How Should I Invest Cash on the Sidelines?

00:00:00.000 | (beeping)

00:00:02.180 | - Welcome back to Ask the Compound,

00:00:14.520 | where we had two weeks worth of questions building up.

00:00:16.460 | Duncan and I today are thankful for the color purple.

00:00:19.860 | Remember our email here, askthecompoundshow@gmail.com.

00:00:23.700 | Today's sponsor is Bird Dogs.

00:00:27.100 | Duncan and I was in Detroit over the weekend,

00:00:30.180 | which they have an elite, elite holiday,

00:00:32.720 | holiday decoration system there now.

00:00:35.880 | It's great.

00:00:36.720 | The kids love it there.

00:00:37.540 | They had ice skating and slides.

00:00:39.080 | And so John showed the thing here.

00:00:41.480 | I was walking around trying to be comfortable.

00:00:42.860 | So I was of course wearing Bird Dog joggers.

00:00:45.760 | Now they have two different kinds.

00:00:47.060 | One of them is kind of lightweight,

00:00:48.660 | which is good for the summer, fall, spring time.

00:00:51.380 | But they also have these heavier duty ones

00:00:52.700 | that are like sweats almost.

00:00:54.300 | And in the past, I probably would have worn jeans,

00:00:56.100 | but the Bird Dogs pants were great.

00:00:58.060 | They're warm.

00:00:59.100 | I was comfy walking around the city.

00:01:01.740 | We're still giving away the,

00:01:02.660 | they're still giving away the Bird Dog white tech dad hat.

00:01:06.180 | Promo code ATC.

00:01:07.860 | You still get this.

00:01:08.680 | Duncan wants one so bad.

00:01:10.020 | Birddogs.com/ATC or enter the code ATC.

00:01:14.740 | - I gotta say, you look really fashionable in that photo.

00:01:17.820 | - Not bad, right?

00:01:18.660 | - Yeah.

00:01:19.500 | - I could be a Bird Dogs model.

00:01:20.320 | Let's be honest here.

00:01:21.340 | - I think that might be in your future.

00:01:23.260 | Yeah, I think that might.

00:01:24.940 | Very, very comfy.

00:01:26.700 | - So last week, did you miss the show enough

00:01:29.060 | that you were just having people ask you

00:01:30.780 | financial questions at the Thanksgiving table?

00:01:33.540 | - I did get a few finance questions from people at the table,

00:01:36.820 | but nothing special.

00:01:39.280 | - Nothing as exciting as your Twitter exchanges?

00:01:43.180 | - Listen, all I'm trying to do

00:01:47.300 | is put a little good news into the world.

00:01:48.780 | People can get bad news from anywhere, right?

00:01:51.000 | The media likes to share bad news.

00:01:53.100 | People on social media like to share bad news.

00:01:55.140 | Every once in a while,

00:01:55.980 | I like to give some optimistic takes into the world.

00:01:58.820 | And if there's one thing people hate more than anything

00:02:02.080 | on finance social media,

00:02:03.380 | it's good news and long-term stock market returns.

00:02:06.180 | They hate that stuff.

00:02:07.540 | Hate it.

00:02:08.480 | They push back.

00:02:09.320 | So I'm just trying to, listen, I'm not naive.

00:02:11.620 | I know that there's bad things in the economy.

00:02:13.220 | People hate higher prices.

00:02:14.220 | People hate inflation.

00:02:15.740 | But there are some good things going on too.

00:02:17.020 | We've got a strong labor market.

00:02:18.100 | The economy continues to grow.

00:02:20.380 | Housing prices are still up.

00:02:21.580 | It's the stock market is almost back to all-time highs.

00:02:25.060 | Come on.

00:02:26.020 | - I mean, my biggest complaint,

00:02:27.100 | I know the main point of Twitter

00:02:28.340 | is to hate on people essentially and to fight.

00:02:31.060 | But if people are gonna come at you,

00:02:33.340 | they should at least have something original.

00:02:35.460 | Half the time I'm looking, I'm like following the threads

00:02:37.460 | and people are saying the same thing

00:02:39.000 | that someone else already said and you refuted.

00:02:41.020 | Like the one that I keep seeing

00:02:42.260 | is you were talking about the economy

00:02:43.900 | and everyone's saying,

00:02:44.720 | "Well, yeah, what about credit card debt levels?"

00:02:46.940 | And you shared a chart that shows

00:02:50.200 | exactly what they're asking for.

00:02:51.880 | And then like five other people ask you the same thing.

00:02:54.200 | What about credit card debt? - I'm used to it.

00:02:55.200 | I'm Teflon dunking.

00:02:56.040 | It just bounces right off of me.

00:02:57.680 | I have charts galore.

00:02:59.360 | Keep coming at me, people.

00:03:00.200 | - I think people don't realize that you actually do enjoy it.

00:03:02.320 | I think that's the- - I do.

00:03:04.460 | I enjoy sharing good news when it's here.

00:03:06.760 | And guess what?

00:03:07.600 | When there's bad news, I'll share that too.

00:03:08.440 | But right now I think the good outweighs the bad.

00:03:11.080 | - Yeah.

00:03:11.920 | - Let's do a question. - Let's do a good news.

00:03:13.080 | - Okay.

00:03:14.560 | Up first today, we have,

00:03:16.640 | I'm finding it incredibly hard to invest my excess cash

00:03:20.080 | with the S&P 500 closing in on new highs.

00:03:22.640 | I know I'm supposed to just grip my teeth and invest,

00:03:25.120 | not try to predict the market,

00:03:26.460 | and take comfort in knowing that time in the market

00:03:29.800 | is the biggest factor in my long-term investment success.

00:03:32.600 | But it's so damn hard for me to do psychologically

00:03:35.480 | in these seemingly overbought conditions.

00:03:37.560 | I'm not an idiot.

00:03:38.440 | I do max out my 401(k),

00:03:39.920 | contribute a fair amount to 529s,

00:03:42.160 | and even invest a bit into my brokerage account.

00:03:45.100 | But I have money building up on the sidelines.

00:03:47.000 | There's cash on the sidelines, who you guys talk about.

00:03:49.720 | But I know I should do something with,

00:03:51.160 | and every day the market hits a new high,

00:03:53.200 | I feel more paralyzed.

00:03:54.960 | Would love to see you tackle this problem,

00:03:56.660 | because I know I'm not the only one suffering

00:03:58.280 | from this strange and yes, enviable malady.

00:04:01.600 | - I'm glad we put problem in quotes here,

00:04:04.080 | because it is a first world problem.

00:04:06.080 | I think for some investors, this will always be a problem.

00:04:08.920 | The thing is, obviously, market timing is hard.

00:04:11.160 | And the problem is, once you do it,

00:04:13.320 | and the worst thing that can happen is you're right,

00:04:16.120 | 'cause it leads to a cash addiction.

00:04:18.180 | So when markets are falling, and you're sitting in cash,

00:04:20.840 | you just say, well, they're gonna fall even further,

00:04:22.320 | so I'm just gonna wait, so cash becomes a safety blanket.

00:04:24.640 | And then when markets are rising, you go,

00:04:26.320 | wait, well, I already missed it,

00:04:27.400 | I'm just gonna wait for it to crash,

00:04:29.000 | and then cash becomes a safety blanket again.

