Cullen Roche: The Market Divide Leaving Investors Behind | The Hidden Risks in Your Portfolio
Summary
Macro Divergence: The guest highlights bifurcations across housing, inflation, and technology-driven wealth concentration as key inputs into asset allocation.
Global Diversification: He advocates reducing U.S. concentration and increasing international stocks exposure as a currency hedge and to mitigate Mag 7 risk.
Emerging Markets: Bullish long-term case based on under-ownership, valuation gaps, and structural convergence of middle classes driven by globalization.
Precious Metals: Metals strength is a “perfect storm,” with gold framed as long-duration fiat insurance best owned over multi-decade horizons rather than chased near-term.
Short Duration Bonds: Recommends 0–5 year Treasuries for safer income and diversification, noting attractive coupons and manageable rate risk versus long-duration bonds.
Tech Concentration Risk: Suggests tilting away from concentrated U.S. tech toward broader diversification; Nvidia (NVDA) is cited as a dominant holding in many funds.
AI and Geopolitics: AI is a critical national priority (Taiwan risk, data center energy costs), but also an inflation and policy wildcard impacting rate-cut expectations.
Product Selection Risk: Cautions on private market/option-income ETFs due to poor price transparency, spreads, and structural mismatches in ETF wrappers.
Transcript
There's so many different sort of divergences and bifurcations in the macro economy. We've seen inequality has been such a big story and that's nowhere more apparent than it is in technology. If you weren't a homeowner and you weren't very heavily invested in the US stock market and especially technology in the last 10 years, you're on sort of on the outside looking in right now and I think you're really frustrated. There are so many people who are on the outside looking in at those two asset classes and saying to themselves, I don't know how I'm going to catch up at this point. Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.comfree. Hello and welcome to Wealthon. I'm Maggie Lake and joining me today to discuss asset allocation is Colin Ro, founder and chief investment officer of Discipline Funds and the author of the book Your Perfect Portfolio, which we all need right now. Hi Colin, it's great to have you with us. >> Hey Maggie, it's so great to talk to you again. >> So let's start uh with the sort of macroeconomic background first. Um and what is your outlook right now for the US economy? Where do you think we are? This is one of the craziest times that I can remember ever thinking about the macroeconomic environment and and especially macro asset allocation in general just because there's so many different sort of divergences and bifurcations in the macroeconomy. So you you you've got so many different currents going on where for instance the the housing market is not in a recession but the housing market is in the doldrums by almost any measure and the you know there was an old famous paper that said the the US economy is the real estate market basically and and that's true to a large degree because it has such a big broad impact and I think that this is probably in my view nowhere more apparent than it is in consumer sentiment. And I think, you know, we got a new consumer sentiment reading this morning. It was terrible again. And I think a lot of that is the frustration over the housing situation and shelter just broadly because we've had, as everybody knows from COVID, we had a huge boom in house prices. Uh rents have gone up a ton. It's filtered through into inflation. Inflation has improved, but it's still it's a still a very very frustrating situation for a lot of people. And so you've had this really weird situation where the housing market is actually really soft now because no one there's no housing turnover. And so for the last, you know, we go through this 50% increase in prices and then in the last three years, real house prices have actually been negative. And so I think um a lot of this is just the digestion of what's been going on with COVID. And the the economy, weirdly, is still digesting a lot of what's going on from CO where the the fiscal stimulus packages were gigantic. They have continue to sort of filter through and impact inflation in a lot of ways. They've added to demand. They've frustrated the Fed. The Fed I think has done a fairly good job of bringing down inflation, but they were I mean they obviously were were late in 2021, but they have since sort of caught up and they're trying to fight this big fiscal headwind though that's been going on for the last few years. And so that's bolstered the economy to some degree or at least added to aggregate demand and but it's been very very uneven the way that it's filtered through the economy and I think this is probably most uh apparent in sectors like technology and god even the I mean we've seen inequality has been such a big story and that's nowhere more apparent than it is in technology and the the anything AI related has gone through almost like a in a lot of ways people in the AI sectors and anything sort of related to it have gone through I mean generational wealth transformations here where they've seen huge explosions in their in their wealth and that's impacted the stock market in a really acute way too where the inequality story isn't just a macroeconomic story it's very much a stock market story where the the inequality of returns has been very uneven too where so much of the market capitalization growth has flowed to fewer and fewer firms especially these ones you know the mag seven and the the sort of AI leaning companies. And so even the the wealth generation inside of the the the financial asset markets has been very very contained to very specific sectors and components where if you haven't been in if you weren't a homeowner and you weren't very heavily invested in the US stock market and especially technology in the last 10 years, you're on sort of on the outside looking in right now and I think you're really frustrated. And so that's I think a big big part of the explanation for why consumer sentiment is so bad because the there are so many people who are on the outside looking in at those two asset classes and saying to themselves, I don't know how I'm going to catch up at this point. >> Yeah. No, I think I think you bring up some really really important points and this is huge, right? because we not only for consumer spending but al also for the sort of political backlash that is starting to make its way and will really be profoundly felt as we go toward midterm elections and I I think I would add to that maybe that you have uh first of all people frustrated because they were theoretically doing the right thing right they were they maybe they had safer stocks value stocks maybe they were diversified across the broader stock market if they didn't go all in on Nvidia and a couple of names you know, they've watched it run away from them. So, that's a problem in terms of what do I do now? And I wonder if you think that we're we're sort of tracking the right thing. I think people feel really frustrated when they hear, oh, well, you know, the Fed's bringing inflation down. There's some price inflation and goods inflation that have come down that are kind of related to supply chains. But for a lot of people, if you look at your insurance premiums, we just got a letter my insurance premium up 22%. 22%. Right? College has exploded, health care costs have exploded, a lot of people don't get covered from their employers, and they have to go into the um exchanges, which we know here in the US is fraught with peril. I feel like a lot of people are not sure that even the data we look represents what's actually happening in the real economy. >> Yeah. Well, that's one of the really tricky things about especially inflation metrics and and things like the CPI is that they don't measure personal inflation. They try to measure a really broad basket of goods at a national level and so it doesn't capture your personal inflation level and it doesn't it certainly doesn't capture inflation accurately. I think the I don't know I I think the capturing inflation really really accurately is an incredibly difficult data uh you know compiling process. And so I I tend to I mean I know some people at the Bureau of Labor Statistics and I know how that process works and I just know how hard it is to actually obtain the data and obtain it accurately more importantly. And so you know even it's weird because even some online third-party metrics like uh trueflation I mean they gosh that thing says that inflation right now is like 1 2% or something. It's like near near one of the low points. That's way wrong in my view. But it's very it's incredibly bifurcated. And part of this is due to the the macroeconomic landscape too where I mean things like health care. I find it really really difficult to see an environment where health care costs come down at all or that health care inflation doesn't run at a rate that is meaningfully higher than the average CPI just because of the demographic situation in the country. And this is so important for the macroeconomic landscape where I mean you've got a very very different situation in healthcare compared to something like shelter where shelter is actually a really weird component of CPI because the shelter component the BLS is you know they're they use a a little bit of a a weird metric in owner's equivalent rent which really lags it lags sort of famously by up to 18 months or more inside of the data the way it filters in because rents don't update every month like the CPA I does rents update typically, you know, your your rent updates once a year. And so they use like a rolling six-month um update inside of the owner's equivalent rent metric, which then filters in and it lags. And so you're getting for for really like the last like two years, we know that real-time rents are actually declining year-over-year. You can look at things like the Zillow rent index and things like that and you we know that the the rental prices are actually they they've gone up a lot but they're they've started to flatline too and so that's it's this really weird bifurcation where and this is why I say it's this is such a a confounding sort of moment in the macro economy because there's so many diverging elements going on and then the you know god the the most recent wrinkle in all of this is that the you know I kept saying that in the last couple years that with the shelter component being such a huge headwind to inflation with this negative um you know sort of pressure from from shelter prices that you would have a lot of trouble seeing a really high inflation print because of that just because CPI I mean shelter is like 35% in uh in CPI. So, it's just it's such a big component that when you've got a low uh metric there, when you got a low year-over-year rate because the because the the data has been lagging so much, you need some other huge tailwind to actually cause high inflation. And I've been saying that the commodity price component could be the thing that would cause that. If you look back to like the 1970s, like the thing that really drove that inflation was just it was a nonstop increase in the price of oil where oil went from like $3 to $30 and it did it for 10 years. Almost almost every single month it was going up for a 10-year period. And so when you get something like that, especially back in the 70s, oil was such an important commodity, so much more important even than it is now. Right now though, what we're seeing is commodity prices are starting to go up a whole lot. And so commodity prices just this year are already up on average like 20%. And so and some of them god I mean the price of silver is already up what you know 60 70%. There's there's a lot of crazy things going on. And so this is very disconcerting for the Fed because the Fed I think was starting to increasingly get to a point where they were feeling more and more comfortable with rate cuts. And obviously I think Trump is going to put someone in charge there that is going to be amendable to rate cuts. But this commodity price uh surge in the first few weeks of the year, it starts to add a really nasty wrinkle to that narrative where if you're especially if you're somebody like Rick Reer, you know, it's been rumored that Rick Reer is going to become the he's kind of the front runner for Fed Chief now. He's a guy that looks at he looks at market data. He looks at real-time market data. And I can guarantee you that he's looking at things like commodity prices surging in real time and that's giving him a lot of pause about, you know, hey, maybe maybe we were feeling more comfortable cutting rates a month ago, but right now with commodity prices surging, maybe the math on that starts to change and maybe we, you know, we're not only going to pause at the next meeting, but we might be on hold for longer than people think here. So, this is a the commodity price surge is a nasty wrinkle in the whole narrative that just adds another piece of confusing data to the whole macroeconomic picture. >> If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hard Assets Alliance, at hard assetsalliance.com. That's hardassallalliance.com. Yeah. So, how are you thinking about political risk here? because uh you you