Will Retiring Baby Boomers Crash the Stock Market?
Summary
AI Concentration: Extended discussion on AI's dominance and potential bubble-like characteristics, with a call for caution and broader diversification rather than timing the market.
Demographics: Analysis of baby boomers’ $90T+ in wealth, RMD dynamics, and the offsetting impact of millennials entering peak earning years, suggesting fears of mass selling may be overblown.
Housing Market: Boomers own roughly half of U.S. housing; future inheritances and sales could unlock supply, with emphasis that land drives long-term home value appreciation.
401k Flows: The “relentless bid” from automated retirement contributions is likely to persist, aided by increased Roth usage and easier access/automation.
Health Care Economics: Nonprofit hospitals and high insurance costs were highlighted, underscoring how healthcare inflation shapes retirement planning and spending needs.
Tribal Land Case: No property taxes and subsidized healthcare materially reduce retirement targets, but resale constraints on tribal land limit home equity liquidity.
Entrepreneurship: Starting a software business concentrates risk akin to equity; consider QSBS planning and adjust portfolio liquidity to support the venture runway.
Overall View: No specific stock picks; the stance favors diversification over concentrated AI bets and warns against heeding billionaire market calls for timing.
Transcript
my money to work. >> That's right, Mr. Finchley. You can own a share of American business. There are over 1,200 companies listed on the New York Stock Exchange. Companies which employ more than 11 million people, produce half of all the goods made in America. >> Welcome back. This is Ask the Compound, the show where you ask the questions, we provide the answers. I am Ben Carlson. The baby boomers control nearly 90 trillion dollars of of wealth in the United States. It's wealthiest generation in history. They've been powering the stock market higher for years by being buyers. What happens when those boomers retire and turn into sellers? Are they going to crash the stock market, crash the housing market? I'm going to answer these questions and more on today's show. Let's do it. All right. Ask the compound showgmail.com is our email here. Duncan is back with his Compound Masters hat. You got him before I did. We got new >> unofficial. Unofficial. Nothing. No affiliation with Masters. You know, >> true. I don't shop.com for all your compound merch needs. Welcome to everyone in the live chat on YouTube. As always, Duncan was worried Cliff wasn't here. Cliff made it. All the usuals. Cliff, Dave, Sean. Thanks, guys. Uh, send us your questions. We'll do them live on the air. On today's show, we have questions about time management. How do you stay in shape with kids in a job? How the public student loan forgiveness plan works? Should you still save money while starting a business? What happens when the baby boomers turn into sellers? What if you didn't have to pay property taxes or health insurance? How'd that change your financial plan? And finally, should you follow Ray Dalio's investment advice? First, today's show is sponsored by Public. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S&P 500. You approve the workflow and your agent handles the rest, monitoring the market, watching for your conditions, and executing your strategies exactly as defined. Public is the world's first agent brokerage, an investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via public API. Go to public.comc to get started. That's public.comc. Paid for by public investing. Full disclosures in the podcast description. AI is taking over. >> I I love it. I'm using AI all the time for for uh my questions about the market. When I don't have you, I ask AI, you know. >> Okay. So, you going to use agentic traders? >> Uh probably. Yeah. I haven't I haven't looked into it yet, but yeah, it's on my it's on my radar. I want to >> Every time Oley falls 20%, buy more shares. >> Your AI is going to go, "Take it easy. I'm busy doing this all the time." >> Yeah. >> All right. >> I like that. Good idea. >> Let's do some questions. >> Okay. All right. Up first, we got a question from James. >> Ben, what's your secret to staying in shape with kids? I've got a three-year-old and another on the way. I used to run or lift daily, but between work and time with the kid, I now work out zero to four times a week. Many weeks on the lower end. I'm about five pounds up from prekid. Not bad at first glance, but my body comp is definitely now more fat and less muscle. Feel like my trajectory is towards a dadbod. What do I do? >> And I just have to ask you, is is James you? Is this you, Ben? Are you [laughter] Did you see this question? >> No. Hey, listen. I don't like answering questions like this because I'm not a fitness influencer and it makes my skin crawl when people talk about their workout routines and their diets. I hate it. But we're all about transparency here at Compound. Someone asked the question, I answer. Listen, the dad bot is easy, especially at that age because the kids are eating starting to eat chicken nuggets and um mac and cheese and they never finish it all. And so you just I'm going to have a few plates of mac and cheese. I'll have a few chicken nuggets. Um listen, it's hard to give blanket advice on health just like personal finance because it's personal. That out of the way, let's just talk about how I how I do it. Okay? I started lifting weights in high school because I was like a buck 25 heading into high school. I was like 5'6, 125, right? I was nothing. I I needed to lift weights. So, I developed good habits in the >> weight. Except I didn't lift weights. >> Yeah, there you go. Uh people in the chat saying I secretly wanted to tell. No, I didn't. I'm just telling Hey, listen. We're all all about transparency here. Um so, I developed good habits of exercise through sports, which I think is one of the best things ever happened to me in terms of like the discipline and all that stuff. Arnold Schwarzenegger, he was on um the uh Smartless Comp uh podcast last year and he talked about when he rides his bike into Gold's Gym every day, which kind of funny, still goes to Gold's Gym down the street. He said it's like life is gray when he rides his bike to the gym and after he does it, life is in color. And that's the way I feel to whatever you get from working out, the endorphins or whatever the science is behind it, I get that, too. Um but it is a lot harder with kids. Okay, so here's here's my not to brag of the day. I'm in better shape now in my mid-40s than I was in my early 30s. Um, but it was really hard. And the reason the biggest change for me was um I already had the exercise habit, but it was the diet was the game changer. We had our twins nine years ago. They just turned nine last month. That's when I kn knew I needed to up my game because I'm not a coffee drinker. I needed some form of energy. So, I had to decide like how am I going to do this? We have three kids under the age of three with twins. Um, and so working out became a lot harder, right? We had to play zone defense with three kids. The good news is once you get them sleeping through the night, like they're in bed by 7:30 every night. Now I'm a night owl, so I work out. I worked out at night. I still do. Right. I'm watching a game. I'm on the treadmill. I'm watching a movie or TV show. I'm on the Pelaton. Right now kids are older. Kids have some a movie on in the background. I'm I can do free weights. Right. I have a gym a half a block from my office. Planet Fitness. It's $10 a month, which I still don't understand the business model. It's a publicly traded company. I I think they just have people pay $10 and never never want to. >> Yeah. Yeah. I think a lot of people aren't going to come. >> So, sometimes I put that on my calendar because for me, exercise is part meditation and part like mental health hack. I get some of the best thinking done when I'm I go on like a jog or something. That's when I get all like for my writing and stuff. I can all these jumbled thoughts. When I go on a run, I get back and I jot a bunch of stuff down because it helps me think. I think sometimes you need to get away from the screen. Now, with kids, it's when they're zero to three, they're still really, really young. When they're older, you make them be active. I go on a jog. I make the kids come with me. Hey, get on your scooters and get on your bike. I'm going for a run. You're coming with me. All right. We go and shoot hoops in the driveway. Sometimes we go to the soccer field at the end of the road and we do I make them do sprints with me, right? Listen, if I'm going to do this, you're going to do it, too. I'm I crack the whip. This summer, we're doing a push-ups and sit-ups challenge. All right? Every day, we do 10 push-ups and 10 sit-ups. Everyone, even my my little daughter could do like two up first. Now she's pumping out 10 push-ups every day. >> Nice. >> It's great. So, um, I take the dog for a walk. I throw my weighted vest. Right. I guess my point here is there really isn't a perfect answer. You have to make it a priority. I don't play golf. I don't do like fantasy football. Exercise is one of my priorities. I make it so. So, and if you can't work out, you know, a few times here or there during the week, diet is the game changer. Diet is the way that you can help stay in shape and not let things get crazy. That's the hardest part though, by far. Dieting is harder, I think, than exercise for most people. >> Yeah, it's so much easier now with all these apps like chronometer where you can track, you know, your exactly how how many grams of protein you're getting or your vitamins and stuff, but that takes a lot of effort to scan and to >> and I think I've I've said this before like people always make the analogy between personal finance and health like, hey, everyone knows what to do. It's just hard to do it. But I think your health is way harder because you can automate so much of your personal finances, as we've talked about here. Automating your health is I mean, you can do the same meals over and over again. That's one way to automate. Uh but it's really hard. You have to get up every day and put on those gym shoes and you actually go do it. You have to decide not to eat the snacks or whatever. It's it's way harder to stay in good health shape, I think, especially with kids when it's easy to just grab the fast food or whatever. What's uh what's your favorite right now people watching by their computer could do on the ground next to a computer. What's your favorite exercise people could do? >> You do you do body weight exercises? >> Just some push-ups. >> Push-ups, squats, lunges, sit-ups, all that stuff. Get yourself a 10- pound weighted vest. You don't need a You don't need a lot. It's easy. I'm never going to be able I should have taken my shirt off for that one because I'm never going to be a fitness influencer if I don't show some skin. Uh, next episode, let's wear weighted vests on the show. >> All right, let's go. I I'll sit on the ball like Dwight in the office. >> There you go. >> All right, that's it for my my health influencer stuff. Next question. >> The people want it. >> Listen, the biggest thing is just it's it's a priority. You have to make it a priority. It's hard to do sometimes, especially with young kids. It happens. >> How often do you run? >> I probably run three or four times a week. >> Okay. >> Yeah. I need it. I crave it. If I if I'm like I'm cranky. My wife always says, "If I don't work out, I'm I'm cranky if I don't do it." >> Yeah. Running. >> Everyone has that. >> Yeah. >> All right. >> All right. Up next, we got one from Zach. >> My question [snorts] is for Bill foreshadowing. I married my wife in February and we're looking at combining our personal and financial lives. She makes around $140,000 as a physician assistant, and I make around 300,000. My wife is doing God's work, saving lives, and I'm in awe of what she does every day. The drawback is that she had to go through extra years of schooling and currently has about $280,000 in student loans. >> What's the opposite of not to brag? >> Yeah, exactly. Uh she's currently participating in the PSLF, public student loan forgiveness program, where if you work for the government or a nonprofit, your loans get forgiven after 10 years of payments. She currently has seven years left of payments to make. These payments are based on her income each year from her tax returns. My question is if we can file our taxes as married filing uh separately. Is that it? Yeah. Married filing separately to lock in a payment based on her $140,000 of taxable income and then go back and amend our taxes as married filing jointly uh to benefit from the wider tax brackets. She's currently paying around $800 a month towards her student loans. If we filed as married filing jointly, the monthly payment would increase to roughly $2,500 a month. Add that one to your cheat sheet, Duncan, for acronyms. >> Yeah. Yeah, that one's a mouth. >> We need to have entrance music for him at this point, I think. But let's bring on Bill Sweet since it was asked. >> Oh my [laughter] god. >> There's a freeway. >> Oh, I didn't see you there. Sorry. >> Oh my goodness. >> I saw Bill in the chat. He said he's holding on for GLP too, and I shouldn't have laughed at it, but I did. [laughter] >> I got you there. Uh, Ben, so can we go back to question one, though? Sorry to sorry to put Zach on pause. Did you know, Ben, that three of our last four presidents were born in 1946? Uh the average age of a US senator is 60 plus and the gerritocracy is a real problem in the USA. So my secret gentleman is to not stay in shape. I'm wasting away at the all-consuming fire of my job and I plan to die at my desk probably in a year or two to open up the seat for somebody to take my spot. Maybe Bill Arts, maybe Dan Parra. Who knows? We're going to find out. >> Sacrifice. I I like it. And then you don't have to have your retirement plan either. You can That's your form of your form of fire. >> Exactly. >> Just dying at your desk. >> Pass on that Roth asset to my wife. can replace fire with yoa. >> Exactly. Exactly. So that's the way I want to live. Uh so [snorts] Ben, back to Zach. Where do we want to start here? >> Hang on. So I I used to work for a nonprofit organization before I came to Riddle Hold. I worked for a nonprofit. >> I didn't know that. >> I know a few people. I knew a few people at my job who did this. Um alas, my student loans were paid off ahead of this, but uh my borrowing rate was like 2.25% or something. It was ridiculous how low. >> Don't say that. >> I can't believe they're giving away for that low. And I go mine are like 7%. Half the chat just died. >> Yeah, I I I don't know why they don't have them as low anymore because it's not like rates were that much different than they That was in 2004. I got them 2.25%. It was ridiculous. Uh so anyway, she's got 280 grand and I'm sure it's going to pay off for