Market Volatility: Discussion of oil’s sharp spike tied to Middle East conflict and the market’s tendency to gap down then recover as investors reassess risks.
Energy Dynamics: The U.S. is relatively insulated due to energy independence and lower household energy spend, while higher oil could pressure Japan and Germany and weigh on emerging markets.
Gold Outlook: While gold has surged on geopolitical fear, the guest suggests much may be priced in, with a medium-term view skewing toward plateau or lower absent major escalation.
Rate Cuts: With oil rising and inflation risks re-emerging, rate cuts are viewed as off the table for now.
Renewables & EVs: Higher oil could be a tailwind for renewable energy and EVs; solar and wind are booming even in the U.S., supporting a gradual reduction in oil dependence.
Recession Risk: Odds have risen amid policy uncertainty and softer labor prints, though consumer spending remains resilient; the outlook into 2026 is framed as a moving target.
Berkshire Concentration: Owning Berkshire Hathaway (BRK.B) is not a proxy for holding cash; it remains equity risk and should not substitute for a true cash allocation.
Concentration & Taxes: A portfolio concentrated in Berkshire and Prologis (PLD) warrants gradual diversification, using tax-aware tactics like bracket management and donor-advised funds.
Transcript
Welcome to Ask the Compound live from Miami. The show where you ask the questions, we provide the answers. We have a couple of guests coming on today. One is already with us, Mr. Bear Ridolf. Duncan is back from Japan. >> Hey everyone. >> How was Japan? >> It was amazing. >> I can imagine. >> I actually I brought Ben something uh that I don't know if he wants to wear it or not, but >> Oh, that is a must. I brought you. It says invincible in Japanese. >> I I'll wear that on the on my run tomorrow if you want a headband >> on the beach. All right. First, a sponsor. Uh today's show is sponsored by Betterment. Every RA knows attention. You don't want to turn people away. You don't want to require high minimums. You want to help clients who are just getting started because that's where the long-term relations begin. But here's the truth. Those simple accounts, they take a lot of work. Account opening, trading, rebalancing. Before long, your staff and back office are underwater trying to stay afloat. That's why established RAAS are turning to Betterment Advisor Solutions. It's a platform built for segmenting your book and streamlining those with smaller and simpler accounts. The onboarding experience is automated and paperless. The portfolio management is streamlined and tax efficient. Client experience is consistent and exceptional. Nicole almost just walked into the shot. Explore this what segmentation can do for you and your firm today. Lower your operational lift, but keep your standard of service high. All with Betterment Advisor Solutions. Your biggest regret will be not doing it sooner. Learn more at betterment.com/advisors. All right, the show today. I put in questions of my own because I want to talk markets because there's a lot of weird stuff going on while we are at So Duncan, you can read the questions and I'm gonna tee Barry up because I just wanted to talk markets. Michael and I didn't get a chance to talk markets on animal spirits today because we were talking other stuff. >> Yeah, cool. Yeah, I was watching things happening from Japan. >> Barry's had no prep. We're just going to talk markets. >> I had questions. So, yeah, you're answering some of them here. All right, so up first today we got one from Ben. Uh, it seems like everyone more or less assumes the financial markets will cause another taco moment from Trump here on the war and this oil spike will be transitory. What's the risk if that doesn't happen and this thing drags on? Are investors becoming too complacent? Are we at risk of some sort of Minsky moment? So, we were at dinner last night, a nice Peruvian place, and halfway through dinner, Caleb Silver from Investipedia leans over to a bunch of us and he says, "Guys, look at the futures of the market. Oil just spiked almost 30%. Futures are down 2%. Stocks in Japan are down almost 7% and three people on the table all at the same time go, "Holy [ __ ] what's going on here?" And then the market opens today and things slowly but surely come back. So, we're having these moments that like scare people. And obviously, oil is up a lot already. It's up 60% this year or something. So, I I guess the question is I'm trying maybe I'm thinking too many levels deep here of this overreaction, this underreaction. I guess my question for you is just are you surprised by what's going on? We're seeing all this movement and then things settle down once advisers digest this stuff and people are like not willing to panic just yet. >> So, so the old line is always it's not the news, it's the reaction to the news. And if you've been watching the market since the am I allowed to call it a war, right? >> Since the bang bang shoot gun, planes, ships, guns thingy in Iran started, not a war. Um the markets have gapped down just about every day and climbed back. Some days they climb back to positive. Some days they just work most of the panic reaction off. To me that's very telling that all right there's a war in Iran. Oil prices is going to go up a h 100red bucks. This will up to 100 and over. This is bad for the rest of the world. But truth be told, the US is energy independent. We're exporting natural gas and oil overseas. Not to be selfish, but from a domestic perspective, this isn't that bad for us. >> In the past, people would have used this as an excuse for a 10 or 50% correction easily, and now it just won't happen. >> Think about it. Not only is the US energy independent, but when you look at the family, the household budget, energy as a percentage of that budget in the 70s was 12%. So when oil prices double, that was really big. Now energy is something like 7% or 6% of the household budget. >> Fully hedged because he drives a Tesla. >> It's true. >> Well, but you're paying for electricity and if oil prices go up, natural gas prices t they won't go up as much, but they tend to get pul any excuse to raise prices. >> If I owned a home, I would have a heat pump by now. >> Geothermal heat pump. >> Yeah, there you go. >> So, but even you said it like the rest of the world, I mean, emerging market stocks are down 9%. the EPA's down 7%. So, it's not like that's just a regular run-of-the-mill correction. It's not even anything bad yet. So, I I just think people I guess it's almost a good thing that the markets are like, "All right, let's just wait before we freak out completely and see what happens here." >> You know, we've had this conversation every time I'm on, but I'll I'll repeat it. The future is inherently unknown and unknowable, and all you could do is lay out here's the best case scenario. Here's the worst case scenario. here are the things in the middle where we're likely to end up most of the time. And so as long as you recognize now sometimes, you know, if you can think about it, it's