A (2:13)

You know, I can't take the smell of it. I'm Just high on life, Duncan. I don't need caffeine to help me. Let's be honest. I have like, three Diet Cokes a day, so I can't. I can't really talk about that.

B (2:22)

Okay, so. So caffeine. So you just don't like the. The mechanism for the.

A (2:27)

Yeah. Someone asked it tapped or bottled? I don't mind tap. I'm not. Come on.

B (2:32)

Okay, I. I could have seen you with a Fiji. A Fiji bottle every day, you know.

A (2:36)

No, no, no. Like Aquafina or something. I have bottled and tap, but I don't. I don't mind either one.

B (2:42)

Okay.

A (2:42)

It's fine.

B (2:43)

Nice.

A (2:43)

All right. I'm not a snob about water. Water's water. Let's do some questions.

B (2:47)

Okay. First today we got a question from Jim. Ben absolutely nailed it with his 11th November 6th column. And then they quote you. It also depends on the following. Do you have an investment plan in place? Do you have a reasonable asset allocation in place? And so then they go on to say, I have a 55% or their portfolio is 55% in growth ETFs, 20% in large cap value ETFs, 20% in medium small cap value ETFs, 2.5% in gold ETFs, and 2.5% in crypto ETFs, plus they have four years of expenses in Treasuries at all times. And then they ask, how can I confirm that this is reasonable?

A (3:29)

Okay, so this. This web. This blog post I did is actually something to do with. As the compound last week, remember, we got a few questions about tech. Someone was worried that we were in a tech bubble. Someone wanted to go all in on tech. So I said, listen, whatever decision you make, these are the things you have to think about. So, Jim, without knowing anything about you, I don't know your goals, I don't know your financial circumstances. This seems like a very reasonable asset allocation investment plan to me. I love the fact that he's got four years of expenses in Treasuries. Right. He's got that part down. I hope they're relatively short term in nature. You don't want to take a lot of duration risk of those spending needs.

B (4:00)

Yeah. You don't risk assets, right?

A (4:02)

Yeah, yeah, yeah. Not like you, psycho. Your risk assets are diversified between, let's see, market caps, investment style, growth and value, even sprinkled in some gold and crypto as a hedge. I don't hate it. My only quibble maybe would be I didn't hear any international Stocks that could be a potential. But we're splitting hairs here. The allocation seems good and the way that I always tell people to think about your asset allocation is you just need to take into account, I learned this in the cfa, your willingness, need and ability to take risk. So what kind of returns do you need to reach your required goals? What's your capacity to deal with gains and more importantly, losses? And what's your appetite for risk? Are you a nervous investor or are you comfortable with volatility? There are a lot of reasonable allocations and investment plans you could choose. The biggest question is, can you stick with this one? Jim, I say nicely done here. I. No notes. I think, I think, I think you did pretty good. Just is this a reasonable allocation that you can stick with and rebalance? Other than that, you're doing just fine. Well done.

B (5:00)

Yeah, they seem very well organized. What do you think about the even gold and bitcoin?

A (5:08)

I mean, that's like a hedge thing. The funny thing is a lot of people say, hey, put 2% of your portfolio in crypto or 2% in gold and you'll be fine. And most people, I don't think, do it. So the fact that he actually does this as a little smaller hedge, I don't mind. It just. Are you going to be able to rebalance into the pain if things go wrong? That's the thing.

B (5:26)

Yeah.

A (5:26)

Talking about having a small. A small piece of your portfolio that's in a highly volatile asset is not a bad thing if you rebalance around it. Right. Sell when it's up, buy when it's down.

B (5:36)

Crypto always gets me the worst more than any stocks. It's like it's back around 100k and I'm like, I can lose money in stocks. Why don't I just go ahead and stop while I'm ahead? But then as soon as it goes back up to like 110, I'll be like, ah, should have, should have bought more. I'm a diploma crypto, really.

A (5:52)

I do think the fear and the greed. I agree. The range is way bigger in bitcoin.

B (6:00)

Right.

