Welcome back to Portfolio Rescue. Duncan, we had a week off, so our inbox is overflowing with questions. Remember, email is askthecompoundshow@gmail.com. Today's sponsor is Liftoff, our automated platform provided by Betterment. It's kind of an uncertain time these days, right? It seems like one week we have stagflation, the next week the economy is too strong, one week we have a hard landing, the next week a soft landing, the years are constantly changing.

In that context, I don't mind just automating and setting and forgetting. That's kind of what I do with my account at Liftoff. My fund's going automatically, my dividends are reinvested automatically, tax loss harvested automatically. All this stuff happens automatically. I don't have to do it. Emotions are taken out of the equation.

If you want to check it out, Liftoff invest.com. Duncan, last time we had a show, we looked at some charts, some long-term 10-year rolling returns, 20-year rolling returns, 30-year rolling returns. John, throw up this tweet. They've got to be rolling, you know? Yes. Well, yeah, that's a more honest way of looking at it.

I put this up, and I did all the different ones, and someone responded, "This was comforting to me in my 30s, not so much anymore looking at the 10 and 20 charts." And I feel like this is a constant back and forth we're having on the show with people with questions.

Should I be 100% in stocks? Should I hedge a little bit and have more money in cash or bonds or alternatives or whatever it is? And this person was saying, "Hey, when I'm 20 and 30, having all my money in stocks is pretty easy, because the very long term looks pretty darn good.

When I'm in my middle age, 40s, 50s or so, maybe 60s, it doesn't look so good, because 10 years you can still have really bad returns." And I think this is the constant push and pull for investors, is thinking through this idea of when to balance and when to take a bunch of risk.

And the good thing is that no one has the right answer. Unfortunately or fortunately, there is no good. Some people are fine taking on that 100% equity risk. Some people aren't and need to do more of a glide path. The good thing is that you just have to do what works for you.

Also, there are plenty of people out there that will tell you they know the answer. Yes. And that's the thing, is it's circumstantial, and it matters. It not only matters your financial situation, but also your personal makeup. If you know that you simply can't handle taking so much risk, then you have to do what works for you.

And if you know that you can, and you're going to be okay with it, then yes. That's the thing I've come to learn, is just do what works for you. All right. Let's get into the questions. Right. I always feel really good about risk until things go against me.

First up today, we have a question from me, actually. I was asking the other day, and we were like, "Let's just do it on the show." I was asking you, "Is it okay to stop contributing to your 401(k) to save up for a down payment?" Yeah. This sounds like a sharp, sharp guy here asking this question.

So you were saying, "Listen, I'm looking to buy a house. We're trying to figure out how much we can afford. We're trying to figure out down payment. Is it ever okay?" And I think you also said, "Your wife might get a match regardless, but you, if you stop your 401(k), you don't get the match anymore." Right?

Right. I understand the hesitancy here, because a lot of these personal finance experts will shame you, because do you know what those contributions could be worth in 30 years if you don't put them on? And it is true that like a match is free money. But it's not like you're turning them off to do Fandu parlays all day.

Right? Probably not. You're turning them off for a good reason. Sometimes life gets in the way of the spreadsheets when it comes to financial planning. You just have to divert your savings into other avenues. So the first house we ever bought, it was a split-level ranch. And the upper half of it was finished.

The lower level was unfinished. And we kind of said, "Hey, this is great. We can grow into it a little bit. And then when the time is right, we can finish out the basement." And it was more expensive than I thought. Now, I will say this. To save some money, my father-in-law knows what he's doing in terms of building and such.

So I'd say 50 or 60% of it we did ourselves. I'm not handy at all, so I did what I was told. I held this and moved this. But we framed it, and we did some of the stuff ourselves. So we did two bedrooms, a bathroom, put a little bar in, big TV area.

But it cost us. And so for probably a period of like, I don't know, 18 to 24 months, that was our big saving focus. And I didn't completely turn off savings elsewhere, but that was money that could have gone into saving money elsewhere. So would it have been nice to have those dollars go into the market?

This is probably 10 years later. Yeah, they'd be worth a lot more money, but my 401(k) wouldn't have added 1,900 square feet to our house either. Right? So I think, listen, it's not easy to save for down payment these days, especially in an expensive real estate market like you're in.

So I think if you have to go for 6, 12, 18 months, and that's where your personal finance focus is, and you know that afterwards you can turn them back on, what's going to make you happier? Getting your living situation figured out? You've already learned that it's kind of tricky when you're renting, right?