00:04:31.480 | I actually found an old email.

00:04:33.140 | This investor, a number of years ago,

00:04:34.720 | emailed me in like 2015, and said,

00:04:36.320 | I went to cash in 1999, timed it perfectly, right?

00:04:39.440 | That was the tail end of the dot-com bubble,

00:04:41.640 | the most expensive the US stock market has ever been,

00:04:44.160 | and the stock market crashed.

00:04:46.240 | And then we came back after that bear market,

00:04:49.300 | and then crashed again, of course, in 2008.

00:04:51.780 | And unfortunately, 15 years later,

00:04:54.800 | this investor was still sitting in cash.

00:04:56.740 | And I wrote him and said,

00:04:58.460 | what do you think the reasons are

00:05:00.500 | that you've been sitting in cash for so long?

00:05:02.220 | He said, well, it's some combination of fear, arrogance,

00:05:05.000 | and then he latched onto this macro doom and gloom

00:05:09.060 | that just put him in the investment fetal position

00:05:11.460 | for a decade and a half.

00:05:13.220 | And so it's like, obviously, market timing is hard,

00:05:15.940 | 'cause you've gotta be right twice.

00:05:17.080 | You've gotta get out at the right time,

00:05:18.120 | then get back in at the right time.

00:05:19.120 | But you also have to psychologically get over that hurdle

00:05:21.560 | of wanting to get back in.

00:05:22.960 | And so I think there's a few ways to get around this fear.

00:05:25.840 | I'll start with the more spreadsheet strategies,

00:05:28.600 | and then get to more of the behavioral side of things,

00:05:30.320 | 'cause the behavioral is obviously the biggest part here.

00:05:32.600 | Like, I view diversification and asset allocation

00:05:35.080 | as risk mitigation strategies.

00:05:36.600 | If everyone knew what the future was going to be,

00:05:38.440 | you wouldn't have to spread your bets.

00:05:40.000 | You would just put 100% of your portfolio into Oatly,

00:05:42.280 | and you'd be fine, right?

00:05:44.200 | - Hey, Oatly's looking pretty good this week.

00:05:45.840 | I have to say.

00:05:46.800 | We joke a lot about my irresponsible position in Oatly,

00:05:50.640 | but the last week's been good.

00:05:52.360 | I'm still more than cut in half.

00:05:53.200 | - Someone in the live, someone wanted to know

00:05:54.840 | how closely your portfolio would match ARK,

00:05:57.720 | and they wanted to dunk it in there.

00:05:59.120 | - For the record, I'm still more than cut in half

00:06:01.400 | in my position.

00:06:02.240 | - So like, the whole idea behind setting

00:06:03.320 | an asset allocation in the first place

00:06:05.160 | is that you're balancing out your various time horizons

00:06:08.520 | and risks as an investor, right?

00:06:11.000 | You don't have one asset allocation for a bull market,

00:06:12.920 | and one asset allocation for a bear market,

00:06:14.520 | and then one asset allocation for inflation,

00:06:16.200 | and then deflation, and rising rates and falling rates.

00:06:18.480 | You set an asset allocation that balances out

00:06:21.240 | the different risks and needs in your portfolio,

00:06:23.440 | and that's durable enough for any environment,

00:06:25.400 | 'cause you don't know what the environment's going to be.

00:06:27.000 | So you have this mix of stocks, bonds, and cash,

00:06:28.960 | and maybe some other assets

00:06:30.480 | that you hold during any market environment.

00:06:32.160 | So the first thing is, like, get an asset allocation,

00:06:34.840 | and that should be true of both your current assets

00:06:36.600 | and then your contributions.

00:06:37.560 | So you have that in place that you can,

00:06:38.800 | and maybe cash is one of those buckets too, right?

00:06:40.800 | Cash can be it, but I think you just have to,

00:06:43.240 | have to think in that asset allocation framework.

00:06:45.520 | And if you're worried about valuations

00:06:47.200 | for large cap stocks, like, we've talked about this.

00:06:49.920 | We talked about this with Jeremy Schwartz a few weeks ago.

00:06:52.080 | There's other asset classes you can invest in

00:06:53.880 | that look much, maybe more attractive.

00:06:55.600 | Bonds have higher yields.

00:06:57.360 | International stocks, much cheaper.

00:06:58.560 | Small caps, much cheaper.

00:07:00.000 | Dividend stocks, high quality stocks,

00:07:01.360 | any of these other things.

00:07:02.440 | There's other places you can invest

00:07:03.640 | besides large cap U.S. stocks.

00:07:05.200 | You can diversify into other strategies and asset classes.

00:07:07.960 | So I think it's also worth pointing out

00:07:09.520 | that new highs in the stock market

00:07:10.600 | are nothing to be afraid of.

00:07:11.560 | John, give me a chart on here.

00:07:12.720 | They happen quite a bit.

00:07:14.280 | I used this one before from a couple weeks ago.

00:07:15.880 | This is new all-time highs in the S&P by decade.

00:07:18.720 | You can see there's some decades where it happens less,

00:07:21.000 | like the '70s and 2000s, but most decades,

00:07:22.760 | like, you're gonna have to get used to it.

00:07:23.920 | I think it's 8% of the time since 1950

00:07:26.480 | we're hitting a new all-time high.

00:07:27.480 | So, you know, roughly one out of every 12 or 13 trading days.

00:07:31.920 | Sure, some of these all-time highs

00:07:33.280 | are going to lead to a peak and then a crash

00:07:34.920 | or a bear market, but most of them

00:07:36.600 | simply lead to more all-time highs.

00:07:38.400 | The other big piece is obviously defining your goals

00:07:41.040 | in the first place.

00:07:41.880 | What are you investing this cash for?

00:07:43.560 | The 401(k) is obviously for retirement.

00:07:45.160 | The 529 is for your kid's college plans.

00:07:47.280 | Like, I think most people look at their investments

00:07:49.280 | in their portfolio and think,

00:07:50.520 | "My goal is to get a good return," right?

00:07:52.640 | But like, the goal of investing is not alpha

00:07:54.800 | or outperformance or a good sharp ratio or whatever.

00:07:57.280 | It's like retirement or a trip to Hawaii

00:07:59.200 | or a second home or renovations or beach house

00:08:01.880 | or whatever it is, healthcare needs, rainy day.

00:08:04.960 | So I think you have to kind of attach a goal to this

00:08:08.200 | and define what you're trying to get out of the future

00:08:11.400 | in the first place.

00:08:12.280 | And I think another way of thinking about this,

00:08:14.160 | we've talked about mental accounting before.

00:08:15.800 | Remember we used the Dustin Hoffman example before.

00:08:18.680 | I think you can, even though it's one big pile of money,

00:08:20.680 | you can separate it out by buckets, right?

00:08:22.880 | And you can have a long-term bucket,

00:08:24.280 | which is stocks and retirement funds.

00:08:26.080 | And then you can have an intermediate-term bucket

00:08:28.240 | that maybe is more income-producing assets,

00:08:30.320 | and then maybe a short-term bucket that includes cash.

00:08:32.200 | But I think if you have a cash,

00:08:33.080 | the way that I think about it is,

00:08:34.660 | you can have a percentage of cash over your portfolio,

00:08:36.800 | or you can have a level.

