is what most people have.
• 11:28
  SPEAKER_01: So...
• 11:31
  SPEAKER_00: So the idea is that you want to diversify across asset classes,
• 11:34
  SPEAKER_00: not within one kind of asset class, right?
• 11:37
  SPEAKER_00: Yes.
• 11:37
  SPEAKER_00: So break down the, what are the five pillars of the Austin portfolio?
• 11:41
  SPEAKER_01: So it's stocks, bonds, gold, cash, and real estate.
• 11:46
  SPEAKER_01: And people have all kinds of pushback and arguments against,
• 11:49
  SPEAKER_01: especially the cash,
• 11:51
  SPEAKER_01: because people have been trained to believe that cash is a drag on returns, right?
• 11:56
  SPEAKER_01: Warren Buffett doesn't believe that.
• 11:59
  SPEAKER_01: No, he certainly does not.
• 12:00
  SPEAKER_01: Like, and the reason cash is important,
• 12:04
  SPEAKER_01: first of all, cash nowadays returns a fair amount, right?
• 12:08
  SPEAKER_01: You're getting four, four and a half percent on cash, which is terrific.
• 12:12
  SPEAKER_01: Uh, in around 1980, you were getting 14% on cash.
• 12:18
  SPEAKER_01: And cash was actually the best performing asset in the portfolio.
• 12:23
  SPEAKER_01: So sometimes cash can be your friend.
• 12:25
  SPEAKER_01: But the reason you mentioned Buffett, I'm glad you brought that up.
• 12:29
  SPEAKER_01: Buffett knows that cash is optionality.
• 12:32
  SPEAKER_01: Cash is an option to buy something cheaper in the future.
• 12:36
  SPEAKER_01: And it doesn't necessarily have to be a stock or a company.
• 12:40
  SPEAKER_01: It could be like a condo in Fort Lauderdale, right?
• 12:44
  SPEAKER_01: If you had $400,000 in cash, Which was 20% of a $2 million portfolio.
• 12:50
  SPEAKER_01: And you took a vacation down to Florida and you saw this condo,
• 12:54
  SPEAKER_01: you're like,
• 12:55
  SPEAKER_01: you have,
• 12:55
  SPEAKER_01: you're with your,
• 12:56
  SPEAKER_01: with your wife and you're like, oh, this is where we're going to retire.
• 12:59
  SPEAKER_01: We got to put a bid on this immediately.
• 13:01
  SPEAKER_01: You can just write a check.
• 13:03
  SPEAKER_01: You can just write a check.
• 13:05
  SPEAKER_01: That's the down payment.
• 13:07
  SPEAKER_01: And you don't have to sell stocks.
• 13:09
  SPEAKER_01: You don't have to incur a tax liability.
• 13:12
  SPEAKER_01: You don't have to be moving money around.
• 13:14
  SPEAKER_01: Liquid net worth is one of the most powerful forces in the world.
• 13:19
  SPEAKER_01: And most people are just very cash poor.
• 13:21
  SPEAKER_01: I'm actually cash poor at the moment because I'm in a big hurry to pay off
• 13:25
  SPEAKER_01: the mortgage on this house.
• 13:27
  SPEAKER_01: I'm almost done.
• 13:28
  SPEAKER_01: I'm 90% of the way there.
• 13:29
  SPEAKER_01: What's driving you to do that?
• 13:32
  SPEAKER_01: Well, that's kind of,
• 13:34
  SPEAKER_01: if you remember from No Worries,
• 13:36
  SPEAKER_01: I talked about how there's two sources of financial stress, debt and risk, right?
• 13:43
  SPEAKER_01: So I started off with a lot of debt on this house.
• 13:46
  SPEAKER_01: I had a $3.5 million mortgage.
• 13:49
  SPEAKER_01: And as of today, I have it down to $580,000.
• 13:53
  SPEAKER_01: Nice.
• 13:54
  SPEAKER_01: So I paid that off in two and a half years.
• 13:57
  SPEAKER_01: I'm going to have this paid off in about six months.
• 13:59
  SPEAKER_00: What's your, what's your, what, what interest rate do you have that mortgage at?
• 14:02
  SPEAKER_00: It's going to be frighteningly low, isn't it?
• 14:04
  SPEAKER_01: It's four and a quarter.
• 14:05
  SPEAKER_01: It's not two, but it's still pretty low.
• 14:08
  SPEAKER_00: It's not two, but it's pretty damn low relative to.
• 14:09
  SPEAKER_00: It's pretty low.
• 14:10
  SPEAKER_00: Yeah.
• 14:10
  SPEAKER_00: Yeah.
• 14:11
  SPEAKER_01: Yeah.
• 14:11
  SPEAKER_00: Well, Morgan Housel,
• 14:12
  SPEAKER_00: you know,
• 14:12
  SPEAKER_00: Psychology of Money says it's not really,
• 14:15
  SPEAKER_00: the book will tell you,
• 14:17
  SPEAKER_00: not his book,
• 14:17
  SPEAKER_00: but the textbook of investing will say,
• 14:20
  SPEAKER_00: leave that money in the market, keep that mortgage.
• 14:22
  SPEAKER_00: But he says, you know, if you can sleep better at night, pay off your mortgage.
• 14:26
  SPEAKER_00: Yes.
• 14:27
  SPEAKER_01: I agree with Morgan Housel.
• 14:28
  SPEAKER_01: Yes.
• 14:29
  SPEAKER_01: I mean, the thing about, I've had a paid off house twice in my life.
• 14:34
  SPEAKER_01: It is the best feeling in the world.
• 14:36
  SPEAKER_01: Like, You know, for example, I write a newsletter for a living and I trade for a living.
• 14:42
  SPEAKER_01: So if my hands get cut off in some tragic fishing accident,
• 14:47
  SPEAKER_01: you know, like, and I can't type, my income disappears, right?
• 14:53
  SPEAKER_01: So if my house is paid off,
• 14:55
  SPEAKER_01: I just have to come up with the property taxes and the insurance and I'm fine.
• 15:01
  SPEAKER_01: Like you can't take the house away from me.
• 15:03
  SPEAKER_01: I don't know.
• 15:04
  SPEAKER_00: You got a lot of cats to feed, Jared.
• 15:06
  SPEAKER_00: Yes.
• 15:06
  SPEAKER_00: I have to feed the cats.
• 15:07
  SPEAKER_00: There's one over there.
• 15:08
  SPEAKER_00: Yeah.
• 15:10
  SPEAKER_00: All right.
• 15:10
  SPEAKER_00: So, okay.
• 15:11
  SPEAKER_00: So, so gold, gold is good.
• 15:14
  SPEAKER_00: Cash is good.
