Nov. 7, 2025
Market Crashes, AI, and Risk Management: A lot has changed since 1929
Market Crashes, AI, and Risk Management: A lot has changed since 1929
In this episode of Something More with Chris Boyd, Chris sits down with Jeff Perry to unpack the growing buzz around Andrew Ross Sorkin’s new book 1929 and the anxiety related to some investors who fear the next market slide. Are we headed for another catastrophic market crash? Chris and Jeff explore what made the 1929 crash so severe, why today’s markets are
fundamentally different, and what lessons history offers for managing risk. They also dive into modern concerns like tech-driven valuations, AI’s role in fueling market optimism, and practical strategies for protecting your portfolio. Topics discussed include liquidity buffers,
diversification, asset allocation, rebalancing and stress testing. If you’ve been wondering how to prepare for uncertainty, this episode is packed with insights you won’t want to miss.
#FinancialPlanning #MarketCrash #InvestingWisely #RiskManagement #PortfolioStrategy
#AIandMarkets #1929Lessons #WealthManagement #ChrisBoyd #JeffPerry #FinanicialPlanning #Divesification
For more information or to reach TEAM AMR, click the following link:
https://www.wealthenhancement.com/s/advisor-teams/amr
1
00:00:00,460 --> 00:00:03,080
Welcome to Something More with Chris Boyd.
2
00:00:03,340 --> 00:00:06,120
Chris Boyd is a certified financial planner, practitioner,
3
00:00:06,420 --> 00:00:08,880
and senior vice president and financial advisor at
4
00:00:08,880 --> 00:00:11,180
Wealth Enhancement Group, one of the nation's largest
5
00:00:11,180 --> 00:00:12,780
registered investment advisors.
6
00:00:13,320 --> 00:00:15,219
We call it Something More because we'd like
7
00:00:15,219 --> 00:00:17,340
to talk not only about those important dollar
8
00:00:17,340 --> 00:00:19,520
and cents issues, but also the quality of
9
00:00:19,520 --> 00:00:21,960
life issues that make the money matters matter.
10
00:00:22,380 --> 00:00:25,720
Here he is, your fulfillment facilitator, your partner
11
00:00:25,720 --> 00:00:28,860
in prosperity, advising clients on Cape Cod and
12
00:00:28,860 --> 00:00:29,920
across the country.
13
00:00:30,260 --> 00:00:32,740
Here's your host, Jay Christopher Boyd.
14
00:00:33,280 --> 00:00:34,700
Welcome to the program.
15
00:00:34,960 --> 00:00:35,680
I'm Chris Boyd.
16
00:00:35,700 --> 00:00:36,700
I'm here with Jeff Perry.
17
00:00:36,880 --> 00:00:39,900
We are of the AMR team at Wealth
18
00:00:39,900 --> 00:00:41,440
Enhancement and glad to have you joining us
19
00:00:41,440 --> 00:00:42,320
for another episode.
20
00:00:42,700 --> 00:00:44,820
I wanted to talk about something that's been
21
00:00:44,820 --> 00:00:48,480
coming up a little bit more frequently the
22
00:00:48,480 --> 00:00:49,800
last few weeks.
23
00:00:50,960 --> 00:00:59,360
Andrew Sorkin, he's got three names anyway.
24
00:00:59,400 --> 00:00:59,780
He does.
25
00:00:59,960 --> 00:01:00,600
He's hyphenated.
26
00:01:00,980 --> 00:01:02,260
Andrew Ross Sorkin.
27
00:01:02,560 --> 00:01:07,280
He's been promoting a book talking about the
28
00:01:07,280 --> 00:01:12,760
history of the crash of 1929 and making
29
00:01:12,760 --> 00:01:15,720
some parallels to where we're at.
30
00:01:16,360 --> 00:01:19,860
I think this is causing some concern among
31
00:01:19,860 --> 00:01:22,540
some of the people that are watching this.
32
00:01:23,500 --> 00:01:26,520
Actually, you hear the crash of 1929.
33
00:01:26,960 --> 00:01:30,360
If you have any familiarity with that, it's
34
00:01:30,360 --> 00:01:32,920
naturally very unsettling.
35
00:01:33,160 --> 00:01:37,480
Could we be headed for something of the
36
00:01:37,480 --> 00:01:38,060
magnitude of that?
37
00:01:38,900 --> 00:01:42,760
We used to judge this by the Dow
38
00:01:42,760 --> 00:01:45,300
Jones Industrial Average at that time, more so
39
00:01:45,300 --> 00:01:49,700
than the S&P 500 we use today.
40
00:01:50,300 --> 00:01:52,820
The point is still the same.
41
00:01:54,020 --> 00:01:58,420
It was a drastic decline in values.
42
00:01:58,580 --> 00:02:01,900
It's probably important to remember a little bit
43
00:02:01,900 --> 00:02:07,880
about what went into the circumstances of the
44
00:02:07,880 --> 00:02:08,220
time.
45
00:02:08,740 --> 00:02:12,420
Remember, leading up to the crash of 1929,
46
00:02:12,760 --> 00:02:14,540
first off, we didn't have any of the
47
00:02:14,540 --> 00:02:16,800
regulatory infrastructure we have today.
48
00:02:18,060 --> 00:02:22,840
The consequence of this, it led to the
49
00:02:22,840 --> 00:02:27,820
formation of various Securities Acts and the establishment
50
00:02:27,820 --> 00:02:30,640
of the FCC and so forth.
51
00:02:32,100 --> 00:02:36,380
Not to say that regulators always anticipate what
52
00:02:36,380 --> 00:02:40,020
can happen or that they're always a few
53
00:02:40,020 --> 00:02:41,360
steps ahead of the problems.
54
00:02:41,480 --> 00:02:42,920
That's not necessarily the case.
55
00:02:44,640 --> 00:02:50,000
There are some structures in place that were
56
00:02:50,000 --> 00:02:53,040
not the case in the 1920s and are
57
00:02:53,040 --> 00:02:53,900
very different today.
58
00:02:54,520 --> 00:02:57,560
A big part of what led to the
59
00:02:57,560 --> 00:03:00,700
decline of 1929 was leverage.
60
00:03:02,560 --> 00:03:07,120
You could margin an enormous amount of your
61
00:03:07,120 --> 00:03:07,960
stock.
62
00:03:09,020 --> 00:03:11,680
It was 10 to 1.
63
00:03:12,940 --> 00:03:16,900
I remember that from listening to an interview
64
00:03:16,900 --> 00:03:18,260
with Andrew Sorkin.
65
00:03:18,540 --> 00:03:19,540
He was talking about that.
66
00:03:20,840 --> 00:03:23,320
Today, you can't do that.
67
00:03:24,480 --> 00:03:29,520
Imagine if you've got one-tenth of your
68
00:03:29,520 --> 00:03:35,560
own money, but you've invested 10 times that.
69
00:03:38,150 --> 00:03:40,370
With the movements, if it's going up, you're
70
00:03:40,370 --> 00:03:41,730
feeling brilliant and great.
71
00:03:41,850 --> 00:03:43,990
But once it starts to work against you,
72
00:03:44,550 --> 00:03:48,570
the magnitude of the loss could be dramatic.
73
00:03:48,850 --> 00:03:51,210
That's what's led to the people jumping out
74
00:03:51,210 --> 00:03:52,630
of buildings and all that kind of stuff
75
00:03:52,630 --> 00:03:54,390
we hear about.
76
00:03:55,110 --> 00:03:57,810
But this notion of when things started to
77
00:03:57,810 --> 00:04:05,850
turn, the excess leverage created a dramatic fall
78
00:04:05,850 --> 00:04:09,230
of much more significant magnitude.
79
00:04:09,610 --> 00:04:10,650
That's not allowed today.
80
00:04:11,510 --> 00:04:14,330
You can have margin, but there's a limit
81
00:04:14,330 --> 00:04:17,149
to how much, and it's a limit to
82
00:04:17,149 --> 00:04:19,329
how much related to your own money.
83
00:04:19,430 --> 00:04:23,050
You can't even have one time the amount
84
00:04:23,050 --> 00:04:25,930
of margin 10 times.
85
00:04:27,910 --> 00:04:33,250
Keep in mind, the amount of leverage embedded
86
00:04:33,250 --> 00:04:34,990
in the market is very different now.
87
00:04:35,670 --> 00:04:39,470
You can argue there are areas of risk,
88
00:04:39,650 --> 00:04:42,050
and we can talk about that as well,
89
00:04:42,130 --> 00:04:45,190
embedded in the market.
90
00:04:45,390 --> 00:04:49,530
Brian's been quick to talk about private credit
91
00:04:49,530 --> 00:04:52,870
as a source of somewhat opaque.
92
00:04:53,090 --> 00:04:56,970
We don't really see what's the risk there.
93
00:04:57,130 --> 00:05:00,390
These are more risk engaged in these bonds
94
00:05:00,390 --> 00:05:02,410
than some others.
95
00:05:02,930 --> 00:05:07,410
So, there's potentially areas of risk that could
96
00:05:07,410 --> 00:05:12,350
lead to a need to sell off.
97
00:05:12,710 --> 00:05:15,190
If one part of the market does badly,
98
00:05:15,350 --> 00:05:18,330
people look to other parts of their investments
99
00:05:18,330 --> 00:05:19,770
to pull money from.
100
00:05:20,470 --> 00:05:23,650
So, it can have a residual effect if
101
00:05:23,650 --> 00:05:25,590
there was a disruption.
102
00:05:25,890 --> 00:05:30,670
But again, could it be the magnitude of
103
00:05:30,670 --> 00:05:31,810
1929?
104
00:05:32,110 --> 00:05:37,550
I would argue very unlikely, very, very, very
105
00:05:37,550 --> 00:05:39,950
extreme.
106
00:05:40,350 --> 00:05:41,950
We've been through extremes.
107
00:05:43,850 --> 00:05:45,390
Maybe you want to talk about that.
108
00:05:46,490 --> 00:05:50,050
Well, certainly 1929 is getting attention because of
109
00:05:50,050 --> 00:05:51,870
the book and all that.
110
00:05:51,970 --> 00:05:54,150
But we've had other periods of time that
111
00:05:54,150 --> 00:05:56,990
we've had quote-unquote crashes.
112
00:05:57,550 --> 00:05:59,450
I was looking up the definition for a
113
00:05:59,450 --> 00:06:01,670
crash because we know a bear market.
114
00:06:01,790 --> 00:06:02,890
People know bulls and bears.
115
00:06:03,030 --> 00:06:04,490
We know a bear market is defined as
116
00:06:04,490 --> 00:06:06,890
20% reduction from the high.
117
00:06:06,990 --> 00:06:08,690
So, that's easy to put a definition on.
118
00:06:08,830 --> 00:06:09,590
It's just a number.
119
00:06:10,730 --> 00:06:14,330
But when you attempt to break it down
120
00:06:14,330 --> 00:06:17,970
into the crash category, there's no real definition.
121
00:06:18,530 --> 00:06:21,550
So, I usually turn to Investopedia, and they
122
00:06:21,550 --> 00:06:24,690
have a list of things that they have
123
00:06:24,690 --> 00:06:27,610
listed under the term crash.