00:08:37.640 | And for me, my short-term savings, I have a level of cash.

00:08:41.240 | And once my cash exceeds that level,

00:08:44.560 | I immediately sweep it out

00:08:45.700 | and put it into my investment accounts.

00:08:46.880 | And I think that's what you can do too,

00:08:48.100 | is put a ceiling on it.

00:08:49.320 | And so have your rainy day fund in cash,

00:08:52.180 | but then anything over and above a certain level,

00:08:54.480 | sweep into your investment accounts and put it to work.

00:08:57.760 | So of course, that's like the spreadsheet part of it.

00:09:00.720 | That's easy on paper, hard to do in reality.

00:09:04.680 | So the hard part is implementation.

00:09:06.600 | So that's why I think you just have to,

00:09:07.600 | for most people, it's just automating.

00:09:09.480 | Automate your contributions, automate your asset allocation,

00:09:11.440 | automate your rebalancing, put it on the schedule,

00:09:13.760 | and then just stop looking at your portfolio

00:09:15.360 | so much into thinking about it.

00:09:16.400 | Like, what about valuations?

00:09:17.840 | Like, have an asset allocation, make it automatic,

00:09:20.620 | and just, that's it.

00:09:21.560 | I think that's the best way to avoid mistakes

00:09:22.960 | in your portfolio, is just like,

00:09:24.240 | make good decisions ahead of time

00:09:25.360 | and get out of your own way.

00:09:26.960 | 'Cause obviously, those psychological barriers,

00:09:29.240 | otherwise you're always gonna be

00:09:30.240 | second-guessing yourself and your moves.

00:09:33.000 | - Yeah, that sounds like good advice.

00:09:34.800 | - But this is something that I constantly hear from people.

00:09:38.560 | There was people who got out in 2008 or 2009

00:09:40.800 | and they just could not force themselves to get back in.

00:09:43.660 | And you'd hear from 'em seven or eight years later

00:09:46.200 | after there's a bull market, and then they go,

00:09:47.440 | what do I do now?

00:09:48.540 | And that's a really tough position to be in.

00:09:50.640 | - Yeah, it's like what you and Michael

00:09:52.040 | were talking about on Animal Spirits,

00:09:53.840 | being overly optimistic versus pessimistic.

00:09:56.680 | And you were taking the side of saying

00:09:59.200 | you'd rather be overly optimistic.

00:10:01.440 | 'Cause yeah, I mean, this sounds like

00:10:02.400 | a tough situation to be in.

00:10:04.880 | When you're scared to actually do

00:10:06.880 | what you really kind of need to do.

00:10:08.680 | - But also, being optimistic long-term is good,

00:10:10.800 | but also build into your plan the fact that,

00:10:12.720 | yes, there's gonna be short-term setbacks as well,

00:10:15.080 | but don't build your whole plan

00:10:16.520 | on waiting for those setbacks to happen all the time,

00:10:18.240 | 'cause that's really, really a tough stance to take.

00:10:21.560 | I'm only going to invest when the market crashes,

00:10:24.080 | because you constantly end up in a fetal position that way,

00:10:26.720 | and waiting for things to get worse and worse,

00:10:28.400 | and then you just never invest.

00:10:30.000 | - Yeah, I mean, I guess being a dreamer,

00:10:31.680 | we never run out of baked beans.

00:10:34.060 | - This is true, in bullets.

00:10:35.440 | All right, next question.

00:10:36.280 | - Okay, that question was from Josh, by the way.

00:10:38.080 | Up next, we have a question from Shale.

00:10:41.920 | I'm probably mispronouncing that.

00:10:44.000 | "At a basic level, I understand the inverse relationship

00:10:46.400 | "between bond yields and prices,

00:10:48.380 | "but I can't wrap my head around

00:10:49.480 | "how this works with bond ETFs.

00:10:51.360 | "If prices go down on the ETF,

00:10:53.040 | "shouldn't the yield increase to compensate

00:10:54.820 | "so quarterly dividends are higher?

00:10:56.600 | "What am I misunderstanding?"

00:10:58.720 | - Fair question.

00:10:59.560 | I know it can seem confusing,

00:11:00.520 | because many bond funds have a relatively static maturity

00:11:03.840 | or target duration,

00:11:05.200 | but just remember a bond ETF or mutual fund

00:11:07.140 | is just a portfolio of individual bond securities.

00:11:10.240 | It's the same thing in many ways

00:11:11.840 | as holding an individual bond.

00:11:13.420 | There just might be some more buying and selling

00:11:14.940 | as opposed to holding all the bonds to maturity.

00:11:17.180 | So yes, as interest rates rise, prices go down,

00:11:20.240 | which is bad for returns in the short run,

00:11:22.320 | but now those higher rates translate

00:11:24.400 | into higher bond yields,

00:11:26.000 | making future returns more attractive.

00:11:27.280 | So iShares was actually nice enough to provide us

00:11:29.540 | with a historical look over the last 10 years

00:11:32.180 | at their US aggregate bond ETF, the AG.

00:11:34.400 | This is like a simple total bond fund.

00:11:37.760 | So John, throw up the chart here.

00:11:39.300 | This is the average yield to maturity in the AG

00:11:42.480 | going back 10 years.

00:11:43.320 | You can see rates were pretty skippy there for a while,

00:11:45.240 | obviously.

00:11:46.080 | You got close to 4% in 2018,

00:11:47.240 | and then of course right back down.

00:11:48.920 | Then the pandemic hit,

00:11:49.980 | and we got all the way down to 1% by the end of 2020,

00:11:53.120 | which was just all risks, no reward, more or less.

00:11:57.640 | And now that yields have risen,

00:11:59.360 | by the end of October,

00:12:00.380 | the average yield of maturity on the AG is more than 5.6%,

00:12:03.640 | which is great, right?

00:12:04.840 | But you've had to endure some losses to get there.

00:12:06.880 | So John, show the next, throw the next one on.

00:12:08.800 | This is the AG over the last three or four years

00:12:11.280 | from the, we're in like a three-year bear market.

00:12:13.360 | It's down 13%, which stings,

00:12:15.880 | but now you've got a yield north of 5%,

00:12:18.560 | closing in on 6% to compensate you.

00:12:20.540 | So you're just in a much better position

00:12:22.300 | regardless of where rates go from here.

00:12:24.640 | So you had to endure some short-term pain

00:12:27.320 | of yields going up,

00:12:28.260 | but now your yields are higher,

00:12:30.320 | and your future expected returns are much better.

00:12:33.480 | So it stings to have those losses,

00:12:36.240 | but bond investors are in a pretty good place these days

00:12:38.840 | as far as yields go,

00:12:39.680 | especially compared to the last 15 years or so.

00:12:41.880 | - And now, I don't want to put words in your mouth,

00:12:45.240 | but you did say on yesterday's Animal Spirits

00:12:48.360 | that you think there's a 100% chance of a rate cut in 2024.

00:12:52.880 | Is that what you said?

00:12:54.440 | - What?

00:12:55.260 | I would never say, I wouldn't.

00:12:57.200 | Probabilities is the next question.

00:12:58.640 | We're gonna talk about

00:12:59.640 | how you never say 100% for anything, Duncan.