certainly have the the questions around the Fed and Fed policy and who controls it and independence and the direction of rates as one factor. Uh you had headlines just today. You saw health insurers, some of the stocks were down 20% on news coming out of Washington. Uh we've had a flurry of geopolitical events. Are we in an elevated period for political risk? Then how how can investors think about that when they're trying to figure out what investments to make? >> Oh yeah. I think undoubtedly and I think that the you know gosh the the domestic risks are obvious you know to everybody but the I think the the bigger one is the all the geopolitical stuff that's going on and the you know the it's weird because in general I look at geopolitical risk and just political risk in general inside of portfolio construction and I would say gosh I mean 95% of the time I would look at it and say this is noise people will forget about this in a month and move on and they'll talk about the next thing you know typically it's nonsense things like the you know the debt ceiling or you know some something like Venezuela where you know maybe it you know it seems important in the moment and it causes big moves and then you know we're a month out from that or a few weeks out from that and already it seems like people have forgotten about it. But um some of the geopolitical stuff though is is really really important. And I think the the biggest one is obviously that eventually China becomes a bigger and bigger risk with Taiwan. And I think that the thing that actually was interesting to me about the Venezuela move and and some of the Greenland commentary is that I don't think we're fully digesting the risk that China one day is just going to wake up and they're going to just say Taiwan is ours and everyone is going to be up in arms about it. But the Chinese are going to respond and say, "Well, the Americans spent, you know, so much time negotiating Greenland and, you know, they've just sort of moved in there and then they they decided they just were going to take over Venezuela and look what they're doing there." So, why can't we just do the same thing with Taiwan? And Taiwan's really important because Taiwan changes a lot of the AI dynamics and that has a huge impact not only on the dollar but it has a huge impact potentially in the long run on some of the most important sectors and the most important companies in the United States because the the AI war is something that I really think the United States cannot afford to lose. And I think that I mean from a political perspective I've been of the view that we need to just sort of not impede any of the innovation that's going on around AI because this it's just so early in the the the transformation of all of this that we need to just let the I think we need to let the dust settle where wherever it may and let you know let these big companies fight it out. Don't get in the way. Um, you know, some of the big companies are already feeling like they have to do sort of weird things with mergers and worrying about, you know, oh, are we going to run into antitrust issues and and I'm of the view view that we need to just sort of, you know, back off. Don't get too involved in all this. Don't let the political narratives overtake everything. Um, and and make sure that we're supporting US corporations in a way where we're making sure that the it's the United States that wins this AI fight in the long run. Because if if China and India win it, um that is a I think it's a huge huge gamecher in the long run because it's going to have a huge huge impact on the transformation of who gets the wealth from all of this. And if China is the leader in this going forward for the next 5, 10, 20 years, um that could be really really damaging to the United States in lots of different ways. And we just don't know how this is all going to play out. So I'm I I I don't I'm a I guess I'm a red-blooded capitalist on this issue, you know, more so than maybe a lot of other issues that I that I think about, but I really do think that this is one that we we need to win this war and we need to be backing our own our own guys in this fight in a a really supportive way as much as we can. >> Yeah, it's a it's a super interesting conversation. There's a whole there's a an entire sort of separate one which we won't get into today about, you know, the the AI arms race on one side and then, you know, Do you what is the risk of having no guard rails because of that? You know, what does that unleash? That's a whole that's a whole other topic. But you bring up a really >> that's a messy one. Sorry to interrupt. It's a messy one from the inflation story too because and we're starting to see this that um >> I mean the data center energy usage is that's another component of inflation that I'm increasingly worried about because it's hard to see >> how how do we you know you can't unscramble that egg I think once it starts to get scrambled and that turns into a really messy political fight. >> Yeah. Uh so it's interesting. I think this kind of raises the question um that I guess we all should be asking ourselves, but what what is the risk that you were trying to sort of hedge or protect against when you're thinking about a portfolio in this environment? I mean is it inflation? Is it this sort of geopolitical risk? Uh all of the above? I mean, how are you thinking of what what is it a is it a financial crisis based on debt and what's happening in Japan? How what is the biggest risk that you worry about when you're thinking about how you're allocating right now? >> So, I would say you know there's there's nothing from a macroeconomic perspective that that jumps out in terms of like a you know a debt type of risk, a debt deflation. So, you know, debt deflation risk is sort of at the I would say at the bottom of my list. the the more worrisome thing for me is on a well on a I I guess on a short-term basis I would look at things like the the US equity market and especially with the the administration's sort of anti-doll view. Um I I'm I would be concerned about US valuations relative to foreign and I think that I think there's a strong probability that the the reversal in performance that we saw last year I would not be shocked if that continues well into this year it's already continuing so far and I wouldn't be surprised if God I wouldn't be surprised if emerging and and developed international outperform the United States on a on a 5 to 10 year basis here. So I do think that the argument for global diversification is stronger not only because you're you're insulating yourself from that mag seven trade and the the risks the sort of you know acute risks that we already discussed there but I think that with the the political backdrop too and the the way the world is increasingly looking at the dollar the and this feeds into the debasement trade too where and because this is the the kicker with international allocations is that in my view diversifying to international stocks is not so much a bet on foreign companies outperforming or or out competing US corporations. It's a currency story really that you're really betting on that the dollar will be weak and that this flows into to basically a foreign exchange trade where foreign entities just become more valuable in part because the domestic currency declines in value. And so to me it it operates as a as sort of a double hedge. It's not only a hedge against uh the the the sort of isol or concentration of the mag seven inside of the domestic economy, but it's a domestic inflation hedge too. It's a domestic currency hedge because you're you're basically making a bet that the the dollar might decline and if it does that by virtue of that foreign stocks will outperform domestic stocks and and I wouldn't be shocked if that continues for another you know we could be in the early stages of this. last year might have been just the, you know, the first year of many where this this reversal um continues. And so, you know, the the interesting thing about last year's performance was that we we have cape ratios right now that are 40 in the United States and about mid20s in the foreign markets and that barely budged last year. the foreign markets almost doubled the return of US markets last year and we saw almost no change in the actual um cycllically adjusted price earnings ratio relative to the two of them. And so we've never seen a a divergence like this. The ratio has never been this divergent in its history. And so um you know I think again this is something that you know I I don't know how much that the cape ratios will mean revert but I would be I would be very very very shocked if in 10 years we don't all look back and look at this divergence and say oh of course it mean reverted at least to some degree. And so you know I'm not I'm not necessarily bearish on the United States. Not actually I'm not bearish on the United States at all. I'm I I think I'm approaching the United States in a much more cautious manner where I wouldn't I would be much more comfortable um owning a much more diversified domestic portfolio probably tilting more towards things like value and quality and you know a lot of the things that didn't work before last year that suddenly you know look like they're starting to work now where you're just diversifying away from technology a little bit where you don't have this concentration risk and you you're creating a lot more diversification that insulates you from some of those potential acute risks. >> Yeah. What what is your sense of where most investors are sitting? So I was going to ask you about the opportunity. It sounds like you think the opportunity not not only is in diversity but in the rest of the world um which is interesting and then maybe in the neglected areas in the US. But do do you think that most of us have more tech exposure than we realize? >> Oh, yeah. And this is a really it's actually one of the most interesting things that I wrote about in the book was I tried to I talk about active versus passive investing a lot. And the the thing about this whole debate is that I always say everybody's active. And the reason I say that is because everybody deviates from the global market capitalization of all financial assets in the world. And that portfolio, I call it the global financial asset portfolio. I write an entire chapter about it. And the reason I quantify what this thing is is because I wanted to create one benchmark where I was able to assess if you were to buy the true market capitalization of all of the outstanding financial assets in the world, what would that look like? And that portfolio is actually it's weirdly it's very very different from even something like if you look at Vanguard Total World. Vanguard Total World, it tries to reflect all of the outstanding equity market allocations in the world. But what it does is these index providers, they have to make an index that's actually investable. And the tricky thing about this and the interesting thing about it is that all of the assets that have been issued are not necessarily investable. So for instance, there's there's entire swaths of the Chinese stock market that you're not literally not allowed to invest in if you're a foreign investor. So some an index provider or an index creator like Vanguard, they look quite literally they can't actually buy the actual outstanding financial assets that the Chinese economy has issued because they're uninvestable. And so what ends up happening inside of this portfolio is that the portfolio actually ends up being massively more overweight the United States than it is actually been issued. And so right now that portfolio the actual market cap of the the investable assets is something like 65% US and 35% foreign. If you look at the actual issuance though it flip-flops. So it almost goes to 3565. The United States is massively smaller on a full issuance basis versus the actual investable basis. And so it's interesting for people who buy the market capitalization of of equities because they're they're massively more overweight not only the US but inside of that they're massively more overweight the technology allocation inside of that just by virtue of being so overweight the United States. So it is interesting because I think that people own people have a lot more exposure to technology than they probably think. And you know that >> that question but I I'm I'm so happy you gave that explanation because I think this is you know it's worth looking at everything you have and really digging in. And it's top of mind for me because I was looking at some ETFs recently. Um there are international ETFs. I was just doing some homework and I went into the prospectus and looked at the top holdings, you know, a couple extra clicks and one of them it was inv video was its biggest holding and I was like wait a minute that's that you know so so what you think you're looking at from the outside completely different when you looked under the hood um and for the reasons you just explained it's not you know it's not a gimmick it's because literally this is you know they're chasing winners and they are you know considering that's something investable and they all have to have performance to report. So I feel like Nvidia I I feel like if you went through that probably happened in so many funds that you look at regardless