(beeping) - Welcome back to Ask the Compound, where we had two weeks worth of questions building up. Duncan and I today are thankful for the color purple. Remember our email here, askthecompoundshow@gmail.com. Today's sponsor is Bird Dogs. Duncan and I was in Detroit over the weekend, which they have an elite, elite holiday, holiday decoration system there now.

It's great. The kids love it there. They had ice skating and slides. And so John showed the thing here. I was walking around trying to be comfortable. So I was of course wearing Bird Dog joggers. Now they have two different kinds. One of them is kind of lightweight, which is good for the summer, fall, spring time.

But they also have these heavier duty ones that are like sweats almost. And in the past, I probably would have worn jeans, but the Bird Dogs pants were great. They're warm. I was comfy walking around the city. We're still giving away the, they're still giving away the Bird Dog white tech dad hat.

Promo code ATC. You still get this. Duncan wants one so bad. Birddogs.com/ATC or enter the code ATC. - I gotta say, you look really fashionable in that photo. - Not bad, right? - Yeah. - I could be a Bird Dogs model. Let's be honest here. - I think that might be in your future.

Yeah, I think that might. Very, very comfy. - So last week, did you miss the show enough that you were just having people ask you financial questions at the Thanksgiving table? - I did get a few finance questions from people at the table, but nothing special. - Nothing as exciting as your Twitter exchanges?

- Listen, all I'm trying to do is put a little good news into the world. People can get bad news from anywhere, right? The media likes to share bad news. People on social media like to share bad news. Every once in a while, I like to give some optimistic takes into the world.

And if there's one thing people hate more than anything on finance social media, it's good news and long-term stock market returns. They hate that stuff. Hate it. They push back. So I'm just trying to, listen, I'm not naive. I know that there's bad things in the economy. People hate higher prices.

People hate inflation. But there are some good things going on too. We've got a strong labor market. The economy continues to grow. Housing prices are still up. It's the stock market is almost back to all-time highs. Come on. - I mean, my biggest complaint, I know the main point of Twitter is to hate on people essentially and to fight.

But if people are gonna come at you, they should at least have something original. Half the time I'm looking, I'm like following the threads and people are saying the same thing that someone else already said and you refuted. Like the one that I keep seeing is you were talking about the economy and everyone's saying, "Well, yeah, what about credit card debt levels?" And you shared a chart that shows exactly what they're asking for.

And then like five other people ask you the same thing. What about credit card debt? - I'm used to it. I'm Teflon dunking. It just bounces right off of me. I have charts galore. Keep coming at me, people. - I think people don't realize that you actually do enjoy it.

I think that's the- - I do. I enjoy sharing good news when it's here. And guess what? When there's bad news, I'll share that too. But right now I think the good outweighs the bad. - Yeah. - Let's do a question. - Let's do a good news. - Okay.

Up first today, we have, I'm finding it incredibly hard to invest my excess cash with the S&P 500 closing in on new highs. I know I'm supposed to just grip my teeth and invest, not try to predict the market, and take comfort in knowing that time in the market is the biggest factor in my long-term investment success.

But it's so damn hard for me to do psychologically in these seemingly overbought conditions. I'm not an idiot. I do max out my 401(k), contribute a fair amount to 529s, and even invest a bit into my brokerage account. But I have money building up on the sidelines. There's cash on the sidelines, who you guys talk about.

But I know I should do something with, and every day the market hits a new high, I feel more paralyzed. Would love to see you tackle this problem, because I know I'm not the only one suffering from this strange and yes, enviable malady. - I'm glad we put problem in quotes here, because it is a first world problem.

I think for some investors, this will always be a problem. The thing is, obviously, market timing is hard. And the problem is, once you do it, and the worst thing that can happen is you're right, 'cause it leads to a cash addiction. So when markets are falling, and you're sitting in cash, you just say, well, they're gonna fall even further, so I'm just gonna wait, so cash becomes a safety blanket.

And then when markets are rising, you go, wait, well, I already missed it, I'm just gonna wait for it to crash, and then cash becomes a safety blanket again. I actually found an old email. This investor, a number of years ago, emailed me in like 2015, and said, I went to cash in 1999, timed it perfectly, right?