00:13:01.840 | I just said, I think there's going,

00:13:03.120 | all right.

00:13:03.960 | - That's right, you Grand Rapids hedge.

00:13:05.920 | - Good segue into the next question

00:13:07.160 | because I think you never go 0% or 100% for anything.

00:13:10.800 | That's realistic.

00:13:11.640 | So let's do the next question.

00:13:12.960 | - Okay, up next we have a question from Dave who says,

00:13:16.800 | "I get that the future is unknowable,

00:13:18.600 | "and you're supposed to think about it

00:13:20.020 | "in terms of probabilities,

00:13:21.560 | "but how do all these economists come up

00:13:23.260 | "with their probabilities in the first place?

00:13:25.060 | "It seems like they all just say 40% as a hedge

00:13:27.560 | "so we never really know how much weight

00:13:29.040 | "to put on any outcome."

00:13:31.280 | - That's a really good question

00:13:33.240 | because like you go to the casino,

00:13:34.560 | you know what the probabilities are.

00:13:35.960 | Like you can look those up.

00:13:37.640 | In the markets, you don't know.

00:13:38.660 | So let's bring in the person

00:13:39.540 | who actually was the first one to teach me

00:13:41.880 | about the benefits of thinking in terms of probabilities,

00:13:44.040 | Mr. Barry Ritholtz.

00:13:45.180 | - Hey, Barry.

00:13:46.980 | - Hey, everybody.

00:13:47.800 | How you doing?

00:13:48.640 | - Good.

00:13:49.480 | - Barry, you've always said that like the,

00:13:51.400 | you think of the future in terms of a range of outcomes

00:13:53.860 | or probabilities.

00:13:54.700 | Never, it's not an always or never thing.

00:13:56.700 | It's never 100% this or 0% that,

00:14:00.440 | but you also can't say 40% every time

00:14:02.280 | like some of these economists do

00:14:03.360 | because then that's like an intellectual hedge

00:14:05.420 | of I just never want to be wrong.

00:14:07.440 | And I think the current setup is a good case in point.

00:14:10.480 | I've heard you give talks on this before.

00:14:12.680 | Like people wanna know like what's the hard landing,

00:14:14.920 | soft landing, no landing,

00:14:16.680 | but how do you think about this in terms of,

00:14:18.240 | especially for something as complex as the economy,

00:14:21.360 | placing probabilities on outcomes in an unknowable future?

00:14:25.020 | - Right.

00:14:25.860 | So first, the 40% forecast is hilarious.

00:14:30.360 | Justin Layhart and Ralph Winkler did a piece

00:14:33.420 | in the Wall Street Journal, I think it was 2018,

00:14:35.960 | about, hey, always forecast 40%.

00:14:38.560 | 'Cause if it doesn't happen, I was under half,

00:14:41.900 | so I was right.

00:14:43.280 | And if it does happen, hey, I warn you,

00:14:45.440 | this was almost a 50/50 thing.

00:14:47.520 | - Right.

00:14:48.360 | - I told you this was a--

00:14:49.180 | - You can't be wrong.

00:14:50.020 | - Right, so that's the joke.

00:14:52.000 | So first, really the first question you have

00:14:55.640 | to ask yourself is why do you wanna forecast

00:14:58.880 | anything other than long-term asset class returns?

00:15:03.280 | Hey, here's what equities give us,

00:15:04.960 | and here's what bonds give us,

00:15:06.280 | and this is what gold gives us.

00:15:08.180 | And if you have a long enough holding period,

00:15:10.620 | and you mentioned Jeremy Schwartz before,

00:15:13.060 | 20 years is considered long-term,

00:15:15.280 | well, you could reasonably expect those sort of returns.

00:15:19.720 | But when we look at economists,

00:15:22.400 | some of them just extrapolate the current trends,

00:15:25.640 | others keep in mind--

00:15:26.480 | - That's a lot of it, is recency bias,

00:15:28.400 | is like what just happened is gonna keep going, yeah.

00:15:31.780 | - Right, employment is falling, it'll keep falling.

00:15:36.280 | The other thing that I kinda feel lots of people forget

00:15:41.280 | is when you're an economist working

00:15:43.460 | in a big Wall Street firm,

00:15:45.500 | think about the institutional pressures on you

00:15:49.240 | to try and stay somewhere in the middle of the pack,

00:15:52.880 | don't stand out like the gazelle

00:15:54.940 | on the outskirts of the herd

00:15:57.100 | when the lions are out hunting,

00:15:59.460 | don't say anything too radical,

00:16:01.300 | even if you think the world is going to hell,

00:16:03.940 | or the world is great,

00:16:06.080 | there's a lot of pressure on those sorts of jobs,

00:16:10.260 | career risk, to go too far away from the herd.

00:16:13.740 | And then lastly, let's be blunt,

00:16:16.580 | forecasting is marketing, plain and simple.

00:16:19.720 | This is the silly time of year

00:16:21.880 | where everybody puts out their year-end forecast,

00:16:24.420 | the media covers it,

00:16:25.980 | and we talk about different people's forecasts.

00:16:29.020 | I wanna ask the person who asked this question,

00:16:33.180 | why do you even wanna think about

00:16:36.340 | why people are making forecasts?

00:16:39.500 | If you're an investor,

00:16:40.860 | you should be thinking out decades, or certainly years.

00:16:45.640 | The problem with 12 months is that it's way too short

00:16:50.500 | for any forecast to be consistently accurate

00:16:53.260 | 'cause the world is just too random.

00:16:55.460 | - And your point about forecasting the markets

00:16:58.740 | versus forecasting the economy is great

00:17:00.140 | because even if you had the headlines

00:17:02.260 | and knew what the data was gonna be in the economy,

00:17:03.900 | it might not help you figure out

00:17:05.300 | what the markets are going to do.

00:17:06.620 | - So if I would have told you,

00:17:08.500 | hey, God came down and told me

00:17:10.780 | that the Russians were gonna invade Ukraine next year,

00:17:14.180 | you probably wouldn't have bet

00:17:16.000 | and oil prices will be negative 12 months later.

00:17:18.860 | Like that's the last thing people are gonna think about.

00:17:21.260 | - Right, or by the way, a global pandemic

00:17:23.740 | is gonna shut the whole economy next quarter.

00:17:27.420 | Do you think the market's gonna finish up for that year?

00:17:30.860 | It's so hard to do second and third steps removed.

00:17:35.860 | It's as Howard Marks loves to say,

00:17:38.020 | it's not the first level thinking, it's the second level.

00:17:42.060 | And then the repercussions in the third level,

00:17:44.860 | it just becomes so difficult to try and figure out

00:17:47.980 | how all the little waves in the pond

00:17:50.860 | when you throw a stone in,

00:17:52.620 | where it's gonna end up

00:17:53.820 | by the time it reaches the other side of the lake.

00:17:55.820 | - The one time that the economic model did say

00:17:58.520 | there's 100% chance of recession in 2023, it was wrong.

00:18:03.020 | And everyone assumed there would be a recession this year

00:18:05.540 | and there wasn't.

00:18:06.380 | So yeah, that's so true is that people forecasting

00:18:09.700 | and especially over a short period of time

00:18:11.700 | is not even like the data, it's the reaction to the data.