her over the long haul because she's a physician's physician's assistant. Easier said than done. Um but Bill, is this something that actually can be done that we can do the filed separately to get the Is this a thing? There's a couple of things going on. Uh, but let's start with the married filing separate versus married filing joint question. So, Ben, uh, Duncan, that that was what Zach was getting at. And it this can be done, Ben, but there's a trade-off, right? If you choose to file separately in order to isolate uh, Mrs. Zach's income so they don't have to pay the higher amount just to set the stage. It was not a small amount. It was a difference between $800 a big difference. >> $800 a month to $2,500 is an additional $20,000 a year towards loan repayment. Right. And the theory here is if you get to year 10, which Mrs. Zach has seven years to go, that that loan gets wiped away. One of the features too of PSLF versus the the Microsoft soup of KY uh income based repayment program blah blah blah blah blah is that this specific program which involves working public employer, it doesn't come up as tax. So, one of the problems with a lot of these income based repayment programs is effective uh this year, beginning this year, it hasn't been the case for the last 5 years, the forgiveness is taxable as income in the year that it's forgiven. Not for this program, thank goodness, not to brag for Zack. >> Oh, wow. Yeah. So, they they made it. >> So, now that we know the difference though, gentlemen, is about $20,000 a year plus whatever gets forgiven at the end, uh we have to then gauge what is the difference. >> Well, if they're paying if she's paying $800 a month, it's going to be a huge amount that's going to be forgiven. >> Exactly. Uh is particularly since yeah 10 years 7 years to go at 8K a year it's only it's less than $80,000 right including interest whatever else regardless what we have to do though is calculate the difference between a married fun joint rate which would theoretically be lower because effectively the the tax bracket for a single individual or half of the tax rates for married individ married fun jointly so we have to calculate that and Ben the way I calculated it in order for Zach and Mrs. act to pay more in tax than they would in student loan forgiveness would be somewhere in the neighborhood of $250,000 taxed at the higher tax rate of 32% versus 24. I think they're actually pretty square in the $100,000 range. Therefore, I think filing separately in order to hit this P plsf window makes a lot of sense for Zach. >> Okay. So, you're saying maybe if they made a lot more money, then it might be time to reconsider. >> Yeah. If we see a big spike in income, that usually doesn't happen in the in the public sector, right? Usually you don't see incomes double and triple there. But yeah, Zach's income starts to go skyhigh when he crosses roughly again $250,000 of additional income taxed at 32% instead of 24. That's the time to think about this. And the other factor that you would need to consider is that Mrs. Zach needs to stay in that public sector job for 10 years. Right. So she's basically stuck there at that job. >> Most people don't most people don't realize most hospitals are quote unquote nonprofits. >> Yeah. >> Right. Which it and guess what? Guess what I learned? We used to I used to manage money for hospitals. My very first job out of college, we managed money for a bunch of hospitals around Michigan. Nonprofit does not mean non-revenue. These places make a ton of money. Oh, that's right. >> And they had they had these huge endowments and foundations and pension funds. Like they had a they made a ton of money. So nonprofit like you think nonprofit like oh but at a hospital might be a little different. She might be getting really good benefits and this loan forgiveness it might be a pretty good deal still. >> Also, it's worth pointing out that PSLF is not consecutive. It's like a whole punch card. You just need 10 years of of payments. So you can go work somewhere else for a few years and then come back to a nonprofit. So >> that's right. >> It is just years >> at at the cost though, Duncan, of pushing out that forgiveness period, right? Because you need that 10-year punch card. >> Yeah. And so I did take a look at the 1040X and take a look at those rules because his other question is, look, can I just file separately for X amount of time and then go back and amend. So can we pull up chart the only chart I have here today, gentlemen, it's not in a napkin. So in general what I'm highlighting here is the form 1040X and this is an amended US tax return. You have up to three years Ben Duncan and audience in order to file an amended tax return and potentially claim a refund on taxes previously paid from the filing deadline. Right? So there is a statute of limitations. So Zach cannot get to year 7 years from now in 20 what were it going to be 2032 2033 and then amend all the way back to this year. There's going to be a window of three years of filing. And it's very important to note, it's right there highlighting in red. You cannot change your tax filing status from joint to single. However, with the form 1040x, you are generally allowed to change from single to joint. That is permitted in the tax code. And as far as I can tell, gentlemen, chart off. As far as I can tell, there's nothing preventing this from happening at the student loan, folks. I would not give people that advice though. I don't know if that's necessarily legal, right? because you might need to sign a certification uh when you sign up for the loan forgiveness that might invalidate this. But I think very generally it would make sense I think for Zach and Mrs. Zach to file separately for the time being. >> Oliver in the chat says that the other option is to divorce her because she has so much debt. Uh I don't think that's on the table. But you [snorts] know we actually did get a question from someone who said, "Hey, I know this is taboo, but what do you what what advice do you have for me that I just got divorced? How does my financial plan change?" uh we may be answering that one in the weeks ahead >> because it is something that you don't see a lot from financial planning perspective but uh it happens. All right. >> That's a very good point. Can I riff on this for a second before we move on? Duncan, so I I dislike these types of programs, right? Because I I think if somebody is like tied to the public sector and wants to work in those jobs, I think that's wonderful. I think it's a great thing to do and this is a wonderful benefit. I just don't like this thought of people being trapped, right, in jobs that maybe they don't like or maybe there's another opportunity and, you know, they don't really want to move because if they change jobs, it cost them $200,000, right, of loans shackled to it. >> Yeah. There there's something about this that just doesn't sit well with me and I don't know what to do about it. Again, it's a well-meaning program, but I just don't like it when people are tied to jobs that they they dislike. I don't think that's good for society. Well, I mean, I think the argument is that in the private sector, salaries are typically orders of magnitude higher. And so, this is just a way to encourage people to to go into nonprofits and like Ben saying hospitals, you know, that that maybe they they would otherwise go and work for a private company. >> And unlike R, unlike pay, the fact that the forgiveness isn't taxable, that's a huge catch, right, that comes into play again this year. It was a COVID era American Rescue Plan Act that basically said student loan forgiveness for any plan is going to be waved as income. Uh but however, PSLF appears to continue to be tax exempt, which I think is good for the folks that receive it. >> All right. >> I didn't realize that. All right. >> Yeah, it's uh it's convoluted. So, yeah, we need help. Okay. Up next, we got a question from uh Ry, I think. I'm 41, married, two kids, and two homes with mortgages. I've been doing well as a software engineer, around half a mill in stocks and retirement in diversified world indexes. I save and invest 30% of take-home pay. Recent changes in my career made me drop my savings rate to zero in order to form a new company. Should I cut expenses to save money, or is spending some years building the company akin to investing if all goes well? >> Doing a lot a lot of work in that last sentence. I feel like if all goes >> Yes. Uh I [snorts] wonder if now is a good time as a software engineer to start thinking about your new career job because of AI. Uh it is kind of vibronic that tech has almost displaced themselves first in all of this AI stuff. They're our overlords are coming for us eventually. But the way that I see it, if you started a new company, I mean you have to kind of pour everything into it, right? Time, money, energy. It's a it's a sacrifice. So my question would be before you think about cutting expenses, obviously that might be something, but like what's your liquid back stop right now? And you talked about the he's got bunch of money in index funds I guess but like between cash, stocks, bonds, home equity loans maybe like how much of it are you willing to tap to make sure that this business actually works? The other question is do you need two homes? You know if like are you willing to sell one of those if something goes wrong here? So I guess my first thing would be obviously expenses is one thing but how's your asset allocation doing? your your asset allocation might need to change because you might need a bigger backs stop in case you need to tap something. And uh yeah, the fact that your savings rate went from 30% to zero probably makes sense in a situation like this. Everything should be going into trying to make this happen and hopefully the payoff is big enough from starting the job that you can play catch-up in the future. >> That's right, Ben. That was my point. Uh building a business involves concentrating equity. You're exactly right. It's not just the lower savings rate. It's time. It's capital. It's investing in that business with the expectation of not just income but future payoff. And there's nothing more American Ben in my view than starting and forming your own company, hanging a signal a shingle on the wall and giving it a shot. I think it's a great thing to do. So I guess the thing to think about, Ben, conceptually is where does this, like you said, where does the business asset fit into the asset allocation. I don't think it's unreasonable at all to dial down your savings. Right. >> It's a form of equity, right? >> Totally. Exactly. >> Way riskier than the stock market. >> Yeah. But a lot of it does depend, Ben, on whether or not this business can potentially be sold in the future, whether it's the client lists, whether there's assets in the business. Does software engineering fit into that? I think it generally does fit into this category of recurring revenue, right? If you're providing services to a company, that is something that either you can do or you can outsource via your AI agents that are all running in mainframes behind you. um compared to like a professional service company like an attorney or let's say a wealth manager where generally you don't have much in the way of assets and it's a little more tied to the personality to the reputation and skill of the primary practitioner. I think a lot of that does depend, Ben, on how that forms an equity. Attorneys very generally very high cash comp, right? Because ultimately it's just one person, right, with a laptop giving you advice versus something that's more engineering based that has more products and and ultimately some equipment maybe and and those assets do do count in as equity too. And >> you're right, it is it is seemed very American and risk-like to do this. And the number of people starting jobs has only exploded higher this decade. I think it's going to keep getting higher because >> of AI. >> I think it's great. But when you think about people, it's such a big risk. And you think like sometimes like how do people you almost have to be naive in some ways to to to put your jump off the ledge and do this right with no safety net. And a lot of people do it and it's it's it's a it's a you're right. It's a massive risk. >> Yeah. And Ben, was Thomas Edison naive, you know, when he contemplated, hey, can I can pass an electric current through a piece of glass in order to create light? uh was Eli Whitney naive when he thought about hey instead of picking this stuff with my fingers why don't I create a machine I think it's great uh great book that I read on this topic age of innovation and it postulates that like labor was very uh inexpensive in Europe because there are a lot of people in the US we we came here there were like 3 million people 4 million people at the time of the revolution 250 years ago so labor was very expensive right you didn't have these like roving bands of peasants in the US >> right people actually got paid pretty well relative on a relative basis >> exactly and therefore we as Americans have always always been more these ingenuity AI was generated was was thought up in the lab in in California, right? Same thing with the silicon chip. Same thing all the way through US history and I think that's part of what makes us a successful country. So Ben, can I take a tax angle on on Ray's point? >> That's it. >> So really, really important. I think software engineering, Ben, would potentially qualify could potentially qualify for section 122 qualified small business stock. And so if you haven't already, Ray, I would sit down with somebody who could talk to you about 122 and maybe think about with a 5-year holding period, you could potentially sell your company capital gains taxfree, assuming you meet certain conditions. So I think Ben, now would be the time to think about that given this is early in the process. >> Glass full for sure. Also, back to your Edison point, uh Edison not the greatest guy in the world. Okay. Uh on his wedding night, he left his wife and went back to his lab to work on stuff. >> Hey said, >> sorry. >> Hey, he had to pay the bills, man. [laughter] >> Sunny. Yeah, he's literally he's got to keep the lights on. >> Yeah, he's infamous for some of his uh [laughter] his behavior >> and not giving credit. >> Two people in the they're still asking me about my workout routine. Someone said, "Ben, are you on Strava?" What's that? Like a running app? I I >> on Strava. >> Uh that's that's a GLP3, guys. That's GLP3. That's what that thing is. >> Strava is where you uh you track like your runs and it shows the map of like where you ran and you can hide your start and finish. So >> I'm an underoptimizer. I don't like the sleep stuff like sleep bands. I don't like recording. I just like doing it. >> You know what's fun? The the fun part of Strava though is there's segments around like different cities and it ranks the fastest people to run it and so you can find like a segment that you feel like you're really fast at and you can try to like climb the climb the rankings. >> Growth without goals, Duncan. That's me. >> Yeah. >> See, I I have this app I got on my phone. It's Strombola. It helps me find the best Stromboli in town. So that's that's the that's the fitness app because I'm gonna fit that in my mouth. My m my mother made the greatest stromboly was always my favorite meal going home. Every time I went home from college, she'd have a stromboly waiting for me. >> Ain't nothing wrong with that. >> All right. >> I gotta be honest, I don't know the difference in a stromboly and a cowzone, but they're both like a good kind of inside out pizzas. >> Yeah. >> Wow. >> Yeah. All right. >> It holds 12 Italy. >> Someone explain it in the chat. Okay. [laughter] >> Exactly. >> Okay. Up next, we got a we got someone coming in here trying to be a bummer. Uh so Joe's Joe's coming in. The relentless bid of 401ks uh has inflated stock prices and dampened volatility for years. As the population ages, target date funds are swapping stocks for bonds and people have to take required minimum distributions. At what point does this cavalcade of selling drive stock prices down and become the relentless beg or relentless ask if you prefer? Or is wealth so topheavy that this phenomenon is just too small to make a difference? >> A fair listen, this is kind of negative. It's a fair question. I've been getting some variation of this question for 10 years. Also, covulcade, I'm going to flag you for AI on that one. I don't know what that word means. >> Oh, no. >> I do. But who uses that word? Come on. >> Yeah. It's not not uh >> The funny thing is every time we have a really well-written question now, someone writes in and says, "Hey, that person used AI." And it's almost like the good writers are now being lumped in with LLM, which is not fair. >> Yeah. It's not right. >> Um, so the baby boomers, I think, have to some degree been powering the market higher for years now. They were the first ones to take part in IRA and 401ks and all this stuff. And they, you know, they're such a big, we've never had a group this large before. 