Having your own place might make things a little easier. So yes, I bless this decision. If you have to do it, you have to do it. Right? Okay. Yeah. And the other part that I was just having trouble figuring out is, so if you have a traditional 401(k) contribution that's before taxes or whatever, then you have to factor in, okay, well, how much is this actually going to end up netting me for a down payment, savings, all that kind of stuff.

So yeah, it's a little confusing to figure out. I think if you're doing Roth contributions, I guess it's more straightforward. That's a very stressful process too. Buying your first home especially. Buying a home at any time is stressful, but knowing you have that sort of fallback for the down payment and having it be ready, that if you find a place you really love, that you can go ahead and do it, and you already got the letter from the bank saying, "Yes, you're signed off at this level." That's good peace of mind.

That money sitting in your 401(k) is not going to give you nearly as much peace of mind as having that down payment sitting there ready to go. Yeah. That makes sense. Cool. Also, good luck with the housing search. It's a really easy, as we're going to talk about some questions here, it's not the easiest housing market.

Yeah. No, it's not looking great, but the good news is we're about to sign. We're getting into another place finally after the flood for all those of you that follow along week to week. We're actually signing another 12-month lease, so it will be probably 12 months anyway. I bet you have some time then.

All right. Let's do another one. Up next, we have, "I'm in my mid-40s and have been running my own RRSP, Canadian 401(k) for a while now. I have almost no exposure to bonds, and I ran it by an advisor and her reply was, 'Why would you want bonds?' I could see her panic as bonds had been paying next to nothing for years and didn't appear to offer much protection when stocks dropped.

Instead of bonds, I've been buying covered call ETFs for what would be the fixed income portion of my portfolio. They pay a nice 6% to 10% distribution, and looking at charts, seem to be more secure than even a bond ETF. I'm not expecting to make a massive of capital gains from the value of the individual shares, but using a drip and watching the shares multiply over time seems like a much better play than making almost nothing on a bond ETF.

Does this make sense, or have the rate hikes changed things?" Before we get into this one, someone actually in the live comments here said, "How about a 401(k) loan for Duncan?" We're going to get into that in a couple weeks, actually. Blair Ducanet is going to come talk about her situation with that.

So, put a pin in that one. Also, a drip just for our young and new investors watching, that's an automated dividend reinvestment plan. Dividend reinvestment plan, right? Yep. Okay. So, we're going to start off with questions, and the section on investing has been filling up with covered call questions for the better part of a year.

There are a ton of investors who swear by this strategy. Jason Zweig at the Wall Street Journal actually just had a piece about this a couple weeks ago, how covered call strategies are just exploding in popularity. And the reason why, because the strategy outperformed last year. And given how it works, it kind of makes sense.

So, some people might not understand exactly how these work, so let's do a quick tutorial here. So, selling a call option, a call option itself gives the buyer of that option the right to buy at a specified price by a specified date. So, if it hits a certain price by a date, you have the right to buy that.

To get that option, you have to pay a premium. So, let's look at an example. So, let's say you own 50 shares of a stock currently trading for $20. Call options with a strike price of 25 bucks, say, cost 50 cents a piece. So, the person who's selling these options would earn $25 in income on their $1,000 position.

That's good enough for you at 2.5%. So, now, though, if you own this stock, your upside is limited to 25%, going from $20 to 25, plus that 2.5% option premium. And if the stock goes to 30 or 35 or higher, you're over and above 25, you're sort of off the walk, right?

You're capped there. So, this is a type of strategy that, in a bull market, you assume it's going to underperform. The income on the sale of options can help in a hard-charging bull market, but you're likely to miss out on some gains and lag the market, because you're probably going to get taken out on some of those call options.

However, in a bear market, this thing should outperform from the option income alone, right? Plus, in a bear market, volatility spikes, and that actually increases some of that income, maybe because it helps with the pricing of options. So, essentially, what you're doing with a covered call strategy is you are reducing both upside and downside volatility.

And so, many of these covered call strategies also target lower volatile stocks or low volatile sectors. So, that can also help lessen the blow from stock losses. So, I think one of the reasons so many investors are clamoring for these strategies is because last year, they were much less volatile and they outperformed in a bear market.