probably not a black swan. So the thought that, hey, this can spiral out of control in a way that we haven't thought of. The US is going to exhaust all its uh missiles and drones and then China invades Taiwan. Like that is a nonzero possibility. Is it likely? I don't think so. But I'm not a geopolitical strategist. What the hell do I know? Maybe it happens. Um, but it's always what are the range of possibilities if we stop thinking in binary terms, which is what usually that panic open, you know, selloff is, and start thinking of what's likely to happen, what's the range, you end up with something a little more reasonable. And I think uh this is all hindsight bias but that's what I think the market effect is gapping down and then you know settling in. So where are we now where the NASDAQ is slightly positive at quarter to three. Um the S&P is barely down and I want to say the Dow is down one and a half% earlier. It's down 60 70 pips. That's pretty >> Yeah, corrections should be outlawed. We're in the sun like this. >> That's I think that's fair. All right, Dun. >> Well, I have a question for you guys. What do you think will be higher or will have gained the most a year from now? Energy stocks, tech stocks, or gold >> from current levels? >> Yeah, >> that's tough. That's a tough question. I'm going to punt that to Ben. >> I mean, if it was like say software stocks, it seems like that would be like >> that's okay. Just say tech. >> Yeah, I think that' probably be the easiest one, don't you? >> Okay. >> Yeah. I was just curious what you guys could say like, you know, gold is the one that's going the craziest because of crazy things keep happening. Uh, read the next question. We'll talk. Hey, before we move by gold, my question is, I always like to take a contrarian stance. How much of all the geopolitical mayhem, the tariff stuff, the Trump uh just like whatever is causing volatility and mayhem, how much of that is already priced in? I I'm more inclined to say I don't know where gold is going to be next week or next month, but two years from now, unless a mammoth run, >> unless unless something really goes off the rails, I think I think the path of least resistant is plateau or lower, not doubling from here. But again, I'm not a geopolitical strategist. I don't know. >> It's had a great decade. >> It really has. >> So short gold. >> Yeah. >> Okay. I'm just kidding. Short silver. I kept the question short for you, Duncan. >> There we go. Okay. Up next, uh, are the financial markets now the only rule of law that matters in a profit greedy world? >> All right. So, I think you can make the case that the financial markets have kind of taken the place of Congress in a lot of ways to impose bad decisions. So, this happened in liberation day. The stock market sold off. Bond yields started rising and that's when the whale said, "All right, we're not doing the tariffs that we're saying." And I think that's what they're trying to even they're saying Iran is saying like we're going to do the straight of hormuz until they have to do something because oil prices are going to skyrocket and you're going to get four or $5 gallon gas and people are going to hate that. And it seems like the financial markets are the thing that as long as like you don't mess with us and you let our profits run, we're fine. Do whatever you want, but if you start messing with our profits, you're going to get a slap on the wrist. So I I think people think about these things sometimes in the wrong way. You know the US is what we 3 4% of the global population 20% of the global economy and 58 almost 60% of the global market cap. That doesn't make any sense until you stop and think what is it that has made the United States such a good place to do business. And it's always been the sanctity of contracts, respect for property rights, and the rule of law. And we could argue about how much that's been undercut recently, but still all of that will be here. >> I heard I heard an interview with CFIs the other day. He said that's [ __ ] He said the rule of law stuff doesn't matter as long as you leave our profits alone. If you start messing with our profits and our growth, then we get mad. They say the market is like amoral. It doesn't care about that stuff at all. It just cares about making money. If you make money, if you mess that up, that's we're gonna get mad. Otherwise, whatever. We don't care. >> Was that Steve Eman or Steve Leman? >> Steve Eisman. Yeah. >> Steve Eisman. I I don't like to be on the other side of Steve Eisman, but >> I just thought it was interesting. He's like, markets are amoral. They don't make a judgment. >> That is absolutely true. >> They don't make a judgment decision on this stuff. They just like profits and that's the only thing that matters. So during the financial crisis, we put a whole bunch of rules in that uh you had reggga FD come along in the 2000s and then you had all of the new rules on banking and this and that. Arguably, oh, this is going to crimp everybody's profits and the market has done nothing but go straight up since the end of the financial crisis and those new rules went into effect. So yes, markets are amoral because it I it's just an unthinking uh interface between buyers and sellers between supply and demand. It's not casting moral judgments. It's how much demand is there for this stock. If there's more demand than than there is supply, the stock will go up until the demand supply. >> But it is interesting that people a lot of leaders now look to like what are the markets saying? That's how I know this is a good or a bad idea. Um, I guess when Congress abdigates its responsibilities, then the next check on executive power is arguably the market. And that's where the whole taco acronym came about. Cuz if any, >> just for people that don't know, it's Trump always chickens out. Well, which which I think is an exaggeration cuz the reality is as a president in both the first term and the second term, he has always he's not exactly self-critical, but he has always used the stock market as a way to say, "Hey, I'm doing great market." And any anytime there was a pullback during the Obama administration, he was always, "See, this guy ain't good. The market's going down." So maybe taco is an exaggeration, but ultimately if the market's down 15, 20, 25%. You will get a change of policy from Trump pretty rapidly. >> Well, let's talk about what it means for the economy. Duncan, do the next one. >> Okay. Up next, we got how bad would things have to get uh for us to have to actually worry about a recession this year? >> As we looked at polymarket odds and it went from in the last week or so, it's gone from 20% recession odds to like 35% or something. >> That was Ed Yardini's number this morning. 