That was the tail end of the dot-com bubble, the most expensive the US stock market has ever been, and the stock market crashed. And then we came back after that bear market, and then crashed again, of course, in 2008. And unfortunately, 15 years later, this investor was still sitting in cash.

And I wrote him and said, what do you think the reasons are that you've been sitting in cash for so long? He said, well, it's some combination of fear, arrogance, and then he latched onto this macro doom and gloom that just put him in the investment fetal position for a decade and a half.

And so it's like, obviously, market timing is hard, 'cause you've gotta be right twice. You've gotta get out at the right time, then get back in at the right time. But you also have to psychologically get over that hurdle of wanting to get back in. And so I think there's a few ways to get around this fear.

I'll start with the more spreadsheet strategies, and then get to more of the behavioral side of things, 'cause the behavioral is obviously the biggest part here. Like, I view diversification and asset allocation as risk mitigation strategies. If everyone knew what the future was going to be, you wouldn't have to spread your bets.

You would just put 100% of your portfolio into Oatly, and you'd be fine, right? - Hey, Oatly's looking pretty good this week. I have to say. We joke a lot about my irresponsible position in Oatly, but the last week's been good. I'm still more than cut in half. - Someone in the live, someone wanted to know how closely your portfolio would match ARK, and they wanted to dunk it in there.

- For the record, I'm still more than cut in half in my position. - So like, the whole idea behind setting an asset allocation in the first place is that you're balancing out your various time horizons and risks as an investor, right? You don't have one asset allocation for a bull market, and one asset allocation for a bear market, and then one asset allocation for inflation, and then deflation, and rising rates and falling rates.

You set an asset allocation that balances out the different risks and needs in your portfolio, and that's durable enough for any environment, 'cause you don't know what the environment's going to be. So you have this mix of stocks, bonds, and cash, and maybe some other assets that you hold during any market environment.

So the first thing is, like, get an asset allocation, and that should be true of both your current assets and then your contributions. So you have that in place that you can, and maybe cash is one of those buckets too, right? Cash can be it, but I think you just have to, have to think in that asset allocation framework.

And if you're worried about valuations for large cap stocks, like, we've talked about this. We talked about this with Jeremy Schwartz a few weeks ago. There's other asset classes you can invest in that look much, maybe more attractive. Bonds have higher yields. International stocks, much cheaper. Small caps, much cheaper.

Dividend stocks, high quality stocks, any of these other things. There's other places you can invest besides large cap U.S. stocks. You can diversify into other strategies and asset classes. So I think it's also worth pointing out that new highs in the stock market are nothing to be afraid of.

John, give me a chart on here. They happen quite a bit. I used this one before from a couple weeks ago. This is new all-time highs in the S&P by decade. You can see there's some decades where it happens less, like the '70s and 2000s, but most decades, like, you're gonna have to get used to it.

I think it's 8% of the time since 1950 we're hitting a new all-time high. So, you know, roughly one out of every 12 or 13 trading days. Sure, some of these all-time highs are going to lead to a peak and then a crash or a bear market, but most of them simply lead to more all-time highs.

The other big piece is obviously defining your goals in the first place. What are you investing this cash for? The 401(k) is obviously for retirement. The 529 is for your kid's college plans. Like, I think most people look at their investments in their portfolio and think, "My goal is to get a good return," right?

But like, the goal of investing is not alpha or outperformance or a good sharp ratio or whatever. It's like retirement or a trip to Hawaii or a second home or renovations or beach house or whatever it is, healthcare needs, rainy day. So I think you have to kind of attach a goal to this and define what you're trying to get out of the future in the first place.

And I think another way of thinking about this, we've talked about mental accounting before. Remember we used the Dustin Hoffman example before. I think you can, even though it's one big pile of money, you can separate it out by buckets, right? And you can have a long-term bucket, which is stocks and retirement funds.

And then you can have an intermediate-term bucket that maybe is more income-producing assets, and then maybe a short-term bucket that includes cash. But I think if you have a cash, the way that I think about it is, you can have a percentage of cash over your portfolio, or you can have a level.

