Is It Time To Raise Cash In Your Portfolio? | Ted Oakley
Summary
Energy Overweight: Guest remains bullish on fossil fuels, with energy still the largest allocation, adding drillers and service companies that offer strong cash flow and dividends.
Underowned Sector: Institutions are broadly underweight traditional energy, supporting a multi-year runway for oil and gas producers and services.
Precious Metals: Trimmed gold and silver miners after sharp gains, then selectively bought back royalty/streaming names after a 30-35% pullback.
Short-Term Treasuries: Advocates 20-25% (or more) in cash/short-term Treasuries for dry powder and risk management amid high valuations.
Private Credit Risk: Warns of stress in private credit/private equity with rising rates, redemptions, and gating, viewing Wall Street’s overcapitalization as a key vulnerability.
Oil Tankers & Logistics: Highlights tanker insurance challenges in the Gulf and potential tailwinds for non-Gulf sourcing, reinforcing the case for U.S. oil & gas and select tanker exposure.
Market Outlook: Notes indices near 200-day averages; higher oil and rates together could trigger recession and compression in earnings and multiples.
All-Weather Approach: Emphasizes liquidity, scaling into cheaper prices, and trimming stretched names to navigate potential stagflation or disinflation scenarios.
Transcript
If you don't have at least, you know, 20 or 25% in some sort of a cash mode, you know, we we own short-term treasuries, but, you know, three, six month treasuries, that kind of thing. If you don't have at least that much right now, I think you're you're you're taking a bigger risk because valuations are still really, really high. You know, we're still at a high multiple AS&P. And what happens in times, tough times, is they shrink the multiple and they shrink the earnings both. And that's how that's how you get hit. And I don't think people are factoring any of that in. >> Welcome to Thoughtful Money. I'm Thulful Money founder and your host, Adam Tagert. Very happy to welcome back to the program Ted Oakley. Ted is a founder and CEO of Oxbow Advisors, a high- net worth advisory firm. Um Ted is one of the absolute uh true gems uh of the investing world. I always love getting to interview him. We've got a lot to talk about. Ted, thank you so much for joining us. >> Good to see you, Adam. >> Good to see you, Ted. Um, and I think uh I think the audience is going to particularly appreciate your calm, just levelheaded, quiescent demeanor here, um, at a time where there's a lot of concerns swirling around Wall Street right now. Right, we've got uh spiking oil prices from the Iran war. Uh we've got concerns about uh private credit, you know, potentially spilling over into other parts of the credit system. Um the stock market's basically gone nowhere for pretty much six months at this point. Um I don't even know where we should start. Um from from your perch, what are you looking at most closely these days with your team at Oxbow? Well, you know, Adam, we look uh at companies from the companies themselves and you know, we we'll wait till we get certain opportunities to own things. Um and and that's that presents us with a few things. Rates ticked up a little bit and so we've been able to buy a little two and threeear paper that were better than normal and uh and but we we we've really picked off some things. I mean, you have to for us, we look we look at the companies as opposed to like the overall if we have a a certain level, we want to own something, then we'll own it. I I mean, I know there's a lot going on for sure that's affected it, but uh you know, we were in pretty good shape on all this. I don't I think the economy, if this thing keeps on going, obviously it's going to suffer. I mean, you've got diesel prices over $5 now, which is a big big factor, even more so really than gasoline when you think about it for shipping. >> And uh I I think we are going to run in some headwinds. No question about it. But >> typically, if you have quite a bit of liquidity like we do, it actually sets you up for a period where you can own things that you might not be able to own before. And so that's the way we that's the way we view it. you know, a cheap price for us is an entry point, uh, not necessarily a place for us to get spooked about the market. >> Yeah. And and you have said many times in your previous appearances on this program that your firm's best years have been coming out of bare markets, right? And so, you know, part of your strategy is keeping enough dry powder so that if and when a bare market arrives, you can withstand it well and then have capital to deploy when valuations are really attractive. Now, we're not in a bare market yet. Um, and while Wall Street has been a lot more volatile and uh, like I said, the tenor there is much more nervous now, we're still not that far from all-time highs, right? We're down like 400 S&P points from from the all time. >> Um, so, uh, I guess let me ask you this. Um, have you have you made many material changes to your portfolio based upon what's been happening, especially since the the outbreak of the war, or are you just kind of steadying, just, you know, sticking to your original knitting? >> Well, you know, we sold uh at the very end of the year, last week of the year in the first week of the new year, we sold um some of our gold miners. sold basically sold almost all the silver itself >> when it went over when it went to 100 uh and sold silver miners. So, and we we really uh we we sold a little bit of gold but not much. We usually don't sell much of the gold itself, but we did the miners. And what happened in really in the last in the last month is that the particularly the gold mining royalty companies that with three we own uh you they came down about 30% or 35%. So we we bought some of those back, you know, and then on the on the energy side, what happens on energy is that the service companies, drilling companies, service companies, they come in, they come in at the end. Uh they start to move later than the producers themselves. And we own the producers as well. And you I don't people probably don't know this, but oil and energy was our biggest holding last year coming into this year as far as amount that we have in a portfolio. And so obviously it's been a good period for us, but we haven't we haven't done anything real unusual other than find if we find a company that's cheap, we're going to we're going to add it when we've added a few. Uh and so that's that's pretty much what we've done here. We're still carrying, you know, overall probably 45 to 48% in US treasuries. >> All right. So, um, you've got a a fairly high cash balance, and again, that's that's going with the strategy of making sure you've got dry powder on hand if lower valuations present themselves. Um, I'm curious, is is energy still your largest single holding there at Oxbow right now? >> It is. Uh, and we have we've actually uh added we've added a driller, added a service company or two. And we we we don't we don't really feel like that that's something that's just a flash in the pan right here. We really feel like they're they're still fairly cheap. They pay good cash flow, good dividends, and so it's still the largest holding for us in general. Yeah. >> Okay. Um, so I want to I want to talk more about energy, but I want to relate it to the precious metals. So the precious metals just had a phenomenal run especially going into into the end of last year right you know I mean silver start of the year around 25 bucks or so 2025 you know ended the year zooming uh into the 100 uh bucks an ounce range and then catapulted to 120 very quickly and then has had this it's basically been cut in half more or less since then. Um, so that was sort of an example of a a sector just getting ahead of itself wi price price-wise, right? Just had so much price appreciation in a short period of time. I'm presuming you said, "Guys, look, it's been too good too quickly. Let's let let's d-risk here. Certainly proved to be the right move." Um, sounds like you're seeing some all clear signs there. you're you're getting a little back into at least parts of the space like the the silver or the precious metal streamers or royalty companies you mentioned with oil. It's a little bit of a similar story. I mean, not quite as extreme, but you and I talked last year a couple of times about how oil was starting to look like a place to to put capital back to work in after years of it having been kind of a pretty underperforming sector. Um the oil stocks did really well at the beginning of this year and this was pre-war. Um but they had a lot of price appreciation. I mean I would say kind of on average like 25 30% for a lot of the names in that sector. Now we've had the war which has pushed prices up even higher. Uh sorry oil prices up even higher which presumably should help a lot of these producers and other companies in the space at least in the near term um profit-wise. I guess my question is is is this space starting to get ahead of itself? Um or do you think it has sustainable um legs to run from here? I'm presuming it's more the latter if you still hold it as your largest uh core position. >> Well, we certainly think it has more to go and you have to remember not many people own it. If you look at most of the money on the east and west coast, for example, that are in pension plans, endowments, and that sort of thing, they have totally turned off and kicked fossil fuels out of those portfolios. They don't even own any. It's almost like they don't even know what's going on the rest of the world. And so, you've got a whole group of people that don't even own it. A lot of institutions don't necessarily own a lot of oil. Uh, and they claim to have energy, but it's off-the-wall stuff. I mean, it's wind wind energy and that sort of thing, but you you they're missing the point here that, you know, fossil fuel is probably going to be the place it's going to be the next two or three or four years. And even withstanding, if everything goes back to normal in the M East, you're still in a situation where it's cheap and we haven't, you know, a lot of people don't own them and you only have about three less than 3% of the S&P that's in energy that, you know, oil. So, >> um, yeah, I think it has more to go. I mean, it's like it hasn't ever gotten the level. Like, for example, uh when when the when the min gold miners hit such highs, we basically cut those in half uh right at the end of the year, beginning of January 2nd, 3rd, and fourth. And we did the same thing with silver. Same. We owned Heckla. We cut that in half on the silver miners because it it tripled in a year. And so, it was a thing to do. Well, all those have come back now, you know, and you have a lot of retail in those stocks. In energy, you don't have as much retail. They're not chasing those things. Uh, it's more of a steady climb where people are starting to realize that, hey, you know, we're we're going to need we're going to need this and it's going to no matter what, it's going to be a while before they get this thing resolved in terms of getting back to normal. Uh, it may never go back to normal for quite a while. So, I think you have to stay with energy in here for the time being. >> Okay. And I'm curious. I love talking to folks like you who are based in Texas. Um, because you're just you hear the conversations about the oil industry that are being had in the oil industry around you. Is there anything notable that you're hearing right now either in terms of optimism about the future or, you know, any general vibe coming from the folks that actually work in that industry? Well, they like the price. You know what happens with the with energy in in in the oil fields is that it has to go for a while before you're going to see them say, "Okay, we're going to start to increase drilling and do that sort of thing." And people people forget that with horizontal drilling. It's not like when you would raise a bunch of rigs when you were vertically drilling. It's a it's a different game now. But, you know, they like the price and a lot of a lot of the producers in Texas in the southwest really have gas and gas is is not as you know, the price is not as strong. So, they're not getting that much revenue. But the oil, they're just, you know, they like the price right now and they'll take it. Uh, and I think if you sustain the price or you drive it higher, then you'll start to see maybe uh you an increased drilling because they'll come out of the woodwork then and say, "Hey, it's time to do something." >> Okay. What one of the questions I've been asking folks I'd like to get your thoughts on Ted recently, which is um this is a conclusion I'm I'm increasingly coming to and and I am not an oil analyst nor a geopolitical analyst. Um but it seems pretty reasonable to me that there's going to be a higher risk premium placed on oil and gas coming out of the Persian Gulf in the future. you know, once hopefully once this war stops and things the dust starts to settle and and you know, nations that buy from the Gulf are going to say, you know what, like yes, I was it was nice buying, you know, oil and gas from there. Um, but I'm just so uncomfortable now about sending my ships there and worrying that the region might, you know, turn into a flash point again or or a mine might hit my boat or Iran might, you know, uh, start demanding a toll for my tankers to to go through there. And so I I want to start thinking about sourcing more of my fossil fuels from, you know, more stable, quote unquote, safer countries. Um, and the administration's been saying, "Yeah, we've we've seen this already. We we've we just signed a 56 billion dollar worth of energy deals with Indoacific countries recently. Um they're they're ringing their phones off the hook saying, "Hey, can we can we buy more from you going forward?" And you know, a lot of these countries, let's talk about Japan. Uh Japan uh buys a lot of fuel from the Persian Gulf. It takes 25 days to get there. Well, if they buy from America to get get it to them from Alaska, that's only eight days. and they don't really worry about Alaska turning into a, you know, a war zone. So, do you think that that there may be some long-term benefits coming out of this war that may actually be additional tailwinds to America's oil and gas industry? >> Yeah. I mean, all of that could happen. Uh I I don't know. You know, you're talking about the you know, you're talking about moving the oil, but if you look at tankers today, one of the problems about the all the tankers over there is they don't have any insurance. is not so much they can't get through the straight, but if you don't have you they dropped the they gave them seven day outs on the insurance, so they don't have any insurance. So, if you don't have any insurance, you you know, you you're not going to I mean, you may run into something. It has nothing to do with the mine or anything else. And so that's the one of the biggest problems nobody talks about in that regard. But uh yeah and I I think as uh you know we only we own we only want we own one tanker DHT but it's but and it's been good for us. But I think and it has a young fleet. No, you the debt flow all that sort of has it's the best one in our opinion. But the thing about it is is that uh yeah, that could very well happen that way, especially if it goes on longer, you know, a lot longer. I'm talking about where they just can't get anything resolved over a six-month period or something. >> Well, let's talk about that risk, too, just to the general markets, right? So, um, presumably the longer the war goes on, the longer oil prices are going to remain elevated. Maybe they'll go even higher, right? I mean, one wild card here is is how much damage will be done to the energy infrastructure of the Gulf by the time this is over. You know, hopefully no more than already has been done, but it could get a lot worse. Um, but the