A (6:01)

It's the kind of thing where, yeah, when it's up, it feels like, oh, my gosh, what an idiot. Of course. And when it's down, you go, oh, what an idiot. Of course.

B (6:07)

Right. And in a couple years, if it was 50,000 in a couple of years, I wouldn't be surprised. And if it was 500,000 in a couple of years, I wouldn't be surprised.

A (6:15)

No.

B (6:17)

It'S hard.

A (6:17)

I totally Agree. The range of outcomes is wide still.

B (6:20)

Yeah.

A (6:21)

All right, let's do another one.

B (6:22)

All right. Up next, we got a question from Sam. My parents have a new financial advisor who's always selling them on insurance products. The pitch sounds something like this. You pay a large premium, in their case, hundreds of thousands of dollars. Then in retirement, you get an income stream. Oh, and you don't have to worry about stock market volatility. It always sounded too good to be true. So I've been talking them out of this. Then I solve a thing with Kyle Busch and his wife suing an insurance company for what sounds like the exact same product my parents are looking at. Can you help me sort out what's going on here? Do these things ever make sense? Are they a scam? And for those that don't know, Kyle Busch is a. Is a famous NASCAR driver, like one of the, you know, most famous all time. And.

A (6:59)

Yeah, so I know you're an F1 guy. Are you also a NASCAR guy?

B (7:03)

A little bit. Like, I don't watch it nearly. Like, I watch every F1 race. I. I occasionally watch NASCAR and try to follow it, but.

A (7:09)

Okay, so throw his. Throw his tweet up here. So he did this tweet, and he also did a video with his wife where they, like, had their Sunday best on, and he talked about how they thought that they got scammed or misled or whatever you want to say. Right. And they. They, like. It's kind of a. Like a PSA saying, hey, be careful if you're. If you're thinking of these. So let's bring on one.

B (7:25)

And Ben, you don't nervous. Jonathan, who we're about to bring on, knows this, but. But he has, like a. He has a reputation for being, like, a tough guy and, like, speaking his mind. And so that's why this. It makes sense to people who follow nascar. But, like, he would. He would not go quietly, speak out.

A (7:39)

Not. Okay. Yeah, that's good. All right, so let's bring on Jonathan Novy from Ritholtz, Chicago.

B (7:43)

Hey, Jonathan.

C (7:44)

Hey, guys.

A (7:46)

Jonathan, how long have you worked with insurance products for now?

C (7:49)

I have worked with insurance products since the beginning of 2007. Started my career at an insurance company, broker, dealer. Learned pretty quickly that an insurance company is a terrible place to be a fiduciary, which is one of the things that is kind of a red flag in a situation like this. But I can talk a little bit more about that as we get.

A (8:08)

Yeah. So I'm sure you've come across stuff like this at first glance my initial read on this was it wasn't necessarily like they got sold a scam like a Ponzi scheme. It was more like whoever sold this to them made some promises that this product could not keep. Right. Whatever they thought they were getting, they didn't get and that's why they are angry. So what do you think? It seems more like this was. And it's funny, the person in the question used the word pitch and I think these things are made to be pitched. So maybe you could explain what exactly happened to them.

C (8:38)

Sure. So let's start specifically with the Kyle Busch thing. We did some research on that and shout out to our friends Mitch and Keith at Vanbridge who knew quite a bit about the specifics of this thing. So in the Kyle Busch and this is going to lead us to help Sam out with what to tell his parents not to do, which would be buy this stuff. But Kyle Busch case, specifically one the agent in the case had what you would call a decorated disciplinary history. And that's one of the things you can always find because that's public information. So the guy had some pockmarks, man.

A (9:12)

I'm surprised that his team didn't find this out before.

B (9:14)

By public you mean. You mean that if you just Google someone's name you'll like.

C (9:18)

Yeah. There's things like broker check with finra and you can see when people have disciplinary actions and stuff like that. That is all perfectly public information. So this guy had a history that was not great with the insurance industry. It comes with the worst incentives in financial services precisely because they pay especially in cases like this, these really large, it's known as heaped or upfront commissions. Without getting.