Still, I would not go so far as to call this strategy a bond replacement. I think that's a stretch. A lot of people will say the same thing for dividends. I think dividends are a bond replacement. I'm not willing to go that far. I also think it's a stretch to call option income the same as fixed income yield, because it's so much more volatile and the pricing can change on it.

You're not locking in a yield. That yield can change. I don't think it's the same thing. These strategies still carry equity risk. That risk might be blunted a little bit, but if stocks get crushed, these strategies are going to go down a lot, too. They might not go down as much, but they're still going to get hit.

So, I think this strategy can act as a form of diversification, but I don't think it's a bond or cash substitute by any means, especially as far as my risk tolerance is concerned. There's a little fixed income slander here. I want to stick up for bonds a little bit.

I know bonds had a dreadful year last year. They got crushed. And I hate the term "perfect storm" when it comes to finance, but last year was basically like a tornado mixed with a hurricane mixed with a tsunami for bonds. Like a sharknado. There you go. My kids are always talking about, "Is there a tornado with lightning in it or something?" There's some weird thing like that.

I'm sure, yeah. I mean, the pandemic drove bond yields to levels that we've never seen before. I think the 10-year got to 37 basis points intraday or something. It was ridiculous. So, that was unstable before we even got to 9% inflation. So, there was absolutely no margin of safety built into bonds.

And they rose so fast last year because the Fed went on one of their most aggressive hiking cycles ever. And that's just never happened before. So, John, give me a chart of stock and bond returns historically. These are all the years since 1928 that the U.S. stock market has been down.

It's happened 26 times by my count. And on the right side there is what happened in 10-year treasuries in those same down years. So, by my calculations, the average loss for a down year in stocks is a loss of almost 14%. The average gain for 10-year treasuries in those years is a gain of a little more than 4%.

Now, 21 out of the 26 years bonds have been up. So, that average includes last year's almost 18% massacre in 10-year treasuries. So, the biggest loss in bonds during a down year in stocks before last year was 5%. And that happened in 1969. So, 21 out of 26 years for bonds being up and stocks are down, that's not a perfect batting average, but there's always exceptions to the rule.

So, I don't think you can just throw bonds out the window because they had one bad year. I think last year there was a lot of stuff going on that caused that. Plus, yields could always move higher from here, but we're talking 4-5% in U.S. government bonds now. You can get 5% on a 6- or 12-month T-bill, which basically has zero duration or interest rate risk.

And so, I understand people not wanting to be involved when rates are 1%, but that's not the world we live in anymore. Maybe bonds aren't for you, that's fine, depending on your risk tolerance. They're not for everyone. But I just think you have to remember that any sort of income-producing strategy that involves a little bit of equity risk, whether it's dividend stocks or covered call strategies or high-yield bonds, whatever it is, that always, always, always with higher yields comes higher risk.

So, I'm not going to try to talk you out of a covered call strategy. I'm not going to try to talk you into it either. I just want people to go into it with their eyes wide open and understand how it works before investing in something like this. Also, it's probably worth reiterating, but this is something that works much better in a tax-advantaged account because of all those distributions.

Good call, Duncan. Yes, the taxes and the options, even if it's an ETF, you still get dinged a little bit. So, yes, just know what you're getting yourself into. I'm always weary of bond substitutes because I don't think there really is a substitute for government bonds. Right. And they call it secure, but really what they're talking about is low beta, right?

Yes. Which, like you're saying, means that it's capped on the upside some, too, right? The same thing works with defensive stocks or dividend-producing stocks that are in consumer staples or utilities. Those kind of sectors are probably going to outperform in a bear market. They're going to underperform in a bull market.

And I think you just have to get used to that kind of thing where you're not getting into it after the bear market already happened and, you know, jumping in and out at the wrong time. Cool. All right. Let's do another one. All right. And that question was from Mike, I believe.

So, thanks, Mike. Okay. Up next, we have, "You mentioned previously that you took out a HELOC during COVID. I'm wondering why you chose that instead of a home equity one. We moved into a new home and we're going to sell it, but I've chosen to rent it out instead.

Without having the proceeds from a prior home sale, we are considering either a HELOC or a home equity loan, now that we have equity in two homes." So this is the kind of thing that became very popular during the ultra-low mortgage rate phase of the pandemic. If you hold a 3% mortgage and have the ability to rent out your house and that covers all or most of your needs, why would you give up on a 3% mortgage?

I think that's what a lot of people are thinking. Obviously, there's another thing here with being a landlord, but yeah, I kind of get it. Also, side note, I think eventually some bank is going to step in and let you port your 3% mortgage to another loan. I think they're going to have to, to get housing activity back up.

