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The Long View
Adam Grossman: Asset Allocation Is an Investor’s Best Defense
00:45:21
A flat-fee financial advisor and columnist discusses why less complicated portfolios are usually best, how he addresses inflation risk in client portfolios, and his biggest worry for new retirees.
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- [00:00]
Adam Grossman
Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. Vanguard bonds are institutional quality. Institutional quality isn't a tagline. It's a commitment to your clients. It means top grade products across the board. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself@vanguard.com audio. That's vanguard.com audio all investing is subject to risk. Vanguard Marketing Corporation Distributor Please stay tuned
- [00:28]
Morningstar Disclaimer/Announcer
for important disclosure information at the conclusion of this episode.
- [00:34]
Christine Benz
Hi, and welcome to the Longview. I'm Christine Benz, Director of personal finance and Retirement Planning for Morningstar.
- [00:40]
Amy Arnott
And I'm Amy Arnott, Portfolio strategist for Morningstar.
- [00:44]
Christine Benz
Our guest on the podcast today is Adam Grossman. Adam's the founder of Mayport, a fixed fee wealth management firm. He's also a regular contributor to humbledollar, the website founded by late financial writer Jonathan Clements. Before founding Mayport, Adam worked as an investment advisor or analyst at several firms, including Middle and Company, Ballantyne Partners and MFS Investment Management. He also founded About Face Software, a social networking software firm. Adam received his undergraduate degree from Williams College and his MBA from MIT's Sloan School of Management, and he's also a CFA charter holder. Adam, welcome to the Longview.
- [01:26]
Adam Grossman
Thank you for having me.
- [01:27]
Christine Benz
Well, thanks for being here. We wanted to start with your contributions to Humble Dollar, where you're a prolific contributor. This is the website that was founded by the late financial writer Jonathan Clements. Can you talk about how your collaboration started?
- [01:44]
Adam Grossman
Sure. It got started back in 2016. I was working at another wealth management firm here in Boston, and I was feeling a little frustrated because I wanted to do more writing, but there were compliance issues. And so for some odd reason, I decided that the solution to all of my problems was to reach out to Jonathan Clements. And I didn't know Jonathan. We'd never communicated. But in his usual gracious style, he responded to my email at about 6am the next morning, and then we spoke on the phone. And the timing was fortuitous because he was getting Humble Dollar started at just that time. And so he was looking for writers and I was looking to write. And so that was how things got started.
- [02:29]
Christine Benz
Can you discuss your relationship with Jonathan and his influence on your work as it unfolded?
- [02:36]
Adam Grossman
Sure. So over the years, Jonathan edited about 400 of my submissions. And so over time, certainly through the editing process, I think he helped me improve immeasurably. And over time, I would say that I probably began to adopt some of his style. But at the end of the day, everyone has their own style. And there were things that Jonathan could pull off with his writing that I never could and still can't.
- [03:06]
Amy Arnott
So the Humble Dollar still has a wealth of information and, you know, many people posting every day, even though Jonathan is no longer available to oversee it. Can you talk about who's curating all the content on the site these days?
- [03:23]
Adam Grossman
The way that I think about it is it's a little bit like Warren Buffett. You know, he recently retired as CEO of Berkshire Hathaway, and his job was too big for any one person to take over, so they had to split up his responsibilities among a team. And so it was sort of the same with Jonathan. His wife, Elaine is in charge, but she's put together a sort of board, if you will. So there's a group of us that help each in different ways. There's a fellow who's in charge of kind of policing the submissions and making sure that everything is kind of the appropriate tone. There's a designer, and Elaine sets the overall direction. And I continue as a contributor. So so far it's worked well. I think a key piece was that Jonathan's vision was that people would be able to submit writing and not have to go through an editing process. And so the site would be sort of self sustaining, you know, over time, without necessarily a lot of kind of human input and editing effort on an ongoing basis.