70 plus million. It was like a title wave. >> For people who have no idea what this question is talking about, retirement plans like 401ks came came around in what the 70s or something is that >> late '7s or early ' 80s. Really was the early ' 80s for the IRA. And the thing that it did, I wrote about this in my book a little bit. It finally tie it like forced people to think long term. And that's when they said, "Oh, well, if I'm going to have to lock this money up for a few decades anyway, why don't I just put it all in stocks?" So, people were more conservative before these existed. Now, here's the thing. Boomers do control most of the assets. Let's do chart on here. This is from the Fed. They do this generational wealth cohort thing. You see here, the baby boomers are worth around $90 trillion in total net worth in America, but I think it's higher than that because the silent generation somehow is still holding on. They still have their oxygen masks on. They they control $20 trillion in assets. people who are 81 and older. So, let's let's be honest and figure that most of that money is being passed down. So, it's more like 110 trillion for baby boomers. All right, chart off. Baby boomers and older control 70% of the stocks and own close to half of the housing market. All right, so yeah, the idea is what happens when they turn from buyers into sellers. And I think the fears are kind of overblown for three reasons. All right, let me tick them off, Bill, and then you you can you can give me some feedback. Number one, stock market wealth is still extremely concentrated. The top 10% controls 87% of the stocks. Um, there's even more wealth coming for the stock market, I think, because so many baby boomers are selling their businesses and wanting to get liquid that I think that there's going to be even more money coming for the stock market in the years ahead from them. Most of this wealth isn't going to be spent. It's going to be passed on to the next generation. Sure, obviously there's some selling in the years ahead for people who need to fund retirement. And when it but when it does get spent, it's more of a glide path. Number two, baby boomers still need to take risk. 65-year-old couple today has a 50% chance of at least one spouse lasting to their 90s. That's 20 to 30 years in retirement. They'll still need to like hedged inflation somehow. And the thing, Bill, that you and I know, RMDs don't need to be spent. Sometimes people pay the taxes and then reinvest the money in the stock market. >> Yeah. >> Right. That's something a lot of people do if they don't need to spend it. And then number three, this is a big one. There is an offset to the boomers. 70 million baby boomers. There's gonna it's going to be down 16 million are supposedly going to be gone by 2036. Kind of morbid, but it's true. Another 24 million gone by 2045. There's 73 million millennials who will be reaching their prime earnings years. I turned 45 this summer. I'm the world's oldest millennial. Technically, we're getting old now, too. The the largest population group right now is 33 to 37. there is a group who will come in as as willing buyers if these assets are being sold, but I do think most of them are going to be passed down and not spent. Thoughts? >> Yeah, Ben, on that point, there's somewhere in the neighborhood a little less than 4.3 million 32 62 year olds today, right? So that's about the it's, you know, a little more than 1% of the US population. Guess what the most popular age is in the US right now? Any guesses? >> 35, 43, >> 35, and 46. And it's almost 5 million of those. So this generational thing I it's fun for cultural reasons. It's fun to talk about Pearl Jam versus CCR. I'm into all this stuff. However, when it comes to like population, guess what happens when when people, you know, take off, right? More people are born and >> the average age is going up there, right? We're not having Yeah, it has to. You're right. There is but but people are living longer, right? And that's a real thing. And yes, >> that's part of it. The living longer is a big thing we've never had before like this. >> Totally. So these these waves have an impact. But Ben, to your point, if somebody if if somebody at age 75 takes an R&D, what do they do with the money? They usually spend it, right? What does that spending do? It circulates out in the economy, it goes to a company, it goes to Coca-Cola or SpaceX or wherever else, right? Because they're buying a rocket ship to Mars or wherever else so they can live their last couple lives in zero gravity. Like the wealth transfer thing is completely overrated. It doesn't mean that there's some sort of cliff and life goes on. That's what happens in the world is that >> corporations are so smart these days. Let's say there wasn't let's say the millennials didn't exist and it was just baby boomers selling. Guess what would happen? Corporations would buy back their own stock >> because you're right that spending is revenue and in profits. >> So I have no concerns at all about corporate America. I think they will be able to make money on whoever people's age are. And then you know in 10 years folks who are 52 right now are going to be 62 then and we're going to having a similar conversation. The interesting thing to me is just due to the demographic curve right the 35 and 36 year olds are not having children at the rate that they did uh 20 30 years ago. So the what I think it's going to hit and it's already happened in my hometown. I don't know about you guys, but elementary schools, I think, are going to be the first ones to kind of get get hit by this, right? And that Yeah, there there's just less there's less kids. >> The classes are shrinking. That's a demographic thing that Yeah, the classes are shrinking. >> That's right. And and and that will begin to work its way all the way through to college and then elsewhere. We were talking backstage about the price of homes, right? Duncan is driving around with his in-laws in Connecticut just to gas at the price of homes. probably the prices will stay elevated but there will be this supply and demand shift right as this this huge demographic wave which is again my in my view almost 20% bigger than the baby boomers begins to hit their mid-40s and then their 50s and I just Ben I don't think these things can be predicted right I I really don't I don't I don't think we can look at the demographic data and >> it's not a title wave it's a slow it's a tide that slowly comes in and goes out >> so let me let me frame this question a little differently do you think we've seen the peak uh peak number of people contributing to 401k case. >> No, >> with automation and robots and things like that. >> No way. Because young people are doing it way earlier. So young people now own more stocks than ever because baby boomers, it was still harder for them. The technology wasn't there. They had >> But as far as individuals today putting into a 401k, you don't think that that's that's peaked? >> No, I think that'll only get bigger because it's getting easier. >> Yeah, it's easier. The technological change is easier. There's been a lot of incentive changes. Like one of the great stats that we talked about three asset compounds ago was something like 78% of contributions going to IAS are going to Roth, right? It's a really powerful thing, Duncan. So yeah, the the modern pension or excuse me, the ancient pension just doesn't exist anymore. I think that only heightens the need for folks to see >> and I think a lot of the houses that get passed down, the kids are going to go, do I want to put 70 grand into my parents house that hasn't been updated in 30 years or I just want to sell it? They're probably going to sell a lot of them >> and I think that'll hopefully help unlock some of the stuff in the years ahead. It won't be, but I think it's like four or five million houses a year. They're projecting something like that. >> Uh, so hopefully that'll help the housing market, too. >> Yeah, I guess there's just there will be change. I just don't know if it's useful to try to predict it. I I think it'll be different. It would change, but it won't necessarily be bad or just >> demographics. Demographics are the one thing that you can project out with relative certainty. >> Yeah. >> Right. So, it's not like the market doesn't know this already. >> It's a good point. It's a good point. >> And this room must bid thing, I mean, it's a legitimate thing. I I know Josh is the one that coined this a few years ago, right? Or >> almost 10 years ago. Yeah, >> it's definitely changed the markets. The fact that money weeks, how much money is going into the market just >> I totally agree. It's had it's had a change for >> I think it's great just an economic theory because that probably in theory leads to better asset allocation, right? That that money that goes to the company gets invested somehow, right, in public equities, finds its way to the most productive way, that invisible hand. 1776 Adam Smith. It's good stuff. >> Again, fair question. [snorts] >> Yeah, definitely fair. >> Let's do another one. All right, up next, uh, we got a question from Jason. I'm a tribal member of a federally recognized tribe. As a tribal member, I have the ability to build on a lifetime leased plot of tribal land with no property taxes. I also have access to very lowcost or no cost healthare. Since property taxes and healthcare can be significant retirement expenses, how would you factor those advantages into the calculation when setting a target retirement number? Bonus question. Would you still count a house in net worth if it's built on tribal land? I don't own that the land. It's leased and if I wanted to sell, the market would be limited to other tribal members which could significantly impact my ability to sell. >> Very interesting question. >> This is a unique question. Never had anything like this. >> I didn't know. Um, so I grew up in Northern Michigan where there was a lot of tribal land in many areas. One of the reasons that we had casinos before many other areas too, like you could build a casino on the tribal land. So we had a few of those which was great. >> Same in North Carolina. We had Cherokee Casino >> and I actually had a bank teller job in the summer in college for a couple years and one of the branches that I filled in at occasionally uh was close to one of the Native American tribes and they would come in every other Friday cashing their tribal checks and there would be a line out the door of people cashing their checks. So I I had a little background with this but I didn't know the property taxes thing is very nice obviously that's the biggest ancillary cost for most people on their home. What is it 1 to 2% of the home's value essentially? >> Yeah, roughly more more in New York and New Jersey and Connecticut. I can tell you that. Uh, you know better than anyone else, Bill. Cost of healthcare is ridiculously high. You helped with this with Rholt's Wealth. Um, that one alone is probably one of the biggest inflation hedges you could have beyond a house. Right, >> Ben? I got my renewal rates for the company yesterday and let me just be clear about this. I am pissed. I'm not in a good mood about it. >> So, that that healthc care one is a huge one. Um, I guess the one worry I didn't realize this this thing about the fact that the tribe owns the land. So, I I've never seen a study on this, but I wonder if housing prices don't go up as much. It's interesting. I I'm just getting done with this book um the land trap by Mike Bird, who is from The Economist, and he talked about this study that estimates that 80% of the increase over the past, call it 100 years or so in housing is the land, not the not the structures itself, because the structure depreciates, right? You have to constantly keep it up. In fact, >> in the tax code, thou shalt not depreciate land. You're not allowed to. Only, >> right? So, the land is the thing that goes up in value. Um, so I I wonder if the portfolio for him is going to matter way more. The positive obviously is listen, if you have those costs taken out, especially healthcare and retirement, your number is probably smaller. No property taxes, you might not be able to rely on your house as much for wealth, but your portfolio is more important, but you just have to pull less from your portfolio than most people. >> Yeah, that's where I was going to land. So to start with the the land observation, yeah, less supply, you know, less demand, excuse me, for for the property, right? If you're isolated to the to the tribal folks who can buy it, you know, legally, yeah, you're not going to get the same type of price premium or probably inflation, too, depending on what the you know, what the what the birth rate is locally, which I I don't have a lot of information on. So, definitely I think that's the case. But Ben, you you kind of hit where I was going to go