124
00:06:28,550 --> 00:06:33,490
So, according to Investopedia, 1929, major crash that
125
00:06:33,490 --> 00:06:34,510
led to the Great Depression.
126
00:06:35,330 --> 00:06:38,750
Dow Jones lost half of its average by
127
00:06:38,750 --> 00:06:40,430
mid-November of that year.
128
00:06:40,810 --> 00:06:43,190
The next one that they have is the
129
00:06:43,990 --> 00:06:45,810
1987 Black Monday.
130
00:06:46,670 --> 00:06:49,610
That was a huge disruption.
131
00:06:50,030 --> 00:06:51,970
What did it drop in that day?
132
00:06:52,010 --> 00:06:54,410
About a third in about five days or
133
00:06:54,410 --> 00:06:55,290
something like that?
134
00:06:55,790 --> 00:06:59,510
They only had 22% in one day.
135
00:07:00,290 --> 00:07:00,710
There you go.
136
00:07:01,070 --> 00:07:02,370
And then it kind of lingered on.
137
00:07:03,050 --> 00:07:05,910
But it had a rapid recovery in that
138
00:07:05,910 --> 00:07:06,390
instance.
139
00:07:07,250 --> 00:07:11,730
I want to say it was within eight
140
00:07:11,730 --> 00:07:13,790
months or something like that.
141
00:07:14,990 --> 00:07:21,430
Whereas, if you think about 1929, it took
142
00:07:21,430 --> 00:07:22,150
decades.
143
00:07:22,610 --> 00:07:26,050
It was the 1940s, really, before it started.
144
00:07:26,570 --> 00:07:30,210
It took a world war, basically, and all
145
00:07:30,210 --> 00:07:32,250
the spending that government did and so forth
146
00:07:32,250 --> 00:07:33,890
to change that.
147
00:07:35,250 --> 00:07:40,710
So, from 1929 to 1987 to 2002, started
148
00:07:40,710 --> 00:07:45,050
2000 to 2002 time frame, that what was
149
00:07:45,050 --> 00:07:47,910
commonly referred to as the dot-com bubble.
150
00:07:50,110 --> 00:07:53,690
Crash, but this was a technology crash.
151
00:07:53,770 --> 00:07:57,730
This was a NASDAQ heavy index crash, which
152
00:07:57,730 --> 00:08:00,410
certainly had a big effect on people's investments
153
00:08:00,410 --> 00:08:00,950
and stuff.
154
00:08:00,950 --> 00:08:05,490
And losing nearly 80% of its value,
155
00:08:06,470 --> 00:08:12,170
and it took 82 months to recover from
156
00:08:12,170 --> 00:08:12,730
the fallout.
157
00:08:17,520 --> 00:08:21,760
It's relevant to think about maybe that moment,
158
00:08:22,040 --> 00:08:23,460
that aspect for a moment.
159
00:08:23,800 --> 00:08:27,600
It does take time to recover from disruptions.
160
00:08:28,400 --> 00:08:33,419
Most times, we've been in a period where
161
00:08:33,419 --> 00:08:40,159
over the last 20 years, if there's a
162
00:08:40,159 --> 00:08:42,679
market disruption, it comes racing down.
163
00:08:45,340 --> 00:08:49,300
So, not quite 20 years, but since the
164
00:08:49,300 --> 00:08:55,900
declines of 2007, 2008, 2009, we've had this
165
00:08:55,900 --> 00:08:58,580
period where the Great Recession, if you will,
166
00:08:58,660 --> 00:09:02,860
we've had since that, where if the market
167
00:09:02,860 --> 00:09:05,760
goes down, it's back within under two years,
168
00:09:05,840 --> 00:09:06,580
it seems like.
169
00:09:07,280 --> 00:09:10,300
It's something close to that, where any disruption
170
00:09:10,300 --> 00:09:11,920
is very rapidly erased.
171
00:09:13,020 --> 00:09:16,320
And it's not always the case.
172
00:09:16,660 --> 00:09:20,480
You mentioned this circumstance that took several years.
173
00:09:21,600 --> 00:09:25,060
I think if we look at 2000, 2008,
174
00:09:25,140 --> 00:09:27,740
it took years for both of those to
175
00:09:27,740 --> 00:09:29,900
have significant recovery.
176
00:09:30,620 --> 00:09:33,480
And in the case of 2000s, just about
177
00:09:33,480 --> 00:09:35,940
when you got back from those declines, you
178
00:09:35,940 --> 00:09:38,160
started into the declines in 2008.
179
00:09:42,200 --> 00:09:45,960
So, okay, fine.
180
00:09:46,820 --> 00:09:48,780
Sometimes that can take a lot longer.
181
00:09:49,180 --> 00:09:53,960
When we look at the early 2000s, the
182
00:09:53,960 --> 00:09:56,720
declines of early 2000s, we'd see bigger markets
183
00:09:56,720 --> 00:09:57,900
coming in down a year.
184
00:09:58,960 --> 00:10:00,840
Okay, then people aren't buying again.
185
00:10:01,780 --> 00:10:04,200
It's worth pointing out, there are times when
186
00:10:04,200 --> 00:10:08,720
we have multiple back-to-back declining years,
187
00:10:09,020 --> 00:10:11,860
which we had three years in that instance,
188
00:10:12,040 --> 00:10:16,960
which is it does happen.
189
00:10:17,440 --> 00:10:19,480
I think part of that, we had more
190
00:10:19,480 --> 00:10:28,300
of a disruptive markets and that extended that
191
00:10:28,300 --> 00:10:30,180
perhaps longer than it might have otherwise.
192
00:10:32,340 --> 00:10:36,220
But you can have prolonged periods of time
193
00:10:36,220 --> 00:10:40,580
where equities are languishing.
194
00:10:41,100 --> 00:10:43,640
You had to talk about something else before
195
00:10:43,640 --> 00:10:44,500
we went on the air.
196
00:10:45,300 --> 00:10:48,280
We had the period of the 1970s, the
197
00:10:48,280 --> 00:10:51,680
Jimmy Carter years, the stagflation, the energy crisis.
198
00:10:52,360 --> 00:10:56,460
All those things certainly had a significant impact
199
00:10:56,460 --> 00:10:57,300
on stocks.
200
00:11:00,050 --> 00:11:05,190
So, as we think about a crash, it's
201
00:11:05,190 --> 00:11:08,610
probably relevant to talk about should I be
202
00:11:08,610 --> 00:11:09,730
worried as an investor?
203
00:11:10,690 --> 00:11:11,690
I think so.
204
00:11:12,050 --> 00:11:14,390
I think it's always relevant.
205
00:11:14,530 --> 00:11:16,070
I think it's important to go back and
206
00:11:16,710 --> 00:11:18,830
look at some of the lessons of these
207
00:11:18,830 --> 00:11:19,270
times.
208
00:11:20,170 --> 00:11:21,630
Maybe we don't have to go back all
209
00:11:21,630 --> 00:11:25,270
the way to 1929 or looking at the
210
00:11:25,270 --> 00:11:27,890
1970s because things were different.
211
00:11:28,270 --> 00:11:31,550
You were correct to point out regulatory changes,
212
00:11:31,790 --> 00:11:34,330
the willingness of government to intervene in these
213
00:11:34,330 --> 00:11:34,890
things.
214
00:11:35,470 --> 00:11:36,910
We didn't talk about it, but I think
215
00:11:36,910 --> 00:11:37,430
it's relevant.
216
00:11:38,110 --> 00:11:41,990
Public disclosure is now such a required thing.
217
00:11:42,450 --> 00:11:45,870
The way information is shared and consumers and
218
00:11:45,870 --> 00:11:46,590
investors...
219
00:11:46,590 --> 00:11:48,110
Speed at which it's available.
220
00:11:48,110 --> 00:11:50,350
Just have access to it.
221
00:11:52,010 --> 00:11:55,530
1929, if you're an investor, you have one
222
00:11:55,530 --> 00:12:00,350
daily newspaper in the mirror that you're relying
223
00:12:00,350 --> 00:12:00,730
on.
224
00:12:01,770 --> 00:12:04,290
Now, you can turn to live news all
225
00:12:04,290 --> 00:12:08,130
the time, different opinions, endless slates and publications
226
00:12:08,130 --> 00:12:09,210
and opinions.
227
00:12:10,430 --> 00:12:11,630
Commentator on that.
228
00:12:11,750 --> 00:12:12,610
That's a good point.
229
00:12:12,610 --> 00:12:17,350
So, just going back to the 2000-2002
230
00:12:17,350 --> 00:12:19,470
bubble in technology stocks.
231
00:12:19,670 --> 00:12:25,690
To me, the lesson was about over-speculation,
232
00:12:26,510 --> 00:12:28,850
not doing your homework.
233
00:12:29,490 --> 00:12:32,270
It almost seemed like back then if something
234
00:12:32,270 --> 00:12:34,930
had .com on the end of a stock
235
00:12:34,930 --> 00:12:39,390
name, people were jumping into it without doing
236
00:12:39,390 --> 00:12:42,370
their due diligence, without saying, this is company
237
00:12:42,370 --> 00:12:44,530
real in some cases.
238
00:12:45,630 --> 00:12:49,610
And also about not being diversified, just jumping
239
00:12:49,610 --> 00:12:49,970
in.
240
00:12:50,190 --> 00:12:51,650
The fear of missing out.
241
00:12:52,170 --> 00:12:54,350
Technology, technology, all this new thing is going
242
00:12:54,350 --> 00:12:55,190
to take over the world.
243
00:12:55,330 --> 00:12:56,270
And I guess we can have it.
244
00:12:56,850 --> 00:12:59,510
We do have something to talk about related
245
00:12:59,510 --> 00:13:00,430
to technology.
246
00:13:00,590 --> 00:13:02,510
Technology is something taking over the world right
247
00:13:02,510 --> 00:13:04,930
now with AI.
248
00:13:04,930 --> 00:13:08,050
I think that's part of what fuels this
249
00:13:08,050 --> 00:13:17,590
anxiety is the idea that markets are basically
250
00:13:17,590 --> 00:13:19,530
at a relatively high PE.
251
00:13:20,990 --> 00:13:23,490
And a lot of that is fueled by
252
00:13:23,490 --> 00:13:31,540
the price earnings ratio relative to these artificial
253
00:13:31,540 --> 00:13:34,440
intelligence driven companies.
254
00:13:34,680 --> 00:13:36,800
When we look at some of these biggest
255
00:13:36,800 --> 00:13:40,520
names in the S&P 500 today, there
256
00:13:40,520 --> 00:13:45,460
is concentration in these names and the growth
257
00:13:45,460 --> 00:13:48,680
expectations from them are significant.
258
00:13:49,540 --> 00:13:52,720
We do see them growing at a rapid
259
00:13:52,720 --> 00:13:55,560
rate, but there's a lot of assumptions that
260
00:13:55,560 --> 00:13:58,440
are going into that for this building out
261
00:13:58,440 --> 00:14:06,310
of infrastructure related to artificial intelligence that everything
262
00:14:06,310 --> 00:14:07,410
will go as planned.
