October 12, 2022 • 31 mins
If you’ve been impatiently waiting for another installment in Host Josh Bretl’s compelling tutorial about all things bonds, then this episode of The Retirement Equals Freedom Podcast is for you! In addition to recapping how today’s bond market differs from what we’ve seen over the past 40 years, Josh is explaining everything you need to know about alternative investments, the bases these investments should ideally cover (risk reduction and a decent rate of return) and some of the specific vehicles you might want to explore (Christmas wreaths are not among them). The guys also give a shout-out to educators who inspired and shaped them and the edgy senior project Co-Host Dave Schmidt produced while in art school – including a secret blooper reel featuring Josh that might somehow find its way into the public domain. So sit tight and enjoy this roller coaster of a bond ride. And, no, we’re not talking 007. (Sorry. Too tempting to resist.)
Are you ready to chat with Josh? You can schedule your complimentary 15-minute checkup call at this link.
Brew your own Cometeer Coffee at home with $25 off your first order: Just click here!
Click here to learn more about or listen to previous episodes of The Retirement Equals Freedom Podcast.
Don’t miss out on the show’s exciting weekly email, which you can subscribe to at this link. And if you feel like chatting, join the lively conversation at our private Facebook group, which you can find here.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Josh Bretl (00:02):
So as interest rates rise, bond values
mathematically have to fall.
So we're losing some of thisdownside protection and we
also have ultra low interestrates still, so they're
not paying much interest.
And you could deal withnot getting much interest
when we weren't worriedabout the values falling
out from underneath of us.
So we've been talking toclients for a couple years
(00:23):
about bond alternatives.
What other optionsdo we have out there?
Dave Schmidt (00:28):
The day has finally come.
Today we talk all aboutbond alternatives.
Josh is here to explaineverything you need to know
about alternative investments,the bases these investments
should ideally cover, i erisk reduction and a decent
rate of return, as well assome of the specific vehicles
(00:49):
you might wanna explore.
Just when you thought youcouldn't learn anything else
about bonds, here we are,talking about bond alternatives.
This is The RetirementEquals Freedom Podcast.
Your host, Josh Bretl, is theowner of FSR Wealth Strategies.
For the last few decades, he'sbeen helping fine folks like
you thrive in the retirement.
(01:10):
And me?
Well I'm Dave.
Josh's long time friend,co-host and fan of
older Tim Burton movies.
So now let me, let you, letme end this introduction
so we can start theenthralling conversation
about bond alternatives.
FSR Wealth Management is aregistered investment advisor
located in Elmhurst, Illinois.
(01:31):
Information and opinionscontained in this audio
have been arrived atby FSR Wealth advisors.
All information herein isfor informational purposes
and should not be construedas investment advice.
It does not constitute an offer,a solicitation or recommendation
to purchase any security.
FSR is not providing legal,tax, accounting, or financial
planning advice in this audio.
These views are as of thedate of this publication
and are subject to change.
(02:08):
Awe shucks, thanks.
Josh Bretl (02:09):
Oh, darn it.
Did you read throughthe show notes, Dave?
Dave Schmidt (02:14):
Yeah.
None of it makes sense to me.
So I'm just going to...
Josh Bretl (02:18):
Dave is truly flying by the seat of his pants today.
Dave Schmidt (02:21):
Yeah.
Josh Bretl (02:21):
So Dave, I told you.
Are we-
Dave Schmidt (02:23):
Yeah, we're recording.
Go ahead.
Josh Bretl (02:24):
Are we good?
Dave Schmidt (02:25):
Yeah.
Josh Bretl (02:25):
You're just going to mess with your headphones?
Dave Schmidt (02:27):
Yep, that's what I love about these headphones.
Josh Bretl (02:29):
So we are such epic podcasters that yesterday
I went and helped somebodyelse do their podcast.
Dave Schmidt (02:35):
Yeah, yeah.
Josh Bretl (02:36):
And I texted you during, it was pretty cool.
It was Jeff Mauroof the Food Network.
Dave Schmidt (02:40):
Okay.
Josh Bretl (02:41):
Now Missy and I are Food Network dorks.
Dave Schmidt (02:44):
Yep.
Josh Bretl (02:45):
We love watching the Food Network.
I have watched way too manyand if you give me a food
cooking competition, A TopChef, a Iron Chef, even
Netflix during the beginningof the pandemic had something
where these world chefs werecompeting all over the place.
Dave Schmidt (03:02):
Oh yeah.
Yeah.
Josh Bretl (03:03):
I will watch any food competition.
And a couple years ago, whichis 10 to be precise, we were
watching the Next Food NetworkStar, which is on Food Network,
and Jeff Mauro was the winnerand I thought he was so funny.
He's a local Chicago guy and hecould cook, but he was truly,
(03:25):
authentically personable.
And I am involved here withthe community bank in town
and the History Museum herein town and he was doing a
thing at the History Museumand they asked if I would
help because he was going torecord his podcast live there.
And it was so fun to gowatch and actually meet him.
He was a super nice, he wasjust as authentic and personal
(03:47):
and funny and in person asI had hoped he would be.
Dave Schmidt (03:51):
Well, that's awesome.
Josh Bretl (03:52):
And I learned a few things that I want to
do and I don't want to do.
And you've been talking abouta live podcast for a while.
Dave Schmidt (03:59):
Thank you.
I didn't want to interrupt you,but I'm hoping that you really
liked it and you're thinking,"Yeah, you know what, this Dave
guy, he may be onto something."
Josh Bretl (04:06):
Well, if we do a live podcast, you're
going to need a new shirt.
Dave Schmidt (04:12):
Shoot.
Well, if, look, here'sthe thing, if we do a live
podcast in the fall, mywardrobe is far more expansive
than my summer wardrobe.
Josh Bretl (04:20):
So I have an idea.
If I gave Carla a giftcertificate and I just said,
"The only thing this can beused for is shirts for Dave,"
do you think she'd do it?
Dave Schmidt (04:29):
No.
I would take it and go toCalifornia Pizza Kitchen.
I mean, look, there's a chanceyou could sneak out of the
house without me knowing, but Ithink we're on something here.
I like it.
No.
Okay.
But you did say if any of one ofour episodes hit 500 downloads
that we would do a live-
Josh Bretl (04:46):
I did.
Dave Schmidt (04:46):
Episode.
Josh Bretl (04:47):
We're not quite there yet.
Dave Schmidt (04:48):
No, we're not quite there.
We're getting closer.
My question would be, we woulddo at the beginning of a big
client event and those whowere privy to be invited would
actually get to see us record?
Josh Bretl (04:59):
Yeah, I think so.
Dave Schmidt (05:00):
That'd be kind of cool.
Josh Bretl (05:00):
We invite all the podcast audience, so...
Dave Schmidt (05:03):
Wow.
Josh Bretl (05:03):
It's been a lot of fun.
The last couple weeks we'vehad a few client events.
We've had even some new justregular events that we do.
The number of peoplethat have brought up
the podcast is amazing.
And Erin actually had anappointment with somebody who
was brand new to our office,came into one of our seminars
and he heard the podcast.
And you and I have beenself-conscious about this
(05:24):
part of the podcast where wetalk back and forth to each
other and relive our glorydays of high school basketball
and do all that fun stuff.
And so the people who knowus, like our moms, they
really like this part.
But I do wonder, doother people enjoy it?
And so when I get a chance,people who don't know us, I
ask them or Erin will ask themor Sean will ask them and the
(05:46):
guy's response yesterday waskind of, "I like it, but I've
learned how to listen to iton one and a half time speed."
Dave Schmidt (05:52):
oh no!
Josh Bretl (05:54):
So you and I probably sound like
a chipmunk to him.
We're talking really fast.
We don't have time to speak.
Dave Schmidt (05:58):
And since we sound like school girls,
it's probably like...
So I'm guessing this guy,this guy and Dave Milburn
are probably BFFs becausethey both feel the same.
Josh Bretl (06:08):
Well Dave, just fast forwards through this,
so he's not hearing this atall, but I do think Dave would
come to a live recording.
Dave Schmidt (06:16):
Oh, absolutely.
Josh Bretl (06:16):
We'd make him listen to this part.
Dave Schmidt (06:18):
Oh yeah.
Dave's a huge fan of ours.
Now what's really cool istoday and today alone, we
had two separate people cominto your office asking me to
brew them a Cometeer coffee.
Josh Bretl (06:30):
That is pretty cool.
Dave Schmidt (06:31):
I thought that was really cool.
One's not a client, oneis a client I think.
And I mean one of themthought that you and
I owned the company.
That's why we promoted itso much on the podcast.
Maybe one day we will.
Cometeer.
Josh Bretl (06:45):
Cometeer.
Dave Schmidt (06:47):
This is not Cometeer.
We did have Cometeerearlier today.
Josh Bretl (06:49):
This morning we did.
Yeah.
Dave Schmidt (06:50):
Yeah.
This goes out to ourfavorite local coffee shop.
Brewpoint coffee.
Josh Bretl (06:55):
Yeah.
We were doing local restaurantlittle plugs here, but we do
like our Brewpoint coffee here.
Yeah.
Dave Schmidt: Brewpoint is the best. (07:00):
undefined
They have that thelittle, the works...
What do they call it?