00:18:14.100 | And that's the thing that you can't,

00:18:15.460 | because trying to, you know,

00:18:16.860 | I can't guess what I'm gonna do tomorrow in some cases,

00:18:19.620 | trying to guess what all these collective investors

00:18:21.540 | are going to do in a month or a few months, it's impossible.

00:18:24.740 | - That's why all this sentiment polling is so silly,

00:18:28.020 | whether it's markets or inflation or elections.

00:18:31.540 | When you ask somebody who you're gonna vote for,

00:18:33.940 | A, 12 months out,

00:18:35.580 | we have no idea who's even gonna be around.

00:18:38.200 | Good chance that either of the presidential candidates

00:18:41.260 | aren't on the ticket, not a coin flip,

00:18:44.920 | but a pretty significant possibility

00:18:47.500 | that one or the other won't be.

00:18:49.600 | And then it's, are you gonna vote for who you're gonna say?

00:18:52.100 | Say you are, are you even gonna get out of the house

00:18:54.060 | and vote?

00:18:54.900 | We have such low levels of voter participation.

00:18:57.700 | Those sorts of things are always terrible.

00:18:59.420 | And it's the same as true when we talk to people

00:19:01.420 | about inflation or markets.

00:19:03.700 | Nobody really knows what next year looks like.

00:19:06.100 | Nobody knows the random events that are gonna come up.

00:19:08.840 | So why even try and forecast that?

00:19:11.640 | Just look at the long-term returns for various asset classes

00:19:15.380 | and that's how you should be thinking about your portfolio.

00:19:17.100 | - Yeah, I think we can say like,

00:19:18.380 | the longer your holding period,

00:19:20.060 | the better your results should be,

00:19:21.340 | but we still can't guarantee with 100% accuracy

00:19:23.540 | that like, this is what they're going to be,

00:19:25.020 | that the future is gonna match the past

00:19:26.300 | 'cause we just don't know.

00:19:27.260 | - Right, we can say 99% of all 20-year rolling averages

00:19:31.380 | in equities have been positive.

00:19:33.380 | That's about as much, as close to a guarantee

00:19:35.660 | as you're gonna get.

00:19:36.500 | And by the way, that's just US equities.

00:19:38.540 | Different countries don't have that same advantage.

00:19:41.180 | - Right.

00:19:42.080 | - Is there anyone that like, ranks economist calls

00:19:44.760 | and sees like, who has the best, you know,

00:19:47.560 | rating for getting things closest over time?

00:19:50.580 | - Institutional investor does these annual awards.

00:19:55.280 | Ed Hyman of ISI for like, 40 years in a row

00:19:59.240 | was always top ranked,

00:20:01.220 | but it was never because he was making forecasts.

00:20:04.600 | It was always because,

00:20:06.120 | hey, these are the three possibilities.

00:20:08.040 | This is what everybody is expecting.

00:20:10.240 | This is the surprise that might happen.

00:20:13.160 | And here's how we think markets will react

00:20:15.240 | in each of these cases.

00:20:16.600 | He actually would be probabilistic

00:20:20.160 | and do that second level thinking.

00:20:22.440 | And his institutional clients have always loved him.

00:20:25.080 | - I think that is the way if you're thinking of the economy

00:20:26.600 | is like, here's maybe my baseline,

00:20:28.440 | but here's also some other paths.

00:20:29.660 | And then you have the outside stuff that happens

00:20:31.840 | that you just can't forecast.

00:20:32.880 | My favorite is the strategists

00:20:34.480 | who do the year-end S&P targets.

00:20:36.480 | And then they let them change them

00:20:38.040 | three months before the end of the year.

00:20:40.200 | And they just put it close to whatever's happened.

00:20:42.480 | - Right.

00:20:43.320 | Hey, we were forecasting a 30% crash,

00:20:45.360 | but the market's up 20%.

00:20:47.040 | So let's change our target.

00:20:48.820 | Thanks for nothing.

00:20:49.920 | - Yeah, of course.

00:20:51.360 | All right.

00:20:52.200 | - I like the idea of a choose your own adventure style,

00:20:54.000 | though, where you have a couple of different--

00:20:55.840 | - That's basically what it is.

00:20:57.040 | - And it's a smart way to think about an unknowable future.

00:21:00.360 | Ed Hyman's probably the guy best known

00:21:02.160 | for popularizing that.

00:21:04.480 | - All right, cool.

00:21:06.000 | - All right, next question.

00:21:06.840 | - Up next, we have a question from Michael.

00:21:09.560 | Huge fan of your podcasts and writing.

00:21:11.840 | My girlfriend recently received an inheritance

00:21:13.760 | and is thinking about how to invest it.

00:21:15.680 | We're planning to keep a good chunk in cash

00:21:17.800 | for a house purchase, but want to invest some as well.

00:21:20.920 | She was given a few equity positions

00:21:22.900 | from her parents' financial advisor,

00:21:24.560 | Apple and Microsoft, et cetera,

00:21:26.960 | that she was told were expected to outperform

00:21:29.100 | over the next five to 10 years.

00:21:30.760 | I see they really went out there with their calls.

00:21:33.200 | While that's possible, I think this money

00:21:36.240 | should be invested in market ETFs

00:21:38.080 | for diversification purposes.

00:21:39.760 | Do you have any advice on how I should convince her

00:21:42.160 | that diversification could be the best option here?

00:21:44.720 | It's a tricky situation since this is technically her money,

00:21:47.520 | but if we get married like we both expect to

00:21:49.320 | in the coming years, this decision will impact us both.

00:21:52.080 | - I mean, obviously, someone in our position

00:21:56.960 | that studied this stuff, we can spout

00:21:58.760 | on the merits of diversification.

00:22:00.800 | If you're a young person hearing this for the first time,

00:22:02.920 | your eyes are gonna glaze over.

00:22:04.240 | There's no way that anyone wants to hear that.

00:22:06.320 | So I guess you could try to give the textbook stuff,

00:22:11.320 | but it's almost like some people just need

00:22:14.120 | to live through the experience

00:22:15.500 | of holding some individual stocks

00:22:16.760 | to know why diversification is important in the first place.

00:22:19.480 | I don't know if you're gonna be able to convince her

00:22:21.280 | unless she really listens to what you have to say.

00:22:23.840 | - By the way, this was literally Thanksgiving conversation

00:22:27.840 | from a cousin of a niece who we hadn't seen

00:22:31.440 | in a couple of years since the pandemic,

00:22:34.320 | single, living on her own, saving for an apartment,

00:22:37.920 | saving to buy a house, and ended up getting a bunch

00:22:41.080 | of individual stocks and said, "What do I do with these?"

00:22:44.360 | And it's like, well, do you wanna live

00:22:46.000 | with the ups and downs?

00:22:47.460 | You're young, you got a 40-year investment horizon.

00:22:50.280 | You wanna live with the ups and downs of the volatility,

00:22:53.240 | or do you wanna just put it on set and forget

00:22:55.920 | and not stress about it?

00:22:57.960 | I love the framework of regret minimization.

00:23:01.200 | What's gonna be worse if you stay with these stocks

00:23:05.480 | and one of 'em crashes, or if you sell these stocks

00:23:08.600 | for an index and they, you know, magnificent seven on you?