• 15:15
  SPEAKER_00: But you know, here's what I'm thinking.
• 15:17
  SPEAKER_00: Let's just say I wanted to run the playbook.
• 15:20
  SPEAKER_00: I've got,
• 15:20
  SPEAKER_00: you know, I,
• 15:21
  SPEAKER_00: I'm probably,
• 15:22
  SPEAKER_00: I don't,
• 15:22
  SPEAKER_00: I don't know what my mix is right now, but,
• 15:24
  SPEAKER_00: but how do I reallocate in a,
• 15:26
  SPEAKER_00: in a place where I've got all these appreciated stocks and reallocating is going
• 15:30
  SPEAKER_00: to cost me some capital gains taxes.
• 15:32
  SPEAKER_00: It's going to cost you some what?
• 15:34
  SPEAKER_00: Some taxes.
• 15:36
  SPEAKER_01: Yeah.
• 15:36
  SPEAKER_01: So here is the one downside of the awesome portfolio.
• 15:40
  SPEAKER_01: It's not tax efficient.
• 15:43
  SPEAKER_01: Okay.
• 15:44
  SPEAKER_01: So I recommend implementing it in some kind of retirement plan.
• 15:50
  SPEAKER_01: Right.
• 15:50
  SPEAKER_01: That's the best place to do it.
• 15:53
  SPEAKER_01: Or 529.
• 15:53
  SPEAKER_01: Or 529.
• 15:54
  SPEAKER_01: So, um, and the reason that is, is that you have to rebalance it every year, once a year.
• 16:00
  SPEAKER_01: So when you're rebalancing it,
• 16:02
  SPEAKER_01: if stocks go up,
• 16:03
  SPEAKER_01: you're selling some stocks, you're buying some gold, you're buying some bonds.
• 16:06
  SPEAKER_01: You're going to have, you're going to pay taxes along the way.
• 16:09
  SPEAKER_01: It's not very tax efficient.
• 16:11
  SPEAKER_01: Um, Optimally, I wanted to create an ETF for the awesome portfolio.
• 16:18
  SPEAKER_01: It doesn't look like I'm going to do that because the book is not really taking off.
• 16:23
  SPEAKER_01: But the ETF would be structured in such a way that it would be tax efficient
• 16:29
  SPEAKER_01: and you would only pay taxes when you sold the ETF, right?
• 16:33
  SPEAKER_01: It would just compound all the returns.
• 16:36
  SPEAKER_00: And all the balancing would happen on your side.
• 16:39
  SPEAKER_01: What's that?
• 16:39
  SPEAKER_00: All the rebalancing would happen on your side.
• 16:41
  SPEAKER_01: Yes.
• 16:42
  SPEAKER_01: Yes.
• 16:43
  SPEAKER_01: Yeah.
• 16:45
  SPEAKER_01: So it's not very tax efficient, but nonetheless, I still think it's superior.
• 16:51
  SPEAKER_00: Okay.
• 16:52
  SPEAKER_00: So now that you own your home or mostly own your home,
• 16:55
  SPEAKER_00: what calculation do you do to figure out how much exposure you have to real estate
• 17:00
  SPEAKER_00: in your own portfolio?
• 17:02
  SPEAKER_00: Yeah.
• 17:03
  SPEAKER_01: So, um, I say you, so first of all, some people don't own their house, right?
• 17:08
  SPEAKER_00: Well, you've got some degree of equity in your home, right?
• 17:11
  SPEAKER_01: Right.
• 17:11
  SPEAKER_01: But some people don't, some people rent.
• 17:14
  SPEAKER_01: And for those people,
• 17:15
  SPEAKER_01: you would buy a REIT ETF to get your allocation to real estate, like BNQ, right?
• 17:21
  SPEAKER_01: BNQ is the Vanguard REIT ETF.
• 17:24
  SPEAKER_01: So you'd have a 20% allocation of that.
• 17:26
  SPEAKER_00: And does that have both commercial and residential in it?
• 17:29
  SPEAKER_01: Yes, it's got everything.
• 17:30
  SPEAKER_01: It's got apartments, it's got malls, it's got offices, everything, right?
• 17:34
  SPEAKER_01: There is a very tiny ETF, which is not very liquid.
• 17:38
  SPEAKER_01: It's called HOUSE,
• 17:40
  SPEAKER_01: H-A-U-S,
• 17:41
  SPEAKER_01: which is residential only, which is kind of ideal, but it doesn't really trade.
• 17:48
  SPEAKER_01: So I don't recommend that.
• 17:50
  SPEAKER_01: I would just go with one of the big REIT indexes.
• 17:54
  SPEAKER_01: But if you own your house,
• 17:55
  SPEAKER_01: you would count the equity in your house as your real estate allocation.
• 17:59
  SPEAKER_01: So if you had a $2 million house and you had half a million in equity,
• 18:03
  SPEAKER_01: that would be your real estate allocation.
• 18:05
  SPEAKER_01: And then the goal would be to have half a million in stocks,
• 18:07
  SPEAKER_01: half a million in bonds, half a million in cash and half a million in gold, right?
• 18:12
  SPEAKER_00: So.
• 18:15
  SPEAKER_00: Gold's pretty expensive right now from a historical perspective, right?
• 18:19
  SPEAKER_00: Yeah.
• 18:21
  SPEAKER_01: Well, it's gone up a lot.
• 18:22
  SPEAKER_01: It's really hard to say whether gold is expensive or cheap.
• 18:26
  SPEAKER_01: It's been on a
• 18:28
  SPEAKER_00: bit of a run recently.
• 18:30
  SPEAKER_01: Yeah, except for the last nine months.
• 18:33
  SPEAKER_01: It's corrected a lot.
• 18:36
  SPEAKER_01: But yeah, it's $4,147 an ounce.
• 18:37
  SPEAKER_01: And it got up to as high as $5,600.
• 18:39
  SPEAKER_01: Yeah.
• 18:44
  SPEAKER_00: So if I'm trying to reallocate or trying to implement the Austin portfolio,
• 18:49
  SPEAKER_00: do I dollar cost average over time to get into one of those asset classes?
• 18:53
  SPEAKER_00: Or do I just go, fuck it, I'm going all in on gold right now, regardless of its history?
• 18:57
  SPEAKER_01: I mean, I always recommend dollar cost averaging because it minimizes execution risk.
• 19:04
  SPEAKER_01: You know, the,
• 19:05
  SPEAKER_01: you know,
• 19:05
  SPEAKER_01: there is execution risk,
• 19:07
  SPEAKER_01: even if you were dollar,
• 19:08
  SPEAKER_01: even if you had a spy and you were entering a position in spy,
• 19:13
  SPEAKER_01: you would want to enter into that position over six to 12 months,
• 19:17
  SPEAKER_01: because what if you put all the So I would
• 19:24
  SPEAKER_01: dollar cost average into it over a period
• 19:25
  SPEAKER_01: of six months.
