We Study Billionaires - The Investor’s Podcast Network - TIP568: Current Market Conditions, Alternative Assets, & AI w/ David Stein

Starting point is 00:00:00 You're listening to TIP. On today's episode, we bring back David Stein. For those of you who don't yet know David, he is the host of money for the rest of us, a weekly personal finance podcast with over 20 million downloads. He's also the co-founder of Asset Camp, a fintech platform of dynamic data-driven research tools focused on asset classes. In this episode, we cover his updated assessment of current market conditions and why we should care about current market conditions in the first place.

Starting point is 00:00:29 The role international stocks can play in a portfolio and is updated assessment of that. If investors should care if the U.S. has a reserve currency or not, ways in which investors can get exposure to AI, if GDP is an outdated metric and potentially misleading, the role that crowdfunding platforms and alternative assets can play in a portfolio, David's thoughts around living a richer, wiser, and happier life, and much more. This was a fun chat with a lot of great pieces of wisdom from David, so I hope you enjoy it.

Starting point is 00:01:02 We're listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Welcome to The Investors Podcast. I'm your host, Clay Fink. Today, I am thrilled to welcome back, my friend David Stein to the show. David, great to have you back. Hey, it's good to be here. Thanks, Clay.

Starting point is 00:01:34 David, since the last time we had you on, we've had plenty of. you know, pretty crazy things happening in the markets. We've seen equity markets swiftly start to approach new all-time highs. And this is in the backdrop of everyone calling for a big crash in light of the Fed raising rates, the fastest it ever has. And then we have people becoming pretty enamored with AI stocks, which we'll be talking about a bit later. I don't want to make you feel old, David, but your experience covering the markets professionally is closing in on 30 years. So I'm grateful to have you on to help people like me, less sophisticated, less experienced investors to better understand what's sort of happening here. So higher interest rates have been what everyone is talking about over the past year.

Starting point is 00:02:18 So very excited to get your updated assessment on current market conditions today. Before we talk about that, I think a good place to start is to talk about why we should care about market conditions in the first place as long-term investors. Right. Well, first, when we think about market conditions, there's many ways to measure that. But fundamentally, as investors, we're managing portfolios and we have a number of different asset classes and we want to understand what's going on in the markets that could impact those asset classes and foremost asset class valuations. The price to earnings ratios of stocks, for example, is a type of market condition that we need to be aware of. And so other market conditions would include economic trends, which can impact corporate earnings. And then there's

Starting point is 00:03:07 what are, be called the market's temperature, which, which we call internally market internal. So the level of fear and greed in the market and what's that average investor doing. And so when we look at where we are with market conditions and why they're important is essentially is to keep us grounded. Knowing where things are helps us stay invested. And it keeps us from sort of being flipped around as something new comes along. So just, you know, we look at, I formerly look at market conditions once a month. I've done it as an institutional investor since early 2000s, just really understanding where we are.

Starting point is 00:03:40 And in fact, I know, Clay, you discussed Howard Marks' book, Mastering the Market Cycle. And he uses some of the same language. He recently had a editorial in the Financial Times. And one of his points is, is the market is generally somewhere in the middle. It's rare that it's at an extreme. And we've seen that in our work. We've done a monthly investment conditions and strategy report for over a decade. And only 10% of the time, it's really been overall conditions, asset class valuations,

Starting point is 00:04:11 economic trans market internals. About 10% of the time, you get more of an extreme where it's in our parlance is red, so more bearish or green, more bullish, because most of the time we're sort of in the middle. And so we're sort of weighing different elements. And ultimately, most of the time decide, hey, we want to stay invested. This is not a time to move significantly in or out of the markets, stay close to our long-term targets. And I think so many people are confused by sort of what's happening.

Starting point is 00:04:41 I think this really stems from what happened in 2020, where we saw a big disconnect between the economy and the stock market and the real estate market as well. You know, people are really confused because the economy shut down and then, Now people kind of expected that in light of interest rate hikes that, you know, markets would be in for a world of trouble. So what's your take on market conditions today? We're recording today at July 21st, 2023. And you just recently put out your monthly report that you just mentioned. So what's your take on current market conditions?

Starting point is 00:05:14 And then what are you keeping an eye on? So, you know, overall, when we look at across the bar, we're sort of low neutral. So in our models, we're slightly underweight stocks. But it's been an incredibly fascinating three years. You mentioned the pandemic and just, and I know we'll talk a little bit about the Fed later, but just the sheer amount of cash that was created, liquidity through a combination of massive federal budget deficits in the U.S. and quantitative easing. At the same time, we shut down the economy.

Starting point is 00:05:43 So we had the money supply, M2, which is essentially checking accounts, cash, retail money market mutual funds, went from $15 trillion to over $23,000. trillion in about a year. That's money and purchasing power going out into the economy. And in that environment, why do we have inflation? Because the economy had shut down. Supply chains had got interrupted. Yet now there's massive cash going into meme stocks, going into real estate and going into crypto, going into watches. And we're just working our way through that. And the Federal Reserve essentially was caught off guard just the sheer amount of inflation that we've seen. And not Not that I'm saying, well, I know better than the Fed. The reality is we don't know exactly

Starting point is 00:06:29 how long this inflation period will last. And so when we talk about people sitting around waiting for a recession because the Federal Reserve's raising interest rates, the most aggressive, it's raised them in several decades. But this is sort of a blunt tool. And because of all the cash that was in the system, the savings that people had, the fact that we had a decade of very low interest rates. And so businesses and individuals, homeowners had locked in very low mortgages, it's taking a very long time for higher interest rates to impact the economy. And it's not certain that we'll even get a recession. We're already seeing inflation. And especially after the most recent report, core inflation is coming down. And maybe the Fed will get incredibly lucky and pull off a,

Starting point is 00:07:16 this sort of Goldilocks economy where inflation comes down and we never enter into recession. We don't know. Typically, there's an 18-month lag before interest rates really start to bite the economy. We're starting to see the economy slow. And one of the things that we look at, the measures, is what are known as purchasing manager indices or PMIs. And this is data that basically business surveys around the world and that the statisticians ask businesses, well, how else? What about your new orders? What's your inventory like? What are your employment plants? What kind of price increases are you seeing? And it's normalized to where 50 is, and it's done at every different countries. They do manufacturing. They do services. So when it's above 50, that's generally an

Starting point is 00:08:01 expanding economy. When it's below 50, its economy is slowing or contracting. And we're at 48.6. And so we've been hovering around 50, but it's getting slightly worse, but it's not as if, and I'm talking globally now, because we look, you know, in our work, we look at across the globe and then look at what percentage of countries are expanding, basically above 50 or below 50. So when we look at the PMI data, it's sort of low neutral. It's not flashing recession. And I think the takeaway is there's a balance of things or multiple measures that we can look

