Market Valuations: The podcast discusses the current high valuations of the US stock market, questioning whether this indicates a bubble or a new normal, with historical context provided to understand these valuations.
Investment Strategies: There is a focus on the importance of total return over yield in investment strategies, emphasizing that relying solely on income-generating assets can be misleading if not considering total returns.
Roth IRAs and 401ks: The discussion highlights the benefits of Roth IRAs and 401ks, noting that while Roth options are increasingly available, many investors still underutilize them, potentially missing out on future tax advantages.
Powerball Winnings: The hosts explore how to manage a large windfall, like a Powerball jackpot, emphasizing the importance of strategic financial planning, including estate, tax, and investment management.
Economic Insights: The podcast touches on economic concepts such as regression to the mean and how they apply to market valuations, suggesting that while current valuations are high, they may be justified by the efficiency and profitability of modern companies.
Tax Considerations: Tax implications of different investment strategies are discussed, particularly the benefits of Roth conversions and the importance of considering tax efficiency in retirement planning.
Investment Platforms: Public, an investing platform, is mentioned as a sponsor, offering a multi-asset portfolio approach and emphasizing the integration of AI for enhanced investment insights.
Transcript
Welcome back to Ask the Compound, the show where you ask and we answer. I, your host, Ben Carlson. Valuations on the US stock market are once again at nosebleleed levels. They just keep moving higher. Is this another bubble? Is this the new normal? Something you should worry about? Something you should ignore? We're going to answer that question and more on the show today. Let's do this. [Music] All right, welcome back to our usuals in the chat on YouTube live. Email here, remember members, is ask the compound show@gmail.com. And if you're in the live chat, ask us a question. We'll fire it off immediately. On today's show, we answer questions sent in by our very own audience at the compound about where we stand in terms of stock market valuations, why there isn't more running money in Roth IAS and 401ks. Mr. Roth IRA himself will be here to answer that. How would you manage money for a Powerball lottery winner? It's funny how many people dream about this. Um, should you target an income based approach for your retirement strategy? Why I don't like it according to this one reader. And what's the best strategy for Roth conversions in your retirement accounts? All right, today's asset compound is sponsored by Public. Public is the investing platform for investors who take it seriously, like the people who watch as a compound, right? Tired of juggling apps for stocks here and crypto there and cash somewhere else? public brings it all under one roof. You can build a multi-asset portfolio of stocks, bonds, options, crypto, and more. We just got a question in our inbox last week from someone who still has their cash sitting in a checking account earning nothing. Not a public. They have 4.1% APY on your cash with no fees or minimums. Um, but AI isn't just a feature there. It's also woven into entire experience from portfolio insights to earnings recaps and call recaps. It's pretty easy. Public gives you smarter contexts at every touch point. We're going to be answering questions on today's show about IAS and 401ks. And for a limited time at Public, you can earn 1% match on all IRA deposits, IRA transfers, and 401k rollovers. Fund your account in 5 minutes or less. Find out more today at public.comc. That's public.comc. Paid for by public investing. Full disclosures in description on the podcast. All right, let's go. >> We've got a loaded chat today. We've got Michael watching from Italy. It's the evening there, so good evening, Michael. >> He's he's here from Italy quite a bit. I uh >> Yeah. Yeah. >> I'm a fan. >> We got Yeah. Good turnout. >> Let's do it. >> All right. Up first today we've got one from >> Can you imagine being against Italy, >> right? >> No, I can't. I can't. Okay. Up first, we got one from Mark. Every bull market, there are people who like to remind us that valuations are high and unsustainable. They point out that the historical average PE ratio is 15 to 20, depending on how you calculate it. We're getting a good taste of this now. The S&P 500's PE is quite high and doomers are predicting trouble on the horizon. However, in my opinion, comparing today's valuations to historical averages requires a bit of nuance. While it's true that the long-term average PE for the S&P is about 17, the average since 1990 is significantly higher than that. So, have we been in a 35-year bubble that's destined to pop? Or is there a legitimate reason valuations have been higher since 1990? I.e., this time is different. Ben loves digging into market history, so I'd like to hear his thoughts. >> I do like digging into market history. >> You do? They know you. >> They know us. Um, this is also a relevant question. We look at like valuations that are at nosebleleed levels, right? Because um I think people are people have been concerned for a while, but I don't think it's it's right to just completely sweep this under the rug. So, the greatest book ever written about the concept of risk was Against the Gods by Peter Bernstein. Duncan, you ever read it? at least put it in the chat GPT for a >> so he has this entire chapter on regression of the mean that I think applies here. So in the book Bernstein writes about this sir Francis Golton who did experiments with peep pods and he would take planted seeds of different sizes right small medium and large just to see how it impacted the size of their offspring and what they found was that the offspring of very large seeds tended to be a little smaller and then the the offspring of smaller seeds tended to be a little larger. It wasn't a complete regression of the mean, but it was that was kind of the the whole experiment behind the idea. Uh it's enough to be noticeable. And so investors have been wondering the same for years now, like when does the regression finally hit the US stock market? When do returns come back down? And especially when do valuations come back down? So here's the monkey wrench. Bernstein writes about why regression to the mean can be so tricky, especially outside the realm of science when you're dealing with human nature. So Bernstein writes, "There are three reasons why regression of the mean can be such a frustrating guide to decision-making. First, it sometimes proceeds so slow a pace that a shock will disrupt the process. Second, regression may be so strong that matters do not come to rest once they mean once they reach the mean. Rather, they fluctuate around the mean with repeated irregular deviations on either side, meaning the pendulum swings from one direction to the other. Finally, and I think this is the most important point here, the mean itself may be unstable so that yesterday's normality may be supplanted today by a new normality that we know nothing about. New normal. Heard of it? So, I think the la last point is the one I want to pull on a little more. So, let's do a chart on first. Check out the cap ratio going all the way back to when Francis Golton was still alive in the 1800s. Okay, the long-term average is 17.6. It's been rising, but look at this 30-year average closer to 30. Now, obviously, today's note levels, we've seen these these levels exactly three times in history. Now, the last time it happened in 2019 or whatever, things worked out fine. We're up 14% per year since then. But the question is what's more relevant, a full 150 plus year history or the past 30 years? All right, let's do the next chart. Here's another way of looking at the evolution of values over time. So this just shows kind of the the change in the average over time and this is like a shorter term average and how it so you can see in the 80s the long-term average is way longer and it's been going up and to the right ever since here. So I think one of the main reasons to keep an open mind >> think that railroad businesses are different than semiconductors. Well, that's funny because last week we talked, you can do chart off real quick. Last week we talked about how the S&P used to be filled with railroad companies and industrials. They were capital intensive businesses, low margins. So today's companies have more intangible assets, right? They're far more efficient. So good gez Duncan, that was a good lead in. Look at the next chart. Look at the average margin. And this only goes back to 1990s. This is the average margin by decade. Now that obviously it fluctuates, but you can see that the averages go up every decade, right? Even in the 2000s, we had two recessions. This is super impressive to me, >> isn't it? Right. So, this was supposed to be the this people have said this is the most mean-reverting series in all of finance. Why? Because if a company has high margins, competition will come in. Those margins will compress. Economics 101, it makes sense. In the real world, maybe not. They were wrong. >> A lot of this is is SAS, right? SAS companies have crazy margins. >> It's more efficient. It's technology, right? And so, put that chart up real quick. Just one one thing I wanted to know on a side note. It's crazy that we've dealt with a pandemic, supply chain shocks, 9% inflation, and now tariffs, and yet margins are still higher this decade than they were last decade. It's it's it's kind of unbelievable. Um, good luck betting against American corporations, I guess, is a good thing. So, do chart off. Now, here's the thing. Even if we agree that the past 30 years is more indicative of like current stock market characteristics, right? Even today's valuations probably require more context. So, the JP Morgan guide to the markets has some really great charts on that. So, let's go to these next. So, let's do another chart on this. shows uh the S&P at different inflection points and it shows the forward PE ratio, the dividend yield and the 10-year Treasury at these different times right before a peak, right? 2000, 2007, 2020, and 2022. Um the interesting thing about that is that the great financial crisis is the biggest crash on here and the forward PE was 15 times. Like you couldn't say that valuations were crazy. Like it started at relatively muted valuation levels. It's just that no one saw that earnings were about to fall off a cliff. Um, all right. Next chart. Forward PE ratio since 1994. This also shows the cape ratio, the dividend yield, and then the EY spread, which is just the earnings yield minus corporate bond yield. Um, and you can see they show the 30-year average along with current readings. Now, obviously, the current readings are higher than the 30-year average, right? So, it would be hard to argue that the US stock market is not highly valued at this point. But here's the thing. Chart off. The US stock market should be highly valued right now. We have the biggest best companies. We're on like a we're on like year 16 of a massive bull market. It would be even weirder if the stock market wasn't overvalued right now, right? The fact that these companies are so efficient. However, it should be pointed out most of this overvaluation exists in the mega cap tech stocks. Let's do one more chart on lots of charts today. This is another one from JP Morgan that shows the valuations of the top 10 stocks in the S&P versus the remaining stocks. So the 490ish and then the whole S&P 500. Um, and you can see again both of them have elevated levels compared to their averages since the 1990s. But the highest amount of valuation comes in those top 10 stocks. And that guess what? That's those big mega cap hyperscaler stocks. And so those stocks should be expensive, right? So 21 times earnings for the rest of the market, 22 times for the whole market is certainly at the high end of the historical range. is not like outside the realm of possibilities. So, I think on a scale of like Dollar Tree to Disney World in terms of valuations, we're obviously closer to Disney World, right? That's expensive for those people who don't know. Start