I think they're going to tell people, "Listen, if you have a 3% mortgage, we'll let you trade it once for a new house. This is going to happen. Someone is going to do this. Fintech people, call me." Listen, homeowners have plenty of equity to deal with these days, so it makes sense people are trying to think about what to do with it.

John, the chart we've used before. This is homeowners' equity since the end of 2019, which is essentially the start of the pandemic. It's up 50%. It's up to $29 trillion or something. You'd probably take off, I don't know, $1 or $2 trillion now, based on maybe where housing prices are now, because this is as of the end of last year.

You'd expect it to fall a little bit, but we're talking about a $10 trillion increase in home equity. What do you do with it? As Taylor pointed out, I went with a HELOC during the pandemic. Here's how it works. I have a 10-year draw period. It works like a line of credit.

The bank gave me an amount based on my loan-to-value ratio. In that 10-year window, I can draw on that credit as needed. I just have to write a check. It's really easy. I can use it as many times as I want. If I use the money, then pay it off and use it again and pay it off in that 10-year window as many times as I want.

During this time, the loan is interest-only, so I don't have to pay it on the principal if I don't want to. I could just pay the interest after that 10-year draw period is done. Then, it essentially converts to a 15-year mortgage with minimum principal and interest payments. It's like another mortgage, basically.

It's a 25-year period. The upside to this approach is it has a ton of flexibility. When I took out my HELOC, we really didn't need it for anything. I just did it because I wanted to use it as a backstop, or if I needed to write a big check for some reason, I didn't want to have to shuffle a bunch of other things around.

I could just go here and take it out immediately. Since we didn't have any huge projects on the horizon, we thought we might have some in the future. I just wanted to have it there. The downside is that the rate is floating. When I first took out my HELOC, the rate was sub-3% in 2020.

Now, it's over 7%. I think it's 7.25%. The good news is you can use that. If you use it for home renovations, you can write off that as tax deductible, the interest. Obviously, looking at the benefit in hindsight, a home equity loan or refinance cash out would have been better if I just put that money in cash and let it sit in T-bills.

I'm a process guy, not an outcomes guy. I didn't know interest rates were going to do that at the time. The problem with that, if you took out a home equity loan against your house's collateral or cash out refinance, is that that's a loan you have to pay back immediately.

I didn't want to have monthly payments unless I knew I was going to do something with it. There's not as much flexibility there. You kind of have to ask yourself two questions. When do I need this money? Do I need it right now or can it wait? Then, are you willing to lock in a 7% rate right now with a home equity loan, or do you want to roll the dice with the HELOC and maybe those rates fall and come back down to earth?

They are variable. They'll move. It's kind of prime plus something, basically. I think liquidity needs probably matter most. Do you need this money for something? Do you need it for a down payment to cover some cash since you now have two houses you're sitting on? Anyway, like all personal finance decisions, do what works for you.

Whether that's borrowing money at 7% if you need the money now and make the payments, or taking out a HELOC and seeing what happens. For what it's worth, HELOC sounds cooler to tell people about. Home equity line of credit, right? Yeah. Not bad. All right, let's do another one.

That one was from Taylor. Up next, we have a question from Jimmy. This is a two-parter, so hang in there. With interest rates rising quickly, I know it makes sense for housing prices to stagnate or fall in the short and probably medium term. However, this still makes me think that in the long run, housing will keep getting more and more expensive.

I find it hard to imagine in 5 to 10 years, rates will be as high as they are whenever the Fed raises rates to the peak. Assuming there continues to be a shortage of housing, as soon as there is any sort of combined or continued rate cutting, prices would skyrocket.

It may never go down to 2% again, but even a 4 to 5% rate would likely see a huge increase in prices if rates keep climbing. Page two. My fiance and I bought a house in December of 2021, so I'm biased to try and look at the positive side since we didn't get the COVID equity bump.

We also plan on staying in this house for 5 to 10 years, so we aren't overly stressed about what our house is worth right now. But I feel like housing is in a weird spot where if interest rates go up and no one can afford a house, supply won't increase.

But if interest rates go down, there will be a lot of demand, so prices will go up. Curious to hear your thoughts. All right. I love talking about the housing market, so let's bring on one of the very first people I ever read blogging about the housing market. This is pre-2008 crisis.