And for me, my short-term savings, I have a level of cash. And once my cash exceeds that level, I immediately sweep it out and put it into my investment accounts. And I think that's what you can do too, is put a ceiling on it. And so have your rainy day fund in cash, but then anything over and above a certain level, sweep into your investment accounts and put it to work.

So of course, that's like the spreadsheet part of it. That's easy on paper, hard to do in reality. So the hard part is implementation. So that's why I think you just have to, for most people, it's just automating. Automate your contributions, automate your asset allocation, automate your rebalancing, put it on the schedule, and then just stop looking at your portfolio so much into thinking about it.

Like, what about valuations? Like, have an asset allocation, make it automatic, and just, that's it. I think that's the best way to avoid mistakes in your portfolio, is just like, make good decisions ahead of time and get out of your own way. 'Cause obviously, those psychological barriers, otherwise you're always gonna be second-guessing yourself and your moves.

- Yeah, that sounds like good advice. - But this is something that I constantly hear from people. There was people who got out in 2008 or 2009 and they just could not force themselves to get back in. And you'd hear from 'em seven or eight years later after there's a bull market, and then they go, what do I do now?

And that's a really tough position to be in. - Yeah, it's like what you and Michael were talking about on Animal Spirits, being overly optimistic versus pessimistic. And you were taking the side of saying you'd rather be overly optimistic. 'Cause yeah, I mean, this sounds like a tough situation to be in.

When you're scared to actually do what you really kind of need to do. - But also, being optimistic long-term is good, but also build into your plan the fact that, yes, there's gonna be short-term setbacks as well, but don't build your whole plan on waiting for those setbacks to happen all the time, 'cause that's really, really a tough stance to take.

I'm only going to invest when the market crashes, because you constantly end up in a fetal position that way, and waiting for things to get worse and worse, and then you just never invest. - Yeah, I mean, I guess being a dreamer, we never run out of baked beans.

- This is true, in bullets. All right, next question. - Okay, that question was from Josh, by the way. Up next, we have a question from Shale. I'm probably mispronouncing that. "At a basic level, I understand the inverse relationship "between bond yields and prices, "but I can't wrap my head around "how this works with bond ETFs.

"If prices go down on the ETF, "shouldn't the yield increase to compensate "so quarterly dividends are higher? "What am I misunderstanding?" - Fair question. I know it can seem confusing, because many bond funds have a relatively static maturity or target duration, but just remember a bond ETF or mutual fund is just a portfolio of individual bond securities.

It's the same thing in many ways as holding an individual bond. There just might be some more buying and selling as opposed to holding all the bonds to maturity. So yes, as interest rates rise, prices go down, which is bad for returns in the short run, but now those higher rates translate into higher bond yields, making future returns more attractive.

So iShares was actually nice enough to provide us with a historical look over the last 10 years at their US aggregate bond ETF, the AG. This is like a simple total bond fund. So John, throw up the chart here. This is the average yield to maturity in the AG going back 10 years.

You can see rates were pretty skippy there for a while, obviously. You got close to 4% in 2018, and then of course right back down. Then the pandemic hit, and we got all the way down to 1% by the end of 2020, which was just all risks, no reward, more or less.

And now that yields have risen, by the end of October, the average yield of maturity on the AG is more than 5.6%, which is great, right? But you've had to endure some losses to get there. So John, show the next, throw the next one on. This is the AG over the last three or four years from the, we're in like a three-year bear market.

It's down 13%, which stings, but now you've got a yield north of 5%, closing in on 6% to compensate you. So you're just in a much better position regardless of where rates go from here. So you had to endure some short-term pain of yields going up, but now your yields are higher, and your future expected returns are much better.

So it stings to have those losses, but bond investors are in a pretty good place these days as far as yields go, especially compared to the last 15 years or so. - And now, I don't want to put words in your mouth, but you did say on yesterday's Animal Spirits that you think there's a 100% chance of a rate cut in 2024.