Starting point is 00:08:32 at. This has been a recession that analysts have been calling for two years, mainly because the yield curve went inverted with longer term rates lower than the shorter term rates, and that often can lead to recession, not every time, but we're waiting around. In the meantime, it's been a great time to stay invested in risk assets because we've been rewarded for doing so. This was not a time to run for the hills and not have exposure to risk assets such as stocks, non-investment-grade bonds, and others. You mentioned the massive increase in the money supply and sort of the effect and how that's kind of helped things keep going sort of as the Fed. They're really doing a balancing act here

Starting point is 00:09:16 and they're trying to crush inflation without crushing the economy, as many people have said, in the recent inflation number for US CPI came in at 3%. And I believe we're seeing higher inflation in places like Europe and different areas of the world. I'm curious what your sort of assessment is on how well the Fed has done in managing inflation over the past couple of years after inflation rose to around 9%. Well, the Fed was embarrassed, right? They are acting, trying to save the reputation, you know, a reputation of low interest rates, low inflation.

Starting point is 00:09:50 They won't say it, but the fact that inflation got up to 9%, that's embarrassing. Now, there's reasons for it, et cetera. They have raised rates very, very aggressively. When you think about it, I mean, it's within 15 months, we've gone from zero to where it looks like they'll raise the policy rate, the Fed funds rate, another 25 basis points in their next meeting. and now we're close to 5.5% if they do that. That's in a year. And so when we talk about the impact on the economy, that takes time to work through. But the good news is, is that, for example,

Starting point is 00:10:24 core inflation, the annual rate of core inflation in the June report was a 20-month low at 4.8%. And more importantly, inflation is made up of hundreds of difference of products, basically it is basket. But a third of inflation, the CPI measure, is housing-related. So it's rents on apartments, but it's also what homeowners think they could rent their house for. And they survey. They survey every six months and they ask a bunch of homeowners, what do you think you could rent your house for? And then they compare that to the prior survey. Well, home prices in the 20 city Schiller index is down or deflat over the past year. Home prices are not appreciating as much as they were. And so now eventually with the real, really big lag, homeowners suddenly realize, well, maybe I can't rent my home for 20% more than I thought I could two years ago. And so that's starting to flow through the inflation numbers. So there is a lag. Inflation's coming down. Hopefully, that will allow central banks to pause. And then once they paused, because interest rates, longer term interest rates are

Starting point is 00:11:38 a function of expectations for shorter term rates. And so if investors believe bond market participants, that shorter term rates will be higher, then that pushes up longer term rates. Once the Fed pauses or other central banks indicate they're going to pause, that can bring down the real rate of interest that's baked into, for example, the yield on the 10-year government bonds. Now there's other factors there.

Starting point is 00:12:04 Inflation expectations are built in those interest rates. And then surprisingly, and this is what I find incredibly fascinating, there's something within interest rates called the term premium. So it's additional compensation that bond investors demand for uncertainty regarding inflation and uncertainty regarding central bank actions. And that term premium at times has been one to two percent. So above what expectations were for short-term interest rates and above what inflation expectations were, there was another one to two percent just because of uncertainty, whether the Fed could pull it off. Well, the term premium has been zero for a number of years now, which indicates high confidence

Starting point is 00:12:47 in the Federal Reserve, despite the embarrassment of the 9% inflation. So we'll see they do the best, but their reputations are on the line, but like any investor, they don't really know what's going to happen. Despite having hundreds of PhDs on their staff, inflation still got away from them. Approaching the summer of 2022, when the rate hikes really started to pick up really quickly. And you've mentioned on your show previously that it generally takes 18 months for the changes and interest rates for that impact to sort of flow through the economy. Can you talk about that and how that works and how you're viewing that today now that we're in

Starting point is 00:13:27 July 2023? So it just works in the fact that people or corporations that want to borrow money to fund projects, if interest rates are higher, the hurdle rate that they need, the potential return of a particular capital project is higher. And so there could be less investment in the economy, which can slow the economy. The same time, consumers are potentially less willing to go out and buy a car because with the higher interest rates, the payment so much higher. And so just, you know, as rates flow through, people are less willing to borrow. And much of the economy is based on borrowing because people accelerate that future purchasing power into the president. They go out and buy stuff or they

Starting point is 00:14:15 invest in things. And so, but there is a lag as people in, as I mentioned, they've had savings in place and many have been able to lock in lower rates. So the lag potentially is even longer now because people don't need to refinance. Look at the home market. One reason home prices haven't cratered is due to a lack of supply because people have locked in, you know, in our case, we have a 3% mortgage interest rate on our mortgage in Tucson and we're not going to move because we don't want to give up our 3% mortgage. And that's played out across the economy. And so there definitely is a lag, but that doesn't mean we have to have a recession. And even if we do, do have a recession because there isn't really the excesses that we saw with the great financial

Starting point is 00:15:02 crisis in terms of debt bubbles. Households are in better shape. Corporations are in better shape. It could be a very, very mild recession, and in markets are forward-looking and may in fact already be looking through the recession, given all their excitement with AI and other developments. I believe you mentioned that the temperature of the market in the economy is around average. So we're not in a sort of euphoric phase. We're not in a depression type phase. What are the main indicators you're sort of looking at to gauge the temperature of the market, equity market specifically?

Starting point is 00:15:41 So we look at in terms of earnings growth. We're looking at, you know, what are expectations for corporate earnings? And if we look at that, corporate earnings expectations actually have been increasing for the last six months. And this is globally. So analysts are saying basically raising what they think earnings will be over the next year. This is sort of a bottom up analysis. And then we combine it into, you know, look at it on an index level. So that's one thing.

Starting point is 00:16:08 I've mentioned the PMI data that, you know, that hasn't fallen off a cliff. Now, other things that we look at is just as I mentioned, that level of fear and greed with markets. And so when we combine all the things that we look at, yeah, we would say that we're sort of low neutral. Like this is not a horrible environment. Now, we're monitoring to see if the recession comes, but we don't think it'll be very deep. At the same time, we've been monitoring inflation. And inflation and core inflation, as I mentioned, the shelter component is coming down. And there's, aside from the shelter component, there are many areas that didn't have even seen increases. And so on the economic front, much of it is good news, so not fearful news.

Starting point is 00:16:48 is. And so we consider that a good thing. One of the things I think a lot of investors maybe underappreciate or maybe overlook is the role that international stocks can play in a portfolio. And you've been pretty vocal about, you know, the important role that international stocks can play in a portfolio. And one of the big reasons for that is just the difference in the valuations between the two different markets, you know, in many markets, you're able to get essentially more bank for your bucks. Can you talk about the role that international stocks can play in a portfolio? And then I'm also curious how you weight the two. So we are very much in favor understanding what's driving markets.