Mr. Barry Ritholtz. The blog father himself. Barry, I was at your house this summer. Before we get into this question, you did a lot of work too. Did you do the HELOC or home equity line of credit? It's funny you said that. We bought a house that was a wreck, and it was the only way we could afford it because we knew how much work it needed.

We set up a HELOC. If you go back to the '08, '09 crisis, people really abused both home equities and HELOCs. When we set up a $300,000 HELOC, we said, "We're only going to use it for home repairs. It's a flat roof, not cheap to repair. Take out 50 grand, put in a new roof, pay it down, do the next project." Year after year, we've been doing project after project.

It just gives you a lot of flexibility. The risk with the HELOC, as so many people see, they use it to subsidize their lifestyle, and that's where people get into a lot of trouble. Right. Yeah. You want to use it for a big project. You don't want to just go on vacations with it and then be forced to pay back the rate spikes.

Right, which is what people did in the 2000s. Rather than admit that their salaries weren't keeping up with inflation, that their standard of living was dropping, they just tapped into that equity. For a lot of people, their home is going to be their most valuable holding. As that grows, when you retire, you get the benefit of all that built-in inflation.

You cash out and sail off into the sunset, not if you keep tapping that home equity. Right. I want to ask you about the current housing market. John, throw out my tweet from this week. I basically said, "The economy gets really strong, mortgage rates go up," which is kind of what we've seen for the last three or four weeks, and then no one wants to sell.

You see mortgage purchase applications just fall to the floor. The economy gets weaker, mortgage rates might go down, but then demand comes back, and more people want to buy. So, I said it kind of feels like we're in a no-win situation for prospective homebuyers. Duncan, cover your ears. This isn't an earmuff situation for you.

Unless prices come down substantially. Well obviously, we're not going to be in this situation forever, but how do you see this? I think the point of the emailer's question here is basically, we just didn't build enough homes, so the supply issue is going to constantly cause problems. I don't necessarily think that means that prices have to continue rising, but I think it probably, I don't know, puts a floor where people want to see housing prices crash 30%.

I think the floor is probably there because so many people want to buy houses. Yeah, no doubt about it. First, when we talk about houses, recognize it's so variable. People tend to talk about real estate as if it's all the same. Geography makes a difference. The type of house, is it a starter house, is it a move-up house?

Makes a big difference that the price range, the million dollars and up, and the $5 million and up are their own animals. Rates make a difference. If you look at new home starts, I like to use FRED as my data source. If you look at the new home starts, they really cranked up since the lows in '09.

We were way, way below average. We probably under-built two years. Hang on, John, throw my chart up here. I did houses built by decade, and this goes back to the '70s. You can see that huge drop in the 2010s when all the builders got scared after the last housing boom and bust.

I just get the feeling that the home builders are just not incentivized to build right now. They build these, you talked about maybe some higher priced homes, and the people on the lower end are out of luck. They also pivoted to multifamily homes during the 2010s. There's a huge apartment shortage in lots of cities.

I think you now have more housing starts. The peak was 1.8 million around spring of last year, which is still way above anywhere in the 2010s. Even now, we're probably running about a million and a half rate, which would put us at the peak of the last decade. That said, rates matter, but they're not the only factor that matter.

Now, the US is 330 million people. Go back to the '90s, we were 290 million people. There are more people looking for houses. Following the financial crisis, track household formation, how often people get married, move in together. That really plummeted. People were living in their basements. They weren't forming families.

That, during the pandemic, picked up. Suddenly, we went from too many houses to not enough houses. All that said, everything is always specific. I've looked at some houses online. We all go Zillow surfing. You could look at the price history, and I'm genuinely shocked that someone buys a house for $800,000 in 2015, and then flips it for $900,000, and then someone buys it and puts a few hundred thousand dollars in it, and has $3 million.

The HDTV home flipper stuff, I don't know if that's going to happen anymore. Ben, you did a great piece on 75% of mortgage holders have rates at 4% or less. Not only is that stimulative to the economy because they're not spending money, they're just not going anywhere. Lewis: Right.

I think your point about it being circumstantial is really helpful. Unless you get a 2008 scenario where most housing prices fall, you're right, it's going to depend on your neighborhood, where you're located, or the price point you're at. National housing prices for most people are not going to matter.

It's going to matter what's going on in your local region. If you're buying houses or flipping them, or just trying to make some money on your own house, it's going to be very specific to where you live. Unfortunately, the Case Shiller Index is probably not going to matter to you, personally.