longer this all goes on, those high oil prices just weigh on the economy, right? It's just the higher input costs. They start even crimping supply chains. we might have some of the echoes of what we had to deal with during co um how worried is that starting to make you about the general markets as the thing that triggers you know a really material correction in the financial markets. >> Well, I don't I don't look at the the markets exactly and that and that. In other words, I look at where the S&P and and the NASDAQ are and that sort of thing and I will tell you they're right down on their 200 day average, >> right? use techn I don't use technicals a lot. I know how to use it a lot, but we I particularly use it when you're breaking these levels like that and you're right down on those levels. So, if anything if anything gets a lot worse and you start to break those levels, then all of a sudden you end up in a situation where people pile on, so to speak, and you get more selling than you expected. >> The one thing I've always known in this business is we know nothing about the future. I don't know anything that's going to happen. I I don't I it's but you always have to have a portfolio that can operate under any circumstance. In other words, if you if you're going to have a market that really just keeps right on moving, things are great. That's okay. But if you break it and things get really really cheap, how are you how are you situated then? Are you in a situ situation where you can take advantage of it? And I think I think that people need to think about having sort of an all-weather portfolio rather than uh trying to stay fully invested in 12 exchange rated funds and just forgetting it. I just don't think that's going to work the next five years. >> Okay. Um just for folks that maybe don't know exactly what you mean by all weather portfolio generally, what are you what are you talking about allocation wise? >> Well, presumably there's a big chunk there to catch. You're going to have to have some. You don't have to have as much as we have necessarily because >> we've we've really done well the last couple years even with a high allocation because if you own the right things it's going to work. >> Mh. >> But what what I mean by that is always have a portfolio such that no matter which what happens in the marketplace if you un unfortunately have say a move down that's really tough you know I'm talking 30 40% you can weather that. In other words, you you've got enough liquidity so that you're okay to so and let that thing come back on its own what you've got invested. If you don't have any liquidity, you can't do that, right? >> Which everything you have is down at that point. And you need something in the portfolio that that doesn't get hurt in those kinds of times. And consequently on the way up as you go higher you know you and things are doing really really well and you have these major moves in stocks you need to take some of them off. In other words you need to try to set that up so that you know eventually those those names will come back. You know they'll sell off some. So it gives you a chance on both ends to participate. That's that's the point. You can't, you know, you can't just u put everything in a market portfolio and say I'm good to go. I we just don't believe in that. Well, and and I'll I'll talk more about this at the very end, but um uh I am a an Oxbow client and one of the things that I have very much appreciated um has been the performance um of especially of late um but also with sort of that higher margin of safety where you've got a fair amount that's in either just cash or it's in you know short-term treasuries that are paying an income along there. And so it just really helps you sleep at night, I guess, is what I'm saying. Um is when um you know, you you you know that that you're not fully exposed uh to the market. Um and yet you're still seeing the the type of progress you want to see in the overall account balances. Um >> I would say this, we've had, you know, we've had more trading in the last really five or six months than we normally do, but because that's that's why we know how to do it. But the main point is that I think uh we we'll go into the next five or ten years and it things will change. You can't just be fully invested all the time. There'll be periods when you need to know how to raise cash. Um I'm writing about that in the April comments that'll be coming out. They're entitled the gambler. But I got that McKenna Rogers song about know when to hold them and when to fold them. >> And that that's >> that's the point. There's times when you need to know when to deploy cash and times when you need to raise cash, but I think uh that's right now in the investment community on the advising side. Uh that's that's an art that is only displayed with a few people. >> All right. Well, so this is this is sort of why I asked that question about um your level of concern about high oil prices maybe being the trigger here that that sends the markets into a material correction because on many of your previous appearances here, you know, you and I have talked about your your level of discomfort with valuations that they've been historically rich, right? Um and so I I guess maybe if I can distill my question down and ask it again, is this a time to fold them? Are you concerned enough that you're saying, "Look, we're we're we're actually adding to our cash balances because we think the odds of of lower prices ahead is is is now more likely." >> Well, I would say to your viewers out there, if you don't have if you don't have at least, you know, 20 or 25% in some sort of a cash mode, you know, we we own short-term treasuries, but, you know, three, six month treasuries, that kind of thing. If you don't have at least that much right now, I think you're you're you're taking a bigger risk because valuations are still really really high. I mean, if you look at the cape ratio is still really high, you know, 40 times, you're you're pre, you know, if you look at future earnings for next 12 months, high multiple on that stuff. You know, we're still at a high multiple AS&P. Um, and that doesn't factor in anything. And what happens in times, tough times, is they shrink the multiple and they shrink the earnings both. And that's how that's how you get hit. And I don't think people are factoring any of that in. And I'm not saying it's guaranteed to happen, but if you don't have any liquidity right now, you we think at least that you should have if you if you want to try to get through this period in here. And I've said this before, we're in these second years of presidential elections. And these people do all sorts of things during this year that are negative and positive. And so you never know. Second years are not very good, by the way. So I think that's >> not very good on an average market return. >> Average return is 1%. You know, so and we've had some really negative years in in secondyear terms. >> Okay. What what um I guess the question I want to ask is is what risk factors are you most concerned about right now? We've talked about valuations. We've talked about high oil prices. Um there's the concerns that are, you know, we're seeing in the headlines at least about private credit and some worrying that that may lead to a contagion uh that that that could be problematic. Um you also mentioned earlier too just just higher interest rates, right? Um so that you know that ob that's good for folks that are owning you know short-term treasuries like you. Um but it's bad for companies that are trying to roll over maturing debt and whatnot. So, um, is one of those four factors, um, what you consider to be the biggest risk factor right now, or is there something else I haven't listed? >> Well, the higher rates, Adam, will also affect private equity and private credit. Yeah. they, you know, they'll go hand in hand. And I think people, uh, you know, they when they look at, they look at their bond, if I, you know, if you own long-term bonds, we've said this really for the last three years, you don't you you really can't own the long bond like the 30-year paper and that sort of thing, and you look at it now, just give you an example, we bought a Bergkshire Hathaway three-year bond on a 467 just today. Okay? And yet you're at a 488 or 489 on the 30-year Treasury. Think about that. >> Think about that. I get almost the entire yield from maybe a better credit than than the Treasury. And I don't think people think about that when they're looking at things. They just they just they just sort of throw it on a fund and hope it works. Okay. But yeah, you and you're really seeing this private credit come unwound, but they it almost had to. It was a, you know, they had over like a Wall Street overd does everything. They've overdone private equity. They've overdone private credit. And, you know, every family office that I know of has got some of both because they were sold it by some consultant. And people don't really know what's in those things. And now they're having to, if you go look and look at the first quarter, I got the graph today of redemptions from the top seven. Okay? It's huge. I mean, they it's amazing. looking back over over the last four quarters, what what's happening in that? So, people are saying, "Hey, >> so so it's a high redemption rate even though they're starting to gate uh withdrawals." >> Yeah. Well, they're gating it. Yeah. But it's still overall, if you just look at the firms, if I can give it to you, if you look at the firms, they're they're really uh if they haven't gated it, they probably will. And it just goes to show you, you know, you can't trust Wall Street. You know, you look at private equity, private any they did this years ago on hedge funds. They learned the lesson. They should have and uh they'll gate them every time because they look out for themselves first. >> Yeah. So I I just had uh produced thoughtful money's spring online conference this past weekend and one of the members of the faculty was Matt Taibbe, >> you know, the great chronicler of of the the great financial crisis. >> Yeah. Interesting. >> And a great guy. I mean, super smart guy, but also just one of the nicest men you could ever hope to meet. And uh I asked him uh you know, if if he saw um you if you heard a rhyming in what's going on with private credit versus you know credit issues back in 2008. And he said, "Yeah, absolutely." And I said, "Well, you know, so from your perspective, what have we learned? You know, what did Wall Street learn um coming out of GFC until now?" and he said basically nothing. Basically learned that it can continue doing what it's doing and still pay itself record bonuses along the way and probably have a high degree of confidence it's going to get bailed out. >> And the problem too, uh, Adam, is that, you know, for all your listeners out there, >> uh, gating means they can cut you off. You can't get your money out. You know, it's a term we use on the street, but, you know, when they went in to allow individual investors to get pieces of all these things, they didn't know what they were buying. you know, that somebody sold it to them and and they end up again, I've always said this, but you really have to know what you own in a portfolio. I mean, you the companies we own, you know them. I mean, you would you would know them. U but you have to know what you own. You can't just own something that somebody said, "Hey, this is a great thing. You need to go into it." And that's that's sort of where that stuff went to. >> Yeah. Um, and it's I think you and I have talked about this, but it's really hard not to look at the push to bring retail into the private markets as a way for the private issuers or or or um the private investors, the big ones, the institutional ones, to basically pawn their poor performing assets off onto an unsuspecting public. Right. To your point, hey, these people don't really know what's going on. you know, we'll get them excited that, oh, you get you you get to get behind the velvet rope and invest in the same thing that the big names do, but we're going to take basically the junk on our books that we don't want and sell it to the retail client. Do do you feel that that's pretty much what's been going on? >> Well, I I I totally agree with you. Exactly. I told somebody the other day, I said, "Hey, if you really feel like you need to go buy some private credit, why don't you just go buy a few rent houses on your own because you can control that." Okay. And uh because you can't control this other situation. It's just like everything on Wall Street though. The early players make money. The early players in private credit did well. The early players in private equity. But see, Wall Street ruins everything. I've seen this with computer leasing, with tech, with drilling rigs all over the years. It's now it's these two. They over capitalize it. And so what happens is you end up they spend too much money. So they buy everything and they over overpay for it. Like you're going to make more money I think in the straight S&P than you will in private equity when it's all said and done. >> Done. Yeah. Um which of course is so contrary to the narrative of why you want to buy, you know, private assets, but but yeah, and I completely agree with you. So your point about, you know, really knowing what you own, um obviously it's it's foundational advice to to any investor. Um, but at at Oxbow, you know, in addition to interviewing you, I interview your uh chief investment officer, Chance Penukin, and and Chance, I mean, essentially his time is basically just spent building that watch list. I I know working in conjunction with you and the rest of the team there at Oxbow, but then just really living and breathing that watch list, right? and determining when something on it, you know, rises to or maybe falls to a value that makes it, you know, worthwhile to consider putting it in the portfolio or looking at the existing portfolio and saying, "Hey, we loved this company when we first bought it, but now this has changed. Time maybe to prune it." But it really is about developing a mastery over a portfolio of individual companies. Correct. >> You know, totally. And I'll I'll uh put in a plug for him. He he's as good as there is. and I've been around this business a long long time >> and I will tell you he's a great partner uh owns part of the firm and he is an excellent excellent guy in the stock market. >> All right. Well, folks, we'll be having Chance back on the program in I think like two two and a half weeks. So, you'll get a fresh crack at at what Chance is seeing as well. Um All right. So, um, you know, I I I don't get the sense, and correct me if I'm I'm wrong here. I don't get the sense that you're you're um entering a batten down the hatches moment in the markets yet. Um, even though you are concerned about current valuations and some of the risks that we've talked about, what would get you there? What what would you need to see to start saying, you know what, this looks like uh a bare market could be starting here and we want to go into sort of full um bare market mode, whatever that looks like for Oxbow. >> Well, a couple of things. Number one, if rates really went higher, now I'm talking about two points or something higher than they are now, you're going to throw you're going to throw yourself into a big recession. And oil the same way. If you look at the 74 bare market, what kicked that off was the embargo. It killed everything >> and you went into a major recession and prices went that was the cheapest that 74 low or the cheapest prices that have been since then. I mean they were low in 82 too but not that 74 low was dirt cheap and it was because you were really into a recession and you had inflation. I mean, it was crazy. It was it was a mess. And uh >> that would that would bother us to have both of those things happen at the same time. Have really high oil, really high rates