They have a cool new, a-
Josh Bretl (07:05):
Like a shared office space type thing.
I forget what they call it.
Dave Schmidt (07:07):
Yeah.
They have a cool-
Josh Bretl (07:08):
Something catchy and hip, trendy.
I mean something we'renot allowed to be in the
financial services world.
Dave Schmidt (07:14):
That's true.
I can go there causeI'm super cool.
Josh Bretl (07:16):
But yeah.
And we don't let youtouch people's money.
So that's better that way.
So I've started coaching Alex'ssoccer team this year and I did
it because Alex loves soccer.
He really enjoys playing.
And a couple years ago he hadthe world's greatest coach.
This guy was awesome.
Coach Adam here in Elmhurst.
(07:39):
He knows soccer,he plays soccer.
Actually I found out he alsoowns his own watch company.
Dave Schmidt (07:44):
Oh that's cool.
Josh Bretl (07:45):
Farr and Swit Watches.
It's really, he's got coolwatches, but I've seen
him around a few times.
F A R R and S W I T.
Swit or sweet.
I don't know what it is.
But anyways, coachAdam was awesome and he
got Alex so pumped up.
He taught him a ton.
And the following year hehad a coach who was not very
(08:07):
good and actually kind of wasdepressing towards the kids.
And I said to myself, Ican't complain because
I didn't volunteer.
If you don't volunteer tocoach, you can't complain
about the volunteer coach.
So I decided I was going tovolunteer and coach this year.
And as kids get older, theybecome tougher to coach.
(08:27):
Especially your own kid.
Now the kids are reallyenjoying it, I'm proud of
what I'm doing with him.
But it is a challenge.
It's been fun.
We're a few weeks in now andthey're learning something.
Dave Schmidt (08:37):
That sounds fun.
Did you know Carla was thehead basketball coach for
Landon's team last season?
Josh Bretl (08:44):
Well, that would make sense.
Dave Schmidt (08:44):
Yeah.
Josh Bretl (08:45):
She's a great basketball player and she
knows how to coach kids.
Dave Schmidt (08:48):
Exactly right.
Yeah.
And now she's been theassistant baseball coach for
every team since he started.
So okay, there's acompetition brewing.
Coach Adam versus any CPA thatworks with taxes, who's Al
going to hang out with a soccercoach or guy who knows taxes?
Josh Bretl (09:05):
He'd probably hang out with Coach Adam
and talk to him about taxes.
I mean that's how great Alex is.
Dave Schmidt (09:09):
Win-win.
Josh Bretl (09:11):
And Adam looked at him like, "You crazy."
Dave Schmidt (09:12):
Do your kids ever read those
"Who Would Win" books?
Josh Bretl (09:15):
Oh, all the time.
Dave Schmidt (09:15):
Yeah.
So who would win: taxes or soccer? (09:16):
undefined
Josh Bretl (09:21):
So Dave, today's topic is one that I talk
about a lot with clients.
Dave Schmidt (09:29):
Coffee?
Josh Bretl (09:30):
Nope.
Dave Schmidt (09:30):
Food?
Josh Bretl (09:31):
Nope.
Dave Schmidt (09:31):
Taxes?
Josh Bretl (09:33):
No, not even taxes today.
We talk about it so muchthat this is the third time
we're going to do kind of amajor representation to it.
And it was actually, thisis Erin's recommendation
because we've spent twopodcasts in the past talking
about bonds and then talkingabout the 60-40 portfolio.
And I have a rule in the officethat if you come to me with
a problem, you better alsohave a proposed solution.
(09:54):
And I feel like in thosetwo episodes I told you
guys, "Hey, bonds arehaving problems right now."
And I never gave youa solution to it.
Dave Schmidt (10:04):
But they were intentional cliffhangers
for today's episode.
Josh Bretl (10:07):
My life is one intentional cliffhanger.
Dave Schmidt (10:10):
Says the non movie buff guy.
Josh Bretl (10:13):
I haven't seen a movie in four years.
Dave Schmidt (10:14):
Yeah, there's no cliff hangers in your
food competition shows.
Josh Bretl (10:17):
If any of our friends were listening
to this, they're going tobe like, "You watch TV?"
It's like, no, we don't watchwhat everyone else is watching.
I've never seen theLord of the Rings.
I've never seen any of thatstuff, but I know every cooking
competition known to man.
Dave Schmidt (10:28):
Love it.
Josh Bretl (10:29):
I also know all local news personalities.
Okay, so you want to go there?
I gotcha.
Dave Schmidt (10:34):
I prefer not.
Josh Bretl (10:36):
So let me recap here a little bit
as to what we talked aboutin the previous episode.
And we always, what thepurpose of bonds are.
Bonds are a part of a lot ofpeople's portfolios and bonds
have two major components (10:46):
one is for downside protection.
So as part of a portfolio,whatever positions you have
allocated to bonds hopefullyare going to protect you
when the market goes down.
The second reason isthat they're going to
pay you a decent interestrate, there's some minor
growth potential there.
And it's done thatpretty much forever.
(11:07):
But the problem with bondsis that bonds operate
what they call an inverserelationship to interest rates.
So as interest ratesfall, bond prices rise.
Now for the last 40 years,we've seen interest rates
pretty much start at 15, 16,18% and fall down to near zero.
Well, we are now seeing interestrates start to rise back up.
(11:29):
And so the converse or theinverse of that is true.
So as interest ratesrise, bond values
mathematically have to fall.
So we're losing some of thisdownside protection and we
also have ultra, ultra lowinterest rates still, so they're
not paying much interest.
And you could deal withnot getting much interest
(11:50):
when we weren't worriedabout the values falling
out from underneath of us.
But now we kind of havethis worst of the world.
So we've been talking toclients for a couple years
about bond alternatives.
What other optionsdo we have out there?
Does that make sense?
Does that ring a bell?
Dave Schmidt (12:05):
Oh, how could I forget this stuff?
Josh Bretl (12:06):
That glassy look in your eyes when you go,
"What is he talking about?"
Dave Schmidt (12:10):
No, that's just because I stayed up too
late last night celebratingthe Buffalo Bills' first
victory this season.
Josh Bretl (12:15):
You're still a Bills fan?
I grew up, I mean theonly reason I knew Buffalo
existed as a city when Iwas a high schooler was
your love of the Bills.
So we've been talking aboutbond alternatives Maybe
there's some really proactivepodcast listeners out there.
Maybe they Googled bondalternatives to see what this
kid was talking about over here.
(12:36):
And they're going to list allsorts of different things.
They're going to list REITsand preferred stocks, dividend
stocks, high yield savings,all sort of different things.
Dave Schmidt (12:43):
Did you say wreaths as in Christmas wreaths?
Josh Bretl (12:48):
REITs as in real estate investment trust.
Dave Schmidt (12:51):
Oh.
Josh Bretl (12:51):
So now I'm not recommending any of those, but-
Dave Schmidt (12:54):
No, sure because it's Halloween season.
You go Halloween wreath,not Christmas wreath.
Josh Bretl (12:59):
True.
Dave Schmidt (13:00):
We're on the same page.
Josh Bretl (13:00):
We are.
We're on the same page.
So before we look at this,I want to look at some
different options from thetwo things we're looking for.
If you remember, for a bondalternative, we're looking
for risk reduction, tryingto protect on the downside
and to pay you a decentinterest rate along the way.
So one of the first thingsthat we've looked at is we
look at cash, I mean cashis a very real option.
(13:22):
Maybe for a portionit could work.
Now the problem with cash, cashwill protect on the downside.
Great protectionon the downside.
Right now it's paying youvirtually zero interest.
So it could come back ina little bit, but it only
provides one of thosetwo options as there.
So we do use it in some spots.
CDs can be also there.
Unfortunately right now,CD rates have really
(13:44):
dropped precipitously.
And Erin did a quick littleGoogle search for us today and
the best rates she could findas of we're recording, this is
September 9th, 2022, the best CDrates out there for a one year
were like 2.7 and up to threeand a half but you got to lock
it up for five years for that.
So even then when we're throwinginflation numbers in the
(14:05):
high single digits, that's atough pill to swallow there.
Dave Schmidt (14:09):
Sure.
And you look at CD rates and Iknow we've talked about I Bonds,
you'd almost be like you'd putyour money in an I bond instead.
Josh Bretl (14:15):
Yeah, I bonds, the episode we did on I Bonds
is a great bond alternative.
You can't put that muchinto it if you're looking
at a bigger portfolio.
Dave Schmidt (14:24):
That's true.
That's true.
Josh Bretl (14:24):
There's only so much you can put in.
We'll also look at what wecall alternative investments,
what I call a bond alternative.
But an alternative investment issomething that's nontraditional.
And the reason we do that isfor a lack of correlation.
So a correlation is how tiedto an index an investment is.
So think about the S&P 500.
(14:45):
It's a index of 500largest US companies.
And a perfectly correlatedinvestment, if the S&P goes up
10, the investment go up 10.
If S&P goes down 10, theinvestment would go down 10.
They would say that hasa correlation of one.
Okay, It's aperfect correlation.
If the S&P goes up 10 andthe investment goes up 20,
(15:06):
that's a two correlation,it's a double correlation.
So what we look foractually is close to a zero
correlation as we can get.