35. It should be 40 because everyone always says 40. Um, but that's that's like the worry for a lot of people is like, you know, the 70s that's what it was. If we have a a sustained oil price hike, that's that's that that energy shock. That's the thing that leads to bad economic outcomes. So my question is like, yeah, everyone thinks this is just going to be transitory. They'll back off, but how long would this actually have to last to have an actual economic impact that put us into a recession? It have to be a long time, right? So last year when some of the volatility started I I wrote something where I said I don't really see a recession the first half of this year. It's hard to imagine the second half of the 2025 seeing a recession. There would have to be a series of ongoing errors from the administration to lead to a recession. Now here it is 12 months later. Five of the past nine months have seen negative numbers in the labor market. the non-farm payrolls and now you had a government shutdown in the middle of that. You had some crazy weather. So you could squish some of that back. But the more radical decision-m, more policy that seems to be uh a little bit either extreme or out there, like at as terrible as the war in Iraq was, and as much as we were lied to for a year leading up to the war, at least there was a sense of I don't buy any of that nonsense I'm hearing, but at least they're selling the war to the public. This was let's blow up those guys. Nobody had any idea this was going. >> At the very least, consumer sentiment is just going to tank with $4 gallon gas. >> Consumer sentiment has been in the tank for 10. >> But that's the thing. And it hasn't mattered, right? >> Hasn't made a different I can't hear what you're saying because what you're doing is speaking so loudly. So every time consumers say, "We feel terrible. Excuse us while we go online and buy all this stuff." The sentiment becomes irrelevant. So each one of these events is just another straw on the camel's back and it increases the odds of a recession. Clearly if oil stays over $100 that's going to that's going to affect Japan that's going to affect uh Germany. It's going to affect >> more energy export. >> Is it bullish for renewable energy and EV stocks? outside of the United States, the rest of the world has fully embraced and in fact there's just a Bloomberg article that said despite the administration, um, solar and wind power is booming in the United States. So, so the fact that the administration thinks it it it's a hoax, climate change is a hoax. The rest of the world hasn't, >> we're a little less dependent on oil than we were 5 years ago when we're probably going to be less dependent on oil. Everything we've thrown at this at this economy and market has been taken. >> Every hit to the chin has been like people just keep spending. >> Sounds like famous last words. >> It is eventually it is but that's what's keep happening and that almost has to be your baseline now that like guilty until proven innocence or innocent until proven guilty. Right. >> So locksman authan atri the economic cycle research institute one of the things he's always said that's so interesting is you could throw anything at a healthy economy. You could it'll you can knock it over. You could it'll stumble but it just keeps going. When the economy is unhealthy, it doesn't take much of a hit to tip it into a recession. So >> that's true. You can't die jumping out of the 6 in window. >> But if six floors up, >> then there's a different story. So what we've seen is this was a robust market and a robust economy coming into the new administration in January of 2025. the market and the economy has absorbed all manner of hits, all manner of I don't want to get partisan, so let's say illconsidered >> well just everything everything this decade and it's been fine >> right everything we've thrown at it now to to bring locksman into this the more damage you do it's like a fighter plane you know during World War II at a certain point you're going to hit that crucial spot and that'll just be one bullet hole too many. So the labor market kind of the canary in the coal mine. The counter to that is how much of this is being driven by AI? How much of this is >> Yeah, we got a weak labor market. AI is here to take take its place and it's a perfect handoff and you can you can make that narrative. >> So but you know right now I don't see a recession today, tomorrow, next month. Does anyone want to make a bet whether or not we're in a recession fourth quarter of 2026? I think that is pretty close to 50/50 at this point. >> No way. >> No way. You want to make a bet? >> The the betting markets have it at 30%. >> Um, >> is that free money? >> That's today. >> You're >> So So if you want to if you think So I'm saying they're mispricing the risk. >> All right. >> And it's not 100%. It's closer to 50/50 Q4 if we see more and more mistakes. The question is, it's not a snapshot. It's a moving picture. 50/50 is a grand hedge. All right, one more question cuz and we're going to make him do a one-word answer here because we got to get to the pool. >> Okay, >> one word answer. >> Okay. With oil prices spiking, are rate cuts off the table for the time being? >> Oh, for sure. Yes. >> Okay. >> You're not going to see any rate cuts? Any any >> You get out of here, Blair. Get in here. >> Thanks so much, Barry. >> Mic drop. >> Oh my god. Thank you. >> Thank you. >> Thanks, Barry. >> Blair, welcome. Thank you for having me. Uh, love your headband. >> Yeah, I'm liking it. It actually it looks better than I I thought. I thought it was going to be funny. >> You actually look kind of cool. So, yeah. >> And it says invincible, son. Don't get mad at me. All right, we got some questions for Blair. >> All right, up first. Uh, my family has liquid net worth of $2.1 million, $1.9 million in stocks, all in SPY and VXUS, $200,000 cash, an additional $375,000 in home equity. Our household income is around $250,000, and we have no debt other than our mortgage. We are 43 and 39 with two kids in elementary school. I absolutely dread logging it on in the morning and want to quit my job and take a 10 to 12 month break or find a new job with a better work life balance. Should I just suck it up and keep grinding? At what point does it make sense to slow down in life? And that's from Jay. All right, so there's like the emotional side of this one, but also the number side from financial planning. And it's interesting, we've gotten a handful of these midlife crisis questions in recent weeks. Like I actually have done really well like these people for where they are in their stage in life, they've done really well for themselves obviously. like they've got a very good SG. They probably could just let it ride and be okay. But like how do you how do you approach this from a financial planning perspective of making them feel like it's okay to do this decision or alternatively maybe you shouldn't do this? Like how do you approach that question? >> One of the things I I say all the time is you can do anything different for a short period of time. So, this 10-month time horizon, 10 months of not saving and potentially dwindling down your your cash reserves is not going to make or break a financial plan. Sounds like these people are good savers. They've accumulated quite a bit in investments, >> right? They have good financial habits already. >> Exactly. So, I would say think about