Is that what you said? - What? I would never say, I wouldn't. Probabilities is the next question. We're gonna talk about how you never say 100% for anything, Duncan. I just said, I think there's going, all right. - That's right, you Grand Rapids hedge. - Good segue into the next question because I think you never go 0% or 100% for anything.

That's realistic. So let's do the next question. - Okay, up next we have a question from Dave who says, "I get that the future is unknowable, "and you're supposed to think about it "in terms of probabilities, "but how do all these economists come up "with their probabilities in the first place?

"It seems like they all just say 40% as a hedge "so we never really know how much weight "to put on any outcome." - That's a really good question because like you go to the casino, you know what the probabilities are. Like you can look those up. In the markets, you don't know.

So let's bring in the person who actually was the first one to teach me about the benefits of thinking in terms of probabilities, Mr. Barry Ritholtz. - Hey, Barry. - Hey, everybody. How you doing? - Good. - Barry, you've always said that like the, you think of the future in terms of a range of outcomes or probabilities.

Never, it's not an always or never thing. It's never 100% this or 0% that, but you also can't say 40% every time like some of these economists do because then that's like an intellectual hedge of I just never want to be wrong. And I think the current setup is a good case in point.

I've heard you give talks on this before. Like people wanna know like what's the hard landing, soft landing, no landing, but how do you think about this in terms of, especially for something as complex as the economy, placing probabilities on outcomes in an unknowable future? - Right. So first, the 40% forecast is hilarious.

Justin Layhart and Ralph Winkler did a piece in the Wall Street Journal, I think it was 2018, about, hey, always forecast 40%. 'Cause if it doesn't happen, I was under half, so I was right. And if it does happen, hey, I warn you, this was almost a 50/50 thing.

- Right. - I told you this was a-- - You can't be wrong. - Right, so that's the joke. So first, really the first question you have to ask yourself is why do you wanna forecast anything other than long-term asset class returns? Hey, here's what equities give us, and here's what bonds give us, and this is what gold gives us.

And if you have a long enough holding period, and you mentioned Jeremy Schwartz before, 20 years is considered long-term, well, you could reasonably expect those sort of returns. But when we look at economists, some of them just extrapolate the current trends, others keep in mind-- - That's a lot of it, is recency bias, is like what just happened is gonna keep going, yeah.

- Right, employment is falling, it'll keep falling. The other thing that I kinda feel lots of people forget is when you're an economist working in a big Wall Street firm, think about the institutional pressures on you to try and stay somewhere in the middle of the pack, don't stand out like the gazelle on the outskirts of the herd when the lions are out hunting, don't say anything too radical, even if you think the world is going to hell, or the world is great, there's a lot of pressure on those sorts of jobs, career risk, to go too far away from the herd.

And then lastly, let's be blunt, forecasting is marketing, plain and simple. This is the silly time of year where everybody puts out their year-end forecast, the media covers it, and we talk about different people's forecasts. I wanna ask the person who asked this question, why do you even wanna think about why people are making forecasts?

If you're an investor, you should be thinking out decades, or certainly years. The problem with 12 months is that it's way too short for any forecast to be consistently accurate 'cause the world is just too random. - And your point about forecasting the markets versus forecasting the economy is great because even if you had the headlines and knew what the data was gonna be in the economy, it might not help you figure out what the markets are going to do.

- So if I would have told you, hey, God came down and told me that the Russians were gonna invade Ukraine next year, you probably wouldn't have bet and oil prices will be negative 12 months later. Like that's the last thing people are gonna think about. - Right, or by the way, a global pandemic is gonna shut the whole economy next quarter.

Do you think the market's gonna finish up for that year? It's so hard to do second and third steps removed. It's as Howard Marks loves to say, it's not the first level thinking, it's the second level. And then the repercussions in the third level, it just becomes so difficult to try and figure out how all the little waves in the pond when you throw a stone in, where it's gonna end up by the time it reaches the other side of the lake.

- The one time that the economic model did say there's 100% chance of recession in 2023, it was wrong. And everyone assumed there would be a recession this year and there wasn't. So yeah, that's so true is that people forecasting and especially over a short period of time is not even like the data, it's the reaction to the data.