because you're going to damage a lot of people then. I mean, not just you're going to damage the consumer, which our economy runs off of. You're going to damage companies and then you're that's what I was talking about. Then your earnings going to go down, your multiples are going to go down and that's how you get into these severe bare markets. both happen at the same time. Um, and you know, as far as I'm concerned, we're still in in what some people would still call a bubble because the prices are still very very expensive in these markets relative to where they have been say in the last 50 years. >> Okay. Um, I will tell you that fear that you just mentioned there that that that is Luke Roman's current outlook. Um, from what he just shared at the conference, um, his big concern is that we enter a essentially a stagflationary recession um because of the high oil prices and the the high yields um throwing everything into this this recession. So sort of history repeating again. >> Well, I know uh I know Luke's a great guy. I'm sure he did well for you because he's very knowledgeable person. That's for sure. Well, what was so wonderful about the conference is um and this is why I love doing them is, you know, the mission of this channel is to help the the average investor, you know, look through the eyes um and and and crawl around in the brains of of people who have um you know, decades of great experience, and you're certainly one of them, Ted. Um, and I feel like everybody I bring on the channel has, you know, one to several kind of pieces of the puzzle. And over time, we're collecting more and more pieces of that puzzle, you know, as I interview people week after week on this channel. What's fun about or what I think is really valuable about these these um online conferences, it's 11 hours. I mean, it's it's it's like 15 16 of these speakers all right after the other. And I feel like you get a lot of pieces of the puzzle all at once. So you walk away from the day I think with a much clearer view of what's going on at least right now at this snapshot in time um than you're able to get just you know watching week after week after week. Um so we had a number of people you know there's certainly some differences of opinions on exactly how this is going to play out but if I had to say there was sort of a majority view it's that there is a shock that's happening right now to the economy. um it is going to be inflationary in the short term and then the question is is what happens after that and like I said Luke sort of thinks we get stuck in this this um stagflationary recession though like Lacy Hunts and Ed Dows of the world they see this same potential in the immediate term but they have got longer cons they've got larger concerns about the economy um and its weakness that they had before the the the war broke out and they think that this this oil shock essentially even though it's inflationary initially um is just going to add insult to injury on on where the economy was before and that things are going to then dramatically slow and as Lacy says you know oil shocks while initially inflationary are actually deflationary in the long run. Um and so they they predict more of a sort of disinflationary deflationary recession to be the the legacy of this oil shock. So, we'll see what comes out. But again, a lot of people sort of think what's happening right now is not good. Like there's there's no good that's going to come out of it. >> Well, I I suppose unlike Lacy and Luke, I know I don't know what's going to happen. Yeah, for sure. >> U and I never have since I've been in the business, but again, you know, you just got to be ready to play play a hand either way. I mean, that's really what ends. Well, you and I talk about the sports that we play when we're off camera, Ted. And and I think it's that sort of athleticism, which is, you know, really one of the things I see as one of the strengths of Oxbow, which is, you know, you you sort of mentioned the all-w weatherather portfolio, but it's the ability to be reflexive to what happens. Um, you've got your core holdings and your core framework, but you've got the ability to kind of, you know, pivot and react um to to some, you know, some of the larger macro developments as they happen. if you feel it's worth you know changing the portfolio structure for that but I get a sense you don't change the portfolio structure to macro events very often >> not very often we change it relative to companies or a company gets too high like we had with the gold miners and so still some of those back then >> uh but again we bought some of the you just in the last day or two bought some of the some of the royalty companies back but you know Adam at at a really low point in a bare market. Uh if you and I were having this conversation, uh we will have to be people will be you have to drag them to the altar to buy stocks and there they'll be they'll be cheap, but you have to drag them in to buy them. And actually, that's where they'll make the most money. But that's when you have to be able to say, "Hey, look, you're going to own a piece of a company here that makes this much money that will do well over the next five years, and if you had all the money in the world, you buy the whole company right now. you. That's when you can make sense to people rather than playing off of their fears at lows, you know, like, hey, I I hear you. You need to get out. That's that's not the right thing at that time. If they had enough liquidity, they can take advantage of some really good pricing. And really, they need to take advantage of higher pricing, too, and sell some things. >> I mean, if you look at these big seven or big 10 stocks right now in the S&P, >> you'd be better off to sell some of them. We've sold some of them, a lot of them. >> So, let's let's dig into that just for a minute, Ted. So, um I mean, first, let's hope this war is over tomorrow. Let's hope the administration is correct and that uh you know, the oil oil shock's going to be fleeting and it's going to, you know, Trump's words, drop like a stone after the war ends. and and that everything the administration has been saying is going to provide a tailwind to the economy this year from the one big beautiful bill and the deregulation and the tariff revenue and you know all this stuff. Let's hope that all happens and we actually end up having a great year but we got to be realistic about the current challenges that we're facing and and the uncertainty that's there. So to your point about a bare market, I I not saying this is going to happen, but let's assume for a moment that these events actually do trigger, you know, a bare market um in in the financial markets. Um, you know, you have said that investors, you know, as as as the fear begins to build, they start making a lot of really bad decisions and they get to a point where they just have zero appetite for stocks anymore and they generally tend to flush out their positions often times near the lows and when it's the best time to be buying, they they're allergic to the idea. But again, you've said that's where time and time again over market cycles where you've actually had your best performing years is coming out of a bare market. So, what would you advise the average investor to just mentally prepare for um you know, assuming for a moment that that a bare market lies ahead. Well, if you make that assumption and you say that's going to be, you need to have enough money, I'm talking about set asidewise, so that let's just say that you don't know this, but it's going to be a two-year bare market >> because I' I've been through numerous of those. What happens is they just eat away at you every day. The market opens up in the morning and the time you get to the afternoon and it's down again. And people keep buying, think, I've got a low. I've got a low. I've got a low. But it keeps on coming at you. You have to have enough money to to to sit out the market at least >> to see where where we going to get to here and not not apply all of your funds at one time. You know, this whole business and cheaper prices about scaling things. You can buy a little bit of things and and buy a little more later on, but I think you have to have enough money enough so that if you look out over the next say it's two or three years or something, you can wade through that. You know, if you have everything in the stock market and every day you get up and it's lower, for example, that's going to be a problem. And what I see out of this real expensive market right here is one of two things. either you really get a significant sell-off that sets everything back cheap again all in one throw, you know, like within a six-month period or something, or you don't make any money for seven or eight years. In other words, it's a 3% return, 2% return for a long period. >> And you got to be to me, you have to have enough liquidity either way to work through those things. So Ted, there's a lot of people that are watching this port uh this video here who are older, you know, 50 years older. We've got plenty that are in retirement. Um a lot of them have been, you know, successful and successful enough to retire, but um I don't know how many of those people would be able to withstand seven or eight years of of going nowhere, >> right? Um, uh, what would you advise somebody who's who's watching who sort of fits that criteria do? Um, I don't want to encourage panic. I don't want them to make any rash decisions, but um, I guess what kind of conversations should they be having perhaps with an adviser um, just to to review their their situation and kind of kind of just do a stress test to say, okay, look, if we entered a bare market, you know, if I took steps XYZ now, might that actually help me weather it better? Well, it's interesting you bring that up, Adam. I'm I'm I'm thinking of a new book. In fact, uh I've been talking to staff about this. I've got a lot of stuff lined up on it called Thin Ice, and it's about u people over 65 that are in the market because a lot of them are fully in the market. They they don't they they're like out their portfolio is 90% stocks. Um, we have pe we see people 70 year old 80 year old people that have 80 90% in stocks. All right. >> And there used to be an old saw on Wall Street and and still around but said that you know if you take a 100 minus your age that's probably about what you should start to look at in in stocks. In other words, as you get older, you settle things down because you don't know what the future holds and you got to make sure that you're okay. And obviously at 70 or 80, you don't have as long to live as you do at at 40. So, you know, you got to start thinking about that because I think they're missing the point. It's been great for a number of years and all the advisors are telling them, hey, you don't need you don't need that safety valve. just stay in the market. It's done great for you. And they have great profits, by the way. And so, it's hard to get them to understand that. But I think they should understand it because right now, if you had a major bare market with people over 65 or 70, I think it would really really affect them a lot. I think they I don't think they're ready for that. And I think the biggest problem they'll have is it emotionally will affect them more than it would have in any other time. You got to realize, you know, next year the average baby boomer be 72, which means they got to start taking money out of all their pension plans. And secondly, back in 2000, you know, >> they were 45. So that's that's the difference. See, and that that's what you get into. You had plenty of time back then as a baby boomer. You could wait on it, but man, not at this stage. You have to do it. I I just think they're missing the point and I know uh it's going to be hard for them to say to raise liquidity and do something different but um they should think about that for their own benefit. I think >> all right I I think that book would would help a lot of people and I think there'd be a lot of interest in this audience at it and uh you do such a a wonderful job of writing these books and and very much in a very digestible way but you generally make them free to the public. Is that your plan for this book as well? Yeah, I I doubt if I'll can have it finished until the end of the year, but uh or the fall at least. But yeah, that would that would be it. And it it won't be that long a book because, you know, I can give a lot of facts and a lot of graphs and a lot of things about this age group u that that'll ring home with them. And the you know, the Federal Reserve's done a lot of work on that, too. They've got a lot of great graphs at Fred that you can look at and see what the numbers are, but they're alltime high all time. I mean going as far back as they have records. Uh so so we know they're all in and all in in a big way right now. >> Yeah. And when you say alltime high, you mean percent of stocks? >> Percent of stocks. >> Yeah. Yeah. It's it's the highest. Um well, yeah, it's the highest ever, but it's certainly the highest ever amongst the the retired cohort. I've seen those same charts. Um and you know, Ted, you your your advice here makes sense in any market, right? in terms of hey the older you are you know the the less specul speculation you should have in your portfolio and and in general the less exposure to stocks you should have um but I'm assuming particularly in an environment like right now where valuations are as high as they are I mean we've had we've had the major Wall Street houses you know the the Goldman Sachs the JP Morgans publish forecasts of saying like hey you know given where valuations are we expect average returns over the coming decade to be single digits, low single digits, maybe even some have said zero. John Husman says less than zero. So I mean this is a valuations are not a good timing metric but they do give you a sense of the risk here, right? And they're they are sort of flashing red that like valuations aren't great for forward returns. >> Well, if you look at the return like for example January 1, 2000 to 2012, the S&P was 1%. However, you had major ups and downs in that period and that's what throws people off. They, you know, they had maybe a couple of periods where they go a lot lower and then they come back and they look up and you look up five years later or something and and you haven't made any money. Um, and you're like, well, wait a minute, all my costs are going up, you know, and I'm not of the age that I can make more money. That's the key right there. And I think people have to stop and think about that, >> right? Well, and that's that's um you know, if their portfolio is flat and their their costs are rising, that's not a good situation to be in. But as you know, a long period of of flat returns, doesn't mean the stock market went flat during that time. It probably generated around a lot. And so what what what really damages people is when they're in a down cycle and they're like, "Wait a minute, my costs are going up, but my my >> market value, my portfolio just went down 25%." And that's when they really start panicking and making their really damaging decisions. Correct. >> Oh, for sure. I mean, I I I can show you market examples of people that start at the wrong time or start at the right time when they retire. Like with money in the market, if you started January 1, 2000, you take out 4% a year, for example, and you look up uh you know, you look up 20 years later, you don't have you don't have as much principle. But if you started at at January 1 of 2003, you have three or four times as much principle. >> Mhm. >> It's it's timing. And but so you can't you always have to have enough liquidity so that timing doesn't kill you. In other words, if you have everything in, your timing is poor, you know, so you have to give yourself some options or it won't work. So, it is this personally, this is why, you know, I I really