A (9:40)

Sorry, sorry to interrupt. It's not like you get a percentage of something over time. It's like whatever you get percentage, it's all paid up front.

C (9:48)

It can be. And there are ways to limit the, the, the size of those commissions that are paid out depending and it depends on product structure. And without getting into all that nerdy stuff, the specifics of this case are ugly.

B (10:02)

Well and so a lot of people watching are, are probably as clueless as me about this. When you say that someone puts a hundred grand into one of these products like what kind of commission is that? The, the person that sold them that getting, you know, most likely.

C (10:15)

So it all depends the in a first year commission environment if the entire thing is commissionable and they don't do things to these contracts to reduce those commissions, they could get paid up to 90 some percent of that it's a big number. And the insurance business that the reason a lot of these insurance contracts are sold is because they pay big commissions. When we talk about why the incentives are bad, that's why that doesn't mean that the products are necessarily bad and it doesn't mean that the carriers are scamming people. What it does often, and in this case for sure say, is that the advisor did everything he could to maximize his compensation and not be totally upfront and transparent with Kyle Busch and his wife.

A (11:05)

Right. So the idea was we put in a set amount of money in a certain amount of years we're going to get an annual income equal to X or range.

C (11:13)

All of that stuff is largely nonsense when you see those illustrations. And like they don't necessarily. These products you can invest in, they have things like indexed segments where you can say there's no downside but there's capped upside and all of that. The specific contracts in question here with Pacific Life is a fine insurance carrier. They're not any better or worse than anybody else. These contracts are notoriously complicated.

B (11:40)

My question is more why did they employ someone who had such a track record?

C (11:45)

So they didn't necessarily. We don't know if he was a captive agent with Pacific Life or he was an independent.

B (11:51)

Gotcha, gotcha.

A (11:52)

Just using their products, maybe.

B (11:54)

I see.

C (11:54)

So there definitely. There should have been better structural controls in place and compliance in place to prevent some of the things that went on here. Those things look like they slipped through the cracks. You should not be able to do what it looks like this agent did to them. That doesn't mean that this is a scam. It does mean that the sales practices here were super misleading. And I feel for the Bushes in this case. We see this kind of stuff all the time. I would say the vast majority of the work we do on the insurance end for our clients here is, is helping people understand what they actually did and undoing stuff that they really don't need. We are proponents of the use of insurance products when it's reasonable and responsible. Insurance is just a tool that helps somebody accomplish something. It was utterly misused in a case like this. So, and like I said, we went through the details of it. There were things like non taxable exchanges after policies were issued, things called 1035 that happened during a surrender period. That is a massive red flag. And all that does is increase the time at which you can get a full surrender value on cash values. The Bushes got ripped off 100%. They got ripped off. But Like I said, it doesn't cross over into the scam territory.

A (13:23)

Right, right. They're just sold a bill of goods that they didn't get. And so I guess the question here is, like, what should this guy say to his parents who's having an advisor pitch them? Because these things are so complicated. For a DIY person who's just trying to help. Sam's probably not. He's probably not gonna understand how to explain these things or how to help his parents.

C (13:43)

So, Sam, I wanna speak directly to Sam. So, Sam, this is what you should do. You should go find the clip from the movie Minority Report. When Tom Cruise is talking to Agatha, and in the middle of them talking, she screams, run. She shows parents that clip. And your parents should run. So here's what's going on. If they're looking for retirement planning and things like that, largely we do not recommend the use of permanent insurance products for cash value accumulation and then distribution for retirement planning. Too many things can go wrong. Too many really razor thin assumptions have to come true in order for these things to work. They are very high cost. And when people commit to premium payments into contracts like this, this is the first thing people stop paying for when things go badly. Illustrations never work out the way you think they're going to. And insurance products are fantastic for the purpose of insurance. They're not great for cash accumulation and distribution, which is.

A (14:49)

Yeah, insurance is different than investing.