of what the name is on the outside. >> Oh yeah. Yeah. It's really I mean it's sort of a it's weird because I talked to some of the the sort of famous researchers who have done some of the the you know the really really hard work on actually quantifying these things and like Alroy Dimson who's you know kind of like probably the man on quantifying these things. He I actually was talking to him when I was researching the book and uh and he he said something that was even more interesting that when you look at especially like emerging markets emerging markets are I think when I did research on the book it was like 10% of all the outstanding financial assets and but if you if you actually were to do the full market cap the or the the full issuance it would double it would be 20%. So we're like you you can argue that not only are we are we massively overweight the US and technology but investors are massively underweight emerging markets which is a to me a really interesting thing to think about because I think from a a very if you're a very very long-term investor it is very hard for me to see a world in which emerging markets don't converge in a lot of ways just because the the populations are so huge and I think that you know A lot of politicians right now are trying to stop globalization but I think that I think technology is going to make that impossible. I think the technology makes the world a very small place just by the way technology operates. And I think increasingly as you know as God is you know space shuttles you know continue to improve and all the technology that Elon is working on and the robots and everything AI continues to you know to boom. I I find it very hard to believe that globalization is not going to actually continue to multiply and the world is going to start to feel a like a much much smaller place by virtue of that. And what that does though also is it it causes a convergence between the especially the middle class and emerging markets and the middle class in places like the United States. And this is another big political trend that a lot of people talk about that we have to some degree we've sort of exported some of our relative wealth to the to the emerging world. And I think as much as we're trying to fight that, I think that's going to actually I think it's going to accelerate in the next the next 20 to 30 40 50 years. And as that does what it what will happen is that the emerging world is going to adopt a lot of the consumption needs of the developed world. And that has huge ramifications not just on you know the way we consume commodities but also the way that you know the wealth transformation the the middle class in China and India in 30 years I mean they're going to be incredibly incredibly wealthy their consumption needs are going to be through the roof and that's going to have a huge transformational impact not just on the financial markets but also inflation and everything >> that so the middle class has left the building and they're not coming back in in the developed world. >> It on a relative basis, it is it's a really sort of sad and and I I think difficult story to to see improvement in in large part because you're almost getting hit from both ends. The the really wealthy in the United States are I think especially with the way that the AI and technology is going to continue to accelerate, I think in inequality in the United States is likely to get worse. and we're not we're not doing anything politically right now that seems to be making that a lot better. Um, >> and then you're getting hit with the the the other end of it from the international side where the the boom in in emerging markets and a lot of the the foreign middle class, the convergence there is just likely to continue. And so, um, you know, it's weird because I actually agree with, uh, Elon Musk that I think all roads eventually end up at a universal basic income at some point. I don't know when. Um, but it I do find it hard to believe that that doesn't come at some point because at some point in the next 20 years, you get you get probably it probably takes a big big recession, a really messy recession, and if you got the right people in office, um, you know, we pass something that either it expands social security, it expands, you know, a universal basic income of some sort. And that's the thing that that probably starts to put a pretty a a fairly meaningful dent in the actual inequality issue. But there's there's nobody that's in a rush to do that right now. And I don't think you have the you don't have the you know the the fuse hasn't been lit to cause something >> social unrest that would cause a massive change like that. >> Yeah. But it takes something like a that's kind of the weird thing about big change like that. Sometimes it takes a GFC type of event to cause something like that. So, you know, I don't I don't want to wish that on anybody, but that might be the thing that actually, you know, actually um causes something like that. >> Yeah. Um it's it's these are such big issues that I think we're all going to have to wrap our head around. Let's let's talk a little bit about um we you you have the book The Perfect Portfolio. And it's such a it's such an interesting title because I'm sure everybody hears it and says, "Yes, great. Give it to me. What is the perfect portfolio?" because everyone's desperately looking for answers. But what did you mean by that? >> Yeah. So I I titled it your perfect portfolio very specifically because the the main message of the book is that you know I've managed money for 20 plus years now and I've always built sort of I try to build customized portfolios for my own practice so that I can take models basically and then plug and play them into client portfolios to some degree. And what I found is that everyone I've ever encountered is different. And what ends up happening with every single portfolio that I construct is I mean, especially over the course of time as things change, they all end up being customized and personalized. They're all very very different in the long run. And so I've realized that the the portfolio that ends up being right for people is the one that's perfect for them. And so, you know, it's a it's a frustration I think that some people have when they when they see the title and they think that, oh, this guy is going to give me the the what the holy grail. And my message in it is that no, that that the holy grail doesn't exist. And but at the same time, my goal is to help people find a holy grail for themselves. And so, I go through basically like 20 really famous strategies. I cover um a ton of different principles, styles, and strategies. And the goal is really I'm sort of operating as like a third-party analyst. I'm sort of like independently being aggressively objective about it all and saying like, "Hey, this is where risk parody strategies came from. This is the story behind them. We can understand Ray Dalio's history and how he came up with the concept, how he implements it, how there are easier ways to implement. And then I talk about the pros and the cons and who this might be good for, who this might be bad for. And I do that with a whole bunch of different really famous styles and strategies. And the goal though is to to sort of help people whittle this down to a point where they, you know, hopefully they find they read a chapter and they say, "You know what? I really like this. I feel like I I could utilize this particular strategy for my maybe my Roth IRA. I'm really aggressive there. I've got a 40-year time horizon. I don't care what technology does in the next, you know, five or 10 years. I'm just gonna you know, pedal to the metal. This is going to be super aggressive and, you know, I'm gonna look back in 30 years and, you know, thank my myself for for having been really aggressive there. Whereas, you know, maybe somebody's looking at like a taxable account and they're living off the portfolio and they're doing something that is much more conservative. Maybe it's one of the income strategies. Maybe it's, you know, there's a whole chapter on what I call T-Bill and chill, which is basically like, you know, a customized cash management strategy where you're basically rolling T- billill ladders and things like that. And so there's a little bit of something for everybody in there, but the main thrust of the book is that you've got to find a a portfolio that's perfect for you and not just buy a strategy that someone's selling you or buy things that you read about in the financial media because you you know you you heard that the the historical performance is through the roof. >> Yeah, I think that's so important and especially right now. Um, and and hopefully it will take some of the stress off of people because I feel like they think they're getting it wrong when in essence they just really have to understand the framework that's going to work for them and have some robust discussions about then really tailoring it down to something that's going to fit their needs. Um, which is what we try to tell people all the time as well. What do what is what are some of the common mistakes you think investors make when they're when they're trying to figure out what that framework is or if they're looking at their portfolio and it's not performing the way they want it to? >> Yeah. Well, I think the biggest one is I think a lot of people go into it with wrong expectations. I think that there's an entire there's a section that the book is really broken up into two parts and the first part is essential principles and the number one is that I very specifically refer to portfolios as a savings portfolio and I say that you it sounds like kind of a a wonky academic you know concept but I it was funny because when I I wrote my first book pragmatic capitalism 10 years 10 years ago I ran into this really weird problem where the word investing has a totally different meaning in the field of economics than it does in the field of finance. And in the field of economics, it means to spend for future production. And firms do this primarily when when they go out and they build a factory for instance. That's they're spending money for future production. And it's very different than consumption. It's the opposite of consumption basically because it has a return on investment whereas consumption is basically like a sunk cost almost. And so the but in the field of finance, investment basically means that you're you're allocating a sum of money to try to earn a return. And the interesting thing is when you look at the financial markets, what what people do when they're buying stocks and bonds is they're not literally investing. We call it investing, but they're not spending for future production. They're literally reallocating some part of their savings. So people have earned an income, they've saved some of it, and then when they go out and they buy stocks and bonds, they're taking some of that cash savings and they're saying, "I'm going to allocate this to the stock market, to the bond market, or whatever it might be." And the distinction is really I think it's kind of eye opening for me because I think a lot of people go into the asset allocation process and the portfolio construction process and they say, "I just want to make as much money as I can and I want to earn the highest returns I can." And you set sort of this unrealistic expectation where the the endeavor is not a a methodical process, but rather it turns into like a horse race where you're just trying to make bets and you're more you look more like a gambler than you do like someone who's implementing a really thoughtful process. And so, you know, the the message in this is not that you can't make a lot of money allocating assets. You obviously can, but I think that the you I like calling it an allocation of savings because another thing that I try to emphasize a lot in the book is that this has to be based on a plan. This has to be based on a process. You've got to go into this in a very methodical way where you're you're doing things in a strategic way rather than a you know a sort of haphazard gambling like mentality where yeah, we all want to make the most amount of money we can with the least amount of risk. The best way to do that is to have a really rigid process and plan in place before you're actually allocating money in a sort of haphazard way that you know where you're just trying to you know turn water into wine and you know try to you know make instruments that you have no control of generate returns that are higher than can reasonably be expected over time. Yeah, I think that's an excellent point and especially now when everyone has the apps in their hand on their phone and the whole system has kind of has a gamification to it. Um, it feels a lot like gambling all the time. Um, which I really worry about, especially >> a huge problem. I mean, and it's filtered into the way that I think a lot of people think of the stock market and the way they're allocating their assets. But you when you step back and you set realistic expectations about all this and you you think about this more of like hey I I am literally allocating my life's savings to something um it implies a much more prudent process that I think people will hopefully be more thoughtful about implementing. >> I think that's that's fantastic. I I hope people walk