how much you spend on a monthly basis. Look, sounds like they already have a good cash reserve. Maybe save up a little bit more in preparation and go for it. Um, >> yeah, you're right. take like 6 or 12 months, build up the cash a little higher, and then you have like your runway. Figure out your, you know, expenses that you're going to run on, and then like give it a try essentially. Cuz you're right, it's not like they're saying this is it. I'm retiring at 42, and this money has to last me forever. >> It's not without risk. You don't know what job you're going to be able to get on the other side. You don't know if it's going to take you longer than expected. So, just double all of your assumptions. >> Yeah. >> And and go for it because it sounds horrible. I dread logging in every day. I mean, I really want this person to have a break and to be able to come back fresh for the next part of their career. >> Yes. And it does seem like their resources are good enough where they they Yes, they have a chance to do that even if it ends up being 24 months or something and then they get a little worried. But yeah, I um >> and they can cut back on discretionary spending too during that time. >> Well, yeah, their savings rate is obviously got to be very high. The good news is I feel like in the post uh COVID world, companies have cared a lot more about work life balance. So maybe they can find a company that values that a little more and I feel hopeful that they'll find something >> or maybe even a career change. I'm not sure what the reason for the dread is but that's no way to live life. >> Yeah. No, the amount of time you spend at the office in around your colleagues or whatever to dread waking up every morning to go, >> yeah, >> that's soul sucking. >> Yo, >> but the thing is that's why a lot of people do the fire route because they hate the job they work at. Right. >> Right. So yeah, find something even if it pays less that you're not so you're not so miserable at. >> All right. Another one. >> Up next, we got one from Mark. I've been a long-term investor in Birkshshire Hathway and it's now 37% of my portfolio. I also have a substantial investment in prologus from stock compensation/carried interest representing about 29% of my investment portfolio. Having concentrated 66% of my investments in two companies, I'm I'm sure you're screaming at me to diversify, right? As a CPA, I always struggle to diversify because with stock compensation, you have to pay taxes as a cost of diversifying versus compounding those dollars. Also, I recently retired and I'm heavily in equities. I've justified that by thinking of my investment in Birkshshire as partly a cash allocation given the cash they hold on their balance sheet. Do you buy this argument? >> It's it's actually kind of surprising to me that a CPA has this much risk in their portfolio. you usually think that they are risk managers and obviously the reason for it is the tax piece. They did not want to pay taxes. They want to keep compounding. So that's the part but um >> also is it it's Bergkshire. I just said it like it's Lord of the Rings. >> I would say Shire too I think. >> Um so he's so Bergkshire has you know 300 billion in cash or something. >> No I don't >> it's not cash. Well, I no, I do not think that you can I do not buy this argument that you can look at look through to the cash on their balance sheet as part of yours because you have no ability to tap that liquidity. And that's the point of having cash and diversification with bonds or cashlike things is that you have the ability to that doesn't dampen your volatility. The stock that stock can still fall regardless of how high the cash level is. >> It's still going to have stock-like volatility. Now, it is a diversified company of companies. So you could make the case there that it's not like owning one company but no you cannot look through uh to the cash as far as concentration is concerned. Uh I actually have a draft post in my blogs post that is is titled the tyranny of capital gains and it's about this paralysis that people get when they have a lot of unrealized capital gains in their portfolio. Mhm. >> And and it's just like an IRA. If you're going to spend this money ever, you owe tax, right? >> You already owe that tax. Delaying that tax does not change the fact that you owe the tax. Maybe you want to do a little bit of thoughtful tax planning on a year-to-year basis so that you don't pay 37% every single year. >> You don't have to rip the bandit off and sell it all immediately. >> Exactly. So, you do need to diversify. If you ever want to suspend any of these dollars, you're going to have to sell the stock. Take a look at your tax, you know, the the brackets where your income is going to fall. Do a little planning. And if you're charitable at all, highly appreciated stock is a great thing to give away to charity. So consider opening a donor adise fund. You can throw the shares in there. Uh you don't have to give away to charity if you didn't already want to just for tax planning purposes, but you might as well do it. And you might as well diversify because there will be another bare market. I don't know when. I don't know what will cause it. I don't know how long it will last or how deep it will be, but you'll probably be regretting the fact that you knew you already know you have an issue here. So, uh, just start attacking it. >> Yeah. And and guess what? If this if these stocks crashed and your game wasn't as big, it would make you feel better by selling them because you're not paying as good in taxes. Like Bill Sweet always says if you have taxes, it means you won the game of investing. It's a good thing. And you're right. And and it sounds like Mark is doing this on his own. So, he could talk to an adviser. There are ways that advisers can help create plans to, like you said, slowly but surely offload this risk. Um because I twothirds of your money in two stocks in retirement with most of your money being in equities. It's just way it's it's an unnecessary risk to take. >> It's too big of a risk. It is >> absolutely >> regardless of how they perform. >> Even a fund of even a company of companies like Bergkshire slightly less risk because it has multiple companies under one company that is still going to act like a stock despite how much cash they have on their balance. >> How much cash does Oley have Duncan? Cuz Duncan's got two of his net worth in Oly stock. Oh, no. One third. I'm just kidding. >> All right. If you have a question for us, remember, email us askthecompoundshow@gmail.com. This is our first time ever doing this live. Yeah. Um, >> it was hard. Uh, it's very loud. I can hear myself think. So, it was it was difficult. >> And we pulled in Barry and Blair because they're here and we appreciate it. >> We should say thanks to Sean, Cliff, Roger, Sodak, Jason, Chris, John, Carlo. I'm sure in the chat. I'm sure they're in there. So, thank you. >> And um again, ask the compound showgmail.com. Subscribe to Blair's blog at >> the bell curve. All right, B L E. >> And we'll see you next time. Thanks everyone.