at the end, that ultimately what what happens is the the tribal benefits, the healthcare benefits, it really just lowers Jason's expected retirement spending, right? I don't know that it would necessarily impact the asset math and you know there are other reasons Ben other than financial reasons right to want to live in the place that you call home right family usually usually people don't go that far from mom uh right because that's just generally what ties families and community together and that that's the same for for just about anybody I certainly don't live where I live because of the financial opportunity I I live in close proximity to a great school system and my parents right so ultimately then I think this just sort of reduces some of the stress and back to the rituals comment I made about the health plan. Like we're looking at cost increases of 9%, right, for health insurance. It's going to cost me in excess of $50,000 to ensure the median uh family here at Rholtz next year, which is an insane amount of money. I really can't wrap my head around how much that is. So Jason, I think this is a great benefit and it really just means that you have a, you know, a lower savings total that you need to hit relative to somebody who didn't have these advantages. >> Yeah. Very interesting question though. >> Yeah. Fascinating. >> Yeah. >> Yeah. >> Good stuff. >> That was cool. >> All right, one more. Okay, up next we got one on Ray Dallio. This one's from Jonathan. Ray Dalio is worth over $20 billion, so he knows something, that's for sure. A lot of people certainly believe in his thinking. I'm not saying he's wrong, but are you down with his current thinking, or at least some of it? >> All right, so Jonathan sent me a few pieces from radio recently, so I'll read you some of what he's talking about and why he's asking these questions. All right, bonds are now much more attractively priced than stocks. market and economic concentration is in one new sector, AI of course, that is highly volatile and risky and is super popular among unsophisticated investors. That's classic bubble stuff. Ouch. >> Okay. Dio also said the real returns in equities over the next 5 to 10 years look to be about negative 5 to 10%. Though there's considerable uncertainty on those numbers, it appears to me that these stocks are long duration assets that are very risky because it's very difficult to see reliably far into the future and they appear expensive and are in weak hands. He's letting us have it. All right, I want to quote allow myself to quote myself [laughter] from risk and reward. Duncan's reading it right now. In the epilogue of the book, I wrote 20 things I believe about investing. Number three, I believe you should ignore what billionaires and legendary investors say about the markets. These people don't share your circumstances, time, horizon, or risk profile. Why should you take investing advice from them? Mic drop. But let's let's go into a little more detail here because I think there is some nuance involved here. All right. First of all, let's do do my uh headlines on here. I I've I've been tracking Dio's >> uh >> crash calls for years. He first wrote about a 1937 prediction in 2015, which 1937 was like the echo recession crash from the the Great Depression. And he was he's been making these these crash predictions for the last 12 years really, right? End of the debt super cycle, perfect storm for the economy, heart attack within three years, all these things. Dio really really badly before he he wants to call one more crash. That's his he wants to ride out in the sunset on one more crash call and he's going to try his damnest. Okay. The problem is he's been doing this forever. He in 1982 predicted that we were going to have a depression in the United States right before the biggest bull market in history. The thing is if you look at his results they never match what he says. So, I think you have to heavily discount what these hedge fund managers say in the financial media versus what they do with their portfolios. >> Yeah. Wouldn't it be nice if these financial media outlets required people to show their portfolio when they made calls like this? >> Like, show us how short you are of the market or you know. >> So, here's the thing is that's why you can't trust what they say because they want to they they're not only trying to like make a call, it's good it's good PR and good marketing for them. It gets people interested in their funds. Here's what Deli, he's got a blog on LinkedIn, which I think is hilarious. Why does he have it on LinkedIn? I don't know. He just does. Um, he says, "I confidently believe because of my back testing, because of my delivering actual returns I delivered over my 50 years of playing the investment game that having excellent diversification of bets and gearing them towards one desired volatility produce much better returns over time than having concentrated bets that most investors are inclined to have." So he's saying listen he said um when we have the fact that we have an unusually concentrated market centered around a revolutionary new technology should lead us not to confuse our excitement about the new technology with the attractiveness of the new technology stocks and throw caution to the wind. And he said he basically wants to have smart diversification. So he's saying I'm and he at the end he even said listen I'm not going to tell you what my diversification is. It's in like 20 different bets because I'm not your adviser. So he says listen I'm I'm just saying be more diversified than AI. So take away the scary headlines. He's saying I'm so I don't know for him maybe that means bonds and gold and who knows what other kind of he's talking about uncorrelated assets and all this stuff. Um and that that to me is way better than the headline stuff of the stock market's going to crash and the stocks are overpriced and all this stuff. He's saying I'm just going to be more diversified. Like that to me is okay. And I'm I I wish that the headlines would lead with that stuff as opposed to the big scary stuff. But that's how you that's how you market these days. My kids would call that rage baiting. [laughter] Yeah, Ray Dalio is an attention-seeking algorithm. God bless him. Uh Ben, the only thing I would add to that is uh prediction is is very hard and especially about the future. And yeah, I would study what people do, not necessarily what they say on TV. >> But but it's really hard to look at someone and say, "My gosh, this person's a billionaire. Of course, they know what's going to happen." But they don't. >> Seems like it would be better if you just caveed with fellow billionaires. We've already won. We don't want to [laughter] lose a ton of our wealth. So here's here's how I feel, right? Like you're so right. That feels more relevant. >> We I I've told this story before, but coming out of the 2008 financial crisis, we invested in a long short hedge fund with the endowment I worked at. >> And this guy ran a $3 billion hedge fund and all of his personal net worth was in it. And this is after kind of the worst of the worst was over and the stock market started to turn up. And a lot of his investors were going, "Why are you still so conservative? What's going on here? Because don't aren't you, you know, positioned like what if the crash is over?" and he said, "I have all of I have every last cent of my net worth in this fund and I'm not going to let it fail if the financial system really does tip over." And you're right, there's something to that where once you've already made it, your mindset is completely different. And that's why almost every gray-haired legendary investor is been ultra bearish for the last 10 years. >> Yeah, I get it. It's just math. like yeah a 10% draw down when you have 20 billion dollars >> that's uh yeah that would be pretty pretty >> they they'll be fine either way. Yeah, it kind of hits to me too back to the generational point we were talking about in question two or three that like life goes on like yeah okay like this system this company this whatever might might crash might fail might be a decline but that's not a reason to to pull all your money out so much more money Ben has been lost trying to time these market super cycles than has ever been gained by nailing it my my favorite study on this comes from Wes Gray our friend and colleague at Alpha Architect it's even got fired at an active manager and it's a great study and it's a great headline just kind of says, "Hey, even with perfect knowledge about how this future will play out, if you tried to do this with actual real people, you would fail. You would fail because markets are not predictable and it's not even worth it." Planning for a range of outcomes is always going to be more fruitful than whatever the hell this is. >> One of my favorite discomfort. >> One of my favorite finance books ever is the long-term capital management one, right? When genius failed. That's Yeah. You have all these people, the smartest guys in the room. >> Yeah. The most brilliant people. >> Yep. And That's again back to to bring it back to 1776 and the founders. I I do believe that human nature is is in is is is immutable. Uh it will always be the people will keep making the same mistakes again and again and again. And falling for gurus, falling for the strong man, standing up saying doom is coming. That is going to fail you again and again. So I would >> Dave in the chat said being diversified but don't sell. That's a good way to think about it, right? There's a difference between like moving to cash and trying to figure what to do next versus like diversifying your assets. >> Yeah. >> And hedging your bets. or back to Ben Graham, you know, he oscillated right between twothirds invested stocks and bonds to one-third and never never outside of those guard rails, right? Just depending on on market timing. So ultimately, yeah, I I just this guru thing is strange to me. I I don't understand I I kind of take information from a bunch of different sources and synthesize my own opinion. I don't understand this thing where people like absolutely get get like zeroed in on this one person. Uh Phil Tetlock's got a great series of studies on this, academic papers about expert forecasting, how often people are wrong. Even the experts that we all look to for advice, more than half the time they tend to be wrong. >> Sometimes more so than regular people. Yes. >> Wisdom of credit. >> If you like Duncan's hat today, idonshop.com, can I I know we're running long, but can I ask you my bonus question? >> Oh, sure. Hit me with >> Yeah. So, speaking of Ben's book, which again, everyone should buy. It's selling really well and uh no surprise there. Um, I was asking you, you're writing about how inflation kind of didn't exist really for all intents and purposes for a long period of time in this country. So my question for you was, so are you basically saying that inflation is a policy a policy decision that lawmakers make and that we took the trade-off of having increasing wages um, and inflation over stagnant wages but predictable future prices? Yeah, the stat was something from like 1800 to 1940. The collective total inflation in the United States was 28%. >> Wow. >> Basically went nowhere. The thing is, and part of the reason is because we had the gold standard. And so we had these huge booms and huge busts. It was also war. So there was really high inflation, but then there'd be crushing deflation >> and essentially we've sort of ironed that out. And now the economy is it's it's not it's a policy choice, but it isn't. It's also more that the economy is just more dynamic, more diversified, way bigger. And so we're not going to have these huge booms and busts anymore. We were we were in emerging market at that point. We're not in the emerging market anymore, right? We have the world's glo, you know, the global reserve currency, all that stuff. We have the biggest best financial markets. And so part of it is just the economy got more mature. And we figured out like, wait, why would we want like 20% inflation and then 20% deflation? Why wouldn't we just want to have 2 to 3% inflation and occasional negative 1% deflation when the stuff hits the fan? >> Yeah, but I can't I can't find it right now. Uh, but it's an insane number of what a million dollars, you know, whatever 20 25 years ago is worth today. It's pretty depressing. >> The millionaire next door came out in 1996 and that would be the 2.4 million next door now. You know, something like that. So, uh, if listen, if the economy keeps growing and the pie keeps getting bigger, we're going to have inflation. It's not that inflation is good, it's that deflation is worse. So, it's the lesser of two evils. How's that? Yeah, it uh inflation is everywhere a monetary phenomenon, but it does kind of spook me out, gentlemen, that we aren't really able to explain what causes inflation, right? That's kind of a strange thing to think about. Yeah. [laughter] So therefore, Duncan, I don't know. I don't I It's like the human brain. Like we don't really understand how these things work. It's one of the funnier things when people talking about the AI stuff and well, they could never possibly uh imitate a human brain or be or be a real sentient thing. And it's like we can't explain how our own brains work. We can't explain how inflation works in the real world. So it's it's very difficult outside of the measurements. >> Yeah. It's weird because I feel like most people would take having their same salary for the next 10 years if they knew prices weren't going up. >> I think most people would would take that >> politically. Yeah. Just from a political standpoint, being a political science, you know, person, nothing pisses people off more than >> Dunan. Do you want a lost decade in the stock market with that too? Because profits aren't going up revenue. You're saying, but in your in your own book to quote you, you're saying that inflation is like the worst thing for the stock market when you look at those uh the comparisons of >> Go back and read my chart again. You took the wrong lesson away. We'll talk about this later. Okay. >> Yeah. And and I get that people are pissed about inflation, but risk risk cannot be destroyed. It can only be transformed, right? >> I'm just saying Ben Ben's own book says that Warren Buffett talks about how one of the worst things for the stock market is high inflation. >> High inflation. We're talking like above 57%. >> Okay. Okay. >> Wow. Overtime. Should I come with bonus questions? I feel like I didn't bring enough to the show today. >> No, no, it's fine. >> All right. Ask the compound showgmail.com if you have a question. Duncan wanted Duncan got a freebie today. If you're in the live chat, you can get a freebie as well. >> Leave us a review on Apple. Like, subscribe to the compound. See you next time. >> Uh, I need a second actually. Where did this go? Okay. Yeah. Thanks everyone. See you, >> bro. >> [music]
Will Retiring Baby Boomers Crash the Stock Market?