• 19:26
  SPEAKER_01: But the thing with the awesome portfolio is doesn't matter all that much
• 19:31
  SPEAKER_01: because you have these five asset classes that are not correlated and moving
• 19:35
  SPEAKER_01: in different directions.
• 19:36
  SPEAKER_01: So it doesn't make that big of a difference.
• 19:40
  SPEAKER_00: You know,
• 19:40
  SPEAKER_00: one of the things that struck me is you said both the real estate market and
• 19:44
  SPEAKER_00: the bond market are much larger than the equities market.
• 19:47
  SPEAKER_00: I don't think people realize that.
• 19:50
  SPEAKER_01: Yeah, the real estate market is the biggest.
• 19:53
  SPEAKER_01: I want to say the real estate market in the U.S. is in the hundreds of trillions.
• 19:58
  SPEAKER_01: Yeah.
• 19:59
  SPEAKER_01: And like,
• 20:00
  SPEAKER_01: basically if you,
• 20:02
  SPEAKER_01: let's say theoretically you wanted to be perfectly diversified,
• 20:06
  SPEAKER_01: you would have a piece of every asset in every country in the world, right?
• 20:12
  SPEAKER_01: So you would have real estate in Malaysia and bonds in the Philippines and gold
• 20:19
  SPEAKER_01: and all this stuff.
• 20:20
  SPEAKER_01: And I actually talk about that in the book.
• 20:22
  SPEAKER_01: I talk about this ETF called VT.
• 20:26
  SPEAKER_01: Which you could use instead of VTI.
• 20:28
  SPEAKER_01: VT is the world ETF, right?
• 20:32
  SPEAKER_01: So it gives you exposure really to the biggest companies in the world, right?
• 20:37
  SPEAKER_01: So you don't have that home country bias.
• 20:40
  SPEAKER_01: Like, you know, we're Americans, we invest in America.
• 20:43
  SPEAKER_01: It's good to also invest internationally.
• 20:45
  SPEAKER_01: So I talk about that.
• 20:46
  SPEAKER_01: I did all the calculations with VTI, the Total Stock Market Index.
• 20:51
  SPEAKER_01: But I said, look,
• 20:51
  SPEAKER_01: like ideally you should,
• 20:53
  SPEAKER_01: you know,
• 20:54
  SPEAKER_01: The U.S.
• 20:55
  SPEAKER_01: market cap is about 70% of world market cap,
• 20:58
  SPEAKER_01: which means the other 30% you should put somewhere else in the world.
• 21:03
  SPEAKER_00: You have any thoughts of where that would be prudent to put it right now or just in
• 21:07
  SPEAKER_00: that one ETF?
• 21:09
  SPEAKER_01: I mean, uh, there's also EFA, right?
• 21:12
  SPEAKER_01: EFA, which is the MSCI Europe,
• 21:15
  SPEAKER_01: Asia and Far East ETF,
• 21:17
  SPEAKER_01: which is kind of like the world X, um, U S so you can do that.
• 21:24
  SPEAKER_01: Um, or you can just buy VT and get, and get the whole thing.
• 21:28
  SPEAKER_00: So what,
• 21:29
  SPEAKER_00: so you make a,
• 21:30
  SPEAKER_00: you make a great case that if,
• 21:33
  SPEAKER_00: if a person's objective is Is to set it and forget it for the most part
• 21:39
  SPEAKER_00: that this portfolio is,
• 21:43
  SPEAKER_00: this is a way to reduce volatility significantly and sleep better at night.
• 21:48
  SPEAKER_01: That's the whole point.
• 21:49
  SPEAKER_01: That's the whole point.
• 21:52
  SPEAKER_01: You know,
• 21:52
  SPEAKER_01: people forget, like, I mean,
• 21:55
  SPEAKER_01: you read the book or listened to the book,
• 21:57
  SPEAKER_01: so you know the answer to this question,
• 22:00
  SPEAKER_01: but the stock market from 1929 to 1932 went down 89%, right?
• 22:02
  SPEAKER_01: And it went down 50% in 1973, it went down 50% in 2000, and it went down 57% in 2008, right?
• 22:18
  SPEAKER_01: So a lot of people look at the Great Depression and they're like, well, that was an anomaly.
• 22:22
  SPEAKER_01: That can never happen again.
• 22:23
  SPEAKER_01: Like that was just like a one-time deal.
• 22:25
  SPEAKER_01: And I'm like, I don't know.
• 22:27
  SPEAKER_01: Like maybe, maybe it can happen again.
• 22:30
  SPEAKER_01: Right.
• 22:31
  SPEAKER_01: And even in the Great Depression,
• 22:33
  SPEAKER_01: if you had a 60-40 portfolio, if you had 40% bonds, you were only down about 45%.
• 22:41
  SPEAKER_01: Right.
• 22:42
  SPEAKER_01: Which is a lot better than 89%.
• 22:44
  SPEAKER_01: Bonds went up from 1929 to 1932.
• 22:49
  SPEAKER_01: So, um, the point is you always want to be diversified.
• 22:54
  SPEAKER_00: And that gold is one of these things,
• 22:55
  SPEAKER_00: especially that could,
• 22:57
  SPEAKER_00: that can provide a counterweight to an equities heavy, heavy portfolio.
• 23:03
  SPEAKER_01: Yep.
• 23:03
  SPEAKER_01: Yep.
• 23:04
  SPEAKER_00: Um, you said people think long-term but trade short-term and that this is,
• 23:09
  SPEAKER_00: that this approach is a way to,
• 23:11
  SPEAKER_00: uh, prevent ourselves from making bad decisions when the markets are way, way down.
• 23:18
  SPEAKER_01: Uh, yeah.
• 23:20
  SPEAKER_01: Because you look at
• 23:21
  SPEAKER_00: those returns,
• 23:21
  SPEAKER_00: you look at the returns,
• 23:22
  SPEAKER_00: the historic returns of even an 80-20 port,
• 23:25
  SPEAKER_00: you know,
• 23:25
  SPEAKER_00: portfolio and you go, oh, well that was 12% or whatever it was over all those years.
• 23:29
  SPEAKER_01: Yes.
• 23:30
  SPEAKER_01: If you didn't sell.
• 23:33
  SPEAKER_01: You know,
• 23:33
  SPEAKER_01: the funny thing is,
• 23:34
  SPEAKER_01: is that I saw a tweet about an hour ago of Scott Galloway,
• 23:39
  SPEAKER_01: and I guess he said on his podcast that he sold all his stocks after the election
• 23:44
  SPEAKER_01: in 2016.