Yup. When you look around at how things are going, we're in the midst of a, maybe once in a generation, rejiggering of where people are going to work and live. If you don't have to be in the office, if you don't need to be near a big city center, what does that mean?

New York saw a population drop like a few hundred thousand, California, three or 400,000, Texas increased, Florida increased, and a lot of inland cities are seeing increases. If you're no longer tied to New York, D.C., Boston, San Francisco, L.A., it frees people up. I think you're going to see prices find a new level as the country moves around and finds new places to live.

Hey, if I could be someplace warmer where the taxes are lower, maybe it's worth selling a house and going elsewhere. I think we're seeing some of that. A lot of people don't want to stay where their family is, and they may not want to pick up and move a thousand miles away, but it's definitely shifting in a pretty substantial way.

I think of it as a giant reset that's taking place. Please do not tell everyone how affordable it still is in the Midwest here, because traffic is fine here. I never have to wait in traffic. I never get stuck. It's fine. No one come here. Actually, I saw Grand Rapids on a list of best places to live.

Here's the funny thing. You look at the big cities in Florida that are attracting all these transplants from the Northeast, and their infrastructure already is past capacity. They have traffic issues. They have school issues, even sewage and electrical issues. They're just not prepared for the influx. What looks really desirable, actually, you may be five years behind in your belief system.

You have to go kick some tires and hang with the locals. Disney can't even handle the capacity, which is the main perk of being in Florida. All right. We've got one more question. One thing I was going to share real fast on the housing thing. I told you about this, Ben, recently, but I just want our audience to hear.

I saw when I was looking at places recently, a place for $600,000 in the Upper West Side somewhere. I was like, "Wow, that doesn't sound that bad for the Upper West Side." The HOA fee was $3,000 something a month. Can you imagine? What do you get for that? I don't know.

They take the garbage to the curb from the front. Everyone gets a Bugatti to drive or something. I don't know. Not for $3,000 a month. Sign me up for a Bugatti at $3,000 a month. I'm in. Okay. Last but not least. Also, I feel like we have to point out the name that Barry has here.

That was auto-generated by this platform that we're using and he liked it. I may have to get that website. I kind of dig that. Okay. Yeah. Bartholomew. Okay. Last but not least, we have a question from Peter. Some say that U.S. equity valuations are generally driven higher over time by the large, relatively constant stream of increasing contributions coming from 401(k) plans.

Based on known U.S. population demographics, when does this macro driver switch from a net positive to a net drag because net contributions turn into net withdrawals? What did Josh say about this when he wrote about it? The constant bid or something? The relentless bid. Relentless bid, yeah. So, I think it makes sense that fewer barriers to entry would drive up valuations somewhat.

Like, Barry, I'm not trying to age you here, but your first stock was probably purchased over the phone. No, my first stock was E*TRADE, was on E*TRADE. Okay, E*TRADE. So, that's what brought me in. But back in the day, you had to go get on the phone or go to an office and fill out some paperwork and maybe write a check.

And now, you can just link your bank to an app and be investing in five minutes. So, if you take those barriers down, I think that that should in some ways help take away the frictions that should help valuations. But do you put much – we get questions about this all the time.

Do you put much stock in the idea that baby boomers will eventually have to sell en masse and that will make it more difficult for the stock market going forward? Do you think there's anything to this? Very very little. First, 401(k)s are one factor out of many. I think the US has about $6 trillion in 401(k)s across six or 700,000 plans, and each plan has multiple employees.

So, it's just a little bit of money every month. It's not an incredible amount of money. That's number one. Number two, we have a very distorted viewpoint of the average investor versus where all the money is. The vast majority of the assets in the stock market – and again, you and I, Ben, have both written about this – the vast majority are in the top 1% and the top 10%.

I think it's 90% is owned by the top 10%, right? They're not going to have to sell all at once. Not only are they not going to have to sell all at once, they're going to not want to sell because it's going to generate a giant tax hit. And what's much better to do is you give the appreciated stock to either your grad or your trust or your kids or whoever it is, and so they get a lower cost basis for ownership.

There are all sorts of ways to do this that minimize the tax burden. Selling highly appreciated stock is probably the least efficient way to transfer wealth. And in fact, we've had these conversations with some very wealthy clients about, "Hey, the most efficient way to give money to philanthropies is to take some of that appreciated stock, give it to them.

