June 25, 2025 • 52 mins
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Rich Weiss, CIO of Multi-Asset Strategies at American Century, brings 40 years of investment experience to discuss market reactions to global turmoil and why the VIX index remains surprisingly calm despite international tensions.
• Markets appear to be undervaluing risk despite geopolitical conflicts and economic uncertainties
• Economic consensus forecasts predict 1.5% growth this year, avoiding recession but not stellar
• Manufacturing and housing sectors show concerning weakness while consumer data remains resilient
• Bond vigilantes could reject the "Big Beautiful Bill" and drive up interest rates if deficit concerns intensify
• Fed Chair Powell maintaining independence despite political pressure for rate cuts
• Companies likely to pass tariff increases directly to consumers in coming months
• Congressional Budget Office estimates tax legislation could add $2-3 trillion to deficit over next decade
• U.S. interest payments as percentage of GDP have reached approximately 4%, comparable to struggling economies
• Gold has overtaken the Euro as the second most popular central bank reserve asset globally
• Diversification remains "the only free lunch in investing" during uncertain times
• Short-term investment thinking resembles gambling more than actual investing
• High-quality corporate bonds may provide better security than treasuries in the near term
For more insights on navigating market uncertainty with a balanced approach, subscribe to "Ask Rich" on Mondays at 4:00 PM or follow the Skeptic's Guide to Investing.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Steve Davenport (00:02):
Hello everyone and welcome to Skeptic's Guide
to Investing.
Today we're fortunate, ClemMiller and I have a guest, Rich
Weiss.
Rich is the CIO ChiefInvestment Officer of
Multi-Asset Strategies atAmerican Century, and to say he
has a lot of people who listento him and who follow his advice
(00:24):
and his insights on markets isa large understatement.
I listen to Ask Rich on Mondaysat four o'clock and I think
it's one of the best half hoursin the markets.
Listen to Rich because Rich isa balanced, even-handed, very
(00:48):
measured and doesn't getinvolved in the emotions and
some of the other things aboutsome of these political events.
He is from the Bronx and I dohold out a little bit against
him that he's a Mets fan.
But we all have to learn to workwith diversity and I think
today will be a test for mydiversity training as to whether
I can work with it.
(01:09):
But,Rich, it's great to haveyou on board.
As we talked about in the pre.
How do you think about todayand the actions of today and the
markets in terms of do you staycalm, cool, collected at all
times, or is there ever a timewhen you get a piece of news
(01:29):
that says, hey, bunker bustingbombs have been dropped in Iran.
That's going to be theexplosion point of like.
What makes you worried, or howdo you feel about what's
happening in the world today?
Rich Weiss (01:42):
Sure.
Thanks,Steve, and first of allClem.
Steve, thanks for having me onLove your podcast.
Oh, it was Brooklyn, by the way.
Steve Davenport (01:50):
Oh, brooklyn, sorry yeah.
Rich Weiss (01:51):
Sorry.
Yeah, we take that verypersonally, you know.
Steve Davenport (01:56):
I went to Columbia and I know what
Manhattan is, but I, you know, Iwent over one time to a Mets
game and I went over to watchthe tennis once, and I couldn't
go to Yankee Stadium.
Though it's just like as a RedSox fan, I think some part of me
would die.
Rich Weiss (02:19):
Yeah, the Yankees-Mets rivalry and the
Islanders-Rangers rivalry.
There I mean, there's morefights outside the rink than
there are in ZML.
But hey, in response to yourquestion, you know I've been in
the investment managementbusiness for 40 years now, a
little over 40 years, so it'shard to get riled up.
(02:40):
You know it changes the norm.
Get riled up, you know itchanges the norm.
And, granted, you know thingslike pandemics and acts of man,
like wars, are jarring on apersonal level, but this is
standard fare for the markets.
You know, what is amazing is,even with all this perceived
turmoil, whether it'sgeopolitical or on the financial
(03:02):
front or the budget, I'm surewe're going to hit all the major
topics.
But you know the VIX index iskind of like Alfred E Newman
from the old Mad Magazine.
What me?
Worry If you remember that.
Sorry, I'm dating myself, butVIX index is hanging around 20,
which is not too far above itslong-term average.
So the market's taking it instride.
Steve Davenport (03:25):
But I don't know.
I think the market's missingsomething here.
I think the market isundervaluing risk and, as a
derivatives trader andderivatives, I look at the VIX
and I think it's mispriced.
So I'm buying protection, but Idon't think we have a real good
transfer mechanism to what Ijust look at society and the
(03:47):
protests in LA and theassassinations in Minnesota and
like things that would normallybe.
You know, like this Indianplane goes down, 240 people on
it.
Okay, that's item number six inthe list of things that are
happening today.
I just find it to be you know mydaughter just got back from
(04:08):
South Korea my wife was like Iwas worried every moment.
She was there and I just feellike we're at a heightened sense
of awareness.
But the market seems to be likewhat is?
It Is today, tuesday orWednesday.
Rich Weiss (04:22):
Like you know, it doesn't care Wholeheartedly
agree I mean the market's wewould agree in our positions,
you know, for potentially moredownside than upside at this
(04:51):
point.
And you know, here I go againdating myself.
But remember the what was it?
The good, the bad and the uglywith Clint Eastwood.
There's always that layout inthe markets.
But the good news, at least forright now the consensus of
economists for real growth thisyear is somewhere around one and
(05:12):
a half percent, which is notstellar, but it ain't no
recession.
The bad news the so-called softeconomic data, the surveys, the
PMIs these are all theexpectational data.
They're pretty negative.
Most of them are pretending arecession at this point.
(05:34):
And then the ugly is some ofthe hard data.
It is and has been prettynegative To your point.
Housing sector again thismorning, some stats there really
in the dumps, and the same istrue for manufacturing.
But I think the reason themarket is holding up so strong
(05:56):
to this point is that the coreof the so-called hard economic
data that is relating to theconsumer hard economic data that
is relating to the consumer,which we all know is the
mainstay of the US economy, isstill relatively healthy.
Right that consumer sales,income, personal income and
spending for May is going tocome out this week, but that
(06:17):
data still shows resiliency, andthe same is true for the jobs
market, the labor force data.
So all of this nervousness, allof the surveys that you know
are looking for a recession orsomething close to that, it has
not come through.
Now to your point, steve.
It may be around the corner,and you know.
(06:40):
On the inflation front, Idefinitely agree.
Uh, we cannot call the war oninflation over yet, that the
tariff induced inflation.
Just that data hasn't comethrough yet and I think that
that chairman, uh powell,mentioned it in his comments the
other day.
Let's, let's see what happensin june, july, because all of
(07:00):
that front loading on inventorybuilding that's allowing,
because all of that frontloading on inventory building
that's allowing the companies tokeep prices low.
But now that tariff increase isgoing to start coming through.
There was a recent New York Fedreport showing that most
companies are going to pass allor most of those tariffs right
on to the consumer.
So we should be starting to seethat in June and July and I
(07:25):
think that's probably thebiggest problem ahead right here
is that inflation could beproblematic.
Lunar KING, federal ADVISOR.
Steve Davenport (07:30):
FEDERAL ECONOMY AND INDUSTRY CONGRESSMAN,
congressman.
Federal ECONOMY AND.
Clem Miller (07:34):
INDUSTRY CONGRESSMAN LUNAR KING, federal
ECONOMY AND INDUSTRY CONGRESSMANexpectations and perhaps the
markets expecting and your viewson GDP growth.
How are you positioning yourmulti-asset portfolios?
Also, I was curious what arethe asset classes that you
(07:58):
actually have in yourmulti-asset?
I mean, how do you define yourasset classes, because everybody
defines them a little bitdifferently.
Rich Weiss (08:06):
Right.
Well, overall, I'm happy to saywe have been this year, and
remain, positioned fairlyconservatively or defensively.
And you know, as you know, allthose stocks have now done a
full 360,.
Right, they're back where theystarted this year, but bonds at
(08:26):
least, as measured by theBloomberg Aggregate Index, still
outperforming the S&P year todate by a few basis points.
Sectors in the stock marketlike utilities and consumer
staples, which are verydefensive sectors, tend to do
well in downturns or recessions.
They are leaders in the market.
And, of course, non-us equities, significantly outperforming US
(08:52):
equities both in local anddollar terms, in part because of
the dollar being weak this year.
So, being defensivelypositioned in fixed income, at
the margin and outside the USand in the more defensive
sectors, that's been a winnerthis year for us and that's
where we remain.
Oh and Clem, as far as assetclasses, it includes all the
(09:16):
usual suspects US and non-USequities, emerging market
equities, fixed income allsectors of fixed income, non-us,
of course, as well and avariety of other asset classes
TIPS, treasury, inflation,protected Securities, real
estate, investment trusts.
I'd say the only things nottypically found in our main
(09:39):
multi-asset strategies arecryptocurrency at this point
still, we find that somewhatproblematic and private markets.
We don't have them in themainstream strategies, although
we certainly would offer them orwork with them for clients who
desire it.
So public investmentsnon-crypto, it's pretty much the
(10:01):
whole game.
Yeah, public investmentsnon-crypto it's pretty much the
whole game.
Steve Davenport (10:04):
Yeah.
Do you think that this wholeargument with Powell and Trump,
I mean, do you think it cementsthe Fed against some of what he
wants to show their independence?
Or do you think?
I've been believing in REITs?
When the rates come down, Ithink there's going to be a
(10:27):
boost to REITs.
I love REITs for non-taxableaccounts to be there generating
the four to eight and giving mesome upside in principle, and I
just think that they should bealmost a separate asset class,
like preferreds and other highyield debt.
They don't necessarily pick myfixed income, they don't
necessarily fit in equity, butthey're in what I call the messy
(10:49):
middle.
Do you think this thing isgoing to get resolved between?
Do you think that this processwill work and that they will
make the best decision they canfor the economy and Trump will
accept whatever that decision is?
And won't?
You know, reek?
I heard he took in the bigbeautiful bill.
He took out all the salariesfor the Fed.