00:23:12.480 | And the answer this person gave me is,

00:23:15.640 | "I don't wanna think about it.

00:23:16.740 | "I got enough stuff going on in my life.

00:23:18.200 | "I can't be stressed about this."

00:23:20.520 | And I had to say, well, you know the answer then.

00:23:24.080 | Roll it into VTI, roll it into Vanguard Total Market

00:23:27.040 | or the S&P 500, or whatever your index of choice is,

00:23:31.040 | and just forget about it.

00:23:33.020 | Even if it's Microsoft and Apple,

00:23:35.200 | and you say, "I wanna have a more tech-focused investment."

00:23:40.200 | All right, well, roll it into the Qs

00:23:42.040 | so you don't have a single stock focus.

00:23:45.720 | Any given stock could get whacked 50%.

00:23:48.520 | - Well, I always say the Black Monday crash happened

00:23:51.760 | one time in the United States for the market.

00:23:54.400 | For an individual stock, that can happen

00:23:55.960 | any time they put out earnings.

00:23:57.360 | - Tuesday, right, every Tuesday you get that.

00:23:59.520 | The market could be up and your stock could be down 20%.

00:24:01.560 | So, yes, that's a way to think about

00:24:03.440 | the volatility of an individual stock.

00:24:05.040 | Maybe that's, I do like the regret minimization framework.

00:24:08.360 | That is always a good one.

00:24:09.680 | And just helping them understand the difference

00:24:11.520 | between an individual stock and a basket of stocks.

00:24:13.560 | A basket of stocks can still go down,

00:24:15.520 | but it might not get crushed as much,

00:24:17.640 | especially in a short period of time,

00:24:19.600 | as the range of outcomes is just way wider

00:24:22.040 | for individual stocks.

00:24:23.360 | - You know, this question really forces people

00:24:25.560 | to think about who they are, what their risk tolerance is,

00:24:29.320 | how, you have to kind of project yourself forward

00:24:32.040 | in time, a decade, and think back

00:24:34.200 | about what really is gonna bother me

00:24:35.960 | about decisions I made.

00:24:37.640 | I've spoken to younger people

00:24:39.320 | who have investment portfolios and they're like,

00:24:41.560 | I don't care about my, if the stock goes up and down,

00:24:44.200 | I'm in my 20s, let it bounce around

00:24:47.520 | and Microsoft and Apple are great companies,

00:24:49.520 | they're not going anywhere.

00:24:50.760 | If that's your attitude, by all means,

00:24:52.720 | hold on to a couple of positions

00:24:55.400 | around your core portfolio and let 'em run.

00:24:58.440 | But just be aware of the fact that sometimes,

00:25:02.240 | look at how many times Amazon,

00:25:04.280 | one of the biggest companies in the world,

00:25:06.200 | in the early 2000s, Amazon crashed 80 something percent

00:25:10.400 | to three or four dollars.

00:25:12.120 | And then again, we saw the crash post.com

00:25:15.680 | and then in 2020, and then they took off.

00:25:18.520 | And you really have to understand,

00:25:21.200 | I'm in this company for the long run

00:25:23.160 | and I'm hoping it's not Lehman or Enron.

00:25:26.240 | - He also said here that they're dating now

00:25:29.280 | and hoping to get married in the future.

00:25:31.080 | I actually think this is a good time

00:25:32.080 | to have this kind of money talk

00:25:33.080 | to understand how you both approach it.

00:25:35.200 | So before you even get married,

00:25:37.000 | I think you can, it's a good time

00:25:38.560 | to have this kind of talk to understand

00:25:40.000 | how you feel about this kind of stuff.

00:25:42.000 | - You know, indexers and active stock pickers can be married.

00:25:45.360 | It's just a core and satellite sort of portfolio.

00:25:49.040 | They don't have to butt heads.

00:25:50.320 | It could be complimentary.

00:25:52.000 | - He's such a romantic.

00:25:53.440 | - The data shows she's gonna outperform him.

00:25:55.680 | Women are better investors than men

00:25:57.200 | because they're more logical.

00:25:58.800 | They're more rational.

00:26:00.280 | They don't make these crazy moves.

00:26:01.120 | - Less overconfidence, less arrogance.

00:26:03.600 | The data, by the way, is overwhelming on this.

00:26:06.320 | And it's not like a teeny little bit.

00:26:08.000 | It's a substantial amount of bips.

00:26:11.560 | You'll see 50 or 100 basis points of outperformance

00:26:14.520 | by women over male fund managers.

00:26:18.160 | - On that note, speaking from experience,

00:26:20.480 | you'd be surprised or maybe not surprised

00:26:22.400 | how demoralizing it is to open up your brokerage account

00:26:25.400 | and just see a straight line down

00:26:27.320 | on one of your biggest holdings.

00:26:29.000 | And especially if it happens multiple times in a year,

00:26:31.480 | it can get exhausting, you know?

00:26:33.640 | - The time to have those experiences, as Ben says,

00:26:36.680 | is when you're young and you could recover it.

00:26:39.640 | That's the crazy thing about the best time

00:26:42.920 | to have terrible things happen to your portfolio

00:26:46.520 | is when it really doesn't matter

00:26:47.680 | because your portfolio is so small.

00:26:50.080 | And as you get older and you hold bigger portfolios

00:26:53.880 | and more and more of your wealth is in the stock market,

00:26:56.600 | you kind of look at market crashes when it does matter.

00:26:59.760 | And you say, yeah, I'm in a broad index.

00:27:02.480 | It'll come back.

00:27:03.560 | It's so weird that the less it matters,

00:27:06.400 | the worse it is for you.

00:27:08.040 | And the more it matters, you've by that time

00:27:10.320 | had a little experience and wisdom

00:27:11.600 | and you're just willing to ride it out.

00:27:13.760 | - All right, we got one more question.

00:27:16.320 | This is actually one we haven't really gotten before.

00:27:18.200 | And I wanted you particularly for this one, Barry.

00:27:20.240 | So I'm interested in your thoughts on this.

00:27:22.720 | - Okay, so this question's from Adam.

00:27:25.760 | Do you have any rules of thumb for clients

00:27:27.360 | regarding rare jewelry, collectibles, or art?

00:27:30.040 | I want to buy a watch and I'm having trouble moving forward.

00:27:32.560 | If you looked at my financials,

00:27:33.840 | you'd have no problem approving the purchase.

00:27:35.800 | I didn't grow up well off, so it's foreign to me

00:27:37.800 | to make a big ticket purchase like this.

00:27:40.240 | One thought I had was that a limited collection of art

00:27:42.560 | or watches can appreciate in value.

00:27:44.680 | I've studied watches for over a decade and know them well.

00:27:47.840 | But I'm now thinking that if I was fine buying iBonds

00:27:50.400 | when the rates were super high,

00:27:51.640 | why wouldn't I do the same for an investment watch?

00:27:54.160 | Am I just rationalizing this

00:27:55.480 | or is there some merit to this thinking?

00:27:57.400 | We have the right guy.

00:27:58.400 | Barry is a watch expert.

00:28:00.160 | - Yeah, I'm really not a big collectibles guy.

00:28:02.440 | But Barry, you've dabbled in some of this stuff

00:28:04.440 | and you like cars and stuff.