- [04:27]
Christine Benz
So can you discuss the focus of Humble Dollar? It seems like it's a lot about money matters, but also I find a lot of posters are talking about bigger kind of life issues. Can you discuss the scope of Humble Dollar and who it's geared toward?
- [04:45]
Adam Grossman
You know, I think when Jonathan started, his vision was, you know, very much in line with the name Humble. You know, that it was not for stock pickers, it was not for gunslingers. It was for people who wanted to take the kind of simple path to wealth, you know, if we can use that term, and to, you know, not swing for the fences. So that was the original thinking. I think over time, what he found was that most of the people who were attracted to the site were those who were approaching retirement. And so the focus became more retirement focused over time.
- [05:22]
Amy Arnott
We also wanted to spend a little bit of time talking about your day job at Mayport Wealth Management, which is a firm that you founded. What did you set out to do differently at Mayport than was the practice at other registered investment advisors?
- [05:42]
Adam Grossman
So at the time, a few threads came together. The first was an observation about the industry standard kind of 1% of assets business model. And what I had observed over time was that it didn't really make a lot of sense because there isn't a whole lot of difference, in my opinion, in managing a portfolio that has, say, $2 million versus a portfolio that's 3 or 5 or even 10 million. Mm, sure, if you're Bill Gates, of course, that's a different level of effort. But for most people, the effort is mostly the same. And so it. It seemed illogical to me that the fee would go up necessarily just because the market went up or because someone added to their portfolio. And in fact, I saw clients sometimes kind of object to this. I remember one case in particular where a fellow had sold his company, so he had a big windfall, his account grew overnight, and the standard fee model would have his fee growing pretty significantly overnight. And so that was kind of observation number one. And I thought about my accountant who each year he sends me an invoice, and it says something like, for services rendered, and there's some round number, it seems reasonable, and I'm happy to pay it, and life goes on. I thought, you know, if an accountant looked at someone's income and saw that their income had gone up and then tried to increase their fee proportionally, then they probably wouldn't get away with it. But the investment industry does get away with it. So that was observation number one, was to ask, is there another way to do it? And I settled on a flat fee. The other observation was that at the time, I was working for another firm and doing equity research, so, you know, picking stocks. And my results were pretty consistent with what all the data has found, which is, you win some, you lose some. But after fees and after taxes especially, I didn't find it a productive use of time. And so I thought, well, if you can put together a simple investment strategy just based on index funds and a simple fee structure with flat fees, that that might work.
- [07:57]
Christine Benz
So I wanted to follow up on your assertion that clients require roughly the same amount of time. It seems to me that there would be the potential for clients to have wildly differing demands on your time, but you haven't found that to be the case. So even though I might be paying the same amount as someone else, I could be just incredibly needy and have you on the phone all the time. But do you find that clients roughly require the same amount of time from you?
- [08:26]
Adam Grossman
It's a common question, but I think the reality is that even if you look at a firm that, say, charges the traditional percentage Model that there you might have the same issue, right? Two people might have, say, million dollar portfolio, so they're paying the same fee, but one has more going on in their life than another. And so, you know, they'll require more time and effort. So I think it's more of a universal problem. But I think what a lot of people find is that over time it averages out, right? So people's needs ebb and flow over time. You know, just with life transitions, you know, say in the year leading up to retirement, there's probably a lot more hands on effort. But then there are other periods where it's more status quo. But at the same time, somebody else might be getting married or buying a home. So I do think it just averages out over time.
- [09:18]
Amy Arnott
And I'd guess that with most clients, you meet with them on a regular schedule, like once or twice a year or something like that.
- [09:28]
Adam Grossman
We do, we look at every portfolio every month and then we meet in the fall and in the spring to go through a pretty standard agenda each time. And then of course, as things come up. And so as I said, I think it, it really does average out on any given day, one person is happily in retirement with their feet up, and somebody else is working on some financial question, and we're working with them at that time.