263
00:14:09,130 --> 00:14:15,890
I think when I hear people talk about
264
00:14:15,890 --> 00:14:23,590
this, I think there's an expectation that even
265
00:14:23,590 --> 00:14:27,530
within the growth rate that's happening is so
266
00:14:27,530 --> 00:14:31,170
impressive and incredible.
267
00:14:32,110 --> 00:14:36,710
It may be that these PE ratios are
268
00:14:38,660 --> 00:14:42,420
not necessarily a good barometer for what we
269
00:14:42,420 --> 00:14:47,480
might envision for the potential profitability over time
270
00:14:47,480 --> 00:14:48,500
of these companies.
271
00:14:49,840 --> 00:14:53,380
The reality though is we don't know, just
272
00:14:53,380 --> 00:14:56,120
like in the early 2000s, we don't know
273
00:14:56,120 --> 00:15:00,220
who will be the big winners that come
274
00:15:00,220 --> 00:15:00,880
out of this.
275
00:15:02,540 --> 00:15:05,760
Again, these are things that enter into themes
276
00:15:05,760 --> 00:15:09,400
that our team and Brian Regan has put
277
00:15:09,400 --> 00:15:11,780
into place when thinking about how do we
278
00:15:11,780 --> 00:15:13,980
invest in a way that will benefit us
279
00:15:13,980 --> 00:15:17,840
from artificial intelligence.
280
00:15:18,220 --> 00:15:19,880
It's on the one hand, yes, it may
281
00:15:19,880 --> 00:15:24,410
be semiconductors and some of the mega cap
282
00:15:24,410 --> 00:15:28,770
names, but it can also be picks and
283
00:15:28,770 --> 00:15:29,570
shovels.
284
00:15:30,250 --> 00:15:32,290
Utilities is one of the moves that Brian
285
00:15:32,290 --> 00:15:34,850
has made that I think is right on
286
00:15:34,850 --> 00:15:35,390
that subject.
287
00:15:37,330 --> 00:15:40,870
There's sort of off to the side benefactors.
288
00:15:45,030 --> 00:15:47,530
Let me go back to a couple of
289
00:15:47,530 --> 00:15:47,750
things.
290
00:15:47,930 --> 00:15:53,970
One is the regulatory environment is very different
291
00:15:53,970 --> 00:15:54,610
than it was.
292
00:15:58,420 --> 00:16:03,470
To most investors that we work with and
293
00:16:03,470 --> 00:16:08,390
probably listed, they're not invested solely in stock.
294
00:16:09,010 --> 00:16:12,490
The reason they're not invested entirely in stock
295
00:16:12,490 --> 00:16:15,730
is for diversification, to mitigate risk.
296
00:16:18,010 --> 00:16:22,330
Diversification and asset allocation, the diversification of asset
297
00:16:22,330 --> 00:16:27,470
classes, we don't want to be so concentrated
298
00:16:27,470 --> 00:16:28,750
in any one name.
299
00:16:28,950 --> 00:16:30,590
We all know that's kind of rule number
300
00:16:30,590 --> 00:16:35,210
one, diversify, but diversify in terms of asset
301
00:16:35,210 --> 00:16:36,890
class representation.
302
00:16:37,650 --> 00:16:40,850
That's another way that things are a little
303
00:16:40,850 --> 00:16:42,070
different today.
304
00:16:42,250 --> 00:16:47,650
People are oftentimes, I think, most oftentimes broadly
305
00:16:47,650 --> 00:16:48,530
diversified.
306
00:16:49,170 --> 00:16:51,150
We want that to be not just in
307
00:16:51,150 --> 00:16:56,630
terms of stock and bonds, but also geographically.
308
00:16:56,770 --> 00:16:59,050
We want some foreign exposure, not just the
309
00:16:59,050 --> 00:17:00,610
US and so on.
310
00:17:00,770 --> 00:17:04,150
By having some of these characteristics, we reduce
311
00:17:04,150 --> 00:17:05,069
risk.
312
00:17:05,190 --> 00:17:08,510
We spread our risk exposure.
313
00:17:08,690 --> 00:17:10,490
That's not saying that the market goes down.
314
00:17:10,630 --> 00:17:12,569
You'll be exempt.
315
00:17:12,970 --> 00:17:16,210
You'll still feel it, but you're not necessarily
316
00:17:16,210 --> 00:17:21,970
going to see, oh, this company or maybe
317
00:17:21,970 --> 00:17:25,710
sector of companies is so disrupted that I've
318
00:17:25,710 --> 00:17:27,069
lost all my wealth.
319
00:17:27,490 --> 00:17:29,210
It's temporary in nature.
320
00:17:29,490 --> 00:17:30,890
I've got some exposure.
321
00:17:31,130 --> 00:17:33,830
I've got broader exposure in a variety of
322
00:17:33,830 --> 00:17:34,210
ways.
323
00:17:34,950 --> 00:17:37,170
If I've got how much I've got in
324
00:17:37,170 --> 00:17:40,090
stock versus bond is going to define the
325
00:17:40,090 --> 00:17:43,150
level of volatility and the level of performance
326
00:17:43,150 --> 00:17:46,030
I might have in a portfolio.
327
00:17:47,050 --> 00:17:50,030
We would say for our clientele that we're
328
00:17:50,030 --> 00:17:54,910
also tuned into macroeconomic indicators and this affects
329
00:17:54,910 --> 00:17:58,410
some of the tactical decisions we make with
330
00:17:58,410 --> 00:18:00,370
the allocation decisions we make.
331
00:18:00,870 --> 00:18:05,190
So that too could be part of how
332
00:18:05,190 --> 00:18:08,890
we expect to help our clients navigate such
333
00:18:08,890 --> 00:18:09,270
risks.
334
00:18:09,450 --> 00:18:10,970
We try to be forward thinking.
335
00:18:11,490 --> 00:18:13,330
It doesn't mean we're always going to anticipate
336
00:18:13,330 --> 00:18:17,090
whatever risks may occur, but we do make
337
00:18:17,090 --> 00:18:20,570
an effort to try to identify where there's
338
00:18:20,570 --> 00:18:24,530
problems and try to position with that in
339
00:18:24,530 --> 00:18:24,870
mind.
340
00:18:25,090 --> 00:18:28,150
And some of the tactical positioning we do
341
00:18:28,150 --> 00:18:31,050
helps us to have a buffer to downside
342
00:18:31,050 --> 00:18:33,510
risk, whether it's maybe in terms of what
343
00:18:33,510 --> 00:18:36,950
asset classes we reach or include, what alternatives
344
00:18:36,950 --> 00:18:39,590
we might have in the mix of investments.
345
00:18:41,190 --> 00:18:43,470
We also think it's really important for people
346
00:18:43,470 --> 00:18:44,510
to have liquidity.
347
00:18:45,670 --> 00:18:48,230
We talk about this a lot, the buckets
348
00:18:48,230 --> 00:18:49,150
kind of mindset.
349
00:18:49,910 --> 00:18:53,550
But if you're worried about a markets crash,
350
00:18:54,290 --> 00:18:57,330
it's a good time to talk about liquidity
351
00:18:57,330 --> 00:18:57,890
buffer.
352
00:18:58,390 --> 00:19:03,750
How much do you retain as a place
353
00:19:03,750 --> 00:19:07,590
to have some excess safety in the process?
354
00:19:07,830 --> 00:19:11,590
When things get disrupted, do you have to
355
00:19:11,590 --> 00:19:13,050
sell when it's down or do you have
356
00:19:13,050 --> 00:19:17,410
a place to go for cashflow demands?
357
00:19:21,970 --> 00:19:25,690
Again, this is maybe where you could, if
358
00:19:25,690 --> 00:19:28,570
you had a prolonged disruption, could look to
359
00:19:28,570 --> 00:19:31,950
some of your fixed income resources as a
360
00:19:31,950 --> 00:19:34,790
place where they would likely be at a
361
00:19:34,790 --> 00:19:35,090
profit.
362
00:19:35,250 --> 00:19:37,570
If you needed to sell something, you could
363
00:19:37,570 --> 00:19:39,610
sell there while you're waiting for things to
364
00:19:39,610 --> 00:19:40,050
recover.
365
00:19:42,050 --> 00:19:47,060
We think taking time routinely to do some
366
00:19:48,810 --> 00:19:52,410
rebalancing of your portfolio is part of how
367
00:19:52,410 --> 00:19:53,450
you manage risk.
368
00:19:54,850 --> 00:19:57,610
Not just leaving things to grow and grow
369
00:19:57,610 --> 00:19:59,910
and grow, even though we love when they
370
00:19:59,910 --> 00:20:03,150
grow, we don't want to get our allocation
371
00:20:03,150 --> 00:20:03,810
out of whack.
372
00:20:04,750 --> 00:20:06,690
We want to rebalance from time to time.
373
00:20:06,810 --> 00:20:11,810
That can also create some opportunities for tax
374
00:20:11,810 --> 00:20:14,710
loss, as they say, but this notion of
375
00:20:14,710 --> 00:20:18,130
tax loss harvesting, generating a little bit of
376
00:20:18,130 --> 00:20:22,130
benefit from the consolation prize, as we might
377
00:20:22,130 --> 00:20:23,530
think of it, but it's a little bit
378
00:20:23,530 --> 00:20:25,730
of tax benefit when we have something that's
379
00:20:25,730 --> 00:20:26,690
in favor.
380
00:20:28,170 --> 00:20:32,410
When we work with clients, we do stress
381
00:20:32,410 --> 00:20:32,910
testing.
382
00:20:33,110 --> 00:20:34,930
We look at this in the context of
383
00:20:34,930 --> 00:20:36,030
a financial plan.
384
00:20:36,710 --> 00:20:39,750
What if markets have a disruption?
385
00:20:40,170 --> 00:20:44,590
What if we have less rate of return
386
00:20:44,590 --> 00:20:45,570
than we expect?
387
00:20:45,990 --> 00:20:47,150
What if we have higher taxes?
388
00:20:47,330 --> 00:20:50,430
What if we go through a variety of
389
00:20:50,430 --> 00:20:50,650
these things?
390
00:20:50,950 --> 00:20:54,310
That can be helpful for clients to think
391
00:20:54,310 --> 00:20:54,770
about.
392
00:20:55,910 --> 00:21:00,010
If you're getting those kinds of stress with
393
00:21:00,010 --> 00:21:03,610
your financial advisor, that might be something to
394
00:21:03,610 --> 00:21:05,930
talk to them about or talk to someone
395
00:21:05,930 --> 00:21:08,410
else about to say, hey, I want to
396
00:21:08,410 --> 00:21:13,090
get this kind of planning in my circumstances.
397
00:21:14,190 --> 00:21:17,350
Maybe it's time for a portfolio review.
398
00:21:17,850 --> 00:21:20,910
Is there excess risk built into your portfolio?
399
00:21:21,410 --> 00:21:24,650
Do you have the level of diversification you
400
00:21:24,650 --> 00:21:28,630
probably should have to manage some of these
401
00:21:28,630 --> 00:21:29,050
risks?
402
00:21:29,550 --> 00:21:31,510
That's really something that we see when people
403
00:21:31,510 --> 00:21:33,890
come in for a second look on their
404
00:21:33,890 --> 00:21:37,210
investment portfolio, or it's a new client, or
405
00:21:37,210 --> 00:21:39,990
someone coming in for the first time.