And that's the thing that you can't, because trying to, you know, I can't guess what I'm gonna do tomorrow in some cases, trying to guess what all these collective investors are going to do in a month or a few months, it's impossible. - That's why all this sentiment polling is so silly, whether it's markets or inflation or elections.

When you ask somebody who you're gonna vote for, A, 12 months out, we have no idea who's even gonna be around. Good chance that either of the presidential candidates aren't on the ticket, not a coin flip, but a pretty significant possibility that one or the other won't be. And then it's, are you gonna vote for who you're gonna say?

Say you are, are you even gonna get out of the house and vote? We have such low levels of voter participation. Those sorts of things are always terrible. And it's the same as true when we talk to people about inflation or markets. Nobody really knows what next year looks like.

Nobody knows the random events that are gonna come up. So why even try and forecast that? Just look at the long-term returns for various asset classes and that's how you should be thinking about your portfolio. - Yeah, I think we can say like, the longer your holding period, the better your results should be, but we still can't guarantee with 100% accuracy that like, this is what they're going to be, that the future is gonna match the past 'cause we just don't know.

- Right, we can say 99% of all 20-year rolling averages in equities have been positive. That's about as much, as close to a guarantee as you're gonna get. And by the way, that's just US equities. Different countries don't have that same advantage. - Right. - Is there anyone that like, ranks economist calls and sees like, who has the best, you know, rating for getting things closest over time?

- Institutional investor does these annual awards. Ed Hyman of ISI for like, 40 years in a row was always top ranked, but it was never because he was making forecasts. It was always because, hey, these are the three possibilities. This is what everybody is expecting. This is the surprise that might happen.

And here's how we think markets will react in each of these cases. He actually would be probabilistic and do that second level thinking. And his institutional clients have always loved him. - I think that is the way if you're thinking of the economy is like, here's maybe my baseline, but here's also some other paths.

And then you have the outside stuff that happens that you just can't forecast. My favorite is the strategists who do the year-end S&P targets. And then they let them change them three months before the end of the year. And they just put it close to whatever's happened. - Right.

Hey, we were forecasting a 30% crash, but the market's up 20%. So let's change our target. Thanks for nothing. - Yeah, of course. All right. - I like the idea of a choose your own adventure style, though, where you have a couple of different-- - That's basically what it is.

- And it's a smart way to think about an unknowable future. Ed Hyman's probably the guy best known for popularizing that. - All right, cool. - All right, next question. - Up next, we have a question from Michael. Huge fan of your podcasts and writing. My girlfriend recently received an inheritance and is thinking about how to invest it.

We're planning to keep a good chunk in cash for a house purchase, but want to invest some as well. She was given a few equity positions from her parents' financial advisor, Apple and Microsoft, et cetera, that she was told were expected to outperform over the next five to 10 years.

I see they really went out there with their calls. While that's possible, I think this money should be invested in market ETFs for diversification purposes. Do you have any advice on how I should convince her that diversification could be the best option here? It's a tricky situation since this is technically her money, but if we get married like we both expect to in the coming years, this decision will impact us both.

- I mean, obviously, someone in our position that studied this stuff, we can spout on the merits of diversification. If you're a young person hearing this for the first time, your eyes are gonna glaze over. There's no way that anyone wants to hear that. So I guess you could try to give the textbook stuff, but it's almost like some people just need to live through the experience of holding some individual stocks to know why diversification is important in the first place.

I don't know if you're gonna be able to convince her unless she really listens to what you have to say. - By the way, this was literally Thanksgiving conversation from a cousin of a niece who we hadn't seen in a couple of years since the pandemic, single, living on her own, saving for an apartment, saving to buy a house, and ended up getting a bunch of individual stocks and said, "What do I do with these?" And it's like, well, do you wanna live with the ups and downs?

You're young, you got a 40-year investment horizon. You wanna live with the ups and downs of the volatility, or do you wanna just put it on set and forget and not stress about it? I love the framework of regret minimization. What's gonna be worse if you stay with these stocks and one of 'em crashes, or if you sell these stocks for an index and they, you know, magnificent seven on you?