Why Won’t the Stock Market Go Down?
Summary
Transcript
Welcome to Ask the Compound live from Miami. The show where you ask the questions, we provide the answers. We have a couple of guests coming on today. One is already with us, Mr. Bear Ridolf. Duncan is back from Japan. >> Hey everyone. >> How was Japan? >> It was amazing. >> I can imagine. >> I actually I brought Ben something uh that I don't know if he wants to wear it or not, but >> Oh, that is a must. I brought you. It says invincible in Japanese. >> I I'll wear that on the on my run tomorrow if you want a headband >> on the beach. All right. First, a sponsor. Uh today's show is sponsored by Betterment. Every RA knows attention. You don't want to turn people away. You don't want to require high minimums. You want to help clients who are just getting started because that's where the long-term relations begin. But here's the truth. Those simple accounts, they take a lot of work. Account opening, trading, rebalancing. Before long, your staff and back office are underwater trying to stay afloat. That's why established RAAS are turning to Betterment Advisor Solutions. It's a platform built for segmenting your book and streamlining those with smaller and simpler accounts. The onboarding experience is automated and paperless. The portfolio management is streamlined and tax efficient. Client experience is consistent and exceptional. Nicole almost just walked into the shot. Explore this what segmentation can do for you and your firm today. Lower your operational lift, but keep your standard of service high. All with Betterment Advisor Solutions. Your biggest regret will be not doing it sooner. Learn more at betterment.com/advisors. All right, the show today. I put in questions of my own because I want to talk markets because there's a lot of weird stuff going on while we are at So Duncan, you can read the questions and I'm gonna tee Barry up because I just wanted to talk markets. Michael and I didn't get a chance to talk markets on animal spirits today because we were talking other stuff. >> Yeah, cool. Yeah, I was watching things happening from Japan. >> Barry's had no prep. We're just going to talk markets. >> I had questions. So, yeah, you're answering some of them here. All right, so up first today we got one from Ben. Uh, it seems like everyone more or less assumes the financial markets will cause another taco moment from Trump here on the war and this oil spike will be transitory. What's the risk if that doesn't happen and this thing drags on? Are investors becoming too complacent? Are we at risk of some sort of Minsky moment? So, we were at dinner last night, a nice Peruvian place, and halfway through dinner, Caleb Silver from Investipedia leans over to a bunch of us and he says, "Guys, look at the futures of the market. Oil just spiked almost 30%. Futures are down 2%. Stocks in Japan are down almost 7% and three people on the table all at the same time go, "Holy [ __ ] what's going on here?" And then the market opens today and things slowly but surely come back. So, we're having these moments that like scare people. And obviously, oil is up a lot already. It's up 60% this year or something. So, I I guess the question is I'm trying maybe I'm thinking too many levels deep here of this overreaction, this underreaction. I guess my question for you is just are you surprised by what's going on? We're seeing all this movement and then things settle down once advisers digest this stuff and people are like not willing to panic just yet. >> So, so the old line is always it's not the news, it's the reaction to the news. And if you've been watching the market since the am I allowed to call it a war, right? >> Since the bang bang shoot gun, planes, ships, guns thingy in Iran started, not a war. Um the markets have gapped down just about every day and climbed back. Some days they climb back to positive. Some days they just work most of the panic reaction off. To me that's very telling that all right there's a war in Iran. Oil prices is going to go up a h 100red bucks. This will up to 100 and over. This is bad for the rest of the world. But truth be told, the US is energy independent. We're exporting natural gas and oil overseas. Not to be selfish, but from a domestic perspective, this isn't that bad for us. >> In the past, people would have used this as an excuse for a 10 or 50% correction easily, and now it just won't happen. >> Think about it. Not only is the US energy independent, but when you look at the family, the household budget, energy as a percentage of that budget in the 70s was 12%. So when oil prices double, that was really big. Now energy is something like 7% or 6% of the household budget. >> Fully hedged because he drives a Tesla. >> It's true. >> Well, but you're paying for electricity and if oil prices go up, natural gas prices t they won't go up as much, but they tend to get pul any excuse to raise prices. >> If I owned a home, I would have a heat pump by now. >> Geothermal heat pump. >> Yeah, there you go. >> So, but even you said it like the rest of the world, I mean, emerging market stocks are down 9%. the EPA's down 7%. So, it's not like that's just a regular run-of-the-mill correction. It's not even anything bad yet. So, I I just think people I guess it's almost a good thing that the markets are like, "All right, let's just wait before we freak out completely and see what happens here." >> You know, we've had this conversation every time I'm on, but I'll I'll repeat it. The future is inherently unknown and unknowable, and all you could do is lay out here's the best case scenario. Here's the worst case scenario. here are the things in the middle where we're likely to end up most of the time. And so as long as you recognize now sometimes, you know, if you can think about it, it's probably not a black swan. So the thought that, hey, this can spiral out of control in a way that we haven't thought of. The US is going to exhaust all its uh missiles and drones and then China invades Taiwan. Like that is a nonzero possibility. Is it likely? I don't think so. But I'm not a geopolitical strategist. What the hell do I know? Maybe it happens. Um, but it's always what are the range of possibilities if we stop thinking in binary terms, which is what usually that panic open, you know, selloff is, and start thinking of what's likely to happen, what's the range, you end up with something a little more reasonable. And I think uh this is all hindsight bias but that's what I think the market effect is gapping down and then you know settling in. So where are we now where the NASDAQ is slightly positive at quarter to three. Um the S&P is barely down and I want to say the Dow is down one and a half% earlier. It's down 60 70 pips. That's pretty >> Yeah, corrections