Starting point is 00:17:32 And so part of that is the equity market. And so if we take the U.S. stock market, for example, it's returned 12.2 percent annualized over the past decade. But we can deconstruct that, break it down into the drivers. So the dividend yield, the cash flow, the percentage of profits or the profits that companies are paying to shareholders, that contributed 1.9 percentage points to that 12% return. The earnings growth grew at 6.9. So corporate earnings grew at 6.9. So these things are additive. So we can add the dividend yield plus the earnings growth. And then we care about what are investors paying for that cash flow in earnings. And if we look at the P.E. of the U.S. market over the past decade. So 10 years ago, the price to earnings ratio was 16.6. Now it's 23.6.

Starting point is 00:18:21 So close to four percentage points of that 12% return was because investors bid up stocks and are willing to pay more for stocks. So combined, and if we back out that 4%, I mean, the U.S. stock market would be closer to 8%. Now, if we contrasts that with the world, so developed market outside of the U.S., the dividend yield contributed 3.1%. And so dividend yields outside the U.S. are twice as high as the U.S. The earnings growth slower. So it grew up 5.2% versus 6.9% for U.S. market. But wasn't a tail win for non-U.S. stocks was valuations. Valuations actually got a little cheaper. It went from 15.8 PE a decade ago to 15.4 today. And so that cost 30 basis points of return. And then we've had a decade where the U.S. dollar has strengthened about 20%

Starting point is 00:19:16 versus a basket, basically the rest of the world. And so that was a two and a quarter percent drag per year because the dollar got stronger. And we care about why things happen. And when we say, why did non-U.S. lag the U.S. stock market by seven percentage points over the past year? 2% was because of currency, the strengthening dollar. A little bit was because earnings growth were a little slower. The dividend yield was higher for non-U.S., so that should have helped. But it was the valuation increase for U.S. stocks was really a huge driver, close to four percentage points of additional return because stocks got more expensive going forward.

Starting point is 00:19:59 And so that's backward looking. We care about, where are we today? Well, we're sitting here with U.S. dividends, as I mentioned, half as much as non-U.S. So one and a half percent dividend in the U.S.S., 3 percent, 3.2 percent for non-U.S. If we assume that earnings growth has been a same, in the decade ahead, it will be the same as it's been in the previous decade, we basically get a very similar return with non-U.S. growing a little slower at 5 percent earnings growth. With U.S. growing, their earnings at 7 percent, often due to buy back.

Starting point is 00:20:33 and more technology. But that gives you a return of roughly 8.5% for each. And so I'm overweight non-U.S. in my portfolio or adaptive model portfolio examples are because when we look at expected returns, they're similar to the U.S. But if we actually had the dollar headwin that we've had with a dollar weakened a little bit, that actually helps non-U.S. stocks. Because many foreign corporations, borrow in U.S. dollars. And so if you have a period where the dollar is strengthening, it's more expensive for them to pay the interest on that debt in the local currency or to service it. And so we actually see a negative impact not only just because of the pure currency impact, but just from an economic standpoint, as companies struggle to service their dollar debt,

Starting point is 00:21:26 their foreign companies. And so if we actually saw the currency weekend, that could potentially to lead non-US to outperform U.S. over the next decade. And if we see a repricing of non-U.S. stocks where they get closer to what U.S. are paying for, that would be, you would see a positive valuation adjustment. So when we look at the overall global stock market, it's right currently, it's 62% U.S. stocks, 48% or 38% non-U.S. stocks. And so at a minimum, if you're just going to be neutral to the market, you should have close to 40% of your stock exposure in non-U.S. stocks.

Starting point is 00:22:01 If you don't, then you're saying you're probably more home country biased and believe the U.S. will outperform, which is fine. We can believe that. We just have to understand why. Is it because earnings are going to grow even faster? But it's understanding the drivers so that when we talk about being grounded in investment conditions, we don't want to invest blindly. We want to know what has to happen for our particular investment thesis to work out.

Starting point is 00:22:28 And then if that includes overweighting U.S. stocks, then we ought to be very clear that we think the U.S. will grow their earnings much faster than the rest of the world and the other aspects that I discussed. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord. and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year, bringing together activists, technologists, journalists, investors, and builders from all over the

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Starting point is 00:27:04 relative to other countries or other drivers. I'm curious whether the role the U.S. plays in being the reserve currency, whether that plays a factor in, you know, considering this U.S. first non-U.S. allocation and determining the weighting, or does the currency reserve status not really matter at all in your mind? Well, nobody elected the U.S. to have the reserve currency. That's a bottom-up phenomenon. So most trade is still conducted in U.S. dollars. I mentioned the Eurodollar, the sheer amount of borrowing that is done in U.S. dollar. Nobody is telling these corporations overseas to borrow money in U.S. dollars. In fact, if I was an overseas corporation or at least definitely a household,

Starting point is 00:27:45 I would not be borrowing. My mortgage is not in a foreign currency. It's in the currency that I'm earning money. But for whatever reason, because of attractive interest rates, businesses borrow in U.S. dollars. And as I mentioned, that does have an impact because when economies are slowing, there's often a flight to quality, which tends to be to the U.S. because of the reserve currency status. But it isn't anything special. It's just a bottom of decision person by person, business by business, how trades conducted. Now, back in the 40s, I mean, there were obviously some structural things that contributed to the U.S. dollar, being the reserve currency. But it's sort of something that's going on in the background, other than to recognize that over the past decade,

Starting point is 00:28:30 the dollar got stronger and that hurt non-U.S. returns. I would just be content if it just held its own. And if we look at where the dollar has been, so the U.S. dollar, the long-term trend is actually for a weaker dollar. So the U.S. dollar peaked relative to non-dollar currencies. This is the dollar index, the Dixie essentially, 167 in 1985. So super, super strong dollar. It hit 133 in 2002. And then the most recent high was last October at 123. And so even though the dollar strengthened 20 percent, it's not getting to where it was back in the 80s or even the early 2000. Now we're at 115. And so over time, and as some trade moves away from the dollar, and people realize that, wow, maybe I would rather invest in Japan where the stocks are much,

Starting point is 00:29:22 much cheaper or some other countries. And so you get capital flows into non-dollar assets, which can put some downward pressure on the dollar. So the dollar does influence it, but the reserve currency status in and of itself, it's a bottom up. phenomena with flows of dollars and non-dollar going all over the world. But the U.S. has some advantages. It's the deepest market. It's a country where we run massive trade deficits. And if you run a trade deficit, that means there's dollars going all over the world that people can use and spend and borrow from. And so these are sort of the underlying macro mechanisms, but it isn't top-down decisions. It's bottom up. And it'll be a while before the U.S. dollar is not a reserve currency.