It goes into their foundation and they tap it as they need." So, okay, so there's 60 million baby boomers who are retiring. A quarter of them have a substantial pile of assets that are below the top 10%. It's not enough money to really move the needle. Here, Jon, throw this chart from Goldman Sachs.

This is one of my favorite charts. Goldman Sachs has this ownership of US equity markets since 1949 or 1945. And it shows that, maybe we don't have the chart, but it shows that back in like the 1940s and 50s, US households owned, there you go, 95% of all stocks.

Individually, they owned them in a brokerage account or something, right? Now you have ETFs and mutual funds and index funds and pensions and foreign investors and hedge funds and all this other stuff. And obviously a lot of individuals hold their stock through these things, but it's just so much more diverse now than it used to be.

And it's not just mom and pop buying AT&T stock and what happens if they all go to sell? Oh no, the market's screwed. It doesn't really work like that anymore. The market is so much bigger and more professionalized and institutionalized. And you also have millennials stepping in to buy, like millennials kind of match the boomers one for one in terms of there's 70 million of you and 70 million of us, and people are going to be stepping in to sort of buy that, I think.

And the other part is, baby boomers living longer means they're going to have to continue to own some stocks. Right. That's exactly right. I would love to see that chart from 1945 to today, broken up by decile of wealth. And the bottom, forget even bottom half, the bottom 90% are such a tiny chunk of the assets.

Now it's expanded over the past century or so, but it's still 8, 10, 12% of total equity. They're not really moving the needle. The people who are the wealthy people in America, they're not sellers. They're long-term investors. Yeah. Robert Shiller did some great work on this in Irrational Exuberance, where he kind of said, plus you think the market doesn't know this demographic stuff is happening?

This is the most telegraphed thing that you could possibly think of. And it's not like the market is just going to be surprised by it all of a sudden one of these days. That's my answer every time someone says, you know, there's the buying season for gold is coming up in India.

It's like, yeah, for the past 5,000 years, is it not already? Does the market not understand that? Unless you're teasing out something that's extremely novel, it's probably already in the price. Right. Exactly. Okay, Barry, any good masters of business guests coming up for you? Yeah. So last week was Tim Buckley, CEO of Vanguard.

That was a lot of fun. I have coming up Cliff Asness of AQR, who's having a fantastic couple of years. He's been defending value investing, which the past decade has been an uphill battle. And wherever they fell behind in the previous decade, they now just leapfrogged. AQR is putting up crazy numbers.

Cliff is great. He's always good for some quotes. And always, always fun. This week is David Leighton, CEO of The Partners Group, which is the largest publicly listed private equity firm in Europe, which coincidentally is headquartered in Colorado. It's kind of interesting that they're a fascinating company and their approach to looking at the difference between public and private equity is really intriguing.

It's all about valuation. He points out we've switched. Public equities used to be cheap. Private equities used to be expensive. Now they see the world as, "Hey, public equities are 18, 20 PE. Private is still 10 to 13." He obviously sees more upside for his side of the street.

Some really interesting people coming up. If you could have anyone alive or dead on Masters of Business, who would you have? My experience has been dead people make for terrible guests. So I would skip all the people who are dead. But my white whales are essentially Jim Simons, who I met when I was looking at colleges in 1979 or '80.

And that's a whole nother story. Druckenmiller and Paul Tudor Jones are the other. And I got to interview Steve Cohen at SALT a couple of years ago, but it was a panel interview. And I really want to sit down one-on-one with him, especially since he just bought the Mets.

And part of the conversation would absolutely be about baseball. Duncan wants you to bring on the CEO of Oatly. Of Oatly? Yeah, that'd be interesting. Oatmilk. I'd be up for that. All right, there you go. All right. I want to thank- That is a booming segment of the market, isn't it?

I want to thank Barry for coming on again. Stock's been hurting. Thanks, Duncan. We want to give a big shout out to John, the man behind the scenes, who's doing all our charts live from Belgium today. Actually, I told you right, he's in Amsterdam now. Amsterdam, okay. John is just a world traveler.

Remember, if you have a- The Netherlands. Email for us any questions, askthecompoundshow@gmail.com, or leave a question. Thanks to all the people who tuned in live. We always appreciate your comments. Remember, if you want some Compound merch, idontshop.com. No other shows this week, but everything will be back to regularly scheduled programs next week.

Right, Duncan? Next week, we're back. All right, we'll see you then. See you, everyone.