And the answer this person gave me is, "I don't wanna think about it. "I got enough stuff going on in my life. "I can't be stressed about this." And I had to say, well, you know the answer then. Roll it into VTI, roll it into Vanguard Total Market or the S&P 500, or whatever your index of choice is, and just forget about it.

Even if it's Microsoft and Apple, and you say, "I wanna have a more tech-focused investment." All right, well, roll it into the Qs so you don't have a single stock focus. Any given stock could get whacked 50%. - Well, I always say the Black Monday crash happened one time in the United States for the market.

For an individual stock, that can happen any time they put out earnings. - Tuesday, right, every Tuesday you get that. The market could be up and your stock could be down 20%. So, yes, that's a way to think about the volatility of an individual stock. Maybe that's, I do like the regret minimization framework.

That is always a good one. And just helping them understand the difference between an individual stock and a basket of stocks. A basket of stocks can still go down, but it might not get crushed as much, especially in a short period of time, as the range of outcomes is just way wider for individual stocks.

- You know, this question really forces people to think about who they are, what their risk tolerance is, how, you have to kind of project yourself forward in time, a decade, and think back about what really is gonna bother me about decisions I made. I've spoken to younger people who have investment portfolios and they're like, I don't care about my, if the stock goes up and down, I'm in my 20s, let it bounce around and Microsoft and Apple are great companies, they're not going anywhere.

If that's your attitude, by all means, hold on to a couple of positions around your core portfolio and let 'em run. But just be aware of the fact that sometimes, look at how many times Amazon, one of the biggest companies in the world, in the early 2000s, Amazon crashed 80 something percent to three or four dollars.

And then again, we saw the crash post.com and then in 2020, and then they took off. And you really have to understand, I'm in this company for the long run and I'm hoping it's not Lehman or Enron. - He also said here that they're dating now and hoping to get married in the future.

I actually think this is a good time to have this kind of money talk to understand how you both approach it. So before you even get married, I think you can, it's a good time to have this kind of talk to understand how you feel about this kind of stuff.

- You know, indexers and active stock pickers can be married. It's just a core and satellite sort of portfolio. They don't have to butt heads. It could be complimentary. - He's such a romantic. - The data shows she's gonna outperform him. Women are better investors than men because they're more logical.

They're more rational. They don't make these crazy moves. - Less overconfidence, less arrogance. The data, by the way, is overwhelming on this. And it's not like a teeny little bit. It's a substantial amount of bips. You'll see 50 or 100 basis points of outperformance by women over male fund managers.

- On that note, speaking from experience, you'd be surprised or maybe not surprised how demoralizing it is to open up your brokerage account and just see a straight line down on one of your biggest holdings. And especially if it happens multiple times in a year, it can get exhausting, you know?

- The time to have those experiences, as Ben says, is when you're young and you could recover it. That's the crazy thing about the best time to have terrible things happen to your portfolio is when it really doesn't matter because your portfolio is so small. And as you get older and you hold bigger portfolios and more and more of your wealth is in the stock market, you kind of look at market crashes when it does matter.

And you say, yeah, I'm in a broad index. It'll come back. It's so weird that the less it matters, the worse it is for you. And the more it matters, you've by that time had a little experience and wisdom and you're just willing to ride it out. - All right, we got one more question.

This is actually one we haven't really gotten before. And I wanted you particularly for this one, Barry. So I'm interested in your thoughts on this. - Okay, so this question's from Adam. Do you have any rules of thumb for clients regarding rare jewelry, collectibles, or art? I want to buy a watch and I'm having trouble moving forward.

If you looked at my financials, you'd have no problem approving the purchase. I didn't grow up well off, so it's foreign to me to make a big ticket purchase like this. One thought I had was that a limited collection of art or watches can appreciate in value. I've studied watches for over a decade and know them well.

But I'm now thinking that if I was fine buying iBonds when the rates were super high, why wouldn't I do the same for an investment watch? Am I just rationalizing this or is there some merit to this thinking? We have the right guy. Barry is a watch expert. - Yeah, I'm really not a big collectibles guy.