Starting point is 00:30:07 but that doesn't mean the dollar can't weaken over time consistent with its long-term trend, and that would be beneficial to non-dollar assets, including international stocks. And since we're talking about the drivers of returns, you've spoken extensively about the importance of diversification, and many investors out there are heavily concentrated in the U.S. When looking at the S&P 500 to use as an example, we've seen the top companies, specifically the top seven really drive the returns year to date at least. We've seen as in May 2023, the top seven companies essentially kind of for all of the year to date returns. And then when I take a look at what's in the S&P 500 at the time of this recording, the top seven companies now comprise of around 28% of the index.

Starting point is 00:30:59 I'm curious, how do you think about, you know, the larger concentration with within just a select few number of companies. And if there was a point where these companies became so large that further diversification within a portfolio was prudent. Well, I think further diversification in U.S. stock portfolio is prudent now. And so if we look at, you know, going back to the drivers of that analysis, those big cap companies are growth companies. The U.S. growth index returned 15.5% annualized over the past decade. It outperform. It basically perform double the U.S. value index, which returned 8.3%. And if we look at why, sure, earnings growth growth growth stocks, 7.7% versus 4.6% per value. But the biggest component

Starting point is 00:31:51 is 6.5% annual return contribution because U.S. growth stocks got more expensive. The PE a decade ago was 19.8. Today, it's 37.2. So think about that. that 6.5% of that 50% return is just because investors are bidding up those big cap stocks, as you mentioned. In that environment, I think it's appropriate to have some small cap value exposure, which surprisingly actually had higher earnings growth. And I was shocked when I saw this in our data of over 9% over the past decade. But its valuation went from a PE of 19.6 down to 14.2. So even to just add whatever, 10, 15% of U.S. stock allocation to small cap value, you're basically getting a higher yield of 2.5%. Higher, let's say, you know, it's unlikely, I think small

Starting point is 00:32:47 cap value return have earnings worth of 9%. But the historic five-year average earnings growth for small-cap value is 6%. So you have 2.5% dividend yield and 6% earnings growth. That's an 8.5% 8.5% return for small cap value if they don't get more expensive. If we get a more basically closer to the average, the average PE for small cap value over time is over 20. We're at 14.2. So there is that potential boost if small cap value got more expensive. And that's why diversification makes sense. But understanding sort of where we are, the market temperatures we talked about. What is the dividend yield for the different areas of the market? What is the, potential earnings worth. What are analysts expecting and what are current valuations? Because that's

Starting point is 00:33:37 the math that drives investing and that's what we need to be well schooled in. Thank you for expanding on that. That's a very useful framework to think about how investors can be more prudent in the way they're putting together a portfolio. I want to transition here to talk a little bit about AI. seems to be what so many people are focused on in 2023, you know, especially looking at the popularity and the rise of chat GPT. And then the meteoric rise in the stock price of Nvidia, which is up over 300% from its October 2022 lows. And I just recently saw that Elon Musk during his Q2 earnings call, he mentioned that Tesla's demand for Nvidia chips is so high that Nvidia simply can't keep up with that demand and Tesla essentially is going to purchase whatever hardware that Invadia can deliver to them. For investors that want exposure to AI because of the obvious enormous potential, but they also don't want to get caught up in a bubble, essentially. How do you think about getting exposure to it? Well, the primary way, and I recently did an episode on AI, and it's important,

Starting point is 00:34:50 this is meaningful. And it's only been six months, seven months, eight months ago since chat, GPT comes out. But to invest in it, first off, invest in yourself, use it. It's eye-opening. When I do a search right now, if it's not something recent, but if I just want to learn something or understand something, I'll ask chat GPT because I don't have to see ads, at least currently, and I pay for the premium version. And the information is distilled. And so when you talk about AI, there are business models that are going to be positively impacted and negatively impacted. Google, which is one of those top seven companies, they call to code red because of the potential or the threat of AI to their advertising business because people suddenly aren't searching Google and they're just

Starting point is 00:35:40 searching AI to get information in a clear fashion. And not that there's not issues with AI, but I'm saying, you know, as I see it, it can fundamentally change the creation for particularly professionals and just something like chat GPT, which means that they become more productive. Software developers, we have a software developer that's a member of our community. And he said chat GPT has doubled his productivity. It's writing documentation for his code. It's putting scaffolding in place as he builds out code. Now, he has to monitor what it produces, but it's like this virtual assistant that has

Starting point is 00:36:18 doubled his productivity. If that goes through the economy, that boost earnings growth, which means to participate, if we just own the global stock market, we'll participate in AI. Now, if you go out and I say, I want to participate by buying Navidia, that's much more risky because when you purchase an individual stock, there's a price there and that price is based on the consensus of investors, all the buyers and sellers say that Navidia should be worth 300% more than it was a, you know, you know, year ago, which means for that stock to go up, Navidia has to do better than what everybody expects, the consensus. And that's why I generally prefer to invest in index funds, ETFs, occasionally an active

Starting point is 00:37:03 fund. But the reason why is I want a basket of securities. I don't want to be betting on whether something's going to do better than expected. But I have a basket of securities or an index funds, some will do better, some will do worse and disappoint, but in aggregate, the performance will be driven by those drivers I've already discussed, the dividend yields, the earnings growth, the change in valuations. And AI will proliferate throughout the economy, and that will benefit all stocks, both U.S. and non-U.S. over time. And so that would be by the Vanguard Total World Stock Index Fund, ETF, VT, and you can participate in AI that way, and you already have. If you owned it, you benefited with Navidia making up roughly three to five percent of that particular ETF.

Starting point is 00:37:53 Yeah, it makes sense. And a lot of people are talking about how some people are even sort of afraid where, you know, the top companies might, you know, extract a lot of the benefit from AI and, you know, having a lot of the data and having a lot of the technology behind it. You're absolutely right. Like, this is not a technology where little tiny startups are benefiting because of the huge cost it takes to train these large language models, it's incredibly expensive. And so it is the bigger cap companies, at least for now, that are benefiting.

Starting point is 00:38:26 And again, instead of trying to pick out which particular one, if you just own a size weighted or a capitalization weighted index fund, you're participating. And now there's other ways to do it. But that would be the simplest and most direct and just accept the fact that this potentially could be life-changing, at least grow the economy faster because of greater productivity for workers if they're suddenly able to produce twice as much work or output than they did before. And there's some debate about the long-term effects of AI. One of which I've been really pondering is how it may impact our current financial system.