away with that in mind. I know I'm going to. So let's let's hit a couple of topics. Speaking of um the temptation to jump in and gamble on this metals, I mean precious metals have just been on fire. I imagine that a lot of IAS are getting phone calls from their clients saying, "Am I in it? If I'm not, I want to get in it or I've missed it. What do I do?" How are you feeling? What What your take on what's happening in the precious metal space? >> Gosh, I mean it's it's pretty crazy. Um, you know, it's there's a lot of, you know, it's a sort of a, you know, somebody asked me the other day, what's causing all this? I was like, this seems like a sort of an everything all at once, you know, just perfect storm of everything for for the metals, whether it's, you know, the usage in in AI or the, you know, the geopolitical environment or the dollar debasement trade or whatever it might be. It's all kind of all of these things all at once. And so, um, I think of metals very specifically as a form of, especially gold, um, as a form of fiat currency insurance. And so, to me, a lot of this is it's a time horizon trade. Um, insurance in my my methodology is an inherently long-term instrument. It covers a very, you know, if you want to buy insurance for the rest of your life, you you could think of your portfolio as having like a whole life bucket basically. Um, how would you allocate that? It might be, might be a little bit of Bitcoin, there might be a little bit of gold, there might be um some Treasury inflation protected securities. um things like that that are inherently sort of long duration instruments that you can actually you can make a reasonably high probability bet that over the course of a 10 20 30 40 year period these things are going to protect you from inflation pretty well. I think the danger with metals right now is that when you see these sort of parabolic moves, gosh, it kind of reminds me almost of like the the US stock market to some degree and the way we've seen the sort of parabolic increase in in in cape ratios and things like that. What happens when you get environments like this is and I talk about this in the book a little bit that the way I like to think about this is that it creates what's called a what I call a price compression. that for instance if you took the price of gold and you said hey I think this thing reasonably can do 8% per year well when you take 8% and then you take a year like 2025 and the thing does 65% what you've done is you've basically taken you've taken a whole bunch of those future returns and you've crushed them all down into into the present and what that does is it creates greater what financial nerds would call sequence of return risk basically that it basically means that your your future risk adjusted returns are likely to be lower because the instrument just mathematically cannot do 65% per year. It's not going to do that. And so if you have expectations like that, you're in for a bumpy ride. And so I think a lot of this and I I talk about time horizons so much in the book because I think that it's really important for investors to think about things across specific time horizons where if you own gold and you are looking at it on a one-year basis, you might as well be making bets at a horse track because it's a very similar type of mentality. Whereas if you're looking at gold and you're saying, you know what, I've got a bunch of this stuff locked up in a safe. It's probably maybe it's for multigenerational needs, maybe it's for a doomsday scenario. Who knows what it is? It's a 30 40-year bet. You're in a I think a much healthier asset allocation and and psychological state of mind with that asset in your portfolio compared to someone who's looking at this thing and saying, I'm buying this because I think it's going to continue to go up in the next six months. I think that's more akin to gambling. And so, you know, there's a there's a proper way to own this asset in even inside of a huge boom like this where if you're if you're able to think about it over the course of a very long time horizon, um then I think there's nothing wrong with owning it. But if you're thinking of it in the next 6 to 24 months or something like that, it's I think it's going to be a really really bumpy road. And if you're really really acutely exposed to it, um, that probably means there's a there's a reasonable argument for you to, hey, maybe you maybe you take some of the profits that you've, you know, been so fortunate to earn and maybe you diversify it into some other stuff just to, you know, reduce some of that the the skew that's been caused inside of your portfolio because of the huge gains. >> Yeah. Yeah. And that's the tough thing. It's hard to hard to let go when you're hanging on to, you know, riding the winner like that. But I think it's it's really sage advice right now. What about bonds? We talked about T bill and chill for super short term and I love the time horizon bucket idea. Um what about bonds? Because there is a narrative based on some of the geopolitics we've talked about and concerns about fiat currencies and the dollar that bonds are no longer investable. That is not the safe haven that it used to be. >> Yeah, it's funny. I you know I would have said that you know that narrative was probably a lot more applicable 5 years ago. I mean when when interest rates are zero and you're getting 0% on T bills there's no there's virtually no argument to be you know to own large allocations of that. Um these days you're getting three and a half% in a you know in a six or 12 month T bill. Um you're you're almost getting a real return there. Um, so you know that is a mathematically it's just a totally different instrument than it was back in 2019 or something like that. And the the same thing's true though for a lot of the curve. I would say that but it depends on where you are. I mean I like to look at the the yield curve across very specific time horizons. I use a metric that I call escape velocity where I think of the the interest rate risk relative to the current interest rate in the instrument. And by that metric right now, and what I mean by escape velocity is escape velocity is kind of the point on the curve where the interest rate is high enough that you don't have a really significant amount of interest rate risk. And so if you're looking at the yield curve right now, right now I'd say the the point of like almost um I would say equilibrium I guess is the word I'm looking for. It's right around like four years. And so it's still relatively short-term, but I would I would feel really really comfortable owning bonds in the zero to fiveyear time horizon. So anything from a zero to fiveyear note um looks really attractive because you're still getting you're getting 4% or whatever on a on a fiveyear note. Um again, you can lock that in or maybe maybe you're not going to generate a real return over the whole term, but you don't have a lot of interest rate risk there. um you're earning a pretty good coupon. When you start getting longer, um the the math just starts looking way way different where I mean, God, if you're buying 20-year Treasury bonds right now, um you know, again, you're getting four and a half% with um you know, a modified duration of like, you know, 17. That means that for every 1% change in interest rates, you're going to get 17% uh volatility basically either negative or positive depending on which way rates go and you're earning four and a half percent. The math there just it doesn't it's not nearly as compelling. You know, when you look at something like a like a five-year note you can allocate, you know, your time horizon, you know the interest rate. We even have a pretty good idea of what inflation's probably going to do over that time horizon. So, you know, I don't think you have to you don't have to succumb to only owning tea bills if you if you want to own, you know, super safe instruments. I think you can, especially now with the, you know, if if we are going to have a Fed chief that comes in that's more amendable to cutting rates. I think that actually makes the argument for pushing your duration out a little bit longer a lot more compelling where you know I've been urging people in the last couple really the last year you should be pushing your duration out to two three four years get it out to more of that equilibrium point of uh you know about four years as much as you can as much as you're comfortable with because there's still not a lot of interest rate risk there so it's weird because I would say you know bonds are bonds are not the great divers diversifier that they were in the the 80s or 90s, but especially in that 0 to 5year range, I think bonds are actually anything in that range is a is a really good diversifier, especially if you're looking for for really safe income inside of a a specific short time horizon because there's not there's not a lot lot of other in instruments that are going to give you that sort of short-term certainty with with almost near uh principal guarantee like things like US government bonds will. >> Yeah. The last thing I wanted to ask you about is we've seen a lot of products coming up that try to give access to alternatives or private market or private credit. These have sort of been popular as people talk about diversification. Is that a smart idea in general? is are you more concerned about what's happening there and you know maybe the lack of transparency or is that something that you know when we're thinking about what diversification looks like in this environment people need to consider? Yeah, it's really it's really messy because um I mean these private instruments they in a lot of ways when you utilize them especially inside of ETFs um and the some of the popular rappers I mean ETFs are obviously the sort of popular rapper right now for most financial products and and we're an ETF issuer so I I I know the the plumbing of these things really really well and the problem is is that the the secret sauce of an ETF really is that it relies very very heavily on having price transparency in the underlying. And that is the thing that really makes ETFs incredibly efficient when you use them properly and you construct them properly. And the problem with with private markets is that private markets don't mark their assets to market every day. We don't even know what the value of these things are every day. And so when you try to put that thing into an ETF wrapper, in a lot of ways, you're trying to jam a square peg into a round hole where the thing quite literally can't be as efficient as you want it to be because the market makers who are running the ETF, they really have no idea what the underlying value of those things, what the underlying assets are actually worth. And so you get crazy spreads, you get crazy, you actually get like, you know, big big um deviations in terms of premiums and discounts from NAV on those sorts of things because the market makers really and the market the people buying these things, they don't really know what these things are worth. And so >> they're they're not my favorite products mainly because they just don't work well in the ETF wrapper. So, you know, unfortunately the the ETF rapper has become really popular and there's a lot of lot of different products that are coming online that are are utilizing the ETF rapper in ways that I don't really think are appropriate, but sort of they are more narrative driven than anything else. And >> you see this nowhere more apparent in like the than it is in like the income space where there it's become really popular to utilize ETFs inside of a sort of an option income generating strategy where they actually call this distribution yield. And it's not yield in any really, you know, traditional sense of the word yield in terms of what they're really doing is they're they're basically for the most part they're capturing some of your future upside um inside of the instrument. And they're calling it distribution yield for marketing sake more than anything else. And I think there's a lot of truth to that in the the private market narrative, too, where we're people are looking for diversifiers outside of bonds, which makes a lot of sense given the way bonds have performed in the last five years. But the the tricky thing is that public the the the private markets, they're not going to solve that diversification problem the way that people want them to because they're just they're just not going to be good fits inside of of publicly listed instruments like ETFs. >> Yeah, buyer beware. Um that's a fantastic explanation because I think a lot of people are looking at uh looking at some of these uh instruments and seeing all the ads to be honest with you. Um, Colin, it's such a it's such a pleasure to have you. It was it's a really critical time to be having this conversation. So, really appreciate you coming on and taking the time. >> Yeah. Yeah. Thank you, Maggie. It was great talking with you. >> Uh, and if you are listening and you would like to like some help customizing your portfolio, figuring out if you have the right mix, you can get a free portfolio review from one of the adviserss in the Wealthy Network. Just head over to the just the link, the description. We'll put it in there, or you can go to wealthon.comfree. Thanks so much for joining us, everyone. We'll see you again soon.