• 23:45
  SPEAKER_01: He thought Trump was going to crash the stock market,
• 23:48
  SPEAKER_01: and then he had to buy them 40% higher, right?
• 23:51
  SPEAKER_01: So, I mean, not to make fun of Scott Galloway, but it kind of proves the point.
• 23:56
  SPEAKER_01: Like, just shut up and hold it.
• 24:00
  SPEAKER_01: Like just hold it.
• 24:01
  SPEAKER_01: Don't trade around it.
• 24:02
  SPEAKER_01: Like you're not smarter than the market.
• 24:04
  SPEAKER_01: Right.
• 24:05
  SPEAKER_01: So, uh, and that goes for, you know, it goes for stocks.
• 24:08
  SPEAKER_01: It goes for gold or anything.
• 24:10
  SPEAKER_00: So, um, well, Galloway's worth nine figures.
• 24:13
  SPEAKER_00: I'm not,
• 24:14
  SPEAKER_00: I'm not worried about him, but,
• 24:15
  SPEAKER_00: but it does prove the point that even smart people,
• 24:17
  SPEAKER_00: uh, smart, attractive bald men make, make mistakes.
• 24:21
  SPEAKER_00: Here's a question from Scott.
• 24:22
  SPEAKER_00: If I have a stake in some oil royalties for a productive field,
• 24:25
  SPEAKER_00: where would you situate that in terms of the five baskets of the portfolio?
• 24:29
  SPEAKER_00: It has economic sensitivity like the stock market,
• 24:32
  SPEAKER_00: but it's an inflation hedge too, like gold and real estate.
• 24:35
  SPEAKER_01: I would probably count that as half stocks,
• 24:39
  SPEAKER_01: half gold, because really gold is a proxy for commodities and this is commodities.
• 24:46
  SPEAKER_01: So I would, I would make it like half and half, like half stocks, half gold.
• 24:50
  SPEAKER_01: So.
• 24:51
  SPEAKER_01: Black gold, Texas tea.
• 24:54
  SPEAKER_00: Yep.
• 24:55
  SPEAKER_00: What do you see,
• 24:56
  SPEAKER_00: and guys,
• 24:58
  SPEAKER_00: men and women, guys and girls, please start asking questions in the comments.
• 25:02
  SPEAKER_00: Happy to bring your question to Mr. Dillion.
• 25:08
  SPEAKER_00: So somebody right now that's got 100% in the equity market,
• 25:13
  SPEAKER_00: they've enjoyed a lot of upside,
• 25:14
  SPEAKER_00: what are the first two or three steps they need to take to protect themselves?
• 25:20
  SPEAKER_01: One, read the book.
• 25:22
  SPEAKER_01: I think that...
• 25:25
  SPEAKER_01: Read The Awesome Portfolio.
• 25:27
  SPEAKER_01: Look, one of the reasons I like this book, first of all, I wrote the book in 10 days.
• 25:33
  SPEAKER_01: No way.
• 25:34
  SPEAKER_01: Seriously?
• 25:34
  SPEAKER_01: Yeah, I wrote the book in 10 days.
• 25:36
  SPEAKER_00: But you had already written about The Awesome Portfolio in No Worries, right?
• 25:40
  SPEAKER_01: Yes.
• 25:40
  SPEAKER_01: So I did a chapter in No Worries.
• 25:42
  SPEAKER_01: Okay.
• 25:44
  SPEAKER_01: But Paul, you're trying to write a book in four months.
• 25:46
  SPEAKER_01: It can be done.
• 25:47
  SPEAKER_01: I did this
• 25:48
  SPEAKER_00: in 10 days.
• 25:49
  SPEAKER_01: Yes.
• 25:51
  SPEAKER_01: But I think the first half of the book,
• 25:54
  SPEAKER_01: is probably one of the best discussions on risk you will ever find.
• 26:01
  SPEAKER_01: But then it starts to get into the construction of the awesome portfolio and stuff like that.
• 26:07
  SPEAKER_00: You want to share some of those thoughts about risk?
• 26:11
  SPEAKER_01: Well, there's some charts in here.
• 26:13
  SPEAKER_01: I don't know if you can see this.
• 26:16
  SPEAKER_00: Um,
• 26:16
  SPEAKER_00: I see squiggly line going up into the right and a straight line going up into the,
• 26:20
  SPEAKER_00: oh, rich, the rich versus happy matrix.
• 26:22
  SPEAKER_00: Yeah.
• 26:22
  SPEAKER_01: Yes.
• 26:22
  SPEAKER_01: The rich versus happy matrix.
• 26:24
  SPEAKER_01: So you can be rich with a lot of volatility or you can be happy.
• 26:28
  SPEAKER_01: You can put your money in a bank account and get no volatility.
• 26:31
  SPEAKER_00: Yeah.
• 26:32
  SPEAKER_01: What I'm proposing is there's a middle way.
• 26:36
  SPEAKER_01: Where you can be rich and happy.
• 26:38
  SPEAKER_01: You just sacrifice a little bit less in the way it returns.
• 26:41
  SPEAKER_01: You have some volatility and you make much more than a bank account.
• 26:47
  SPEAKER_00: Why wouldn't advisors help people?
• 26:49
  SPEAKER_00: I mean, because they're not getting fees from some of the investment vehicles they're buying.
• 26:54
  SPEAKER_00: I mean, are there other reasons that this portfolio just runs counter to their business model?
• 27:01
  SPEAKER_01: Um, I think one of the main reasons,
• 27:04
  SPEAKER_01: so financial advisors are very dismissive of this, uh,
• 27:08
  SPEAKER_01: for a bunch of reasons,
• 27:09
  SPEAKER_01: but the biggest reason is, um,
• 27:13
  SPEAKER_01: Typically,
• 27:13
  SPEAKER_01: financial advisors don't lose clients when their clients lose money, right?
• 27:20
  SPEAKER_01: Because if all their clients are invested in stocks and the stock market goes down,
• 27:23
  SPEAKER_01: they say, well, the stock market goes down, not my fault.
• 27:26
  SPEAKER_01: Right.
• 27:28
  SPEAKER_00: As long as they're within a reasonable proximity of market averages,
• 27:33
  SPEAKER_00: they feel like they're doing their job.
• 27:36
  SPEAKER_01: But when they lose clients are when their clients are not making as much money
• 27:41
  SPEAKER_01: as other people, right?
• 27:44
  SPEAKER_01: So if the stock market's up 20% in a year and they have a client that's up 20%
• 27:49
  SPEAKER_01: and they see this guy over here that was long NVIDIA and he's up 40%,
• 27:53
  SPEAKER_01: he goes to his advisor and says, why am I not up 40%?