off. >> Um, but are we at like Lightning Lane Premiere Passes yet? I don't know. I honestly think it's possible we could see even higher valuations from here, especially if rates fall and people just continue to lose their minds. Um, >> you know what else it reminds me of is the housing market. people like me for the last five years being like, I'm going to wait until prices come back. So, it may just keep going up and to the right in most places. >> Dave in the chat says, "What's the 1990s stock equivalent of Apple, Google, Microsoft, or Nvidia?" It's true that they didn't have companies like this. So, I guess where I really fall in this question is that yes, this time is definitely different. We have never seen companies like this before that are so big and efficient with such high profit margins. But the thing is, the market knows this now and it sure seems like it's more or less priced in, right? So if these companies continue to grow and either meet or exceed expectations, things should be fine. Like you can you can live at these valuation levels, but there is very little margin for if they stumble or if they fail to meet the now lofty expectations. So I guess my Grand Rapids hedge here is this time definitely is different, but trees still don't grow to the sky. How's that? >> Makes sense. >> And and good luck trying to predict like is 25 the time? No, actually 26 is the level that there is no line in the sand here that that makes the most sense in terms of what's going to happen. >> Well, and our show has a nice uh, you know, diverse audience of people that are market professionals and then people that are completely new to investing. So, I can see people completely new to investing probably being like, why wouldn't you just buy the ones that are cheaper? But the whole idea of the market is people are always going for the future, right? They they think that a company is going to grow their revenue, you know, at an insane clip and so they're willing to pay more today for the future, right? Like that's the whole idea. People are always >> Jeremy Seagull Jeremy Seagull has a really good book out called the future for investors. And the whole crux of the book is that expectations, especially at the short to intermediate term, matter more than anything. And so it's not necessarily the growth rate that matters. It's the is it better or worse than expected. And that's what for as high as these growth rates have been and the the expectations have been ratcheted way up. But the I think the even the expectations were too low for these companies because we've never seen anything like them before. So that's the thing. It's better or worse. So if you could have a really low valued company that just does a little better than expected and it could do really well and a really highly valued company that's growing at, you know, 25% but we thought it was going to grow 30%. So that that's kind of where and that's the hard part to well what is what is the what are the expectations being built in right now? And that's the thing that's hard to quantify. >> Yeah. When I first got into the market, I bought a bunch of singledigit PE stocks. >> Yeah, of course. >> A lot of them did not do very well. >> I'll buy all the stocks under five bucks. They're cheap, right? Yeah. >> Yeah. There you go. >> All right. Let's do another one. >> Okay. Up next, we got a question from M. Why are Roth contributions so low compared to 401k balances? Going to keep it simple and not put my tinfoil hat on. Hope Mr. Bill Sweet can chime in. >> All right. >> So, is there conspiracy? Is that >> I don't know what the tin foil hat thing is here. Let's do Roth IRA for life and bring them in. >> Um, >> yeah. What's crazy this question is coming from a person with a single initial M. >> Right. That is some wild stuff. Yeah, >> that's a baller move. Um, >> exactly. >> All right. I'm sure you have thoughts on the tax side of this thing. I again I don't know what the tinfoil hat thing is, but let's look at the actual numbers. So, this is from the Investment Company institute. >> Sure. >> And and they break down like the the IRA assets. All right. So, let's do a chart on here. And so this is as of 2023. So should be a little higher now, but the proportion should be similar. So almost 14 trillion dollars in IAS. 1.4 of that is in Roth IAS. Carry the four. Do the math that. So it's like 10% of IRA money is in Roth. And I think there's 12 trillion or so in 401k type retirement accounts. And I'm sure the proportion there is even lower. >> Now maybe the tin foil hat thing is like maybe the government doesn't want you to be in these things because they're such a good deal. But I think the reason is you can do chart off here is because these things just haven't been around very long, >> right? You didn't have access to them. When did we get a Roth 41k option in our >> 1995? Yeah. >> But when did we get it personally? When did we get it? >> Individual. Gez. Yeah. >> Two years ago, maybe. >> Yeah. Well, a little bit longer than that, but Yeah. Yeah. Yeah. >> But but a lot of the 401k plans don't have a Roth option yet. >> Yeah. >> And um so and a lot of the traditional IRA assets were there before the Roth came around. So, I think I don't think there's a grand conspiracy theory here, >> right? >> Um, I agree with Dave in the chat. I I was about to say if there was a conspiracy, wouldn't it be weighted towards Roth? Because they get their tax money now and the government want that. >> That would be the conspiracy. Yeah. And you guys didn't get my joke. I was trying to make a Q joke. Uh, so Emon asks, you know, why isn't there more assets in Roth? Duncan, you bring up you bring up the interesting point, right? It hasn't been around that long. But Ben, I want to challenge something you said. Uh, as of 2022, a Vanguard study showed that 80% of 401k plans had Roth options. And a 2025 Fidelity report showed that 93% of current plans have Roth options. >> Oh, that's way higher than I would have thought. >> Way higher, too. However, however, only of that Fidelity study that happened this year was released in August, only 17% are participating in Roth. So, I don't think this is a conspiracy, Emman. I think it's more of a case that people haven't really prostilized Roth, right? This is a Rothtober to remember, gentlemen. And that's why I want to bring the message to the people. >> Here here's the thing though. Here's what so yes they maybe more plants have it now but even it being a newer thing I think people just inertia like why would I change that's fine I got I don't want >> Yeah. Well that then we are in instant gratification culture right? So if I could tell like people that don't eat their their vegetables at dinner do you want to take a tax deduction now or do you want to get it 30 years from now? Most commonly people are going to opt for that now now option. However again I want to challenge M's premise. Can we chart on one of the things I wanted to demonstrate on my chart is, hey, listen, like the traditional IRA option and a Roth IRA option are both fixed at $7,000. I I think what M might have been comparing to is the IRA limits compared to the 401k limits. And while the traditional 401k cap for employer sponsored, excuse me, employee elective contributions is 23,500 per the 402G limit, you can contribute up to $70,000 as long as your employer is willing to do that. And that 10x uh differential is probably what M is getting at. However, like I said, Ben, in the world where 93% of 401ks have Roth options, this is just a matter of flipping a switch. And so I would say M, join us. Let's break the conspiracy. Let's make this a Roth timber to remember and let's get the word on the street. >> So the thing is if if they magically, you know, they have the defaults, right? The default is the target date fund and saving 6% or whatever it is. If the default was turned to a Roth, you see a lot more Roth dollars. That's the thing. The defaults matter. And the thing is, I personally look at it like I'm able to put more money in because I contribute to the Roth 401k because most people don't take their tax savings and then invest it, right? They use that tax savings for something else or they forget about it >> and they take their tax refund and go spend it at Disney. I I look at it as if I'm able to put the same amount in with Roth dollars versus traditional, it feels to me like I'm putting more money in because >> a lot of subliminal Disney talk today. Are you still a shareholder? I I sold that piece of crap and it's probably and probably because we're taking the kids we're taking the kids again in November and I can't believe it. >> Oh my god, that New York Times article redpilled me, guys. Talk about that. Yeah, like I I we we were at uh we were at Legoland over the weekend uh just before Labor Day and we were watching people march up on their fastpass and skip the line. And I have to tell you, like I I was ready to throw Molotov cocktails into that line because it was >> This is where inequality finally starts to see the pitch. >> Exactly. I was I was mad and I consider myself a fortunate investor, but the the lack of fairness, right, that that's what drove me nuts. I highly recommend that article. It's it's a great it's a great read. >> Yeah, that that don't ever look at the people in first class, right? Don't look them in the eye. >> Exactly. Just keep walking. Um, however, I thought M was asking more interesting questions. So, if you go back to like why is the Roth uh excuse me, the IRA limit so much smaller than the traditional 401k limit, right? If you go back to my chart of 7,000 versus 70, it's 10x. That goes back to the original 1970s, 1980s uh math in that Congress capped contributions uh to employer like employee elective contributions because they did not want highinccome people like Ben Carlson, like Bill Sweet, like Duncan Hill to be contributing their money into a tax shield basically. And so what they wanted to do is create incentive for employers to fund uh contributions for the employees and that that's the primary reason. >> And there should also be a rule though if you don't have one at your job, your limit should go up. >> Yeah, >> that seems like a simple fix. And we talked on our last show, last time I was here about three weeks ago about the Carlson suite uh 2028 platform, which is combine all this stuff into one big account. Like I don't need my TSB, my 403b, my 457. Exactly. >> Yes. >> Yeah. How many people end up with with accounts they completely forgot about? It seems very likely given like how >> disperate a lot of this is, but >> yeah, I think a lot of the value that we add as financial planners is bringing everything in one house, right? So we can look at it all. But one of the things Duncan that sticks with me, it might be an apocryphal fidelity study that came from General Shaughnessy, but the two types of accounts that outperformed everybody else were one, people who changed their address and they didn't update it, right? So, they weren't monitoring their account. And the second one was dead people. Uh, which is a great way to outperform the market. And basically, the message is don't mess with your investments. >> As a tax person, Bill, you're going to hate me for this. And the personal finance people will come at me, but I don't have an HSA. And the only reason is because I don't feel like adding another account to my my buffet of accounts. I just that's I just it feels like too much of a pain in the ass. I don't want that. too far. Yeah. No, I I that that's a personal decision, Ben. Yeah, I wouldn't I wouldn't throw I wouldn't throw rain on you for that one. >> All right, let's do another one. Let's let's dream a little bit here. >> Okay, up next we uh we have a question from Andrew. I gota admit this guy this guy hoping not to brag. >> I've Yeah, I've never bought a Powerball ticket in my life. I used to be really into scratchoffs because I like the instant instant >> scratchoff is the best stocking stuffer that there is. >> Great Christmas gift. Agree. Top of the list. >> If someone gives everyone a scratchoff ticket at Christmas, wait, who's got coins? Who's got coins? That's a great gift. >> Yep. >> Yeah. I think uh some people are just lucky with them, too. Like my wife has gotten like 50 bucks off of one before. I think I've