um favor the active approach going forward in this type of market, right, where odds are looking higher than we'd all like that um forward returns are going to be lower than normal. And it doesn't mean you can't make money in that market. Um, but you have to do it by being smart and having a process that lets you determine when it's time to lighten up and when it's time to to be buying back in. And of course, that's one of the specializations of your firm. Let me ask you this, Ted. Um, you you talked about how the baby boomers um the average baby boomer term is 72 this year, the age at which you have to start taking >> or actually next year. This year 71, but yes, >> sorry. Okay. Next year, but but coming up soon. Um I I think you're familiar with um Michael Green's um framework of looking at passive capital flows and how that that has created a bid under this market, right? He calls it the giant mindless robot. It's the the the massive amounts monthly that get put into the market to buy retirement assets, you know, through corporate retirement programs and things like that. It's it's a it's a price blind purchaser, right? Just comes in every Right. >> Right. Um, so this required minimum distributions of the baby boomers is almost a bit of that in reverse, right? It's a price blind seller, right? So the more that the baby boomers age, the more that that that average age of the baby boomer gets more and more of the baby boomer cohort in it, >> that, you know, we used to see the stat that 10,000 baby boomers um hit retirement age every day. Now it's going to be 10,000 baby boomers more are having to take require required minimum distributions every every year. Um do you expect that to kind of be like a permanent or or a long-term headwind on on equities for as long as it takes that bolus of the cohort to go through? >> Well, I do. And the other side of that is if you have a generally not so great a market anyway now you'll have pressure from the outside one of these days. is all the 401k people and I know you've had some great interviews with Mike. I I know him. He's a bright guy. He's right about this. Uh you know, if you look at just the average 401k person, they don't they just do whatever the plan person tells them, right? You know, >> and so um if they get into a mode where they're losing money, you can bet that they're going to make those allocation changes at the same time that you're trying to take money out over here on an RMD. And so I I those two could come together right there and and create a change where all of a sudden just like you're talking about, Adam, you're you have a you have people taking out as opposed to putting in. >> Yeah. All right. Um that's it's going to be interesting to see the effect of that and we'll we'll track it on here in real time as it starts to happen. Um I I I we're gonna have to start wrapping up in a minute, Ted, just given the time wise, but um real quick, is there anything that's really brightly burning on your radar that I haven't thought to ask you about yet? >> Well, not really, Adam. I mean, you you generally cover all the bases as far as I'm concerned, uh, for sure. But, you know, hopefully hopefully people will keep their head on straight during these periods in here and and, you know, and and really understand what again what they own. So, that's been real important to them. >> Okay. Um, well, I've got I've got two questions for you as we wrap up. Um, and they're both kind of around the the high net worth client that that you service there at Oxbow. I I guess first question is what's on the top what's top of mind for high net worth investors right now? Um you know are you seeing or hearing any feedback from them this year that's different from years previous? Is it excitement at at you know pursuing future gains or is it much more about protecting what they have? Is it something else? What what what is the that successful high net worth investor really focused on right now? Well, believe it or not, it's a couple things. Number one, most of the hours that are large investors, you know, they they they wonder what's really going on. Know that they they don't feel like >> they don't feel like you have any particularly great leadership anywhere in the country or at the state level or at the local level. I think that bothers them as much as anything because they can see that not getting any better just as a general look. We talk about it. >> Yeah. Um and and one of the things they always are concerned about, believe it or not, their children. They they wonder about their children. What what's going to happen in here? And they have the same this same battle all the time of how much how much should I give them money? If so, how much? Too much, whatever it is. And that's an ongoing thing with them all the time. >> All right. Um for folks that might not be aware, uh Ted and I have talked about that particular topic an awful lot. um he's written a book on it called Second Generation Wealth. Um we did a webinar on it. You can find all this in the history of the thoughtful money um catalog if you go to YouTube or Apple podcast or Spotify or whatnot. Um so if that's a topic that's of interest to you, I highly recommend you go listen to those discussions. Um so uh for you know I one of the things that you guys have have really focused on since the start in Oxbow has been the person who has come into a big liquidity event right uh so this is generally an entrepreneur who spent their whole life running a business sold it now sitting on a big pile of cash doesn't know what to do with it they've kind of lost their their main reason for getting up in the morning it's a very disorienting time and it's a time where really need to make some some good smart decisions for the long run. But this could also be somebody who's worked for a tech company that their options went to the moon or it could be somebody who just came into a big inheritance or whatnot. Um, for that type of person right now, given the current conditions that we've been talking about in this this uh discussion so far, um, because it seems like there's a bit more uncertainty certainly than there's been in the past several years. Um I I if if somebody is has just experienced a liquidity event or expecting one in the relatively near future, um is this a time where it would benefit them to play a lot more defense um than offense right now with that money given all the uncertainty that's out there? >> Well, I think you're right, Adam, and you know, I love business people. I think they're they're the best investors we have probably in many respects. But if you've just sold a business or come into money or option when anything you're talking about that you've just picked probably one of the worst times to have that liquidity unfortunately. Um and that's the way the markets work actually because people are willing to pay high prices when times are good for private companies or that's when you get inheritance. People are feeling good about the you know of what they're going to get that sort of thing. But now's the worst time. And so if you've just come into a big liquidity event, it's all liquid. My advice to you would be to uh if you want to invest a little bit of it, that's okay, but you need to really ice a lot of it and try to see what happens over the next two or three years to try to get your get your feet on the ground a little bit because things are really really expensive right now. And this wouldn't be the time to allocate all that that you come out of something and then go right back into, you know, the stock market or something like that and then all of a sudden you lose part of it. It'll really affect your investing the rest of your life. So you have to you have to give it time to see kind of see how some things shake out in here because things are expensive and and you just picked a a tough you know it's one of the great times to sell a company because they'll pay you a lot of money for it but it's one of the worst times to have the liquidity too even if you inherit it or have stock options or whatever. The reason you have those stock options is because the price is up. So you have to remember that and and really use that to your your advantage. >> Okay. um and presumably if somebody's watching and they they fall into that category, um your firm would be happy to sit down and just have a conversation with them to kind of help them think through their options. Again, this is this is uh you know, sort of what we do here at Thoughtful Money is is is you know, these connections. So, in other words, this wouldn't cost them anything. There's no commitments involved. Uh but because this is your area of expertise, your firm could really walk them through all the different potential options that they should be thinking about. Yes, we would be happy to. >> Okay. I I also presume too that um what you just talked about kind of like the uh one of the worst times right now to to to think about deploying or one of the worst times to deploy that that capital uh that's just come in uh because of the all the factors you just mentioned. That that's got to also apply to the the sad reality of of um widows and widowers, right? I mean, somebody who has just um they've lost their spouse, particularly if if the spouse was the one that managed the family finances and now all of a sudden you're you're you're responsible for all that. You don't necessarily really know what you have, why you have it. Maybe investing is not even your bag. Anyways, uh this is probably a really important time for that person to say, "Look, I need to get some help in just figuring out how to how to safeguard this stuff so that if some of the things we talked about happen in the future actually happen, they're less vulnerable to it. >> No question about that. I mean, we see uh a lot of situations where either the wife or the husband was the manager of the funds, okay? And then something happens to them and so they're left with whatever they were doing and they don't really they don't really have a good grasp on it to speak of and that's that's when they need the help really. They need somebody to say, "Okay, this is what you own. This is what it does." You know, this is what you can expect. And u I I think I I think we we've done a lot of work with people like that after losing losing one of their partners and it's it's it's it's first of all it's a big deal for them because they're in a grieving mode a lot of times for a year or two and and uh and they need a better sort of a outside better set of eyes on things at the time where it's not emotional. >> Okay, very well said. Um, I've got another last question for you as we wrap up here. Real quick though, folks, um, if if you fit in either of those categories that Ted just talked about, and you'd like to talk to him and his team at Oxbow, just fill out the very short form at thoughtfulmoney.com/oxpo and they'll be in touch with you right away. Um Ted, I know that philanthropy is um a big part of what you sort of consider to be a rich life and it's certainly been a big part of your life and I'm trying to remember um you're you're you've been very involved in it's either foster care or adoption. Um and hopefully you can clarify which foster kids. Foster kids. >> Foster kids. Okay. So I I just want to end on this topic of of philanthropy. um uh one, share any thoughts about it and the role you think it should play in a rich life, but also um obviously if you got a lot of money, it's easy to write checks to uh organizations that you care about. For the person that doesn't have a ton of money, um just speak to how they can still be a philanthropist. And it might not even be with money, right? It might be with their time. >> Um it might be I mean fostering it might be fostering a kid, right? I mean, so um if you can just because it you're you're one of the people I know who who has been such a great champion for philanthropy. I'd love to hear your thoughts on this. >> Well, there's a lot of ways you can help people. I think I mean I think uh for people that don't have a lot of money, I think one of the things you do is you have a listening ear to people that have some trouble or something and they need they they need a they need somebody to hear them out and give advice or whatever. And then and then you if you don't have a lot of money, just doing small things, you know, maybe you have somebody you know that just needs a small thing or you tip a higher than you normally do. You do things that you can do. One of the things I found about giving is it all comes back to you. Emerson had a thing called compensation. Ralph Waldo Emerson and was about how it's all a big circle and it really really is. I find the the more I give and the more I give to to people and the people in need, the more of it comes back to me. I don't really worry about giving it. And we have we have two of the largest foster child foundations in Texas. Uh both of them cover about 35 counties called Foster Angels. But but what we do there is, you know, we we were really directly helping kids. And I don't think about uh and they're 501 so it's not just my money but I'm just saying the thing about it is is that if you give it even small amounts it will it will when I didn't have any money at all and I'm when I really I grew up poor but I still did things for people and still gave money away and believe it or not I'd always get it back some way or another. And so my advice to people that don't have a tremendous amount of money is just do something. You'll be surprised. A lot of good things will show up in your life. >> All right. Well, very well said and a great sentiment to end on. Um so folks, if you can please join me in expressing your gratitude for Ted coming on and sharing all of his wisdom with us. Um please let him know how much you appreciate that by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. Um, if you would like to talk to the adviserss at uh, Oxbow, again, just go to thoughtfulmoney.com/oxpo, uh, fill out the form there. The firm will be in touch with you right away. These discussions are free. There's no commitments involved. It's just them being as helpful to as many people as they can. Um, Ted, we should clarify. Um, while your firm is very generous and trying to help as many people as it can, um, you do have minimums there. Um, what what minimum should we let folks know just so I'm not sending people over there who might get disappointed if they fall below it? Well, uh, and I, and this is not a a we're not trying to, but it's not a hotty remark or anything like that. We just we put a lot of people on an account. Our average accounts probably 4 to5 million, but we have at least a $2 million minimum to to have an account. And and and again, that's not that's not because we're trying to cut people out, but we also help a lot of people that don't meet the minimum. They come in and we still keep them on all of the things we do because I'm trying to help them out even though we're not doing it for them. I I let them know everything we're doing and they can be on our list and I like to I like to do that. I like to try to help people even if they don't have enough money to be with us. They'll see everything we do. >> Okay. Um well, thank you for that and and again for full disclosure, um I am a client of Oxbow. I've been for a while. Ted was very kind way back then and and uh opened the back door of the firm for me uh because the minimums have increased since then. Um but uh but yes, just being very transparent with folks. I am an existing client of Oxbow. Um dead uh I can't thank you enough. It's just always um it's such a learning experience always talking from you. I love benefiting from your wisdom. I've really enjoyed benefiting from your friendship um and your firm's partnership over the years. Thanks so much for coming back on the channel. >> You bet, Adam. >> All right. Uh, and everybody else, thanks so much for watching.