should be outlawed. We're in the sun like this. >> That's I think that's fair. All right, Dun. >> Well, I have a question for you guys. What do you think will be higher or will have gained the most a year from now? Energy stocks, tech stocks, or gold >> from current levels? >> Yeah, >> that's tough. That's a tough question. I'm going to punt that to Ben. >> I mean, if it was like say software stocks, it seems like that would be like >> that's okay. Just say tech. >> Yeah, I think that' probably be the easiest one, don't you? >> Okay. >> Yeah. I was just curious what you guys could say like, you know, gold is the one that's going the craziest because of crazy things keep happening. Uh, read the next question. We'll talk. Hey, before we move by gold, my question is, I always like to take a contrarian stance. How much of all the geopolitical mayhem, the tariff stuff, the Trump uh just like whatever is causing volatility and mayhem, how much of that is already priced in? I I'm more inclined to say I don't know where gold is going to be next week or next month, but two years from now, unless a mammoth run, >> unless unless something really goes off the rails, I think I think the path of least resistant is plateau or lower, not doubling from here. But again, I'm not a geopolitical strategist. I don't know. >> It's had a great decade. >> It really has. >> So short gold. >> Yeah. >> Okay. I'm just kidding. Short silver. I kept the question short for you, Duncan. >> There we go. Okay. Up next, uh, are the financial markets now the only rule of law that matters in a profit greedy world? >> All right. So, I think you can make the case that the financial markets have kind of taken the place of Congress in a lot of ways to impose bad decisions. So, this happened in liberation day. The stock market sold off. Bond yields started rising and that's when the whale said, "All right, we're not doing the tariffs that we're saying." And I think that's what they're trying to even they're saying Iran is saying like we're going to do the straight of hormuz until they have to do something because oil prices are going to skyrocket and you're going to get four or $5 gallon gas and people are going to hate that. And it seems like the financial markets are the thing that as long as like you don't mess with us and you let our profits run, we're fine. Do whatever you want, but if you start messing with our profits, you're going to get a slap on the wrist. So I I think people think about these things sometimes in the wrong way. You know the US is what we 3 4% of the global population 20% of the global economy and 58 almost 60% of the global market cap. That doesn't make any sense until you stop and think what is it that has made the United States such a good place to do business. And it's always been the sanctity of contracts, respect for property rights, and the rule of law. And we could argue about how much that's been undercut recently, but still all of that will be here. >> I heard I heard an interview with CFIs the other day. He said that's [ __ ] He said the rule of law stuff doesn't matter as long as you leave our profits alone. If you start messing with our profits and our growth, then we get mad. They say the market is like amoral. It doesn't care about that stuff at all. It just cares about making money. If you make money, if you mess that up, that's we're gonna get mad. Otherwise, whatever. We don't care. >> Was that Steve Eman or Steve Leman? >> Steve Eisman. Yeah. >> Steve Eisman. I I don't like to be on the other side of Steve Eisman, but >> I just thought it was interesting. He's like, markets are amoral. They don't make a judgment. >> That is absolutely true. >> They don't make a judgment decision on this stuff. They just like profits and that's the only thing that matters. So during the financial crisis, we put a whole bunch of rules in that uh you had reggga FD come along in the 2000s and then you had all of the new rules on banking and this and that. Arguably, oh, this is going to crimp everybody's profits and the market has done nothing but go straight up since the end of the financial crisis and those new rules went into effect. So yes, markets are amoral because it I it's just an unthinking uh interface between buyers and sellers between supply and demand. It's not casting moral judgments. It's how much demand is there for this stock. If there's more demand than than there is supply, the stock will go up until the demand supply. >> But it is interesting that people a lot of leaders now look to like what are the markets saying? That's how I know this is a good or a bad idea. Um, I guess when Congress abdigates its responsibilities, then the next check on executive power is arguably the market. And that's where the whole taco acronym came about. Cuz if any, >> just for people that don't know, it's Trump always chickens out. Well, which which I think is an exaggeration cuz the reality is as a president in both the first term and the second term, he has always he's not exactly self-critical, but he has always used the stock market as a way to say, "Hey, I'm doing great market." And any anytime there was a pullback during the Obama administration, he was always, "See, this guy ain't good. The market's going down." So maybe taco is an exaggeration, but ultimately if the market's down 15, 20, 25%. You will get a change of policy from Trump pretty rapidly. >> Well, let's talk about what it means for the economy. Duncan, do the next one. >> Okay. Up next, we got how bad would things have to get uh for us to have to actually worry about a recession this year? >> As we looked at polymarket odds and it went from in the last week or so, it's gone from 20% recession odds to like 35% or something. >> That was Ed Yardini's number this morning. 