• 27:57
  SPEAKER_01: You're fired, right?
• 27:59
  SPEAKER_01: So they don't want to put somebody in something that is proven to return less over time.
• 28:06
  SPEAKER_01: Right.
• 28:06
  SPEAKER_01: And this kind of gets back to like this.
• 28:09
  SPEAKER_01: I have this pet peeve in general where people are just focused on revenue.
• 28:16
  SPEAKER_01: You
• 28:24
  SPEAKER_01: should think about what risk you are willing to accept and then back into
• 28:29
  SPEAKER_01: the returns that you are going to get.
• 28:32
  SPEAKER_01: That's the way people should think about it.
• 28:34
  SPEAKER_01: So, you know,
• 28:35
  SPEAKER_01: the stock market has done great for the last 18 years,
• 28:39
  SPEAKER_01: which means this is the worst time for this book to come out.
• 28:44
  SPEAKER_01: What people haven't seen is that breathtaking volatility that
• 28:49
  SPEAKER_01: the stock market sometimes delivers.
• 28:51
  SPEAKER_00: We saw a bit of it in 2020 during the pandemic, but those were pretty short blips, right?
• 29:05
  SPEAKER_01: Yeah.
• 29:06
  SPEAKER_01: I mean, 2022 was it was it was legitimate bear market.
• 29:10
  SPEAKER_01: Stocks were down 25 percent at one point.
• 29:13
  SPEAKER_01: They ended up down 20 percent on the year.
• 29:16
  SPEAKER_01: And that's that was a pretty serious bear market.
• 29:19
  SPEAKER_01: And people were pretty upset.
• 29:22
  SPEAKER_01: Um, but nothing compared to,
• 29:25
  SPEAKER_01: you know,
• 29:25
  SPEAKER_01: what I went through or you went through in the financial crisis
• 29:29
  SPEAKER_01: when people literally believe that the world was coming to an end.
• 29:32
  SPEAKER_01: Like, you know, people sold stocks down 50% because they believe they would go down 60, 70, 80%.
• 29:40
  SPEAKER_01: People believe that, you know.
• 29:43
  SPEAKER_00: I lived down the street in Santa Monica, California from an IndyMac branch.
• 29:49
  SPEAKER_00: And I remember seeing people lined up around the bank looking to pull their money out.
• 29:57
  SPEAKER_00: Yep.
• 29:58
  SPEAKER_00: It was a pretty crazy time.
• 30:00
  SPEAKER_01: I think Mnuchin was running IndyMac back then.
• 30:03
  SPEAKER_00: He may have
• 30:04
  SPEAKER_01: been.
• 30:04
  SPEAKER_00: Yeah.
• 30:04
  SPEAKER_00: He may have been.
• 30:06
  SPEAKER_00: I worked for a brief time with his ex-wife.
• 30:09
  SPEAKER_00: Before that.
• 30:10
  SPEAKER_00: Anyway, Paul McClintock says, the book is fantastic.
• 30:13
  SPEAKER_00: What ETFs would you put in taxable accounts versus prioritizing qualified retirement accounts?
• 30:20
  SPEAKER_01: I mean, just the same.
• 30:22
  SPEAKER_01: I don't think there's any advantage to picking different ETFs for taxable accounts.
• 30:32
  SPEAKER_01: Yeah, there's no way to beat the rebalancing.
• 30:35
  SPEAKER_01: There's no way to beat the taxes, unfortunately.
• 30:39
  SPEAKER_00: Well, Jacob SP says, just pay your taxes.
• 30:42
  SPEAKER_00: Nothing wrong with that.
• 30:43
  SPEAKER_00: I mean, you got to pay him eventually,
• 30:45
  SPEAKER_00: but we all want to kick him down the road as far as we can.
• 30:48
  SPEAKER_00: Please put your questions for Jared or me if you want to ask me a question in the comments area.
• 30:56
  SPEAKER_00: If you don't follow Jared, please take a second to follow him.
• 30:58
  SPEAKER_00: Subscribe to his Substack.
• 31:00
  SPEAKER_00: Subscribe to mine.
• 31:02
  SPEAKER_00: I write about everything from comedy to comedy.
• 31:06
  SPEAKER_00: I'm writing about Nicole Hannah-Jones, the article she wrote in the New York Times last week.
• 31:10
  SPEAKER_00: That's going to run in the Hill tomorrow, I'm excited to see.
• 31:12
  SPEAKER_00: Really?
• 31:13
  SPEAKER_00: Yeah.
• 31:14
  SPEAKER_00: Wow, outstanding.
• 31:15
  SPEAKER_00: Yeah.
• 31:15
  SPEAKER_00: Terrific.
• 31:17
  SPEAKER_00: Um, and, uh, I just think about this stuff.
• 31:19
  SPEAKER_00: I think about America, Jared.
• 31:21
  SPEAKER_00: I think about the,
• 31:22
  SPEAKER_00: you know,
• 31:22
  SPEAKER_00: I live in New York city,
• 31:23
  SPEAKER_00: so I have a front row seat to what's going on with,
• 31:27
  SPEAKER_00: uh, you know, the democratic socialists of America.
• 31:30
  SPEAKER_00: And it drives me crazy.
• 31:31
  SPEAKER_00: It's, it's, uh, you know, I'm thinking about it all the time.
• 31:34
  SPEAKER_00: And so I had some thoughts on Nicole Hannah-Jones and I'm not really,
• 31:37
  SPEAKER_00: you know, I'm not throwing it at Nicole Hannah-Jones.
• 31:40
  SPEAKER_00: I'm just saying it's symptomatic of where we are in the world today.
• 31:42
  SPEAKER_01: Yeah.
• 31:44
  SPEAKER_00: Aaron Murray says, what about direct indexing?
• 31:48
  SPEAKER_01: I actually don't.
• 31:49
  SPEAKER_01: I'm going to throw up a brick on that one.
• 31:52
  SPEAKER_01: I don't really know anything about direct indexing.
• 31:55
  SPEAKER_01: I know it exists.
• 31:56
  SPEAKER_01: I don't know what it means.
• 31:57
  SPEAKER_01: So that was like a big thing like seven years ago.
• 32:00
  SPEAKER_01: I remember I went to an ETF conference and they were just talking
• 32:04
  SPEAKER_01: about direct indexing all the time.
• 32:06
  SPEAKER_01: And I didn't know what they were talking about.
• 32:08
  SPEAKER_01: Yeah.
• 32:10
  SPEAKER_00: I know you're executing on a portfolio to minimize your worries in the world,
• 32:16
  SPEAKER_00: but what concerns you if you look at the horizon in the world?
• 32:21
  SPEAKER_00: Iran?