Starting point is 00:39:05 For example, if AI pushes down the costs of many goods and services, then that would lead to deflation all else equal. And since we live in an inflationary financial system, then in my mind, currency debasement would be something that's necessary to offset that deflation. And one example I sort of think of is just currently I pay an accountant a good sum of money to go and do my taxes for me each year. And maybe eventually there's an AI software that can do it for a fraction of the cost for me and not have me, you know, drive over to an office a few times. Every single. single year and sign all these papers and whatnot. So I'm curious if you've considered the long-term impacts of AI on our financial system overall. Well, first off, there basically is, I mean,

Starting point is 00:39:53 there's turbotax, right? So you don't have to go to your accountant now. And so why do we, why do I pay my accountant? One, I trust him and the taxes are complicated. And so AI is, in my view, not going to replace highly trained professionals who are creative that are trustworthy. You're going to replace less creative professionals that are just turning out things that AI could turn out. Personal finance articles, for example, or investing articles. There's going to be so much content out there, average content. Why? Because AI models are trained on the average that's out there. And so they are by definition somewhat average in terms of their creativity. But the As you mentioned, the economy is naturally inflationary because the money supply keeps increasing

Starting point is 00:40:43 because of the banking system. When banks make loans, what does a bank do? It puts money in a checking account, if you're a borrower. It doesn't have to go find that money through the magic of accounting. It just puts a loan receivable on its balance sheet. And so there's these inflationary pressures just as the economy grows and as households and businesses borrow more money. And then if you got the government running a budget deficit and the central banks going out and buying bonds, essentially monetizing the debt, that in and of itself creates money, as we saw, going the M2, going from $15 trillion to over $20 trillion. So that you have this inflationary push.

Starting point is 00:41:28 But then, as you point out, there's deflation. And there's a natural deflation aspect of things getting cheaper or more efficient and more productive. And those work together. And generally, as I see it, and it could be disinflationary, which is sort of a combination of two. It means inflation rates are not as high as they would be because of the deflationary impact of AI and other technologies.

Starting point is 00:41:53 But because the system itself is built on an ongoing increase in the money supply, that's inflationary. So ideally, we'll just have lower inflation than we would, which is actually good news because we've had 20 years of low inflation up until post-pandemic. And we've already discussed why. It was the money creation combined with the capacity constraints, having shut down the economy, just taking along to start producing goods and services in the supply chain again. It's quite an interesting topic. And it's one I'm super interested to watch play out. over the long run, over the many years to come. And I've also heard debate around GDP being, say, an outdated metric or for lack of a better term or something like misleading, maybe.

Starting point is 00:42:41 I pulled this idea from Jeff Booth's great book, The Price of Tomorrow. And to help explain what I mean by this, you can think about how much value Apple products provide to people. You think about the Mac, the iPhone. So many people in the U.S. I know are going to purchase Apple products no matter what, because they add so much value to their lives. Or you can think about, you know, like we've already talked about, how technology and AI, its role is to be deflationary in a way. And its role is to, and you think about entrepreneurs, too, their job is to make things better, faster, cheaper, and increase the wealth of society through that. So I think that kind of conflates with the idea of we need to have continuously increasing GDP, whereas AI is sort of,

Starting point is 00:43:28 of fighting that in a way. I love to get your take on whether you think GDP is maybe an outdated metric or is this the wrong way of thinking about it? First off, let's define GDP. So gross domestic product is the monetary value of the goods and surfaces produced. So it's the output. What is produced? That's all it is. That's what's measured. What is the dollar value of what's produced? Now, when the government estimates what that is, you can estimate what's produced based on what people spent on goods and services, but you can also base it on the income received. And GDP grows because the population is increasing or that population of workers is producing more with less.

Starting point is 00:44:14 They're getting more efficient and more productive. So if you go back to that software developer, that developer because of AI is able to produce more and that leads to greater productivity and that would grow GDP if he's actually creating more software. Now, on the other side, there's people have to buy the stuff if they're not going to produce it. And I think that's where you're getting at it. If there's a surplus of things and where I don't think GDP is where there's a flaw, well, we're going to call it a flaw. It's just GDP just measures the dollar value of what's produced. It doesn't measure well-being. It doesn't measure happiness.

Starting point is 00:44:54 And there was a Scottish philosopher James Maitland that had a great example. He wrote about this around 1800. And he distinguished what he basically called wealth, which was the exchange value, the monetary value of things, what's basically being measured in GDP. What's the monetary value of what's produced? But then he talked about abundance. Abundance is things that aren't necessarily scarce. They're useful. They're delightful, but there's not a scarcity of it.

Starting point is 00:45:22 The GDP is basically based on scarcity, demand and supply. But the example we gave, if somebody realized if you just ate one kernel of corn, that your life expectancy could increase by 100 years, the impact of well-being would be amazing. But what would be the price impact of corn? It probably wouldn't change that much because it's so abundant. And so we can't, GDP measures what's produced. It doesn't measure abundance and it doesn't measure well-being. And we know that because there are areas of the world that have as high a life expectancy as the U.S.

Starting point is 00:45:58 The people are just as happy, but that country's GDP per person is 20% of what the U.S. is. So just producing more doesn't lead to well-being and happiness. And so I'm fine with how GDP is measured. The part that worries me in a little bit that we don't capture adequately in that metric is the cost of producing. In other words, we measure the value it's produced, but if, you know, what's the cost to the planet? If we're producing in developed countries at a level that if the entire world produced at the

Starting point is 00:46:34 same amount of cement and steel and clothing, it would take three to four as many planets to do that. And so maybe technology can solve that. but we ought to be measuring as part of our output calculation, what is the cost to the natural system, the ability to produce as a world, all these things that we produce. Very interesting. A lot to take in and sort of think on there. I wanted to transition here to chat about crowdfunding platforms. We've chatted about a number of these sort of platforms on the show here. And I think it'd be really beneficial to our listeners to chat about some of the things you

Starting point is 00:47:14 should think through when talking about these sort of platforms and considering maybe what sort of role they play in a portfolio as well. So definitely want to get your take on what your thoughts are on how reliable some of these platforms can be and how we might utilize them in a portfolio. Of course, many people are probably going to think of all of the cryptocurrency platforms specifically as they've sort of been the poster child of investment platforms that have gone bust and bankrupt. And I'm sure many of our listeners are aware of that sort of risk. I'd like to get focused more in this discussion on platforms that are more non-cryptocurrency. You can think about art, real estate, private debt. What's your take on the role, these sort of crowdfunding methods,

Starting point is 00:47:58 how they play in a portfolio? Well, they selectively can be beneficial because, because they can give us access to investments that we typically aren't available in the public market. So it could be a private real estate transaction. It could be a piece of art. It could be a real estate backed loan. The key, I mean, a platform basically is bringing in investors and then it is sourcing investments that those investors can invest in. Where I don't think investors appreciate as much is what is the structure of that investment. And so, We recently did an episode on Peer Street. So Peer Street was a crowdfunding platform that investors could come in and basically back debt that was collateralized by real estate. And so these were typically the borrowers were home flippers or somebody remodeling. So they're looking for, these are called hard money loans, basically looking for some short term financing to fix up a house, fix up an apartment, and either sell it or once it's fixed up, they have renters in to go get more traditional type more. mortgage. So this start in 2013, they've been around, but what most people didn't realize,