Cullen Roche: The Market Divide Leaving Investors Behind | The Hidden Risks in Your Portfolio
Summary
Transcript
There's so many different sort of divergences and bifurcations in the macro economy. We've seen inequality has been such a big story and that's nowhere more apparent than it is in technology. If you weren't a homeowner and you weren't very heavily invested in the US stock market and especially technology in the last 10 years, you're on sort of on the outside looking in right now and I think you're really frustrated. There are so many people who are on the outside looking in at those two asset classes and saying to themselves, I don't know how I'm going to catch up at this point. Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.comfree. Hello and welcome to Wealthon. I'm Maggie Lake and joining me today to discuss asset allocation is Colin Ro, founder and chief investment officer of Discipline Funds and the author of the book Your Perfect Portfolio, which we all need right now. Hi Colin, it's great to have you with us. >> Hey Maggie, it's so great to talk to you again. >> So let's start uh with the sort of macroeconomic background first. Um and what is your outlook right now for the US economy? Where do you think we are? This is one of the craziest times that I can remember ever thinking about the macroeconomic environment and and especially macro asset allocation in general just because there's so many different sort of divergences and bifurcations in the macroeconomy. So you you you've got so many different currents going on where for instance the the housing market is not in a recession but the housing market is in the doldrums by almost any measure and the you know there was an old famous paper that said the the US economy is the real estate market basically and and that's true to a large degree because it has such a big broad impact and I think that this is probably in my view nowhere more apparent than it is in consumer sentiment. And I think, you know, we got a new consumer sentiment reading this morning. It was terrible again. And I think a lot of that is the frustration over the housing situation and shelter just broadly because we've had, as everybody knows from COVID, we had a huge boom in house prices. Uh rents have gone up a ton. It's filtered through into inflation. Inflation has improved, but it's still it's a still a very very frustrating situation for a lot of people. And so you've had this really weird situation where the housing market is actually really soft now because no one there's no housing turnover. And so for the last, you know, we go through this 50% increase in prices and then in the last three years, real house prices have actually been negative. And so I think um a lot of this is just the digestion of what's been going on with COVID. And the the economy, weirdly, is still digesting a lot of what's going on from CO where the the fiscal stimulus packages were gigantic. They have continue to sort of filter through and impact inflation in a lot of ways. They've added to demand. They've frustrated the Fed. The Fed I think has done a fairly good job of bringing down inflation, but they were I mean they obviously were were late in 2021, but they have since sort of caught up and they're trying to fight this big fiscal headwind though that's been going on for the last few years. And so that's bolstered the economy to some degree or at least added to aggregate demand and but it's been very very uneven the way that it's filtered through the economy and I think this is probably most uh apparent in sectors like technology and god even the I mean we've seen inequality has been such a big story and that's nowhere more apparent than it is in technology and the the anything AI related has gone through almost like a in a lot of ways people in the AI sectors and anything sort of related to it have gone through I mean generational wealth transformations here where they've seen huge explosions in their in their wealth and that's impacted the stock market in a really acute way too where the inequality story isn't just a macroeconomic story it's very much a stock market story where the the inequality of returns has been very uneven too where so much of the market capitalization growth has flowed to fewer and fewer firms especially these ones you know the mag seven and the the sort of AI leaning companies. And so even the the wealth generation inside of the the the financial asset markets has been very very contained to very specific sectors and components where if you haven't been in if you weren't a homeowner and you weren't very heavily invested in the US stock market and especially technology in the last 10 years, you're on sort of on the outside looking in right now and I think you're really frustrated. And so that's I think a big big part of the explanation for why consumer sentiment is so bad because the there are so many people who are on the outside looking in at those two asset classes and saying to themselves, I don't know how I'm going to catch up at this point. >> Yeah. No, I think I think you bring up some really really important points and this is huge, right? because we not only for consumer spending but al also for the sort of political backlash that is starting to make its way and will really be profoundly felt as we go toward midterm elections and I I think I would add to that maybe that you have uh first of all people frustrated because they were theoretically doing the right thing right they were they maybe they had safer stocks value stocks maybe they were diversified across the broader stock market if they didn't go all in on Nvidia and a couple of names you know, they've watched it run away from them. So, that's a problem in terms of what do I do now? And I wonder if you think that we're we're sort of tracking the right thing. I think people feel really frustrated when they hear, oh, well, you know, the Fed's bringing inflation down. There's some price inflation and goods inflation that have come down that are kind of related to supply chains. But for a lot of people, if you look at your insurance premiums, we just got a letter my insurance premium up 22%. 22%. Right? College has exploded, health care costs have exploded, a lot of people don't get covered from their employers, and they have to go into the um exchanges, which we know here in the US is fraught with peril. I feel like a lot of people are not sure that even the data we look represents what's actually happening in the real economy. >> Yeah. Well, that's one of the really tricky things about especially inflation metrics and and things like the CPI is that they don't measure personal inflation. They try to measure a really broad basket of goods at a national level and so it doesn't capture your personal inflation level and it doesn't it certainly doesn't capture inflation accurately. I think the I don't know I I think the capturing inflation really really accurately is an incredibly difficult data uh you know compiling process. And so I I tend to I mean I know some people at the Bureau of Labor Statistics and I know how that process works and I just know how hard it is to actually obtain the data and obtain it accurately more importantly. And so you know even it's weird because even some online third-party metrics like uh trueflation I mean they gosh that thing says that inflation right now is like 1 2% or something. It's like near near one of the low points. That's way wrong in my view. But it's very it's incredibly bifurcated. And part of this is due to the the macroeconomic landscape too where I mean things like health care. I find it really really difficult to see an environment where health care costs come down at all or that health care inflation doesn't run at a rate that is meaningfully higher than the average CPI just because of the demographic situation in the country. And this is so important for the macroeconomic landscape where I mean you've got a very very different situation in healthcare compared to something like shelter where shelter is actually a really weird component of CPI because the shelter component the BLS is you know they're they use a a little bit of a a weird metric in owner's equivalent rent which really lags it lags sort of famously by up to 18 months or more inside of the data the way it filters in because rents don't update every month like the CPA I does rents update typically, you know, your your rent updates once a year. And so they use like a rolling six-month um update inside of the owner's equivalent rent metric, which then filters in and it lags. And so you're getting for for really like the last like two years, we know that real-time rents are actually declining year-over-year. You can look at things like the Zillow rent index and things like that and you we know that the the rental prices are actually they they've gone up a lot but they're they've started to flatline too and so that's it's this really weird bifurcation where and this is why I say it's this is such a a confounding sort of moment in the macro economy because there's so many diverging elements going on and then the you know god the the most recent wrinkle in all of this is that the you know I kept saying that in the last couple years that with the shelter component being such a huge headwind to inflation with this negative um you know sort of pressure from from shelter prices that you would have a lot of trouble seeing a really high inflation print because of that just because CPI I mean shelter is like 35% in uh in CPI. So, it's just it's such a big component that when you've got a low uh metric there, when you got a low year-over-year rate because the because the the data has been lagging so much, you need some other huge tailwind to actually cause high inflation. And I've been saying that the commodity price component could be the thing that would cause that. If you look back to like the 1970s, like the thing that really drove that inflation was just it was a nonstop increase in the price of oil where oil went from like $3 to $30 and it did it for 10 years. Almost almost every single month it was going up for a 10-year period. And so when you get something like that, especially back in the 70s, oil was such an important commodity, so much more important even than it is now. Right now though, what we're seeing is commodity prices are starting to go up a whole lot. And so commodity prices just this year are already up on average like 20%. And so and some of them god I mean the price of silver is already up what you know 60 70%. There's there's a lot of crazy things going on. And so this is very disconcerting for the Fed because the Fed I think was starting to increasingly get to a point where they were feeling more and more comfortable with rate cuts. And obviously I think Trump is going to put someone in charge there that is going to be amendable to rate cuts. But this commodity price uh surge in the first few weeks of the year, it starts to add a really nasty wrinkle to that narrative where if you're especially if you're somebody like Rick Reer, you know, it's been rumored that Rick Reer is going to become the he's kind of the front runner for Fed Chief now. He's a guy that looks at he looks at market data. He looks at real-time market data. And I can guarantee you that he's looking at things like commodity prices surging in real time and that's giving him a lot of pause about, you know, hey, maybe maybe we were feeling more comfortable cutting rates a month ago, but right now with commodity prices surging, maybe the math on that starts to change and maybe we, you know, we're not only going to pause at the next meeting, but we might be on hold for longer than people think here. So, this is a the commodity price surge is a nasty wrinkle in the whole narrative that just adds another piece of confusing data to the whole macroeconomic picture. >> If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hard Assets Alliance, at hard assetsalliance.com. That's hardassallalliance.com. Yeah. So, how are you thinking about political risk here? because uh you you certainly have the the questions around the Fed and Fed policy and who controls it and independence and the direction of rates as one factor. Uh you had headlines just today. You saw health insurers, some of the stocks were down 20% on news coming out of Washington. Uh we've had a flurry of geopolitical events. Are we in an elevated period for political risk? Then how how can investors think about that when they're trying to figure out what investments to make? >> Oh yeah. I think undoubtedly and I think that the you know gosh the the domestic risks are obvious you know to everybody but the I think the the bigger one is the all the geopolitical stuff that's going on and the you know the it's weird because in general I look at geopolitical risk and just political risk in general inside of portfolio construction and I would say gosh I mean 95% of the time I would look at it and say this is noise people will forget about this in a month and move on and they'll talk