Summary
Transcript
my money to work. >> That's right, Mr. Finchley. You can own a share of American business. There are over 1,200 companies listed on the New York Stock Exchange. Companies which employ more than 11 million people, produce half of all the goods made in America. >> Welcome back. This is Ask the Compound, the show where you ask the questions, we provide the answers. I am Ben Carlson. The baby boomers control nearly 90 trillion dollars of of wealth in the United States. It's wealthiest generation in history. They've been powering the stock market higher for years by being buyers. What happens when those boomers retire and turn into sellers? Are they going to crash the stock market, crash the housing market? I'm going to answer these questions and more on today's show. Let's do it. All right. Ask the compound showgmail.com is our email here. Duncan is back with his Compound Masters hat. You got him before I did. We got new >> unofficial. Unofficial. Nothing. No affiliation with Masters. You know, >> true. I don't shop.com for all your compound merch needs. Welcome to everyone in the live chat on YouTube. As always, Duncan was worried Cliff wasn't here. Cliff made it. All the usuals. Cliff, Dave, Sean. Thanks, guys. Uh, send us your questions. We'll do them live on the air. On today's show, we have questions about time management. How do you stay in shape with kids in a job? How the public student loan forgiveness plan works? Should you still save money while starting a business? What happens when the baby boomers turn into sellers? What if you didn't have to pay property taxes or health insurance? How'd that change your financial plan? And finally, should you follow Ray Dalio's investment advice? First, today's show is sponsored by Public. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S&P 500. You approve the workflow and your agent handles the rest, monitoring the market, watching for your conditions, and executing your strategies exactly as defined. Public is the world's first agent brokerage, an investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via public API. Go to public.comc to get started. That's public.comc. Paid for by public investing. Full disclosures in the podcast description. AI is taking over. >> I I love it. I'm using AI all the time for for uh my questions about the market. When I don't have you, I ask AI, you know. >> Okay. So, you going to use agentic traders? >> Uh probably. Yeah. I haven't I haven't looked into it yet, but yeah, it's on my it's on my radar. I want to >> Every time Oley falls 20%, buy more shares. >> Your AI is going to go, "Take it easy. I'm busy doing this all the time." >> Yeah. >> All right. >> I like that. Good idea. >> Let's do some questions. >> Okay. All right. Up first, we got a question from James. >> Ben, what's your secret to staying in shape with kids? I've got a three-year-old and another on the way. I used to run or lift daily, but between work and time with the kid, I now work out zero to four times a week. Many weeks on the lower end. I'm about five pounds up from prekid. Not bad at first glance, but my body comp is definitely now more fat and less muscle. Feel like my trajectory is towards a dadbod. What do I do? >> And I just have to ask you, is is James you? Is this you, Ben? Are you [laughter] Did you see this question? >> No. Hey, listen. I don't like answering questions like this because I'm not a fitness influencer and it makes my skin crawl when people talk about their workout routines and their diets. I hate it. But we're all about transparency here at Compound. Someone asked the question, I answer. Listen, the dad bot is easy, especially at that age because the kids are eating starting to eat chicken nuggets and um mac and cheese and they never finish it all. And so you just I'm going to have a few plates of mac and cheese. I'll have a few chicken nuggets. Um listen, it's hard to give blanket advice on health just like personal finance because it's personal. That out of the way, let's just talk about how I how I do it. Okay? I started lifting weights in high school because I was like a buck 25 heading into high school. I was like 5'6, 125, right? I was nothing. I I needed to lift weights. So, I developed good habits in the >> weight. Except I didn't lift weights. >> Yeah, there you go. Uh people in the chat saying I secretly wanted to tell. No, I didn't. I'm just telling Hey, listen. We're all all about transparency here. Um so, I developed good habits of exercise through sports, which I think is one of the best things ever happened to me in terms of like the discipline and all that stuff. Arnold Schwarzenegger, he was on um the uh Smartless Comp uh podcast last year and he talked about when he rides his bike into Gold's Gym every day, which kind of funny, still goes to Gold's Gym down the street. He said it's like life is gray when he rides his bike to the gym and after he does it, life is in color. And that's the way I feel to whatever you get from working out, the endorphins or whatever the science is behind it, I get that, too. Um but it is a lot harder with kids. Okay, so here's here's my not to brag of the day. I'm in better shape now in my mid-40s than I was in my early 30s. Um, but it was really hard. And the reason the biggest change for me was um I already had the exercise habit, but it was the diet was the game changer. We had our twins nine years ago. They just turned nine last month. That's when I kn knew I needed to up my game because I'm not a coffee drinker. I needed some form of energy. So, I had to decide like how am I going to do this? We have three kids under the age of three with twins. Um, and so working out became a lot harder, right? We had to play zone defense with three kids. The good news is once you get them sleeping through the night, like they're in bed by 7:30 every night. Now I'm a night owl, so I work out. I worked out at night. I still do. Right. I'm watching a game. I'm on the treadmill. I'm watching a movie or TV show. I'm on the Pelaton. Right now kids are older. Kids have some a movie on in the background. I'm I can do free weights. Right. I have a gym a half a block from my office. Planet Fitness. It's $10 a month, which I still don't understand the business model. It's a publicly traded company. I I think they just have people pay $10 and never never want to. >> Yeah. Yeah. I think a lot of people aren't going to come. >> So, sometimes I put that on my calendar because for me, exercise is part meditation and part like mental health hack. I get some of the best thinking done when I'm I go on like a jog or something. That's when I get all like for my writing and stuff. I can all these jumbled thoughts. When I go on a run, I get back and I jot a bunch of stuff down because it helps me think. I think sometimes you need to get away from the screen. Now, with kids, it's when they're zero to three, they're still really, really young. When they're older, you make them be active. I go on a jog. I make the kids come with me. Hey, get on your scooters and get on your bike. I'm going for a run. You're coming with me. All right. We go and shoot hoops in the driveway. Sometimes we go to the soccer field at the end of the road and we do I make them do sprints with me, right? Listen, if I'm going to do this, you're going to do it, too. I'm I crack the whip. This summer, we're doing a push-ups and sit-ups challenge. All right? Every day, we do 10 push-ups and 10 sit-ups. Everyone, even my my little daughter could do like two up first. Now she's pumping out 10 push-ups every day. >> Nice. >> It's great. So, um, I take the dog for a walk. I throw my weighted vest. Right. I guess my point here is there really isn't a perfect answer. You have to make it a priority. I don't play golf. I don't do like fantasy football. Exercise is one of my priorities. I make it so. So, and if you can't work out, you know, a few times here or there during the week, diet is the game changer. Diet is the way that you can help stay in shape and not let things get crazy. That's the hardest part though, by far. Dieting is harder, I think, than exercise for most people. >> Yeah, it's so much easier now with all these apps like chronometer where you can track, you know, your exactly how how many grams of protein you're getting or your vitamins and stuff, but that takes a lot of effort to scan and to >> and I think I've I've said this before like people always make the analogy between personal finance and health like, hey, everyone knows what to do. It's just hard to do it. But I think your health is way harder because you can automate so much of your personal finances, as we've talked about here. Automating your health is I mean, you can do the same meals over and over again. That's one way to automate. Uh but it's really hard. You have to get up every day and put on those gym shoes and you actually go do it. You have to decide not to eat the snacks or whatever. It's it's way harder to stay in good health shape, I think, especially with kids when it's easy to just grab the fast food or whatever. What's uh what's your favorite right now people watching by their computer could do on the ground next to a computer. What's your favorite exercise people could do? >> You do you do body weight exercises? >> Just some push-ups. >> Push-ups, squats, lunges, sit-ups, all that stuff. Get yourself a 10- pound weighted vest. You don't need a You don't need a lot. It's easy. I'm never going to be able I should have taken my shirt off for that one because I'm never going to be a fitness influencer if I don't show some skin. Uh, next episode, let's wear weighted vests on the show. >> All right, let's go. I I'll sit on the ball like Dwight in the office. >> There you go. >> All right, that's it for my my health influencer stuff. Next question. >> The people want it. >> Listen, the biggest thing is just it's it's a priority. You have to make it a priority. It's hard to do sometimes, especially with young kids. It happens. >> How often do you run? >> I probably run three or four times a week. >> Okay. >> Yeah. I need it. I crave it. If I if I'm like I'm cranky. My wife always says, "If I don't work out, I'm I'm cranky if I don't do it." >> Yeah. Running. >> Everyone has that. >> Yeah. >> All right. >> All right. Up next, we got one from Zach. >> My question [snorts] is for Bill foreshadowing. I married my wife in February and we're looking at combining our personal and financial lives. She makes around $140,000 as a physician assistant, and I make around 300,000. My wife is doing God's work, saving lives, and I'm in awe of what she does every day. The drawback is that she had to go through extra years of schooling and currently has about $280,000 in student loans. >> What's the opposite of not to brag? >> Yeah, exactly. Uh she's currently participating in the PSLF, public student loan forgiveness program, where if you work for the government or a nonprofit, your loans get forgiven after 10 years of payments. She currently has seven years left of payments to make. These payments are based on her income each year from her tax returns. My question is if we can file our taxes as married filing uh separately. Is that it? Yeah. Married filing separately to lock in a payment based on her $140,000 of taxable income and then go back and amend our taxes as married filing jointly uh to benefit from the wider tax brackets. She's currently paying around $800 a month towards her student loans. If we filed as married filing jointly, the monthly payment would increase to roughly $2,500 a month. Add that one to your cheat sheet, Duncan, for acronyms. >> Yeah. Yeah, that one's a mouth. >> We need to have entrance music for him at this point, I think. But let's bring on Bill Sweet since it was asked. >> Oh my [laughter] god. >> There's a freeway. >> Oh, I didn't see you there. Sorry. >> Oh my goodness. >> I saw Bill in the chat. He said he's holding on for GLP too, and I shouldn't have laughed at it, but I did. [laughter] >> I got you there. Uh, Ben, so can we go back to question one, though? Sorry to sorry to put Zach on pause. Did you know, Ben, that three of our last four presidents were born in 1946? Uh the average age of a US senator is 60 plus and the gerritocracy is a real problem in the USA. So my secret gentleman is to not stay in shape. I'm wasting away at the all-consuming fire of my job and I plan to die at my desk probably in a year or two to open up the seat for somebody to take my spot. Maybe Bill Arts, maybe Dan Parra. Who knows? We're going to find out. >> Sacrifice. I I like it. And then you don't have to have your retirement plan either. You can That's your form of your form of fire. >> Exactly. >> Just dying at your desk. >> Pass on that Roth asset to my wife. can replace fire with yoa. >> Exactly. Exactly. So that's the way I want to live. Uh so [snorts] Ben, back to Zach. Where do we want to start here? >> Hang on. So I I used to work for a nonprofit organization before I came to Riddle Hold. I worked for a nonprofit. >> I didn't know that. >> I know a few people. I knew a few people at my job who did this. Um alas, my student loans were paid off ahead of this, but uh my borrowing rate was like 2.25% or something. It was ridiculous how low. >> Don't say that. >> I can't believe they're giving away for that low. And I go mine are like 7%. Half the chat just died. >> Yeah, I I I don't know why they don't have them as low anymore because it's not like rates were that much different than they That was in 2004. I got them 2.25%. It was ridiculous. Uh so anyway, she's got 280 grand and I'm sure it's going to pay off for her over the long haul because she's a physician's physician's assistant. Easier said than done. Um but Bill, is this something that actually can be done that we can do the filed separately to get the Is this a thing? There's a couple of things going on. Uh, but let's start with the married filing separate versus married filing joint question. So, Ben, uh, Duncan, that that was what Zach was getting at. And it this can be done, Ben, but there's a trade-off, right? If you choose to file separately in order to isolate uh, Mrs. Zach's income so they don't have to pay the higher amount just to set the stage. It was not a small amount. It was a difference between $800 a big difference. >> $800 a month to $2,500 is an additional $20,000 a year towards loan repayment. Right. And the theory here is if you get to year 10, which Mrs. Zach has seven years to go, that that loan gets wiped away. One of the features too of PSLF versus the the Microsoft soup of KY uh income based repayment program blah blah blah blah blah is that this specific program