406
00:21:40,550 --> 00:21:43,110
Things that we see are exactly what you're
407
00:21:43,110 --> 00:21:43,670
talking about.
408
00:21:43,670 --> 00:21:46,050
One you didn't touch on, but we do
409
00:21:46,050 --> 00:21:48,630
talk about it frequently is concentration.
410
00:21:49,370 --> 00:21:51,390
Maybe an employer stock.
411
00:21:51,690 --> 00:21:55,010
A lot of people work for these big
412
00:21:55,010 --> 00:21:57,710
companies who are in this AI sector, technology
413
00:21:57,710 --> 00:21:58,190
sector.
414
00:21:59,270 --> 00:22:01,410
They have big salaries.
415
00:22:02,670 --> 00:22:06,250
It's a really robust industry, it appears.
416
00:22:06,550 --> 00:22:08,130
They're buying stock in these companies.
417
00:22:08,590 --> 00:22:12,650
They come in and a significant, sometimes all,
418
00:22:12,830 --> 00:22:15,990
but a significant part of their future investing
419
00:22:15,990 --> 00:22:19,490
portfolio is all on this one company or
420
00:22:19,490 --> 00:22:20,150
one sector.
421
00:22:20,790 --> 00:22:22,670
It's a big issue.
422
00:22:23,450 --> 00:22:24,630
Very common.
423
00:22:26,210 --> 00:22:29,190
A lot of times people live with it
424
00:22:29,190 --> 00:22:31,930
because they just don't want the capital gains
425
00:22:31,930 --> 00:22:35,190
that are embedded in these stocks.
426
00:22:36,070 --> 00:22:38,190
They think, well, I'll just wait until I
427
00:22:38,190 --> 00:22:41,690
die and get the step-up and basis
428
00:22:41,690 --> 00:22:43,030
of the next generation.
429
00:22:45,750 --> 00:22:47,750
We've run into this quite a bit recently.
430
00:22:48,070 --> 00:22:49,850
I would say that if you're in this
431
00:22:49,850 --> 00:22:54,730
circumstance, there are techniques to try to help
432
00:22:54,730 --> 00:22:55,010
you.
433
00:22:56,530 --> 00:23:00,490
It's worth having a conversation to strategize.
434
00:23:00,930 --> 00:23:06,010
How could I mitigate some of this embedded
435
00:23:06,010 --> 00:23:08,990
gain to try to diversify my risk?
436
00:23:14,070 --> 00:23:17,130
When it comes to this topic, I think
437
00:23:17,130 --> 00:23:18,750
it's a little bit scary.
438
00:23:18,930 --> 00:23:21,970
I think it might be a little bit
439
00:23:21,970 --> 00:23:22,690
sensational.
440
00:23:23,330 --> 00:23:26,870
That is to say, in 1929, it's not
441
00:23:26,870 --> 00:23:28,770
to say we can't have a crash or
442
00:23:28,770 --> 00:23:31,170
a decline or a disruption in the market.
443
00:23:32,810 --> 00:23:38,410
Inevitably, as Andrew Ruff said, we will have
444
00:23:38,410 --> 00:23:40,830
a crash.
445
00:23:41,130 --> 00:23:42,470
I just can't tell you when.
446
00:23:42,950 --> 00:23:44,450
Well, we don't know when.
447
00:23:44,450 --> 00:23:47,530
We just know inevitably this is the nature
448
00:23:47,530 --> 00:23:50,550
of markets that there will be excesses and
449
00:23:50,550 --> 00:23:51,490
there will be disruption.
450
00:23:52,790 --> 00:23:54,310
That's the norm.
451
00:23:54,510 --> 00:23:55,910
That's the way it works.
452
00:23:56,610 --> 00:24:01,050
We can prepare for that the way we
453
00:24:01,050 --> 00:24:06,910
invest and the liquidity we retain in preparation
454
00:24:06,910 --> 00:24:07,690
for that.
455
00:24:08,650 --> 00:24:14,150
So, how you invest makes a difference.
456
00:24:14,630 --> 00:24:16,830
It's probably worth talking about for a second
457
00:24:16,830 --> 00:24:21,050
here is the idea that there's never a
458
00:24:24,350 --> 00:24:26,270
perfect solution.
459
00:24:27,570 --> 00:24:30,930
If you pick a product that helps to
460
00:24:30,930 --> 00:24:34,150
mitigate risk, you give up something else.
461
00:24:35,410 --> 00:24:37,770
Maybe you give up some performance.
462
00:24:38,410 --> 00:24:42,450
Maybe you have embedded high internal costs.
463
00:24:42,710 --> 00:24:46,250
Maybe you have surrender charges that last a
464
00:24:46,250 --> 00:24:47,110
long time.
465
00:24:47,690 --> 00:24:51,550
There are products that are designed to give
466
00:24:51,550 --> 00:24:58,150
you some equity exposure by limited downside risk.
467
00:24:59,210 --> 00:25:02,790
These are possibilities both, I'll just say inside
468
00:25:02,790 --> 00:25:04,490
annuities and outside annuities.
469
00:25:04,690 --> 00:25:06,490
There are structured products as well.
470
00:25:06,970 --> 00:25:09,590
If that's something that you're really drawn to,
471
00:25:10,170 --> 00:25:15,230
be aware oftentimes there's more cost efficient ways
472
00:25:15,230 --> 00:25:18,470
to do things than what you get through
473
00:25:18,470 --> 00:25:20,750
an annuity product.
474
00:25:21,150 --> 00:25:22,570
For a contract, right?
475
00:25:22,990 --> 00:25:27,570
Yeah, that it prolonged and keeps you sitting
476
00:25:27,570 --> 00:25:30,430
in a pile of captives for five to
477
00:25:30,430 --> 00:25:33,330
10, even we've seen 12 years sometimes.
478
00:25:33,650 --> 00:25:33,750
Yeah.
479
00:25:34,010 --> 00:25:37,090
Sometimes those products are sold to people, often
480
00:25:37,090 --> 00:25:38,830
those products are sold to people who are
481
00:25:38,830 --> 00:25:40,410
looking for a specific solution.
482
00:25:40,550 --> 00:25:42,830
It might be income, it might be market
483
00:25:42,830 --> 00:25:45,290
protection, and they don't take enough time to
484
00:25:45,290 --> 00:25:48,170
spend by the people buying those products to
485
00:25:48,170 --> 00:25:49,990
ask, what are we giving up here?
486
00:25:50,550 --> 00:25:51,750
What is the downside?
487
00:25:52,010 --> 00:25:53,230
Because you're correct.
488
00:25:53,410 --> 00:25:55,690
In life, there's very few, if any, free
489
00:25:55,690 --> 00:25:56,150
lunches.
490
00:25:56,410 --> 00:25:58,210
To get something, you're giving something.
491
00:25:59,750 --> 00:26:02,510
Learn the downside about whatever you're doing too.
492
00:26:03,130 --> 00:26:03,270
Yeah.
493
00:26:04,850 --> 00:26:06,790
Think in terms of, it's not an all
494
00:26:06,790 --> 00:26:10,470
or nothing kind of solution too.
495
00:26:10,570 --> 00:26:13,050
I think in investing, that's one of the
496
00:26:13,050 --> 00:26:16,670
continuing lessons is, you don't have to be
497
00:26:16,670 --> 00:26:20,970
all in or all out or whatever approach
498
00:26:20,970 --> 00:26:21,590
you take.
499
00:26:22,270 --> 00:26:26,490
It's probably virtuous to have a range of
500
00:26:26,490 --> 00:26:27,770
considerations.
501
00:26:28,130 --> 00:26:28,510
Absolutely.
502
00:26:29,950 --> 00:26:32,950
Even taking all of your money and putting
503
00:26:32,950 --> 00:26:37,890
it in a FDIC institution with thinking, I
504
00:26:37,890 --> 00:26:40,010
don't want any risk, I don't want to
505
00:26:40,010 --> 00:26:41,230
suffer through any of this.
506
00:26:41,610 --> 00:26:42,670
You're still taking risk.
507
00:26:42,670 --> 00:26:43,250
Yeah.
508
00:26:43,410 --> 00:26:44,610
It's just different risk.
509
00:26:44,850 --> 00:26:46,290
You're taking inflation risk.
510
00:26:46,430 --> 00:26:49,850
You're taking the interest rate risk.
511
00:26:50,410 --> 00:26:53,050
There's a variety of risks that you're taking
512
00:26:53,050 --> 00:26:53,990
in that process.
513
00:26:54,750 --> 00:26:58,590
Even the most conservative person is exposed to
514
00:26:58,590 --> 00:26:58,930
risk.
515
00:26:59,050 --> 00:27:01,390
It's just which risks to what extent.
516
00:27:02,610 --> 00:27:03,250
All right.
517
00:27:03,310 --> 00:27:06,250
With that, that's probably a good conversation.
518
00:27:06,570 --> 00:27:08,450
Thanks, Jeff, for indulging me.
519
00:27:08,550 --> 00:27:10,090
This was something that I wanted to spend
520
00:27:10,090 --> 00:27:11,990
a little time on because I feel like
521
00:27:11,990 --> 00:27:13,770
it's been coming up and I hope it's
522
00:27:13,770 --> 00:27:14,950
helpful to our listeners.
523
00:27:15,670 --> 00:27:18,250
Until next time, everybody keeps striving for something.
524
00:27:19,770 --> 00:27:21,870
Thank you for listening to Something More with
525
00:27:21,870 --> 00:27:22,570
Chris Boyd.
526
00:27:22,890 --> 00:27:25,050
Call us for help, whether it's for financial
527
00:27:25,050 --> 00:27:28,970
planning or portfolio management, insurance concerns, or those
528
00:27:28,970 --> 00:27:31,010
quality of life issues that make the money
529
00:27:31,010 --> 00:27:32,110
matters matter.
530
00:27:32,510 --> 00:27:35,730
Whatever's on your mind, visit us at somethingmorewithchrisboyd
531
00:27:35,730 --> 00:27:38,950
.com or call us toll free at 866
532
00:27:38,950 --> 00:27:42,630
-771-8901.
533
00:27:42,730 --> 00:27:46,490
Or send us your questions to amr-info
534
00:27:46,490 --> 00:27:48,450
at wealthenhancement.com.
535
00:27:48,510 --> 00:27:50,550
You're listening to Something More with Chris Boyd
536
00:27:50,550 --> 00:27:51,390
Financial Talk Show.
537
00:27:51,550 --> 00:27:53,990
Wealth Enhancement Advisory Services and Jay Christopher Boyd
538
00:27:53,990 --> 00:27:56,330
provide investment advice on an individual basis to
539
00:27:56,330 --> 00:27:56,870
clients only.
540
00:27:57,070 --> 00:27:59,010
Proper advice depends on a complete analysis of
541
00:27:59,010 --> 00:28:00,190
all facts and circumstances.
542
00:28:00,430 --> 00:28:02,290
The information given on this program is general
543
00:28:02,290 --> 00:28:04,330
financial comments and cannot be relied upon as
544
00:28:04,330 --> 00:28:05,930
pertaining to your specific situation.