- [09:56]
Amy Arnott
Do your clients tend to cluster in a certain demographic or age group? And what are some of the most common issues that you help clients with?
- [10:06]
Adam Grossman
Yes, it wasn't intentional, but what I found over time was that the flat fee structure tends to be most attractive to those with larger portfolios. And almost by definition, folks with larger portfolios are those who are in or near retirement. And so as a result, we tend to work almost exclusively with folks at that stage in life. And so we do a lot of retirement planning over the years.
- [10:36]
Christine Benz
We've heard from a lot of financial advisors that they're in the behavioral management business. Can you talk about whether managing client behavior is a big part of what you do? Or do you think the narrative about clients acting irrationally or feeling emotional in market downdrafts, is it a little overdone?
- [10:56]
Adam Grossman
I might phrase it a little bit differently, rather than talking about behavioral management, because, you know, after all, if someone's accumulated a significant portfolio, they've done a lot of hard work to get to that point. But at the same time, it is natural to be unnerved by events like a pandemic or inflation or a war. And so we'll have those conversations. And some people are more concerned than others by particular events. But what we try and do is, rather than, you know, kind of burying our heads in the news, is instead to put our heads down and to look at the numbers. And so we'll have a conversation with clients, looking back at market history. We'll look at past downturns, the frequency and the depth and the duration of past downturns and how we got out of them. And then we'll look at their portfolios, we'll look at their asset allocation, point to the amounts that they have in bonds, in cash, you know, kind of safely outside the stock market, and do some simple arithmetic to just point out how many years of spending that might carry them through, even if the stock market took several years to recover. And usually we find that that's the best approach rather than trying to look into our crystal ball and make a prediction about when or how the market will recover.
- [12:17]
Amy Arnott
Yeah. So related to that, you recommend what you call the John Cleese method of managing our finances. What does that mean to you?
- [12:28]
Adam Grossman
Years ago, I was working with a young couple and we were sitting at their kitchen table and they had the numbers spread out and one of them asked a sort of funny question. He said, do you think we're spending too much on organic fruit? And my response was, let's come at the question from the other direction, which is to ask, how much are you putting into your savings each year and is that enough? And that's the way that I look at it, which is that if you're doing what you need to do, there's the expression pay yourself first. If you're doing what you need to do to meet your long term goals, then if you choose to spend what's left over on organic fruit or on vacation or a nicer home or a car, then nobody should judge that. And so the connection to John Cleese, years ago he had a television show and in an interview once, he talked about how on the set there was a lot of time wasting and fooling around. He said, but what we figured out was that over the course of a week, as long as we got 15 or 20 minutes of material written through all of the kind of time wasting and unproductive hours, then that was enough. And so I think about it the same way with financial planning. If you're saving for retirement, if you know the basic numbers, and I sometimes think about, you know, if you can recite your financial plan standing on one foot, then that's the ideal plan, and then you don't need to sweat all of the other details.
- [13:57]
Christine Benz
I had a follow up on that, Adam, because I have been an avid reverse budgeter ever since. I figured out that that was the way to do it, where, you know, just saving first and then, you know, not worrying about the line items on the budget was the way to go. I've heard that as retirement approaches, I should. Should attempt to get more granular about where we're spending. Do you advise that for your clients? Do you advise that, you know, as they come into the home stretch toward retirement, they start looking at the line items in their budget to really be more specific about how they're spending?
- [14:30]
Adam Grossman
It's a very good question. And what I sometimes recommend is to at least create categories, just big categories. So the first category might be, you know, how much does it take to keep the lights on, so to speak. And then there might be a category for just general discretionary expenses. And then beyond that, you might have a category, say, for travel and maybe giving to family. And I think that it's important if you can at least see what those big numbers are. I know exactly one family that has tracked every single expense since they got married, so every single Starbucks receipt. But that's really, really difficult. I think, though, at the same time, if you can have a handle on those big numbers, then that's really key, because as you head into, say, a market downturn or if things get tight at some point during retirement, if you know what those numbers are, then you know how much flex there is in terms of where you can dial back. And so I do think that that's very, very important, even if it is sometimes tedious to track expenses.