which involves working public employer, it doesn't come up as tax. So, one of the problems with a lot of these income based repayment programs is effective uh this year, beginning this year, it hasn't been the case for the last 5 years, the forgiveness is taxable as income in the year that it's forgiven. Not for this program, thank goodness, not to brag for Zack. >> Oh, wow. Yeah. So, they they made it. >> So, now that we know the difference though, gentlemen, is about $20,000 a year plus whatever gets forgiven at the end, uh we have to then gauge what is the difference. >> Well, if they're paying if she's paying $800 a month, it's going to be a huge amount that's going to be forgiven. >> Exactly. Uh is particularly since yeah 10 years 7 years to go at 8K a year it's only it's less than $80,000 right including interest whatever else regardless what we have to do though is calculate the difference between a married fun joint rate which would theoretically be lower because effectively the the tax bracket for a single individual or half of the tax rates for married individ married fun jointly so we have to calculate that and Ben the way I calculated it in order for Zach and Mrs. act to pay more in tax than they would in student loan forgiveness would be somewhere in the neighborhood of $250,000 taxed at the higher tax rate of 32% versus 24. I think they're actually pretty square in the $100,000 range. Therefore, I think filing separately in order to hit this P plsf window makes a lot of sense for Zach. >> Okay. So, you're saying maybe if they made a lot more money, then it might be time to reconsider. >> Yeah. If we see a big spike in income, that usually doesn't happen in the in the public sector, right? Usually you don't see incomes double and triple there. But yeah, Zach's income starts to go skyhigh when he crosses roughly again $250,000 of additional income taxed at 32% instead of 24. That's the time to think about this. And the other factor that you would need to consider is that Mrs. Zach needs to stay in that public sector job for 10 years. Right. So she's basically stuck there at that job. >> Most people don't most people don't realize most hospitals are quote unquote nonprofits. >> Yeah. >> Right. Which it and guess what? Guess what I learned? We used to I used to manage money for hospitals. My very first job out of college, we managed money for a bunch of hospitals around Michigan. Nonprofit does not mean non-revenue. These places make a ton of money. Oh, that's right. >> And they had they had these huge endowments and foundations and pension funds. Like they had a they made a ton of money. So nonprofit like you think nonprofit like oh but at a hospital might be a little different. She might be getting really good benefits and this loan forgiveness it might be a pretty good deal still. >> Also, it's worth pointing out that PSLF is not consecutive. It's like a whole punch card. You just need 10 years of of payments. So you can go work somewhere else for a few years and then come back to a nonprofit. So >> that's right. >> It is just years >> at at the cost though, Duncan, of pushing out that forgiveness period, right? Because you need that 10-year punch card. >> Yeah. And so I did take a look at the 1040X and take a look at those rules because his other question is, look, can I just file separately for X amount of time and then go back and amend. So can we pull up chart the only chart I have here today, gentlemen, it's not in a napkin. So in general what I'm highlighting here is the form 1040X and this is an amended US tax return. You have up to three years Ben Duncan and audience in order to file an amended tax return and potentially claim a refund on taxes previously paid from the filing deadline. Right? So there is a statute of limitations. So Zach cannot get to year 7 years from now in 20 what were it going to be 2032 2033 and then amend all the way back to this year. There's going to be a window of three years of filing. And it's very important to note, it's right there highlighting in red. You cannot change your tax filing status from joint to single. However, with the form 1040x, you are generally allowed to change from single to joint. That is permitted in the tax code. And as far as I can tell, gentlemen, chart off. As far as I can tell, there's nothing preventing this from happening at the student loan, folks. I would not give people that advice though. I don't know if that's necessarily legal, right? because you might need to sign a certification uh when you sign up for the loan forgiveness that might invalidate this. But I think very generally it would make sense I think for Zach and Mrs. Zach to file separately for the time being. >> Oliver in the chat says that the other option is to divorce her because she has so much debt. Uh I don't think that's on the table. But you [snorts] know we actually did get a question from someone who said, "Hey, I know this is taboo, but what do you what what advice do you have for me that I just got divorced? How does my financial plan change?" uh we may be answering that one in the weeks ahead >> because it is something that you don't see a lot from financial planning perspective but uh it happens. All right. >> That's a very good point. Can I riff on this for a second before we move on? Duncan, so I I dislike these types of programs, right? Because I I think if somebody is like tied to the public sector and wants to work in those jobs, I think that's wonderful. I think it's a great thing to do and this is a wonderful benefit. I just don't like this thought of people being trapped, right, in jobs that maybe they don't like or maybe there's another opportunity and, you know, they don't really want to move because if they change jobs, it cost them $200,000, right, of loans shackled to it. >> Yeah. There there's something about this that just doesn't sit well with me and I don't know what to do about it. Again, it's a well-meaning program, but I just don't like it when people are tied to jobs that they they dislike. I don't think that's good for society. Well, I mean, I think the argument is that in the private sector, salaries are typically orders of magnitude higher. And so, this is just a way to encourage people to to go into nonprofits and like Ben saying hospitals, you know, that that maybe they they would otherwise go and work for a private company. >> And unlike R, unlike pay, the fact that the forgiveness isn't taxable, that's a huge catch, right, that comes into play again this year. It was a COVID era American Rescue Plan Act that basically said student loan forgiveness for any plan is going to be waved as income. Uh but however, PSLF appears to continue to be tax exempt, which I think is good for the folks that receive it. >> All right. >> I didn't realize that. All right. >> Yeah, it's uh it's convoluted. So, yeah, we need help. Okay. Up next, we got a question from uh Ry, I think. I'm 41, married, two kids, and two homes with mortgages. I've been doing well as a software engineer, around half a mill in stocks and retirement in diversified world indexes. I save and invest 30% of take-home pay. Recent changes in my career made me drop my savings rate to zero in order to form a new company. Should I cut expenses to save money, or is spending some years building the company akin to investing if all goes well? >> Doing a lot a lot of work in that last sentence. I feel like if all goes >> Yes. Uh I [snorts] wonder if now is a good time as a software engineer to start thinking about your new career job because of AI. Uh it is kind of vibronic that tech has almost displaced themselves first in all of this AI stuff. They're our overlords are coming for us eventually. But the way that I see it, if you started a new company, I mean you have to kind of pour everything into it, right? Time, money, energy. It's a it's a sacrifice. So my question would be before you think about cutting expenses, obviously that might be something, but like what's your liquid back stop right now? And you talked about the he's got bunch of money in index funds I guess but like between cash, stocks, bonds, home equity loans maybe like how much of it are you willing to tap to make sure that this business actually works? The other question is do you need two homes? You know if like are you willing to sell one of those if something goes wrong here? So I guess my first thing would be obviously expenses is one thing but how's your asset allocation doing? your your asset allocation might need to change because you might need a bigger backs stop in case you need to tap something. And uh yeah, the fact that your savings rate went from 30% to zero probably makes sense in a situation like this. Everything should be going into trying to make this happen and hopefully the payoff is big enough from starting the job that you can play catch-up in the future. >> That's right, Ben. That was my point. Uh building a business involves concentrating equity. You're exactly right. It's not just the lower savings rate. It's time. It's capital. It's investing in that business with the expectation of not just income but future payoff. And there's nothing more American Ben in my view than starting and forming your own company, hanging a signal a shingle on the wall and giving it a shot. I think it's a great thing to do. So I guess the thing to think about, Ben, conceptually is where does this, like you said, where does the business asset fit into the asset allocation. I don't think it's unreasonable at all to dial down your savings. Right. >> It's a form of equity, right? >> Totally. Exactly. >> Way riskier than the stock market. >> Yeah. But a lot of it does depend, Ben, on whether or not this business can potentially be sold in the future, whether it's the client lists, whether there's assets in the business. Does software engineering fit into that? I think it generally does fit into this category of recurring revenue, right? If you're providing services to a company, that is something that either you can do or you can outsource via your AI agents that are all running in mainframes behind you. um compared to like a professional service company like an attorney or let's say a wealth manager where generally you don't have much in the way of assets and it's a little more tied to the personality to the reputation and skill of the primary practitioner. I think a lot of that does depend, Ben, on how that forms an equity. Attorneys very generally very high cash comp, right? Because ultimately it's just one person, right, with a laptop giving you advice versus something that's more engineering based that has more products and and ultimately some equipment maybe and and those assets do do count in as equity too. And >> you're right, it is it is seemed very American and risk-like to do this. And the number of people starting jobs has only exploded higher this decade. I think it's going to keep getting higher because >> of AI. >> I think it's great. But when you think about people, it's such a big risk. And you think like sometimes like how do people you almost have to be naive in some ways to to to put your jump off the ledge and do this right with no safety net. And a lot of people do it and it's it's it's a it's a you're right. It's a massive risk. >> Yeah. And Ben, was Thomas Edison naive, you know, when he contemplated, hey, can I can pass an electric current through a piece of glass in order to create light? uh was Eli Whitney naive when he thought about hey instead of picking this stuff with my fingers why don't I create a machine I think it's great uh great book that I read on this topic age of innovation and it postulates that like labor was very uh inexpensive in Europe because there are a lot of people in the US we we came here there were like 3 million people 4 million people at the time of the revolution 250 years ago so labor was very expensive right you didn't have these like roving bands of peasants in the US >> right people actually got paid pretty well relative on a relative basis >> exactly and therefore we as Americans have always always been more these ingenuity AI was generated was was thought up in the lab in in California, right? Same thing with the silicon chip. Same thing all the way through US history and I think that's part of what makes us a successful country. So Ben, can I take a tax angle on on Ray's point? >> That's it. >> So really, really important. I think software engineering, Ben, would potentially qualify could potentially qualify for section 122 qualified small business stock. And so if you haven't already, Ray, I would sit down with somebody who could talk to you about 122 and maybe think about with a 5-year holding period, you could potentially sell your company capital gains taxfree, assuming you meet certain conditions. So I think Ben, now would be the time to think about that given this is early in the process. >> Glass full for sure. Also, back to your Edison point, uh Edison not the greatest guy in the world. Okay. Uh on his wedding night, he left his wife and went back to his lab to work on stuff. >> Hey said, >> sorry. >> Hey, he had to pay the bills, man. [laughter] >> Sunny. Yeah, he's literally he's got to keep the lights on. >> Yeah, he's infamous for some of his uh [laughter] his behavior >> and not giving credit. >> Two people in the they're still asking me about my workout routine. Someone said, "Ben, are you on Strava?" What's that? Like a running app? I I >> on Strava. >> Uh that's that's a GLP3, guys. That's GLP3. That's what that thing is. >> Strava is where you uh you track like your runs and it shows the map of like where you ran and you can hide your start and finish. So >> I'm an underoptimizer. I don't like the sleep stuff like sleep bands. I don't like recording. I just like doing it. >> You know what's fun? The the fun part of Strava though is there's segments around like different cities and it ranks the fastest people to run it and so you can find like a segment that you feel like you're really fast at and you can try to like climb the climb the rankings. >> Growth without goals, Duncan. That's me. >> Yeah. >> See, I I have this app I got on my phone. It's Strombola. It helps me find the best Stromboli in town. So that's that's the that's the fitness app because I'm gonna fit that in my mouth. My m my mother made the greatest stromboly was always my favorite meal going home. Every time I went home from college, she'd have a stromboly waiting for me. >> Ain't nothing wrong with that. >> All right. >> I gotta be honest, I don't know the difference in a stromboly and a cowzone, but they're both like a good kind of inside out pizzas. >> Yeah. >> Wow. >> Yeah. All right. >> It holds 12 Italy. >> Someone explain it in the chat. Okay. [laughter] >> Exactly. >> Okay. Up next, we got a we got someone coming in here trying to be a bummer. Uh so Joe's Joe's coming in. The relentless bid of 401ks uh has inflated stock prices and dampened volatility for years. As the population ages, target date funds are swapping stocks for bonds and people have to take required minimum distributions. At what point does this cavalcade of selling drive stock prices down and become the relentless beg or relentless ask if you prefer? Or is wealth so topheavy that this phenomenon is just too small to make a difference? >> A fair listen, this is kind of negative. It's a fair question. I've been getting some variation of this question for 10 years. Also, covulcade, I'm going to flag you for AI on that one. I don't know what that word means. >> Oh, no. >> I do. But who uses that word? Come on. >> Yeah. It's not not uh >> The funny thing is every time we have a really well-written question now, someone writes in and says, "Hey, that person used AI." And it's almost like the good writers are now being lumped in with LLM, which is not fair. >> Yeah. It's not right. >> Um, so the baby boomers, I think, have to some degree been powering the market higher for years now. They were the first ones to take part in IRA and 401ks and all this stuff. And they, you know, they're such a big, we've never had a group this large before. 