(11:11):
I mean, it seems like these twocan't keep going like this, Can
they?
Rich Weiss (11:17):
Yeah, I guess marriages do exist like this but
not I'm very pleased to seethat Chairmanaron powell is is,
you know, remaining strongly infavor of an independent fed and
resisting the pressure, uh, tojust cave here.
And and remaining true to theirmandate, their dual mandate.
Now, whether president trumpwill accept that, uh, I, I, I
(11:42):
don't know about that, but itmay resolve itself this way,
because a couple of the Fedgovernors recently have come out
unofficially and hinted thatthe Fed's kind of closer to
reducing rates than many think.
I think Fed funds futures arestill expecting two rate cuts
this year, but not till the endof the year this year, but not
(12:06):
till the end of the year.
But those two governors cameout and hinted that it may be
coming sooner, depending on whatcomes out on these inflation
reports.
So it may resolve itself inthat Chairman Powell and the Fed
will lower interest rates,maybe June or July, as soon as
June or July, and that'llresolve the conflict there.
But they'll do it for the rightreasons, not because of the
pressure but because their dualmandate demands it.
Steve Davenport (12:31):
Yeah, I mean I've seen some people say that
they're a point and a half 150basis points behind.
So I think that they could calmdown the whole discussion by
taking it down 50 and sayingwait and see and I think that's
a good way for this to getresolved he gets a cut.
I don't think it really doesmuch for real estate because I
(12:52):
think it's kind of like 50 basispoints when you're at four is
you know it's meaningful, butit's not quite the same as when
you were at zero and you went up50.
So I think there's a magnitudeas a percent of the total that
somehow gets involved here.
But I guess the reason wereally wanted you on this call
(13:14):
is I've been just kind ofepileptic about this big,
beautiful bill.
I think that it's the mostimportant thing that's going to
happen this year in terms of themarkets, because if it goes the
wrong way meaning it doesn'tget passed I think the market
has no expectation of that andtherefore it will be blindsided.
(13:37):
Just don't look at the votesand count the votes and see that
they're going to be able tomake all the adjustments they
want to please the Senate, andthe House is just going to roll
over and say thank you very much.
Give me some more.
I think that the House and theSenate are completely different
(13:58):
and I think that if we saythey're both being directed by
Trump, I'd say both of themwould tell you that you know.
I mean, they have their ownopinions about Trump and I'm not
sure they're just going to votebecause this is Trump's big
beautiful bill.
And I don't know, maybe I'midealistic and I think that
people base things on good dataand facts and they make good
(14:21):
decisions when they're informed.
And they make good decisionswhen they're informed.
I mean, I don't know.
I think this big beautiful billis one of those things that
people will look back on and sayhe should have started that
before he started the tariffs.
Rich Weiss (14:36):
You know you may be right there.
You know I hate tounderestimate the president's
strong arm ability, you know, tobasically browbeat the Senate
and the House to get in line andpass something that's a
compromise.
But yeah to your point aboutmaybe should have started here
instead of tariffs.
That's a tricky one because inpart I believe the
(14:58):
administration's argument isthat the tariffs pay for some of
this deficit-increasing bigbeautiful bill which many are
still arguing needs to go onOzempic and lose a little more
weight.
Right, because I think thelatest estimate by the CBO, the
Congressional Budget Office, isthat it's going to add $2
(15:19):
trillion to $3 trillion to thedeficit over the next 10 years.
Now I know the administrationwill argue back that that does
not factor in the positiveeffects of the income tax cuts
which will spur economic growthand remove that deficit.
But that's all on the come.
I think going by the CBO'sestimate is the right way to go.
(15:41):
That's the way we've alwaysgone and it looks like it's
going to increase the deficit.
And the only way to prevent thedeficit-busting bill that's not
quite BBB, but deficit-bustingit's DBB, I guess, but is to get
those tariffs through.
Now I won't get into the wholeissue of who's paying for it.
(16:04):
I mean, it's pretty clearbetween the tariffs and the bill
itself.
It's a redistribution of income, but that's a social comment,
not an economic one, right?
It's sort of reverse, robinHood, you're taking from the
poor and giving to the rich.
The way that works.
Because tariffs are regressivein nature.
They hit lower income more sothan upper income and the income
(16:29):
tax code, of course, isprogressive.
So when you lower taxes thereyou're benefiting at the margin
the higher income.
So it's somewhat regressive innature, but still it can get
paid for.
Tariffs are all implemented,it's just who's paying for it.
Steve Davenport (16:47):
Yeah, just the assumption that this tax
extension can be done with a$3.8 trillion impact on the
economy and the government andit doesn't count as increasing
the debt.
I mean, I've heard people makeyou know I've been sold islands
(17:09):
in the stream and I've hadpeople tell me to buy property
in Florida, but I can't believethat anybody's looking at
extending a tax cut inperpetuity not for four years,
not for eight years forever andit doesn't have any impact on
the budget.
It looks like $3.8 trillion is$3.8 trillion, no matter how you
(17:33):
slice it.
Rich Weiss (17:36):
You know, again, this is very much political.
I'm not sure why we're lookingat a tax year.
We're not in a recession.
We don't need that fiscal juiceor stimulus.
One can argue right.
It's more political than it iseconomic.
You would think that whicheverparty was in charge, they'd be
looking to reduce that deficitand lower our debt.
(17:57):
The fact is, you know, if youlook at our interest payments as
a percentage of GDP I just sawthis in a report and confirmed
it online but it's scary Ourinterest payments as a percent
of real GDP, I think, aresomewhere around 4%, depending
(18:19):
on which source.
You look at 3.5%, 4%.
You look at 3.5%, 4%.
And that puts us just under theinterest percentage rate of
countries like Pakistan, kenya,angola and, believe it or not,
ukraine.
Those kinds of countries havethat kind of interest expense,
(18:39):
that kind of fiscal problem.
I'm not saying we're likeUkraine by a long stretch, but
we're up at a level we've neverbeen at.
It's far higher debt burdenthan any other developed nation
in the world.
You know, even worse thanGreece and some of those.
(19:00):
You know countries in Europethat have had perennial problems
fiscally.
So it needs to be tended to.
This administration with thebig beautiful bill is not
particularly paying attention toit, at least in the near term.
Now again, you can argue growthover the next 10 years may
mitigate that problem.
But that's all on the come, andthis interest expense is a big
(19:23):
burden.
It'll continue to be.
It's been weighing on the USdollar, the value of the US
dollar.
Countries have been migratingat the margin away from the US
dollar as the reserve currencyof choice globally.
That's not a good thing for usin the long term.
Clem Miller (19:59):
So Rich.
There seems to me to be sort ofa logical inconsistency between
the budget and the tariffs, inthe sense that you know with if
you're going to have a tradesurplus or a lower trade deficit
, that means there's less moneycoming in from abroad to finance
the US.
That means less money coming infrom abroad to finance the US
budget deficit, right?
So if the US budget deficitgoes up at the same time that
(20:23):
the trade deficit goes down,that necessarily is going to
imply higher interest rates forgovernment debt.
That's the way I look at it.
It's an inconsistency, and sohopefully there will be
(20:43):
negotiations on the externalfront that will lead to lower
tariffs and sort of arecognition that trade deficits
aren't necessarily bad.
Budget deficits are much worse.
Rich Weiss (21:00):
I couldn't agree more.
And of course we need todistinguish between the trade in
manufactured goods versusservices, where I don't think
we're in a deficit with services.
But the president in particular, this has long been one of his
bugaboos, you know, to fightagainst this manufacturing trade
deficit, which in and of itselfis not a bad thing.
(21:23):
To your point, it's painfullyelementary or rudimentary to
just say we need to export morethan we import.
It's very naive economics.
I know the president went toWharton for a few years.
I can't believe he learned thatthere, because that's not what
they teach there.
That you know, that's where Iwas schooled.
(21:45):
Trade deficits in and ofthemselves are not bad because
they have beneficial results.
And by the way, to a pointearlier about the dollar and the
reserve currency, when you arethe world's reserve currency.
By definition, you're going tohave a trade deficit.
I mean that's what it means, andthat's a status you want,
(22:06):
that's a cachet you want.
That's not something to fightagainst, so it has its benefits.
It's just naive and somewhatmisleading, I feel, to just
argue against manufacturingtrade deficits.
Now, granted, though, if you oryour household work in that
(22:28):
sector and it's been hurting youand your family, that's a
different story.
Right, there are definitelysectors of the economy which
have been harmed by our exportsversus imports, our trade
deficit in certain industries.
So it's a social issue as wellas a political one, and that you
know.
I don't have a fight in that oran opinion on that.
(22:52):
But overall trade deficit, notbad, trade surplus not good in
and of themselves, yeah, yeah.
Clem Miller (23:02):
Yeah.
Steve Davenport (23:03):
Well, go ahead.
Clem Miller (23:06):
No, oh, I was just going to add.
You mentioned that you don'thave cryptocurrency in your
asset allocation, which, by theway, I happen to agree that
cryptocurrency shouldn't be inan asset allocation.
But I'm wondering you knowthere are those that have it and
you know, I imagine, there arearguments for and against it.
Um, what would you characterizeas the arguments for and
(23:28):
against having a cryptoallocation?
Rich Weiss (23:30):
sure, uh well, hell, uh, for for crypto.
Just look at the returns.
Right, it's hard to argue withthat now.
It is highly volatile.
They are highly volatile ifwe're just going to use Bitcoin
as the representative, but thereturns have been spectacular.
(23:54):
So it's always hard to argueagainst that.
But the arguments against andwell, I don't know if you saw,
maybe a year or two old the CFAInstitute, which tends to be
fairly objective in theiranalyses.
The CFA Institute, which tendsto be fairly objective in their
analyses, that's CharteredFinancial Analyst Institute came
out with a very detailedoverview of cryptocurrency in
general and they had a chapterin that report that went through
(24:17):
five or six differentmethodologies for valuing
Bitcoin, much like you would astock or a bond how do you value
these things?