• 32:23
  SPEAKER_00: No, actually.
• 32:24
  SPEAKER_00: Midterms?
• 32:26
  SPEAKER_00: National debt?
• 32:27
  SPEAKER_01: What keeps you up at night, if anything?
• 32:31
  SPEAKER_01: You're going to be a very receptive audience to this take.
• 32:35
  SPEAKER_01: Iran is priced in, more or less.
• 32:38
  SPEAKER_01: Outside of something like a nuclear weapon or something like that, Iran is priced in.
• 32:44
  SPEAKER_01: Iran is not a concern.
• 32:47
  SPEAKER_01: AI is somewhat of a concern that the AI bubble pops.
• 32:52
  SPEAKER_01: To me, the biggest concern for the stock market is Is politics, right?
• 32:59
  SPEAKER_01: If AOC were to be elected in 2028, the stock market is not going up.
• 33:06
  SPEAKER_01: I assure you of that.
• 33:07
  SPEAKER_01: How do you hedge it?
• 33:12
  SPEAKER_00: I don't know if you
• 33:12
  SPEAKER_01: know this.
• 33:13
  SPEAKER_01: If you nationalize a company, the stock goes to zero.
• 33:17
  SPEAKER_01: It goes to zero.
• 33:18
  SPEAKER_01: If you nationalize lots of energy companies,
• 33:21
  SPEAKER_01: lots of healthcare companies, big parts of the economy, they go to zero.
• 33:27
  SPEAKER_01: Nobody is talking about this in 2026.
• 33:31
  SPEAKER_01: But that is what is going to happen if she gets elected or somebody like her in 2028.
• 33:37
  SPEAKER_01: I actually wrote a piece.
• 33:40
  SPEAKER_01: I wrote a substack.
• 33:41
  SPEAKER_01: This is a couple of months ago.
• 33:42
  SPEAKER_01: I call it the one thing that keeps me up at night.
• 33:46
  SPEAKER_01: Maybe you read it, maybe you didn't.
• 33:51
  SPEAKER_01: And look, the alternatives are not great.
• 33:54
  SPEAKER_01: J.D.
• 33:55
  SPEAKER_01: Vance is a right-wing socialist.
• 33:57
  SPEAKER_01: He's like,
• 33:58
  SPEAKER_01: there's not a lot of daylight in between him and Bernie Sanders when it comes
• 34:02
  SPEAKER_01: to economics, you know?
• 34:04
  SPEAKER_01: So really our only hope here is we get maybe Marco Rubio or Ron DeSantis in 2028.
• 34:12
  SPEAKER_01: Other than that, I,
• 34:14
  SPEAKER_01: I am, you know, because of politics, I am not bullish on stocks two years forward.
• 34:19
  SPEAKER_01: So, um, um,
• 34:24
  SPEAKER_00: What industries or what companies would you think would be nationalized first
• 34:29
  SPEAKER_00: if you had to make a bet?
• 34:30
  SPEAKER_00: What would that look like?
• 34:31
  SPEAKER_01: Oil companies, for sure.
• 34:34
  SPEAKER_01: I mean, look, Maxine Waters was threatening that in 2000.
• 34:37
  SPEAKER_01: You should pull up the clip on YouTube.
• 34:39
  SPEAKER_01: She had the oil executives in front of her at some committee hearing,
• 34:43
  SPEAKER_01: and she's like, we will nationalize you guys.
• 34:45
  SPEAKER_01: That was 26 years ago.
• 34:48
  SPEAKER_01: Um, so, uh, healthcare for sure.
• 34:50
  SPEAKER_01: The health insurers gone.
• 34:52
  SPEAKER_01: Um, uh, maybe I, probably not the pharma companies, but the health insurers for sure.
• 34:59
  SPEAKER_01: Um, anyway, so stuff like that.
• 35:02
  SPEAKER_00: Yeah.
• 35:03
  SPEAKER_00: All right.
• 35:03
  SPEAKER_00: Has aging, this is from Tom, TGW Tom.
• 35:07
  SPEAKER_00: Hi, TGW Tom.
• 35:08
  SPEAKER_00: Has aging affected your personal investing?
• 35:11
  SPEAKER_01: Um, no.
• 35:13
  SPEAKER_01: I can't say no.
• 35:16
  SPEAKER_01: I think it has a little bit.
• 35:17
  SPEAKER_01: I'm 52.
• 35:19
  SPEAKER_01: I still take a lot of risk.
• 35:21
  SPEAKER_01: I do.
• 35:22
  SPEAKER_01: It was funny because I was sitting with my wife last night and she has
• 35:26
  SPEAKER_01: a much smaller brokerage account than I do.
• 35:28
  SPEAKER_01: And she has a lot in, we keep our money separate.
• 35:32
  SPEAKER_01: And she has a lot of money in a money market fund.
• 35:35
  SPEAKER_01: And I said, you should move a big chunk of that over to bonds.
• 35:40
  SPEAKER_01: I told her that last night.
• 35:42
  SPEAKER_01: And she's like, how much?
• 35:43
  SPEAKER_01: And I'm like, 30 grand.
• 35:45
  SPEAKER_01: She's like, ooh, that's too much.
• 35:46
  SPEAKER_01: And I'm You know, and me, I'm a trader.
• 35:48
  SPEAKER_01: Like I like to swing things around and trade big and stuff like that.
• 35:52
  SPEAKER_01: And she's very risk averse, but I am, I would say I'm more risk averse than I used to be.
• 35:58
  SPEAKER_01: Um, which is maybe one of the reasons I'm doing stuff like this, you know?
• 36:04
  SPEAKER_01: Yeah.
• 36:04
  SPEAKER_01: Um, well,
• 36:07
  SPEAKER_01: speaking of bonds,
• 36:09
  SPEAKER_00: um, Sorry, I am, but here's Pete W. He's, thoughts of volatility post midterms.
• 36:16
  SPEAKER_00: Are you moving more into cash in Q4 for a potential buying opportunity
• 36:19
  SPEAKER_00: of hard assets commodities sometime in 2027 after a liquidity event
• 36:25
  SPEAKER_00: where everything gets hit for a sell-off, in a sell-off?
• 36:30
  SPEAKER_01: I don't have any cash.
• 36:31
  SPEAKER_01: It's all going into the house.
• 36:33
  SPEAKER_01: I wish I had some cash to take advantage of stuff like that.
• 36:36
  SPEAKER_01: I just don't.
• 36:37
  SPEAKER_00: But it's not like it's going to be easy to pull cash out with interest rates going
• 36:41
  SPEAKER_00: to where they're going, right?
• 36:42
  SPEAKER_00: I mean, if you had to change your mind in the future.
• 36:46
  SPEAKER_00: Right.