70 plus million. It was like a title wave. >> For people who have no idea what this question is talking about, retirement plans like 401ks came came around in what the 70s or something is that >> late '7s or early ' 80s. Really was the early ' 80s for the IRA. And the thing that it did, I wrote about this in my book a little bit. It finally tie it like forced people to think long term. And that's when they said, "Oh, well, if I'm going to have to lock this money up for a few decades anyway, why don't I just put it all in stocks?" So, people were more conservative before these existed. Now, here's the thing. Boomers do control most of the assets. Let's do chart on here. This is from the Fed. They do this generational wealth cohort thing. You see here, the baby boomers are worth around $90 trillion in total net worth in America, but I think it's higher than that because the silent generation somehow is still holding on. They still have their oxygen masks on. They they control $20 trillion in assets. people who are 81 and older. So, let's let's be honest and figure that most of that money is being passed down. So, it's more like 110 trillion for baby boomers. All right, chart off. Baby boomers and older control 70% of the stocks and own close to half of the housing market. All right, so yeah, the idea is what happens when they turn from buyers into sellers. And I think the fears are kind of overblown for three reasons. All right, let me tick them off, Bill, and then you you can you can give me some feedback. Number one, stock market wealth is still extremely concentrated. The top 10% controls 87% of the stocks. Um, there's even more wealth coming for the stock market, I think, because so many baby boomers are selling their businesses and wanting to get liquid that I think that there's going to be even more money coming for the stock market in the years ahead from them. Most of this wealth isn't going to be spent. It's going to be passed on to the next generation. Sure, obviously there's some selling in the years ahead for people who need to fund retirement. And when it but when it does get spent, it's more of a glide path. Number two, baby boomers still need to take risk. 65-year-old couple today has a 50% chance of at least one spouse lasting to their 90s. That's 20 to 30 years in retirement. They'll still need to like hedged inflation somehow. And the thing, Bill, that you and I know, RMDs don't need to be spent. Sometimes people pay the taxes and then reinvest the money in the stock market. >> Yeah. >> Right. That's something a lot of people do if they don't need to spend it. And then number three, this is a big one. There is an offset to the boomers. 70 million baby boomers. There's gonna it's going to be down 16 million are supposedly going to be gone by 2036. Kind of morbid, but it's true. Another 24 million gone by 2045. There's 73 million millennials who will be reaching their prime earnings years. I turned 45 this summer. I'm the world's oldest millennial. Technically, we're getting old now, too. The the largest population group right now is 33 to 37. there is a group who will come in as as willing buyers if these assets are being sold, but I do think most of them are going to be passed down and not spent. Thoughts? >> Yeah, Ben, on that point, there's somewhere in the neighborhood a little less than 4.3 million 32 62 year olds today, right? So that's about the it's, you know, a little more than 1% of the US population. Guess what the most popular age is in the US right now? Any guesses? >> 35, 43, >> 35, and 46. And it's almost 5 million of those. So this generational thing I it's fun for cultural reasons. It's fun to talk about Pearl Jam versus CCR. I'm into all this stuff. However, when it comes to like population, guess what happens when when people, you know, take off, right? More people are born and >> the average age is going up there, right? We're not having Yeah, it has to. You're right. There is but but people are living longer, right? And that's a real thing. And yes, >> that's part of it. The living longer is a big thing we've never had before like this. >> Totally. So these these waves have an impact. But Ben, to your point, if somebody if if somebody at age 75 takes an R&D, what do they do with the money? They usually spend it, right? What does that spending do? It circulates out in the economy, it goes to a company, it goes to Coca-Cola or SpaceX or wherever else, right? Because they're buying a rocket ship to Mars or wherever else so they can live their last couple lives in zero gravity. Like the wealth transfer thing is completely overrated. It doesn't mean that there's some sort of cliff and life goes on. That's what happens in the world is that >> corporations are so smart these days. Let's say there wasn't let's say the millennials didn't exist and it was just baby boomers selling. Guess what would happen? Corporations would buy back their own stock >> because you're right that spending is revenue and in profits. >> So I have no concerns at all about corporate America. I think they will be able to make money on whoever people's age are. And then you know in 10 years folks who are 52 right now are going to be 62 then and we're going to having a similar conversation. The interesting thing to me is just due to the demographic curve right the 35 and 36 year olds are not having children at the rate that they did uh 20 30 years ago. So the what I think it's going to hit and it's already happened in my hometown. I don't know about you guys, but elementary schools, I think, are going to be the first ones to kind of get get hit by this, right? And that Yeah, there there's just less there's less kids. >> The classes are shrinking. That's a demographic thing that Yeah, the classes are shrinking. >> That's right. And and and that will begin to work its way all the way through to college and then elsewhere. We were talking backstage about the price of homes, right? Duncan is driving around with his in-laws in Connecticut just to gas at the price of homes. probably the prices will stay elevated but there will be this supply and demand shift right as this this huge demographic wave which is again my in my view almost 20% bigger than the baby boomers begins to hit their mid-40s and then their 50s and I just Ben I don't think these things can be predicted right I I really don't I don't I don't think we can look at the demographic data and >> it's not a title wave it's a slow it's a tide that slowly comes in and goes out >> so let me let me frame this question a little differently do you think we've seen the peak uh peak number of people contributing to 401k case. >> No, >> with automation and robots and things like that. >> No way. Because young people are doing it way earlier. So young people now own more stocks than ever because baby boomers, it was still harder for them. The technology wasn't there. They had >> But as far as individuals today putting into a 401k, you don't think that that's that's peaked? >> No, I think that'll only get bigger because it's getting easier. >> Yeah, it's easier. The technological change is easier. There's been a lot of incentive changes. Like one of the great stats that we talked about three asset compounds ago was something like 78% of contributions going to IAS are going to Roth, right? It's a really powerful thing, Duncan. So yeah, the the modern pension or excuse me, the ancient pension just doesn't exist anymore. I think that only heightens the need for folks to see >> and I think a lot of the houses that get passed down, the kids are going to go, do I want to put 70 grand into my parents house that hasn't been updated in 30 years or I just want to sell it? They're probably going to sell a lot of them >> and I think that'll hopefully help unlock some of the stuff in the years ahead. It won't be, but I think it's like four or five million houses a year. They're projecting something like that. >> Uh, so hopefully that'll help the housing market, too. >> Yeah, I guess there's just there will be change. I just don't know if it's useful to try to predict it. I I think it'll be different. It would change, but it won't necessarily be bad or just >> demographics. Demographics are the one thing that you can project out with relative certainty. >> Yeah. >> Right. So, it's not like the market doesn't know this already. >> It's a good point. It's a good point. >> And this room must bid thing, I mean, it's a legitimate thing. I I know Josh is the one that coined this a few years ago, right? Or >> almost 10 years ago. Yeah, >> it's definitely changed the markets. The fact that money weeks, how much money is going into the market just >> I totally agree. It's had it's had a change for >> I think it's great just an economic theory because that probably in theory leads to better asset allocation, right? That that money that goes to the company gets invested somehow, right, in public equities, finds its way to the most productive way, that invisible hand. 1776 Adam Smith. It's good stuff. >> Again, fair question. [snorts] >> Yeah, definitely fair. >> Let's do another one. All right, up next, uh, we got a question from Jason. I'm a tribal member of a federally recognized tribe. As a tribal member, I have the ability to build on a lifetime leased plot of tribal land with no property taxes. I also have access to very lowcost or no cost healthare. Since property taxes and healthcare can be significant retirement expenses, how would you factor those advantages into the calculation when setting a target retirement number? Bonus question. Would you still count a house in net worth if it's built on tribal land? I don't own that the land. It's leased and if I wanted to sell, the market would be limited to other tribal members which could significantly impact my ability to sell. >> Very interesting question. >> This is a unique question. Never had anything like this. >> I didn't know. Um, so I grew up in Northern Michigan where there was a lot of tribal land in many areas. One of the reasons that we had casinos before many other areas too, like you could build a casino on the tribal land. So we had a few of those which was great. >> Same in North Carolina. We had Cherokee Casino >> and I actually had a bank teller job in the summer in college for a couple years and one of the branches that I filled in at occasionally uh was close to one of the Native American tribes and they would come in every other Friday cashing their tribal checks and there would be a line out the door of people cashing their checks. So I I had a little background with this but I didn't know the property taxes thing is very nice obviously that's the biggest ancillary cost for most people on their home. What is it 1 to 2% of the home's value essentially? >> Yeah, roughly more more in New York and New Jersey and Connecticut. I can tell you that. Uh, you know better than anyone else, Bill. Cost of healthcare is ridiculously high. You helped with this with Rholt's Wealth. Um, that one alone is probably one of the biggest inflation hedges you could have beyond a house. Right, >> Ben? I got my renewal rates for the company yesterday and let me just be clear about this. I am pissed. I'm not in a good mood about it. >> So, that that healthc care one is a huge one. Um, I guess the one worry I didn't realize this this thing about the fact that the tribe owns the land. So, I I've never seen a study on this, but I wonder if housing prices don't go up as much. It's interesting. I I'm just getting done with this book um the land trap by Mike Bird, who is from The Economist, and he talked about this study that estimates that 80% of the increase over the past, call it 100 years or so in housing is the land, not the not the structures itself, because the structure depreciates, right? You have to constantly keep it up. In fact, >> in the tax code, thou shalt not depreciate land. You're not allowed to. Only, >> right? So, the land is the thing that goes up in value. Um, so I I wonder if the portfolio for him is going to matter way more. The positive obviously is listen, if you have those costs taken out, especially healthcare and retirement, your number is probably smaller. No property taxes, you might not be able to rely on your house as much for wealth, but your portfolio is more important, but you just have to pull less from your portfolio than most people. >> Yeah, that's where I was going to land. So to start with the the land observation, yeah, less supply, you know, less demand, excuse me, for for the property, right? If you're isolated to the to the tribal folks who can buy it, you know, legally, yeah, you're not going to get the same type of price premium or probably inflation, too, depending on what the you know, what the what the birth rate is locally, which I I don't have a lot of information on. So, definitely I think that's the case. But Ben, you you kind of hit where I was going to go at the end, that ultimately what what happens is the the tribal benefits, the healthcare benefits, it really just lowers Jason's expected retirement spending, right? I don't know that it would necessarily impact the asset math and you know there are other reasons Ben other than financial reasons right to want to live