about the next thing you know typically it's nonsense things like the you know the debt ceiling or you know some something like Venezuela where you know maybe it you know it seems important in the moment and it causes big moves and then you know we're a month out from that or a few weeks out from that and already it seems like people have forgotten about it. But um some of the geopolitical stuff though is is really really important. And I think the the biggest one is obviously that eventually China becomes a bigger and bigger risk with Taiwan. And I think that the thing that actually was interesting to me about the Venezuela move and and some of the Greenland commentary is that I don't think we're fully digesting the risk that China one day is just going to wake up and they're going to just say Taiwan is ours and everyone is going to be up in arms about it. But the Chinese are going to respond and say, "Well, the Americans spent, you know, so much time negotiating Greenland and, you know, they've just sort of moved in there and then they they decided they just were going to take over Venezuela and look what they're doing there." So, why can't we just do the same thing with Taiwan? And Taiwan's really important because Taiwan changes a lot of the AI dynamics and that has a huge impact not only on the dollar but it has a huge impact potentially in the long run on some of the most important sectors and the most important companies in the United States because the the AI war is something that I really think the United States cannot afford to lose. And I think that I mean from a political perspective I've been of the view that we need to just sort of not impede any of the innovation that's going on around AI because this it's just so early in the the the transformation of all of this that we need to just let the I think we need to let the dust settle where wherever it may and let you know let these big companies fight it out. Don't get in the way. Um, you know, some of the big companies are already feeling like they have to do sort of weird things with mergers and worrying about, you know, oh, are we going to run into antitrust issues and and I'm of the view view that we need to just sort of, you know, back off. Don't get too involved in all this. Don't let the political narratives overtake everything. Um, and and make sure that we're supporting US corporations in a way where we're making sure that the it's the United States that wins this AI fight in the long run. Because if if China and India win it, um that is a I think it's a huge huge gamecher in the long run because it's going to have a huge huge impact on the transformation of who gets the wealth from all of this. And if China is the leader in this going forward for the next 5, 10, 20 years, um that could be really really damaging to the United States in lots of different ways. And we just don't know how this is all going to play out. So I'm I I I don't I'm a I guess I'm a red-blooded capitalist on this issue, you know, more so than maybe a lot of other issues that I that I think about, but I really do think that this is one that we we need to win this war and we need to be backing our own our own guys in this fight in a a really supportive way as much as we can. >> Yeah, it's a it's a super interesting conversation. There's a whole there's a an entire sort of separate one which we won't get into today about, you know, the the AI arms race on one side and then, you know, Do you what is the risk of having no guard rails because of that? You know, what does that unleash? That's a whole that's a whole other topic. But you bring up a really >> that's a messy one. Sorry to interrupt. It's a messy one from the inflation story too because and we're starting to see this that um >> I mean the data center energy usage is that's another component of inflation that I'm increasingly worried about because it's hard to see >> how how do we you know you can't unscramble that egg I think once it starts to get scrambled and that turns into a really messy political fight. >> Yeah. Uh so it's interesting. I think this kind of raises the question um that I guess we all should be asking ourselves, but what what is the risk that you were trying to sort of hedge or protect against when you're thinking about a portfolio in this environment? I mean is it inflation? Is it this sort of geopolitical risk? Uh all of the above? I mean, how are you thinking of what what is it a is it a financial crisis based on debt and what's happening in Japan? How what is the biggest risk that you worry about when you're thinking about how you're allocating right now? >> So, I would say you know there's there's nothing from a macroeconomic perspective that that jumps out in terms of like a you know a debt type of risk, a debt deflation. So, you know, debt deflation risk is sort of at the I would say at the bottom of my list. the the more worrisome thing for me is on a well on a I I guess on a short-term basis I would look at things like the the US equity market and especially with the the administration's sort of anti-doll view. Um I I'm I would be concerned about US valuations relative to foreign and I think that I think there's a strong probability that the the reversal in performance that we saw last year I would not be shocked if that continues well into this year it's already continuing so far and I wouldn't be surprised if God I wouldn't be surprised if emerging and and developed international outperform the United States on a on a 5 to 10 year basis here. So I do think that the argument for global diversification is stronger not only because you're you're insulating yourself from that mag seven trade and the the risks the sort of you know acute risks that we already discussed there but I think that with the the political backdrop too and the the way the world is increasingly looking at the dollar the and this feeds into the debasement trade too where and because this is the the kicker with international allocations is that in my view diversifying to international stocks is not so much a bet on foreign companies outperforming or or out competing US corporations. It's a currency story really that you're really betting on that the dollar will be weak and that this flows into to basically a foreign exchange trade where foreign entities just become more valuable in part because the domestic currency declines in value. And so to me it it operates as a as sort of a double hedge. It's not only a hedge against uh the the the sort of isol or concentration of the mag seven inside of the domestic economy, but it's a domestic inflation hedge too. It's a domestic currency hedge because you're you're basically making a bet that the the dollar might decline and if it does that by virtue of that foreign stocks will outperform domestic stocks and and I wouldn't be shocked if that continues for another you know we could be in the early stages of this. last year might have been just the, you know, the first year of many where this this reversal um continues. And so, you know, the the interesting thing about last year's performance was that we we have cape ratios right now that are 40 in the United States and about mid20s in the foreign markets and that barely budged last year. the foreign markets almost doubled the return of US markets last year and we saw almost no change in the actual um cycllically adjusted price earnings ratio relative to the two of them. And so we've never seen a a divergence like this. The ratio has never been this divergent in its history. And so um you know I think again this is something that you know I I don't know how much that the cape ratios will mean revert but I would be I would be very very very shocked if in 10 years we don't all look back and look at this divergence and say oh of course it mean reverted at least to some degree. And so you know I'm not I'm not necessarily bearish on the United States. Not actually I'm not bearish on the United States at all. I'm I I think I'm approaching the United States in a much more cautious manner where I wouldn't I would be much more comfortable um owning a much more diversified domestic portfolio probably tilting more towards things like value and quality and you know a lot of the things that didn't work before last year that suddenly you know look like they're starting to work now where you're just diversifying away from technology a little bit where you don't have this concentration risk and you you're creating a lot more diversification that insulates you from some of those potential acute risks. >> Yeah. What what is your sense of where most investors are sitting? So I was going to ask you about the opportunity. It sounds like you think the opportunity not not only is in diversity but in the rest of the world um which is interesting and then maybe in the neglected areas in the US. But do do you think that most of us have more tech exposure than we realize? >> Oh, yeah. And this is a really it's actually one of the most interesting things that I wrote about in the book was I tried to I talk about active versus passive investing a lot. And the the thing about this whole debate is that I always say everybody's active. And the reason I say that is because everybody deviates from the global market capitalization of all financial assets in the world. And that portfolio, I call it the global financial asset portfolio. I write an entire chapter about it. And the reason I quantify what this thing is is because I wanted to create one benchmark where I was able to assess if you were to buy the true market capitalization of all of the outstanding financial assets in the world, what would that look like? And that portfolio is actually it's weirdly it's very very different from even something like if you look at Vanguard Total World. Vanguard Total World, it tries to reflect all of the outstanding equity market allocations in the world. But what it does is these index providers, they have to make an index that's actually investable. And the tricky thing about this and the interesting thing about it is that all of the assets that have been issued are not necessarily investable. So for instance, there's there's entire swaths of the Chinese stock market that you're not literally not allowed to invest in if you're a foreign investor. So some an index provider or an index creator like Vanguard, they look quite literally they can't actually buy the actual outstanding financial assets that the Chinese economy has issued because they're uninvestable. And so what ends up happening inside of this portfolio is that the portfolio actually ends up being massively more overweight the United States than it is actually been issued. And so right now that portfolio the actual market cap of the the investable assets is something like 65% US and 35% foreign. If you look at the actual issuance though it flip-flops. So it almost goes to 3565. The United States is massively smaller on a full issuance basis versus the actual investable basis. And so it's interesting for people who buy the market capitalization of of equities because they're they're massively more overweight not only the US but inside of that they're massively more overweight the technology allocation inside of that just by virtue of being so overweight the United States. So it is interesting because I think that people own people have a lot more exposure to technology than they probably think. And you know that >> that question but I I'm I'm so happy you gave that explanation because I think this is you know it's worth looking at everything you have and really digging in. And it's top of mind for me because I was looking at some ETFs recently. Um there are international ETFs. I was just doing some homework and I went into the prospectus and looked at the top holdings, you know, a couple extra clicks and one of them it was inv video was its biggest holding and I was like wait a minute that's that you know so so what you think you're looking at from the outside completely different when you looked under the hood um and for the reasons you just explained it's not you know it's not a gimmick it's because literally this is you know they're chasing winners and they are you know considering that's something investable and they all have to have performance to report. So I feel like Nvidia I I feel like if you went through that probably happened in so many funds that you look at regardless of what the name is on the outside. >> Oh yeah. Yeah. It's really I mean it's sort of a it's weird because I talked to some of the the sort of famous researchers who have done some of the the you know the really really hard work on actually quantifying these things and like Alroy Dimson who's you know kind of like probably the man on quantifying these things. He I actually was talking to him when I was researching the book and uh and he he said something that was even more interesting that when you look at especially like emerging markets emerging markets are I think when I did research on the book it was like 10% of all the outstanding financial