So the movement of theS&P or whatever index it
is not correlated to themovement of the asset price.
Dave Schmidt (15:22):
I see.
Josh Bretl (15:22):
And so if you have a net worth north of a
million, $2 million, beingable to allocate some money
to this can really help dothose two things - reduce
risk and help provide a decentinterest rate comparison there.
The problem with that is thereis some market risk to those
and there's also some liquidity.
(15:43):
It's not an issue, butit's a risk that's there.
So that's why I wouldn'trecommend those to
everyone under the sun.
For some people they can be anice part of a bond alternative.
Dave Schmidt (15:53):
Wait, what was it called?
What was it?
What were you talking about?
Josh Bretl (15:56):
The alternative investments.
Dave Schmidt (15:58):
Oh, okay.
Josh Bretl (15:58):
Yeah, the non-correlated assets.
Dave Schmidt (16:00):
Okay, because I'm sitting here thinking I did
some research before our show.
Do you know what thecorrelation is of the Retirement
Equals Freedom podcast?
It's like four to one.
It's incredible.
Josh Bretl (16:09):
Oh, that's incredible.
Dave Schmidt (16:10):
I have no idea what that means.
We're like way in the S&P two.
Josh Bretl (16:16):
You're just pulling numbers out.
Dave Schmidt (16:18):
That's what I do.
Josh Bretl (16:19):
I mean there's other financial advisors that pull
numbers out just like that too.
But some examples of alternativeinvestments, they could be
REITs, R E I T, Halloween REITs.
There's some precious metals,private equity, hedge funds.
There's all sorts ofdifferent things that
could be utilized there.
Dave Schmidt (16:37):
Rewind precious metals like gold and silver?
Josh Bretl (16:40):
Yeah.
Dave Schmidt (16:40):
Oh.
Josh Bretl (16:40):
Yeah.
Dave Schmidt (16:41):
I didn't think that was still a thing.
Josh Bretl (16:43):
They still exist and for some higher
net worth investorsyou'll see them in there.
But it's not common anymore.
Dave Schmidt (16:50):
Because I have a few gold teeth.
Would that count?
Josh Bretl (16:52):
Oh yeah.
Your mother was very proudof that when you were a kid.
Dave Schmidt (16:55):
Totally.
Josh Bretl (16:55):
When she knocked those teeth out of your
mouth, she said "David, wereputting the gold ones in."
Dave Schmidt (16:59):
"David, did you eat the last
Markey Day sandwich?"
Josh Bretl (17:03):
"This is what you get for eating
the last puddin' cake."
Dave Schmidt (17:06):
No, back then it was those poppy seed bagel dogs.
Josh Bretl (17:08):
Oh my god.
Dave Schmidt (17:09):
Full size bagel dogs.
Josh Bretl (17:09):
You used to leave the dirty plates
in my car for weeks.
Dave Schmidt (17:14):
Oh man.
I'm surprised my mom nevermade me go to paper plates.
She would get so mad becauseyou would leave five glass
plates in your trunk at a time.
"David, we're runningout of plates.
The family needs plates."
Josh Bretl (17:25):
I'm also surprised that was like a convertible.
We put the top down a lot.
And you used to put it backwhere the top would go down.
Dave Schmidt (17:31):
No, I thought I threw it in the trunk usually.
Josh Bretl (17:33):
Oh did you?
Dave Schmidt (17:33):
And then it would just stink.
The smell would aggregateand then it would just
knock your brother outwhen he would open it.
Josh Bretl (17:39):
Oh,
Dave Schmidt (17:40):
REITs, man.
Josh Bretl (17:41):
REITs man.
Now let's move on.
Another bond alternative.
This is becoming alittle bit more popular.
Technologically, there'ssomething called buffered ETFs.
And now buffered ETF, it'sa way to give you a hedge
against market downturns.
Instead of incorporating bonds,your portfolio, you can utilize
some of these strategies.
(18:02):
It takes a little bit moreknowledge to get into those,
but they've become more andmore popular that's out there.
Another one that we'vebeen using, we use quite
a bit in our office, areactually some different
annuities that are out there.
Now when I say "A" wordto some people that are
like, "Yeah, that's great."
Some people are like,"No, annuities evil."
And again, they'renot for everybody.
And I always tell peoplethere's no investment that's
(18:25):
inherently good or bad.
But when I look at thepurpose of why we do it, if
we are looking for downsideprotection and to pay you a
decent interest rate, as a bondalternative, there are certain
annuities that can be quitevaluable in that situation.
And then we do see those insome people's portfolios.
But one of the nice morecommon will utilize in certain
(18:46):
situations are differentannuities as a bond alternative.
So I do feel like in a fewyears we'll be able to put
them back into portfolioslike we normally would.
It's been fun to look andutilize different alternatives.
It makes managing someone'sassets not so cookie cutter.
I mean there's a lot of justcookie cutter portfolios, but
this makes it a little bit lesscookie cutter as we go in there.
Dave Schmidt (19:07):
Why do some people have a bad
relationship with annuities?
Josh Bretl (19:12):
There's been press out there.
There are some of themthat have really high fees.
There's been some badsales people out there.
We should probably doa whole annuities good,
bad, ugly podcast.
Dave Schmidt (19:23):
I like it.
Josh Bretl (19:24):
And go into the details because our industry
has some shady people in it.
So you just want to be cognizantof why you're doing things
and the purpose behind them.
Dave Schmidt (19:31):
Yeah, makes sense.
Cool.
Josh Bretl (19:33):
Dave?
Dave Schmidt (19:34):
Yeah.
Josh Bretl (19:35):
I've talked a lot.
What do you think?
Oh yeah, that's whatI'm thinking, Dave.
Dave Schmidt (19:40):
Hey, Mr.
Josh, let's take a break.
You've been talking for solong and my ear's are sore.
Let's not make them snore.
Listening shouldn't be a chore.
So let's get to know Josh andDave and watch our ratings soar.
Oh yeah.
(20:01):
Dave Mauro, am I sayinghis last name correctly?
Josh Bretl (20:05):
Mauro.
Mauro.
Mauro.
Dave Schmidt (20:07):
Eat your heart out.
You don't have a getto know Josh and Dave
segment on your podcast.
However, I am open to newpodcast producing opportunities.
Email me at...
Just kidding.
Josh Bretl (20:16):
He actually has a ton of sound effects and spends
time like singing them in hisbasement and stuff like that.
Dave Schmidt (20:21):
Does he really?
Josh Bretl (20:22):
Yeah.
It's pretty cute.
You'd enjoy it.
Dave Schmidt (20:23):
Oh.
Josh Bretl (20:23):
It was called, "Come On Over" was the
name of the podcast.
It was pretty cool.
"Come on Over" by Jeff Mauro.
Dave Schmidt (20:29):
I like it.
Josh Bretl (20:30):
It was really cool.
I actually bought hiscookbook, the "Come On Over"
cookbook because I like peoplecoming over to our house.
Come on over.
We'll cook something.
I don't know what I'mgoing to cook yet, but
I'll cook something.
Dave Schmidt (20:38):
I love when you cook for me.
Josh Bretl (20:40):
I know you do.
Dave Schmidt (20:40):
So yeah, the music just played that catchy beat
that's top 10 hits on Spotify.
Get to know Josh and DaveSong by Dave Schmidt.
What you got forus today, buddy?
Josh Bretl (20:49):
So the question I have for you today, I told you
before, I picked the card andI went a little sentimental.
All right.
Did you have a favoriteteacher or a teacher who made
a big impact on your life?
Dave Schmidt (21:03):
Oh, my relationships with teachers
was a bit rocky at times.
Josh Bretl (21:09):
I only knew you in high school, I didn't
know you younger than that.
And I could tell you, you wereprobably not many high school
teachers favorite student.
Dave Schmidt (21:15):
Definitely not.
Josh Bretl (21:17):
And it has to be hard.
I mean, you married a teacher.
Dave Schmidt (21:21):
Josh, you actually helped me with this idea.
So I will give you some credit.
But Coach Jim Prunty.
Josh Bretl (21:26):
I know him well.
Dave Schmidt (21:28):
Absolutely.
You should know him well.
My senior year, your junior yearwas his first year coaching at
York and he was just awesome.
It was night and day fromthe previous coach who
I also liked, but verydifferent coaching style.
And Prunty just kind of got us.
He was very mildmannered, even keeled.
And to be honest, he wrote theplay "Snap Four" just for me.
(21:50):
So how could I not love the guy?
Josh Bretl (21:52):
He seemed to understand you quite well.
Dave Schmidt (21:55):
I only remember one moment when
he got really, really madat quote unquote his "bigs"
because we couldn't rebound.
He was referring of course tome and Mark and Mark was one of
the league's best rebounders.
So he was reallyreferring to me.
And it was one game, we werejust, I think by Central, we
were just getting outrebounded.
And he went in the lockerroom and he goes, he probably
cursed a few times and-
Josh Bretl (22:16):
Oh, he didn't put me in the game.
So I mean, it wasn't that bad.
Dave Schmidt (22:18):
It wasn't that bad.
I know.
yeah, Coach Jim Prunty.
Josh, how about you?
Do you have a favoritememorable teacher?
Josh Bretl (22:25):
I actually have lots of teachers who
I really, really like.