Is It Time To Raise Cash In Your Portfolio? | Ted Oakley
Summary
Transcript
If you don't have at least, you know, 20 or 25% in some sort of a cash mode, you know, we we own short-term treasuries, but, you know, three, six month treasuries, that kind of thing. If you don't have at least that much right now, I think you're you're you're taking a bigger risk because valuations are still really, really high. You know, we're still at a high multiple AS&P. And what happens in times, tough times, is they shrink the multiple and they shrink the earnings both. And that's how that's how you get hit. And I don't think people are factoring any of that in. >> Welcome to Thoughtful Money. I'm Thulful Money founder and your host, Adam Tagert. Very happy to welcome back to the program Ted Oakley. Ted is a founder and CEO of Oxbow Advisors, a high- net worth advisory firm. Um Ted is one of the absolute uh true gems uh of the investing world. I always love getting to interview him. We've got a lot to talk about. Ted, thank you so much for joining us. >> Good to see you, Adam. >> Good to see you, Ted. Um, and I think uh I think the audience is going to particularly appreciate your calm, just levelheaded, quiescent demeanor here, um, at a time where there's a lot of concerns swirling around Wall Street right now. Right, we've got uh spiking oil prices from the Iran war. Uh we've got concerns about uh private credit, you know, potentially spilling over into other parts of the credit system. Um the stock market's basically gone nowhere for pretty much six months at this point. Um I don't even know where we should start. Um from from your perch, what are you looking at most closely these days with your team at Oxbow? Well, you know, Adam, we look uh at companies from the companies themselves and you know, we we'll wait till we get certain opportunities to own things. Um and and that's that presents us with a few things. Rates ticked up a little bit and so we've been able to buy a little two and threeear paper that were better than normal and uh and but we we we've really picked off some things. I mean, you have to for us, we look we look at the companies as opposed to like the overall if we have a a certain level, we want to own something, then we'll own it. I I mean, I know there's a lot going on for sure that's affected it, but uh you know, we were in pretty good shape on all this. I don't I think the economy, if this thing keeps on going, obviously it's going to suffer. I mean, you've got diesel prices over $5 now, which is a big big factor, even more so really than gasoline when you think about it for shipping. >> And uh I I think we are going to run in some headwinds. No question about it. But >> typically, if you have quite a bit of liquidity like we do, it actually sets you up for a period where you can own things that you might not be able to own before. And so that's the way we that's the way we view it. you know, a cheap price for us is an entry point, uh, not necessarily a place for us to get spooked about the market. >> Yeah. And and you have said many times in your previous appearances on this program that your firm's best years have been coming out of bare markets, right? And so, you know, part of your strategy is keeping enough dry powder so that if and when a bare market arrives, you can withstand it well and then have capital to deploy when valuations are really attractive. Now, we're not in a bare market yet. Um, and while Wall Street has been a lot more volatile and uh, like I said, the tenor there is much more nervous now, we're still not that far from all-time highs, right? We're down like 400 S&P points from from the all time. >> Um, so, uh, I guess let me ask you this. Um, have you have you made many material changes to your portfolio based upon what's been happening, especially since the the outbreak of the war, or are you just kind of steadying, just, you know, sticking to your original knitting? >> Well, you know, we sold uh at the very end of the year, last week of the year in the first week of the new year, we sold um some of our gold miners. sold basically sold almost all the silver itself >> when it went over when it went to 100 uh and sold silver miners. So, and we we really uh we we sold a little bit of gold but not much. We usually don't sell much of the gold itself, but we did the miners. And what happened in really in the last in the last month is that the particularly the gold mining royalty companies that with three we own uh you they came down about 30% or 35%. So we we bought some of those back, you know, and then on the on the energy side, what happens on energy is that the service companies, drilling companies, service companies, they come in, they come in at the end. Uh they start to move later than the producers themselves. And we own the producers as well. And you I don't people probably don't know this, but oil and energy was our biggest holding last year coming into this year as far as amount that we have in a portfolio. And so obviously it's been a good period for us, but we haven't we haven't done anything real unusual other than find if we find a company that's cheap, we're going to we're going to add it when we've added a few. Uh and so that's that's pretty much what we've done here. We're still carrying, you know, overall probably 45 to 48% in US treasuries. >> All right. So, um, you've got a a fairly high cash balance, and again, that's that's going with the strategy of making sure you've got dry powder on hand if lower valuations present themselves. Um, I'm curious, is is energy still your largest single holding there at Oxbow right now? >> It is. Uh, and we have we've actually uh added we've added a driller, added a service company or two. And we we we don't we don't really feel like that that's something that's just a flash in the pan right here. We really feel like they're they're still fairly cheap. They pay good cash flow, good dividends, and so it's still the largest holding for us in general. Yeah. >> Okay. Um, so I want to I want to talk more about energy, but I want to relate it to the precious metals. So the precious metals just had a phenomenal run especially going into into the end of last year right you know I mean silver start of the year around 25 bucks or so 2025 you know ended the year zooming uh into the 100 uh bucks an ounce range and then catapulted to 120 very quickly and then has had this it's basically been cut in half more or less since then. Um, so that was sort of an example of a a sector just getting ahead of itself wi price price-wise, right? Just had so much price appreciation in a short period of time. I'm presuming you said, "Guys, look, it's been too good too quickly. Let's let let's d-risk here. Certainly proved to be the right move." Um, sounds like you're seeing some all clear signs there. you're you're getting a little back into at least parts of the space like the the silver or the precious metal streamers or royalty companies you mentioned with oil. It's a little bit of a similar story. I mean, not quite as extreme, but you and I talked last year a couple of times about how oil was starting to look like a place to to put capital back to work in after years of it having been kind of a pretty underperforming sector. Um the oil stocks did really well at the beginning of this year and this was pre-war. Um but they had a lot of price appreciation. I mean I would say kind of on average like 25 30% for a lot of the names in that sector. Now we've had the war which has pushed prices up even higher. Uh sorry oil prices up even higher which presumably should help a lot of these producers and other companies in the space at least in the near term um profit-wise. I guess my question is is is this space starting to get ahead of itself? Um or do you think it has sustainable um legs to run from here? I'm presuming it's more the latter if you still hold it as your largest uh core position. >> Well, we certainly think it has more to go and you have to remember not many people own it. If you look at most of the money on the east and west coast, for example, that are in pension plans, endowments, and that sort of thing, they have totally turned off and kicked fossil fuels out of those portfolios. They don't even own any. It's almost like they don't even know what's going on the rest of the world. And so, you've got a whole group of people that don't even own it. A lot of institutions don't necessarily own a lot of oil. Uh, and they claim to have energy, but it's off-the-wall stuff. I mean, it's wind wind energy and that sort of thing, but you you they're missing the point here that, you know, fossil fuel is probably going to be the place it's going to be the next two or three or four years. And even withstanding, if everything goes back to normal in the M East, you're still in a situation where it's cheap and we haven't, you know, a lot of people don't own them and you only have about three less than 3% of the S&P that's in energy that, you know, oil. So, >> um, yeah, I think it has more to go. I mean, it's like it hasn't ever gotten the level. Like, for example, uh when when the when the min gold miners hit such highs, we basically cut those in half uh right at the end of the year, beginning of January 2nd, 3rd, and fourth. And we did the same thing with silver. Same. We owned Heckla. We cut that in half on the silver miners because it it tripled in a year. And so, it was a thing to do. Well, all those have come back now, you know, and you have a lot of retail in those stocks. In energy, you don't have as much retail. They're not chasing those things. Uh, it's more of a steady climb where people are starting to realize that, hey, you know, we're we're going to need we're going to need this and it's going to no matter what, it's going to be a while before they get this thing resolved in terms of getting back to normal. Uh, it may never go back to normal for quite a while. So, I think you have to stay with energy in here for the time being. >> Okay. And I'm curious. I love talking to folks like you who are based in Texas. Um, because you're just you hear the conversations about the oil industry that are being had in the oil industry around you. Is there anything notable that you're hearing right now either in terms of optimism about the future or, you know, any general vibe coming from the folks that actually work in that industry? Well, they like the price. You know what happens with the with energy in in in the oil fields is that it has to go for a while before you're going to see them say, "Okay, we're going to start to increase drilling and do that sort of thing." And people people forget that with horizontal drilling. It's not like when you would raise a bunch of rigs when you were vertically drilling. It's a it's a different game now. But, you know, they like the price and a lot of a lot of the producers in Texas in the southwest really have gas and gas is is not as you know, the price is not as strong. So, they're not getting that much revenue. But the oil, they're just, you know, they like the price right now and they'll take it. Uh, and I think if you sustain the price or you drive it higher, then you'll start to see maybe uh you an increased drilling because they'll come out of the woodwork then and say, "Hey, it's time to do something." >> Okay. What one of the questions I've been asking folks I'd like to get your thoughts on Ted recently, which is um this is a conclusion I'm I'm increasingly coming to and and I am not an oil analyst nor a geopolitical analyst. Um but it seems pretty reasonable to me that there's going to be a higher risk premium placed on oil and gas coming out of the Persian Gulf in the future. you know, once hopefully once this war stops and things the dust starts to settle and and you know, nations that buy from the Gulf are going to say, you know what, like yes, I was it was nice buying, you know, oil and gas from there. Um, but I'm just so uncomfortable now about sending my ships there and worrying that the region might, you know, turn into a flash point again or or a mine might hit my boat or Iran might, you know, uh, start demanding a toll for my tankers to to go through there. And so I I want to start thinking about sourcing more of my fossil fuels from, you know, more stable, quote unquote, safer countries. Um, and the administration's been saying, "Yeah, we've we've seen this already. We we've we just signed a 56 billion dollar worth of energy deals with Indoacific countries recently. Um they're they're ringing their phones off the hook saying, "Hey, can we can we buy more from you going forward?" And you know, a lot of these countries, let's talk about Japan. Uh Japan uh buys a lot of fuel from the Persian Gulf. It takes 25 days to get there. Well, if they buy from America to get get it to them from Alaska, that's only eight days. and they don't really worry about Alaska turning into a, you know, a war zone. So, do you think that that there may be some long-term benefits coming out of this war that may actually be additional tailwinds to America's oil and gas industry? >> Yeah. I mean, all of that could happen. Uh I I don't know. You know, you're talking about the you know, you're talking about moving the oil, but if you look at tankers today, one of the problems about the all the tankers over there is they don't have any insurance. is not so much they can't get through the straight, but if you don't have you they dropped the they gave them seven day outs on the insurance, so they don't have any insurance. So, if you don't have any insurance, you you know, you you're not going to I mean, you may run into something. It has nothing to do with the mine or anything else. And so that's the one of the biggest problems nobody talks about in that regard. But uh yeah and I I think as uh you know we only we own we only want we own one tanker DHT but it's but and it's been good for us. But I think and it has a young fleet. No, you the debt flow all that sort of has it's the best one in our opinion. But the thing about it is is that uh yeah, that could very well happen that way, especially if it goes on longer, you know, a lot longer. I'm talking about where they just can't get anything resolved over a six-month period or something. >> Well, let's talk about that risk, too, just to the general markets, right? So, um, presumably the longer the war goes on, the longer oil prices are going to remain elevated. Maybe they'll go even higher, right? I mean, one wild card here is is how much damage will be done to the energy infrastructure of the Gulf by the time this is over. You know, hopefully no more than already has been done, but it could get a lot worse. Um, but the longer this all goes on, those high oil prices just weigh on the economy, right? It's just the higher input costs. They start even crimping supply chains. we might have some of the echoes of what we had to deal with during co um how worried is that starting to make you about the general markets as the thing that triggers you know a really material correction in the financial markets. >> Well, I don't I don't look at the the markets exactly and that and that. In other words, I look at where the S&P and and the NASDAQ are and that sort of thing and I will tell you they're right down on their 200 day average, >> right? use techn I don't use technicals a lot. I know how to use it a lot, but we I particularly use it when you're breaking these levels like that and you're right down on those levels. So, if anything if anything gets a lot worse and you start to break those levels, then all of a sudden you end up in a situation where people pile on, so to speak, and