C (14:50)

That's exactly right. Insurance salespeople. And believe me, I was at an insurance company broker, dealer, so I remember the training classes they would put us through. Your managers teach you to use language that would lend someone to believe that you knew something about tax planning and estate planning. And they give you sections of the tax code that you can drop so you sound intelligent. They tell you to use words like investment grade. What on earth does that mean to someone? But it makes you sound intelligent, like you are someone who has a duty of care and look after them. But people should be really, really skeptical about working specifically with someone who leads with an insurance product.

A (15:37)

All right, hang on, Put a pin there. Let's do the next question because I think I like the retirement angle. So let's do this one too.

B (15:42)

One thing I was just going to throw in, Ben. I was reading Kyle Busch's Wikipedia and there's a Grand Rapids connection. It says, in 2006, Bush established the Kyle Busch foundation after visiting St. John's Home in Grand Rapids, Michigan. Oh, and it's a foundation for underprivileged children.

A (15:59)

Good for him.

B (16:00)

Yeah. All right, so up next, kind of a continuation of. This is a question from Ryan. I spoke with an advisor a while back who brought up some insurance products they were trying to sell. They talked about withdrawals, specifically the sequencing of withdrawals during potential market corrections in retirement, which wasn't something I'd really thought much about before. When you're building a portfolio for someone, how do you think about structuring it for withdrawals instead of just accumulation? Do you ever incorporate insurance products that provide guaranteed cash flows after a set period, or do you prefer to manage withdrawals strictly through investment allocation? The insurance thing feels a little scammy to me and seems like something you can do through normal portfolio construction. I already have standard term life, a standard term life policy to protect my family. It feels like maybe a good, a good thing to just keep in mind with this is if you're having to ask if something is a scam or if it sounds scammy, like maybe be weird sometimes.

A (16:55)

Sometimes it sounds too good to be true and like it's a good point in sequence of return risk, that is a big thing people have to worry about. Like, if you don't want to be selling stocks or risk assets into a bear market at the outside of your retirement years, that's why you want something on the safer side. The question here is, do you want that something on the safer side to be insurance? We actually have a local advisor here in West Michigan who is on TV all the time with commercials and he talks about this thing and his thing he preaches is always, you can get the income from these insurance products and forget about stock market volatility. That. Jonathan, to your point that that sales pitch sounds amazing. Wait, I don't have to worry about the stock market volatility in retirement? Oh, my gosh, yes.

C (17:27)

Sign me up in this question from Ryan. So annuities are insurance products and it sounds like what they're being pitched are annuities. There's a lot of different kinds of annuities. And just like with life insurance products, the problem with them is not the products themselves, it's the incentive structures behind the sale.

A (17:46)

The idea behind an annuity, like you give this lump sum and they pay you back out in income at a certain period of time. So you don't have to. Again, that that is true. You don't have to worry about the fluctuations. There's no one. There's no inflation kick or anything like that. So that, that's hard, but still. So for people who are on a set amount of income like or money, it can actually be helpful. They're great in theory.

C (18:05)

Annuities.

B (18:05)

Well, to my point, no one knows what these things are though. Like someone in the chat just asked if I break my neck, back or a bunch of other things, can I use life insurance? I don't even know what it does. This is like no one understands exactly what these products even are, what they're for. You know, that's part of it.

C (18:19)

So that person, if they get injured, they're going to want disability insurance, which they probably should have through an employer. But in this situation itself, let's talk about annuities. Like every financial transaction, there are trade offs involved and there are levers you can pull to change your outcomes with an annuity, what you are trading. And this is simplifying it a little bit because there's lots of different kinds of annuities. There's variable annuities and indexed annuities. There's annuities with withdrawal or income benefits. I generally default to single premium immediate annuities. SPIAs. What you trade is you trade liquidity for longevity risk, for taking care of longevity risk. You take a lump sum of money. Insurance company agrees to pay you back out your own money to start with, but a bigger percentage of it than you might be comfortable taking on your own over time. And then if that money runs out, they are on the hook to pay you X amount of money.