I'm going to go way.
Dave Schmidt (22:29):
Nerd.
Josh Bretl (22:29):
I know, I know.
I'm going to go wayback to, actually, my
kindergarten teacher.
Mrs.
Porter, Trilby Porter.
I had her, oh man, I don'tknow how many ever years ago.
I love school.
I thought it was fun.
And I think she was part of it.
But she was in Elmhurst as akindergarten teacher forever.
My uncle who's 20 yearsmy senior had her,
my sister had her.
(22:50):
She was great.
In fact, there's many,many children in Elmhurst
that will have a Mrs.
Porter story andit's pretty cool.
Dave Schmidt (22:56):
That's cool.
And you know what, I rememberyou telling me about her because
she made you feel okay that youweren't potty trained and that
you'd wet your pants every day.
Josh Bretl (23:07):
She was very understanding.
Dave Schmidt (23:09):
Yeah, I knew it.
Josh Bretl (23:10):
My sister teaches kindergarten right
now and that probablyisn't that far of a joke.
I've heard from her stories.
There's kids indifferent stages.
Dave Schmidt (23:17):
Absolutely.
Yeah.
Different stages.
What are you going to do?
Yeah.
So Josh, I was sitting here, wewere talking about get to know
Josh and Dave and I thoughtabout Dave relates to retirees.
Yeah.
Josh Bretl (23:31):
Do you think when you're older and you're
actually retired, you'll lookback at this and go, "Man,
I didn't relate at all."
Dave Schmidt (23:38):
My goal is to relate less and less
to make your job harder.
Josh Bretl (23:42):
Good.
I can't wait to seewhat's coming today.
Dave Schmidt (23:45):
I went to the Illinois Institute of Art.
Josh Bretl (23:48):
You did.
Dave Schmidt (23:48):
We've talked about this a few times.
My senior project, we got topretty much choose anything
that we wanted to do.
It's art school.
You really had totry to get a B.
It's really hard to not get A's.
So my idea was to come upwith an entire marketing
plan for a made up moviecalled "The Empty".
(24:09):
You're holding backyour laughter because
you remember it.
So originally the scope ofmy senior project was to
develop a website, a poster.
Back then it was aninteractive CD Rom, which
was a lot of fun to make.
They're completelyirrelevant now.
And I finished all thatwithin the first two weeks
of the trimester or quarter.
And I thought, I think I'm goingto actually make a film now.
(24:32):
So how this is relatingto bonds is because I
chose an alternative path.
See what I did there?
I could have just beenhappy with what I made,
but I said, "No, I'mgoing to make the film."
So that was one of thefew moments I've ever
overachieved in my life.
Instead of writing a scriptand hiring actors from a
local college, I relied onmy good friend, Josh, Kevin,
(24:55):
Carla, and Jackie, to bethe actors of this film.
The end result reflects this.
It is one of the worstthings you will ever watch.
However, we did come away witha blooper reel, which I'm going
to post on our Facebook group.
Josh Bretl (25:10):
No, no.
Dave Schmidt (25:11):
Oh, I am.
Josh Bretl (25:12):
No, no.
Dave Schmidt (25:13):
Oh, I am.
Josh was the imaginaryevil spirit slash bad guy.
And you're going to seeJosh in action folks.
Josh Bretl (25:21):
Oh, please, God.
You promised thiswas never coming out.
Dave Schmidt (25:26):
Well, I promised that if you weren't
going to run for officewhich I don't think you are.
So that's how Irelate to retirees.
The retirees are sittinghere like, "Man, I need a
good alternative to bonds."
And I'm like, "Yeah, Ineed an alternative to
just my senior project.
I'm going to make a film baby."
Remember I was heavilyinspired by Tim Burton even
though this film has nothingto do with Tim Burton.
(25:46):
So Josh, I would likeyou to relate "The Empty"
to bond alternatives.
Josh Bretl (25:52):
Dave.
Dave Schmidt (25:53):
Yeah?
Josh Bretl (25:54):
I didn't laugh for a lot of it because I
kind of had an idea where youwere going with all of it.
And I'm thinking to myself,good God, how am I going
to be able to relate thisback to bond alternatives?
Dave Schmidt (26:07):
To me that's mission accomplished then.
Josh Bretl (26:09):
And it's going to be difficult and I'm going
to change your story a bit.
Dave Schmidt (26:14):
Insert "Full House" music.
Josh Bretl (26:15):
The reason retirees need an alternative to bonds
is because the bonds aren'tliving up to the purpose that
they are supposed to provide.
Now I'm going to assumethat your senior project
of a website, CD rom,and poster was okay work.
Dave Schmidt (26:37):
It was great work.
Josh Bretl (26:38):
But the purpose was it didn't
fulfill you internally.
Dave Schmidt (26:42):
Thank you.
Josh Bretl (26:43):
And so you needed something else to
fulfill you internally.
And so you created thisvisual masterpiece-
Dave Schmidt (26:52):
Thank you.
Josh Bretl (26:52):
That I am utterly embarrassed to be a part of.
So when I refer to bondalternatives, they're looking
for this option that canprovide something for them,
the fulfillment, if you will,to their needs of protection
and a good interest ratewhere you were looking
for fulfillment to youreducational, academic desires.
Dave Schmidt (27:15):
And my art skills.
Josh Bretl (27:16):
Yes, you're very artsy.
But they're a little different.
But I do kind of see whereyou are going with that.
Dave Schmidt (27:21):
I appreciate it.
Josh Bretl (27:23):
I appreciate you.
Dave Schmidt (27:24):
I've had the idea of sharing the story
of "The Empty" for a while.
I just kind of needed something,just even the slimmest of
things that I could relate to.
Josh Bretl (27:33):
And you said, "He's going to talk about
bonds for a third time."
Dave Schmidt (27:36):
I mean, yeah.
So yeah, it was aperfect fit in my mind.
Josh Bretl (27:39):
"We're going to embarrass the snot out of him
by talking about 'The Empty'."
Dave Schmidt (27:42):
I mean, who's more embarrassed, you or Jackie?
Lets be honest.
Or me for making it?
Josh Bretl (27:47):
Definitely Jackie.
Without a doubt.
Dave Schmidt (27:48):
Yeah, I think so.
Josh Bretl (27:49):
Yeah.
Poor Jackie.
Dave Schmidt (27:50):
But she can watch it and get a
good laugh out of it.
Josh Bretl (27:52):
That is true.
Dave Schmidt (27:53):
Oh man, Josh.
So bond alternatives.
Yeah.
We talked about REITs,which I learned is not a
Halloween or Christmas wreath.
I learned about bond, whatyou call these things?
Alternative...
Josh Bretl (28:05):
Investments.
Dave Schmidt (28:05):
Investments.
Josh Bretl (28:06):
Non correlated assets is another way
to think about it.
Dave Schmidt (28:09):
You learned that the "Retirement Equals Freedom
"podcast is a four to onecorrelation in the S&P two.
Josh Bretl (28:15):
True.
True.
Dave Schmidt (28:17):
Yep.
So what do we have plannedhere for future episodes, Josh?
I kind of want to whet people'sappetite now because since we
are going biweekly, every otherweek, I kind of want to set the
stage for future episodes now.
Josh Bretl (28:30):
Well, we talked about doing a annuities
good, bad, and ugly.
Dave Schmidt (28:33):
Yeah.
Josh Bretl (28:34):
I also, we're approaching the end of the year
here and there's some reallykey things for end of the year
tax planning, end of the yearinvestment planning that you can
do that are very time sensitive.
I'd like, Dave, I'd liketo interview somebody too.
Dave Schmidt (28:47):
Before the year ends.
Josh Bretl (28:48):
Before the year ends.
Dave Schmidt (28:49):
Sure.
Josh Bretl (28:49):
Maybe that can be our final 2022 podcast.
We interview your mom.
Dave Schmidt (28:54):
Oh, you think Becks-
Josh Bretl (28:55):
you think Becks would want to do it?
Dave Schmidt (28:57):
Oh, for sure she'd want to do it.
Josh Bretl (28:58):
Yeah, I think it would be fun.
Let's just interview Becks.
Yeah, I mean, why not.
Dave, at the end of everypodcast we've done, we've
asked our listeners to dosomething for us and we're
going to do something a littlebit different this time.
Dave Schmidt (29:10):
What?
Did you run this by me first?
Josh Bretl (29:12):
No, sorry.
But bond alternatives areactually important and looking
at your portfolio is important.
And if you look at yourportfolio and you see, "Hey,
I've got 10% bonds, 20% bonds,40% bonds, 80% bonds," whatever
it might be, it should belisted right there on your
first page of your statement,it's time for you to talk.
And if you talk to your advisorand ask them about it, great.
If you have questions, youwant to talk to me about it.
(29:33):
Wonderful.
We'd love to talk to youand see if an alternative
might be a right fit foryour situation or not.
Dave Schmidt (29:39):
Excellent.
And on the FSRwealth.com/podcastpage, at the very bottom
there is an embedded calendar.
So you can actually booka free or complimentary
15 minute call with Josh.
Josh Bretl (29:49):
Whoa.
Dave Schmidt (29:50):
Yeah.
Did you know that?
Did you know thecalendar was on there?
Josh Bretl (29:53):
Yeah, yeah.