you get more selling than you expected. >> The one thing I've always known in this business is we know nothing about the future. I don't know anything that's going to happen. I I don't I it's but you always have to have a portfolio that can operate under any circumstance. In other words, if you if you're going to have a market that really just keeps right on moving, things are great. That's okay. But if you break it and things get really really cheap, how are you how are you situated then? Are you in a situ situation where you can take advantage of it? And I think I think that people need to think about having sort of an all-weather portfolio rather than uh trying to stay fully invested in 12 exchange rated funds and just forgetting it. I just don't think that's going to work the next five years. >> Okay. Um just for folks that maybe don't know exactly what you mean by all weather portfolio generally, what are you what are you talking about allocation wise? >> Well, presumably there's a big chunk there to catch. You're going to have to have some. You don't have to have as much as we have necessarily because >> we've we've really done well the last couple years even with a high allocation because if you own the right things it's going to work. >> Mh. >> But what what I mean by that is always have a portfolio such that no matter which what happens in the marketplace if you un unfortunately have say a move down that's really tough you know I'm talking 30 40% you can weather that. In other words, you you've got enough liquidity so that you're okay to so and let that thing come back on its own what you've got invested. If you don't have any liquidity, you can't do that, right? >> Which everything you have is down at that point. And you need something in the portfolio that that doesn't get hurt in those kinds of times. And consequently on the way up as you go higher you know you and things are doing really really well and you have these major moves in stocks you need to take some of them off. In other words you need to try to set that up so that you know eventually those those names will come back. You know they'll sell off some. So it gives you a chance on both ends to participate. That's that's the point. You can't, you know, you can't just u put everything in a market portfolio and say I'm good to go. I we just don't believe in that. Well, and and I'll I'll talk more about this at the very end, but um uh I am a an Oxbow client and one of the things that I have very much appreciated um has been the performance um of especially of late um but also with sort of that higher margin of safety where you've got a fair amount that's in either just cash or it's in you know short-term treasuries that are paying an income along there. And so it just really helps you sleep at night, I guess, is what I'm saying. Um is when um you know, you you you know that that you're not fully exposed uh to the market. Um and yet you're still seeing the the type of progress you want to see in the overall account balances. Um >> I would say this, we've had, you know, we've had more trading in the last really five or six months than we normally do, but because that's that's why we know how to do it. But the main point is that I think uh we we'll go into the next five or ten years and it things will change. You can't just be fully invested all the time. There'll be periods when you need to know how to raise cash. Um I'm writing about that in the April comments that'll be coming out. They're entitled the gambler. But I got that McKenna Rogers song about know when to hold them and when to fold them. >> And that that's >> that's the point. There's times when you need to know when to deploy cash and times when you need to raise cash, but I think uh that's right now in the investment community on the advising side. Uh that's that's an art that is only displayed with a few people. >> All right. Well, so this is this is sort of why I asked that question about um your level of concern about high oil prices maybe being the trigger here that that sends the markets into a material correction because on many of your previous appearances here, you know, you and I have talked about your your level of discomfort with valuations that they've been historically rich, right? Um and so I I guess maybe if I can distill my question down and ask it again, is this a time to fold them? Are you concerned enough that you're saying, "Look, we're we're we're actually adding to our cash balances because we think the odds of of lower prices ahead is is is now more likely." >> Well, I would say to your viewers out there, if you don't have if you don't have at least, you know, 20 or 25% in some sort of a cash mode, you know, we we own short-term treasuries, but, you know, three, six month treasuries, that kind of thing. If you don't have at least that much right now, I think you're you're you're taking a bigger risk because valuations are still really really high. I mean, if you look at the cape ratio is still really high, you know, 40 times, you're you're pre, you know, if you look at future earnings for next 12 months, high multiple on that stuff. You know, we're still at a high multiple AS&P. Um, and that doesn't factor in anything. And what happens in times, tough times, is they shrink the multiple and they shrink the earnings both. And that's how that's how you get hit. And I don't think people are factoring any of that in. And I'm not saying it's guaranteed to happen, but if you don't have any liquidity right now, you we think at least that you should have if you if you want to try to get through this period in here. And I've said this before, we're in these second years of presidential elections. And these people do all sorts of things during this year that are negative and positive. And so you never know. Second years are not very good, by the way. So I think that's >> not very good on an average market return. >> Average return is 1%. You know, so and we've had some really negative years in in secondyear terms. >> Okay. What what um I guess the question I want to ask is is what risk factors are you most concerned about right now? We've talked about valuations. We've talked about high oil prices. Um there's the concerns that are, you know, we're seeing in the headlines at least about private credit and some worrying that that may lead to a contagion uh that that that could be problematic. Um you also mentioned earlier too just just higher interest rates, right? Um so that you know that ob that's good for folks that are owning you know short-term treasuries like you. Um but it's bad for companies that are trying to roll over maturing debt and whatnot. So, um, is one of those four factors, um, what you consider to be the biggest risk factor right now, or is there something else I haven't listed? >> Well, the higher rates, Adam, will also affect private equity and private credit. Yeah. they, you know, they'll go hand in hand. And I think people, uh, you know, they when they look at, they look at their bond, if I, you know, if you own long-term bonds, we've said this really for the last three years, you don't you you really can't own the long bond like the 30-year paper and that sort of thing, and you look at it now, just give you an example, we bought a Bergkshire Hathaway three-year bond on a 467 just today. Okay? And yet you're at a 488 or 489 on the 30-year Treasury. Think about that. >> Think about that. I get almost the entire yield from maybe a better credit than than the Treasury. And I don't think people think about that when they're looking at things. They just they just they just sort of throw it on a fund and hope it works. Okay. But yeah, you and you're really seeing this private credit come unwound, but they it almost had to. It was a, you know, they had over like a Wall Street overd does everything. They've overdone private equity. They've overdone private credit. And, you know, every family office that I know of has got some of both because they were sold it by some consultant. And people don't really know what's in those things. And now they're having to, if you go look and look at the first quarter, I got the graph today of redemptions from the top seven. Okay? It's huge. I mean, they it's amazing. looking back over over the last four quarters, what what's happening in that? So, people are saying, "Hey, >> so so it's a high redemption rate even though they're starting to gate uh withdrawals." >> Yeah. Well, they're gating it. Yeah. But it's still overall, if you just look at the firms, if I can give it to you, if you look at the firms, they're they're really uh if they haven't gated it, they probably will. And it just goes to show you, you know, you can't trust Wall Street. You know, you look at private equity, private any they did this years ago on hedge funds. They learned the lesson. They should have and uh they'll gate them every time because they look out for themselves first. >> Yeah. So I I just had uh produced thoughtful money's spring online conference this past weekend and one of the members of the faculty was Matt Taibbe, >> you know, the great chronicler of of the the great financial crisis. >> Yeah. Interesting. >> And a great guy. I mean, super smart guy, but also just one of the nicest men you could ever hope to meet. And uh I asked him uh you know, if if he saw um you if you heard a rhyming in what's going on with private credit versus you know credit issues back in 2008. And he said, "Yeah, absolutely." And I said, "Well, you know, so from your perspective, what have we learned? You know, what did Wall Street learn um coming out of GFC until now?" and he said basically nothing. Basically learned that it can continue doing what it's doing and still pay itself record bonuses along the way and probably have a high degree of confidence it's going to get bailed out. >> And the problem too, uh, Adam, is that, you know, for all your listeners out there, >> uh, gating means they can cut you off. You can't get your money out. You know, it's a term we use on the street, but, you know, when they went in to allow individual investors to get pieces of all these things, they didn't know what they were buying. you know, that somebody sold it to them and and they end up again, I've always said this, but you really have to know what you own in a portfolio. I mean, you the companies we own, you know them. I mean, you would you would know them. U but you have to know what you own. You can't just own something that somebody said, "Hey, this is a great thing. You need to go into it." And that's that's sort of where that stuff went to. >> Yeah. Um, and it's I think you and I have talked about this, but it's really hard not to look at the push to bring retail into the private markets as a way for the private issuers or or or um the private investors, the big ones, the institutional ones, to basically pawn their poor performing assets off onto an unsuspecting public. Right. To your point, hey, these people don't really know what's going on. you know, we'll get them excited that, oh, you get you you get to get behind the velvet rope and invest in the same thing that the big names do, but we're going to take basically the junk on our books that we don't want and sell it to the retail client. Do do you feel that that's pretty much what's been going on? >> Well, I I I totally agree with you. Exactly. I told somebody the other day, I said, "Hey, if you really feel like you need to go buy some private credit, why don't you just go buy a few rent houses on your own because you can control that." Okay. And uh because you can't control this other situation. It's just like everything on Wall Street though. The early players make money. The early players in private credit did well. The early players in private equity. But see, Wall Street ruins everything. I've seen this with computer leasing, with tech, with drilling rigs all over the years. It's now it's these two. They over capitalize it. And so what happens is you end up they spend too much money. So they buy everything and they over overpay for it. Like you're going to make more money I think in the straight S&P than you will in private equity when it's all said and done. >> Done. Yeah. Um which of course is so contrary to the narrative of why you want to buy, you know, private assets, but but yeah, and I completely agree with you. So your point about, you know, really knowing what you own, um obviously it's it's foundational advice to to any investor. Um, but at at Oxbow, you know, in addition to interviewing you, I interview your uh chief investment officer, Chance Penukin, and and Chance, I mean, essentially his time is basically just spent building that watch list. I I know working in conjunction with you and the rest of the team there at Oxbow, but then just really living and breathing that watch list, right? and determining when something on it, you know, rises to or maybe falls to a value that makes it, you know, worthwhile to consider putting it in the portfolio or looking at the existing portfolio and saying, "Hey, we loved this company when we first bought it, but now this has changed. Time maybe to prune it." But it really is about developing a mastery over a portfolio of individual companies. Correct. >> You know, totally. And I'll I'll uh put in a plug for him. He he's as good as there is. and I've been around this business a long long time >> and I will tell you he's a great partner uh owns part of the firm and he is an excellent excellent guy in the stock market. >> All right. Well, folks, we'll be having Chance back on the program in I think like two two and a half weeks. So, you'll get a fresh crack at at what Chance is seeing as well. Um All right. So, um, you know, I I I don't get the sense, and correct me if I'm I'm wrong here. I don't get the sense that you're you're um entering a batten down the hatches moment in the markets yet. Um, even though you are concerned about current valuations and some of the risks that we've talked about, what would get you there? What what would you need to see to start saying, you know what, this looks like uh a bare market could be starting here and we want to go into sort of full um bare market mode, whatever that looks like for Oxbow. >> Well, a couple of things. Number one, if rates really went higher, now I'm talking about two points or something higher than they are now, you're going to throw you're going to throw yourself into a big recession. And oil the same way. If you look at the 74 bare market, what kicked that off was the embargo. It killed everything >> and you went into a major recession and prices went that was the cheapest that 74 low or the cheapest prices that have been since then. I mean they were low in 82 too but not that 74 low was dirt cheap and it was because you were really into a recession and you had inflation. I mean, it was crazy. It was it was a mess. And uh >> that would that would bother us to have both of those things happen at the same time. Have really high oil, really high rates because you're going to damage a lot of people then. I mean, not just you're going to damage the consumer, which our economy runs off of. You're going to damage companies and then you're that's what I was talking about. Then your earnings going to go down, your multiples are going to go down and that's how you get into these severe bare markets. both happen at the same time. Um, and you know, as far as I'm concerned, we're still in in what some people would still call a bubble because the prices are still very very expensive in these markets relative to where they have been say in the last 50 years. >> Okay. Um, I will tell you that