pretty much always just lost or gotten like free tickets. >> My kids get so excited if they win $2. >> Yeah, >> it's the best. All right. >> Okay. So, Andrew writes, "As of today, the Powerball jackpot is at $950 million with a cash value of $428,900 I mean 428.9 million." >> In the actual email, they calculated this to the decimal point. It's very impressive. >> Oh my god. Okay. Uh this is this is one of those things where you can take it over the rest of your life or take a lump sum. Is that the idea? Okay. Uh it will likely be even higher by the time they do the drawing on Saturday. And if it makes it to your recording next Wednesday, it will be well over $1 billion. >> I know lottery tickets. Yeah, I know lottery tickets are a total waste of money and I rarely buy them. But sometimes paying $20 to fantasize about what I would do with all that cash can be a good value. Let's say I win Saturday's drawing. I'm in Texas, so if my math is right, u my after tax takehome would be a little over $270 million. If I win $270 million, I'm going to need some help. How would RWM approach a new client that had that kind of money and what unique considerations come from that scale? P.S. I've long had a deal with myself that whenever I get some type of windfall, I take 10% to use for fun money and invest the rest. Do you have a similar approach? >> So, lottery is one of those things that it's just totally irrational. But the I think the funniest most rational thing about it is people play the lottery more when the power ball grows to a large number. It's like listen, if it's at 300 million, I'm not playing. But if it gets to a billion, then I'm in. Like like I I can't you can't bother me for 300 million, but a billion, then I'm in. >> Um, okay. I I do think I do like the fun money approach, taking any sort of bonus or windfall and and spending enjoying it on yourself, vacation, spending on the kids, whatever. Take yourself out and get a new hat for Duncan. Um, >> or new shoes. >> So, we get a we get a client this size that comes to Riddle's Wealth. They're in our multif family office group, right? It's ultra high net worth people. they the estate planning, insurance planning, tax planning with the bills. Um the funny thing is is that from an investment management perspective, these types of clients are either the easiest or the hardest. So, uh a couple weeks ago, I I've had a pontoon for a few years now, right? I've mentioned this before, shown some pictures on the on the show. Um I think I'm ready for a larger motor, right? I've got a 150cc. I think I can get to like 250 now that I'm more comfortable driving this boat. And so I called the dealership and I said, "What what are my options here?" And the guy, the first thing the guy says to me, he says, "Here's the thing with it, when it comes to a boat, you don't need anything. There are no needs here. It's what do you want?" Right? And I think that's the same thing with someone with this much money. They don't need to invest in anything without you could put it on T bills. You could put it on uni bonds. You could put it all in stocks. Either way, you're going to be fine. Your kids are going to be fine. Your grandkids are going to be fine. Right? So that almost makes it harder to offer advice because it's like very freeing but also scary. So you need to have some sort of limitations on yourself so you don't drive yourself crazy. I also think the way that I used to think about this with institutional investors. I managed money with these large endowments and foundations. They had hundreds of millions or even billions of dollars. And I always said that it's just a few extra zeros. The the evergreen principles still apply. you still have to account for your risk profile and your time horizon when making investment decisions. Um, so that's kind of my theory. Bill, what do you think? What what what would your advice be when someone comes to you with this much money? >> I think that you adequately answered that question, Ben. So, I'd like to answer a different question, which is, should you play the lottery? And I would say never, never, ever, ever. Mark, >> you don't think it's okay to pay it to Dream for entertainment purposes? Listen, I don't I don't pay play it either, but I I can sort of see the Let's just I because I know people love doing that. >> Yeah. If you're not like addicted to it, I know there are people that get addicted to it, but if you're not addicted to it, I just have to say like, yeah, if you're spending $20 to go to a movie or $20 on on a lottery, like what is what is the difference? >> Why not methamphetamine if you're not addicted to it? Like, I I get the point, but my problem is it's an empty dream. Like, you're buying an empty promise. The statistical odds of winning the lottery are one in 238 million. Like that is the thing. So like no matter how much you multiply the amount of chances you get statistically nobody wins the lottery. I know that they roll somebody out every year and they show you all the great and wonderful things that they're doing. They ignore what happens over the next 10 years because it's actually very bad people that come up with that money. >> Most people who My favorite stat is that the neighbors of lottery winners are more likely to go bankrupt because they see them spending money so they try to keep up. >> Yeah. So it's grim. So Mark Twain said the lotteryy's attacks on those poor math and that is what I advocate to people. I think it's a completely empty dream. And I'll share two more statistics for you guys. One is that only 45% of wagers from lottery tickets end up as winnings. So they're literally taking half of the money that people are wagering and they're only return and they're keeping half of it, right? And some of that goes to government programs, but most of it goes to administrative support. It pays the shop owner. Like there there's stuff going on. Let's compare that to other forms of fun. I would say entertainment. what casinos pay roughly $99 90 cents on the dollar right so I just don't think it's a very efficient way of gambling and the last point is supporting schools in a lot of places >> I don't know if you are yeah with make a donation to the school if you want to feel good about yourself but the other thing guys it's a government monopoly and this has always kind of freaked me out is like where are the private monop where are the private lotteryies like why can't why these odds are so terrible why are they so terrible it's because it's a monopoly and I don't I just don't think it's a good way to tax people I would much rather I understand it's voluntary but it's selling you an empty promise. And I want to chart on really quick. You know what's better than throwing $20 a week away? Stick that into a into an index fund, right? And so over a hypothetical uh 30-year investment, you'll end up with $114,000. God willing, this is not an actual investment, but it's much more likely that if you invest that $20 into literally anything else, you're going to be better off than throwing it away in the lottery. >> Yeah. I mean, this is not investment advice obviously, but your odds of striking it, you know, big with a uh with a super risky option contract would be far better than than probably, you know, a power ball. Not profit definitely at one in 23 dreams out here. >> I know Sean and Sean and Mhat's not >> I'm not cuz they're not real cuz they're not real dreams. But here's the thing. If you play this every week, your statistical chance goes to one in every five million years, right? Like that's not that's not good enough for me, guys. >> Okay, but wait, wait, wait. What if you get together with everyone at your work and you and you all go in on board because Well, no, not no with each other that I could win with them at Bool. I always support those like office lotteryies, right? >> Oh, no. No. I meant everyone goes in and buys buys Powerball tickets. >> No, because still your chances of winning, Duncan. >> Your chances of winning are zero. Exactly. And then you sue the pants out of each other. It's just there's no upside. I don't understand the point. I don't >> Okay. Well, let's let's have a little bit of fun for people that are here. Of course, the tax guy, >> please. What would you do if you if you won 200 and however many million dollars there? >> Uh half goes to municipal bonds. Uh the other half into a broad basket of uh of tax managed uh uh exchange funds and ETFs and uh canvas at their fine folks at riddle management. >> Wait, no fun. You wouldn't like have you have that much money yet? >> You couldn't go for if you tried and you wouldn't have any fun with that. >> I think everything becomes fun at that point. I think I'm fortunate where I am in life where like if if I really really want something, I don't want a private jet. I that sounds lovely, but like no. I don't I don't think my life would change at all and GT is a false dream. >> Would you drive it though? What I don't understand that people buy those cars is they don't drive them. >> Oh, no. I would drive it. >> Okay, great. >> I would drive it. Great. Then I'm into this. >> Awesome. >> They'll just kill. >> I've got everything I want. >> Let's do another one. >> Okay. Up next, we've got one from uh Ah, I don't see a name. Okay. Ben keeps saying it feels odd or even weird when people prefer to invest in income generating assets instead of just selling some stock to live off of in retirement. But today with tools like Chad GPT, anyone can run a Monte Carlo analysis based on age, retirement savings, and annual spending to estimate the odds of running out of money. And when you do this, income based strategies almost always outperform non-income approaches in terms of making the money last and even grow. Try it yourself, Ben. So Ben, why do you say income approaches in retirement are odd or a bad idea? >> Shots fired. >> We're taking my I think we're taking this a little out of context here. >> This is almost like you saying that I said you could get a Porsche for $20,000. Dave said if Duncan won the lottery, he'd buy a $20,000 Porsche. Uh so my point here is that not that you shouldn't that you should avoid income generating assets completely. Of course not. Like my point is and I don't know what chat I think you're leading the witness with chat GPT there a little bit. Um, I'd like to see these Monty Carlo analysis. My point here is that total return matters more than yield. Like, um, so in my book, Duncan, you mentioned this a few weeks ago. I brought up Analy Capital. I actually did an update on this. So, pull up the chart here. This is >> This is funny you mentioned that. That's one of those stocks I bought when I first got into the market that had a lot of people loved these stocks. So, this this is in the low rate world. So, this is >> rent free and Duncan's head. It's amazing. >> So, I wrote about this in 2015 in my book. Let's update it to the last 10 years. The average yield on Analy Capital for the last 10 years has been almost 12%. Pretty good, right? Man, if I just clip those coupons. Now, let's go to the next one and look at the actual total return. This is with the price. It's up 6% per year. So, wait a minute. I clipped that 6% but or my 12% but I only got 6% per year. How is that? Because the price went down actually on a total return basis. That's why I'm saying chart off. Um yield is not the only thing you should be looking at. If you say, "I'm just going to live off the yield," you have to look at total return. I'm not saying you should avoid income generating assets altogether. I'm saying you have to be smart about it and you have to combine total return with yield, right? And yield is part of total return. That's my whole point. That you can't just say, "Oh, if I just live off the yield, I'll be fine." You have to look at everything, >> right? There's a very famous Reddit post about GE, right? And the stock, I don't know if you guys know what I'm talking about, but it was the same kind of thing where like total return ultimately it trumps everything. >> Yeah. that G had a 5% yield dividend probably, right? But it was down 50% in price, so who cares? >> Exactly. >> And the thing is, Bill, if you are doing an income only approach to retirement, guess what? Your tax bill is going to hit, right? >> Yep. Yep. Ben, and