A (19:16)

Right. You live to 100. I beat them. I beat the insurance industry, right?

B (19:19)

Yeah.

C (19:19)

Congratulations. So like as an example, one of our other advisors here was working with a couple who are in their 70s and they were very healthy and they had longevity in their family. They were able to take a percentage of their bond allocation which they were earning maybe 4.5% on by a joint and survivor immediate annuity. Espia get paid 8%. Now it's 8% of their own money. So they're getting their own money back first. But you compare the 4.5% they might get on the bond portfolio, now they're getting 8% on part of their bond portfolio and they'll get that the rest of their life. Now that takes the pressure off the balance of their assets to deliver an income to them.

A (20:03)

That's peace of mind, right?

C (20:04)

It's exactly what they bought. They wanted peace of mind. They were tired of market risk. And there's no single good way to accomplish retirement planning for every individual. The point is you have to figure out what motivates the individual. And if someone is really risk averse and they would prefer the trade off of certainty for liquidity, then these are fantastic products, right? The zero issue with them at all, when used correctly, they really make someone's experience of retirement and volatility in the market a whole lot easier.

A (20:38)

I think the rest of the.

B (20:39)

You're saying it would be worth 90% upfront in some cases, or you're saying that that fee. That fee is not.

C (20:46)

Forget fees for a minute. The commissions that are paid with annuities are different than the commissions that are paid on life insurance products. Two totally different kinds of things.

A (20:55)

But I think the red flag is when someone gives you this as the solution for every financial problem you have. Buy this insurance product. Buy that insurance product. Do this one. Can it be part of an overall plan? Of course it can. For the right circumstances and the right person. I think you just want to be careful. If this is the answer to everything that you put in front of someone. Well, yeah, buy the insurance product. Like, it can't be the solution to everything. It's just. It's not.

B (21:16)

Can a fiduciary push these products? Is that a thing or are these inherently not fiduciary standard?

C (21:26)

So there's a couple wrinkles around that. One of the licensing wrinkles is there are things that are variable products and there are fixed insurance products. Variable products contain things like mutual funds in them. Strict fiduciaries will not have the licensing to sell variable products, meaning a Series 7. There are RIA Friendly Annuity products out there. I suppose you're opening up a can of worms when you ask what a fiduciary is, because I'm going to argue that a fiduciary has to know what these products do and has to have the ability to at least talk about them intelligently with clients of theirs.

B (22:05)

But yeah, I guess what I'm more asking is if you get on a call with an advisor and the first thing they're pushing as an insurance product, is there a good chance they're not a fiduciary?

C (22:13)

There is a very good chance they're not a fiduciary.

A (22:15)

And I think, Jonathan, I think in the future a lot of the problems are going to be solved. These products are going to be lower fees and better transparency. Like that stuff is coming, I think.

C (22:25)

I hope so. I mean, there's interesting products all of the time. There's now ETFs that pay out like annuities do, right?

A (22:33)

Yeah. Using options. And that's all these insurance products are. They're using options and financial securities create these streams and they're taking. Some people are gonna die early, some people are gonna die later. And they're using actuaries to figure out what the right payout is for these things. It's not like rocket science.

C (22:47)

And when it comes to simple like single premium, immediate annuities, the securities that insurance companies can invest in are the same things that most individuals can invest in. They buy fixed income. But insurance companies have the luck of the law of large numbers, so they know exactly what their payouts can be. And if they're issuing 2,000 annuities, they're going to have a pretty good idea of when they have to stop paying for them. So an individual who would buy something like this, it transfers the risk, the longevity risk that they have on their own and they transfer that risk to the insurance carrier.

A (23:22)

Right. Just. Yeah, buyer beware, all that stuff. Jonathan, we appreciate it. Thank you to everyone in the Chicago office, your insurance man. Appreciate it. Thanks, man.

C (23:31)

Good seeing you guys. Duncan, I got my coffee here for you.

A (23:34)

Nice.