35. It should be 40 because everyone always says 40. Um, but that's that's like the worry for a lot of people is like, you know, the 70s that's what it was. If we have a a sustained oil price hike, that's that's that that energy shock. That's the thing that leads to bad economic outcomes. So my question is like, yeah, everyone thinks this is just going to be transitory. They'll back off, but how long would this actually have to last to have an actual economic impact that put us into a recession? It have to be a long time, right? So last year when some of the volatility started I I wrote something where I said I don't really see a recession the first half of this year. It's hard to imagine the second half of the 2025 seeing a recession. There would have to be a series of ongoing errors from the administration to lead to a recession. Now here it is 12 months later. Five of the past nine months have seen negative numbers in the labor market. the non-farm payrolls and now you had a government shutdown in the middle of that. You had some crazy weather. So you could squish some of that back. But the more radical decision-m, more policy that seems to be uh a little bit either extreme or out there, like at as terrible as the war in Iraq was, and as much as we were lied to for a year leading up to the war, at least there was a sense of I don't buy any of that nonsense I'm hearing, but at least they're selling the war to the public. This was let's blow up those guys. Nobody had any idea this was going. >> At the very least, consumer sentiment is just going to tank with $4 gallon gas. >> Consumer sentiment has been in the tank for 10. >> But that's the thing. And it hasn't mattered, right? >> Hasn't made a different I can't hear what you're saying because what you're doing is speaking so loudly. So every time consumers say, "We feel terrible. Excuse us while we go online and buy all this stuff." The sentiment becomes irrelevant. So each one of these events is just another straw on the camel's back and it increases the odds of a recession. Clearly if oil stays over $100 that's going to that's going to affect Japan that's going to affect uh Germany. It's going to affect >> more energy export. >> Is it bullish for renewable energy and EV stocks? outside of the United States, the rest of the world has fully embraced and in fact there's just a Bloomberg article that said despite the administration, um, solar and wind power is booming in the United States. So, so the fact that the administration thinks it it it's a hoax, climate change is a hoax. The rest of the world hasn't, >> we're a little less dependent on oil than we were 5 years ago when we're probably going to be less dependent on oil. Everything we've thrown at this at this economy and market has been taken. >> Every hit to the chin has been like people just keep spending. >> Sounds like famous last words. >> It is eventually it is but that's what's keep happening and that almost has to be your baseline now that like guilty until proven innocence or innocent until proven guilty. Right. >> So locksman authan atri the economic cycle research institute one of the things he's always said that's so interesting is you could throw anything at a healthy economy. You could it'll you can knock it over. You could it'll stumble but it just keeps going. When the economy is unhealthy, it doesn't take much of a hit to tip it into a recession. So >> that's true. You can't die jumping out of the 6 in window. >> But if six floors up, >> then there's a different story. So what we've seen is this was a robust market and a robust economy coming into the new administration in January of 2025. the market and the economy has absorbed all manner of hits, all manner of I don't want to get partisan, so let's say illconsidered >> well just everything everything this decade and it's been fine >> right everything we've thrown at it now to to bring locksman into this the more damage you do it's like a fighter plane you know during World War II at a certain point you're going to hit that crucial spot and that'll just be one bullet hole too many. So the labor market kind of the canary in the coal mine. The counter to that is how much of this is being driven by AI? How much of this is >> Yeah, we got a weak labor market. AI is here to take take its place and it's a perfect handoff and you can you can make that narrative. >> So but you know right now I don't see a recession today, tomorrow, next month. Does anyone want to make a bet whether or not we're in a recession fourth quarter of 2026? I think that is pretty close to 50/50 at this point. >> No way. >> No way. You want to make a bet? >> The the betting markets have it at 30%. >> Um, >> is that free money? >> That's today. >> You're >> So So if you want to if you think So I'm saying they're mispricing the risk. >> All right. >> And it's not 100%. It's closer to 50/50 Q4 if we see more and more mistakes. The question is, it's not a snapshot. It's a moving picture. 50/50 is a grand hedge. All right, one more question cuz and we're going to make him do a one-word answer here because we got to get to the pool. >> Okay, >> one word answer. >> Okay. With oil prices spiking, are rate cuts off the table for the time being? >> Oh, for sure. Yes. >> Okay. >> You're not going to see any rate cuts? Any any >> You get out of here, Blair. Get in here. >> Thanks so much, Barry. >> Mic drop. >> Oh my god. Thank you. >> Thank you. >> Thanks, Barry. >> Blair, welcome. Thank you for having me. Uh, love your headband. >> Yeah, I'm liking it. It actually it looks better than I I thought. I thought it was going to be funny. >> You actually look kind of cool. So, yeah. >> And it says invincible, son. Don't get mad at me. All right, we got some questions for Blair. >> All right, up first. Uh, my family has liquid net worth of $2.1 million, $1.9 million in stocks, all in SPY and VXUS, $200,000 cash, an additional $375,000 in home equity. Our household income is around $250,000, and we have no debt other than our mortgage. We are 43 and 39 with two kids in elementary school. I absolutely dread logging it on in the morning and want to quit my job and take a 10 to 12 month break or find a new job with a better work life balance. Should I just suck it up and keep grinding? At what point does it make sense to slow down in life? And that's from Jay. All right, so there's like the emotional side of this one, but also the number side from financial planning. And it's interesting, we've gotten a handful of these midlife crisis questions in recent weeks. Like I actually have done really well like these people for where they are in their stage in life, they've done really well for themselves obviously. like they've got a very good SG. They probably could just let it ride and be okay. But like how do you how do you approach this from a financial planning perspective of making them feel like it's okay to do this decision or alternatively maybe you shouldn't do this? Like how do you approach that question? >> One of the things I I say all the time is you can do anything different for a short period of time. So, this 10-month time horizon, 10 months of not saving and potentially dwindling down your your cash reserves is not going to make or break a financial plan. Sounds like these people are good savers. They've accumulated quite a bit in investments, >> right? They have good financial habits already. >> Exactly. So, I would say think about how much you spend on a monthly basis. Look, sounds like they already have a good cash reserve. Maybe save up a little bit more in preparation and go for it. Um, >> yeah, you're right. take like 6 or 12 months, build up the cash a little higher, and then you have like your runway. Figure out your, you know, expenses that