But Barry, you've dabbled in some of this stuff and you like cars and stuff. How do you, do you ever approach this stuff differently because it is more of a hobby than anything? Or do you try to have a finance brain when going into collectibles and think like, well, I think I'm gonna buy this because I like it, but also because it's gonna appreciate in value potentially?

- So I love this question for so many reasons. And you know, as I do, when we're dealing with clients who are successful and have money in the bank and all their boxes are checked and all their bills are paid, we kind of have to push them into spending money on things like vacations and family travel.

- Right, if you wanna do this then, and you can afford to do it. - So that's number one. Number two, and you've heard me say this so many times, whenever I see the list of, look how much this art has appreciated or this particular Ferrari was just sold for $51 million or this watch, that is classic survivorship bias.

'Cause you're telling me what's done really well. You're not telling me about all the other stuff people bought 10, 20, 30 years ago. Hey, I'm buying this Ford Escort 'cause I think it's gonna go up in value. Or this, I give you a list of beautiful watches from some of the finest watch companies in the world that haven't appreciated the value.

- Yeah, the bad ones don't get reported probably, right? - You don't hear about that. So what I always tell people who are looking at an expensive watch, first, if it's not one of the big three trilogy, which is essentially AP, Patek Philippe, and Rolex, the first thing you should do is, well, first, if you want a watch, go buy a watch.

Second, if you're looking at an expensive watch, don't be afraid to buy a used watch. You could go to places like Chrono24 or Hodinkee. And there was a watch I was in love with for years and never wanted to pull the trigger on, found it about half price used.

- Wait, are you saying that my Fossil is not in the big three? - Your Fossil is not in the big three, but it's owned by a company that has a lot of great brands. In fact, there's about half a dozen big Swiss watch companies that own, you know, there's hundreds of brands.

So I happen to like, a Lange & Söhne is a watch I like. I'm wearing a Rolex, my first Rolex, I got right as I was finishing up Bailout Nation. I bought it from a mortgage broker who is liquidating everything. - Oh, really? Oh, so you bought low. - Too soon.

No, I bought, and I still have that watch. I never sell these. I hardly sell cars. If you want to buy something that's collectible, go buy what you love and enjoy it. And if it turns out to appreciate, great. But, you know, if you, I love there's a couple of websites that do watch charts.

Bloomberg also has a watch index. And not surprisingly, a lot of people had a lot of money in their bank accounts during the pandemic. Watches ran up, and a lot of these watches, yeah, and a lot of these are now down 20, 30% from their highs. So it was a speculative bubble.

Don't think about things like, unless that's your full-time job, right? Unless you really want to spend a lot of time thinking about the investment aspects of cars and watches. By the way, watches require safes. They require bank vaults. Cars require maintenance and insurance and mechanical upgrades. It's a lot more complicated than, you know, it's not just a matter of paying $3,000 for a Ferrari in 1965 and selling it for $50 million 50 years later.

That's the exception. Most of the time, you're driving the car, you're putting insurance on it, you're doing maintenance. They're breaking down on the side of the road. It's, as opposed to cost you nothing to buy an index fund and you put it away and forget about it, a much easier experience.

- It sounds like he's also asking for permission, too, 'cause he said, "I grew up not very well off. "Now I have some money." I'm sure he's looking at the price tag and going, "Am I really gonna spend that on something "that goes on my wrist?" - Yeah, does a Rolex keep time better than, you know, a watch half the price?

- No. Your phone keeps time better than anything. In fact-- - That was the great Paul Rudd quote in Sarah Marshall. He said, "I got rid of my watch and I moved out here." And they said, "Oh, really? "You don't?" "No, it's because I have it on my phone." But yes, I think it's-- - But it's really true.

- Yeah, but if you're looking for the permission to do it, and again, your finances are fine, and you spend on a big ticket item, like, enjoy yourself a little. What's the point of saving in the first place if you're really well off if you're not gonna enjoy it?

- The only caveat is all of these things, whether it's art or automobiles or watches or pick your poison, they're a rabbit hole. And, you know, it's the joke about tattoos. Two tattoos is either too many or too few. You start to have the same thing happening with watches and cars or whatever.