00:28:05.720 | How do you, do you ever approach this stuff differently

00:28:09.520 | because it is more of a hobby than anything?

00:28:11.440 | Or do you try to have a finance brain

00:28:13.440 | when going into collectibles and think like,

00:28:14.880 | well, I think I'm gonna buy this because I like it,

00:28:16.840 | but also because it's gonna appreciate in value potentially?

00:28:19.560 | - So I love this question for so many reasons.

00:28:22.120 | And you know, as I do, when we're dealing with clients

00:28:26.520 | who are successful and have money in the bank

00:28:28.760 | and all their boxes are checked

00:28:30.960 | and all their bills are paid,

00:28:32.360 | we kind of have to push them into spending money on things

00:28:35.880 | like vacations and family travel.

00:28:37.800 | - Right, if you wanna do this then,

00:28:38.720 | and you can afford to do it.

00:28:40.600 | - So that's number one.

00:28:41.600 | Number two, and you've heard me say this so many times,

00:28:44.880 | whenever I see the list of,

00:28:46.280 | look how much this art has appreciated

00:28:48.100 | or this particular Ferrari was just sold for $51 million

00:28:52.120 | or this watch, that is classic survivorship bias.

00:28:56.080 | 'Cause you're telling me what's done really well.

00:28:58.760 | You're not telling me about all the other stuff

00:29:00.520 | people bought 10, 20, 30 years ago.

00:29:03.240 | Hey, I'm buying this Ford Escort

00:29:07.560 | 'cause I think it's gonna go up in value.

00:29:09.400 | Or this, I give you a list of beautiful watches

00:29:13.600 | from some of the finest watch companies in the world

00:29:17.080 | that haven't appreciated the value.

00:29:18.540 | - Yeah, the bad ones don't get reported probably, right?

00:29:20.380 | - You don't hear about that.

00:29:21.700 | So what I always tell people

00:29:23.140 | who are looking at an expensive watch,

00:29:26.020 | first, if it's not one of the big three trilogy,

00:29:30.380 | which is essentially AP, Patek Philippe, and Rolex,

00:29:35.180 | the first thing you should do is,

00:29:36.940 | well, first, if you want a watch, go buy a watch.

00:29:39.380 | Second, if you're looking at an expensive watch,

00:29:42.380 | don't be afraid to buy a used watch.

00:29:44.820 | You could go to places like Chrono24 or Hodinkee.

00:29:48.140 | And there was a watch I was in love with for years

00:29:51.020 | and never wanted to pull the trigger on,

00:29:53.360 | found it about half price used.

00:29:54.200 | - Wait, are you saying that my Fossil

00:29:55.860 | is not in the big three?

00:29:57.140 | - Your Fossil is not in the big three,

00:29:58.740 | but it's owned by a company that has a lot of great brands.

00:30:02.340 | In fact, there's about half a dozen

00:30:04.060 | big Swiss watch companies that own,

00:30:07.220 | you know, there's hundreds of brands.

00:30:08.960 | So I happen to like, a Lange & Söhne is a watch I like.

00:30:13.300 | I'm wearing a Rolex, my first Rolex,

00:30:17.140 | I got right as I was finishing up Bailout Nation.

00:30:20.920 | I bought it from a mortgage broker

00:30:22.600 | who is liquidating everything.

00:30:24.540 | - Oh, really?

00:30:25.380 | Oh, so you bought low.

00:30:26.200 | - Too soon.

00:30:27.040 | No, I bought, and I still have that watch.

00:30:29.180 | I never sell these.

00:30:30.660 | I hardly sell cars.

00:30:33.180 | If you want to buy something that's collectible,

00:30:36.260 | go buy what you love and enjoy it.

00:30:38.960 | And if it turns out to appreciate, great.

00:30:41.940 | But, you know, if you,

00:30:43.500 | I love there's a couple of websites that do watch charts.

00:30:46.100 | Bloomberg also has a watch index.

00:30:48.180 | And not surprisingly, a lot of people had a lot of money

00:30:51.340 | in their bank accounts during the pandemic.

00:30:54.120 | Watches ran up, and a lot of these watches,

00:30:56.780 | yeah, and a lot of these are now down 20, 30%

00:30:59.680 | from their highs.

00:31:00.520 | So it was a speculative bubble.

00:31:03.020 | Don't think about things like,

00:31:05.180 | unless that's your full-time job, right?

00:31:08.100 | Unless you really want to spend a lot of time

00:31:11.260 | thinking about the investment aspects of cars and watches.

00:31:14.820 | By the way, watches require safes.

00:31:16.580 | They require bank vaults.

00:31:18.340 | Cars require maintenance and insurance

00:31:20.500 | and mechanical upgrades.

00:31:21.860 | It's a lot more complicated than, you know,

00:31:24.060 | it's not just a matter of paying $3,000 for a Ferrari

00:31:26.660 | in 1965 and selling it for $50 million 50 years later.

00:31:31.100 | That's the exception.

00:31:32.260 | Most of the time, you're driving the car,

00:31:34.580 | you're putting insurance on it, you're doing maintenance.

00:31:37.500 | They're breaking down on the side of the road.

00:31:39.820 | It's, as opposed to cost you nothing to buy an index fund

00:31:43.940 | and you put it away and forget about it,

00:31:46.140 | a much easier experience.

00:31:48.900 | - It sounds like he's also asking for permission, too,

00:31:50.580 | 'cause he said, "I grew up not very well off.

00:31:52.460 | "Now I have some money."

00:31:54.780 | I'm sure he's looking at the price tag and going,

00:31:56.420 | "Am I really gonna spend that on something

00:31:59.000 | "that goes on my wrist?"

00:31:59.840 | - Yeah, does a Rolex keep time better than, you know,

00:32:02.140 | a watch half the price? - No.

00:32:03.500 | Your phone keeps time better than anything.

00:32:05.820 | In fact-- - That was the great

00:32:07.180 | Paul Rudd quote in Sarah Marshall.

00:32:09.500 | He said, "I got rid of my watch and I moved out here."

00:32:11.220 | And they said, "Oh, really?

00:32:12.040 | "You don't?"

00:32:12.880 | "No, it's because I have it on my phone."

00:32:14.020 | But yes, I think it's-- - But it's really true.

00:32:15.800 | - Yeah, but if you're looking for the permission to do it,

00:32:17.840 | and again, your finances are fine,

00:32:19.700 | and you spend on a big ticket item,

00:32:21.340 | like, enjoy yourself a little.

00:32:22.700 | What's the point of saving in the first place

00:32:24.260 | if you're really well off if you're not gonna enjoy it?

00:32:26.780 | - The only caveat is all of these things,

00:32:29.820 | whether it's art or automobiles or watches

00:32:32.420 | or pick your poison, they're a rabbit hole.

00:32:35.260 | And, you know, it's the joke about tattoos.

00:32:38.100 | Two tattoos is either too many or too few.

00:32:41.260 | You start to have the same thing happening

00:32:43.460 | with watches and cars or whatever.

00:32:45.940 | Artwork, if you wanna tumble down that rabbit hole,

00:32:50.140 | you can, but, you know, I go to different car events

00:32:53.860 | and different watch events,

00:32:55.220 | and it's a casual, fun interest for me.