that's what you asked me to take a look at. So, again, very simplified case, but I think overindexing on income and overindexing on yield usually leads you to choose investments such as real estate or bonds that pay ordinary income. And can we chart on and just do some really quick math? $5,000 a month equals $60,000 a year. So that's on a 6% that's roughly a million dollar portfolio. If that is all coming down in ordinary income using 2025 tax rates, I'm paying roughly $5,000 of tax on that, right? Not not a huge tax rate, but still that's one monthly payment of money that's going off to the IRS versus capital gains, Ben, and your point, that are coming tax-free. And and that that to me is it is that not all that glitters is gold. Yield is not the determinant of success or failure. It's a part of a solution, a portfolio. The second point that I would like to make, Ben, is it that what what I think what I think questioner is talking about a sequence of returns risk, which Ben you've written out, a lot of our folks have and what income allows you to do is basically get a less volatile approach to investing. If you have a steady income stream coming out of part of your portfolio that does make it less volatile and it does reduce sequence of returns risk, however, gentlemen, risk can be can be transformed. It cannot be destroyed. So moving from a total return to more of a fixed income approach, you give up expected returns in exchange for lower volatility, but you do still get those lower returns. And that means that you're taking on potentially purchasing power risk, inflation risk. It's just a way to transform. Not neither is right or wrong, right? At the end of the day, we need a mix of assets to make this all work. But >> make it be part of it and maybe those you keep those incomeroucing assets in a tax deferred account and have them have the asset location >> where you're paying ordinary income anyway. Exactly. The thing that always gets me is the people who say, "I'm just going to live off the income and never touch the principal." And I my whole point is like, why why what's the point of saving in the first place if you're never going to touch the principal? Like that that doesn't make any sense to me. >> And the really crazy thing that's going on right now, and I think it's just indicative of where we are in the market cycle, right? We've had a big run with with big tech. Big tech stocks have done so well over the last 20 years. So, we have a lot of people, these embedded gains, they don't want to sell and realize the capital gains. They want to generate income. So, they go into these like covered call writing strategies and other nonsense. You know what else works? Selling the stock, right? because because you need to get from here to there unless you're in a tax shielded account. You you need a transition at some point. So why not just do that through through disciplined sales and I think this is the work of the financial planner to try to put this puzzle together, >> right? I just think my whole point is that there's no like easy button to hit like, oh, I'll be fine. I'll just put it in this and look at the yield. Yay, I'm done. No, it's not that easy. >> I mean, I'll point out I think Nvidia yields I just looked 0.02% >> um dividend. So, if you're looking for dividend stocks that uh have >> Great. That's like negative 5% yield. Real, right? Yeah. >> All right. We got one more. >> All right. Up next, we got a question from Keith. The Thrift Savings Plan will start allowing Roth conversions in 2026. The only thing we know at this point is that the conversion must be paid from outside money. I don't make that much. Uh, as of today, my gross salary is $64,000. I am 35, very single, no house, no kids, no debt. I file single 00 I don't know what that means and live in Connecticut. My TSP is around uh that's thrift savings plan is around $96,000 and about 55% is traditional. If you were me would you convert 100% of that on day one or do smaller chunks throughout the year. I'm going to do at least $15,000 because I always take the standard deduction. I have around $19,000 in cash in a high yield savings account right now. >> See he's got a high yield savings account. >> Yeah. Yeah. My plan is to acrew as much cash as possible in 2025 and 2026 to pay the tax bill that will be due in 2027. What are your thoughts? Smart, dumb, or maybe not do it at all and have more tax flexibility in retirement. But please correct me if I'm wrong, Benjamin. Do any of your clients ever say, "Man, wow. I man, I wish I had less Roth money in retirement." I hope to hear back. I know y'all are busy. I Benjamin is very formal to call you Benjamin. >> Yeah, sounds like my mother. Um, yeah, Bill always says, no one says, "I wish I had less Roth money in retirement." So, so I guess that the idea here, I never I never heard about this, that the TSP will start allowing these. So, just that the outside the taxes have to be paid from outside money. You can't like pay it from your retirement. That's what he's saying. So, >> correct. >> Okay. >> Yeah. And you usually wouldn't because if you did a Roth conversion Yeah. It's it's it's almost always better to pay with outside money. >> Do you think that the timing on this matters at all? >> I do. I do. And this is the thing is that if we pull up Can we chart on here? My last and final chart here, if we're thinking about Roth TSP or not, one of the useful indicators that Keith gave me was his salary at $64,000. And this will be adjusted for inflation a little bit going into 2026, but as of today, assuming a standard deduction, he Keith is right at that 22% tax bracket. Like he's right on the edge, right? And so what Keith is talking about is do I add to my taxable income this year, right, to save in the future? Keith also gave us a couple other key points at 35, no kids, no debt. Sounds like Keith is living just a great life. However, what I think is probably going to happen with Keith, if I could just index and Keith can write back later and tell me, probably he's going to keep working his job, right? He'll get raises. Life will go on. I think he'll Keith will do great. He'll retire at some point. The TSP implies a government service job, right? Can we we can chart off here. So, he probably is looking at a pension. He'll probably end up moving, I would guess, guys, somewhere Florida, right? Somewhere south, somewhere out of Connecticut because Connecticut is getting older by the day, unfortunately. And if that's the case, >> maybe that's why he's very single. >> May maybe maybe look look for love in his 60s. Um, but probably what'll happen for Keith, it's just my guess is that he's probably at his tax bracket right now. So, it's more or less just a neutral thing. I would not be rushing to do Roth conversions where Heath is unless his income would dip below that $64,000 for some reason. Maybe a health savings contribution account, maybe some other reason. Um, so what I would probably >> what I'm hearing right now, >> what I would probably remedy, Keith, let me finish up, is maybe just just tweak your contributions going into the TSP, right? I don't see the benefit of a large >> also just have all the new contributions be Roth. >> Correct. That's correct. Particularly again in Connecticut, which is not a low tax state by any stretch of the imagination. So there's nothing compelling me for Keith to Roth convert. If his income was 54K, I would say 10K makes sense. But I just I wouldn't want to be converting too much in the 22 or 24. Would it would it ever would it ever make sense for him to do these later in life then? >> Yeah, definitely possible. If Keith takes a year off, his sbatical, if he does some traveling, or if he has a gap year, changes careers, let's say, that is a perfect opportunity to Roth convert. But I don't there's no there's no there's no red flashing light that says 2026 is the year for our friend and listener Keith. >> This was the upset of the year. Bill saying don't go into the Roth conversion. >> Yeah, nuance is important. Yeah, >> very surprised. >> Roth timber is not for everyone, guys. And I wouldn't want >> See, lottery tickets do come true sometimes. Louise for Bill. >> Louise in the chat says, "Imagine a lottery ticket you can buy by saving taxes by not relying on dividends." >> Exactly. Exactly. >> No, but great question. And again, Keith, there's nothing wrong with some Rothification. I would just do it in an ongoing basis. I don't see any reason to wreck your tax bracket. >> Yeah. And so he says it's 55% traditional. That means he's probably already putting a lot of new money into the Roth and eventually it's going to swamp the traditional anyway. I mean, just just a Roth AR contribution, you can just plug $7,000 in in addition to your other savings. >> Hey, guess what? Take the cash you're sitting on and invest it. >> Exactly. >> Right. Exactly. >> Because if you're not Yeah. >> And let that grow. You can always get your basis back taxree if down the road you decide to move, buy a house or something else. >> Yeah. So, take some of that. Max your Roth out. What is it? 7,7500. >> 7,000. 7,000 this year. Yep. Amen. >> If you want to do Roth dollars, just max out your Roth I right now. >> Do you think Keith is wanting our help finding finding someone by emphasizing very single? Should we have a ask the compound like dating game or something? >> Keith Keith sounds like a like a catch to me. >> I mean, we've got a lot of people with high FICO scores here, I'm sure. So, that's that's got to be high FICO scores don't play the lottery. $20,000 Porsche. That's like that's very I bet do well on the dating sites. >> No, I I think Keith is going to clean up later in life. So, I don't I don't think he needs a lot of help there given given the facts and circumstances. Yeah. >> Spouses dig Roth IAS. It's a known fact >> that tattoo is played at the bar. Yep. >> True. All right. Thank you to Bill as always. >> Uh before we get out of here, I got we were I I kind of teased this in the the pre-show, but uh >> That's right. Okay. >> I tariffs. I have bad news. I I experienced my first like slap in the face from from tariffs. Um and I got to say I don't think most people are going to like this once this starts uh hitting more and more people pay tariff. >> So I bought I I bought a pair of shoes from Spain uh and they were already expensive for me. I usually try to buy shoes on sale, but these were $126. I got some like ransom note from DHL saying, "We have your shoes. They're ready to be delivered, but you have to pay $43 in import duty because of the tariff policy before we can deliver them to you." >> So, I had to pay to like, you know, I had to pay ransom basically to get my shoes that I already paid for. >> What kind of shoes $43? They don't have Are they like specially made? Why Why don't they have them in here? >> These aren't They're vegan shoes. They're They're like handmade. import for consumption. >> They're made from like pineapple leather or something like that with bamboo. There they are. Uh they're they're awesome shoes. I'm excited about getting them. But like I just $43 on a pair of shoes that were $126. I mean I I'm not good at math, but that's a big percentage like that. >> So we have a big tariff on cactus these days, huh? Cacti, is that the deal? >> I don't know. Yeah, I don't know. I just I was thinking like this feels this feels like a tax. I know a lot of people are saying it's not a tax on the consumer, but it sure >> thing is though, when you wear these shoes now, if once you pay the ransom note, um you're going to have a good story every time you wear them. >> Sure. >> And I I hope to have them in time for future proof. So, you'll probably see me wearing them uh next week. >> Yes. But a 40% tariff or whatever it is, that's uh that seems a little high. >> It's I Yeah, I'm just >> It's unpatriotic. >> It's not like there's not an Americanmade like equivalent or I would have sure I would have bought that maybe, but >> Duncan wants a GoFundMe page set up. All right. No, >> email us at askthe compoundshow@gmail.com. Thanks everyone in the chat as always on YouTube and on Twitter. Thanks to Bill and Duncan and the whole production team here at the compound and we will see you next time. Thank you. >> See you everyone. [Music] [Music]
Is This a Bubble?