Starting point is 00:49:10 and frankly, I didn't realize in the first couple years I invested. At one point, I had 2% of my net worth on Pierce Street. And then an attorney that's a member of our plus member community pointed out that look at the structure that you're investing, you're not investing in the loan, you don't have the collateral, you're investing in a mortgage dependent note. You have an unsecured liability with Pierce Street. And so if Pierce Street goes bankrupt, you're going to be in line with all the other unsecured creditors. You don't get the real estate to go sell. That's on the other side of the platform. You're in this unsecured debt in a venture capital back company that doesn't provide any transparency. And so when we invest on a crowdfunding platform, we don't get transparency.

Starting point is 00:49:55 I'm blockfi, cryptocurrency lender. We have no transparency as to their financial situation. And it turns out they didn't do so well and they went bankrupt. And so then you have all these unsecured creditors. Pierce Street went bankrupt a month ago. And so after, and I warned about this back in early 2018 and I let my loans run off because of the risk of having an unsecured liability. And so when it comes to crowdfunding platforms, there's way to get around this. So more often than not now, the platforms will set up either a special purpose vehicle.

Starting point is 00:50:31 And so that particular investment is shielded from the corporate assets if the corporation goes bankrupt and somebody else will take over. Or it could be a registered fund structure. So it's like a private mutual fund effectively. And so those assets are custodied separate from the crowdfunding platform's own assets. Or it could be actually registered security. So we think about Masterworks and Art. Every piece of art sold on Masterworks is its own secure. outright, custody. And so you're not exposed to a corporate entity where you don't have any

Starting point is 00:51:07 transparency on their viability. And most of these crowdfunding platforms are still early stage. And so they're very dependent on venture capital backing. And that's what happened with Pierce Street. The mortgage market collapsed as interest rates went up. And so they didn't have enough money to operate. And they were getting money from venture capital firms, which have been much more reticent to invest in these companies. And so you're seeing it sort of their capital starved. And if these businesses don't have a profitable business model, then they're going under. And that's what happened with Pears Street. But the key then is, you know, what is the structure of the investment you're purchasing on a platform? And with the cryptocurrency, it wasn't separate. They

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Starting point is 00:55:19 All right. Back to the show. One of the terms you mentioned that sort of struck me and took me by surprise was the term blitzscaling, essentially the way I interpret it as these companies are VC-backed and they have to essentially grow, grow, grow, and when they aren't growing as investors wanted them to, then eventually they just could get shut down and go bankrupt. Can you talk more about that? That's basically what venture capitalists do in today's environment. They, or at least over the past 10 years, they're growing for market share. And so the typical private company will stay private for 12, 13 years.

Starting point is 00:55:59 Even when they go public, they still haven't figured out a profitable business model because it's almost like a Ponzi scheme. So they build up these companies, they invest money. And then right before they go public, they'll, let's say it's an advertise personal finance website that makes money from affiliate deals if somebody buys a credit card or whatever. They just advertise like crazy, running a deficit, losing money but growing market share, and then the thing goes public, and then the company has to figure out a profitable business model, and more often than not, they don't, and then the share of prices crash.

Starting point is 00:56:36 That's what blitzscaling is. It's this process that we're going to do anything it takes to build market share, and then eventually either another private company will buy it at a higher valuation or they'll go public. And unfortunately, the public suffers from that. Well, the public benefits, like Uber for many years, it was super cheap to take an Uber or a Lyft because it was effectively being subsidized by venture capitalists. Now that Uber, yeah, I believe Uber is public, they have to be profitable. And so they've had to raise prices and so it's not as cheap.

Starting point is 00:57:11 So from a from a use perspective, it can be very, very inexpensive for us because the prices don't affect an economic reality because they're being subsidized by venture capitalists and the limited partners that invest in in venture capital. And so, but from a, you know, buying an IPO is typically doesn't work out. If you're buying, well, you can get an early allocation and there's a bump, then that's great. then you can make money. But if you're a long-term investor in an IPO, the exception of it being a profitable investment or the idea that it'll be profitable, it's actually very rare. I mean, there's always the big, well, Google, that was popular. Amazon, that went well, most IPOs fall below whatever their stock price was, and even more

Starting point is 00:57:57 so today because they don't have profitable business models when they go public and they have to figure it out on the fly. I can't help us think of this Howard Marks calls it the C change. Interest rates aren't at zero anymore. Now they're at, call it 5% or whatever. And I just think about, you know, is the case of Peer Street where this VC funding company goes bankrupt? Do you see this sort of these one-off situations where, you know, a VC funding company just happens to go under? Or is this something where we're going to start to see it maybe pick up and be more of a

Starting point is 00:58:33 trend over the next few years with higher interest rates? Oh, I think you'll see more of a trend. There are 16,000 private companies that are venture capital backed. And the competition for capital is ever more intense. The amount of VC-funded companies in the past year has gone, like the actual capital invested, fell 50%. And so in some ways, it's good because suddenly these companies realize, oh, we actually We have to figure out how to make money on our own without being subsidized by venture capitalists.

Starting point is 00:59:05 But many won't, so you'll see more close. But I mean, these are, they're small companies in many regards. So it's not like it's going to crater the economy. But if you are invested in venture capital, the returns will, there's certainly going to be lower than they were because the difficulty to exit. They're not able to sell the private companies or the VC back companies at a premium. And the IPO market, at least currently is not. The public market is not really receptive to IPOs. And so that will cascade through the venture

Starting point is 00:59:36 capital space, which is why as investors, this is a very risky place for us to play. A lot of these crowdfunding platforms were to invest in startups. And the challenge is, in order to be a successful investor in private equities, so venture capital, in buyouts, you need dozens, if not hundreds of positions. So I have about 20% of my portfolio is in what we'll call private capital. capital. So it's it's leveraged buyout funds, it's venture capital, it's real assets, including real estate. So these are fund of funds run by my old advisory firm. And I was just looking at this the other day. So I'm in six of their funds. Just one of their funds is in 30 underlying limited partnerships and are invested in 500 different deals. And so the model is based on

Starting point is 01:00:23 most of them failing, but some doing very, very well. And so if you're investing in a startup up in a crowdfunding platform, the better way to do it is at least do it in a portfolio. Maybe they're offering a portfolio. Maybe the sponsors are screening it. But you can't do private equity investing, venture capital, and doing two or three deals because the numbers basically don't work against you because most won't work out. That's just the nature of venture capital. Very interesting.