No.
Dave Schmidt (29:54):
Oh yeah.
I'm going to add a secondcalendar if you want to
come in for a complimentarycup of Cometeer coffee
brewed by yours truly.
I won't put a calendar up there,but you can request when next
time you come in the office.
Josh Bretl (30:07):
And with that Dave, thank you for sitting
down recording with me today.
Dave Schmidt (30:14):
Bond alternatives baby.
We got some excitingstuff coming up Josh.
Thank you.
And we'll end thisshow by saying bye.
Josh Bretl (30:21):
I actually think that was a decent show.
Dave Schmidt (30:27):
That was fantastic.
So as interest rates rise, bond values
mathematically have to fall.
So we're losing some of thisdownside protection and we
also have ultra low interestrates still, so they're
not paying much interest.
And you could deal withnot getting much interest
when we weren't worriedabout the values falling
out from underneath of us.
So we've been talking toclients for a couple years
(00:23):
about bond alternatives.
What other optionsdo we have out there?
Dave Schmidt (00:28):
The day has finally come.
Today we talk all aboutbond alternatives.
Josh is here to explaineverything you need to know
about alternative investments,the bases these investments
should ideally cover, i erisk reduction and a decent
rate of return, as well assome of the specific vehicles
(00:49):
you might wanna explore.
Just when you thought youcouldn't learn anything else
about bonds, here we are,talking about bond alternatives.
This is The RetirementEquals Freedom Podcast.
Your host, Josh Bretl, is theowner of FSR Wealth Strategies.
For the last few decades, he'sbeen helping fine folks like
you thrive in the retirement.
(01:10):
And me?
Well I'm Dave.
Josh's long time friend,co-host and fan of
older Tim Burton movies.
So now let me, let you, letme end this introduction
so we can start theenthralling conversation
about bond alternatives.
FSR Wealth Management is aregistered investment advisor
located in Elmhurst, Illinois.
(01:31):
Information and opinionscontained in this audio
have been arrived atby FSR Wealth advisors.
All information herein isfor informational purposes
and should not be construedas investment advice.
It does not constitute an offer,a solicitation or recommendation
to purchase any security.
FSR is not providing legal,tax, accounting, or financial
planning advice in this audio.
These views are as of thedate of this publication
and are subject to change.
(02:08):
Awe shucks, thanks.
Josh Bretl (02:09):
Oh, darn it.
Did you read throughthe show notes, Dave?
Dave Schmidt (02:14):
Yeah.
None of it makes sense to me.
So I'm just going to...
Josh Bretl (02:18):
Dave is truly flying by the seat of his pants today.
Dave Schmidt (02:21):
Yeah.
Josh Bretl (02:21):
So Dave, I told you.
Are we-
Dave Schmidt (02:23):
Yeah, we're recording.
Go ahead.
Josh Bretl (02:24):
Are we good?
Dave Schmidt (02:25):
Yeah.
Josh Bretl (02:25):
You're just going to mess with your headphones?
Dave Schmidt (02:27):
Yep, that's what I love about these headphones.
Josh Bretl (02:29):
So we are such epic podcasters that yesterday
I went and helped somebodyelse do their podcast.
Dave Schmidt (02:35):
Yeah, yeah.
Josh Bretl (02:36):
And I texted you during, it was pretty cool.
It was Jeff Mauroof the Food Network.
Dave Schmidt (02:40):
Okay.
Josh Bretl (02:41):
Now Missy and I are Food Network dorks.
Dave Schmidt (02:44):
Yep.
Josh Bretl (02:45):
We love watching the Food Network.
I have watched way too manyand if you give me a food
cooking competition, A TopChef, a Iron Chef, even
Netflix during the beginningof the pandemic had something
where these world chefs werecompeting all over the place.
Dave Schmidt (03:02):
Oh yeah.
Yeah.
Josh Bretl (03:03):
I will watch any food competition.
And a couple years ago, whichis 10 to be precise, we were
watching the Next Food NetworkStar, which is on Food Network,
and Jeff Mauro was the winnerand I thought he was so funny.
He's a local Chicago guy and hecould cook, but he was truly,
(03:25):
authentically personable.
And I am involved here withthe community bank in town
and the History Museum herein town and he was doing a
thing at the History Museumand they asked if I would
help because he was going torecord his podcast live there.
And it was so fun to gowatch and actually meet him.
He was a super nice, he wasjust as authentic and personal
(03:47):
and funny and in person asI had hoped he would be.
Dave Schmidt (03:51):
Well, that's awesome.
Josh Bretl (03:52):
And I learned a few things that I want to
do and I don't want to do.
And you've been talking abouta live podcast for a while.
Dave Schmidt (03:59):
Thank you.
I didn't want to interrupt you,but I'm hoping that you really
liked it and you're thinking,"Yeah, you know what, this Dave
guy, he may be onto something."
Josh Bretl (04:06):
Well, if we do a live podcast, you're
going to need a new shirt.
Dave Schmidt (04:12):
Shoot.
Well, if, look, here'sthe thing, if we do a live
podcast in the fall, mywardrobe is far more expansive
than my summer wardrobe.
Josh Bretl (04:20):
So I have an idea.
If I gave Carla a giftcertificate and I just said,
"The only thing this can beused for is shirts for Dave,"
do you think she'd do it?
Dave Schmidt (04:29):
No.
I would take it and go toCalifornia Pizza Kitchen.
I mean, look, there's a chanceyou could sneak out of the
house without me knowing, but Ithink we're on something here.
I like it.
No.
Okay.
But you did say if any of one ofour episodes hit 500 downloads
that we would do a live-
Josh Bretl (04:46):
I did.
Dave Schmidt (04:46):
Episode.
Josh Bretl (04:47):
We're not quite there yet.
Dave Schmidt (04:48):
No, we're not quite there.
We're getting closer.
My question would be, we woulddo at the beginning of a big
client event and those whowere privy to be invited would
actually get to see us record?
Josh Bretl (04:59):
Yeah, I think so.
Dave Schmidt (05:00):
That'd be kind of cool.
Josh Bretl (05:00):
We invite all the podcast audience, so...
Dave Schmidt (05:03):
Wow.
Josh Bretl (05:03):
It's been a lot of fun.
The last couple weeks we'vehad a few client events.
We've had even some new justregular events that we do.
The number of peoplethat have brought up
the podcast is amazing.
And Erin actually had anappointment with somebody who
was brand new to our office,came into one of our seminars
and he heard the podcast.
And you and I have beenself-conscious about this
(05:24):
part of the podcast where wetalk back and forth to each
other and relive our glorydays of high school basketball
and do all that fun stuff.
And so the people who knowus, like our moms, they
really like this part.
But I do wonder, doother people enjoy it?
And so when I get a chance,people who don't know us, I
ask them or Erin will ask themor Sean will ask them and the
(05:46):
guy's response yesterday waskind of, "I like it, but I've
learned how to listen to iton one and a half time speed."
Dave Schmidt (05:52):
oh no!
Josh Bretl (05:54):
So you and I probably sound like
a chipmunk to him.
We're talking really fast.
We don't have time to speak.
Dave Schmidt (05:58):
And since we sound like school girls,
it's probably like...
So I'm guessing this guy,this guy and Dave Milburn
are probably BFFs becausethey both feel the same.
Josh Bretl (06:08):
Well Dave, just fast forwards through this,
so he's not hearing this atall, but I do think Dave would
come to a live recording.
Dave Schmidt (06:16):
Oh, absolutely.
Josh Bretl (06:16):
We'd make him listen to this part.
Dave Schmidt (06:18):
Oh yeah.
Dave's a huge fan of ours.
Now what's really cool istoday and today alone, we
had two separate people cominto your office asking me to
brew them a Cometeer coffee.
Josh Bretl (06:30):
That is pretty cool.
Dave Schmidt (06:31):
I thought that was really cool.
One's not a client, oneis a client I think.
And I mean one of themthought that you and
I owned the company.
That's why we promoted itso much on the podcast.
Maybe one day we will.
Cometeer.
Josh Bretl (06:45):
Cometeer.
Dave Schmidt (06:47):
This is not Cometeer.
We did have Cometeerearlier today.
Josh Bretl (06:49):
This morning we did.
Yeah.
Dave Schmidt (06:50):
Yeah.
This goes out to ourfavorite local coffee shop.
Brewpoint coffee.
Josh Bretl (06:55):
Yeah.
We were doing local restaurantlittle plugs here, but we do
like our Brewpoint coffee here.
Yeah.
Dave Schmidt: Brewpoint is the best. (07:00):
undefined
They have that thelittle, the works...
What do they call it?
They have a cool new, a-
Josh Bretl (07:05):
Like a shared office space type thing.
I forget what they call it.
Dave Schmidt (07:07):
Yeah.
They have a cool-
Josh Bretl (07:08):
Something catchy and hip, trendy.
I mean something we'renot allowed to be in the
financial services world.
Dave Schmidt (07:14):
That's true.
I can go there causeI'm super cool.
Josh Bretl (07:16):
But yeah.
And we don't let youtouch people's money.
So that's better that way.
So I've started coaching Alex'ssoccer team this year and I did
it because Alex loves soccer.
He really enjoys playing.
And a couple years ago he hadthe world's greatest coach.