Summary
Transcript
Welcome back to Ask the Compound, the show where you ask and we answer. I, your host, Ben Carlson. Valuations on the US stock market are once again at nosebleleed levels. They just keep moving higher. Is this another bubble? Is this the new normal? Something you should worry about? Something you should ignore? We're going to answer that question and more on the show today. Let's do this. [Music] All right, welcome back to our usuals in the chat on YouTube live. Email here, remember members, is ask the compound show@gmail.com. And if you're in the live chat, ask us a question. We'll fire it off immediately. On today's show, we answer questions sent in by our very own audience at the compound about where we stand in terms of stock market valuations, why there isn't more running money in Roth IAS and 401ks. Mr. Roth IRA himself will be here to answer that. How would you manage money for a Powerball lottery winner? It's funny how many people dream about this. Um, should you target an income based approach for your retirement strategy? Why I don't like it according to this one reader. And what's the best strategy for Roth conversions in your retirement accounts? All right, today's asset compound is sponsored by Public. Public is the investing platform for investors who take it seriously, like the people who watch as a compound, right? Tired of juggling apps for stocks here and crypto there and cash somewhere else? public brings it all under one roof. You can build a multi-asset portfolio of stocks, bonds, options, crypto, and more. We just got a question in our inbox last week from someone who still has their cash sitting in a checking account earning nothing. Not a public. They have 4.1% APY on your cash with no fees or minimums. Um, but AI isn't just a feature there. It's also woven into entire experience from portfolio insights to earnings recaps and call recaps. It's pretty easy. Public gives you smarter contexts at every touch point. We're going to be answering questions on today's show about IAS and 401ks. And for a limited time at Public, you can earn 1% match on all IRA deposits, IRA transfers, and 401k rollovers. Fund your account in 5 minutes or less. Find out more today at public.comc. That's public.comc. Paid for by public investing. Full disclosures in description on the podcast. All right, let's go. >> We've got a loaded chat today. We've got Michael watching from Italy. It's the evening there, so good evening, Michael. >> He's he's here from Italy quite a bit. I uh >> Yeah. Yeah. >> I'm a fan. >> We got Yeah. Good turnout. >> Let's do it. >> All right. Up first today we've got one from >> Can you imagine being against Italy, >> right? >> No, I can't. I can't. Okay. Up first, we got one from Mark. Every bull market, there are people who like to remind us that valuations are high and unsustainable. They point out that the historical average PE ratio is 15 to 20, depending on how you calculate it. We're getting a good taste of this now. The S&P 500's PE is quite high and doomers are predicting trouble on the horizon. However, in my opinion, comparing today's valuations to historical averages requires a bit of nuance. While it's true that the long-term average PE for the S&P is about 17, the average since 1990 is significantly higher than that. So, have we been in a 35-year bubble that's destined to pop? Or is there a legitimate reason valuations have been higher since 1990? I.e., this time is different. Ben loves digging into market history, so I'd like to hear his thoughts. >> I do like digging into market history. >> You do? They know you. >> They know us. Um, this is also a relevant question. We look at like valuations that are at nosebleleed levels, right? Because um I think people are people have been concerned for a while, but I don't think it's it's right to just completely sweep this under the rug. So, the greatest book ever written about the concept of risk was Against the Gods by Peter Bernstein. Duncan, you ever read it? at least put it in the chat GPT for a >> so he has this entire chapter on regression of the mean that I think applies here. So in the book Bernstein writes about this sir Francis Golton who did experiments with peep pods and he would take planted seeds of different sizes right small medium and large just to see how it impacted the size of their offspring and what they found was that the offspring of very large seeds tended to be a little smaller and then the the offspring of smaller seeds tended to be a little larger. It wasn't a complete regression of the mean, but it was that was kind of the the whole experiment behind the idea. Uh it's enough to be noticeable. And so investors have been wondering the same for years now, like when does the regression finally hit the US stock market? When do returns come back down? And especially when do valuations come back down? So here's the monkey wrench. Bernstein writes about why regression to the mean can be so tricky, especially outside the realm of science when you're dealing with human nature. So Bernstein writes, "There are three reasons why regression of the mean can be such a frustrating guide to decision-making. First, it sometimes proceeds so slow a pace that a shock will disrupt the process. Second, regression may be so strong that matters do not come to rest once they mean once they reach the mean. Rather, they fluctuate around the mean with repeated irregular deviations on either side, meaning the pendulum swings from one direction to the other. Finally, and I think this is the most important point here, the mean itself may be unstable so that yesterday's normality may be supplanted today by a new normality that we know nothing about. New normal. Heard of it? So, I think the la last point is the one I want to pull on a little more. So, let's do a chart on first. Check out the cap ratio going all the way back to when Francis Golton was still alive in the 1800s. Okay, the long-term average is 17.6. It's been rising, but look at this 30-year average closer to 30. Now, obviously, today's note levels, we've seen these these levels exactly three times in history. Now, the last time it happened in 2019 or whatever, things worked out fine. We're up 14% per year since then. But the question is what's more relevant, a full 150 plus year history or the past 30 years? All right, let's do the next chart. Here's another way of looking at the evolution of values over time. So this just shows kind of the the change in the average over time and this is like a shorter term average and how it so you can see in the 80s the long-term average is way longer and it's been going up and to the right ever since here. So I think one of the main reasons to keep an open mind >> think that railroad businesses are different than semiconductors. Well, that's funny because last week we talked, you can do chart off real quick. Last week we talked about how the S&P used to be filled with railroad companies and industrials. They were capital intensive businesses, low margins. So today's companies have more intangible assets, right? They're far more efficient. So good gez Duncan, that was a good lead in. Look at the next chart. Look at the average margin. And this only goes back to 1990s. This is the average margin by decade. Now that obviously it fluctuates, but you can see that the averages go up every decade, right? Even in the 2000s, we had two recessions. This is super impressive to me, >> isn't it? Right. So, this was supposed to be the this people have said this is the most mean-reverting series in all of finance. Why? Because if a company has high margins, competition will come in. Those margins will compress. Economics 101, it makes sense. In the real world, maybe not. They were wrong. >> A lot of this is is SAS, right? SAS companies have crazy margins. >> It's more efficient. It's technology, right? And so, put that chart up real quick. Just one one thing I wanted to know on a side note. It's crazy that we've dealt with a pandemic, supply chain shocks, 9% inflation, and now tariffs, and yet margins are still higher this decade than they were last decade. It's it's it's kind of unbelievable. Um, good luck betting against American corporations, I guess, is a good thing. So, do chart off. Now, here's the thing. Even if we agree that the past 30 years is more indicative of like current stock market characteristics, right? Even today's valuations probably require more context. So, the JP Morgan guide to the markets has some really great charts on that. So, let's go to these next. So, let's do another chart on this. shows uh the S&P at different inflection points and it shows the forward PE ratio, the dividend yield and the 10-year Treasury at these different times right before a peak, right? 2000, 2007, 2020, and 2022. Um the interesting thing about that is that the great financial crisis is the biggest crash on here and the forward PE was 15 times. Like you couldn't say that valuations were crazy. Like it started at relatively muted valuation levels. It's just that no one saw that earnings were about to fall off a cliff. Um, all right. Next chart. Forward PE ratio since 1994. This also shows the cape ratio, the dividend yield, and then the EY spread, which is just the earnings yield minus corporate bond yield. Um, and you can see they show the 30-year average along with current readings. Now, obviously, the current readings are higher than the 30-year average, right? So, it would be hard to argue that the US stock market is not highly valued at this point. But here's the thing. Chart off. The US stock market should be highly valued right now. We have the biggest best companies. We're on like a we're on like year 16 of a massive bull market. It would be even weirder if the stock market wasn't overvalued right now, right? The fact that these companies are so efficient. However, it should be pointed out most of this overvaluation exists in the mega cap tech stocks. Let's do one more chart on lots of charts today. This is another one from JP Morgan that shows the valuations of the top 10 stocks in the S&P versus the remaining stocks. So the 490ish and then the whole S&P 500. Um, and you can see again both of them have elevated levels compared to their averages since the 1990s. But the highest amount of valuation comes in those top 10 stocks. And that guess what? That's those big mega cap hyperscaler stocks. And so those stocks should be expensive, right? So 21 times earnings for the rest of the market, 22 times for the whole market is certainly at the high end of the historical range. is not like outside the realm of possibilities. So, I think on a scale of like Dollar Tree to Disney World in terms of valuations, we're obviously closer to Disney World, right? That's expensive for those people who don't know. Start off. >> Um, but are we at like Lightning Lane Premiere Passes yet? I don't know. I honestly think it's possible we could see even higher valuations from here, especially if rates fall and people just continue to lose their minds. Um, >> you know what else it reminds me of is the housing market. people like me for the last five years being like, I'm going to wait until prices come back. So, it may just keep going up and to the right in most places. >> Dave in the chat says, "What's the 1990s stock equivalent of Apple, Google, Microsoft, or Nvidia?" It's true that they didn't have companies like this. So, I guess where I really fall in this question is that yes, this time is definitely different. We have never seen companies like this before that are so big and efficient with such high profit margins. But the thing is, the market knows this now and it sure seems like it's more or less priced in, right? So if these companies continue to grow and either meet or exceed expectations, things should be fine. Like you can you can live at these valuation levels, but there is very little margin for if they stumble or if they fail to meet the