you're going to run on, and then like give it a try essentially. Cuz you're right, it's not like they're saying this is it. I'm retiring at 42, and this money has to last me forever. >> It's not without risk. You don't know what job you're going to be able to get on the other side. You don't know if it's going to take you longer than expected. So, just double all of your assumptions. >> Yeah. >> And and go for it because it sounds horrible. I dread logging in every day. I mean, I really want this person to have a break and to be able to come back fresh for the next part of their career. >> Yes. And it does seem like their resources are good enough where they they Yes, they have a chance to do that even if it ends up being 24 months or something and then they get a little worried. But yeah, I um >> and they can cut back on discretionary spending too during that time. >> Well, yeah, their savings rate is obviously got to be very high. The good news is I feel like in the post uh COVID world, companies have cared a lot more about work life balance. So maybe they can find a company that values that a little more and I feel hopeful that they'll find something >> or maybe even a career change. I'm not sure what the reason for the dread is but that's no way to live life. >> Yeah. No, the amount of time you spend at the office in around your colleagues or whatever to dread waking up every morning to go, >> yeah, >> that's soul sucking. >> Yo, >> but the thing is that's why a lot of people do the fire route because they hate the job they work at. Right. >> Right. So yeah, find something even if it pays less that you're not so you're not so miserable at. >> All right. Another one. >> Up next, we got one from Mark. I've been a long-term investor in Birkshshire Hathway and it's now 37% of my portfolio. I also have a substantial investment in prologus from stock compensation/carried interest representing about 29% of my investment portfolio. Having concentrated 66% of my investments in two companies, I'm I'm sure you're screaming at me to diversify, right? As a CPA, I always struggle to diversify because with stock compensation, you have to pay taxes as a cost of diversifying versus compounding those dollars. Also, I recently retired and I'm heavily in equities. I've justified that by thinking of my investment in Birkshshire as partly a cash allocation given the cash they hold on their balance sheet. Do you buy this argument? >> It's it's actually kind of surprising to me that a CPA has this much risk in their portfolio. you usually think that they are risk managers and obviously the reason for it is the tax piece. They did not want to pay taxes. They want to keep compounding. So that's the part but um >> also is it it's Bergkshire. I just said it like it's Lord of the Rings. >> I would say Shire too I think. >> Um so he's so Bergkshire has you know 300 billion in cash or something. >> No I don't >> it's not cash. Well, I no, I do not think that you can I do not buy this argument that you can look at look through to the cash on their balance sheet as part of yours because you have no ability to tap that liquidity. And that's the point of having cash and diversification with bonds or cashlike things is that you have the ability to that doesn't dampen your volatility. The stock that stock can still fall regardless of how high the cash level is. >> It's still going to have stock-like volatility. Now, it is a diversified company of companies. So you could make the case there that it's not like owning one company but no you cannot look through uh to the cash as far as concentration is concerned. Uh I actually have a draft post in my blogs post that is is titled the tyranny of capital gains and it's about this paralysis that people get when they have a lot of unrealized capital gains in their portfolio. Mhm. >> And and it's just like an IRA. If you're going to spend this money ever, you owe tax, right? >> You already owe that tax. Delaying that tax does not change the fact that you owe the tax. Maybe you want to do a little bit of thoughtful tax planning on a year-to-year basis so that you don't pay 37% every single year. >> You don't have to rip the bandit off and sell it all immediately. >> Exactly. So, you do need to diversify. If you ever want to suspend any of these dollars, you're going to have to sell the stock. Take a look at your tax, you know, the the brackets where your income is going to fall. Do a little planning. And if you're charitable at all, highly appreciated stock is a great thing to give away to charity. So consider opening a donor adise fund. You can throw the shares in there. Uh you don't have to give away to charity if you didn't already want to just for tax planning purposes, but you might as well do it. And you might as well diversify because there will be another bare market. I don't know when. I don't know what will cause it. I don't know how long it will last or how deep it will be, but you'll probably be regretting the fact that you knew you already know you have an issue here. So, uh, just start attacking it. >> Yeah. And and guess what? If this if these stocks crashed and your game wasn't as big, it would make you feel better by selling them because you're not paying as good in taxes. Like Bill Sweet always says if you have taxes, it means you won the game of investing. It's a good thing. And you're right. And and it sounds like Mark is doing this on his own. So, he could talk to an adviser. There are ways that advisers can help create plans to, like you said, slowly but surely offload this risk. Um because I twothirds of your money in two stocks in retirement with most of your money being in equities. It's just way it's it's an unnecessary risk to take. >> It's too big of a risk. It is >> absolutely >> regardless of how they perform. >> Even a fund of even a company of companies like Bergkshire slightly less risk because it has multiple companies under one company that is still going to act like a stock despite how much cash they have on their balance. >> How much cash does Oley have Duncan? Cuz Duncan's got two of his net worth in Oly stock. Oh, no. One third. I'm just kidding. >> All right. If you have a question for us, remember, email us askthecompoundshow@gmail.com. This is our first time ever doing this live. Yeah. Um, >> it was hard. Uh, it's very loud. I can hear myself think. So, it was it was difficult. >> And we pulled in Barry and Blair because they're here and we appreciate it. >> We should say thanks to Sean, Cliff, Roger, Sodak, Jason, Chris, John, Carlo. I'm sure in the chat. I'm sure they're in there. So, thank you. >> And um again, ask the compound showgmail.com. Subscribe to Blair's blog at >> the bell curve. All right, B L E. >> And we'll see you next time. Thanks everyone.