And they looked at it a numberof different ways and the
results were and maybe I'mexaggerating a little, but it
was on the order of somethinglike it could be valued,
(24:38):
depending on the methodology,anywhere from zero to $600,000
per coin.
Now, I mean, with that kind ofrange of valuations where you
could drive a truck through, itjust doesn't have the status or
the class of a viable assetclass.
It's highly speculative.
(24:58):
There is no underlying value tothat asset.
It's supply and demand.
Underlying value to that assetis supply and demand.
And, granted, if governments,namely the US government,
decides to get in full bore witha what they call what is it?
A central bank crypto CDBC Iforget the acronym for it If the
(25:19):
US treasury decides to issue adigital coin with the US backing
, now, there's something whichwould substantiate, validate it
and possibly move it into therealm of a viable, respectable
asset class.
But right now, bitcoin as itstands, it can go from its
(25:39):
current level of what?
Somewhere around $110,000 to$50,000 tomorrow.
Right, it's got that kind ofvolatility.
That's not something we want toexpose most of our clients to
in the short term, right?
Clem Miller (25:52):
Yeah, yeah.
Steve Davenport (25:54):
I mean Rich when you're in charge of
multi-asset.
I mean, there's always beenthis argument.
I'm from the equity side,clem's from the equity side, so
we believe that what we're doingsomehow is you know, I mean, is
very accurate and on the point.
But the bond vigilantes seem tobe a group who get more respect
(26:16):
than the equity and I guess Iwonder how you feel about do you
think the bond vigilantes is areal thing or do you think that
they look at things in a morerisk-adjusted way?
I kind of think they do, andthey're very hard to shake.
And it seems to me that the onereaction we haven't talked about
(26:37):
is will the bond vigilantestake this bill when they see it
close to passing, and say youknow, this sends the wrong
message and it causes everythingto go the other way, meaning
higher rates in the US, it'sinflationary, it's too much
stimulus, yada, yada, yada.
And all of a sudden, ournational debt we're paying 5% to
(26:59):
6% instead of 3% to 4%.
That, to me, immediately causeda recession.
Do you think the vigilanteshave it in them?
They're not as smart as usequity guys.
Their CFA's right.
Rich Weiss (27:15):
Well, there are many good points you make.
The fixed income markets aremuch more mathematical and they
are less expectational in manyways than stocks.
You know the stock valuationscan vary significantly or have a
very wide degree or range ofvalues, whereas a fixed income,
you know it tends to be moremathematically matrix driven on
(27:38):
the pricing.
But I am definitely fearful ofthe bond vigilantes and, to your
point, and even if the Fed wereto lower short-term interest
rates, it's very possible thebond vigilantes can come in and
blow up the long end of thecurve Because they are, again to
your point, angry about whatthe administration is doing to
(28:01):
the deficit, and so they willsell, and they have done it in
the past.
Administration is doing to thedeficit, and so they will sell,
and they have done it in thepast.
Um, uh, for those of yourlisteners they probably know,
but you know that dates backwhat?
To the mid 80s, I think, whenthat, uh, that term was coined.
But it was james carville, Ibelieve, uh, a former advisor to
president clinton.
He, I'm gonna paraphrase, maybotch it, but he said something
(28:25):
like you know, I used to thinkthat if there was reincarnation
I wanted to come back as thepresident or the pope or you
know, a 400 baseball hitter.
But now I'd like to come backas a bond market vigilante,
because you can intimidateanybody.
I mean, that's the story behindit, right, and they have done
it and they can do it in thepast.
(28:46):
It'll be real interesting tosee if and when this big
beautiful bill passes, what thefinal outcome of it, what the
specifications are in its finalform, and if it does blow up the
deficit and debt to the tunethat the CBO is saying it is, I
(29:07):
have no doubt long-term interestrates will move up, no matter
what the Fed does, because theinflation expectations will
ratchet right up.
Steve Davenport (29:16):
Yeah, I just have a feeling that we're not
taking all the data points,because right now, I mean, this
is my opinion and don't take itpersonally but I believe a lot
of investors' attention span hasgone from minutes to seconds
and we don't focus on thesecondary, tertiary or other
(29:37):
effects.
So therefore, when we look atproblems today, we're so focused
on Iran and Israel that we kindof forget about Taiwan and
China.
And when we're focused on theyou know what's happening in the
US tariffs and we're ignoringthe big beautiful bill, I kind
(29:58):
of feel like we're you know,it's an attention, it's your
attention span stupid and that'swhat we need to kind of
lengthen.
And so I want to ask thesecondary and third and fourth
question, because I thinkeventually, that's kind of as a
chess player that's what I thinkyou've got to do in order to
get through the board and atleast risk and beat your
(30:20):
opponent by as much as you can,and beat your opponent by as
much as you can.
Is the short attention spanhurting us as investors now?
Rich Weiss (30:34):
And will we be rewarded for just being patient
here?
I believe strongly in what yousaid about strategy and looking
over the intermediate and longerterm.
That's the way that's investingat its core, in my opinion.
What you get a lot of times inthe media CNBC has really
perfected it now but thisminute-to-minute tick-to-tick
(30:54):
and when they use verbs like howdo you play this market or what
are you betting on?
These are gambling terms, right,and Steve, as you well know my
weekly calls, you know I have toprepare them.
Since they happen on Monday, Iprepare them on Saturday and
Sunday and sometimes that's noteven.
(31:15):
You know recent enough data,the way the market's been moving
.
I literally have to rewrite itMonday morning because it's
moving so fast.
On this micro, these microissues which really, if you're
setting their investmentstrategy appropriately, you
should be looking past some ofthese short-term items and to
(31:36):
the bigger issues which couldreally affect in a dramatic way
investments like the deficit,right, not not that that the
Middle East conflict and what itmay pretend on a human level,
much less a financial level foreveryone, but in terms of oil
and other things, but that couldbe important potentially.
(31:56):
But the tick to tick, minute tominute maneuvering that you
read and hear about.
I think it's unfortunate formany lay investors in particular
, who think that's the way youshould be investing.
That's a roulette table.
That's not the stock market forme.
Steve Davenport (32:15):
Yeah, I mean, I think when we look at what
Robinhood has gotten intobetting on events and betting on
sports betting like I watch theNBA finals and I see all these
ESPN bets and I kind of feellike I mean, I'm not a puritan,
I'm not a, I don't.
I believe in.
You know, if you want to put awager, you put a wager, but it's
(32:36):
a completely different decisionwhen you're investing and I
guess I'm I'm kind of like whendid society change?
Like, was it the stimuluspayments where they said, hey,
this $1,500, you don't need it,you're just going to get it and
you spend it on whatever youwant?
And everybody went and said I'mgoing to start to use call
(32:56):
options.
And so I started to study thecall options that were being
traded and I'm like these peopledon't understand it.
Like most of the volume was inones with a higher volatility
and they were buying calls.
Why would you pay a higher volthat's, paying a higher price
for the call up and then Irealized these people don't care
, they just wanted to put their$2 on the table and let it roll.
(33:20):
Yeah.
Clem Miller (33:22):
Rich, I got well, sorry, go ahead.
Role, you know, yeah, rich, Igot well, sorry, go ahead.
I was going to say I was goingto ask you uh, what?
How do you, how do you feelabout thematic investing?
And also a separate question uh, how frequently should an
individual investor considerreconsider their asset
(33:45):
allocation?
Rich Weiss (33:47):
If I could take the second part first, it's not
necessarily calendar driven.
Like you know, I'm going toretool or rebalance every
Wednesday.
I'd say it's more market driven, right?
So if there are major moves inthe market that drive your asset
allocation away from itslong-term strategic levels, then
(34:09):
perhaps you should think aboutrepositioning.
And generally the benefit ofdoing that is you'll be buying
low, selling high If stocks havea good run as they have.
It generally means most peoplewill be overweighted in equities
relative to their appropriatelevel, whatever that is, and
therefore you should sellequities to get back in line,
(34:31):
which means, again, you'reselling high and presumably
buying low on the in the otherinvestments.
So I think market drivenrebalancing, uh, is appropriate.
That's not to say you should betrading every time the market
moves a few percentage pointsand you're out of line by a
percent or two or three.
But when your asset allocationfor most retail investors gets
(34:57):
out of line by more than 5%, 10%, maybe it's time to look at it,
of course in a tax-s sensitiveway, right, if it's a taxable
account.
On the issue of thematicinvesting we're fans of that.
We have strategies that tend todo that.
I don't know if you considersustainable investing, thematic
(35:17):
or not, but we have manystrategies that follow that line
of thought.
It makes sense as long as youcan stick to it, right.
I mean, sometimes the themesdon't play out in the short term
and you have to resist thetemptation to abandon the reason
you got in it in the firstplace and wait for it to pay off
, if you will.
But if you can stick with atheme type of investing or
(35:40):
strategy that offers that, atheme type of investing or
strategy that offers that, andyou realize that's the way.
That's why you bought it in thefirst place, buy it and hold it
and wait for it to pay off, Ithink it's a very valid way to
do it.
But overall, nothing beatsdiversification.
That is essentially the onlyfree lunch in investing, or one
(36:04):
of the only ones.
Diversification is smart, it'sprudent, whatever that means to
you and you'll forgive me, I'mnot a very religious person, but
I tend to quote the Bible onthis one, because it turns out
it's in the Old Testament, Ithink, ecclesiastes.
I think they attribute it toSolomon, I forget, but it goes
(36:26):
something like divide yourportion to seven or even to
eight, for you do not know whatmisfortune may befall the earth.
That's a biblical quote.
I think that says it all.
Diversify your investment boardNow.
Back then, of course, they weretalking about goats and, you
know, sheep, but today they weretalking about goats and sheep,
but today we're talking aboutstocks and bonds, and it still
(36:48):
makes sense today to do so.
Don't put all your eggs in onebasket.
I guess that's the Mark Twainmodern version of it.
Or, as I think Tony Sopranosaid or maybe it was Al Capone,
you can put all your eggs in onebasket and then kill anybody
who tries to take them.
But something like that.
Steve Davenport (37:09):
I think that's a good idea.