now lofty expectations. So I guess my Grand Rapids hedge here is this time definitely is different, but trees still don't grow to the sky. How's that? >> Makes sense. >> And and good luck trying to predict like is 25 the time? No, actually 26 is the level that there is no line in the sand here that that makes the most sense in terms of what's going to happen. >> Well, and our show has a nice uh, you know, diverse audience of people that are market professionals and then people that are completely new to investing. So, I can see people completely new to investing probably being like, why wouldn't you just buy the ones that are cheaper? But the whole idea of the market is people are always going for the future, right? They they think that a company is going to grow their revenue, you know, at an insane clip and so they're willing to pay more today for the future, right? Like that's the whole idea. People are always >> Jeremy Seagull Jeremy Seagull has a really good book out called the future for investors. And the whole crux of the book is that expectations, especially at the short to intermediate term, matter more than anything. And so it's not necessarily the growth rate that matters. It's the is it better or worse than expected. And that's what for as high as these growth rates have been and the the expectations have been ratcheted way up. But the I think the even the expectations were too low for these companies because we've never seen anything like them before. So that's the thing. It's better or worse. So if you could have a really low valued company that just does a little better than expected and it could do really well and a really highly valued company that's growing at, you know, 25% but we thought it was going to grow 30%. So that that's kind of where and that's the hard part to well what is what is the what are the expectations being built in right now? And that's the thing that's hard to quantify. >> Yeah. When I first got into the market, I bought a bunch of singledigit PE stocks. >> Yeah, of course. >> A lot of them did not do very well. >> I'll buy all the stocks under five bucks. They're cheap, right? Yeah. >> Yeah. There you go. >> All right. Let's do another one. >> Okay. Up next, we got a question from M. Why are Roth contributions so low compared to 401k balances? Going to keep it simple and not put my tinfoil hat on. Hope Mr. Bill Sweet can chime in. >> All right. >> So, is there conspiracy? Is that >> I don't know what the tin foil hat thing is here. Let's do Roth IRA for life and bring them in. >> Um, >> yeah. What's crazy this question is coming from a person with a single initial M. >> Right. That is some wild stuff. Yeah, >> that's a baller move. Um, >> exactly. >> All right. I'm sure you have thoughts on the tax side of this thing. I again I don't know what the tinfoil hat thing is, but let's look at the actual numbers. So, this is from the Investment Company institute. >> Sure. >> And and they break down like the the IRA assets. All right. So, let's do a chart on here. And so this is as of 2023. So should be a little higher now, but the proportion should be similar. So almost 14 trillion dollars in IAS. 1.4 of that is in Roth IAS. Carry the four. Do the math that. So it's like 10% of IRA money is in Roth. And I think there's 12 trillion or so in 401k type retirement accounts. And I'm sure the proportion there is even lower. >> Now maybe the tin foil hat thing is like maybe the government doesn't want you to be in these things because they're such a good deal. But I think the reason is you can do chart off here is because these things just haven't been around very long, >> right? You didn't have access to them. When did we get a Roth 41k option in our >> 1995? Yeah. >> But when did we get it personally? When did we get it? >> Individual. Gez. Yeah. >> Two years ago, maybe. >> Yeah. Well, a little bit longer than that, but Yeah. Yeah. Yeah. >> But but a lot of the 401k plans don't have a Roth option yet. >> Yeah. >> And um so and a lot of the traditional IRA assets were there before the Roth came around. So, I think I don't think there's a grand conspiracy theory here, >> right? >> Um, I agree with Dave in the chat. I I was about to say if there was a conspiracy, wouldn't it be weighted towards Roth? Because they get their tax money now and the government want that. >> That would be the conspiracy. Yeah. And you guys didn't get my joke. I was trying to make a Q joke. Uh, so Emon asks, you know, why isn't there more assets in Roth? Duncan, you bring up you bring up the interesting point, right? It hasn't been around that long. But Ben, I want to challenge something you said. Uh, as of 2022, a Vanguard study showed that 80% of 401k plans had Roth options. And a 2025 Fidelity report showed that 93% of current plans have Roth options. >> Oh, that's way higher than I would have thought. >> Way higher, too. However, however, only of that Fidelity study that happened this year was released in August, only 17% are participating in Roth. So, I don't think this is a conspiracy, Emman. I think it's more of a case that people haven't really prostilized Roth, right? This is a Rothtober to remember, gentlemen. And that's why I want to bring the message to the people. >> Here here's the thing though. Here's what so yes they maybe more plants have it now but even it being a newer thing I think people just inertia like why would I change that's fine I got I don't want >> Yeah. Well that then we are in instant gratification culture right? So if I could tell like people that don't eat their their vegetables at dinner do you want to take a tax deduction now or do you want to get it 30 years from now? Most commonly people are going to opt for that now now option. However again I want to challenge M's premise. Can we chart on one of the things I wanted to demonstrate on my chart is, hey, listen, like the traditional IRA option and a Roth IRA option are both fixed at $7,000. I I think what M might have been comparing to is the IRA limits compared to the 401k limits. And while the traditional 401k cap for employer sponsored, excuse me, employee elective contributions is 23,500 per the 402G limit, you can contribute up to $70,000 as long as your employer is willing to do that. And that 10x uh differential is probably what M is getting at. However, like I said, Ben, in the world where 93% of 401ks have Roth options, this is just a matter of flipping a switch. And so I would say M, join us. Let's break the conspiracy. Let's make this a Roth timber to remember and let's get the word on the street. >> So the thing is if if they magically, you know, they have the defaults, right? The default is the target date fund and saving 6% or whatever it is. If the default was turned to a Roth, you see a lot more Roth dollars. That's the thing. The defaults matter. And the thing is, I personally look at it like I'm able to put more money in because I contribute to the Roth 401k because most people don't take their tax savings and then invest it, right? They use that tax savings for something else or they forget about it >> and they take their tax refund and go spend it at Disney. I I look at it as if I'm able to put the same amount in with Roth dollars versus traditional, it feels to me like I'm putting more money in because >> a lot of subliminal Disney talk today. Are you still a shareholder? I I sold that piece of crap and it's probably and probably because we're taking the kids we're taking the kids again in November and I can't believe it. >> Oh my god, that New York Times article redpilled me, guys. Talk about that. Yeah, like I I we we were at uh we were at Legoland over the weekend uh just before Labor Day and we were watching people march up on their fastpass and skip the line. And I have to tell you, like I I was ready to throw Molotov cocktails into that line because it was >> This is where inequality finally starts to see the pitch. >> Exactly. I was I was mad and I consider myself a fortunate investor, but the the lack of fairness, right, that that's what drove me nuts. I highly recommend that article. It's it's a great it's a great read. >> Yeah, that that don't ever look at the people in first class, right? Don't look them in the eye. >> Exactly. Just keep walking. Um, however, I thought M was asking more interesting questions. So, if you go back to like why is the Roth uh excuse me, the IRA limit so much smaller than the traditional 401k limit, right? If you go back to my chart of 7,000 versus 70, it's 10x. That goes back to the original 1970s, 1980s uh math in that Congress capped contributions uh to employer like employee elective contributions because they did not want highinccome people like Ben Carlson, like Bill Sweet, like Duncan Hill to be contributing their money into a tax shield basically. And so what they wanted to do is create incentive for employers to fund uh contributions for the employees and that that's the primary reason. >> And there should also be a rule though if you don't have one at your job, your limit should go up. >> Yeah, >> that seems like a simple fix. And we talked on our last show, last time I was here about three weeks ago about the Carlson suite uh 2028 platform, which is combine all this stuff into one big account. Like I don't need my TSB, my 403b, my 457. Exactly. >> Yes. >> Yeah. How many people end up with with accounts they completely forgot about? It seems very likely given like how >> disperate a lot of this is, but >> yeah, I think a lot of the value that we add as financial planners is bringing everything in one house, right? So we can look at it all. But one of the things Duncan that sticks with me, it might be an apocryphal fidelity study that came from General Shaughnessy, but the two types of accounts that outperformed everybody else were one, people who changed their address and they didn't update it, right? So, they weren't monitoring their account. And the second one was dead people. Uh, which is a great way to outperform the market. And basically, the message is don't mess with your investments. >> As a tax person, Bill, you're going to hate me for this. And the personal finance people will come at me, but I don't have an HSA. And the only reason is because I don't feel like adding another account to my my buffet of accounts. I just that's I just it feels like too much of a pain in the ass. I don't want that. too far. Yeah. No, I I that that's a personal decision, Ben. Yeah, I wouldn't I wouldn't throw I wouldn't throw rain on you for that one. >> All right, let's do another one. Let's let's dream a little bit here. >> Okay, up next we uh we have a question from Andrew. I gota admit this guy this guy hoping not to brag. >> I've Yeah, I've never bought a Powerball ticket in my life. I used to be really into scratchoffs because I like the instant instant >> scratchoff is the best stocking stuffer that there is. >> Great Christmas gift. Agree. Top of the list. >> If someone gives everyone a scratchoff ticket at Christmas, wait, who's got coins? Who's got coins? That's a great gift. >> Yep. >> Yeah. I think uh some people are just lucky with them, too. Like my wife has gotten like 50 bucks off of one before. I think I've pretty much always just lost or gotten like free tickets. >> My kids get so excited if they win $2. >> Yeah, >> it's the best. All right. >> Okay. So, Andrew writes, "As of today, the Powerball jackpot is at $950 million with a cash value of $428,900 I mean 428.9 million." >> In the actual email, they calculated this to the decimal point. It's very impressive. >> Oh my god. Okay. Uh this is this is one of those things where you can take it over the rest of your life or take a lump sum. Is that the idea? Okay. Uh it will likely be even higher by the time they do the drawing on Saturday. And if it makes it to your recording next Wednesday, it will be well over $1 billion. >> I know lottery tickets. Yeah, I know lottery tickets are a total waste of