B (23:34)

Thank you.

C (23:35)

See you guys.

A (23:36)

For me. All right, so another one.

B (23:37)

Yeah, I got it. I got to say, I find this interest stuff so confusing. But like Cliff says in the chat, he doesn't buy things he doesn't understand. So I guess I would.

A (23:45)

That's a good rule of thumb, Cliff. I like it. Yeah, it's easier to get confused with complicated stuff, that's for sure.

B (23:51)

Yeah. Hey, up next, we got a question from Andrew. Ben has been harping on the people who pay off their mortgage early. Does that mean he's a fan of the 50 year mortgage idea floated by the Trump administration?

A (24:04)

Harping, harping.

B (24:05)

I mean, you're getting some shade in the questions these days.

A (24:09)

I know the early mortgage people, they pitchforks and torches. Listen, the initial reaction to the 50 year mortgage idea floated out there by Bill Pulte and then Trump shared something too. It was pretty negative across the board. A lot of personal finance people absolutely hated the idea. And I'll show the numbers to show why. So, Daniel, let's do a chart on here. So I looked at a $500,000 mortgage because I like nice and neat numbers. And I looked at a 30 year mortgage and a 50 year mortgage on 6%. Right. And you do get a lower payment for the 50 year mortgage. Right. It's like $366 lower per month. Total interest is about double, though. You pay about $500,000 more in interest. And this is the thing that got people. So we can do chart off. The monthly payment is a little lower, but the lifetime interest is way higher. Okay, now let's look at the monthly payment profile to see why a 50 year mortgage isn't the greatest in terms of billing equity. Okay, chart on. Nope, nope. Do the 50 year one. Oh no, 30. This one's fine. Go to 30. So this is the 30 year at six. And this shows how much of your payment goes towards principal and how much goes towards interest over time. So you can see most of it is interest at the beginning. It's like 83% of your payment. That first payment is interest and it slowly but surely eats into principal. And this is just how amortization works on a loan like this. Now do the 50. Okay, so you can see much more goes towards interest at the beginning. 95% of your first payment goes towards interest and it takes a long time until you're really eating into principal. So let's do chart off. After 10 years, your equity built up in a 30 year mortgage is like $82,000. And a 50 year after 10 years is $20,000. So this is the problem people have in this example. I'm using the same interest rate, 6%. 30 year rates are I think 50 basis points higher than 15 year rates right now. So let's assume 50 year mortgages have similar spread. You'd be probably paying 6.5% for a 50 year mortgage. And so that's the big rub for the people who hate 50 year mortgages. You're paying way more insurance in interest and you're not building any equity basically at all. Now let's play devil's advocate here, right? I like to look at both sides. No one is staying in their house for 50 years. No one is paying off a 50 year mortgage over 50 years. So it's unrealistic to say that looking at these numbers, the average length of time someone lives in a home now is like between 10 and 12 years. So if you wanted to put a positive spin on a 50 year mortgage, you'd say, listen, it's like an interest only loan that allows you to lock in a mortgage payment and hedge against inflation, right? I don't want my, I don't want my rent payment to go up anymore. I don't care if I build equity. It's an interest only loan. I guess in that state why wouldn't you just buy an arm? But hey, what do I know? So maybe it's not as bad as ideas some people would make you believe. But I just think if the idea is to fix the housing market and make it more affordable for young people to Buy. This is not obviously not the answer. It barely decreases your monthly payment and it just, it makes it harder to build equity unless housing prices continue to go up. That's the thing. And some people think that a 50 year loan would make housing prices go up. I'm kind of dubious on that. I don't really think it would. So a 50 year mortgage is kind of like a band aid on a machete wound. If we're going to throw ideas against the wall here and really fix it. Right. For young people who don't own homes, why don't we just offer any first time home buyer a one time 3% mortgage rate. You miss out on the boat in 2020 or 2021 wasn't your fault. It was bad luck, bad timing. Obviously the government would have to get involved mostly like Fannie and Freddie. And some people hate that. But guess what? The government backed loans in the 1950s for soldiers coming back from World War II. Like, it's not like the government has never been part of this war. So they could make it work if they wanted to. So let's look at why a lower mortgage rate is way more advantageous than a longer payback period. Throw up my next chart here. Nope, give me a black one. There we go. 6% loan versus a 3% loan. The monthly payment drops by almost $900 for a $500,000 mortgage. The total interest paid is also lower too, by about $320,000 over the life of the loan. Now look at the payment profile for a 30 year mortgage at 3%. Okay. Look at how much more is going to principal right away. It's like 40%. Right? Okay, now throw them all up at the same time. 50 year, 30 year and then 30 year at 3%. You can see barely any of your money goes to paying down principal at a 50 year mortgage at 6%. But at 3%, a 30 year mortgage, a ton of it goes to principal right away.