I mean, how do you feel aboutgold in your allocation
decisions and how does that?
You know?
I don't know if you listened,but Clem is in that space and
I've said, if it makes sense, itmakes sense.
I mean, where does the yellowmetal fit in your places of
(37:31):
safety?
Robert?
Rich Weiss (37:32):
R.
In various strategies we have,we have used commodities
generally speaking, not alwaysspecifically precious metals
like gold and silver, which, aswe all know, are great safe
havens in times of economic orgeopolitical panic.
Right, and it's proven out thatgold has been one of the best
(37:53):
performing asset classes in theworld what over the last year or
so, maybe outstripped only byNvidia and Bitcoin, perhaps, but
it makes a lot of sense inportfolios as a safe haven.
Now, of course, it can, and hasgone dormant for years, if not
a decade or more at a time, butit does pay off in times of
(38:16):
panic and in defense of gold asa strategic investment going
forward.
Gold as a strategic investmentgoing forward uh, I just saw the
data that came out and we weretalking again about world
reserve currencies.
Certainly, the dollar is stillnumber one, far and away number
one, but number two uh, justwhich just overtook the euro, is
(38:40):
gold.
Um, central banks around theworld now have more invested in
gold than they do in the euro,which formerly was the second
place currency reserve.
So gold has a legitimate placein portfolios, as it's just as
needed now or depended on as theeuro or any other currency in
(39:03):
the world.
Steve Davenport (39:04):
Yeah, I think it's a little ironic that we
criticize individual advisors.
When I bring up the idea ofgold, it's like I'm some kind of
a devil worshiper.
They say it's a dead asset, itdoesn't do anything for you, it
doesn't produce anything for you, it's no income from it.
Therefore it's not an asset,and I've gone down this path
(39:28):
with people.
But then I look and I say waita minute, aren't the people in
these central banks?
You know they're sitting thereand they could buy something
else that would earn, you know,one, two percent return, but
they've chosen to own gold.
So are the researchers at thecentral banks different than
(39:48):
what we should do for ourclients if they think it's an
asset that should be held as asecure value?
Why do we tend to be more inneed of cash flow than the
governments around the world?
Rich Weiss (40:02):
Great Again, in times of panic, it's there.
I don't know if this analogywill work.
It just came to mind, steve, asyou were talking.
But if investing were like acar, everybody wants to just
pedal to the metal, throw it allin stocks, because those are
the things that have the highestreturn generally, whether it's
(40:23):
emerging markets or tech stocks.
But gold to me is like thebrakes in a car.
Yeah, they don't make you gofaster, they actually stop you,
but they are sorely needed attimes.
Right, you don't buy a carwithout brakes because they
don't make you go faster.
You need brakes in a car.
So to me that's kind of likegold.
(40:44):
At times, brakes are veryimportant.
I'm not pretending always toknow when that might be, but
having a small allocation togold or other commodities in
general makes a lot of sense,oil included, right, you never
know which way that's going.
Steve Davenport (41:02):
Do you guys have an allocation to gold or
oil in your current or have youever had allocations to it in
your multi-strat?
Rich Weiss (41:09):
Yes, our global allocation fund a couple of
years ago had it and we can anddo use it occasionally in our
multi-asset strategies on atactical basis.
So it's not necessarily in ourtarget date funds but in some of
our target risk funds.
You'll see it, commodityexposure in general is expensive
(41:32):
to hold strategically over thelong term, but on a tactical
basis could make a lot of sense.
Steve Davenport (41:40):
That's great.
So the last part of the bigbeautiful bill that we haven't
talked about is really the firstthing that's going to be a
problem, which is the debtceiling.
And if this thing starts totake longer and the debt ceiling
becomes more of an issue, Imean, will they have to strip it
out and do it so that they getsomething done?
Will they say, oh, it feelslike an all or nothing bet.
(42:04):
This is either going to work orit's not going to work.
And yet we are 90% in theopinion that it's going to work.
And I look at the debt ceilingand I think Rand Paul is not
alone in saying, hey, adding $5trillion to that, that's kind of
a big number.
And why do we say now versusother times?
(42:28):
I mean, do you?
think the debt ceiling is everuseful or is ever a thing that
helps us?
Rich Weiss (42:36):
Well, yes, I think it's a good guide and I know
every administration just keepsraising it.
You know, becauseadministrations like to spend
money and please consumers andgoose the economy, I think the
bill will pass in some form.
Like its current form.
I think it'll be detrimental tothe debt and deficit to some
(42:57):
degree because I believe theadministration will get it
passed in some form.
The administration will,they'll get it passed in some
form.
As far as it being problematicin the very short term, I don't
know about that.
You know, again, we have theluxury as the world's reserve
currency.
You know, to simply print moremoney.
(43:18):
It'll be inflationary, it's.
You know the US is not like ahousehold.
Certainly, if you were ahousehold and you just blew up
your debt, you're going to getin trouble.
Right At some point thecollectors are coming and you
have to sell your house and Imean there's all kinds of
problems when you get into toomuch debt.
But you know this president inparticular is a big fan of debt.
(43:40):
Right To you know, a user,sometimes an abuser, I mean to a
fault.
So I don't think thepresident's afraid of taking on
more debt.
He's done so many times in hisprior personal and business
lives, so I don't think he'sfearful of it.
At some point there's going tobe a comeuppance.
You can't just keep taking ondebt, saying the level doesn't
(44:02):
matter.
Even if you are the US dollar,we're going to have to pay for
it, and the price comes in termsof inflation, recession or loss
of status as a currency reserve.
There will be a payback at somepoint.
Don't know exactly when orwhere that's going to occur, but
it has to.
(44:22):
Can't just keep printing money.
Steve Davenport (44:31):
Len, do you have anything to add or want to
wrap up with our final thoughts?
Clem Miller (44:34):
Let's wrap up.
I don't have any more questions.
I think I've covered a lot ofterritory.
I think we've all covered a lotof territory today.
Steve Davenport (44:43):
Yeah, I mean, I kind of want to just end on
what I see and what I see as theplace to be for the short term,
you know the next three to sixmonths and I know that's not
part of the, you know, cfaregimen, but I feel that there
could be some times where somepeople in the next three months
are going to get pretty scared,that there could be some times
(45:04):
where some people in the nextthree months are going to get
pretty scared and I believe thatwe will have a problem with the
deficit and we will have aproblem with the bond vigilantes
.
So my thing is, I don't have theconfidence Rich has in treasury
and the ability to print money,because I think we're already
seeing some people politicizeowning treasuries and I think
(45:26):
that if we had Japan and Chinaand some of these big holders
who didn't react the way theynormally do, which occurred
recently and bonds could go downand stocks are going down,
which I don't think people arecomfortable with, because
they've always been told in the60-40 world, your 40 is there
(45:46):
when your 60 isn't, and I thinkit's been a little bit
simplistic because it's workedin the past and I'd say the past
is one indicator of the future,not the only, and so I believe
in corporate bonds right now.
I like a J&J, I like the AAAcompanies that are the US
economy, because I believethey're going to be able to
(46:10):
allocate, take advantage oftariff, take advantage of asset
location and take advantage ofwhatever the Trump
administration puts out.
And I think that there aregreat companies that are at
bonds and I would look at theirbalance sheets and say this
looks as good as, or better than, for the short term, what the
(46:32):
government is doing withtreasuries.
Clem Miller (46:34):
And.
Steve Davenport (46:35):
I think that for us, sometimes we have to
look at these sacred cows.
I was told that we never investin things that we know are
going to have a negative return.
Yet for two years, wheninterest rates were near zero, I
don't see anybody in thefinancial service industry who
said let's get rid of our bonds.
(46:57):
They were basically saying thisisn't going to keep up with
inflation, You're going to losevalue, but we want you to stay
here.
Going to keep up with inflation, you're going to lose value,
but we want you to stay here.
I thought that was the anti ofwhat we were taught.
I thought we were taught tomake wise decisions so that you
always have positive returns.
But that's what happens in thisworld.
(47:17):
Sometimes You're given asituation you're just not
comfortable with.
I think we're in a situation weshould not be comfortable with,
and so I would like to say hey,if you have any reservations,
go to the sidelines.
You got a nice rebound from theApril 8 lows.
Take some chips off the table.
(47:39):
I think that it's not a zeroprobability event that next
year's tax rates are higher thanthis year.
It's low.
I agree with you, Rich, Ifyou're talking about the
majority.
Majority is still in favor ofthe bill gets passed but my
point is that you can't alwaysbet or invest in a way that is
(48:02):
going to be aligned and makesense.
Sometimes things happen thatare events outside our control,
and I think you have tosometimes prepare for them as
well as the ones in your control.
So what do you think for thefuture three to six months, Rich
or Clem or whoever wants.
Rich Weiss (48:25):
Yeah, rich.
We are, I would say, prudentlyand cautiously positioned, not
necessarily misaligned with yourcomments, steve, but defensive
sectors of the equity marketnon-US equities as much as US
equities, and in the fixedincome arena, definitely high
(48:48):
quality, whether it's treasuriesor corporates.
And in terms of duration,actually we're hedging our bets
being short and long becausewe're really not sure if the Fed
is going to yank rates down orwe're going to come into a
slowdown here which mightbenefit long-term rates.
So I think we're welldiversified.
(49:09):
We are not taking on a lot ofrisk over the next three months,
three, six months, and that'swhere we've been so far this
year.
Again, that's worked out prettywell so far this year, even
with the rebound in thehigh-flying US equities more
recently even with the reboundin the high-flying US equities
more recently.
Clem Miller (49:34):
So Rich, as Steve knows, I'm focused very heavily
on well gold, as well as onequities with a significant cash
portion.
But within the equities I'mpretty defensive.
Defensive I look at low pegratios, I look at low beta and
something that a lot of people,I think, don't look at, which is
I tend to favor low shortinterest.
(49:54):
So the combination of thosethree, I think, is pretty
protective as far as equitiesare concerned.
Steve Davenport (50:03):
So it also looks at glass door ratings by
employees, which I think isanother quality measure.