This guy was awesome.
Coach Adam here in Elmhurst.
(07:39):
He knows soccer,he plays soccer.
Actually I found out he alsoowns his own watch company.
Dave Schmidt (07:44):
Oh that's cool.
Josh Bretl (07:45):
Farr and Swit Watches.
It's really, he's got coolwatches, but I've seen
him around a few times.
F A R R and S W I T.
Swit or sweet.
I don't know what it is.
But anyways, coachAdam was awesome and he
got Alex so pumped up.
He taught him a ton.
And the following year hehad a coach who was not very
(08:07):
good and actually kind of wasdepressing towards the kids.
And I said to myself, Ican't complain because
I didn't volunteer.
If you don't volunteer tocoach, you can't complain
about the volunteer coach.
So I decided I was going tovolunteer and coach this year.
And as kids get older, theybecome tougher to coach.
(08:27):
Especially your own kid.
Now the kids are reallyenjoying it, I'm proud of
what I'm doing with him.
But it is a challenge.
It's been fun.
We're a few weeks in now andthey're learning something.
Dave Schmidt (08:37):
That sounds fun.
Did you know Carla was thehead basketball coach for
Landon's team last season?
Josh Bretl (08:44):
Well, that would make sense.
Dave Schmidt (08:44):
Yeah.
Josh Bretl (08:45):
She's a great basketball player and she
knows how to coach kids.
Dave Schmidt (08:48):
Exactly right.
Yeah.
And now she's been theassistant baseball coach for
every team since he started.
So okay, there's acompetition brewing.
Coach Adam versus any CPA thatworks with taxes, who's Al
going to hang out with a soccercoach or guy who knows taxes?
Josh Bretl (09:05):
He'd probably hang out with Coach Adam
and talk to him about taxes.
I mean that's how great Alex is.
Dave Schmidt (09:09):
Win-win.
Josh Bretl (09:11):
And Adam looked at him like, "You crazy."
Dave Schmidt (09:12):
Do your kids ever read those
"Who Would Win" books?
Josh Bretl (09:15):
Oh, all the time.
Dave Schmidt (09:15):
Yeah.
So who would win: taxes or soccer? (09:16):
undefined
Josh Bretl (09:21):
So Dave, today's topic is one that I talk
about a lot with clients.
Dave Schmidt (09:29):
Coffee?
Josh Bretl (09:30):
Nope.
Dave Schmidt (09:30):
Food?
Josh Bretl (09:31):
Nope.
Dave Schmidt (09:31):
Taxes?
Josh Bretl (09:33):
No, not even taxes today.
We talk about it so muchthat this is the third time
we're going to do kind of amajor representation to it.
And it was actually, thisis Erin's recommendation
because we've spent twopodcasts in the past talking
about bonds and then talkingabout the 60-40 portfolio.
And I have a rule in the officethat if you come to me with
a problem, you better alsohave a proposed solution.
(09:54):
And I feel like in thosetwo episodes I told you
guys, "Hey, bonds arehaving problems right now."
And I never gave youa solution to it.
Dave Schmidt (10:04):
But they were intentional cliffhangers
for today's episode.
Josh Bretl (10:07):
My life is one intentional cliffhanger.
Dave Schmidt (10:10):
Says the non movie buff guy.
Josh Bretl (10:13):
I haven't seen a movie in four years.
Dave Schmidt (10:14):
Yeah, there's no cliff hangers in your
food competition shows.
Josh Bretl (10:17):
If any of our friends were listening
to this, they're going tobe like, "You watch TV?"
It's like, no, we don't watchwhat everyone else is watching.
I've never seen theLord of the Rings.
I've never seen any of thatstuff, but I know every cooking
competition known to man.
Dave Schmidt (10:28):
Love it.
Josh Bretl (10:29):
I also know all local news personalities.
Okay, so you want to go there?
I gotcha.
Dave Schmidt (10:34):
I prefer not.
Josh Bretl (10:36):
So let me recap here a little bit
as to what we talked aboutin the previous episode.
And we always, what thepurpose of bonds are.
Bonds are a part of a lot ofpeople's portfolios and bonds
have two major components (10:46):
one is for downside protection.
So as part of a portfolio,whatever positions you have
allocated to bonds hopefullyare going to protect you
when the market goes down.
The second reason isthat they're going to
pay you a decent interestrate, there's some minor
growth potential there.
And it's done thatpretty much forever.
(11:07):
But the problem with bondsis that bonds operate
what they call an inverserelationship to interest rates.
So as interest ratesfall, bond prices rise.
Now for the last 40 years,we've seen interest rates
pretty much start at 15, 16,18% and fall down to near zero.
Well, we are now seeing interestrates start to rise back up.
(11:29):
And so the converse or theinverse of that is true.
So as interest ratesrise, bond values
mathematically have to fall.
So we're losing some of thisdownside protection and we
also have ultra, ultra lowinterest rates still, so they're
not paying much interest.
And you could deal withnot getting much interest
(11:50):
when we weren't worriedabout the values falling
out from underneath of us.
But now we kind of havethis worst of the world.
So we've been talking toclients for a couple years
about bond alternatives.
What other optionsdo we have out there?
Does that make sense?
Does that ring a bell?
Dave Schmidt (12:05):
Oh, how could I forget this stuff?
Josh Bretl (12:06):
That glassy look in your eyes when you go,
"What is he talking about?"
Dave Schmidt (12:10):
No, that's just because I stayed up too
late last night celebratingthe Buffalo Bills' first
victory this season.
Josh Bretl (12:15):
You're still a Bills fan?
I grew up, I mean theonly reason I knew Buffalo
existed as a city when Iwas a high schooler was
your love of the Bills.
So we've been talking aboutbond alternatives Maybe
there's some really proactivepodcast listeners out there.
Maybe they Googled bondalternatives to see what this
kid was talking about over here.
(12:36):
And they're going to list allsorts of different things.
They're going to list REITsand preferred stocks, dividend
stocks, high yield savings,all sort of different things.
Dave Schmidt (12:43):
Did you say wreaths as in Christmas wreaths?
Josh Bretl (12:48):
REITs as in real estate investment trust.
Dave Schmidt (12:51):
Oh.
Josh Bretl (12:51):
So now I'm not recommending any of those, but-
Dave Schmidt (12:54):
No, sure because it's Halloween season.
You go Halloween wreath,not Christmas wreath.
Josh Bretl (12:59):
True.
Dave Schmidt (13:00):
We're on the same page.
Josh Bretl (13:00):
We are.
We're on the same page.
So before we look at this,I want to look at some
different options from thetwo things we're looking for.
If you remember, for a bondalternative, we're looking
for risk reduction, tryingto protect on the downside
and to pay you a decentinterest rate along the way.
So one of the first thingsthat we've looked at is we
look at cash, I mean cashis a very real option.
(13:22):
Maybe for a portionit could work.
Now the problem with cash, cashwill protect on the downside.
Great protectionon the downside.
Right now it's paying youvirtually zero interest.
So it could come back ina little bit, but it only
provides one of thosetwo options as there.
So we do use it in some spots.
CDs can be also there.
Unfortunately right now,CD rates have really
(13:44):
dropped precipitously.
And Erin did a quick littleGoogle search for us today and
the best rates she could findas of we're recording, this is
September 9th, 2022, the best CDrates out there for a one year
were like 2.7 and up to threeand a half but you got to lock
it up for five years for that.
So even then when we're throwinginflation numbers in the
(14:05):
high single digits, that's atough pill to swallow there.
Dave Schmidt (14:09):
Sure.
And you look at CD rates and Iknow we've talked about I Bonds,
you'd almost be like you'd putyour money in an I bond instead.
Josh Bretl (14:15):
Yeah, I bonds, the episode we did on I Bonds
is a great bond alternative.
You can't put that muchinto it if you're looking
at a bigger portfolio.
Dave Schmidt (14:24):
That's true.
That's true.
Josh Bretl (14:24):
There's only so much you can put in.
We'll also look at what wecall alternative investments,
what I call a bond alternative.
But an alternative investment issomething that's nontraditional.
And the reason we do that isfor a lack of correlation.
So a correlation is how tiedto an index an investment is.
So think about the S&P 500.
(14:45):
It's a index of 500largest US companies.
And a perfectly correlatedinvestment, if the S&P goes up
10, the investment go up 10.
If S&P goes down 10, theinvestment would go down 10.
They would say that hasa correlation of one.
Okay, It's aperfect correlation.
If the S&P goes up 10 andthe investment goes up 20,
(15:06):
that's a two correlation,it's a double correlation.
So what we look foractually is close to a zero
correlation as we can get.
So the movement of theS&P or whatever index it
is not correlated to themovement of the asset price.
Dave Schmidt (15:22):
I see.
Josh Bretl (15:22):
And so if you have a net worth north of a
million, $2 million, beingable to allocate some money
to this can really help dothose two things - reduce
risk and help provide a decentinterest rate comparison there.
The problem with that is thereis some market risk to those
and there's also some liquidity.
(15:43):
It's not an issue, butit's a risk that's there.
So that's why I wouldn'trecommend those to
everyone under the sun.
For some people they can be anice part of a bond alternative.
Dave Schmidt (15:53):
Wait, what was it called?
What was it?