545
00:28:06,110 --> 00:28:08,090
Wealth Enhancement Group cannot guarantee that using the
546
00:28:08,090 --> 00:28:10,090
information from this show will generate profits or
547
00:28:10,090 --> 00:28:11,210
ensure freedom from loss.
548
00:28:11,410 --> 00:28:13,570
Listeners should consult their own financial advisors or
549
00:28:13,570 --> 00:28:15,670
conduct their own due diligence before making any
550
00:28:15,670 --> 00:28:16,430
financial decisions.
00:00:00,460 --> 00:00:03,080
Welcome to Something More with Chris Boyd.
2
00:00:03,340 --> 00:00:06,120
Chris Boyd is a certified financial planner, practitioner,
3
00:00:06,420 --> 00:00:08,880
and senior vice president and financial advisor at
4
00:00:08,880 --> 00:00:11,180
Wealth Enhancement Group, one of the nation's largest
5
00:00:11,180 --> 00:00:12,780
registered investment advisors.
6
00:00:13,320 --> 00:00:15,219
We call it Something More because we'd like
7
00:00:15,219 --> 00:00:17,340
to talk not only about those important dollar
8
00:00:17,340 --> 00:00:19,520
and cents issues, but also the quality of
9
00:00:19,520 --> 00:00:21,960
life issues that make the money matters matter.
10
00:00:22,380 --> 00:00:25,720
Here he is, your fulfillment facilitator, your partner
11
00:00:25,720 --> 00:00:28,860
in prosperity, advising clients on Cape Cod and
12
00:00:28,860 --> 00:00:29,920
across the country.
13
00:00:30,260 --> 00:00:32,740
Here's your host, Jay Christopher Boyd.
14
00:00:33,280 --> 00:00:34,700
Welcome to the program.
15
00:00:34,960 --> 00:00:35,680
I'm Chris Boyd.
16
00:00:35,700 --> 00:00:36,700
I'm here with Jeff Perry.
17
00:00:36,880 --> 00:00:39,900
We are of the AMR team at Wealth
18
00:00:39,900 --> 00:00:41,440
Enhancement and glad to have you joining us
19
00:00:41,440 --> 00:00:42,320
for another episode.
20
00:00:42,700 --> 00:00:44,820
I wanted to talk about something that's been
21
00:00:44,820 --> 00:00:48,480
coming up a little bit more frequently the
22
00:00:48,480 --> 00:00:49,800
last few weeks.
23
00:00:50,960 --> 00:00:59,360
Andrew Sorkin, he's got three names anyway.
24
00:00:59,400 --> 00:00:59,780
He does.
25
00:00:59,960 --> 00:01:00,600
He's hyphenated.
26
00:01:00,980 --> 00:01:02,260
Andrew Ross Sorkin.
27
00:01:02,560 --> 00:01:07,280
He's been promoting a book talking about the
28
00:01:07,280 --> 00:01:12,760
history of the crash of 1929 and making
29
00:01:12,760 --> 00:01:15,720
some parallels to where we're at.
30
00:01:16,360 --> 00:01:19,860
I think this is causing some concern among
31
00:01:19,860 --> 00:01:22,540
some of the people that are watching this.
32
00:01:23,500 --> 00:01:26,520
Actually, you hear the crash of 1929.
33
00:01:26,960 --> 00:01:30,360
If you have any familiarity with that, it's
34
00:01:30,360 --> 00:01:32,920
naturally very unsettling.
35
00:01:33,160 --> 00:01:37,480
Could we be headed for something of the
36
00:01:37,480 --> 00:01:38,060
magnitude of that?
37
00:01:38,900 --> 00:01:42,760
We used to judge this by the Dow
38
00:01:42,760 --> 00:01:45,300
Jones Industrial Average at that time, more so
39
00:01:45,300 --> 00:01:49,700
than the S&P 500 we use today.
40
00:01:50,300 --> 00:01:52,820
The point is still the same.
41
00:01:54,020 --> 00:01:58,420
It was a drastic decline in values.
42
00:01:58,580 --> 00:02:01,900
It's probably important to remember a little bit
43
00:02:01,900 --> 00:02:07,880
about what went into the circumstances of the
44
00:02:07,880 --> 00:02:08,220
time.
45
00:02:08,740 --> 00:02:12,420
Remember, leading up to the crash of 1929,
46
00:02:12,760 --> 00:02:14,540
first off, we didn't have any of the
47
00:02:14,540 --> 00:02:16,800
regulatory infrastructure we have today.
48
00:02:18,060 --> 00:02:22,840
The consequence of this, it led to the
49
00:02:22,840 --> 00:02:27,820
formation of various Securities Acts and the establishment
50
00:02:27,820 --> 00:02:30,640
of the FCC and so forth.
51
00:02:32,100 --> 00:02:36,380
Not to say that regulators always anticipate what
52
00:02:36,380 --> 00:02:40,020
can happen or that they're always a few
53
00:02:40,020 --> 00:02:41,360
steps ahead of the problems.
54
00:02:41,480 --> 00:02:42,920
That's not necessarily the case.
55
00:02:44,640 --> 00:02:50,000
There are some structures in place that were
56
00:02:50,000 --> 00:02:53,040
not the case in the 1920s and are
57
00:02:53,040 --> 00:02:53,900
very different today.
58
00:02:54,520 --> 00:02:57,560
A big part of what led to the
59
00:02:57,560 --> 00:03:00,700
decline of 1929 was leverage.
60
00:03:02,560 --> 00:03:07,120
You could margin an enormous amount of your
61
00:03:07,120 --> 00:03:07,960
stock.
62
00:03:09,020 --> 00:03:11,680
It was 10 to 1.
63
00:03:12,940 --> 00:03:16,900
I remember that from listening to an interview
64
00:03:16,900 --> 00:03:18,260
with Andrew Sorkin.
65
00:03:18,540 --> 00:03:19,540
He was talking about that.
66
00:03:20,840 --> 00:03:23,320
Today, you can't do that.
67
00:03:24,480 --> 00:03:29,520
Imagine if you've got one-tenth of your
68
00:03:29,520 --> 00:03:35,560
own money, but you've invested 10 times that.
69
00:03:38,150 --> 00:03:40,370
With the movements, if it's going up, you're
70
00:03:40,370 --> 00:03:41,730
feeling brilliant and great.
71
00:03:41,850 --> 00:03:43,990
But once it starts to work against you,
72
00:03:44,550 --> 00:03:48,570
the magnitude of the loss could be dramatic.
73
00:03:48,850 --> 00:03:51,210
That's what's led to the people jumping out
74
00:03:51,210 --> 00:03:52,630
of buildings and all that kind of stuff
75
00:03:52,630 --> 00:03:54,390
we hear about.
76
00:03:55,110 --> 00:03:57,810
But this notion of when things started to
77
00:03:57,810 --> 00:04:05,850
turn, the excess leverage created a dramatic fall
78
00:04:05,850 --> 00:04:09,230
of much more significant magnitude.
79
00:04:09,610 --> 00:04:10,650
That's not allowed today.
80
00:04:11,510 --> 00:04:14,330
You can have margin, but there's a limit
81
00:04:14,330 --> 00:04:17,149
to how much, and it's a limit to
82
00:04:17,149 --> 00:04:19,329
how much related to your own money.
83
00:04:19,430 --> 00:04:23,050
You can't even have one time the amount
84
00:04:23,050 --> 00:04:25,930
of margin 10 times.
85
00:04:27,910 --> 00:04:33,250
Keep in mind, the amount of leverage embedded
86
00:04:33,250 --> 00:04:34,990
in the market is very different now.
87
00:04:35,670 --> 00:04:39,470
You can argue there are areas of risk,
88
00:04:39,650 --> 00:04:42,050
and we can talk about that as well,
89
00:04:42,130 --> 00:04:45,190
embedded in the market.
90
00:04:45,390 --> 00:04:49,530
Brian's been quick to talk about private credit
91
00:04:49,530 --> 00:04:52,870
as a source of somewhat opaque.
92
00:04:53,090 --> 00:04:56,970
We don't really see what's the risk there.
93
00:04:57,130 --> 00:05:00,390
These are more risk engaged in these bonds
94
00:05:00,390 --> 00:05:02,410
than some others.
95
00:05:02,930 --> 00:05:07,410
So, there's potentially areas of risk that could
96
00:05:07,410 --> 00:05:12,350
lead to a need to sell off.
97
00:05:12,710 --> 00:05:15,190
If one part of the market does badly,
98
00:05:15,350 --> 00:05:18,330
people look to other parts of their investments
99
00:05:18,330 --> 00:05:19,770
to pull money from.
100
00:05:20,470 --> 00:05:23,650
So, it can have a residual effect if
101
00:05:23,650 --> 00:05:25,590
there was a disruption.
102
00:05:25,890 --> 00:05:30,670
But again, could it be the magnitude of
103
00:05:30,670 --> 00:05:31,810
1929?
104
00:05:32,110 --> 00:05:37,550
I would argue very unlikely, very, very, very
105
00:05:37,550 --> 00:05:39,950
extreme.
106
00:05:40,350 --> 00:05:41,950
We've been through extremes.
107
00:05:43,850 --> 00:05:45,390
Maybe you want to talk about that.
108
00:05:46,490 --> 00:05:50,050
Well, certainly 1929 is getting attention because of
109
00:05:50,050 --> 00:05:51,870
the book and all that.
110
00:05:51,970 --> 00:05:54,150
But we've had other periods of time that
111
00:05:54,150 --> 00:05:56,990
we've had quote-unquote crashes.
112
00:05:57,550 --> 00:05:59,450
I was looking up the definition for a
113
00:05:59,450 --> 00:06:01,670
crash because we know a bear market.
114
00:06:01,790 --> 00:06:02,890
People know bulls and bears.
115
00:06:03,030 --> 00:06:04,490
We know a bear market is defined as
116
00:06:04,490 --> 00:06:06,890
20% reduction from the high.
117
00:06:06,990 --> 00:06:08,690
So, that's easy to put a definition on.
118
00:06:08,830 --> 00:06:09,590
It's just a number.
119
00:06:10,730 --> 00:06:14,330
But when you attempt to break it down
120
00:06:14,330 --> 00:06:17,970
into the crash category, there's no real definition.
121
00:06:18,530 --> 00:06:21,550
So, I usually turn to Investopedia, and they
122
00:06:21,550 --> 00:06:24,690
have a list of things that they have
123
00:06:24,690 --> 00:06:27,610
listed under the term crash.
124
00:06:28,550 --> 00:06:33,490
So, according to Investopedia, 1929, major crash that
125
00:06:33,490 --> 00:06:34,510
led to the Great Depression.
126
00:06:35,330 --> 00:06:38,750
Dow Jones lost half of its average by
127
00:06:38,750 --> 00:06:40,430
mid-November of that year.
128
00:06:40,810 --> 00:06:43,190
The next one that they have is the
129
00:06:43,990 --> 00:06:45,810
1987 Black Monday.
130
00:06:46,670 --> 00:06:49,610
That was a huge disruption.