So I really appreciate youcoming on, rich.
You did a great job.
I really like your insights andI like the way you talk about
this market.
I wish I had your patience andI wish I could be as even keeled
(50:24):
.
I just need to listen to youmore.
Probably maybe I should starttrying to imitate the Brooklyn
accent, and maybe that's whatpeople here in the South, every
time they meet me, they sayyou're not from around here, are
you?
And I don't know whether totake that as a positive or a
(50:44):
negative, but I've enjoyedhaving you in the show, glenn.
Thanks again, and we lookforward to all of our listeners.
Please like, share and try totake what we think with a grain
of salt and use it to make yourfinancial IQ and wellness better
.
All right, everybody, thank you.
Hello everyone and welcome to Skeptic's Guide
to Investing.
Today we're fortunate, ClemMiller and I have a guest, Rich
Weiss.
Rich is the CIO ChiefInvestment Officer of
Multi-Asset Strategies atAmerican Century, and to say he
has a lot of people who listento him and who follow his advice
(00:24):
and his insights on markets isa large understatement.
I listen to Ask Rich on Mondaysat four o'clock and I think
it's one of the best half hoursin the markets.
Listen to Rich because Rich isa balanced, even-handed, very
(00:48):
measured and doesn't getinvolved in the emotions and
some of the other things aboutsome of these political events.
He is from the Bronx and I dohold out a little bit against
him that he's a Mets fan.
But we all have to learn to workwith diversity and I think
today will be a test for mydiversity training as to whether
I can work with it.
(01:09):
But,Rich, it's great to haveyou on board.
As we talked about in the pre.
How do you think about todayand the actions of today and the
markets in terms of do you staycalm, cool, collected at all
times, or is there ever a timewhen you get a piece of news
(01:29):
that says, hey, bunker bustingbombs have been dropped in Iran.
That's going to be theexplosion point of like.
What makes you worried, or howdo you feel about what's
happening in the world today?
Rich Weiss (01:42):
Sure.
Thanks,Steve, and first of allClem.
Steve, thanks for having me onLove your podcast.
Oh, it was Brooklyn, by the way.
Steve Davenport (01:50):
Oh, brooklyn, sorry yeah.
Rich Weiss (01:51):
Sorry.
Yeah, we take that verypersonally, you know.
Steve Davenport (01:56):
I went to Columbia and I know what
Manhattan is, but I, you know, Iwent over one time to a Mets
game and I went over to watchthe tennis once, and I couldn't
go to Yankee Stadium.
Though it's just like as a RedSox fan, I think some part of me
would die.
Rich Weiss (02:19):
Yeah, the Yankees-Mets rivalry and the
Islanders-Rangers rivalry.
There I mean, there's morefights outside the rink than
there are in ZML.
But hey, in response to yourquestion, you know I've been in
the investment managementbusiness for 40 years now, a
little over 40 years, so it'shard to get riled up.
(02:40):
You know it changes the norm.
Get riled up, you know itchanges the norm.
And, granted, you know thingslike pandemics and acts of man,
like wars, are jarring on apersonal level, but this is
standard fare for the markets.
You know, what is amazing is,even with all this perceived
turmoil, whether it'sgeopolitical or on the financial
(03:02):
front or the budget, I'm surewe're going to hit all the major
topics.
But you know the VIX index iskind of like Alfred E Newman
from the old Mad Magazine.
What me?
Worry If you remember that.
Sorry, I'm dating myself, butVIX index is hanging around 20,
which is not too far above itslong-term average.
So the market's taking it instride.
Steve Davenport (03:25):
But I don't know.
I think the market's missingsomething here.
I think the market isundervaluing risk and, as a
derivatives trader andderivatives, I look at the VIX
and I think it's mispriced.
So I'm buying protection, but Idon't think we have a real good
transfer mechanism to what Ijust look at society and the
(03:47):
protests in LA and theassassinations in Minnesota and
like things that would normallybe.
You know, like this Indianplane goes down, 240 people on
it.
Okay, that's item number six inthe list of things that are
happening today.
I just find it to be you know mydaughter just got back from
(04:08):
South Korea my wife was like Iwas worried every moment.
She was there and I just feellike we're at a heightened sense
of awareness.
But the market seems to be likewhat is?
It Is today, tuesday orWednesday.
Rich Weiss (04:22):
Like you know, it doesn't care Wholeheartedly
agree I mean the market's wewould agree in our positions,
you know, for potentially moredownside than upside at this
(04:51):
point.
And you know, here I go againdating myself.
But remember the what was it?
The good, the bad and the uglywith Clint Eastwood.
There's always that layout inthe markets.
But the good news, at least forright now the consensus of
economists for real growth thisyear is somewhere around one and
(05:12):
a half percent, which is notstellar, but it ain't no
recession.
The bad news the so-called softeconomic data, the surveys, the
PMIs these are all theexpectational data.
They're pretty negative.
Most of them are pretending arecession at this point.
(05:34):
And then the ugly is some ofthe hard data.
It is and has been prettynegative To your point.
Housing sector again thismorning, some stats there really
in the dumps, and the same istrue for manufacturing.
But I think the reason themarket is holding up so strong
(05:56):
to this point is that the coreof the so-called hard economic
data that is relating to theconsumer hard economic data that
is relating to the consumer,which we all know is the
mainstay of the US economy, isstill relatively healthy.
Right that consumer sales,income, personal income and
spending for May is going tocome out this week, but that
(06:17):
data still shows resiliency, andthe same is true for the jobs
market, the labor force data.
So all of this nervousness, allof the surveys that you know
are looking for a recession orsomething close to that, it has
not come through.
Now to your point, steve.
It may be around the corner,and you know.
(06:40):
On the inflation front, Idefinitely agree.
Uh, we cannot call the war oninflation over yet, that the
tariff induced inflation.
Just that data hasn't comethrough yet and I think that
that chairman, uh powell,mentioned it in his comments the
other day.
Let's, let's see what happensin june, july, because all of
(07:00):
that front loading on inventorybuilding that's allowing,
because all of that frontloading on inventory building
that's allowing the companies tokeep prices low.
But now that tariff increase isgoing to start coming through.
There was a recent New York Fedreport showing that most
companies are going to pass allor most of those tariffs right
on to the consumer.
So we should be starting to seethat in June and July and I
(07:25):
think that's probably thebiggest problem ahead right here
is that inflation could beproblematic.
Lunar KING, federal ADVISOR.
Steve Davenport (07:30):
FEDERAL ECONOMY AND INDUSTRY CONGRESSMAN,
congressman.
Federal ECONOMY AND.
Clem Miller (07:34):
INDUSTRY CONGRESSMAN LUNAR KING, federal
ECONOMY AND INDUSTRY CONGRESSMANexpectations and perhaps the
markets expecting and your viewson GDP growth.
How are you positioning yourmulti-asset portfolios?
Also, I was curious what arethe asset classes that you
(07:58):
actually have in yourmulti-asset?
I mean, how do you define yourasset classes, because everybody
defines them a little bitdifferently.
Rich Weiss (08:06):
Right.
Well, overall, I'm happy to saywe have been this year, and
remain, positioned fairlyconservatively or defensively.
And you know, as you know, allthose stocks have now done a
full 360,.
Right, they're back where theystarted this year, but bonds at
(08:26):
least, as measured by theBloomberg Aggregate Index, still
outperforming the S&P year todate by a few basis points.
Sectors in the stock marketlike utilities and consumer
staples, which are verydefensive sectors, tend to do
well in downturns or recessions.
They are leaders in the market.
And, of course, non-us equities, significantly outperforming US
(08:52):
equities both in local anddollar terms, in part because of
the dollar being weak this year.
So, being defensivelypositioned in fixed income, at
the margin and outside the USand in the more defensive
sectors, that's been a winnerthis year for us and that's
where we remain.
Oh and Clem, as far as assetclasses, it includes all the
(09:16):
usual suspects US and non-USequities, emerging market
equities, fixed income allsectors of fixed income, non-us,
of course, as well and avariety of other asset classes
TIPS, treasury, inflation,protected Securities, real
estate, investment trusts.
I'd say the only things nottypically found in our main
(09:39):
multi-asset strategies arecryptocurrency at this point
still, we find that somewhatproblematic and private markets.
We don't have them in themainstream strategies, although
we certainly would offer them orwork with them for clients who
desire it.
So public investmentsnon-crypto, it's pretty much the
(10:01):
whole game.
Yeah, public investmentsnon-crypto it's pretty much the
whole game.
Steve Davenport (10:04):
Yeah.
Do you think that this wholeargument with Powell and Trump,
I mean, do you think it cementsthe Fed against some of what he
wants to show their independence?
Or do you think?
I've been believing in REITs?
When the rates come down, Ithink there's going to be a
(10:27):
boost to REITs.
I love REITs for non-taxableaccounts to be there generating
the four to eight and giving mesome upside in principle, and I
just think that they should bealmost a separate asset class,
like preferreds and other highyield debt.
They don't necessarily pick myfixed income, they don't
necessarily fit in equity, butthey're in what I call the messy
(10:49):
middle.
Do you think this thing isgoing to get resolved between?
Do you think that this processwill work and that they will
make the best decision they canfor the economy and Trump will
accept whatever that decision is?
And won't?
You know, reek?
I heard he took in the bigbeautiful bill.
He took out all the salariesfor the Fed.
(11:11):
I mean, it seems like these twocan't keep going like this, Can
they?
Rich Weiss (11:17):
Yeah, I guess marriages do exist like this but
not I'm very pleased to seethat Chairmanaron powell is is,
you know, remaining strongly infavor of an independent fed and
resisting the pressure, uh, tojust cave here.
And and remaining true to theirmandate, their dual mandate.
Now, whether president trumpwill accept that, uh, I, I, I
(11:42):
don't know about that, but itmay resolve itself this way,
because a couple of the Fedgovernors recently have come out
unofficially and hinted thatthe Fed's kind of closer to
reducing rates than many think.
I think Fed funds futures arestill expecting two rate cuts
this year, but not till the endof the year this year, but not
(12:06):
till the end of the year.