• 36:47
  SPEAKER_00: Yes.
• 36:48
  SPEAKER_01: Yeah.
• 36:49
  SPEAKER_00: Speaking of which,
• 36:51
  SPEAKER_00: Snarky Trader,
• 36:52
  SPEAKER_00: which is my favorite kind of trader,
• 36:54
  SPEAKER_00: Mr. Snarky, he wants me to ask you how you feel about long bonds.
• 36:59
  SPEAKER_00: I mean, it is...
• 37:03
  SPEAKER_01: I would say the bond market today feels kind of like what stocks felt like in 2008.
• 37:10
  SPEAKER_01: It just feels terrible.
• 37:12
  SPEAKER_01: Bonds have been down 20 out of the last 24 days.
• 37:17
  SPEAKER_01: It is relentless.
• 37:18
  SPEAKER_01: They're down again today.
• 37:19
  SPEAKER_01: The 30-year is at 5.56%.
• 37:25
  SPEAKER_01: Now, any rational person would look at this and say,
• 37:29
  SPEAKER_01: this is the buying opportunity of a lifetime, right?
• 37:32
  SPEAKER_01: Inflation, PCE is at 2.6%.
• 37:37
  SPEAKER_01: You're getting like 3% real yields on the 30-year, which is unprecedented.
• 37:43
  SPEAKER_01: Like, I, I look,
• 37:45
  SPEAKER_01: I think it's a buying opportunity of a lifetime and they just get killed day
• 37:49
  SPEAKER_01: after day after day.
• 37:51
  SPEAKER_01: It's, it's turned it like, I, I mean,
• 37:54
  SPEAKER_01: I've been writing about this in the Daily Dirt now,
• 37:56
  SPEAKER_01: but I think an intervention is coming from the Treasury Department or the Fed
• 38:00
  SPEAKER_01: or both.
• 38:01
  SPEAKER_01: I think what's it going to look like here?
• 38:05
  SPEAKER_01: So there's four possibilities.
• 38:07
  SPEAKER_01: One, they could get Fannie and Freddie to buy mortgage-backed securities,
• 38:12
  SPEAKER_01: which will help a little bit.
• 38:14
  SPEAKER_01: Two, Besant could greatly increase the buybacks in the long end,
• 38:19
  SPEAKER_01: funded by selling the short end.
• 38:22
  SPEAKER_01: Um, three,
• 38:23
  SPEAKER_01: they could do yield curve control,
• 38:25
  SPEAKER_01: which is really not likely at all, but they could.
• 38:28
  SPEAKER_01: And what's the four?
• 38:29
  SPEAKER_01: Oh, the fourth one is, uh, they could discontinue issuance of the 20 and 30 year bond.
• 38:36
  SPEAKER_01: Uh, I mean,
• 38:36
  SPEAKER_01: cause if you think about it,
• 38:37
  SPEAKER_01: if you're best sent,
• 38:38
  SPEAKER_01: like with rates at almost 6%, why do you want to lock that in for 30 years?
• 38:43
  SPEAKER_01: So they could discontinue issuance of the bond.
• 38:46
  SPEAKER_01: So I think those are the four possibilities.
• 38:49
  SPEAKER_00: Do you, you said you,
• 38:50
  SPEAKER_00: you thought Iran, Iran,
• 38:52
  SPEAKER_00: excuse me,
• 38:52
  SPEAKER_00: sorry for my Southern pronunciation of our neighbors there in the Middle East.
• 38:55
  SPEAKER_00: How do you feel about China these days?
• 38:57
  SPEAKER_00: You know,
• 38:57
  SPEAKER_00: we just had, uh,
• 38:59
  SPEAKER_00: the premier over here and,
• 39:01
  SPEAKER_00: uh, what's your, are you long China, our relationship with China?
• 39:06
  SPEAKER_01: Uh, let me see.
• 39:10
  SPEAKER_01: Um, I don't have a lot of thoughts on China.
• 39:13
  SPEAKER_01: Um, I mean, I have big, big picture thoughts.
• 39:21
  SPEAKER_01: First of all, I want to say that everybody calls China a communist country, but...
• 39:27
  SPEAKER_01: China is communist in name only.
• 39:29
  SPEAKER_01: And in a lot of respects, look,
• 39:31
  SPEAKER_01: it is state-directed capitalism,
• 39:33
  SPEAKER_01: but in a lot of respects, they're more capitalist than we are, believe it or not.
• 39:40
  SPEAKER_00: They're the inverse of us.
• 39:41
  SPEAKER_00: We're more socialist than people think we are.
• 39:44
  SPEAKER_01: Yes.
• 39:44
  SPEAKER_01: Yes.
• 39:45
  SPEAKER_01: That's actually true.
• 39:47
  SPEAKER_01: China does not have much in the way of a Social Security program.
• 39:51
  SPEAKER_01: They don't.
• 39:52
  SPEAKER_01: They do have one, but it's very small.
• 39:55
  SPEAKER_01: Ours is obviously enormous.
• 39:58
  SPEAKER_01: If you look at our budget,
• 40:00
  SPEAKER_01: 97% of it is taken up with Social Security, Medicare, and interest on the debt.
• 40:07
  SPEAKER_01: And all the discretionary spending is deficit spending.
• 40:11
  SPEAKER_01: China is...
• 40:14
  SPEAKER_01: Ultimately, I think China will fail.
• 40:15
  SPEAKER_01: This is the point I'm trying to make because state-directed capitalism doesn't work.
• 40:21
  SPEAKER_01: They don't let the invisible hand do its work.
• 40:24
  SPEAKER_01: They have misallocations of capital, malinvestment.
• 40:30
  SPEAKER_01: They built those ghost cities 10 years ago.
• 40:34
  SPEAKER_01: They have this overhang of debt that's been sticking with them for 10 years.
• 40:39
  SPEAKER_01: It's not a superior model, but yeah.
• 40:42
  SPEAKER_00: We could use our housing supply here in New York City and lots of America.
• 40:46
  SPEAKER_00: Unfortunately, that's not a portable asset.
• 40:49
  SPEAKER_00: Yeah, yeah.
• 40:51
  SPEAKER_00: Snarky Trader says there's way too much long bond bashing recently.
• 40:54
  SPEAKER_00: What do you think about that?
• 40:55
  SPEAKER_01: Yeah, 100%.
• 40:56
  SPEAKER_01: I agree.
• 40:57
  SPEAKER_01: I agree.
• 40:59
  SPEAKER_00: Sean Kingston, can you ask Jared to argue both sides of the coin?
• 41:02
  SPEAKER_00: Why might bonds be a great buy right now with positioning in this move higher
• 41:07
  SPEAKER_00: in rates as stretched as it is?