money and I rarely buy them. But sometimes paying $20 to fantasize about what I would do with all that cash can be a good value. Let's say I win Saturday's drawing. I'm in Texas, so if my math is right, u my after tax takehome would be a little over $270 million. If I win $270 million, I'm going to need some help. How would RWM approach a new client that had that kind of money and what unique considerations come from that scale? P.S. I've long had a deal with myself that whenever I get some type of windfall, I take 10% to use for fun money and invest the rest. Do you have a similar approach? >> So, lottery is one of those things that it's just totally irrational. But the I think the funniest most rational thing about it is people play the lottery more when the power ball grows to a large number. It's like listen, if it's at 300 million, I'm not playing. But if it gets to a billion, then I'm in. Like like I I can't you can't bother me for 300 million, but a billion, then I'm in. >> Um, okay. I I do think I do like the fun money approach, taking any sort of bonus or windfall and and spending enjoying it on yourself, vacation, spending on the kids, whatever. Take yourself out and get a new hat for Duncan. Um, >> or new shoes. >> So, we get a we get a client this size that comes to Riddle's Wealth. They're in our multif family office group, right? It's ultra high net worth people. they the estate planning, insurance planning, tax planning with the bills. Um the funny thing is is that from an investment management perspective, these types of clients are either the easiest or the hardest. So, uh a couple weeks ago, I I've had a pontoon for a few years now, right? I've mentioned this before, shown some pictures on the on the show. Um I think I'm ready for a larger motor, right? I've got a 150cc. I think I can get to like 250 now that I'm more comfortable driving this boat. And so I called the dealership and I said, "What what are my options here?" And the guy, the first thing the guy says to me, he says, "Here's the thing with it, when it comes to a boat, you don't need anything. There are no needs here. It's what do you want?" Right? And I think that's the same thing with someone with this much money. They don't need to invest in anything without you could put it on T bills. You could put it on uni bonds. You could put it all in stocks. Either way, you're going to be fine. Your kids are going to be fine. Your grandkids are going to be fine. Right? So that almost makes it harder to offer advice because it's like very freeing but also scary. So you need to have some sort of limitations on yourself so you don't drive yourself crazy. I also think the way that I used to think about this with institutional investors. I managed money with these large endowments and foundations. They had hundreds of millions or even billions of dollars. And I always said that it's just a few extra zeros. The the evergreen principles still apply. you still have to account for your risk profile and your time horizon when making investment decisions. Um, so that's kind of my theory. Bill, what do you think? What what what would your advice be when someone comes to you with this much money? >> I think that you adequately answered that question, Ben. So, I'd like to answer a different question, which is, should you play the lottery? And I would say never, never, ever, ever. Mark, >> you don't think it's okay to pay it to Dream for entertainment purposes? Listen, I don't I don't pay play it either, but I I can sort of see the Let's just I because I know people love doing that. >> Yeah. If you're not like addicted to it, I know there are people that get addicted to it, but if you're not addicted to it, I just have to say like, yeah, if you're spending $20 to go to a movie or $20 on on a lottery, like what is what is the difference? >> Why not methamphetamine if you're not addicted to it? Like, I I get the point, but my problem is it's an empty dream. Like, you're buying an empty promise. The statistical odds of winning the lottery are one in 238 million. Like that is the thing. So like no matter how much you multiply the amount of chances you get statistically nobody wins the lottery. I know that they roll somebody out every year and they show you all the great and wonderful things that they're doing. They ignore what happens over the next 10 years because it's actually very bad people that come up with that money. >> Most people who My favorite stat is that the neighbors of lottery winners are more likely to go bankrupt because they see them spending money so they try to keep up. >> Yeah. So it's grim. So Mark Twain said the lotteryy's attacks on those poor math and that is what I advocate to people. I think it's a completely empty dream. And I'll share two more statistics for you guys. One is that only 45% of wagers from lottery tickets end up as winnings. So they're literally taking half of the money that people are wagering and they're only return and they're keeping half of it, right? And some of that goes to government programs, but most of it goes to administrative support. It pays the shop owner. Like there there's stuff going on. Let's compare that to other forms of fun. I would say entertainment. what casinos pay roughly $99 90 cents on the dollar right so I just don't think it's a very efficient way of gambling and the last point is supporting schools in a lot of places >> I don't know if you are yeah with make a donation to the school if you want to feel good about yourself but the other thing guys it's a government monopoly and this has always kind of freaked me out is like where are the private monop where are the private lotteryies like why can't why these odds are so terrible why are they so terrible it's because it's a monopoly and I don't I just don't think it's a good way to tax people I would much rather I understand it's voluntary but it's selling you an empty promise. And I want to chart on really quick. You know what's better than throwing $20 a week away? Stick that into a into an index fund, right? And so over a hypothetical uh 30-year investment, you'll end up with $114,000. God willing, this is not an actual investment, but it's much more likely that if you invest that $20 into literally anything else, you're going to be better off than throwing it away in the lottery. >> Yeah. I mean, this is not investment advice obviously, but your odds of striking it, you know, big with a uh with a super risky option contract would be far better than than probably, you know, a power ball. Not profit definitely at one in 23 dreams out here. >> I know Sean and Sean and Mhat's not >> I'm not cuz they're not real cuz they're not real dreams. But here's the thing. If you play this every week, your statistical chance goes to one in every five million years, right? Like that's not that's not good enough for me, guys. >> Okay, but wait, wait, wait. What if you get together with everyone at your work and you and you all go in on board because Well, no, not no with each other that I could win with them at Bool. I always support those like office lotteryies, right? >> Oh, no. No. I meant everyone goes in and buys buys Powerball tickets. >> No, because still your chances of winning, Duncan. >> Your chances of winning are zero. Exactly. And then you sue the pants out of each other. It's just there's no upside. I don't understand the point. I don't >> Okay. Well, let's let's have a little bit of fun for people that are here. Of course, the tax guy, >> please. What would you do if you if you won 200 and however many million dollars there? >> Uh half goes to municipal bonds. Uh the other half into a broad basket of uh of tax managed uh uh exchange funds and ETFs and uh canvas at their fine folks at riddle management. >> Wait, no fun. You wouldn't like have you have that much money yet? >> You couldn't go for if you tried and you wouldn't have any fun with that. >> I think everything becomes fun at that point. I think I'm fortunate where I am in life where like if if I really really want something, I don't want a private jet. I that sounds lovely, but like no. I don't I don't think my life would change at all and GT is a false dream. >> Would you drive it though? What I don't understand that people buy those cars is they don't drive them. >> Oh, no. I would drive it. >> Okay, great. >> I would drive it. Great. Then I'm into this. >> Awesome. >> They'll just kill. >> I've got everything I want. >> Let's do another one. >> Okay. Up next, we've got one from uh Ah, I don't see a name. Okay. Ben keeps saying it feels odd or even weird when people prefer to invest in income generating assets instead of just selling some stock to live off of in retirement. But today with tools like Chad GPT, anyone can run a Monte Carlo analysis based on age, retirement savings, and annual spending to estimate the odds of running out of money. And when you do this, income based strategies almost always outperform non-income approaches in terms of making the money last and even grow. Try it yourself, Ben. So Ben, why do you say income approaches in retirement are odd or a bad idea? >> Shots fired. >> We're taking my I think we're taking this a little out of context here. >> This is almost like you saying that I said you could get a Porsche for $20,000. Dave said if Duncan won the lottery, he'd buy a $20,000 Porsche. Uh so my point here is that not that you shouldn't that you should avoid income generating assets completely. Of course not. Like my point is and I don't know what chat I think you're leading the witness with chat GPT there a little bit. Um, I'd like to see these Monty Carlo analysis. My point here is that total return matters more than yield. Like, um, so in my book, Duncan, you mentioned this a few weeks ago. I brought up Analy Capital. I actually did an update on this. So, pull up the chart here. This is >> This is funny you mentioned that. That's one of those stocks I bought when I first got into the market that had a lot of people loved these stocks. So, this this is in the low rate world. So, this is >> rent free and Duncan's head. It's amazing. >> So, I wrote about this in 2015 in my book. Let's update it to the last 10 years. The average yield on Analy Capital for the last 10 years has been almost 12%. Pretty good, right? Man, if I just clip those coupons. Now, let's go to the next one and look at the actual total return. This is with the price. It's up 6% per year. So, wait a minute. I clipped that 6% but or my 12% but I only got 6% per year. How is that? Because the price went down actually on a total return basis. That's why I'm saying chart off. Um yield is not the only thing you should be looking at. If you say, "I'm just going to live off the yield," you have to look at total return. I'm not saying you should avoid income generating assets altogether. I'm saying you have to be smart about it and you have to combine total return with yield, right? And yield is part of total return. That's my whole point. That you can't just say, "Oh, if I just live off the yield, I'll be fine." You have to look at everything, >> right? There's a very famous Reddit post about GE, right? And the stock, I don't know if you guys know what I'm talking about, but it was the same kind of thing where like total return ultimately it trumps everything. >> Yeah. that G had a 5% yield dividend probably, right? But it was down 50% in price, so who cares? >> Exactly. >> And the thing is, Bill, if you are doing an income only approach to retirement, guess what? Your tax bill is going to hit, right? >> Yep. Yep. Ben, and that's what you asked me to take a look at. So, again, very simplified case, but I think overindexing on income and overindexing on yield usually leads you to choose investments such as real estate or bonds that pay ordinary income. And can we chart on and just do some really quick math? $5,000 a month equals $60,000 a year. So that's on a 6% that's roughly a million