in the place that you call home right family usually usually people don't go that far from mom uh right because that's just generally what ties families and community together and that that's the same for for just about anybody I certainly don't live where I live because of the financial opportunity I I live in close proximity to a great school system and my parents right so ultimately then I think this just sort of reduces some of the stress and back to the rituals comment I made about the health plan. Like we're looking at cost increases of 9%, right, for health insurance. It's going to cost me in excess of $50,000 to ensure the median uh family here at Rholtz next year, which is an insane amount of money. I really can't wrap my head around how much that is. So Jason, I think this is a great benefit and it really just means that you have a, you know, a lower savings total that you need to hit relative to somebody who didn't have these advantages. >> Yeah. Very interesting question though. >> Yeah. Fascinating. >> Yeah. >> Yeah. >> Good stuff. >> That was cool. >> All right, one more. Okay, up next we got one on Ray Dallio. This one's from Jonathan. Ray Dalio is worth over $20 billion, so he knows something, that's for sure. A lot of people certainly believe in his thinking. I'm not saying he's wrong, but are you down with his current thinking, or at least some of it? >> All right, so Jonathan sent me a few pieces from radio recently, so I'll read you some of what he's talking about and why he's asking these questions. All right, bonds are now much more attractively priced than stocks. market and economic concentration is in one new sector, AI of course, that is highly volatile and risky and is super popular among unsophisticated investors. That's classic bubble stuff. Ouch. >> Okay. Dio also said the real returns in equities over the next 5 to 10 years look to be about negative 5 to 10%. Though there's considerable uncertainty on those numbers, it appears to me that these stocks are long duration assets that are very risky because it's very difficult to see reliably far into the future and they appear expensive and are in weak hands. He's letting us have it. All right, I want to quote allow myself to quote myself [laughter] from risk and reward. Duncan's reading it right now. In the epilogue of the book, I wrote 20 things I believe about investing. Number three, I believe you should ignore what billionaires and legendary investors say about the markets. These people don't share your circumstances, time, horizon, or risk profile. Why should you take investing advice from them? Mic drop. But let's let's go into a little more detail here because I think there is some nuance involved here. All right. First of all, let's do do my uh headlines on here. I I've I've been tracking Dio's >> uh >> crash calls for years. He first wrote about a 1937 prediction in 2015, which 1937 was like the echo recession crash from the the Great Depression. And he was he's been making these these crash predictions for the last 12 years really, right? End of the debt super cycle, perfect storm for the economy, heart attack within three years, all these things. Dio really really badly before he he wants to call one more crash. That's his he wants to ride out in the sunset on one more crash call and he's going to try his damnest. Okay. The problem is he's been doing this forever. He in 1982 predicted that we were going to have a depression in the United States right before the biggest bull market in history. The thing is if you look at his results they never match what he says. So, I think you have to heavily discount what these hedge fund managers say in the financial media versus what they do with their portfolios. >> Yeah. Wouldn't it be nice if these financial media outlets required people to show their portfolio when they made calls like this? >> Like, show us how short you are of the market or you know. >> So, here's the thing is that's why you can't trust what they say because they want to they they're not only trying to like make a call, it's good it's good PR and good marketing for them. It gets people interested in their funds. Here's what Deli, he's got a blog on LinkedIn, which I think is hilarious. Why does he have it on LinkedIn? I don't know. He just does. Um, he says, "I confidently believe because of my back testing, because of my delivering actual returns I delivered over my 50 years of playing the investment game that having excellent diversification of bets and gearing them towards one desired volatility produce much better returns over time than having concentrated bets that most investors are inclined to have." So he's saying listen he said um when we have the fact that we have an unusually concentrated market centered around a revolutionary new technology should lead us not to confuse our excitement about the new technology with the attractiveness of the new technology stocks and throw caution to the wind. And he said he basically wants to have smart diversification. So he's saying I'm and he at the end he even said listen I'm not going to tell you what my diversification is. It's in like 20 different bets because I'm not your adviser. So he says listen I'm I'm just saying be more diversified than AI. So take away the scary headlines. He's saying I'm so I don't know for him maybe that means bonds and gold and who knows what other kind of he's talking about uncorrelated assets and all this stuff. Um and that that to me is way better than the headline stuff of the stock market's going to crash and the stocks are overpriced and all this stuff. He's saying I'm just going to be more diversified. Like that to me is okay. And I'm I I wish that the headlines would lead with that stuff as opposed to the big scary stuff. But that's how you that's how you market these days. My kids would call that rage baiting. [laughter] Yeah, Ray Dalio is an attention-seeking algorithm. God bless him. Uh Ben, the only thing I would add to that is uh prediction is is very hard and especially about the future. And yeah, I would study what people do, not necessarily what they say on TV. >> But but it's really hard to look at someone and say, "My gosh, this person's a billionaire. Of course, they know what's going to happen." But they don't. >> Seems like it would be better if you just caveed with fellow billionaires. We've already won. We don't want to [laughter] lose a ton of our wealth. So here's here's how I feel, right? Like you're so right. That feels more relevant. >> We I I've told this story before, but coming out of the 2008 financial crisis, we invested in a long short hedge fund with the endowment I worked at. >> And this guy ran a $3 billion hedge fund and all of his personal net worth was in it. And this is after kind of the worst of the worst was over and the stock market started to turn up. And a lot of his investors were going, "Why are you still so conservative? What's going on here? Because don't aren't you, you know, positioned like what if the crash is over?" and he said, "I have all of I have every last cent of my net worth in this fund and I'm not going to let it fail if the financial system really does tip over." And you're right, there's something to that where once you've already made it, your mindset is completely different. And that's why almost every gray-haired legendary investor is been ultra bearish for the last 10 years. >> Yeah, I get it. It's just math. like yeah a 10% draw down when you have 20 billion dollars >> that's uh yeah that would be pretty pretty >> they they'll be fine either way. Yeah, it kind of hits to me too back to the generational point we were talking about in question two or three that like life goes on like yeah okay like this system this company this whatever might might crash might fail might be a decline but that's not a reason to to pull all your money out so much more money Ben has been lost trying to time these market super cycles than has ever been gained by nailing it my my favorite study on this comes from Wes Gray our friend and colleague at Alpha Architect it's even got fired at an active manager and it's a great study and it's a great headline just kind of says, "Hey, even with perfect knowledge about how this future will play out, if you tried to do this with actual real people, you would fail. You would fail because markets are not predictable and it's not even worth it." Planning for a range of outcomes is always going to be more fruitful than whatever the hell this is. >> One of my favorite discomfort. >> One of my favorite finance books ever is the long-term capital management one, right? When genius failed. That's Yeah. You have all these people, the smartest guys in the room. >> Yeah. The most brilliant people. >> Yep. And That's again back to to bring it back to 1776 and the founders. I I do believe that human nature is is in is is is immutable. Uh it will always be the people will keep making the same mistakes again and again and again. And falling for gurus, falling for the strong man, standing up saying doom is coming. That is going to fail you again and again. So I would >> Dave in the chat said being diversified but don't sell. That's a good way to think about it, right? There's a difference between like moving to cash and trying to figure what to do next versus like diversifying your assets. >> Yeah. >> And hedging your bets. or back to Ben Graham, you know, he oscillated right between twothirds invested stocks and bonds to one-third and never never outside of those guard rails, right? Just depending on on market timing. So ultimately, yeah, I I just this guru thing is strange to me. I I don't understand I I kind of take information from a bunch of different sources and synthesize my own opinion. I don't understand this thing where people like absolutely get get like zeroed in on this one person. Uh Phil Tetlock's got a great series of studies on this, academic papers about expert forecasting, how often people are wrong. Even the experts that we all look to for advice, more than half the time they tend to be wrong. >> Sometimes more so than regular people. Yes. >> Wisdom of credit. >> If you like Duncan's hat today, idonshop.com, can I I know we're running long, but can I ask you my bonus question? >> Oh, sure. Hit me with >> Yeah. So, speaking of Ben's book, which again, everyone should buy. It's selling really well and uh no surprise there. Um, I was asking you, you're writing about how inflation kind of didn't exist really for all intents and purposes for a long period of time in this country. So my question for you was, so are you basically saying that inflation is a policy a policy decision that lawmakers make and that we took the trade-off of having increasing wages um, and inflation over stagnant wages but predictable future prices? Yeah, the stat was something from like 1800 to 1940. The collective total inflation in the United States was 28%. >> Wow. >> Basically went nowhere. The thing is, and part of the reason is because we had the gold standard. And so we had these huge booms and huge busts. It was also war. So there was really high inflation, but then there'd be crushing deflation >> and essentially we've sort of ironed that out. And now the economy is it's it's not it's a policy choice, but it isn't. It's also more that the economy is just more dynamic, more diversified, way bigger. And so we're not going to have these huge booms and busts anymore. We were we were in emerging market at that point. We're not in the emerging market anymore, right? We have the world's glo, you know, the global reserve currency, all that stuff. We have the biggest best financial markets. And so part of it is just the economy got more mature. And we figured out like, wait, why would we want like 20% inflation and then 20% deflation? Why wouldn't we just want to have 2 to 3% inflation and occasional negative 1% deflation when the stuff hits the fan? >> Yeah, but I can't I can't find it right now. Uh, but it's an insane number of what a million dollars, you know, whatever 20 25 years ago is worth today. It's pretty depressing. >> The millionaire next door came out in 1996 and that would be the 2.4 million next door now. You know, something like that. So, uh, if listen, if the economy keeps growing and the pie keeps getting bigger, we're going to have inflation. It's not that inflation is good, it's that deflation is worse. So, it's the lesser of two evils. How's that? Yeah, it uh inflation is everywhere a monetary phenomenon, but it does kind of spook me out, gentlemen, that we aren't really able to explain what causes inflation, right? That's kind of a strange thing to think about. Yeah. [laughter] So therefore, Duncan, I don't know. I don't I It's like the human brain. Like we don't really understand how these things work. It's one of the funnier things when people talking about the AI stuff and well, they could never possibly uh imitate a human brain or be or be a real sentient thing. And it's like we can't explain how our own brains work. We can't explain how inflation works in the real world. So it's it's very difficult outside of the measurements. >> Yeah. It's weird because I feel like most people would take having their same salary for the next 10 years if they knew prices weren't going up. >> I think most people would would take that >> politically. Yeah. Just from a political standpoint, being a political science, you know, person, nothing pisses people off more than >> Dunan. Do you want a lost decade in the stock market with that too? Because profits aren't going up revenue. You're saying, but in your in your own book to quote you, you're saying that inflation is like the worst thing for the stock market when you look at those uh the comparisons of >> Go back and read my chart again. You took the wrong lesson away. We'll talk about this later. Okay. >> Yeah. And and I get that people are pissed about inflation, but risk risk cannot be destroyed. It can only be transformed, right? >> I'm just saying Ben Ben's own book says that Warren Buffett talks about how one of the worst things for the stock market is high inflation. >> High inflation. We're talking like above 57%. >> Okay. Okay. >> Wow. Overtime. Should I come with bonus questions? I feel like I didn't bring enough to the show today. >> No, no, it's fine. >> All right. Ask the compound showgmail.com if you have a question. Duncan wanted Duncan got a freebie today. If you're in the live chat, you can get a freebie as well. >> Leave us a review on Apple. Like, subscribe to the compound. See you next time. >> Uh, I need a second actually. Where did this go? Okay. Yeah. Thanks everyone. See you, >> bro. >> [music]