131
00:06:50,030 --> 00:06:51,970
What did it drop in that day?
132
00:06:52,010 --> 00:06:54,410
About a third in about five days or
133
00:06:54,410 --> 00:06:55,290
something like that?
134
00:06:55,790 --> 00:06:59,510
They only had 22% in one day.
135
00:07:00,290 --> 00:07:00,710
There you go.
136
00:07:01,070 --> 00:07:02,370
And then it kind of lingered on.
137
00:07:03,050 --> 00:07:05,910
But it had a rapid recovery in that
138
00:07:05,910 --> 00:07:06,390
instance.
139
00:07:07,250 --> 00:07:11,730
I want to say it was within eight
140
00:07:11,730 --> 00:07:13,790
months or something like that.
141
00:07:14,990 --> 00:07:21,430
Whereas, if you think about 1929, it took
142
00:07:21,430 --> 00:07:22,150
decades.
143
00:07:22,610 --> 00:07:26,050
It was the 1940s, really, before it started.
144
00:07:26,570 --> 00:07:30,210
It took a world war, basically, and all
145
00:07:30,210 --> 00:07:32,250
the spending that government did and so forth
146
00:07:32,250 --> 00:07:33,890
to change that.
147
00:07:35,250 --> 00:07:40,710
So, from 1929 to 1987 to 2002, started
148
00:07:40,710 --> 00:07:45,050
2000 to 2002 time frame, that what was
149
00:07:45,050 --> 00:07:47,910
commonly referred to as the dot-com bubble.
150
00:07:50,110 --> 00:07:53,690
Crash, but this was a technology crash.
151
00:07:53,770 --> 00:07:57,730
This was a NASDAQ heavy index crash, which
152
00:07:57,730 --> 00:08:00,410
certainly had a big effect on people's investments
153
00:08:00,410 --> 00:08:00,950
and stuff.
154
00:08:00,950 --> 00:08:05,490
And losing nearly 80% of its value,
155
00:08:06,470 --> 00:08:12,170
and it took 82 months to recover from
156
00:08:12,170 --> 00:08:12,730
the fallout.
157
00:08:17,520 --> 00:08:21,760
It's relevant to think about maybe that moment,
158
00:08:22,040 --> 00:08:23,460
that aspect for a moment.
159
00:08:23,800 --> 00:08:27,600
It does take time to recover from disruptions.
160
00:08:28,400 --> 00:08:33,419
Most times, we've been in a period where
161
00:08:33,419 --> 00:08:40,159
over the last 20 years, if there's a
162
00:08:40,159 --> 00:08:42,679
market disruption, it comes racing down.
163
00:08:45,340 --> 00:08:49,300
So, not quite 20 years, but since the
164
00:08:49,300 --> 00:08:55,900
declines of 2007, 2008, 2009, we've had this
165
00:08:55,900 --> 00:08:58,580
period where the Great Recession, if you will,
166
00:08:58,660 --> 00:09:02,860
we've had since that, where if the market
167
00:09:02,860 --> 00:09:05,760
goes down, it's back within under two years,
168
00:09:05,840 --> 00:09:06,580
it seems like.
169
00:09:07,280 --> 00:09:10,300
It's something close to that, where any disruption
170
00:09:10,300 --> 00:09:11,920
is very rapidly erased.
171
00:09:13,020 --> 00:09:16,320
And it's not always the case.
172
00:09:16,660 --> 00:09:20,480
You mentioned this circumstance that took several years.
173
00:09:21,600 --> 00:09:25,060
I think if we look at 2000, 2008,
174
00:09:25,140 --> 00:09:27,740
it took years for both of those to
175
00:09:27,740 --> 00:09:29,900
have significant recovery.
176
00:09:30,620 --> 00:09:33,480
And in the case of 2000s, just about
177
00:09:33,480 --> 00:09:35,940
when you got back from those declines, you
178
00:09:35,940 --> 00:09:38,160
started into the declines in 2008.
179
00:09:42,200 --> 00:09:45,960
So, okay, fine.
180
00:09:46,820 --> 00:09:48,780
Sometimes that can take a lot longer.
181
00:09:49,180 --> 00:09:53,960
When we look at the early 2000s, the
182
00:09:53,960 --> 00:09:56,720
declines of early 2000s, we'd see bigger markets
183
00:09:56,720 --> 00:09:57,900
coming in down a year.
184
00:09:58,960 --> 00:10:00,840
Okay, then people aren't buying again.
185
00:10:01,780 --> 00:10:04,200
It's worth pointing out, there are times when
186
00:10:04,200 --> 00:10:08,720
we have multiple back-to-back declining years,
187
00:10:09,020 --> 00:10:11,860
which we had three years in that instance,
188
00:10:12,040 --> 00:10:16,960
which is it does happen.
189
00:10:17,440 --> 00:10:19,480
I think part of that, we had more
190
00:10:19,480 --> 00:10:28,300
of a disruptive markets and that extended that
191
00:10:28,300 --> 00:10:30,180
perhaps longer than it might have otherwise.
192
00:10:32,340 --> 00:10:36,220
But you can have prolonged periods of time
193
00:10:36,220 --> 00:10:40,580
where equities are languishing.
194
00:10:41,100 --> 00:10:43,640
You had to talk about something else before
195
00:10:43,640 --> 00:10:44,500
we went on the air.
196
00:10:45,300 --> 00:10:48,280
We had the period of the 1970s, the
197
00:10:48,280 --> 00:10:51,680
Jimmy Carter years, the stagflation, the energy crisis.
198
00:10:52,360 --> 00:10:56,460
All those things certainly had a significant impact
199
00:10:56,460 --> 00:10:57,300
on stocks.
200
00:11:00,050 --> 00:11:05,190
So, as we think about a crash, it's
201
00:11:05,190 --> 00:11:08,610
probably relevant to talk about should I be
202
00:11:08,610 --> 00:11:09,730
worried as an investor?
203
00:11:10,690 --> 00:11:11,690
I think so.
204
00:11:12,050 --> 00:11:14,390
I think it's always relevant.
205
00:11:14,530 --> 00:11:16,070
I think it's important to go back and
206
00:11:16,710 --> 00:11:18,830
look at some of the lessons of these
207
00:11:18,830 --> 00:11:19,270
times.
208
00:11:20,170 --> 00:11:21,630
Maybe we don't have to go back all
209
00:11:21,630 --> 00:11:25,270
the way to 1929 or looking at the
210
00:11:25,270 --> 00:11:27,890
1970s because things were different.
211
00:11:28,270 --> 00:11:31,550
You were correct to point out regulatory changes,
212
00:11:31,790 --> 00:11:34,330
the willingness of government to intervene in these
213
00:11:34,330 --> 00:11:34,890
things.
214
00:11:35,470 --> 00:11:36,910
We didn't talk about it, but I think
215
00:11:36,910 --> 00:11:37,430
it's relevant.
216
00:11:38,110 --> 00:11:41,990
Public disclosure is now such a required thing.
217
00:11:42,450 --> 00:11:45,870
The way information is shared and consumers and
218
00:11:45,870 --> 00:11:46,590
investors...
219
00:11:46,590 --> 00:11:48,110
Speed at which it's available.
220
00:11:48,110 --> 00:11:50,350
Just have access to it.
221
00:11:52,010 --> 00:11:55,530
1929, if you're an investor, you have one
222
00:11:55,530 --> 00:12:00,350
daily newspaper in the mirror that you're relying
223
00:12:00,350 --> 00:12:00,730
on.
224
00:12:01,770 --> 00:12:04,290
Now, you can turn to live news all
225
00:12:04,290 --> 00:12:08,130
the time, different opinions, endless slates and publications
226
00:12:08,130 --> 00:12:09,210
and opinions.
227
00:12:10,430 --> 00:12:11,630
Commentator on that.
228
00:12:11,750 --> 00:12:12,610
That's a good point.
229
00:12:12,610 --> 00:12:17,350
So, just going back to the 2000-2002
230
00:12:17,350 --> 00:12:19,470
bubble in technology stocks.
231
00:12:19,670 --> 00:12:25,690
To me, the lesson was about over-speculation,
232
00:12:26,510 --> 00:12:28,850
not doing your homework.
233
00:12:29,490 --> 00:12:32,270
It almost seemed like back then if something
234
00:12:32,270 --> 00:12:34,930
had .com on the end of a stock
235
00:12:34,930 --> 00:12:39,390
name, people were jumping into it without doing
236
00:12:39,390 --> 00:12:42,370
their due diligence, without saying, this is company
237
00:12:42,370 --> 00:12:44,530
real in some cases.
238
00:12:45,630 --> 00:12:49,610
And also about not being diversified, just jumping
239
00:12:49,610 --> 00:12:49,970
in.
240
00:12:50,190 --> 00:12:51,650
The fear of missing out.
241
00:12:52,170 --> 00:12:54,350
Technology, technology, all this new thing is going
242
00:12:54,350 --> 00:12:55,190
to take over the world.
243
00:12:55,330 --> 00:12:56,270
And I guess we can have it.
244
00:12:56,850 --> 00:12:59,510
We do have something to talk about related
245
00:12:59,510 --> 00:13:00,430
to technology.
246
00:13:00,590 --> 00:13:02,510
Technology is something taking over the world right
247
00:13:02,510 --> 00:13:04,930
now with AI.
248
00:13:04,930 --> 00:13:08,050
I think that's part of what fuels this
249
00:13:08,050 --> 00:13:17,590
anxiety is the idea that markets are basically
250
00:13:17,590 --> 00:13:19,530
at a relatively high PE.
251
00:13:20,990 --> 00:13:23,490
And a lot of that is fueled by
252
00:13:23,490 --> 00:13:31,540
the price earnings ratio relative to these artificial
253
00:13:31,540 --> 00:13:34,440
intelligence driven companies.
254
00:13:34,680 --> 00:13:36,800
When we look at some of these biggest
255
00:13:36,800 --> 00:13:40,520
names in the S&P 500 today, there
256
00:13:40,520 --> 00:13:45,460
is concentration in these names and the growth
257
00:13:45,460 --> 00:13:48,680
expectations from them are significant.
258
00:13:49,540 --> 00:13:52,720
We do see them growing at a rapid
259
00:13:52,720 --> 00:13:55,560
rate, but there's a lot of assumptions that
260
00:13:55,560 --> 00:13:58,440
are going into that for this building out
261
00:13:58,440 --> 00:14:06,310
of infrastructure related to artificial intelligence that everything
262
00:14:06,310 --> 00:14:07,410
will go as planned.
263
00:14:09,130 --> 00:14:15,890
I think when I hear people talk about
264
00:14:15,890 --> 00:14:23,590
this, I think there's an expectation that even
265
00:14:23,590 --> 00:14:27,530
within the growth rate that's happening is so
266
00:14:27,530 --> 00:14:31,170
impressive and incredible.
267
00:14:32,110 --> 00:14:36,710
It may be that these PE ratios are
268
00:14:38,660 --> 00:14:42,420
not necessarily a good barometer for what we
269
00:14:42,420 --> 00:14:47,480
might envision for the potential profitability over time
270
00:14:47,480 --> 00:14:48,500
of these companies.