fear that you just mentioned there that that that is Luke Roman's current outlook. Um, from what he just shared at the conference, um, his big concern is that we enter a essentially a stagflationary recession um because of the high oil prices and the the high yields um throwing everything into this this recession. So sort of history repeating again. >> Well, I know uh I know Luke's a great guy. I'm sure he did well for you because he's very knowledgeable person. That's for sure. Well, what was so wonderful about the conference is um and this is why I love doing them is, you know, the mission of this channel is to help the the average investor, you know, look through the eyes um and and and crawl around in the brains of of people who have um you know, decades of great experience, and you're certainly one of them, Ted. Um, and I feel like everybody I bring on the channel has, you know, one to several kind of pieces of the puzzle. And over time, we're collecting more and more pieces of that puzzle, you know, as I interview people week after week on this channel. What's fun about or what I think is really valuable about these these um online conferences, it's 11 hours. I mean, it's it's it's like 15 16 of these speakers all right after the other. And I feel like you get a lot of pieces of the puzzle all at once. So you walk away from the day I think with a much clearer view of what's going on at least right now at this snapshot in time um than you're able to get just you know watching week after week after week. Um so we had a number of people you know there's certainly some differences of opinions on exactly how this is going to play out but if I had to say there was sort of a majority view it's that there is a shock that's happening right now to the economy. um it is going to be inflationary in the short term and then the question is is what happens after that and like I said Luke sort of thinks we get stuck in this this um stagflationary recession though like Lacy Hunts and Ed Dows of the world they see this same potential in the immediate term but they have got longer cons they've got larger concerns about the economy um and its weakness that they had before the the the war broke out and they think that this this oil shock essentially even though it's inflationary initially um is just going to add insult to injury on on where the economy was before and that things are going to then dramatically slow and as Lacy says you know oil shocks while initially inflationary are actually deflationary in the long run. Um and so they they predict more of a sort of disinflationary deflationary recession to be the the legacy of this oil shock. So, we'll see what comes out. But again, a lot of people sort of think what's happening right now is not good. Like there's there's no good that's going to come out of it. >> Well, I I suppose unlike Lacy and Luke, I know I don't know what's going to happen. Yeah, for sure. >> U and I never have since I've been in the business, but again, you know, you just got to be ready to play play a hand either way. I mean, that's really what ends. Well, you and I talk about the sports that we play when we're off camera, Ted. And and I think it's that sort of athleticism, which is, you know, really one of the things I see as one of the strengths of Oxbow, which is, you know, you you sort of mentioned the all-w weatherather portfolio, but it's the ability to be reflexive to what happens. Um, you've got your core holdings and your core framework, but you've got the ability to kind of, you know, pivot and react um to to some, you know, some of the larger macro developments as they happen. if you feel it's worth you know changing the portfolio structure for that but I get a sense you don't change the portfolio structure to macro events very often >> not very often we change it relative to companies or a company gets too high like we had with the gold miners and so still some of those back then >> uh but again we bought some of the you just in the last day or two bought some of the some of the royalty companies back but you know Adam at at a really low point in a bare market. Uh if you and I were having this conversation, uh we will have to be people will be you have to drag them to the altar to buy stocks and there they'll be they'll be cheap, but you have to drag them in to buy them. And actually, that's where they'll make the most money. But that's when you have to be able to say, "Hey, look, you're going to own a piece of a company here that makes this much money that will do well over the next five years, and if you had all the money in the world, you buy the whole company right now. you. That's when you can make sense to people rather than playing off of their fears at lows, you know, like, hey, I I hear you. You need to get out. That's that's not the right thing at that time. If they had enough liquidity, they can take advantage of some really good pricing. And really, they need to take advantage of higher pricing, too, and sell some things. >> I mean, if you look at these big seven or big 10 stocks right now in the S&P, >> you'd be better off to sell some of them. We've sold some of them, a lot of them. >> So, let's let's dig into that just for a minute, Ted. So, um I mean, first, let's hope this war is over tomorrow. Let's hope the administration is correct and that uh you know, the oil oil shock's going to be fleeting and it's going to, you know, Trump's words, drop like a stone after the war ends. and and that everything the administration has been saying is going to provide a tailwind to the economy this year from the one big beautiful bill and the deregulation and the tariff revenue and you know all this stuff. Let's hope that all happens and we actually end up having a great year but we got to be realistic about the current challenges that we're facing and and the uncertainty that's there. So to your point about a bare market, I I not saying this is going to happen, but let's assume for a moment that these events actually do trigger, you know, a bare market um in in the financial markets. Um, you know, you have said that investors, you know, as as as the fear begins to build, they start making a lot of really bad decisions and they get to a point where they just have zero appetite for stocks anymore and they generally tend to flush out their positions often times near the lows and when it's the best time to be buying, they they're allergic to the idea. But again, you've said that's where time and time again over market cycles where you've actually had your best performing years is coming out of a bare market. So, what would you advise the average investor to just mentally prepare for um you know, assuming for a moment that that a bare market lies ahead. Well, if you make that assumption and you say that's going to be, you need to have enough money, I'm talking about set asidewise, so that let's just say that you don't know this, but it's going to be a two-year bare market >> because I' I've been through numerous of those. What happens is they just eat away at you every day. The market opens up in the morning and the time you get to the afternoon and it's down again. And people keep buying, think, I've got a low. I've got a low. I've got a low. But it keeps on coming at you. You have to have enough money to to to sit out the market at least >> to see where where we going to get to here and not not apply all of your funds at one time. You know, this whole business and cheaper prices about scaling things. You can buy a little bit of things and and buy a little more later on, but I think you have to have enough money enough so that if you look out over the next say it's two or three years or something, you can wade through that. You know, if you have everything in the stock market and every day you get up and it's lower, for example, that's going to be a problem. And what I see out of this real expensive market right here is one of two things. either you really get a significant sell-off that sets everything back cheap again all in one throw, you know, like within a six-month period or something, or you don't make any money for seven or eight years. In other words, it's a 3% return, 2% return for a long period. >> And you got to be to me, you have to have enough liquidity either way to work through those things. So Ted, there's a lot of people that are watching this port uh this video here who are older, you know, 50 years older. We've got plenty that are in retirement. Um a lot of them have been, you know, successful and successful enough to retire, but um I don't know how many of those people would be able to withstand seven or eight years of of going nowhere, >> right? Um, uh, what would you advise somebody who's who's watching who sort of fits that criteria do? Um, I don't want to encourage panic. I don't want them to make any rash decisions, but um, I guess what kind of conversations should they be having perhaps with an adviser um, just to to review their their situation and kind of kind of just do a stress test to say, okay, look, if we entered a bare market, you know, if I took steps XYZ now, might that actually help me weather it better? Well, it's interesting you bring that up, Adam. I'm I'm I'm thinking of a new book. In fact, uh I've been talking to staff about this. I've got a lot of stuff lined up on it called Thin Ice, and it's about u people over 65 that are in the market because a lot of them are fully in the market. They they don't they they're like out their portfolio is 90% stocks. Um, we have pe we see people 70 year old 80 year old people that have 80 90% in stocks. All right. >> And there used to be an old saw on Wall Street and and still around but said that you know if you take a 100 minus your age that's probably about what you should start to look at in in stocks. In other words, as you get older, you settle things down because you don't know what the future holds and you got to make sure that you're okay. And obviously at 70 or 80, you don't have as long to live as you do at at 40. So, you know, you got to start thinking about that because I think they're missing the point. It's been great for a number of years and all the advisors are telling them, hey, you don't need you don't need that safety valve. just stay in the market. It's done great for you. And they have great profits, by the way. And so, it's hard to get them to understand that. But I think they should understand it because right now, if you had a major bare market with people over 65 or 70, I think it would really really affect them a lot. I think they I don't think they're ready for that. And I think the biggest problem they'll have is it emotionally will affect them more than it would have in any other time. You got to realize, you know, next year the average baby boomer be 72, which means they got to start taking money out of all their pension plans. And secondly, back in 2000, you know, >> they were 45. So that's that's the difference. See, and that that's what you get into. You had plenty of time back then as a baby boomer. You could wait on it, but man, not at this stage. You have to do it. I I just think they're missing the point and I know uh it's going to be hard for them to say to raise liquidity and do something different but um they should think about that for their own benefit. I think >> all right I I think that book would would help a lot of people and I think there'd be a lot of interest in this audience at it and uh you do such a a wonderful job of writing these books and and very much in a very digestible way but you generally make them free to the public. Is that your plan for this book as well? Yeah, I I doubt if I'll can have it finished until the end of the year, but uh or the fall at least. But yeah, that would that would be it. And it it won't be that long a book because, you know, I can give a lot of facts and a lot of graphs and a lot of things about this age group u that that'll ring home with them. And the you know, the Federal Reserve's done a lot of work on that, too. They've got a lot of great graphs at Fred that you can look at and see what the numbers are, but they're alltime high all time. I mean going as far back as they have records. Uh so so we know they're all in and all in in a big way right now. >> Yeah. And when you say alltime high, you mean percent of stocks? >> Percent of stocks. >> Yeah. Yeah. It's it's the highest. Um well, yeah, it's the highest ever, but it's certainly the highest ever amongst the the retired cohort. I've seen those same charts. Um and you know, Ted, you your your advice here makes sense in any market, right? in terms of hey the older you are you know the the less specul speculation you should have in your portfolio and and in general the less exposure to stocks you should have um but I'm assuming particularly in an environment like right now where valuations are as high as they are I mean we've had we've had the major Wall Street houses you know the the Goldman Sachs the JP Morgans publish forecasts of saying like hey you know given where valuations are we expect average returns over the coming decade to be single digits, low single digits, maybe even some have said zero. John Husman says less than zero. So I mean this is a valuations are not a good timing metric but they do give you a sense of the risk here, right? And they're they are sort of flashing red that like valuations aren't great for forward returns. >> Well, if you look at the return like for example January 1, 2000 to 2012, the S&P was 1%. However, you had major ups and downs in that period and that's what throws people off. They, you know, they had maybe a couple of periods where they go a lot lower and then they come back and they look up and you look up five years later or something and and you haven't made any money. Um, and you're like, well, wait a minute, all my costs are going up, you know, and I'm not of the age that I can make more money. That's the key right there. And I think people have to stop and think about that, >> right? Well, and that's that's um you know, if their portfolio is flat and their their costs are rising, that's not a good situation to be in. But as you know, a long period of of flat returns, doesn't mean the stock market went flat during that time. It probably generated around a lot. And so what what what really damages people is when they're in a down cycle and they're like, "Wait a minute, my costs are going up, but my my >> market value, my portfolio just went down 25%." And that's when they really start panicking and making their really damaging decisions. Correct. >> Oh, for sure. I mean, I I I can show you market examples of people that start at the wrong time or start at the right time when they retire. Like with money in the market, if you started January 1, 2000, you take out 4% a year, for example, and you look up uh you know, you look up 20 years later, you don't have you don't have as much principle. But if you started at at January 1 of 2003, you have three or four times as much principle. >> Mhm. >> It's it's timing. And but so you can't you always have to have enough liquidity so that timing doesn't kill you. In other words, if you have everything in, your timing is poor, you know, so you have to give yourself some options or it won't work. So, it is this personally, this is why, you know, I I really um favor the active approach going forward in this type of market, right, where odds are looking higher than we'd all like that um forward returns are going to be lower than normal. And it doesn't mean you can't make money in that market. Um, but you have to do it by being smart and having a process that lets you