00:32:58.220 | I see people who are just hardcore.

00:33:01.140 | They really-- - But it's more of a hobby

00:33:03.180 | than it is an investment.

00:33:04.540 | - 100%, think about it as a hobby.

00:33:06.880 | You'll never be disappointed, and you know what?

00:33:08.900 | If you leave it to your kids or your nephew

00:33:11.340 | and it's appreciated, fantastic.

00:33:13.700 | - Right, hey, that was dad's watch.

00:33:15.500 | - I'm not buying Picassos, obviously,

00:33:17.620 | but I have friends that are artists

00:33:19.820 | and photographers and things,

00:33:20.740 | and I've got some of their work.

00:33:22.420 | And that's cool because it's like,

00:33:23.620 | at least you're also enjoying it, you know?

00:33:25.380 | And if it becomes valuable one day,

00:33:27.020 | then maybe you would consider selling something.

00:33:28.860 | But otherwise, you're enjoying it in the meantime.

00:33:30.820 | It's probably the most speculative

00:33:31.940 | out of all those, right?

00:33:33.380 | - Right, but if you're gonna put it on your wall,

00:33:35.460 | don't assume that pretty painting is your retirement plan.

00:33:39.000 | - Right, exactly, yeah, yeah.

00:33:41.040 | Also, on the note of cars,

00:33:42.400 | I just, I have to bring up the Cybertruck

00:33:45.880 | because I saw you wrote a post literally called clown car.

00:33:49.460 | - So that's not my quote.

00:33:51.160 | I'm quoting somebody who called it a clown car.

00:33:54.680 | To me, it looks like the,

00:33:56.460 | I don't know if you remember the game "Battlezone"

00:33:58.240 | or "Tank Command" that you used to be able to play

00:34:01.080 | those vector-shaped tanks.

00:34:03.680 | That's what it looks like to me.

00:34:05.620 | - He took a swing, he took a swing with it.

00:34:09.020 | - It's funny to see Tesla in a space

00:34:12.020 | where they're behind the rest of the industry

00:34:14.660 | 'cause they've been so far ahead.

00:34:16.400 | Their software, the over-the-air updates,

00:34:18.620 | they've been so far ahead of everybody for so long.

00:34:21.580 | The Ford 150 Lightning is a fantastic truck.

00:34:24.400 | I had one last summer for a week.

00:34:25.940 | - Is it bulletproof?

00:34:28.180 | - I don't know if people, you know,

00:34:29.740 | I'm not expecting the zombie apocalypse.

00:34:32.340 | So a bulletproof car to me isn't worth to exchange

00:34:36.300 | the added weight, the reduced acceleration,

00:34:38.660 | the shorter range.

00:34:40.520 | I don't really think I need those sort of bowling proof,

00:34:43.900 | bowling ball proof glass,

00:34:46.740 | which is what he used on the first demo.

00:34:49.680 | That said, maybe Elon is not the greatest guy

00:34:53.980 | in terms of figuring out humans and social networks,

00:34:57.580 | but he's pretty good when it comes to companies

00:34:59.700 | based on physics.

00:35:00.660 | - Someone in the chat says it's the DeLorean of the 2020s,

00:35:03.940 | which is--

00:35:04.780 | - Wouldn't surprise me.

00:35:06.180 | You know, they're late.

00:35:07.540 | That hardened steel is very hard to work with.

00:35:10.020 | You can't just stamp it.

00:35:11.180 | - As someone who has three kids and a lot of gear,

00:35:13.180 | I just like an SUV, an electric SUV.

00:35:14.940 | That's all I ask for.

00:35:16.400 | - Well, you should look at the R1S.

00:35:18.860 | - That's what I was gonna say.

00:35:19.700 | The Rivian, Doug DeMuro did a video on the R1T pickup,

00:35:24.500 | called it the greatest truck ever made.

00:35:28.660 | Wild acceleration, incredible off-road capabilities,

00:35:32.660 | passing Range Rovers, passing Jeeps up a hill,

00:35:35.740 | just the power and the independence of how--

00:35:38.460 | - The soccer moms are not using these to go off-road, but--

00:35:43.460 | - The Hyundais are nice also, and they're half the price.

00:35:45.740 | So that's not a bad way to look at it.

00:35:46.580 | - I think some of it is gonna come down to capability,

00:35:49.340 | though, right?

00:35:50.180 | If the Cybertruck can tow more than any other truck

00:35:53.860 | in the same price category,

00:35:55.500 | then maybe people will buy it just for that.

00:35:57.100 | - Well, what are you towing?

00:35:59.020 | If I tow a boat, I need it to move 8,000 pounds.

00:36:02.300 | To me, I'm not using it.

00:36:04.900 | Now, that said--

00:36:05.740 | - What if you're towing two boats?

00:36:07.940 | - Or two jet skis, but that said,

00:36:10.420 | Ford really promotes the F-150 Lightning

00:36:13.820 | as a vehicle for contractors,

00:36:15.860 | that it could carry, that it could tow,

00:36:17.860 | and you could plug in all of your electric appliances

00:36:22.060 | and tools. - It's pretty neat.

00:36:23.540 | - Like, it becomes the center of a job site,

00:36:26.780 | and they very much design that

00:36:28.980 | towards those sort of contractors.

00:36:30.820 | We'll see, you know, we're recording this

00:36:33.220 | before the official unveiling is.

00:36:35.220 | - I think it's starting now, right?

00:36:36.540 | - About 45 minutes from now.

00:36:38.780 | We'll get the prices, the details, all the things.

00:36:41.900 | Either they will have nailed it,

00:36:44.260 | and they have almost two million reservations.

00:36:47.260 | - I'll wait 'til they start marking all these down

00:36:48.900 | when people stop buying 'em.

00:36:50.820 | - We'll see what happens.

00:36:52.700 | I mean, it's all gonna be based on price and specs,

00:36:56.460 | and we'll find out soon enough.

00:36:57.700 | - I think it's gonna be really popular

00:36:58.900 | with people who loved playing Halo back in the day.

00:37:00.980 | It kinda looks like

00:37:01.820 | one of those vehicles. - It looks like that, right?

00:37:02.660 | - Yeah. - It does.

00:37:03.500 | - Vector-based auto design.

00:37:05.940 | - Okay, thanks to everyone who showed up live.

00:37:08.140 | As usual, we appreciate your comments.

00:37:10.020 | Thanks to Barry, as usual, for sharing.

00:37:12.860 | Remember, askthecompoundshow@gmail.com.

00:37:15.480 | Leave us a comment or a quote on YouTube.

00:37:18.000 | Send us an email.

00:37:20.300 | Like, rate, review, all that good stuff,

00:37:21.820 | and we'll see you next time.

00:37:22.700 | - See you, everyone.

00:37:25.100 | (upbeat music)

00:37:27.680 | (upbeat music)

00:37:30.260 | (upbeat music)

00:37:32.840 | (upbeat music)

00:37:35.420 | (upbeat music)

00:37:38.000 | (upbeat music)

00:37:40.580 | (upbeat music)

00:37:43.160 | (upbeat music)

00:37:45.740 | (upbeat music)

00:37:48.320 | [BLANK_AUDIO]

How Should I Invest Cash on the Sidelines?

Chapters