271
00:14:49,840 --> 00:14:53,380
The reality though is we don't know, just
272
00:14:53,380 --> 00:14:56,120
like in the early 2000s, we don't know
273
00:14:56,120 --> 00:15:00,220
who will be the big winners that come
274
00:15:00,220 --> 00:15:00,880
out of this.
275
00:15:02,540 --> 00:15:05,760
Again, these are things that enter into themes
276
00:15:05,760 --> 00:15:09,400
that our team and Brian Regan has put
277
00:15:09,400 --> 00:15:11,780
into place when thinking about how do we
278
00:15:11,780 --> 00:15:13,980
invest in a way that will benefit us
279
00:15:13,980 --> 00:15:17,840
from artificial intelligence.
280
00:15:18,220 --> 00:15:19,880
It's on the one hand, yes, it may
281
00:15:19,880 --> 00:15:24,410
be semiconductors and some of the mega cap
282
00:15:24,410 --> 00:15:28,770
names, but it can also be picks and
283
00:15:28,770 --> 00:15:29,570
shovels.
284
00:15:30,250 --> 00:15:32,290
Utilities is one of the moves that Brian
285
00:15:32,290 --> 00:15:34,850
has made that I think is right on
286
00:15:34,850 --> 00:15:35,390
that subject.
287
00:15:37,330 --> 00:15:40,870
There's sort of off to the side benefactors.
288
00:15:45,030 --> 00:15:47,530
Let me go back to a couple of
289
00:15:47,530 --> 00:15:47,750
things.
290
00:15:47,930 --> 00:15:53,970
One is the regulatory environment is very different
291
00:15:53,970 --> 00:15:54,610
than it was.
292
00:15:58,420 --> 00:16:03,470
To most investors that we work with and
293
00:16:03,470 --> 00:16:08,390
probably listed, they're not invested solely in stock.
294
00:16:09,010 --> 00:16:12,490
The reason they're not invested entirely in stock
295
00:16:12,490 --> 00:16:15,730
is for diversification, to mitigate risk.
296
00:16:18,010 --> 00:16:22,330
Diversification and asset allocation, the diversification of asset
297
00:16:22,330 --> 00:16:27,470
classes, we don't want to be so concentrated
298
00:16:27,470 --> 00:16:28,750
in any one name.
299
00:16:28,950 --> 00:16:30,590
We all know that's kind of rule number
300
00:16:30,590 --> 00:16:35,210
one, diversify, but diversify in terms of asset
301
00:16:35,210 --> 00:16:36,890
class representation.
302
00:16:37,650 --> 00:16:40,850
That's another way that things are a little
303
00:16:40,850 --> 00:16:42,070
different today.
304
00:16:42,250 --> 00:16:47,650
People are oftentimes, I think, most oftentimes broadly
305
00:16:47,650 --> 00:16:48,530
diversified.
306
00:16:49,170 --> 00:16:51,150
We want that to be not just in
307
00:16:51,150 --> 00:16:56,630
terms of stock and bonds, but also geographically.
308
00:16:56,770 --> 00:16:59,050
We want some foreign exposure, not just the
309
00:16:59,050 --> 00:17:00,610
US and so on.
310
00:17:00,770 --> 00:17:04,150
By having some of these characteristics, we reduce
311
00:17:04,150 --> 00:17:05,069
risk.
312
00:17:05,190 --> 00:17:08,510
We spread our risk exposure.
313
00:17:08,690 --> 00:17:10,490
That's not saying that the market goes down.
314
00:17:10,630 --> 00:17:12,569
You'll be exempt.
315
00:17:12,970 --> 00:17:16,210
You'll still feel it, but you're not necessarily
316
00:17:16,210 --> 00:17:21,970
going to see, oh, this company or maybe
317
00:17:21,970 --> 00:17:25,710
sector of companies is so disrupted that I've
318
00:17:25,710 --> 00:17:27,069
lost all my wealth.
319
00:17:27,490 --> 00:17:29,210
It's temporary in nature.
320
00:17:29,490 --> 00:17:30,890
I've got some exposure.
321
00:17:31,130 --> 00:17:33,830
I've got broader exposure in a variety of
322
00:17:33,830 --> 00:17:34,210
ways.
323
00:17:34,950 --> 00:17:37,170
If I've got how much I've got in
324
00:17:37,170 --> 00:17:40,090
stock versus bond is going to define the
325
00:17:40,090 --> 00:17:43,150
level of volatility and the level of performance
326
00:17:43,150 --> 00:17:46,030
I might have in a portfolio.
327
00:17:47,050 --> 00:17:50,030
We would say for our clientele that we're
328
00:17:50,030 --> 00:17:54,910
also tuned into macroeconomic indicators and this affects
329
00:17:54,910 --> 00:17:58,410
some of the tactical decisions we make with
330
00:17:58,410 --> 00:18:00,370
the allocation decisions we make.
331
00:18:00,870 --> 00:18:05,190
So that too could be part of how
332
00:18:05,190 --> 00:18:08,890
we expect to help our clients navigate such
333
00:18:08,890 --> 00:18:09,270
risks.
334
00:18:09,450 --> 00:18:10,970
We try to be forward thinking.
335
00:18:11,490 --> 00:18:13,330
It doesn't mean we're always going to anticipate
336
00:18:13,330 --> 00:18:17,090
whatever risks may occur, but we do make
337
00:18:17,090 --> 00:18:20,570
an effort to try to identify where there's
338
00:18:20,570 --> 00:18:24,530
problems and try to position with that in
339
00:18:24,530 --> 00:18:24,870
mind.
340
00:18:25,090 --> 00:18:28,150
And some of the tactical positioning we do
341
00:18:28,150 --> 00:18:31,050
helps us to have a buffer to downside
342
00:18:31,050 --> 00:18:33,510
risk, whether it's maybe in terms of what
343
00:18:33,510 --> 00:18:36,950
asset classes we reach or include, what alternatives
344
00:18:36,950 --> 00:18:39,590
we might have in the mix of investments.
345
00:18:41,190 --> 00:18:43,470
We also think it's really important for people
346
00:18:43,470 --> 00:18:44,510
to have liquidity.
347
00:18:45,670 --> 00:18:48,230
We talk about this a lot, the buckets
348
00:18:48,230 --> 00:18:49,150
kind of mindset.
349
00:18:49,910 --> 00:18:53,550
But if you're worried about a markets crash,
350
00:18:54,290 --> 00:18:57,330
it's a good time to talk about liquidity
351
00:18:57,330 --> 00:18:57,890
buffer.
352
00:18:58,390 --> 00:19:03,750
How much do you retain as a place
353
00:19:03,750 --> 00:19:07,590
to have some excess safety in the process?
354
00:19:07,830 --> 00:19:11,590
When things get disrupted, do you have to
355
00:19:11,590 --> 00:19:13,050
sell when it's down or do you have
356
00:19:13,050 --> 00:19:17,410
a place to go for cashflow demands?
357
00:19:21,970 --> 00:19:25,690
Again, this is maybe where you could, if
358
00:19:25,690 --> 00:19:28,570
you had a prolonged disruption, could look to
359
00:19:28,570 --> 00:19:31,950
some of your fixed income resources as a
360
00:19:31,950 --> 00:19:34,790
place where they would likely be at a
361
00:19:34,790 --> 00:19:35,090
profit.
362
00:19:35,250 --> 00:19:37,570
If you needed to sell something, you could
363
00:19:37,570 --> 00:19:39,610
sell there while you're waiting for things to
364
00:19:39,610 --> 00:19:40,050
recover.
365
00:19:42,050 --> 00:19:47,060
We think taking time routinely to do some
366
00:19:48,810 --> 00:19:52,410
rebalancing of your portfolio is part of how
367
00:19:52,410 --> 00:19:53,450
you manage risk.
368
00:19:54,850 --> 00:19:57,610
Not just leaving things to grow and grow
369
00:19:57,610 --> 00:19:59,910
and grow, even though we love when they
370
00:19:59,910 --> 00:20:03,150
grow, we don't want to get our allocation
371
00:20:03,150 --> 00:20:03,810
out of whack.
372
00:20:04,750 --> 00:20:06,690
We want to rebalance from time to time.
373
00:20:06,810 --> 00:20:11,810
That can also create some opportunities for tax
374
00:20:11,810 --> 00:20:14,710
loss, as they say, but this notion of
375
00:20:14,710 --> 00:20:18,130
tax loss harvesting, generating a little bit of
376
00:20:18,130 --> 00:20:22,130
benefit from the consolation prize, as we might
377
00:20:22,130 --> 00:20:23,530
think of it, but it's a little bit
378
00:20:23,530 --> 00:20:25,730
of tax benefit when we have something that's
379
00:20:25,730 --> 00:20:26,690
in favor.
380
00:20:28,170 --> 00:20:32,410
When we work with clients, we do stress
381
00:20:32,410 --> 00:20:32,910
testing.
382
00:20:33,110 --> 00:20:34,930
We look at this in the context of
383
00:20:34,930 --> 00:20:36,030
a financial plan.
384
00:20:36,710 --> 00:20:39,750
What if markets have a disruption?
385
00:20:40,170 --> 00:20:44,590
What if we have less rate of return
386
00:20:44,590 --> 00:20:45,570
than we expect?
387
00:20:45,990 --> 00:20:47,150
What if we have higher taxes?
388
00:20:47,330 --> 00:20:50,430
What if we go through a variety of
389
00:20:50,430 --> 00:20:50,650
these things?
390
00:20:50,950 --> 00:20:54,310
That can be helpful for clients to think
391
00:20:54,310 --> 00:20:54,770
about.
392
00:20:55,910 --> 00:21:00,010
If you're getting those kinds of stress with
393
00:21:00,010 --> 00:21:03,610
your financial advisor, that might be something to
394
00:21:03,610 --> 00:21:05,930
talk to them about or talk to someone
395
00:21:05,930 --> 00:21:08,410
else about to say, hey, I want to
396
00:21:08,410 --> 00:21:13,090
get this kind of planning in my circumstances.
397
00:21:14,190 --> 00:21:17,350
Maybe it's time for a portfolio review.
398
00:21:17,850 --> 00:21:20,910
Is there excess risk built into your portfolio?
399
00:21:21,410 --> 00:21:24,650
Do you have the level of diversification you
400
00:21:24,650 --> 00:21:28,630
probably should have to manage some of these
401
00:21:28,630 --> 00:21:29,050
risks?
402
00:21:29,550 --> 00:21:31,510
That's really something that we see when people
403
00:21:31,510 --> 00:21:33,890
come in for a second look on their
404
00:21:33,890 --> 00:21:37,210
investment portfolio, or it's a new client, or
405
00:21:37,210 --> 00:21:39,990
someone coming in for the first time.
406
00:21:40,550 --> 00:21:43,110
Things that we see are exactly what you're
407
00:21:43,110 --> 00:21:43,670
talking about.
408
00:21:43,670 --> 00:21:46,050
One you didn't touch on, but we do
409
00:21:46,050 --> 00:21:48,630
talk about it frequently is concentration.
410
00:21:49,370 --> 00:21:51,390
Maybe an employer stock.