What were you talking about?
Josh Bretl (15:56):
The alternative investments.
Dave Schmidt (15:58):
Oh, okay.
Josh Bretl (15:58):
Yeah, the non-correlated assets.
Dave Schmidt (16:00):
Okay, because I'm sitting here thinking I did
some research before our show.
Do you know what thecorrelation is of the Retirement
Equals Freedom podcast?
It's like four to one.
It's incredible.
Josh Bretl (16:09):
Oh, that's incredible.
Dave Schmidt (16:10):
I have no idea what that means.
We're like way in the S&P two.
Josh Bretl (16:16):
You're just pulling numbers out.
Dave Schmidt (16:18):
That's what I do.
Josh Bretl (16:19):
I mean there's other financial advisors that pull
numbers out just like that too.
But some examples of alternativeinvestments, they could be
REITs, R E I T, Halloween REITs.
There's some precious metals,private equity, hedge funds.
There's all sorts ofdifferent things that
could be utilized there.
Dave Schmidt (16:37):
Rewind precious metals like gold and silver?
Josh Bretl (16:40):
Yeah.
Dave Schmidt (16:40):
Oh.
Josh Bretl (16:40):
Yeah.
Dave Schmidt (16:41):
I didn't think that was still a thing.
Josh Bretl (16:43):
They still exist and for some higher
net worth investorsyou'll see them in there.
But it's not common anymore.
Dave Schmidt (16:50):
Because I have a few gold teeth.
Would that count?
Josh Bretl (16:52):
Oh yeah.
Your mother was very proudof that when you were a kid.
Dave Schmidt (16:55):
Totally.
Josh Bretl (16:55):
When she knocked those teeth out of your
mouth, she said "David, wereputting the gold ones in."
Dave Schmidt (16:59):
"David, did you eat the last
Markey Day sandwich?"
Josh Bretl (17:03):
"This is what you get for eating
the last puddin' cake."
Dave Schmidt (17:06):
No, back then it was those poppy seed bagel dogs.
Josh Bretl (17:08):
Oh my god.
Dave Schmidt (17:09):
Full size bagel dogs.
Josh Bretl (17:09):
You used to leave the dirty plates
in my car for weeks.
Dave Schmidt (17:14):
Oh man.
I'm surprised my mom nevermade me go to paper plates.
She would get so mad becauseyou would leave five glass
plates in your trunk at a time.
"David, we're runningout of plates.
The family needs plates."
Josh Bretl (17:25):
I'm also surprised that was like a convertible.
We put the top down a lot.
And you used to put it backwhere the top would go down.
Dave Schmidt (17:31):
No, I thought I threw it in the trunk usually.
Josh Bretl (17:33):
Oh did you?
Dave Schmidt (17:33):
And then it would just stink.
The smell would aggregateand then it would just
knock your brother outwhen he would open it.
Josh Bretl (17:39):
Oh,
Dave Schmidt (17:40):
REITs, man.
Josh Bretl (17:41):
REITs man.
Now let's move on.
Another bond alternative.
This is becoming alittle bit more popular.
Technologically, there'ssomething called buffered ETFs.
And now buffered ETF, it'sa way to give you a hedge
against market downturns.
Instead of incorporating bonds,your portfolio, you can utilize
some of these strategies.
(18:02):
It takes a little bit moreknowledge to get into those,
but they've become more andmore popular that's out there.
Another one that we'vebeen using, we use quite
a bit in our office, areactually some different
annuities that are out there.
Now when I say "A" wordto some people that are
like, "Yeah, that's great."
Some people are like,"No, annuities evil."
And again, they'renot for everybody.
And I always tell peoplethere's no investment that's
(18:25):
inherently good or bad.
But when I look at thepurpose of why we do it, if
we are looking for downsideprotection and to pay you a
decent interest rate, as a bondalternative, there are certain
annuities that can be quitevaluable in that situation.
And then we do see those insome people's portfolios.
But one of the nice morecommon will utilize in certain
(18:46):
situations are differentannuities as a bond alternative.
So I do feel like in a fewyears we'll be able to put
them back into portfolioslike we normally would.
It's been fun to look andutilize different alternatives.
It makes managing someone'sassets not so cookie cutter.
I mean there's a lot of justcookie cutter portfolios, but
this makes it a little bit lesscookie cutter as we go in there.
Dave Schmidt (19:07):
Why do some people have a bad
relationship with annuities?
Josh Bretl (19:12):
There's been press out there.
There are some of themthat have really high fees.
There's been some badsales people out there.
We should probably doa whole annuities good,
bad, ugly podcast.
Dave Schmidt (19:23):
I like it.
Josh Bretl (19:24):
And go into the details because our industry
has some shady people in it.
So you just want to be cognizantof why you're doing things
and the purpose behind them.
Dave Schmidt (19:31):
Yeah, makes sense.
Cool.
Josh Bretl (19:33):
Dave?
Dave Schmidt (19:34):
Yeah.
Josh Bretl (19:35):
I've talked a lot.
What do you think?
Oh yeah, that's whatI'm thinking, Dave.
Dave Schmidt (19:40):
Hey, Mr.
Josh, let's take a break.
You've been talking for solong and my ear's are sore.
Let's not make them snore.
Listening shouldn't be a chore.
So let's get to know Josh andDave and watch our ratings soar.
Oh yeah.
(20:01):
Dave Mauro, am I sayinghis last name correctly?
Josh Bretl (20:05):
Mauro.
Mauro.
Mauro.
Dave Schmidt (20:07):
Eat your heart out.
You don't have a getto know Josh and Dave
segment on your podcast.
However, I am open to newpodcast producing opportunities.
Email me at...
Just kidding.
Josh Bretl (20:16):
He actually has a ton of sound effects and spends
time like singing them in hisbasement and stuff like that.
Dave Schmidt (20:21):
Does he really?
Josh Bretl (20:22):
Yeah.
It's pretty cute.
You'd enjoy it.
Dave Schmidt (20:23):
Oh.
Josh Bretl (20:23):
It was called, "Come On Over" was the
name of the podcast.
It was pretty cool.
"Come on Over" by Jeff Mauro.
Dave Schmidt (20:29):
I like it.
Josh Bretl (20:30):
It was really cool.
I actually bought hiscookbook, the "Come On Over"
cookbook because I like peoplecoming over to our house.
Come on over.
We'll cook something.
I don't know what I'mgoing to cook yet, but
I'll cook something.
Dave Schmidt (20:38):
I love when you cook for me.
Josh Bretl (20:40):
I know you do.
Dave Schmidt (20:40):
So yeah, the music just played that catchy beat
that's top 10 hits on Spotify.
Get to know Josh and DaveSong by Dave Schmidt.
What you got forus today, buddy?
Josh Bretl (20:49):
So the question I have for you today, I told you
before, I picked the card andI went a little sentimental.
All right.
Did you have a favoriteteacher or a teacher who made
a big impact on your life?
Dave Schmidt (21:03):
Oh, my relationships with teachers
was a bit rocky at times.
Josh Bretl (21:09):
I only knew you in high school, I didn't
know you younger than that.
And I could tell you, you wereprobably not many high school
teachers favorite student.
Dave Schmidt (21:15):
Definitely not.
Josh Bretl (21:17):
And it has to be hard.
I mean, you married a teacher.
Dave Schmidt (21:21):
Josh, you actually helped me with this idea.
So I will give you some credit.
But Coach Jim Prunty.
Josh Bretl (21:26):
I know him well.
Dave Schmidt (21:28):
Absolutely.
You should know him well.
My senior year, your junior yearwas his first year coaching at
York and he was just awesome.
It was night and day fromthe previous coach who
I also liked, but verydifferent coaching style.
And Prunty just kind of got us.
He was very mildmannered, even keeled.
And to be honest, he wrote theplay "Snap Four" just for me.
(21:50):
So how could I not love the guy?
Josh Bretl (21:52):
He seemed to understand you quite well.
Dave Schmidt (21:55):
I only remember one moment when
he got really, really madat quote unquote his "bigs"
because we couldn't rebound.
He was referring of course tome and Mark and Mark was one of
the league's best rebounders.
So he was reallyreferring to me.
And it was one game, we werejust, I think by Central, we
were just getting outrebounded.
And he went in the lockerroom and he goes, he probably
cursed a few times and-
Josh Bretl (22:16):
Oh, he didn't put me in the game.
So I mean, it wasn't that bad.
Dave Schmidt (22:18):
It wasn't that bad.
I know.
yeah, Coach Jim Prunty.
Josh, how about you?
Do you have a favoritememorable teacher?
Josh Bretl (22:25):
I actually have lots of teachers who
I really, really like.
I'm going to go way.
Dave Schmidt (22:29):
Nerd.
Josh Bretl (22:29):
I know, I know.
I'm going to go wayback to, actually, my
kindergarten teacher.
Mrs.
Porter, Trilby Porter.
I had her, oh man, I don'tknow how many ever years ago.
I love school.
I thought it was fun.
And I think she was part of it.
But she was in Elmhurst as akindergarten teacher forever.
My uncle who's 20 yearsmy senior had her,
my sister had her.
(22:50):
She was great.
In fact, there's many,many children in Elmhurst
that will have a Mrs.
Porter story andit's pretty cool.