Artwork, if you wanna tumble down that rabbit hole, you can, but, you know, I go to different car events and different watch events, and it's a casual, fun interest for me. I see people who are just hardcore. They really-- - But it's more of a hobby than it is an investment.

- 100%, think about it as a hobby. You'll never be disappointed, and you know what? If you leave it to your kids or your nephew and it's appreciated, fantastic. - Right, hey, that was dad's watch. - I'm not buying Picassos, obviously, but I have friends that are artists and photographers and things, and I've got some of their work.

And that's cool because it's like, at least you're also enjoying it, you know? And if it becomes valuable one day, then maybe you would consider selling something. But otherwise, you're enjoying it in the meantime. It's probably the most speculative out of all those, right? - Right, but if you're gonna put it on your wall, don't assume that pretty painting is your retirement plan.

- Right, exactly, yeah, yeah. Also, on the note of cars, I just, I have to bring up the Cybertruck because I saw you wrote a post literally called clown car. - So that's not my quote. I'm quoting somebody who called it a clown car. To me, it looks like the, I don't know if you remember the game "Battlezone" or "Tank Command" that you used to be able to play those vector-shaped tanks.

That's what it looks like to me. - He took a swing, he took a swing with it. - It's funny to see Tesla in a space where they're behind the rest of the industry 'cause they've been so far ahead. Their software, the over-the-air updates, they've been so far ahead of everybody for so long.

The Ford 150 Lightning is a fantastic truck. I had one last summer for a week. - Is it bulletproof? - I don't know if people, you know, I'm not expecting the zombie apocalypse. So a bulletproof car to me isn't worth to exchange the added weight, the reduced acceleration, the shorter range.

I don't really think I need those sort of bowling proof, bowling ball proof glass, which is what he used on the first demo. That said, maybe Elon is not the greatest guy in terms of figuring out humans and social networks, but he's pretty good when it comes to companies based on physics.

- Someone in the chat says it's the DeLorean of the 2020s, which is-- - Wouldn't surprise me. You know, they're late. That hardened steel is very hard to work with. You can't just stamp it. - As someone who has three kids and a lot of gear, I just like an SUV, an electric SUV.

That's all I ask for. - Well, you should look at the R1S. - That's what I was gonna say. The Rivian, Doug DeMuro did a video on the R1T pickup, called it the greatest truck ever made. Wild acceleration, incredible off-road capabilities, passing Range Rovers, passing Jeeps up a hill, just the power and the independence of how-- - The soccer moms are not using these to go off-road, but-- - The Hyundais are nice also, and they're half the price.

So that's not a bad way to look at it. - I think some of it is gonna come down to capability, though, right? If the Cybertruck can tow more than any other truck in the same price category, then maybe people will buy it just for that. - Well, what are you towing?

If I tow a boat, I need it to move 8,000 pounds. To me, I'm not using it. Now, that said-- - What if you're towing two boats? - Or two jet skis, but that said, Ford really promotes the F-150 Lightning as a vehicle for contractors, that it could carry, that it could tow, and you could plug in all of your electric appliances and tools.

- It's pretty neat. - Like, it becomes the center of a job site, and they very much design that towards those sort of contractors. We'll see, you know, we're recording this before the official unveiling is. - I think it's starting now, right? - About 45 minutes from now. We'll get the prices, the details, all the things.

Either they will have nailed it, and they have almost two million reservations. - I'll wait 'til they start marking all these down when people stop buying 'em. - We'll see what happens. I mean, it's all gonna be based on price and specs, and we'll find out soon enough. - I think it's gonna be really popular with people who loved playing Halo back in the day.

It kinda looks like one of those vehicles. - It looks like that, right? - Yeah. - It does. - Vector-based auto design. - Okay, thanks to everyone who showed up live. As usual, we appreciate your comments. Thanks to Barry, as usual, for sharing. Remember, askthecompoundshow@gmail.com. Leave us a comment or a quote on YouTube.

Send us an email. Like, rate, review, all that good stuff, and we'll see you next time. - See you, everyone. (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music)