dollar portfolio. If that is all coming down in ordinary income using 2025 tax rates, I'm paying roughly $5,000 of tax on that, right? Not not a huge tax rate, but still that's one monthly payment of money that's going off to the IRS versus capital gains, Ben, and your point, that are coming tax-free. And and that that to me is it is that not all that glitters is gold. Yield is not the determinant of success or failure. It's a part of a solution, a portfolio. The second point that I would like to make, Ben, is it that what what I think what I think questioner is talking about a sequence of returns risk, which Ben you've written out, a lot of our folks have and what income allows you to do is basically get a less volatile approach to investing. If you have a steady income stream coming out of part of your portfolio that does make it less volatile and it does reduce sequence of returns risk, however, gentlemen, risk can be can be transformed. It cannot be destroyed. So moving from a total return to more of a fixed income approach, you give up expected returns in exchange for lower volatility, but you do still get those lower returns. And that means that you're taking on potentially purchasing power risk, inflation risk. It's just a way to transform. Not neither is right or wrong, right? At the end of the day, we need a mix of assets to make this all work. But >> make it be part of it and maybe those you keep those incomeroucing assets in a tax deferred account and have them have the asset location >> where you're paying ordinary income anyway. Exactly. The thing that always gets me is the people who say, "I'm just going to live off the income and never touch the principal." And I my whole point is like, why why what's the point of saving in the first place if you're never going to touch the principal? Like that that doesn't make any sense to me. >> And the really crazy thing that's going on right now, and I think it's just indicative of where we are in the market cycle, right? We've had a big run with with big tech. Big tech stocks have done so well over the last 20 years. So, we have a lot of people, these embedded gains, they don't want to sell and realize the capital gains. They want to generate income. So, they go into these like covered call writing strategies and other nonsense. You know what else works? Selling the stock, right? because because you need to get from here to there unless you're in a tax shielded account. You you need a transition at some point. So why not just do that through through disciplined sales and I think this is the work of the financial planner to try to put this puzzle together, >> right? I just think my whole point is that there's no like easy button to hit like, oh, I'll be fine. I'll just put it in this and look at the yield. Yay, I'm done. No, it's not that easy. >> I mean, I'll point out I think Nvidia yields I just looked 0.02% >> um dividend. So, if you're looking for dividend stocks that uh have >> Great. That's like negative 5% yield. Real, right? Yeah. >> All right. We got one more. >> All right. Up next, we got a question from Keith. The Thrift Savings Plan will start allowing Roth conversions in 2026. The only thing we know at this point is that the conversion must be paid from outside money. I don't make that much. Uh, as of today, my gross salary is $64,000. I am 35, very single, no house, no kids, no debt. I file single 00 I don't know what that means and live in Connecticut. My TSP is around uh that's thrift savings plan is around $96,000 and about 55% is traditional. If you were me would you convert 100% of that on day one or do smaller chunks throughout the year. I'm going to do at least $15,000 because I always take the standard deduction. I have around $19,000 in cash in a high yield savings account right now. >> See he's got a high yield savings account. >> Yeah. Yeah. My plan is to acrew as much cash as possible in 2025 and 2026 to pay the tax bill that will be due in 2027. What are your thoughts? Smart, dumb, or maybe not do it at all and have more tax flexibility in retirement. But please correct me if I'm wrong, Benjamin. Do any of your clients ever say, "Man, wow. I man, I wish I had less Roth money in retirement." I hope to hear back. I know y'all are busy. I Benjamin is very formal to call you Benjamin. >> Yeah, sounds like my mother. Um, yeah, Bill always says, no one says, "I wish I had less Roth money in retirement." So, so I guess that the idea here, I never I never heard about this, that the TSP will start allowing these. So, just that the outside the taxes have to be paid from outside money. You can't like pay it from your retirement. That's what he's saying. So, >> correct. >> Okay. >> Yeah. And you usually wouldn't because if you did a Roth conversion Yeah. It's it's it's almost always better to pay with outside money. >> Do you think that the timing on this matters at all? >> I do. I do. And this is the thing is that if we pull up Can we chart on here? My last and final chart here, if we're thinking about Roth TSP or not, one of the useful indicators that Keith gave me was his salary at $64,000. And this will be adjusted for inflation a little bit going into 2026, but as of today, assuming a standard deduction, he Keith is right at that 22% tax bracket. Like he's right on the edge, right? And so what Keith is talking about is do I add to my taxable income this year, right, to save in the future? Keith also gave us a couple other key points at 35, no kids, no debt. Sounds like Keith is living just a great life. However, what I think is probably going to happen with Keith, if I could just index and Keith can write back later and tell me, probably he's going to keep working his job, right? He'll get raises. Life will go on. I think he'll Keith will do great. He'll retire at some point. The TSP implies a government service job, right? Can we we can chart off here. So, he probably is looking at a pension. He'll probably end up moving, I would guess, guys, somewhere Florida, right? Somewhere south, somewhere out of Connecticut because Connecticut is getting older by the day, unfortunately. And if that's the case, >> maybe that's why he's very single. >> May maybe maybe look look for love in his 60s. Um, but probably what'll happen for Keith, it's just my guess is that he's probably at his tax bracket right now. So, it's more or less just a neutral thing. I would not be rushing to do Roth conversions where Heath is unless his income would dip below that $64,000 for some reason. Maybe a health savings contribution account, maybe some other reason. Um, so what I would probably >> what I'm hearing right now, >> what I would probably remedy, Keith, let me finish up, is maybe just just tweak your contributions going into the TSP, right? I don't see the benefit of a large >> also just have all the new contributions be Roth. >> Correct. That's correct. Particularly again in Connecticut, which is not a low tax state by any stretch of the imagination. So there's nothing compelling me for Keith to Roth convert. If his income was 54K, I would say 10K makes sense. But I just I wouldn't want to be converting too much in the 22 or 24. Would it would it ever would it ever make sense for him to do these later in life then? >> Yeah, definitely possible. If Keith takes a year off, his sbatical, if he does some traveling, or if he has a gap year, changes careers, let's say, that is a perfect opportunity to Roth convert. But I don't there's no there's no there's no red flashing light that says 2026 is the year for our friend and listener Keith. >> This was the upset of the year. Bill saying don't go into the Roth conversion. >> Yeah, nuance is important. Yeah, >> very surprised. >> Roth timber is not for everyone, guys. And I wouldn't want >> See, lottery tickets do come true sometimes. Louise for Bill. >> Louise in the chat says, "Imagine a lottery ticket you can buy by saving taxes by not relying on dividends." >> Exactly. Exactly. >> No, but great question. And again, Keith, there's nothing wrong with some Rothification. I would just do it in an ongoing basis. I don't see any reason to wreck your tax bracket. >> Yeah. And so he says it's 55% traditional. That means he's probably already putting a lot of new money into the Roth and eventually it's going to swamp the traditional anyway. I mean, just just a Roth AR contribution, you can just plug $7,000 in in addition to your other savings. >> Hey, guess what? Take the cash you're sitting on and invest it. >> Exactly. >> Right. Exactly. >> Because if you're not Yeah. >> And let that grow. You can always get your basis back taxree if down the road you decide to move, buy a house or something else. >> Yeah. So, take some of that. Max your Roth out. What is it? 7,7500. >> 7,000. 7,000 this year. Yep. Amen. >> If you want to do Roth dollars, just max out your Roth I right now. >> Do you think Keith is wanting our help finding finding someone by emphasizing very single? Should we have a ask the compound like dating game or something? >> Keith Keith sounds like a like a catch to me. >> I mean, we've got a lot of people with high FICO scores here, I'm sure. So, that's that's got to be high FICO scores don't play the lottery. $20,000 Porsche. That's like that's very I bet do well on the dating sites. >> No, I I think Keith is going to clean up later in life. So, I don't I don't think he needs a lot of help there given given the facts and circumstances. Yeah. >> Spouses dig Roth IAS. It's a known fact >> that tattoo is played at the bar. Yep. >> True. All right. Thank you to Bill as always. >> Uh before we get out of here, I got we were I I kind of teased this in the the pre-show, but uh >> That's right. Okay. >> I tariffs. I have bad news. I I experienced my first like slap in the face from from tariffs. Um and I got to say I don't think most people are going to like this once this starts uh hitting more and more people pay tariff. >> So I bought I I bought a pair of shoes from Spain uh and they were already expensive for me. I usually try to buy shoes on sale, but these were $126. I got some like ransom note from DHL saying, "We have your shoes. They're ready to be delivered, but you have to pay $43 in import duty because of the tariff policy before we can deliver them to you." >> So, I had to pay to like, you know, I had to pay ransom basically to get my shoes that I already paid for. >> What kind of shoes $43? They don't have Are they like specially made? Why Why don't they have them in here? >> These aren't They're vegan shoes. They're They're like handmade. import for consumption. >> They're made from like pineapple leather or something like that with bamboo. There they are. Uh they're they're awesome shoes. I'm excited about getting them. But like I just $43 on a pair of shoes that were $126. I mean I I'm not good at math, but that's a big percentage like that. >> So we have a big tariff on cactus these days, huh? Cacti, is that the deal? >> I don't know. Yeah, I don't know. I just I was thinking like this feels this feels like a tax. I know a lot of people are saying it's not a tax on the consumer, but it sure >> thing is though, when you wear these shoes now, if once you pay the ransom note, um you're going to have a good story every time you wear them. >> Sure. >> And I I hope to have them in time for future proof. So, you'll probably see me wearing them uh next week. >> Yes. But a 40% tariff or whatever it is, that's uh that seems a little high. >> It's I Yeah, I'm just >> It's unpatriotic. >> It's not like there's not an Americanmade like equivalent or I would have sure I would have bought that maybe, but >> Duncan wants a GoFundMe page set up. All right. No, >> email us at askthe compoundshow@gmail.com. Thanks everyone in the chat as always on YouTube and on Twitter. Thanks to Bill and Duncan and the whole production team here at the compound and we will see you next time. Thank you. >> See you everyone. [Music] [Music]