determine when it's time to lighten up and when it's time to to be buying back in. And of course, that's one of the specializations of your firm. Let me ask you this, Ted. Um, you you talked about how the baby boomers um the average baby boomer term is 72 this year, the age at which you have to start taking >> or actually next year. This year 71, but yes, >> sorry. Okay. Next year, but but coming up soon. Um I I think you're familiar with um Michael Green's um framework of looking at passive capital flows and how that that has created a bid under this market, right? He calls it the giant mindless robot. It's the the the massive amounts monthly that get put into the market to buy retirement assets, you know, through corporate retirement programs and things like that. It's it's a it's a price blind purchaser, right? Just comes in every Right. >> Right. Um, so this required minimum distributions of the baby boomers is almost a bit of that in reverse, right? It's a price blind seller, right? So the more that the baby boomers age, the more that that that average age of the baby boomer gets more and more of the baby boomer cohort in it, >> that, you know, we used to see the stat that 10,000 baby boomers um hit retirement age every day. Now it's going to be 10,000 baby boomers more are having to take require required minimum distributions every every year. Um do you expect that to kind of be like a permanent or or a long-term headwind on on equities for as long as it takes that bolus of the cohort to go through? >> Well, I do. And the other side of that is if you have a generally not so great a market anyway now you'll have pressure from the outside one of these days. is all the 401k people and I know you've had some great interviews with Mike. I I know him. He's a bright guy. He's right about this. Uh you know, if you look at just the average 401k person, they don't they just do whatever the plan person tells them, right? You know, >> and so um if they get into a mode where they're losing money, you can bet that they're going to make those allocation changes at the same time that you're trying to take money out over here on an RMD. And so I I those two could come together right there and and create a change where all of a sudden just like you're talking about, Adam, you're you have a you have people taking out as opposed to putting in. >> Yeah. All right. Um that's it's going to be interesting to see the effect of that and we'll we'll track it on here in real time as it starts to happen. Um I I I we're gonna have to start wrapping up in a minute, Ted, just given the time wise, but um real quick, is there anything that's really brightly burning on your radar that I haven't thought to ask you about yet? >> Well, not really, Adam. I mean, you you generally cover all the bases as far as I'm concerned, uh, for sure. But, you know, hopefully hopefully people will keep their head on straight during these periods in here and and, you know, and and really understand what again what they own. So, that's been real important to them. >> Okay. Um, well, I've got I've got two questions for you as we wrap up. Um, and they're both kind of around the the high net worth client that that you service there at Oxbow. I I guess first question is what's on the top what's top of mind for high net worth investors right now? Um you know are you seeing or hearing any feedback from them this year that's different from years previous? Is it excitement at at you know pursuing future gains or is it much more about protecting what they have? Is it something else? What what what is the that successful high net worth investor really focused on right now? Well, believe it or not, it's a couple things. Number one, most of the hours that are large investors, you know, they they they wonder what's really going on. Know that they they don't feel like >> they don't feel like you have any particularly great leadership anywhere in the country or at the state level or at the local level. I think that bothers them as much as anything because they can see that not getting any better just as a general look. We talk about it. >> Yeah. Um and and one of the things they always are concerned about, believe it or not, their children. They they wonder about their children. What what's going to happen in here? And they have the same this same battle all the time of how much how much should I give them money? If so, how much? Too much, whatever it is. And that's an ongoing thing with them all the time. >> All right. Um for folks that might not be aware, uh Ted and I have talked about that particular topic an awful lot. um he's written a book on it called Second Generation Wealth. Um we did a webinar on it. You can find all this in the history of the thoughtful money um catalog if you go to YouTube or Apple podcast or Spotify or whatnot. Um so if that's a topic that's of interest to you, I highly recommend you go listen to those discussions. Um so uh for you know I one of the things that you guys have have really focused on since the start in Oxbow has been the person who has come into a big liquidity event right uh so this is generally an entrepreneur who spent their whole life running a business sold it now sitting on a big pile of cash doesn't know what to do with it they've kind of lost their their main reason for getting up in the morning it's a very disorienting time and it's a time where really need to make some some good smart decisions for the long run. But this could also be somebody who's worked for a tech company that their options went to the moon or it could be somebody who just came into a big inheritance or whatnot. Um, for that type of person right now, given the current conditions that we've been talking about in this this uh discussion so far, um, because it seems like there's a bit more uncertainty certainly than there's been in the past several years. Um I I if if somebody is has just experienced a liquidity event or expecting one in the relatively near future, um is this a time where it would benefit them to play a lot more defense um than offense right now with that money given all the uncertainty that's out there? >> Well, I think you're right, Adam, and you know, I love business people. I think they're they're the best investors we have probably in many respects. But if you've just sold a business or come into money or option when anything you're talking about that you've just picked probably one of the worst times to have that liquidity unfortunately. Um and that's the way the markets work actually because people are willing to pay high prices when times are good for private companies or that's when you get inheritance. People are feeling good about the you know of what they're going to get that sort of thing. But now's the worst time. And so if you've just come into a big liquidity event, it's all liquid. My advice to you would be to uh if you want to invest a little bit of it, that's okay, but you need to really ice a lot of it and try to see what happens over the next two or three years to try to get your get your feet on the ground a little bit because things are really really expensive right now. And this wouldn't be the time to allocate all that that you come out of something and then go right back into, you know, the stock market or something like that and then all of a sudden you lose part of it. It'll really affect your investing the rest of your life. So you have to you have to give it time to see kind of see how some things shake out in here because things are expensive and and you just picked a a tough you know it's one of the great times to sell a company because they'll pay you a lot of money for it but it's one of the worst times to have the liquidity too even if you inherit it or have stock options or whatever. The reason you have those stock options is because the price is up. So you have to remember that and and really use that to your your advantage. >> Okay. um and presumably if somebody's watching and they they fall into that category, um your firm would be happy to sit down and just have a conversation with them to kind of help them think through their options. Again, this is this is uh you know, sort of what we do here at Thoughtful Money is is is you know, these connections. So, in other words, this wouldn't cost them anything. There's no commitments involved. Uh but because this is your area of expertise, your firm could really walk them through all the different potential options that they should be thinking about. Yes, we would be happy to. >> Okay. I I also presume too that um what you just talked about kind of like the uh one of the worst times right now to to to think about deploying or one of the worst times to deploy that that capital uh that's just come in uh because of the all the factors you just mentioned. That that's got to also apply to the the sad reality of of um widows and widowers, right? I mean, somebody who has just um they've lost their spouse, particularly if if the spouse was the one that managed the family finances and now all of a sudden you're you're you're responsible for all that. You don't necessarily really know what you have, why you have it. Maybe investing is not even your bag. Anyways, uh this is probably a really important time for that person to say, "Look, I need to get some help in just figuring out how to how to safeguard this stuff so that if some of the things we talked about happen in the future actually happen, they're less vulnerable to it. >> No question about that. I mean, we see uh a lot of situations where either the wife or the husband was the manager of the funds, okay? And then something happens to them and so they're left with whatever they were doing and they don't really they don't really have a good grasp on it to speak of and that's that's when they need the help really. They need somebody to say, "Okay, this is what you own. This is what it does." You know, this is what you can expect. And u I I think I I think we we've done a lot of work with people like that after losing losing one of their partners and it's it's it's it's first of all it's a big deal for them because they're in a grieving mode a lot of times for a year or two and and uh and they need a better sort of a outside better set of eyes on things at the time where it's not emotional. >> Okay, very well said. Um, I've got another last question for you as we wrap up here. Real quick though, folks, um, if if you fit in either of those categories that Ted just talked about, and you'd like to talk to him and his team at Oxbow, just fill out the very short form at thoughtfulmoney.com/oxpo and they'll be in touch with you right away. Um Ted, I know that philanthropy is um a big part of what you sort of consider to be a rich life and it's certainly been a big part of your life and I'm trying to remember um you're you're you've been very involved in it's either foster care or adoption. Um and hopefully you can clarify which foster kids. Foster kids. >> Foster kids. Okay. So I I just want to end on this topic of of philanthropy. um uh one, share any thoughts about it and the role you think it should play in a rich life, but also um obviously if you got a lot of money, it's easy to write checks to uh organizations that you care about. For the person that doesn't have a ton of money, um just speak to how they can still be a philanthropist. And it might not even be with money, right? It might be with their time. >> Um it might be I mean fostering it might be fostering a kid, right? I mean, so um if you can just because it you're you're one of the people I know who who has been such a great champion for philanthropy. I'd love to hear your thoughts on this. >> Well, there's a lot of ways you can help people. I think I mean I think uh for people that don't have a lot of money, I think one of the things you do is you have a listening ear to people that have some trouble or something and they need they they need a they need somebody to hear them out and give advice or whatever. And then and then you if you don't have a lot of money, just doing small things, you know, maybe you have somebody you know that just needs a small thing or you tip a higher than you normally do. You do things that you can do. One of the things I found about giving is it all comes back to you. Emerson had a thing called compensation. Ralph Waldo Emerson and was about how it's all a big circle and it really really is. I find the the more I give and the more I give to to people and the people in need, the more of it comes back to me. I don't really worry about giving it. And we have we have two of the largest foster child foundations in Texas. Uh both of them cover about 35 counties called Foster Angels. But but what we do there is, you know, we we were really directly helping kids. And I don't think about uh and they're 501 so it's not just my money but I'm just saying the thing about it is is that if you give it even small amounts it will it will when I didn't have any money at all and I'm when I really I grew up poor but I still did things for people and still gave money away and believe it or not I'd always get it back some way or another. And so my advice to people that don't have a tremendous amount of money is just do something. You'll be surprised. A lot of good things will show up in your life. >> All right. Well, very well said and a great sentiment to end on. Um so folks, if you can please join me in expressing your gratitude for Ted coming on and sharing all of his wisdom with us. Um please let him know how much you appreciate that by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. Um, if you would like to talk to the adviserss at uh, Oxbow, again, just go to thoughtfulmoney.com/oxpo, uh, fill out the form there. The firm will be in touch with you right away. These discussions are free. There's no commitments involved. It's just them being as helpful to as many people as they can. Um, Ted, we should clarify. Um, while your firm is very generous and trying to help as many people as it can, um, you do have minimums there. Um, what what minimum should we let folks know just so I'm not sending people over there who might get disappointed if they fall below it? Well, uh, and I, and this is not a a we're not trying to, but it's not a hotty remark or anything like that. We just we put a lot of people on an account. Our average accounts probably 4 to5 million, but we have at least a $2 million minimum to to have an account. And and and again, that's not that's not because we're trying to cut people out, but we also help a lot of people that don't meet the minimum. They come in and we still keep them on all of the things we do because I'm trying to help them out even though we're not doing it for them. I I let them know everything we're doing and they can be on our list and I like to I like to do that. I like to try to help people even if they don't have enough money to be with us. They'll see everything we do. >> Okay. Um well, thank you for that and and again for full disclosure, um I am a client of Oxbow. I've been for a while. Ted was very kind way back then and and uh opened the back door of the firm for me uh because the minimums have increased since then. Um but uh but yes, just being very transparent with folks. I am an existing client of Oxbow. Um dead uh I can't thank you enough. It's just always um it's such a learning experience always talking from you. I love benefiting from your wisdom. I've really enjoyed benefiting from your friendship um and your firm's partnership over the years. Thanks so much for coming back on the channel. >> You bet, Adam. >> All right. Uh, and everybody else, thanks so much for watching.