• 41:11
  SPEAKER_01: Let's talk about the flip side.
• 41:11
  SPEAKER_01: Oh, sorry.
• 41:11
  SPEAKER_01: Let me finish this.
• 41:12
  SPEAKER_00: And on the flip side, why might we be in a high for longer regime?
• 41:17
  SPEAKER_01: Yeah, I think the flip side is the private borrowing.
• 41:21
  SPEAKER_01: So the hyperscalers, Google,
• 41:23
  SPEAKER_01: et cetera,
• 41:24
  SPEAKER_01: are issuing bonds like they're going to the electric chair,
• 41:28
  SPEAKER_01: like hundreds of billions of dollars.
• 41:31
  SPEAKER_01: And that price...
• 41:32
  SPEAKER_01: Private borrowing is actually crowding out public borrowing, right?
• 41:37
  SPEAKER_01: So if the hyperscalers hadn't issued all this debt,
• 41:41
  SPEAKER_01: my guess is,
• 41:42
  SPEAKER_01: is that yields would be 50 basis points below where they are right now, right?
• 41:46
  SPEAKER_01: They're just like, I mean,
• 41:48
  SPEAKER_01: the government is borrowing $2 trillion a year,
• 41:50
  SPEAKER_01: but the hyperscalers will borrow a trillion, right?
• 41:54
  SPEAKER_01: It's a huge amount of debt.
• 41:56
  SPEAKER_01: And so that's the flip side is that, look,
• 41:59
  SPEAKER_01: the thing that fixes that is if the AI bubble pops and they stop borrowing,
• 42:05
  SPEAKER_01: but that's, you know, waiting for whatever.
• 42:09
  SPEAKER_01: Well, then,
• 42:10
  SPEAKER_00: so that helps the bond market,
• 42:11
  SPEAKER_00: but then the equities market probably takes a giant kick in the nuts.
• 42:16
  SPEAKER_01: Yeah, yeah.
• 42:18
  SPEAKER_00: Well, there's another reason to be in the Austin portfolio.
• 42:23
  SPEAKER_01: I'll just leave you with one thing.
• 42:25
  SPEAKER_01: You and I are two people who are trying to get eyeballs online.
• 42:30
  SPEAKER_01: We're trying to build a platform.
• 42:32
  SPEAKER_01: We're trying to build a presence on social media.
• 42:35
  SPEAKER_01: It's very, very hard.
• 42:36
  SPEAKER_01: We were talking about this yesterday.
• 42:38
  SPEAKER_01: And it was funny because my brother sent me a video today of Mel Robbins.
• 42:43
  SPEAKER_01: I'm sure you know who Mel Robbins is, right?
• 42:45
  SPEAKER_01: So it was Mel Robbins speaking into a microphone on her podcast,
• 42:50
  SPEAKER_01: talking about the benefits of exercise.
• 42:54
  SPEAKER_01: And what struck me about that video was she is just saying things
• 42:59
  SPEAKER_01: that everybody knows to be true, right?
• 43:02
  SPEAKER_01: But she's Mel Robbins, so she sounds like a genius, right?
• 43:05
  SPEAKER_01: But it was just like,
• 43:06
  SPEAKER_01: if you exercise,
• 43:08
  SPEAKER_01: you'll feel better and your health will be better and you live longer.
• 43:11
  SPEAKER_01: Like, this is all very obvious stuff.
• 43:13
  SPEAKER_01: And one of the things I've come to learn is that you sell books or get followers
• 43:21
  SPEAKER_01: by telling people People, things they already believe, right?
• 43:28
  SPEAKER_01: By reinforcing their beliefs, right?
• 43:31
  SPEAKER_01: So this, this book does not reinforce anybody's beliefs.
• 43:35
  SPEAKER_01: It's cognitive dissonance.
• 43:36
  SPEAKER_01: It's something new.
• 43:37
  SPEAKER_01: It's something foreign.
• 43:38
  SPEAKER_01: It's something scary, right?
• 43:40
  SPEAKER_01: But if I wrote a book and said, look,
• 43:43
  SPEAKER_01: if I just told people what they already thought to be true,
• 43:46
  SPEAKER_01: if I said, just put all your money in the S&P 500, I'd sell 100,000 copies.
• 43:52
  SPEAKER_01: Like The Millionaire Next Door is a great example.
• 43:55
  SPEAKER_01: Everybody thought that the way to get rich was to eat like pork and beans and live
• 44:00
  SPEAKER_01: in a tiny house.
• 44:01
  SPEAKER_01: Right.
• 44:01
  SPEAKER_01: And the book told them that just like cut all your expenses,
• 44:05
  SPEAKER_01: live in a tiny house, eat pork and beans.
• 44:07
  SPEAKER_01: And that book sold like 30 million copies.
• 44:10
  SPEAKER_01: Right.
• 44:11
  SPEAKER_01: When you,
• 44:11
  SPEAKER_01: when you tell,
• 44:12
  SPEAKER_01: when you,
• 44:13
  SPEAKER_01: when you're outside the consensus and you're trying to introduce new ideas,
• 44:18
  SPEAKER_01: it's always treated as foreign at first,
• 44:21
  SPEAKER_01: you know, like snarky trader is saying here.
• 44:24
  SPEAKER_01: You're a quack.
• 44:25
  SPEAKER_00: Yes.
• 44:28
  SPEAKER_00: All right, man.
• 44:28
  SPEAKER_00: Well, I enjoyed the book.
• 44:30
  SPEAKER_00: I think everybody, y'all should all get it.
• 44:32
  SPEAKER_00: Check it out.
• 44:32
  SPEAKER_00: Hey, you don't have to believe it.
• 44:34
  SPEAKER_00: But I think the most important point is diversifying across asset classes is
• 44:41
  SPEAKER_00: an underappreciated strategy.
• 44:43
  SPEAKER_00: It's worth your consideration whether or not you do it for yourself.
• 44:46
  SPEAKER_00: Read the book.
• 44:47
  SPEAKER_00: Give it some serious thought.
• 44:49
  SPEAKER_00: If you haven't followed Jared, please follow him.
• 44:51
  SPEAKER_00: If you don't follow me, please subscribe to me on Substack and other platforms.
• 44:54
  SPEAKER_00: Jared, it's always great to talk to you.
• 44:56
  SPEAKER_00: I learn something every time.
• 44:58
  SPEAKER_01: Awesome, Paul.
• 44:58
  SPEAKER_01: I'll be seeing you around.
• 45:00
  SPEAKER_01: All right, man.
• 45:00
  SPEAKER_01: See you.
• 45:01
  SPEAKER_01: Thanks everybody for joining.
• 45:02
  SPEAKER_01: Take care.