- [15:38]
Amy Arnott
You wrote a great piece called the Five Minds of an Investor during the COVID period, and you noted that successful investors are part optimists, part pessimist, part analyst, part economist, and part psychologist. Which of those minds would you say is most dominant for you? And are there any that you kind of have to focus on to try to actively cultivate?
- [16:05]
Adam Grossman
I'm not sure that my family would agree with this, but I consider myself an optimist, at least when it comes to financial markets. So I'm a believer that markets are resilient, and I think you've seen that in the US Economy, through wars and recessions and so forth, that overall the market has gone much, much higher over time. So that's my view. Personally, I have a hard time with folks who have kind of doomsday scenarios. So I'm not much of a pessimist when it comes to the economy. I'm a believer that things ultimately will recover. But the idea with that framework is that I think all of us have natural tendencies in one direction or another. Some people are very, very analytical. Some people think more about the psychology elements. And the message there was that we should try and kind of expand our thinking and push ourselves to think about all of the other perspectives, because the reality is that they all matter. You know, in some vague way, the sum of all of those five factors is what drives markets.
- [17:18]
Christine Benz
Yeah, I enjoyed that piece too, Adam. It got me reflecting about myself. And I would say similarly, I'm an optimist, which tends to encourage me to be super hands off with my portfolio, which is mostly a good thing, but not always a good thing. So it's a great piece. I want to talk about your approach to investing. You often talk about how a simple stock bond, high quality bond portfolio is effective in many, many different market environments. Are there any other assets that you commonly would add to client portfolios apart from the plain vanilla stock bond? Maybe a little bit of cash?
- [17:57]
Adam Grossman
You know, I think something that investors learned the hard way in 2022 was that cash and bonds are not the same thing. And, you know, they're often grouped together because they're both much less volatile than stocks. But the fact is that bonds can lose money. And you know, the aggregate bond index lost more than 10% in 2022. So I think advocates of the bucket system, Christine, you've often said this, know that cash is an important bucket and that we shouldn't overlook it. And so for me, cash is critical. I'm not a big believer in many other kinds of investments. I think that the combination of stocks and bonds, the negative correlation or at least very low correlations, are very, very powerful combination. So folks who talk about private investments in Bitcoin and commodities and so forth, I just don't think those things are necessary.
- [18:58]
Amy Arnott
How do you address inflation risk with client portfolios? And is your approach different depending on whether someone is in retirement or still saving for retirement?
- [19:09]
Adam Grossman
So we do use tips, which are, you know, inflation protected treasury bonds. And those in a way are the most guaranteed way to protect against inflation. But at the end of the day, they are still bonds. And so, you know, if you look at their performance in 2022, when inflation was high, they were dragged down by the overall effective interest rates. And so tips aren't perfect as an inflation hedge in my view. Actually, I think stocks are the best way to protect against inflation. And I think we've all seen this, say at the grocery store where you've seen that companies have been very, very effective at pushing through price increases. When you pay $25 for packaged paper towels, I think you see that. And so even though that hurts kind of for the individual consumer, what it's done is it's allowed companies to protect their profit margins and thus their stock prices. And so in my view, there's no one perfect inflation hedge. But I do think stocks maybe are the best. I think that the data around gold is an inflation hedge. I think it's pretty weak. I know that some people consider that heresy, but I just don't see the data on there. But that said, I think that's the importance of diversification.
- [20:27]
Amy Arnott
Yeah, I agree with you on gold. I think the data's very mixed where there are some inflation periods when it did really well, but other periods not at all.