assets and but if you if you actually were to do the full market cap the or the the full issuance it would double it would be 20%. So we're like you you can argue that not only are we are we massively overweight the US and technology but investors are massively underweight emerging markets which is a to me a really interesting thing to think about because I think from a a very if you're a very very long-term investor it is very hard for me to see a world in which emerging markets don't converge in a lot of ways just because the the populations are so huge and I think that you know A lot of politicians right now are trying to stop globalization but I think that I think technology is going to make that impossible. I think the technology makes the world a very small place just by the way technology operates. And I think increasingly as you know as God is you know space shuttles you know continue to improve and all the technology that Elon is working on and the robots and everything AI continues to you know to boom. I I find it very hard to believe that globalization is not going to actually continue to multiply and the world is going to start to feel a like a much much smaller place by virtue of that. And what that does though also is it it causes a convergence between the especially the middle class and emerging markets and the middle class in places like the United States. And this is another big political trend that a lot of people talk about that we have to some degree we've sort of exported some of our relative wealth to the to the emerging world. And I think as much as we're trying to fight that, I think that's going to actually I think it's going to accelerate in the next the next 20 to 30 40 50 years. And as that does what it what will happen is that the emerging world is going to adopt a lot of the consumption needs of the developed world. And that has huge ramifications not just on you know the way we consume commodities but also the way that you know the wealth transformation the the middle class in China and India in 30 years I mean they're going to be incredibly incredibly wealthy their consumption needs are going to be through the roof and that's going to have a huge transformational impact not just on the financial markets but also inflation and everything >> that so the middle class has left the building and they're not coming back in in the developed world. >> It on a relative basis, it is it's a really sort of sad and and I I think difficult story to to see improvement in in large part because you're almost getting hit from both ends. The the really wealthy in the United States are I think especially with the way that the AI and technology is going to continue to accelerate, I think in inequality in the United States is likely to get worse. and we're not we're not doing anything politically right now that seems to be making that a lot better. Um, >> and then you're getting hit with the the the other end of it from the international side where the the boom in in emerging markets and a lot of the the foreign middle class, the convergence there is just likely to continue. And so, um, you know, it's weird because I actually agree with, uh, Elon Musk that I think all roads eventually end up at a universal basic income at some point. I don't know when. Um, but it I do find it hard to believe that that doesn't come at some point because at some point in the next 20 years, you get you get probably it probably takes a big big recession, a really messy recession, and if you got the right people in office, um, you know, we pass something that either it expands social security, it expands, you know, a universal basic income of some sort. And that's the thing that that probably starts to put a pretty a a fairly meaningful dent in the actual inequality issue. But there's there's nobody that's in a rush to do that right now. And I don't think you have the you don't have the you know the the fuse hasn't been lit to cause something >> social unrest that would cause a massive change like that. >> Yeah. But it takes something like a that's kind of the weird thing about big change like that. Sometimes it takes a GFC type of event to cause something like that. So, you know, I don't I don't want to wish that on anybody, but that might be the thing that actually, you know, actually um causes something like that. >> Yeah. Um it's it's these are such big issues that I think we're all going to have to wrap our head around. Let's let's talk a little bit about um we you you have the book The Perfect Portfolio. And it's such a it's such an interesting title because I'm sure everybody hears it and says, "Yes, great. Give it to me. What is the perfect portfolio?" because everyone's desperately looking for answers. But what did you mean by that? >> Yeah. So I I titled it your perfect portfolio very specifically because the the main message of the book is that you know I've managed money for 20 plus years now and I've always built sort of I try to build customized portfolios for my own practice so that I can take models basically and then plug and play them into client portfolios to some degree. And what I found is that everyone I've ever encountered is different. And what ends up happening with every single portfolio that I construct is I mean, especially over the course of time as things change, they all end up being customized and personalized. They're all very very different in the long run. And so I've realized that the the portfolio that ends up being right for people is the one that's perfect for them. And so, you know, it's a it's a frustration I think that some people have when they when they see the title and they think that, oh, this guy is going to give me the the what the holy grail. And my message in it is that no, that that the holy grail doesn't exist. And but at the same time, my goal is to help people find a holy grail for themselves. And so, I go through basically like 20 really famous strategies. I cover um a ton of different principles, styles, and strategies. And the goal is really I'm sort of operating as like a third-party analyst. I'm sort of like independently being aggressively objective about it all and saying like, "Hey, this is where risk parody strategies came from. This is the story behind them. We can understand Ray Dalio's history and how he came up with the concept, how he implements it, how there are easier ways to implement. And then I talk about the pros and the cons and who this might be good for, who this might be bad for. And I do that with a whole bunch of different really famous styles and strategies. And the goal though is to to sort of help people whittle this down to a point where they, you know, hopefully they find they read a chapter and they say, "You know what? I really like this. I feel like I I could utilize this particular strategy for my maybe my Roth IRA. I'm really aggressive there. I've got a 40-year time horizon. I don't care what technology does in the next, you know, five or 10 years. I'm just gonna you know, pedal to the metal. This is going to be super aggressive and, you know, I'm gonna look back in 30 years and, you know, thank my myself for for having been really aggressive there. Whereas, you know, maybe somebody's looking at like a taxable account and they're living off the portfolio and they're doing something that is much more conservative. Maybe it's one of the income strategies. Maybe it's, you know, there's a whole chapter on what I call T-Bill and chill, which is basically like, you know, a customized cash management strategy where you're basically rolling T- billill ladders and things like that. And so there's a little bit of something for everybody in there, but the main thrust of the book is that you've got to find a a portfolio that's perfect for you and not just buy a strategy that someone's selling you or buy things that you read about in the financial media because you you know you you heard that the the historical performance is through the roof. >> Yeah, I think that's so important and especially right now. Um, and and hopefully it will take some of the stress off of people because I feel like they think they're getting it wrong when in essence they just really have to understand the framework that's going to work for them and have some robust discussions about then really tailoring it down to something that's going to fit their needs. Um, which is what we try to tell people all the time as well. What do what is what are some of the common mistakes you think investors make when they're when they're trying to figure out what that framework is or if they're looking at their portfolio and it's not performing the way they want it to? >> Yeah. Well, I think the biggest one is I think a lot of people go into it with wrong expectations. I think that there's an entire there's a section that the book is really broken up into two parts and the first part is essential principles and the number one is that I very specifically refer to portfolios as a savings portfolio and I say that you it sounds like kind of a a wonky academic you know concept but I it was funny because when I I wrote my first book pragmatic capitalism 10 years 10 years ago I ran into this really weird problem where the word investing has a totally different meaning in the field of economics than it does in the field of finance. And in the field of economics, it means to spend for future production. And firms do this primarily when when they go out and they build a factory for instance. That's they're spending money for future production. And it's very different than consumption. It's the opposite of consumption basically because it has a return on investment whereas consumption is basically like a sunk cost almost. And so the but in the field of finance, investment basically means that you're you're allocating a sum of money to try to earn a return. And the interesting thing is when you look at the financial markets, what what people do when they're buying stocks and bonds is they're not literally investing. We call it investing, but they're not spending for future production. They're literally reallocating some part of their savings. So people have earned an income, they've saved some of it, and then when they go out and they buy stocks and bonds, they're taking some of that cash savings and they're saying, "I'm going to allocate this to the stock market, to the bond market, or whatever it might be." And the distinction is really I think it's kind of eye opening for me because I think a lot of people go into the asset allocation process and the portfolio construction process and they say, "I just want to make as much money as I can and I want to earn the highest returns I can." And you set sort of this unrealistic expectation where the the endeavor is not a a methodical process, but rather it turns into like a horse race where you're just trying to make bets and you're more you look more like a gambler than you do like someone who's implementing a really thoughtful process. And so, you know, the the message in this is not that you can't make a lot of money allocating assets. You obviously can, but I think that the you I like calling it an allocation of savings because another thing that I try to emphasize a lot in the book is that this has to be based on a plan. This has to be based on a process. You've got to go into this in a very methodical way where you're you're doing things in a strategic way rather than a you know a sort of haphazard gambling like mentality where yeah, we all want to make the most amount of money we can with the least amount of risk. The best way to do that is to have a really rigid process and plan in place before you're actually allocating money in a sort of haphazard way that you know where you're just trying to you know turn water into wine and you know try to you know make instruments that you have no control of generate returns that are higher than can reasonably be expected over time. Yeah, I think that's an excellent point and especially now when everyone has the apps in their hand on their phone and the whole system has kind of has a gamification to it. Um, it feels a lot like gambling all the time. Um, which I really worry about, especially >> a huge problem. I mean, and it's filtered into the way that I think a lot of people think of the stock market and the way they're allocating their assets. But you when you step back and you set realistic expectations about all this and you you think about this more of like hey I I am literally allocating my life's savings to something um it implies a much more prudent process that I think people will hopefully be more thoughtful about implementing. >> I think that's that's fantastic. I I hope people walk away with that in mind. I know I'm going to. So let's let's hit a couple of topics. Speaking of um the temptation to jump in and gamble on this metals, I mean precious metals have just been on fire. I imagine that a lot of IAS are getting phone calls from their clients saying, "Am I in it? If I'm not, I want to get in it or