B (28:21)

Yeah. As someone who would love to be able to buy a home and it's just not in the cards right now. Yeah, I completely agree. The rate matters so much more. You can't have mortgage rates triple and home prices double.

A (28:32)

Like that's the thing.

B (28:34)

It makes no sense.

A (28:35)

You can have one unless. Unless housing prices fall 20%. This is pretty much. And I think people underrate how great of a deal the 3% mortgage is because so much more goes to principal. You're building equity so much faster. Now of course people would say this isn't fair. What are you talking about? I paid 18% for a mortgage in 1980. Life isn't fair. If we really want to fix the housing market, I think this is a far better idea than a 50 year mortgage. Of course if we really want to fix the housing market, we build more houses. Okay. We don't have to come up with convoluted ideas like this. I would love to see some sweeping reforms on the red tape involved to build more new housing in places that need it. It seems like for some reason it's too hard.

B (29:14)

All these policies are just trying to keep home prices from going down for homeowners. But like there's no solution that is going to help young people be able to afford houses other than home prices coming down one way or another. Whether it's from supply or from some kind of regulation.

A (29:28)

Yeah, it's the thing, it's supply. So I think until, until we start building more homes. And again I think that's, it's a hard problem to solve because you have local regulations and rules. And I would love to see the sweeping reform from the government incentivize builders to build more homes. That's what they did in the, in the 1950s. Guess what? The government backed all the loans from the home builders when they built all those, those houses. And you know, everywhere that these, these cookie cutter houses that look the same, that were 900 square feet, didn't have a granite countertop in the kitchen. Very simple houses. The government backed those loans for all the soldiers. Right. So until that happens, we're have to get creative unless we want all of our young people to turn into socialists. That's my theory.

B (30:07)

Yeah, no, I agree and I know you're not a New Yorker, but. And for those people watching that aren't familiar in New York, there's something called rent stabilized or rent controlled apartments. That's what the 50 year mortgage sounds like to me. You're renting, right? You don't own anything. Like you're paying for something that is not yours and probably will never be yours. And like I told you off camera, you know, the other day, to me this, this seems like a middle class tax. It's like, oh you, you're not, you're not wealthy enough to buy a house at the preferred rate. So here you get these horrible terms.

A (30:35)

And it really doesn't help you. I mean rent stabilization worked for Monica and Rachel and friends though. They got a sweet place. They did rent stable.

B (30:42)

I know people who have really nice places that yeah, are way, way below the market. But yeah, that's what this is you're walking in a rate for a long period of time, but it's not yours until 50 years, which, like you said, who's still going to be in the place or.

A (30:54)

Yeah. And anytime any of these ideas are thrown out, a 3% mortgage or a 50 year whatever people say, well, that would just make housing prices go up even more. And that's probably true because the supply is a thing. We're like 3 to 5 million houses short. And especially in places where people want to be, we just don't have enough housing and they don't allow you to build. That's the fix. All right, got one more question.

B (31:14)

Okay, last but not least, we have one. I made it anonymous because it's very specific. Uh, I'm an economic student aiming to become a portfolio manager, and I'm stuck between two job offers, one at the bank of Israel and one at a family office. The family office is offering better pay, but I'm not sure which is strategically better for my resume long term. What do you think is the smarter move to advance my career as a portfolio manager? Thanks.