Starting point is 01:00:49 And these crowdfunding platforms, I'd consider them more an alternative investment. It's something that's not in the traditional space that people, have traditionally parked their money in. Can you talk a bit about the role that alternative investments play in a portfolio? Well, the institutional investors, so endowments and foundations in pension plans are the largest participants in alternative investments. And the main reason where there's two, one is the expected returns are higher than the public market. Now, because these are set up as limited partnerships, you don't know for 10 or 12. years, whether it's going to work out. But if the consultant that's advising that endowment puts a

Starting point is 01:01:34 higher expect to return, so let's say they say private equity will return 10%, and the public market will return 7%. By allocating more to alternative investments, where, you know, if you're a board member, you're a volunteer, and if we can't figure out a way to get a higher return, I mean, there's that demand to do that. Otherwise, you've got to cut how much you're spending on scholarships and operating the university. So by investing in alternative investments, they have higher expect to return, and by the way, we don't know if it works out for another 10 years. As a board member, yeah, I'll do that because I don't have to make hard decisions now. Hopefully it'll work out when I'm not on the board 10 years from now. And so that's why you see

Starting point is 01:02:17 pension plans in Endowment and foundations move into alternative investments. Now, hopefully they will. I mentioned my investments in the private capital space. These are the top tier underlying funds. I mean, they have generated a 20% in return over the past decades. So it's been a very good period. But as individuals, it's hard to do because we can't invest in 100 different startups. So we're trying to select one. And I'm saying, don't select one or two. And so maybe you have to step aside. but there are crowdfunding platforms on the alternative investment space that have set up funds where you get more transparency. So I fund rise is a solid platform. I personally have invested in deals on Crowd Street. So there's some, the real estate's a little easier. I've mentioned art,

Starting point is 01:03:03 which, you know, art is more speculative because it isn't cash flow, but that's another option. But it's a little more challenging on the private capital space. One platform we reviewed on our premium podcast is Moonfair. So that seems better than most. most in terms of, but the idea is to want as much diversification as you can and you want some screening mechanism on those deals so that, and you get enough of them so that hopefully some of them will work out because most won't. And that's where you really, really need the diversification on the alternative investment side. So you do use some of these crowdfunding platforms. Yeah, I have one deal on Crowdstreet, mainly because, and this was one hotel property,

Starting point is 01:03:45 But my hometown, I grew up with Cincinnati. So it was a hotel across the Ohio River in Kentucky. It's a two or three year deal. It seemed very secure. And so I invested. And there are those opportunities. But generally, it's better to use a fund structure that there's multiple real estate deals in the fund or multiple private and venture capital deals in the fund.

Starting point is 01:04:10 And unfortunately, the fees are just high. And it's not easy to do. So most of mine, as I mentioned, is in the institutional funds that my investment, my former investment advisor runs, but they're institutional funds. And so they just made an exception for me because I helped start them, help start the private investment program with FECD advisors. It's the name of the firm. The fees definitely, I'd encourage people to definitely be very mindful of and be careful

Starting point is 01:04:38 of things that might be hidden and not something they show you at face value there. You've talked about things like timber. You mentioned art. You also mentioned people are going towards these alternative investments because they offer higher expected returns. So for something like timber or art, how do you wrap your head around the expected returns for something like that? Art's really challenging because it's like figuring out what's the correct value of

Starting point is 01:05:04 gold or the correct value of Bitcoin because there is no cash flow is pure speculation. And so when I invest in art, antiques is maybe 2% of my net worth, I'm just guessing, right? I mean, I've got a masterworks. I think I own three or four paintings. I don't know. I trust their, I mean, they sponsor a podcast. I trust their experts that they're picking paintings that they think will appreciate. But we don't know.

Starting point is 01:05:27 I mean, I sold one. I had a Monet. I mean, I heard a Monet. So I invested that when I had about a 9% in turn rate of return. But it's, I would prefer cash flow. So timber is a little different. And I have invested in, I mean, there are timber reits out there that you can invest in timber. And timber benefits because the trees keep growing.

Starting point is 01:05:46 But the problem with timber that makes it really challenging is the control and power that the mills have to choose from where they can buy. And so it's a challenging asset class. But there are a number of timber reets. I think plum trees, I think plum trees still around. But there's some timber reits that you, that investor can invest in timber. So it's a publicly traded vehicle that invest. in timber. I mean, there's agriculture that you can do on a private basis on something like farm together or acre traders. So there's private ways to do that, but you could also invest in

Starting point is 01:06:18 Gladstone, which is an ag reet. And so oftentimes there's a public vehicle that's publicly traded a security that we can get investments in alternative investments without having to go to a crowdfunding platform. Another example is a fund that I own is the Bering Corporate Investors Fund. This tickers MCI. This is a closed end fund and they lend money to private companies. So, it's what's sometimes called mezzanine funding. So they're involved to some extent in the management or they can be or they get a little bit of an equity kick in terms of if the company does well. But this is a closed and fund that's yielding close to 10%. But it's public. So if I'm tired of, if I think the environment for private lending is just getting too sketchy, then I can always sell,

Starting point is 01:07:06 in which most of the private opportunities, you don't really get a chance to sell once you're in. And you're seeing that in something like B-Reed, which is a real estate, a private real estate investment trust that Blackstone is sponsored. And it's done well performance-wise, but investors are trying to get out every quarter because I think it won't do us well going forward. But there's a gate. They only limit so many people out or so much funds each month. So bottom line, have to be careful with alternative investments. see if you can find a public alternative, but if you do the private side, make sure that it's very, very diversified with a number of different deals.

Starting point is 01:07:43 Thank you again for that. That was really, really informative. I wanted to transition to the last section of our outline here, which is talking about living a good life. And it's something that TIPs sort of, I feel like has talked more and more over the past couple of years. We recently partnered with William Green, who now hosts the Richer, Wiser, Happier Series. here on the feed here that everyone's listening on. And that series has been unbelievably popular

Starting point is 01:08:11 with our audience, as many have come to realize one way or another, that money is in everything. So I wanted to also mention that I think many people confuse investing with trying to chase returns and try and achieve the highest returns possible, outperform the market and brag to their neighbors that they picked the right investments. But really at the end of the day, we want to align. our investments with our financial goals. So can you talk about how you think about aligning your investments with the life that you want to live? So the term good life, or one of the first individuals who used that term was Aristotle, a Greek

Starting point is 01:08:52 philosopher that lives several hundred years BC, and he wrote about it in Nicaragian ethics. And he said, the good life was a life of virtue. And virtue back then was very different. So probably the way that we would think of virtue now was if you swing a tennis racket or you swing a hit at a baseball, it's hitting this sweet spot. It's really having the right amount at the right time in the right manner for the right reason. And it's often called the golden mean. And so when I think about the good life for me is just to have enough,