But those two governors cameout and hinted that it may be
coming sooner, depending on whatcomes out on these inflation
reports.
So it may resolve itself inthat Chairman Powell and the Fed
will lower interest rates,maybe June or July, as soon as
June or July, and that'llresolve the conflict there.
But they'll do it for the rightreasons, not because of the
pressure but because their dualmandate demands it.
Steve Davenport (12:31):
Yeah, I mean I've seen some people say that
they're a point and a half 150basis points behind.
So I think that they could calmdown the whole discussion by
taking it down 50 and sayingwait and see and I think that's
a good way for this to getresolved he gets a cut.
I don't think it really doesmuch for real estate because I
(12:52):
think it's kind of like 50 basispoints when you're at four is
you know it's meaningful, butit's not quite the same as when
you were at zero and you went up50.
So I think there's a magnitudeas a percent of the total that
somehow gets involved here.
But I guess the reason wereally wanted you on this call
(13:14):
is I've been just kind ofepileptic about this big,
beautiful bill.
I think that it's the mostimportant thing that's going to
happen this year in terms of themarkets, because if it goes the
wrong way meaning it doesn'tget passed I think the market
has no expectation of that andtherefore it will be blindsided.
(13:37):
Just don't look at the votesand count the votes and see that
they're going to be able tomake all the adjustments they
want to please the Senate, andthe House is just going to roll
over and say thank you very much.
Give me some more.
I think that the House and theSenate are completely different
(13:58):
and I think that if we saythey're both being directed by
Trump, I'd say both of themwould tell you that you know.
I mean, they have their ownopinions about Trump and I'm not
sure they're just going to votebecause this is Trump's big
beautiful bill.
And I don't know, maybe I'midealistic and I think that
people base things on good dataand facts and they make good
(14:21):
decisions when they're informed.
And they make good decisionswhen they're informed.
I mean, I don't know.
I think this big beautiful billis one of those things that
people will look back on and sayhe should have started that
before he started the tariffs.
Rich Weiss (14:36):
You know you may be right there.
You know I hate tounderestimate the president's
strong arm ability, you know, tobasically browbeat the Senate
and the House to get in line andpass something that's a
compromise.
But yeah to your point aboutmaybe should have started here
instead of tariffs.
That's a tricky one because inpart I believe the
(14:58):
administration's argument isthat the tariffs pay for some of
this deficit-increasing bigbeautiful bill which many are
still arguing needs to go onOzempic and lose a little more
weight.
Right, because I think thelatest estimate by the CBO, the
Congressional Budget Office, isthat it's going to add $2
(15:19):
trillion to $3 trillion to thedeficit over the next 10 years.
Now I know the administrationwill argue back that that does
not factor in the positiveeffects of the income tax cuts
which will spur economic growthand remove that deficit.
But that's all on the come.
I think going by the CBO'sestimate is the right way to go.
(15:41):
That's the way we've alwaysgone and it looks like it's
going to increase the deficit.
And the only way to prevent thedeficit-busting bill that's not
quite BBB, but deficit-bustingit's DBB, I guess, but is to get
those tariffs through.
Now I won't get into the wholeissue of who's paying for it.
(16:04):
I mean, it's pretty clearbetween the tariffs and the bill
itself.
It's a redistribution of income, but that's a social comment,
not an economic one, right?
It's sort of reverse, robinHood, you're taking from the
poor and giving to the rich.
The way that works.
Because tariffs are regressivein nature.
They hit lower income more sothan upper income and the income
(16:29):
tax code, of course, isprogressive.
So when you lower taxes thereyou're benefiting at the margin
the higher income.
So it's somewhat regressive innature, but still it can get
paid for.
Tariffs are all implemented,it's just who's paying for it.
Steve Davenport (16:47):
Yeah, just the assumption that this tax
extension can be done with a$3.8 trillion impact on the
economy and the government andit doesn't count as increasing
the debt.
I mean, I've heard people makeyou know I've been sold islands
(17:09):
in the stream and I've hadpeople tell me to buy property
in Florida, but I can't believethat anybody's looking at
extending a tax cut inperpetuity not for four years,
not for eight years forever andit doesn't have any impact on
the budget.
It looks like $3.8 trillion is$3.8 trillion, no matter how you
(17:33):
slice it.
Rich Weiss (17:36):
You know, again, this is very much political.
I'm not sure why we're lookingat a tax year.
We're not in a recession.
We don't need that fiscal juiceor stimulus.
One can argue right.
It's more political than it iseconomic.
You would think that whicheverparty was in charge, they'd be
looking to reduce that deficitand lower our debt.
(17:57):
The fact is, you know, if youlook at our interest payments as
a percentage of GDP I just sawthis in a report and confirmed
it online but it's scary Ourinterest payments as a percent
of real GDP, I think, aresomewhere around 4%, depending
(18:19):
on which source.
You look at 3.5%, 4%.
You look at 3.5%, 4%.
And that puts us just under theinterest percentage rate of
countries like Pakistan, kenya,angola and, believe it or not,
ukraine.
Those kinds of countries havethat kind of interest expense,
(18:39):
that kind of fiscal problem.
I'm not saying we're likeUkraine by a long stretch, but
we're up at a level we've neverbeen at.
It's far higher debt burdenthan any other developed nation
in the world.
You know, even worse thanGreece and some of those.
(19:00):
You know countries in Europethat have had perennial problems
fiscally.
So it needs to be tended to.
This administration with thebig beautiful bill is not
particularly paying attention toit, at least in the near term.
Now again, you can argue growthover the next 10 years may
mitigate that problem.
But that's all on the come, andthis interest expense is a big
(19:23):
burden.
It'll continue to be.
It's been weighing on the USdollar, the value of the US
dollar.
Countries have been migratingat the margin away from the US
dollar as the reserve currencyof choice globally.
That's not a good thing for usin the long term.
Clem Miller (19:59):
So Rich.
There seems to me to be sort ofa logical inconsistency between
the budget and the tariffs, inthe sense that you know with if
you're going to have a tradesurplus or a lower trade deficit
, that means there's less moneycoming in from abroad to finance
the US.
That means less money coming infrom abroad to finance the US
budget deficit, right?
So if the US budget deficitgoes up at the same time that
(20:23):
the trade deficit goes down,that necessarily is going to
imply higher interest rates forgovernment debt.
That's the way I look at it.
It's an inconsistency, and sohopefully there will be
(20:43):
negotiations on the externalfront that will lead to lower
tariffs and sort of arecognition that trade deficits
aren't necessarily bad.
Budget deficits are much worse.
Rich Weiss (21:00):
I couldn't agree more.
And of course we need todistinguish between the trade in
manufactured goods versusservices, where I don't think
we're in a deficit with services.
But the president in particular, this has long been one of his
bugaboos, you know, to fightagainst this manufacturing trade
deficit, which in and of itselfis not a bad thing.
(21:23):
To your point, it's painfullyelementary or rudimentary to
just say we need to export morethan we import.
It's very naive economics.
I know the president went toWharton for a few years.
I can't believe he learned thatthere, because that's not what
they teach there.
That you know, that's where Iwas schooled.
(21:45):
Trade deficits in and ofthemselves are not bad because
they have beneficial results.
And by the way, to a pointearlier about the dollar and the
reserve currency, when you arethe world's reserve currency.
By definition, you're going tohave a trade deficit.
I mean that's what it means, andthat's a status you want,
(22:06):
that's a cachet you want.
That's not something to fightagainst, so it has its benefits.
It's just naive and somewhatmisleading, I feel, to just
argue against manufacturingtrade deficits.
Now, granted, though, if you oryour household work in that
(22:28):
sector and it's been hurting youand your family, that's a
different story.
Right, there are definitelysectors of the economy which
have been harmed by our exportsversus imports, our trade
deficit in certain industries.
So it's a social issue as wellas a political one, and that you
know.
I don't have a fight in that oran opinion on that.
(22:52):
But overall trade deficit, notbad, trade surplus not good in
and of themselves, yeah, yeah.
Clem Miller (23:02):
Yeah.
Steve Davenport (23:03):
Well, go ahead.
Clem Miller (23:06):
No, oh, I was just going to add.
You mentioned that you don'thave cryptocurrency in your
asset allocation, which, by theway, I happen to agree that
cryptocurrency shouldn't be inan asset allocation.
But I'm wondering you knowthere are those that have it and
you know, I imagine, there arearguments for and against it.
Um, what would you characterizeas the arguments for and
(23:28):
against having a cryptoallocation?
Rich Weiss (23:30):
sure, uh well, hell, uh, for for crypto.
Just look at the returns.
Right, it's hard to argue withthat now.
It is highly volatile.
They are highly volatile ifwe're just going to use Bitcoin
as the representative, but thereturns have been spectacular.
(23:54):
So it's always hard to argueagainst that.
But the arguments against andwell, I don't know if you saw,
maybe a year or two old the CFAInstitute, which tends to be
fairly objective in theiranalyses.
The CFA Institute, which tendsto be fairly objective in their
analyses, that's CharteredFinancial Analyst Institute came
out with a very detailedoverview of cryptocurrency in
general and they had a chapterin that report that went through
(24:17):
five or six differentmethodologies for valuing
Bitcoin, much like you would astock or a bond how do you value
these things?
And they looked at it a numberof different ways and the
results were and maybe I'mexaggerating a little, but it
was on the order of somethinglike it could be valued,
(24:38):
depending on the methodology,anywhere from zero to $600,000
per coin.
Now, I mean, with that kind ofrange of valuations where you
could drive a truck through, itjust doesn't have the status or
the class of a viable assetclass.
It's highly speculative.
(24:58):
There is no underlying value tothat asset.
It's supply and demand.
Underlying value to that assetis supply and demand.
And, granted, if governments,namely the US government,
decides to get in full bore witha what they call what is it?
A central bank crypto CDBC Iforget the acronym for it If the
(25:19):
US treasury decides to issue adigital coin with the US backing
, now, there's something whichwould substantiate, validate it
and possibly move it into therealm of a viable, respectable
asset class.