Dave Schmidt (22:56):
That's cool.
And you know what, I rememberyou telling me about her because
she made you feel okay that youweren't potty trained and that
you'd wet your pants every day.
Josh Bretl (23:07):
She was very understanding.
Dave Schmidt (23:09):
Yeah, I knew it.
Josh Bretl (23:10):
My sister teaches kindergarten right
now and that probablyisn't that far of a joke.
I've heard from her stories.
There's kids indifferent stages.
Dave Schmidt (23:17):
Absolutely.
Yeah.
Different stages.
What are you going to do?
Yeah.
So Josh, I was sitting here, wewere talking about get to know
Josh and Dave and I thoughtabout Dave relates to retirees.
Yeah.
Josh Bretl (23:31):
Do you think when you're older and you're
actually retired, you'll lookback at this and go, "Man,
I didn't relate at all."
Dave Schmidt (23:38):
My goal is to relate less and less
to make your job harder.
Josh Bretl (23:42):
Good.
I can't wait to seewhat's coming today.
Dave Schmidt (23:45):
I went to the Illinois Institute of Art.
Josh Bretl (23:48):
You did.
Dave Schmidt (23:48):
We've talked about this a few times.
My senior project, we got topretty much choose anything
that we wanted to do.
It's art school.
You really had totry to get a B.
It's really hard to not get A's.
So my idea was to come upwith an entire marketing
plan for a made up moviecalled "The Empty".
(24:09):
You're holding backyour laughter because
you remember it.
So originally the scope ofmy senior project was to
develop a website, a poster.
Back then it was aninteractive CD Rom, which
was a lot of fun to make.
They're completelyirrelevant now.
And I finished all thatwithin the first two weeks
of the trimester or quarter.
And I thought, I think I'm goingto actually make a film now.
(24:32):
So how this is relatingto bonds is because I
chose an alternative path.
See what I did there?
I could have just beenhappy with what I made,
but I said, "No, I'mgoing to make the film."
So that was one of thefew moments I've ever
overachieved in my life.
Instead of writing a scriptand hiring actors from a
local college, I relied onmy good friend, Josh, Kevin,
(24:55):
Carla, and Jackie, to bethe actors of this film.
The end result reflects this.
It is one of the worstthings you will ever watch.
However, we did come away witha blooper reel, which I'm going
to post on our Facebook group.
Josh Bretl (25:10):
No, no.
Dave Schmidt (25:11):
Oh, I am.
Josh Bretl (25:12):
No, no.
Dave Schmidt (25:13):
Oh, I am.
Josh was the imaginaryevil spirit slash bad guy.
And you're going to seeJosh in action folks.
Josh Bretl (25:21):
Oh, please, God.
You promised thiswas never coming out.
Dave Schmidt (25:26):
Well, I promised that if you weren't
going to run for officewhich I don't think you are.
So that's how Irelate to retirees.
The retirees are sittinghere like, "Man, I need a
good alternative to bonds."
And I'm like, "Yeah, Ineed an alternative to
just my senior project.
I'm going to make a film baby."
Remember I was heavilyinspired by Tim Burton even
though this film has nothingto do with Tim Burton.
(25:46):
So Josh, I would likeyou to relate "The Empty"
to bond alternatives.
Josh Bretl (25:52):
Dave.
Dave Schmidt (25:53):
Yeah?
Josh Bretl (25:54):
I didn't laugh for a lot of it because I
kind of had an idea where youwere going with all of it.
And I'm thinking to myself,good God, how am I going
to be able to relate thisback to bond alternatives?
Dave Schmidt (26:07):
To me that's mission accomplished then.
Josh Bretl (26:09):
And it's going to be difficult and I'm going
to change your story a bit.
Dave Schmidt (26:14):
Insert "Full House" music.
Josh Bretl (26:15):
The reason retirees need an alternative to bonds
is because the bonds aren'tliving up to the purpose that
they are supposed to provide.
Now I'm going to assumethat your senior project
of a website, CD rom,and poster was okay work.
Dave Schmidt (26:37):
It was great work.
Josh Bretl (26:38):
But the purpose was it didn't
fulfill you internally.
Dave Schmidt (26:42):
Thank you.
Josh Bretl (26:43):
And so you needed something else to
fulfill you internally.
And so you created thisvisual masterpiece-
Dave Schmidt (26:52):
Thank you.
Josh Bretl (26:52):
That I am utterly embarrassed to be a part of.
So when I refer to bondalternatives, they're looking
for this option that canprovide something for them,
the fulfillment, if you will,to their needs of protection
and a good interest ratewhere you were looking
for fulfillment to youreducational, academic desires.
Dave Schmidt (27:15):
And my art skills.
Josh Bretl (27:16):
Yes, you're very artsy.
But they're a little different.
But I do kind of see whereyou are going with that.
Dave Schmidt (27:21):
I appreciate it.
Josh Bretl (27:23):
I appreciate you.
Dave Schmidt (27:24):
I've had the idea of sharing the story
of "The Empty" for a while.
I just kind of needed something,just even the slimmest of
things that I could relate to.
Josh Bretl (27:33):
And you said, "He's going to talk about
bonds for a third time."
Dave Schmidt (27:36):
I mean, yeah.
So yeah, it was aperfect fit in my mind.
Josh Bretl (27:39):
"We're going to embarrass the snot out of him
by talking about 'The Empty'."
Dave Schmidt (27:42):
I mean, who's more embarrassed, you or Jackie?
Lets be honest.
Or me for making it?
Josh Bretl (27:47):
Definitely Jackie.
Without a doubt.
Dave Schmidt (27:48):
Yeah, I think so.
Josh Bretl (27:49):
Yeah.
Poor Jackie.
Dave Schmidt (27:50):
But she can watch it and get a
good laugh out of it.
Josh Bretl (27:52):
That is true.
Dave Schmidt (27:53):
Oh man, Josh.
So bond alternatives.
Yeah.
We talked about REITs,which I learned is not a
Halloween or Christmas wreath.
I learned about bond, whatyou call these things?
Alternative...
Josh Bretl (28:05):
Investments.
Dave Schmidt (28:05):
Investments.
Josh Bretl (28:06):
Non correlated assets is another way
to think about it.
Dave Schmidt (28:09):
You learned that the "Retirement Equals Freedom
"podcast is a four to onecorrelation in the S&P two.
Josh Bretl (28:15):
True.
True.
Dave Schmidt (28:17):
Yep.
So what do we have plannedhere for future episodes, Josh?
I kind of want to whet people'sappetite now because since we
are going biweekly, every otherweek, I kind of want to set the
stage for future episodes now.
Josh Bretl (28:30):
Well, we talked about doing a annuities
good, bad, and ugly.
Dave Schmidt (28:33):
Yeah.
Josh Bretl (28:34):
I also, we're approaching the end of the year
here and there's some reallykey things for end of the year
tax planning, end of the yearinvestment planning that you can
do that are very time sensitive.
I'd like, Dave, I'd liketo interview somebody too.
Dave Schmidt (28:47):
Before the year ends.
Josh Bretl (28:48):
Before the year ends.
Dave Schmidt (28:49):
Sure.
Josh Bretl (28:49):
Maybe that can be our final 2022 podcast.
We interview your mom.
Dave Schmidt (28:54):
Oh, you think Becks-
Josh Bretl (28:55):
you think Becks would want to do it?
Dave Schmidt (28:57):
Oh, for sure she'd want to do it.
Josh Bretl (28:58):
Yeah, I think it would be fun.
Let's just interview Becks.
Yeah, I mean, why not.
Dave, at the end of everypodcast we've done, we've
asked our listeners to dosomething for us and we're
going to do something a littlebit different this time.
Dave Schmidt (29:10):
What?
Did you run this by me first?
Josh Bretl (29:12):
No, sorry.
But bond alternatives areactually important and looking
at your portfolio is important.
And if you look at yourportfolio and you see, "Hey,
I've got 10% bonds, 20% bonds,40% bonds, 80% bonds," whatever
it might be, it should belisted right there on your
first page of your statement,it's time for you to talk.
And if you talk to your advisorand ask them about it, great.
If you have questions, youwant to talk to me about it.
(29:33):
Wonderful.
We'd love to talk to youand see if an alternative
might be a right fit foryour situation or not.
Dave Schmidt (29:39):
Excellent.
And on the FSRwealth.com/podcastpage, at the very bottom
there is an embedded calendar.
So you can actually booka free or complimentary
15 minute call with Josh.
Josh Bretl (29:49):
Whoa.
Dave Schmidt (29:50):
Yeah.
Did you know that?
Did you know thecalendar was on there?
Josh Bretl (29:53):
Yeah, yeah.
No.
Dave Schmidt (29:54):
Oh yeah.
I'm going to add a secondcalendar if you want to
come in for a complimentarycup of Cometeer coffee
brewed by yours truly.
I won't put a calendar up there,but you can request when next
time you come in the office.
Josh Bretl (30:07):
And with that Dave, thank you for sitting
down recording with me today.
Dave Schmidt (30:14):
Bond alternatives baby.
We got some excitingstuff coming up Josh.
Thank you.
And we'll end thisshow by saying bye.
Josh Bretl (30:21):
I actually think that was a decent show.
Dave Schmidt (30:27):
That was fantastic.
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