Starting point is 01:09:27 not to spend my time fretting about the past and worrying about. the future. And that can be very difficult to do with investing, but to realize that we have enough. And one of the terms I've used for years on our podcast is live like you're already retired. So I left my investment advisory firm 11 years ago. Didn't know what I was going to do. I called myself retired early, but reality is I needed to do something because 50 years is a long time to live off your investments. And my firm owed me money over the next seven years. I wasn't even sure they'd be around to do that. So I eventually launched money for the rest. rest of us and done some other things. It's taken me a while, but the whole idea is that I'm

Starting point is 01:10:06 living a life now that I don't want to retire from. And I have enough. And so my investments, I'm not a growth investor. I focus on making sure my net worth grows each year after my expenditures. And part of that comes from my business. Part of it comes from the yield or dividends, interest on my investments, but just maintain a sustainable life over the long term, but not focus so much in the future. The good life is just focusing on today and focusing on some of the things that I mentioned on this idea that an economy is more than GDP. It doesn't measure well-being and happiness. And the things that produce happiness are things you don't buy. It's health. Part of that you can buy. But friendships,

Starting point is 01:10:47 you can't buy a community. You can't buy friendships. You can't necessarily buy the opportunity to be creative. You have to do that on your own. And so those are the things that make up the good life. It's these basic goods that are oftentimes, they don't have a financial price. And maybe they're not scarce because it's work we have to do on our own. What are some of the other things or themes you've found in your experience, you know, starting your own thing and living a what I'll just call richer, wiser, and happier life, you know, outside of just thinking about the money? Well, one of the things that I, you know, each year I'll, I'll have three words that I sort

Starting point is 01:11:25 focus on. So if I'm meditating, walking, whatever. And one of my words this year is, well, one's breathe. So just just breathe. Like just take a deep breath. Don't overreact. Just breathe. The other is time.

Starting point is 01:11:37 And it's the idea that we have enough time and we spend so much time leaning into the future and we don't do things for their own sake. We do it because we want to get somewhere else. We can, we're having some dinner with some friends tonight. And we don't have to be there anywhere after the dinner. So we're not rushing to get dinner done so we can go somewhere else. or we're not using this dinner so we can get a good connection for something else. We're going to dinner to just be with our friends, enjoy the time, connect with them.

Starting point is 01:12:09 And that's with time, we can do that. We get into trouble when we're always trying to maximize their time or get maximum productivity or we're trying to get something done so we can get something else or we're doing something to achieve something else. We should spend more time just doing something because we enjoy it. And maybe it'll work out, but maybe it won't. we enjoy the process, writing a book. A lot of people write a book.

Starting point is 01:12:31 We don't write a book because you think it's going to sell a lot of copies. You can dream about it, but I've written a book and I publish it. And it turns out you write a book because you enjoy writing and because it's rare for them to become bestseller. So we do, it's just trying to do things for their own sake, not because we're trying to reach some goal or achieve something else. more time just being and doing for the intrinsic value of it. I really love that you mentioned, you know, just truly living in the present. You and I, we're both in the U.S., and I think it's really easy to learn about concepts like compounding, learn about concepts like opportunity costs, and then you log on social media

Starting point is 01:13:13 and see people posting their highlights and their wins. And then I've been to Europe a couple times and I've been to, I know there's different cultures within Europe. But one of the things I caught on to was like a lot of people that like, businesses aren't open as long in some countries over there and they're opening later in the day. And people are generally just more relaxed. They're enjoying life. And I think that's one thing that many people in the U.S. that maybe aren't aware of other cultures and the way other people maybe are more acquainted with, you know, just living in the present, just relaxing. And I love that you just mentioned that. Yeah, I mean, The Economist did a big profile on that a month or so ago

Starting point is 01:13:50 where they were comparing the U.S. economy and how we live and how we work so many hours to the Europe. And the reality is they've made that tradeoff. They don't work as much in Europe. They don't produce as much in Europe. Go back. What was our definition of GDP? It was the value of what's produced that's produced by people and it's produced by technology. And they don't produce as much in Europe per person because they take more time off to spend time with family and friends and go hang out at the cafe. And that's their choice. And I, I actually think that's wonderful. And we can do that in our own lives.

Starting point is 01:14:23 We do not have to work 60, 80 hours a week. And maybe you do it for a stretch, but seek to create a life where you don't have to do that because it's way more enjoyable. That's why I say live like you're already retired. How would you live if you were retired and figure out, well, how do I live that today while still working and contributing to society, but not overworking?

Starting point is 01:14:43 And I think another thing is that with money, you can always log into the account and then see the number. you see the progress. You can see the chart. And then, you know, with living in the present and enjoying time with, you know, people you enjoy spending time with, it's not as tangible. No, it's not, which is why I look at my net worth once a month and my portfolio once a month, partly because I have, I share my portfolio on our membership community. But, you know, if I didn't do that, I'm not sure. Maybe I would do it once a quarter. But I don't look at it every day. And because life's way more fun, not worrying about our investment.

Starting point is 01:15:18 every day, which is another advantage of investing in index funds and other more diversified investments because you don't have to worry about whether Navidia is going to hit its number this month or exceed its earnings estimates or miss it and plummet 30%. You do that if you're investing in individual stocks. You have to do that because you're trying, you're competing against the consensus in everyone out there. And I would rather invest in a way that I don't have to compete and win to be successful. That's why we spend so much time on the drive. I don't have to compete for dividend. I don't have to compete for earnings growth if I am in a diversified fund and index fund.

Starting point is 01:15:55 And so it's easier to invest that way when the performance drivers are not being successful as investor isn't depending on beating other people in winning. Wonderful, David, Walt. Thank you so much for joining me. This is a big pleasure for me to have you back on the show and hope to bring you back again in the future. It's always fun learning for me, that's for sure. and you always bring a new perspective that feels very fresh.

Starting point is 01:16:20 So please give the handoff to our audience on where they can learn more about you and any other resources you'd like to share, please. Sure. So our main website for our free podcast as well as we have some investment free investment guides is money for the rest of us.com. We also have a new website called Assetcamp.com, C-A-M-P-com. And that's really a place that has these tools to analyze stock indexes and index funds, the underlying drivers,

Starting point is 01:16:49 a lot of the mathematics that I shared in this episode come from Assetcamp.com. Awesome. Well, thank you so much again, David. Really, really appreciate it. Great. It's great to be here. Clay, thanks. Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by the Investors Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to the Investors. Investorspodcast.com. This show is for entertainment purposes only. Before making any decision

Starting point is 01:17:22 consult a professional, this show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

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