But right now, bitcoin as itstands, it can go from its
(25:39):
current level of what?
Somewhere around $110,000 to$50,000 tomorrow.
Right, it's got that kind ofvolatility.
That's not something we want toexpose most of our clients to
in the short term, right?
Clem Miller (25:52):
Yeah, yeah.
Steve Davenport (25:54):
I mean Rich when you're in charge of
multi-asset.
I mean, there's always beenthis argument.
I'm from the equity side,clem's from the equity side, so
we believe that what we're doingsomehow is you know, I mean, is
very accurate and on the point.
But the bond vigilantes seem tobe a group who get more respect
(26:16):
than the equity and I guess Iwonder how you feel about do you
think the bond vigilantes is areal thing or do you think that
they look at things in a morerisk-adjusted way?
I kind of think they do, andthey're very hard to shake.
And it seems to me that the onereaction we haven't talked about
(26:37):
is will the bond vigilantestake this bill when they see it
close to passing, and say youknow, this sends the wrong
message and it causes everythingto go the other way, meaning
higher rates in the US, it'sinflationary, it's too much
stimulus, yada, yada, yada.
And all of a sudden, ournational debt we're paying 5% to
(26:59):
6% instead of 3% to 4%.
That, to me, immediately causeda recession.
Do you think the vigilanteshave it in them?
They're not as smart as usequity guys.
Their CFA's right.
Rich Weiss (27:15):
Well, there are many good points you make.
The fixed income markets aremuch more mathematical and they
are less expectational in manyways than stocks.
You know the stock valuationscan vary significantly or have a
very wide degree or range ofvalues, whereas a fixed income,
you know it tends to be moremathematically matrix driven on
(27:38):
the pricing.
But I am definitely fearful ofthe bond vigilantes and, to your
point, and even if the Fed wereto lower short-term interest
rates, it's very possible thebond vigilantes can come in and
blow up the long end of thecurve Because they are, again to
your point, angry about whatthe administration is doing to
(28:01):
the deficit, and so they willsell, and they have done it in
the past.
Administration is doing to thedeficit, and so they will sell,
and they have done it in thepast.
Um, uh, for those of yourlisteners they probably know,
but you know that dates backwhat?
To the mid 80s, I think, whenthat, uh, that term was coined.
But it was james carville, Ibelieve, uh, a former advisor to
president clinton.
He, I'm gonna paraphrase, maybotch it, but he said something
(28:25):
like you know, I used to thinkthat if there was reincarnation
I wanted to come back as thepresident or the pope or you
know, a 400 baseball hitter.
But now I'd like to come backas a bond market vigilante,
because you can intimidateanybody.
I mean, that's the story behindit, right, and they have done
it and they can do it in thepast.
(28:46):
It'll be real interesting tosee if and when this big
beautiful bill passes, what thefinal outcome of it, what the
specifications are in its finalform, and if it does blow up the
deficit and debt to the tunethat the CBO is saying it is, I
(29:07):
have no doubt long-term interestrates will move up, no matter
what the Fed does, because theinflation expectations will
ratchet right up.
Steve Davenport (29:16):
Yeah, I just have a feeling that we're not
taking all the data points,because right now, I mean, this
is my opinion and don't take itpersonally but I believe a lot
of investors' attention span hasgone from minutes to seconds
and we don't focus on thesecondary, tertiary or other
(29:37):
effects.
So therefore, when we look atproblems today, we're so focused
on Iran and Israel that we kindof forget about Taiwan and
China.
And when we're focused on theyou know what's happening in the
US tariffs and we're ignoringthe big beautiful bill, I kind
(29:58):
of feel like we're you know,it's an attention, it's your
attention span stupid and that'swhat we need to kind of
lengthen.
And so I want to ask thesecondary and third and fourth
question, because I thinkeventually, that's kind of as a
chess player that's what I thinkyou've got to do in order to
get through the board and atleast risk and beat your
(30:20):
opponent by as much as you can,and beat your opponent by as
much as you can.
Is the short attention spanhurting us as investors now?
Rich Weiss (30:34):
And will we be rewarded for just being patient
here?
I believe strongly in what yousaid about strategy and looking
over the intermediate and longerterm.
That's the way that's investingat its core, in my opinion.
What you get a lot of times inthe media CNBC has really
perfected it now but thisminute-to-minute tick-to-tick
(30:54):
and when they use verbs like howdo you play this market or what
are you betting on?
These are gambling terms, right,and Steve, as you well know my
weekly calls, you know I have toprepare them.
Since they happen on Monday, Iprepare them on Saturday and
Sunday and sometimes that's noteven.
(31:15):
You know recent enough data,the way the market's been moving
.
I literally have to rewrite itMonday morning because it's
moving so fast.
On this micro, these microissues which really, if you're
setting their investmentstrategy appropriately, you
should be looking past some ofthese short-term items and to
(31:36):
the bigger issues which couldreally affect in a dramatic way
investments like the deficit,right, not not that that the
Middle East conflict and what itmay pretend on a human level,
much less a financial level foreveryone, but in terms of oil
and other things, but that couldbe important potentially.
(31:56):
But the tick to tick, minute tominute maneuvering that you
read and hear about.
I think it's unfortunate formany lay investors in particular
, who think that's the way youshould be investing.
That's a roulette table.
That's not the stock market forme.
Steve Davenport (32:15):
Yeah, I mean, I think when we look at what
Robinhood has gotten intobetting on events and betting on
sports betting like I watch theNBA finals and I see all these
ESPN bets and I kind of feellike I mean, I'm not a puritan,
I'm not a, I don't.
I believe in.
You know, if you want to put awager, you put a wager, but it's
(32:36):
a completely different decisionwhen you're investing and I
guess I'm I'm kind of like whendid society change?
Like, was it the stimuluspayments where they said, hey,
this $1,500, you don't need it,you're just going to get it and
you spend it on whatever youwant?
And everybody went and said I'mgoing to start to use call
(32:56):
options.
And so I started to study thecall options that were being
traded and I'm like these peopledon't understand it.
Like most of the volume was inones with a higher volatility
and they were buying calls.
Why would you pay a higher volthat's, paying a higher price
for the call up and then Irealized these people don't care
, they just wanted to put their$2 on the table and let it roll.
(33:20):
Yeah.
Clem Miller (33:22):
Rich, I got well, sorry, go ahead.
Role, you know, yeah, rich, Igot well, sorry, go ahead.
I was going to say I was goingto ask you uh, what?
How do you, how do you feelabout thematic investing?
And also a separate question uh, how frequently should an
individual investor considerreconsider their asset
(33:45):
allocation?
Rich Weiss (33:47):
If I could take the second part first, it's not
necessarily calendar driven.
Like you know, I'm going toretool or rebalance every
Wednesday.
I'd say it's more market driven, right?
So if there are major moves inthe market that drive your asset
allocation away from itslong-term strategic levels, then
(34:09):
perhaps you should think aboutrepositioning.
And generally the benefit ofdoing that is you'll be buying
low, selling high If stocks havea good run as they have.
It generally means most peoplewill be overweighted in equities
relative to their appropriatelevel, whatever that is, and
therefore you should sellequities to get back in line,
(34:31):
which means, again, you'reselling high and presumably
buying low on the in the otherinvestments.
So I think market drivenrebalancing, uh, is appropriate.
That's not to say you should betrading every time the market
moves a few percentage pointsand you're out of line by a
percent or two or three.
But when your asset allocationfor most retail investors gets
(34:57):
out of line by more than 5%, 10%, maybe it's time to look at it,
of course in a tax-s sensitiveway, right, if it's a taxable
account.
On the issue of thematicinvesting we're fans of that.
We have strategies that tend todo that.
I don't know if you considersustainable investing, thematic
(35:17):
or not, but we have manystrategies that follow that line
of thought.
It makes sense as long as youcan stick to it, right.
I mean, sometimes the themesdon't play out in the short term
and you have to resist thetemptation to abandon the reason
you got in it in the firstplace and wait for it to pay off
, if you will.
But if you can stick with atheme type of investing or
(35:40):
strategy that offers that, atheme type of investing or
strategy that offers that, andyou realize that's the way.
That's why you bought it in thefirst place, buy it and hold it
and wait for it to pay off, Ithink it's a very valid way to
do it.
But overall, nothing beatsdiversification.
That is essentially the onlyfree lunch in investing, or one
(36:04):
of the only ones.
Diversification is smart, it'sprudent, whatever that means to
you and you'll forgive me, I'mnot a very religious person, but
I tend to quote the Bible onthis one, because it turns out
it's in the Old Testament, Ithink, ecclesiastes.
I think they attribute it toSolomon, I forget, but it goes
(36:26):
something like divide yourportion to seven or even to
eight, for you do not know whatmisfortune may befall the earth.
That's a biblical quote.
I think that says it all.
Diversify your investment boardNow.
Back then, of course, they weretalking about goats and, you
know, sheep, but today they weretalking about goats and sheep,
but today we're talking aboutstocks and bonds, and it still
(36:48):
makes sense today to do so.
Don't put all your eggs in onebasket.
I guess that's the Mark Twainmodern version of it.
Or, as I think Tony Sopranosaid or maybe it was Al Capone,
you can put all your eggs in onebasket and then kill anybody
who tries to take them.
But something like that.
Steve Davenport (37:09):
I think that's a good idea.
I mean, how do you feel aboutgold in your allocation
decisions and how does that?
You know?
I don't know if you listened,but Clem is in that space and
I've said, if it makes sense, itmakes sense.
I mean, where does the yellowmetal fit in your places of
(37:31):
safety?
Robert?
Rich Weiss (37:32):
R.
In various strategies we have,we have used commodities
generally speaking, not alwaysspecifically precious metals
like gold and silver, which, aswe all know, are great safe
havens in times of economic orgeopolitical panic.
Right, and it's proven out thatgold has been one of the best
(37:53):
performing asset classes in theworld what over the last year or
so, maybe outstripped only byNvidia and Bitcoin, perhaps, but
it makes a lot of sense inportfolios as a safe haven.