411
00:21:51,690 --> 00:21:55,010
A lot of people work for these big
412
00:21:55,010 --> 00:21:57,710
companies who are in this AI sector, technology
413
00:21:57,710 --> 00:21:58,190
sector.
414
00:21:59,270 --> 00:22:01,410
They have big salaries.
415
00:22:02,670 --> 00:22:06,250
It's a really robust industry, it appears.
416
00:22:06,550 --> 00:22:08,130
They're buying stock in these companies.
417
00:22:08,590 --> 00:22:12,650
They come in and a significant, sometimes all,
418
00:22:12,830 --> 00:22:15,990
but a significant part of their future investing
419
00:22:15,990 --> 00:22:19,490
portfolio is all on this one company or
420
00:22:19,490 --> 00:22:20,150
one sector.
421
00:22:20,790 --> 00:22:22,670
It's a big issue.
422
00:22:23,450 --> 00:22:24,630
Very common.
423
00:22:26,210 --> 00:22:29,190
A lot of times people live with it
424
00:22:29,190 --> 00:22:31,930
because they just don't want the capital gains
425
00:22:31,930 --> 00:22:35,190
that are embedded in these stocks.
426
00:22:36,070 --> 00:22:38,190
They think, well, I'll just wait until I
427
00:22:38,190 --> 00:22:41,690
die and get the step-up and basis
428
00:22:41,690 --> 00:22:43,030
of the next generation.
429
00:22:45,750 --> 00:22:47,750
We've run into this quite a bit recently.
430
00:22:48,070 --> 00:22:49,850
I would say that if you're in this
431
00:22:49,850 --> 00:22:54,730
circumstance, there are techniques to try to help
432
00:22:54,730 --> 00:22:55,010
you.
433
00:22:56,530 --> 00:23:00,490
It's worth having a conversation to strategize.
434
00:23:00,930 --> 00:23:06,010
How could I mitigate some of this embedded
435
00:23:06,010 --> 00:23:08,990
gain to try to diversify my risk?
436
00:23:14,070 --> 00:23:17,130
When it comes to this topic, I think
437
00:23:17,130 --> 00:23:18,750
it's a little bit scary.
438
00:23:18,930 --> 00:23:21,970
I think it might be a little bit
439
00:23:21,970 --> 00:23:22,690
sensational.
440
00:23:23,330 --> 00:23:26,870
That is to say, in 1929, it's not
441
00:23:26,870 --> 00:23:28,770
to say we can't have a crash or
442
00:23:28,770 --> 00:23:31,170
a decline or a disruption in the market.
443
00:23:32,810 --> 00:23:38,410
Inevitably, as Andrew Ruff said, we will have
444
00:23:38,410 --> 00:23:40,830
a crash.
445
00:23:41,130 --> 00:23:42,470
I just can't tell you when.
446
00:23:42,950 --> 00:23:44,450
Well, we don't know when.
447
00:23:44,450 --> 00:23:47,530
We just know inevitably this is the nature
448
00:23:47,530 --> 00:23:50,550
of markets that there will be excesses and
449
00:23:50,550 --> 00:23:51,490
there will be disruption.
450
00:23:52,790 --> 00:23:54,310
That's the norm.
451
00:23:54,510 --> 00:23:55,910
That's the way it works.
452
00:23:56,610 --> 00:24:01,050
We can prepare for that the way we
453
00:24:01,050 --> 00:24:06,910
invest and the liquidity we retain in preparation
454
00:24:06,910 --> 00:24:07,690
for that.
455
00:24:08,650 --> 00:24:14,150
So, how you invest makes a difference.
456
00:24:14,630 --> 00:24:16,830
It's probably worth talking about for a second
457
00:24:16,830 --> 00:24:21,050
here is the idea that there's never a
458
00:24:24,350 --> 00:24:26,270
perfect solution.
459
00:24:27,570 --> 00:24:30,930
If you pick a product that helps to
460
00:24:30,930 --> 00:24:34,150
mitigate risk, you give up something else.
461
00:24:35,410 --> 00:24:37,770
Maybe you give up some performance.
462
00:24:38,410 --> 00:24:42,450
Maybe you have embedded high internal costs.
463
00:24:42,710 --> 00:24:46,250
Maybe you have surrender charges that last a
464
00:24:46,250 --> 00:24:47,110
long time.
465
00:24:47,690 --> 00:24:51,550
There are products that are designed to give
466
00:24:51,550 --> 00:24:58,150
you some equity exposure by limited downside risk.
467
00:24:59,210 --> 00:25:02,790
These are possibilities both, I'll just say inside
468
00:25:02,790 --> 00:25:04,490
annuities and outside annuities.
469
00:25:04,690 --> 00:25:06,490
There are structured products as well.
470
00:25:06,970 --> 00:25:09,590
If that's something that you're really drawn to,
471
00:25:10,170 --> 00:25:15,230
be aware oftentimes there's more cost efficient ways
472
00:25:15,230 --> 00:25:18,470
to do things than what you get through
473
00:25:18,470 --> 00:25:20,750
an annuity product.
474
00:25:21,150 --> 00:25:22,570
For a contract, right?
475
00:25:22,990 --> 00:25:27,570
Yeah, that it prolonged and keeps you sitting
476
00:25:27,570 --> 00:25:30,430
in a pile of captives for five to
477
00:25:30,430 --> 00:25:33,330
10, even we've seen 12 years sometimes.
478
00:25:33,650 --> 00:25:33,750
Yeah.
479
00:25:34,010 --> 00:25:37,090
Sometimes those products are sold to people, often
480
00:25:37,090 --> 00:25:38,830
those products are sold to people who are
481
00:25:38,830 --> 00:25:40,410
looking for a specific solution.
482
00:25:40,550 --> 00:25:42,830
It might be income, it might be market
483
00:25:42,830 --> 00:25:45,290
protection, and they don't take enough time to
484
00:25:45,290 --> 00:25:48,170
spend by the people buying those products to
485
00:25:48,170 --> 00:25:49,990
ask, what are we giving up here?
486
00:25:50,550 --> 00:25:51,750
What is the downside?
487
00:25:52,010 --> 00:25:53,230
Because you're correct.
488
00:25:53,410 --> 00:25:55,690
In life, there's very few, if any, free
489
00:25:55,690 --> 00:25:56,150
lunches.
490
00:25:56,410 --> 00:25:58,210
To get something, you're giving something.
491
00:25:59,750 --> 00:26:02,510
Learn the downside about whatever you're doing too.
492
00:26:03,130 --> 00:26:03,270
Yeah.
493
00:26:04,850 --> 00:26:06,790
Think in terms of, it's not an all
494
00:26:06,790 --> 00:26:10,470
or nothing kind of solution too.
495
00:26:10,570 --> 00:26:13,050
I think in investing, that's one of the
496
00:26:13,050 --> 00:26:16,670
continuing lessons is, you don't have to be
497
00:26:16,670 --> 00:26:20,970
all in or all out or whatever approach
498
00:26:20,970 --> 00:26:21,590
you take.
499
00:26:22,270 --> 00:26:26,490
It's probably virtuous to have a range of
500
00:26:26,490 --> 00:26:27,770
considerations.
501
00:26:28,130 --> 00:26:28,510
Absolutely.
502
00:26:29,950 --> 00:26:32,950
Even taking all of your money and putting
503
00:26:32,950 --> 00:26:37,890
it in a FDIC institution with thinking, I
504
00:26:37,890 --> 00:26:40,010
don't want any risk, I don't want to
505
00:26:40,010 --> 00:26:41,230
suffer through any of this.
506
00:26:41,610 --> 00:26:42,670
You're still taking risk.
507
00:26:42,670 --> 00:26:43,250
Yeah.
508
00:26:43,410 --> 00:26:44,610
It's just different risk.
509
00:26:44,850 --> 00:26:46,290
You're taking inflation risk.
510
00:26:46,430 --> 00:26:49,850
You're taking the interest rate risk.
511
00:26:50,410 --> 00:26:53,050
There's a variety of risks that you're taking
512
00:26:53,050 --> 00:26:53,990
in that process.
513
00:26:54,750 --> 00:26:58,590
Even the most conservative person is exposed to
514
00:26:58,590 --> 00:26:58,930
risk.
515
00:26:59,050 --> 00:27:01,390
It's just which risks to what extent.
516
00:27:02,610 --> 00:27:03,250
All right.
517
00:27:03,310 --> 00:27:06,250
With that, that's probably a good conversation.
518
00:27:06,570 --> 00:27:08,450
Thanks, Jeff, for indulging me.
519
00:27:08,550 --> 00:27:10,090
This was something that I wanted to spend
520
00:27:10,090 --> 00:27:11,990
a little time on because I feel like
521
00:27:11,990 --> 00:27:13,770
it's been coming up and I hope it's
522
00:27:13,770 --> 00:27:14,950
helpful to our listeners.
523
00:27:15,670 --> 00:27:18,250
Until next time, everybody keeps striving for something.
524
00:27:19,770 --> 00:27:21,870
Thank you for listening to Something More with
525
00:27:21,870 --> 00:27:22,570
Chris Boyd.
526
00:27:22,890 --> 00:27:25,050
Call us for help, whether it's for financial
527
00:27:25,050 --> 00:27:28,970
planning or portfolio management, insurance concerns, or those
528
00:27:28,970 --> 00:27:31,010
quality of life issues that make the money
529
00:27:31,010 --> 00:27:32,110
matters matter.
530
00:27:32,510 --> 00:27:35,730
Whatever's on your mind, visit us at somethingmorewithchrisboyd
531
00:27:35,730 --> 00:27:38,950
.com or call us toll free at 866
532
00:27:38,950 --> 00:27:42,630
-771-8901.
533
00:27:42,730 --> 00:27:46,490
Or send us your questions to amr-info
534
00:27:46,490 --> 00:27:48,450
at wealthenhancement.com.
535
00:27:48,510 --> 00:27:50,550
You're listening to Something More with Chris Boyd
536
00:27:50,550 --> 00:27:51,390
Financial Talk Show.
537
00:27:51,550 --> 00:27:53,990
Wealth Enhancement Advisory Services and Jay Christopher Boyd
538
00:27:53,990 --> 00:27:56,330
provide investment advice on an individual basis to
539
00:27:56,330 --> 00:27:56,870
clients only.
540
00:27:57,070 --> 00:27:59,010
Proper advice depends on a complete analysis of
541
00:27:59,010 --> 00:28:00,190
all facts and circumstances.
542
00:28:00,430 --> 00:28:02,290
The information given on this program is general
543
00:28:02,290 --> 00:28:04,330
financial comments and cannot be relied upon as
544
00:28:04,330 --> 00:28:05,930
pertaining to your specific situation.
545
00:28:06,110 --> 00:28:08,090
Wealth Enhancement Group cannot guarantee that using the
546
00:28:08,090 --> 00:28:10,090
information from this show will generate profits or
547
00:28:10,090 --> 00:28:11,210
ensure freedom from loss.
548
00:28:11,410 --> 00:28:13,570
Listeners should consult their own financial advisors or
549
00:28:13,570 --> 00:28:15,670
conduct their own due diligence before making any
550
00:28:15,670 --> 00:28:16,430
financial decisions.