I've missed it. What do I do?" How are you feeling? What What your take on what's happening in the precious metal space? >> Gosh, I mean it's it's pretty crazy. Um, you know, it's there's a lot of, you know, it's a sort of a, you know, somebody asked me the other day, what's causing all this? I was like, this seems like a sort of an everything all at once, you know, just perfect storm of everything for for the metals, whether it's, you know, the usage in in AI or the, you know, the geopolitical environment or the dollar debasement trade or whatever it might be. It's all kind of all of these things all at once. And so, um, I think of metals very specifically as a form of, especially gold, um, as a form of fiat currency insurance. And so, to me, a lot of this is it's a time horizon trade. Um, insurance in my my methodology is an inherently long-term instrument. It covers a very, you know, if you want to buy insurance for the rest of your life, you you could think of your portfolio as having like a whole life bucket basically. Um, how would you allocate that? It might be, might be a little bit of Bitcoin, there might be a little bit of gold, there might be um some Treasury inflation protected securities. um things like that that are inherently sort of long duration instruments that you can actually you can make a reasonably high probability bet that over the course of a 10 20 30 40 year period these things are going to protect you from inflation pretty well. I think the danger with metals right now is that when you see these sort of parabolic moves, gosh, it kind of reminds me almost of like the the US stock market to some degree and the way we've seen the sort of parabolic increase in in in cape ratios and things like that. What happens when you get environments like this is and I talk about this in the book a little bit that the way I like to think about this is that it creates what's called a what I call a price compression. that for instance if you took the price of gold and you said hey I think this thing reasonably can do 8% per year well when you take 8% and then you take a year like 2025 and the thing does 65% what you've done is you've basically taken you've taken a whole bunch of those future returns and you've crushed them all down into into the present and what that does is it creates greater what financial nerds would call sequence of return risk basically that it basically means that your your future risk adjusted returns are likely to be lower because the instrument just mathematically cannot do 65% per year. It's not going to do that. And so if you have expectations like that, you're in for a bumpy ride. And so I think a lot of this and I I talk about time horizons so much in the book because I think that it's really important for investors to think about things across specific time horizons where if you own gold and you are looking at it on a one-year basis, you might as well be making bets at a horse track because it's a very similar type of mentality. Whereas if you're looking at gold and you're saying, you know what, I've got a bunch of this stuff locked up in a safe. It's probably maybe it's for multigenerational needs, maybe it's for a doomsday scenario. Who knows what it is? It's a 30 40-year bet. You're in a I think a much healthier asset allocation and and psychological state of mind with that asset in your portfolio compared to someone who's looking at this thing and saying, I'm buying this because I think it's going to continue to go up in the next six months. I think that's more akin to gambling. And so, you know, there's a there's a proper way to own this asset in even inside of a huge boom like this where if you're if you're able to think about it over the course of a very long time horizon, um then I think there's nothing wrong with owning it. But if you're thinking of it in the next 6 to 24 months or something like that, it's I think it's going to be a really really bumpy road. And if you're really really acutely exposed to it, um, that probably means there's a there's a reasonable argument for you to, hey, maybe you maybe you take some of the profits that you've, you know, been so fortunate to earn and maybe you diversify it into some other stuff just to, you know, reduce some of that the the skew that's been caused inside of your portfolio because of the huge gains. >> Yeah. Yeah. And that's the tough thing. It's hard to hard to let go when you're hanging on to, you know, riding the winner like that. But I think it's it's really sage advice right now. What about bonds? We talked about T bill and chill for super short term and I love the time horizon bucket idea. Um what about bonds? Because there is a narrative based on some of the geopolitics we've talked about and concerns about fiat currencies and the dollar that bonds are no longer investable. That is not the safe haven that it used to be. >> Yeah, it's funny. I you know I would have said that you know that narrative was probably a lot more applicable 5 years ago. I mean when when interest rates are zero and you're getting 0% on T bills there's no there's virtually no argument to be you know to own large allocations of that. Um these days you're getting three and a half% in a you know in a six or 12 month T bill. Um you're you're almost getting a real return there. Um, so you know that is a mathematically it's just a totally different instrument than it was back in 2019 or something like that. And the the same thing's true though for a lot of the curve. I would say that but it depends on where you are. I mean I like to look at the the yield curve across very specific time horizons. I use a metric that I call escape velocity where I think of the the interest rate risk relative to the current interest rate in the instrument. And by that metric right now, and what I mean by escape velocity is escape velocity is kind of the point on the curve where the interest rate is high enough that you don't have a really significant amount of interest rate risk. And so if you're looking at the yield curve right now, right now I'd say the the point of like almost um I would say equilibrium I guess is the word I'm looking for. It's right around like four years. And so it's still relatively short-term, but I would I would feel really really comfortable owning bonds in the zero to fiveyear time horizon. So anything from a zero to fiveyear note um looks really attractive because you're still getting you're getting 4% or whatever on a on a fiveyear note. Um again, you can lock that in or maybe maybe you're not going to generate a real return over the whole term, but you don't have a lot of interest rate risk there. um you're earning a pretty good coupon. When you start getting longer, um the the math just starts looking way way different where I mean, God, if you're buying 20-year Treasury bonds right now, um you know, again, you're getting four and a half% with um you know, a modified duration of like, you know, 17. That means that for every 1% change in interest rates, you're going to get 17% uh volatility basically either negative or positive depending on which way rates go and you're earning four and a half percent. The math there just it doesn't it's not nearly as compelling. You know, when you look at something like a like a five-year note you can allocate, you know, your time horizon, you know the interest rate. We even have a pretty good idea of what inflation's probably going to do over that time horizon. So, you know, I don't think you have to you don't have to succumb to only owning tea bills if you if you want to own, you know, super safe instruments. I think you can, especially now with the, you know, if if we are going to have a Fed chief that comes in that's more amendable to cutting rates. I think that actually makes the argument for pushing your duration out a little bit longer a lot more compelling where you know I've been urging people in the last couple really the last year you should be pushing your duration out to two three four years get it out to more of that equilibrium point of uh you know about four years as much as you can as much as you're comfortable with because there's still not a lot of interest rate risk there so it's weird because I would say you know bonds are bonds are not the great divers diversifier that they were in the the 80s or 90s, but especially in that 0 to 5year range, I think bonds are actually anything in that range is a is a really good diversifier, especially if you're looking for for really safe income inside of a a specific short time horizon because there's not there's not a lot lot of other in instruments that are going to give you that sort of short-term certainty with with almost near uh principal guarantee like things like US government bonds will. >> Yeah. The last thing I wanted to ask you about is we've seen a lot of products coming up that try to give access to alternatives or private market or private credit. These have sort of been popular as people talk about diversification. Is that a smart idea in general? is are you more concerned about what's happening there and you know maybe the lack of transparency or is that something that you know when we're thinking about what diversification looks like in this environment people need to consider? Yeah, it's really it's really messy because um I mean these private instruments they in a lot of ways when you utilize them especially inside of ETFs um and the some of the popular rappers I mean ETFs are obviously the sort of popular rapper right now for most financial products and and we're an ETF issuer so I I I know the the plumbing of these things really really well and the problem is is that the the secret sauce of an ETF really is that it relies very very heavily on having price transparency in the underlying. And that is the thing that really makes ETFs incredibly efficient when you use them properly and you construct them properly. And the problem with with private markets is that private markets don't mark their assets to market every day. We don't even know what the value of these things are every day. And so when you try to put that thing into an ETF wrapper, in a lot of ways, you're trying to jam a square peg into a round hole where the thing quite literally can't be as efficient as you want it to be because the market makers who are running the ETF, they really have no idea what the underlying value of those things, what the underlying assets are actually worth. And so you get crazy spreads, you get crazy, you actually get like, you know, big big um deviations in terms of premiums and discounts from NAV on those sorts of things because the market makers really and the market the people buying these things, they don't really know what these things are worth. And so >> they're they're not my favorite products mainly because they just don't work well in the ETF wrapper. So, you know, unfortunately the the ETF rapper has become really popular and there's a lot of lot of different products that are coming online that are are utilizing the ETF rapper in ways that I don't really think are appropriate, but sort of they are more narrative driven than anything else. And >> you see this nowhere more apparent in like the than it is in like the income space where there it's become really popular to utilize ETFs inside of a sort of an option income generating strategy where they actually call this distribution yield. And it's not yield in any really, you know, traditional sense of the word yield in terms of what they're really doing is they're they're basically for the most part they're capturing some of your future upside um inside of the instrument. And they're calling it distribution yield for marketing sake more than anything else. And I think there's a lot of truth to that in the the private market narrative, too, where we're people are looking for diversifiers outside of bonds, which makes a lot of sense given the way bonds have performed in the last five years. But the the tricky thing is that public the the the private markets, they're not going to solve that diversification problem the way that people want them to because they're just they're just not going to be good fits inside of of publicly listed instruments like ETFs. >> Yeah, buyer beware. Um that's a fantastic explanation because I think a lot of people are looking at uh looking at some of these uh instruments and seeing all the ads to be honest with you. Um, Colin, it's such a it's such a pleasure to have you. It was it's a really critical time to be having this conversation. So, really appreciate you coming on and taking the time. >> Yeah. Yeah. Thank you, Maggie. It was great talking with you. >> Uh, and if you are listening and you would like to like some help customizing your portfolio, figuring out if you have the right mix, you can get a free portfolio review from one of the adviserss in the Wealthy Network. Just head over to the just the link, the description. We'll put it in there, or you can go to wealthon.comfree. Thanks so much for joining us, everyone. We'll see you again soon.