Now, of course, it can, and hasgone dormant for years, if not
a decade or more at a time, butit does pay off in times of
(38:16):
panic and in defense of gold asa strategic investment going
forward.
Gold as a strategic investmentgoing forward uh, I just saw the
data that came out and we weretalking again about world
reserve currencies.
Certainly, the dollar is stillnumber one, far and away number
one, but number two uh, justwhich just overtook the euro, is
(38:40):
gold.
Um, central banks around theworld now have more invested in
gold than they do in the euro,which formerly was the second
place currency reserve.
So gold has a legitimate placein portfolios, as it's just as
needed now or depended on as theeuro or any other currency in
(39:03):
the world.
Steve Davenport (39:04):
Yeah, I think it's a little ironic that we
criticize individual advisors.
When I bring up the idea ofgold, it's like I'm some kind of
a devil worshiper.
They say it's a dead asset, itdoesn't do anything for you, it
doesn't produce anything for you, it's no income from it.
Therefore it's not an asset,and I've gone down this path
(39:28):
with people.
But then I look and I say waita minute, aren't the people in
these central banks?
You know they're sitting thereand they could buy something
else that would earn, you know,one, two percent return, but
they've chosen to own gold.
So are the researchers at thecentral banks different than
(39:48):
what we should do for ourclients if they think it's an
asset that should be held as asecure value?
Why do we tend to be more inneed of cash flow than the
governments around the world?
Rich Weiss (40:02):
Great Again, in times of panic, it's there.
I don't know if this analogywill work.
It just came to mind, steve, asyou were talking.
But if investing were like acar, everybody wants to just
pedal to the metal, throw it allin stocks, because those are
the things that have the highestreturn generally, whether it's
(40:23):
emerging markets or tech stocks.
But gold to me is like thebrakes in a car.
Yeah, they don't make you gofaster, they actually stop you,
but they are sorely needed attimes.
Right, you don't buy a carwithout brakes because they
don't make you go faster.
You need brakes in a car.
So to me that's kind of likegold.
(40:44):
At times, brakes are veryimportant.
I'm not pretending always toknow when that might be, but
having a small allocation togold or other commodities in
general makes a lot of sense,oil included, right, you never
know which way that's going.
Steve Davenport (41:02):
Do you guys have an allocation to gold or
oil in your current or have youever had allocations to it in
your multi-strat?
Rich Weiss (41:09):
Yes, our global allocation fund a couple of
years ago had it and we can anddo use it occasionally in our
multi-asset strategies on atactical basis.
So it's not necessarily in ourtarget date funds but in some of
our target risk funds.
You'll see it, commodityexposure in general is expensive
(41:32):
to hold strategically over thelong term, but on a tactical
basis could make a lot of sense.
Steve Davenport (41:40):
That's great.
So the last part of the bigbeautiful bill that we haven't
talked about is really the firstthing that's going to be a
problem, which is the debtceiling.
And if this thing starts totake longer and the debt ceiling
becomes more of an issue, Imean, will they have to strip it
out and do it so that they getsomething done?
Will they say, oh, it feelslike an all or nothing bet.
(42:04):
This is either going to work orit's not going to work.
And yet we are 90% in theopinion that it's going to work.
And I look at the debt ceilingand I think Rand Paul is not
alone in saying, hey, adding $5trillion to that, that's kind of
a big number.
And why do we say now versusother times?
(42:28):
I mean, do you?
think the debt ceiling is everuseful or is ever a thing that
helps us?
Rich Weiss (42:36):
Well, yes, I think it's a good guide and I know
every administration just keepsraising it.
You know, becauseadministrations like to spend
money and please consumers andgoose the economy, I think the
bill will pass in some form.
Like its current form.
I think it'll be detrimental tothe debt and deficit to some
(42:57):
degree because I believe theadministration will get it
passed in some form.
The administration will,they'll get it passed in some
form.
As far as it being problematicin the very short term, I don't
know about that.
You know, again, we have theluxury as the world's reserve
currency.
You know, to simply print moremoney.
(43:18):
It'll be inflationary, it's.
You know the US is not like ahousehold.
Certainly, if you were ahousehold and you just blew up
your debt, you're going to getin trouble.
Right At some point thecollectors are coming and you
have to sell your house and Imean there's all kinds of
problems when you get into toomuch debt.
But you know this president inparticular is a big fan of debt.
(43:40):
Right To you know, a user,sometimes an abuser, I mean to a
fault.
So I don't think thepresident's afraid of taking on
more debt.
He's done so many times in hisprior personal and business
lives, so I don't think he'sfearful of it.
At some point there's going tobe a comeuppance.
You can't just keep taking ondebt, saying the level doesn't
(44:02):
matter.
Even if you are the US dollar,we're going to have to pay for
it, and the price comes in termsof inflation, recession or loss
of status as a currency reserve.
There will be a payback at somepoint.
Don't know exactly when orwhere that's going to occur, but
it has to.
(44:22):
Can't just keep printing money.
Steve Davenport (44:31):
Len, do you have anything to add or want to
wrap up with our final thoughts?
Clem Miller (44:34):
Let's wrap up.
I don't have any more questions.
I think I've covered a lot ofterritory.
I think we've all covered a lotof territory today.
Steve Davenport (44:43):
Yeah, I mean, I kind of want to just end on
what I see and what I see as theplace to be for the short term,
you know the next three to sixmonths and I know that's not
part of the, you know, cfaregimen, but I feel that there
could be some times where somepeople in the next three months
are going to get pretty scared,that there could be some times
(45:04):
where some people in the nextthree months are going to get
pretty scared and I believe thatwe will have a problem with the
deficit and we will have aproblem with the bond vigilantes
.
So my thing is, I don't have theconfidence Rich has in treasury
and the ability to print money,because I think we're already
seeing some people politicizeowning treasuries and I think
(45:26):
that if we had Japan and Chinaand some of these big holders
who didn't react the way theynormally do, which occurred
recently and bonds could go downand stocks are going down,
which I don't think people arecomfortable with, because
they've always been told in the60-40 world, your 40 is there
(45:46):
when your 60 isn't, and I thinkit's been a little bit
simplistic because it's workedin the past and I'd say the past
is one indicator of the future,not the only, and so I believe
in corporate bonds right now.
I like a J&J, I like the AAAcompanies that are the US
economy, because I believethey're going to be able to
(46:10):
allocate, take advantage oftariff, take advantage of asset
location and take advantage ofwhatever the Trump
administration puts out.
And I think that there aregreat companies that are at
bonds and I would look at theirbalance sheets and say this
looks as good as, or better than, for the short term, what the
(46:32):
government is doing withtreasuries.
Clem Miller (46:34):
And.
Steve Davenport (46:35):
I think that for us, sometimes we have to
look at these sacred cows.
I was told that we never investin things that we know are
going to have a negative return.
Yet for two years, wheninterest rates were near zero, I
don't see anybody in thefinancial service industry who
said let's get rid of our bonds.
(46:57):
They were basically saying thisisn't going to keep up with
inflation, You're going to losevalue, but we want you to stay
here.
Going to keep up with inflation, you're going to lose value,
but we want you to stay here.
I thought that was the anti ofwhat we were taught.
I thought we were taught tomake wise decisions so that you
always have positive returns.
But that's what happens in thisworld.
(47:17):
Sometimes You're given asituation you're just not
comfortable with.
I think we're in a situation weshould not be comfortable with,
and so I would like to say hey,if you have any reservations,
go to the sidelines.
You got a nice rebound from theApril 8 lows.
Take some chips off the table.
(47:39):
I think that it's not a zeroprobability event that next
year's tax rates are higher thanthis year.
It's low.
I agree with you, Rich, Ifyou're talking about the
majority.
Majority is still in favor ofthe bill gets passed but my
point is that you can't alwaysbet or invest in a way that is
(48:02):
going to be aligned and makesense.
Sometimes things happen thatare events outside our control,
and I think you have tosometimes prepare for them as
well as the ones in your control.
So what do you think for thefuture three to six months, Rich
or Clem or whoever wants.
Rich Weiss (48:25):
Yeah, rich.
We are, I would say, prudentlyand cautiously positioned, not
necessarily misaligned with yourcomments, steve, but defensive
sectors of the equity marketnon-US equities as much as US
equities, and in the fixedincome arena, definitely high
(48:48):
quality, whether it's treasuriesor corporates.
And in terms of duration,actually we're hedging our bets
being short and long becausewe're really not sure if the Fed
is going to yank rates down orwe're going to come into a
slowdown here which mightbenefit long-term rates.
So I think we're welldiversified.
(49:09):
We are not taking on a lot ofrisk over the next three months,
three, six months, and that'swhere we've been so far this
year.
Again, that's worked out prettywell so far this year, even
with the rebound in thehigh-flying US equities more
recently even with the reboundin the high-flying US equities
more recently.
Clem Miller (49:34):
So Rich, as Steve knows, I'm focused very heavily
on well gold, as well as onequities with a significant cash
portion.
But within the equities I'mpretty defensive.
Defensive I look at low pegratios, I look at low beta and
something that a lot of people,I think, don't look at, which is
I tend to favor low shortinterest.
(49:54):
So the combination of thosethree, I think, is pretty
protective as far as equitiesare concerned.
Steve Davenport (50:03):
So it also looks at glass door ratings by
employees, which I think isanother quality measure.
So I really appreciate youcoming on, rich.
You did a great job.
I really like your insights andI like the way you talk about
this market.
I wish I had your patience andI wish I could be as even keeled
(50:24):
.
I just need to listen to youmore.
Probably maybe I should starttrying to imitate the Brooklyn
accent, and maybe that's whatpeople here in the South, every
time they meet me, they sayyou're not from around here, are
you?
And I don't know whether totake that as a positive or a
(50:44):
negative, but I've enjoyedhaving you in the show, glenn.
Thanks again, and we lookforward to all of our listeners.
Please like, share and try totake what we think with a grain
of salt and use it to make yourfinancial IQ and wellness better
.
All right, everybody, thank you.
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