A (31:38)

All right, who says. Who says young people are screwed. This person's got two good job offers.

B (31:41)

Juggling two job offers. Yeah.

A (31:43)

All right, so I guess early in your career, do you want to be a learner or an earner? There are pros and cons to each route. So I have friends in their twenties who their only goal was, I want to get the highest salary possible, lifestyle be damned. Right. The theory is if you set a baseline of high pay, then all future jobs must meet or exceed that number. Again, in theory, it doesn't have to work like that, but that was the idea. It is that the amount of income adds up over time, so hopefully help you get rich faster if you just make more money. It also might mean you have no life in your 20s because you're working all the time. But that's the trade off. Being a learner means taking maybe a lower salary for a job is going to set you up for better opportunities in the future. I chose the learner route in my career and it worked. But it was mainly because no one was offering me any earner roles, so I was forced into a learner role. So I spent the first 10 years or so of my career, like, learning anything and everything I could about investing in the markets and risk management and how to work and communicate with clients. And that paid off down the line. I think it might also depend how you feel about working for a larger or smaller organization. So my guess Is the banking job would be more bureaucratic, more people to answer to, more rules, more regulations. But it could also offer you more opportunities for training and advancement. I know a lot of people who worked for a larger financial institution out of college to go through the training route. And I work in this department for a year, in this department for a year, and learn the different tricks of the trade. What do I actually want to do? And then they go somewhere else once that place is taught them right. I personally have always worked for smaller organizations, so the investment consulting firm I worked for right out of college had five people, including me. It was tiny, so there were not a lot of ways for me to advance and try different things. And my boss actually said to me, like, come to work for me for two to three years and then move on to something bigger. I'll teach you everything I know. And that's what happened. So the training opportunities are limited, but I got firsthand knowledge from my boss about how things were done. And there's still things I learned in those first two to three years out of college that I go back to today and so many aspects of the business from a young age. So I think the matrix is, do you want to be a learner or an earner? And do you want to work for a big firm or a small firm? So figure out what box there you fall into. There's no right or wrong answer. I think a lot of it's personality driven, but those are the big variables I would consider, and I think you're probably going to be fine either way.

B (33:53)

Yeah, I graduated in 2009 from undergrad, so I didn't have Werner or earner job offers. But that was a different time.

A (34:03)

That was the you should be happy to have a job. You want to ask for a raise or promotion. No, you should be happy to have a job.

B (34:09)

Right, Exactly.

A (34:10)

All right. Matt in the chat says, go for the bank. I worked for a bigger place. And then family office maybe comes next, but either way, you have two good job offers. It sounds like. All right, quick plug. If you are a financial advisor, you need to check out our new YouTube channel called Talking Wealth. We also have a podcast version by the same name. We just released a new episode today where I talked to Colin Roche from Pragmatic Capitalism and now Discipline Funds while he started his own wealth management firm, how blogging helped him build a following, and why he transitioned his strategies to ETFs from separately managed accounts. Pretty cool thing how a lot of advisors are opening their new ETFs now just search Talking wealth on YouTube or wherever you get your podcast.

B (34:45)

If you had an etf, what would your top holding be?

A (34:49)

Target Day Fund. Can you do that? A fund of Target Day funds. Also, check out talking wealthpod.com for the newsletter. Email us here. Ask the compound showmail.com thanks everyone in the live chat, as always. We appreciate it. Some people, a lot of people pointed out Jonathan may or may not look like a certain character from Home Alone.

B (35:07)

It's. It's true.

A (35:08)

Yeah, he's gotten that on. It's true. Plus, he's based in Chicago. All right, thank you. Subscribe Rate Review all that good stuff. We'll see you next time.

B (35:16)

See you everyone.

D (35:18)

Thanks for listening to Ask the Compound. All opinions expressed by Ben Carlson, Duncan Hill, and any of their guests are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.