- [20:37]
Adam Grossman
So I think when it comes to gold, sometimes I'll post comments online and people think I'm being intentionally inflammatory and they just can't see, you know, gold bugs. They just can't see that there's another point of view. You know, I think that they view it as something that is tangible, unlike, you know, what they call fiat currency, you know, where the government can print money. So I see that perspective on gold, but I think the reality is that you have to look at the numbers and look how it's performed during periods of inflation. And I don't find it convincing personally.
- [21:12]
Christine Benz
I was just going to interject a completely frivolous anecdote about $25 paper towels, which is that I ordered some from Target during COVID and they showed up on the front porch and my husband was like, what is this? It was this probably 40 pound box that I thought was paper towels. It turned out to be like the roller type paper towels in a public restroom. So they were these super heavy industrial style paper towels that I was very excited to get because there was scarcity of paper towels at the time. Going back to our interview, I wanted to ask whether there's any investment related idea that you've changed your mind about. Adam?
- [21:53]
Adam Grossman
Well, I would be stubborn if I said no. There are a few, I think a few things have changed in recent years. So the first is that municipal bonds, they used to be viewed as really close cousins of treasury bonds. And if you go back say 10 years ago for high income investor, it would be kind of borderline malpractice to put treasury bonds, taxable bonds, into a taxable account. And the thinking was, well, of course he used municipals. But what we saw in 2020 with the pandemic was that municipals really are very different from Treasuries. And you know, a lot of municipalities faced severe pressure. The New York MTA kind of famously saw revenue decline 96% in 2020. And thank God the federal government stepped in to help them out. But otherwise those bonds would have come under a lot of stress and there would have been defaults. So that's one area where my thinking has changed. And we'll use treasury bonds a lot of times in high income investors accounts. That's something that you just wouldn't have done 10 years ago. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. Vanguard bonds are institutional quality. Institutional quality isn't a tagline, it's a commitment to your clients. It means top grade products across the board. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself@vanguard.com audio. That's vanguard.com audio all investing is subject to risk. Vanguard Marketing Corporation Distributor as you mentioned
- [23:33]
Amy Arnott
earlier, you work with a lot of people who are getting close to retirement. What are some of the easiest steps for someone to take if they're within say five years of retirement and want to take their retirement plan from just okay to on track?
- [23:53]
Adam Grossman
I think back to an experience I had as a child. I remember once I was at my grandparents house and this older fellow came in and I think he sat down, joined us for dessert. And after he left, my father explained that he had been my grandfather's accountant. And I'm not sure how old he was at that point, but he said that something had gone wrong with his financial plan and he had to go back to work. I don't know if it was in his 70s at some point and it was really kind of a terrible outcome. And that always stuck with me for some reason, just sort of the image of that fellow. And so I think that the key thing is to try to insulate your portfolio if you're approaching retirement, to try and insulate it from the market. So that if you happen to retire at a point, say like the beginning of 2020, you know, where a bear market was right around the corner, that your plans are not negatively impacted by what happens to happen in the market. And so to me, the simplest way an investor's best defense is through asset allocation. So if you have five years or seven years of withdrawals set aside in bonds and cash, then even if you happen to retire at the worst possible time that your plans will not be negatively impacted and you won't end up like that fellow having to go back to work in your 70s.
- [25:15]
Christine Benz
What do you see as the biggest risk for new retirees today? It could be something investment related or maybe an economic risk or a systemic risk like the solvency of Social Security. What is the thing that is front and center in your mind that you worry about with respect to new retirees?
- [25:33]
Adam Grossman
I understand the concerns about Social Security, to be honest. I don't worry about that because fortunately it's not a red state or a blue state issue. Right. There are Social Security recipients in every state. And so I think that Congress will be very, very hesitant to really negatively impact Social Security recipients or future recipients. And I don't really worry about the US Economy over the long term. What I do worry about though is that I think there could be a lost decade. I think that that's a very, very real possibility. I don't think the market is so overvalued. I don't buy the arguments that this is like 2000, but it could certainly go sideways for a period of years after the string of great returns that we've had in recent years. So I think that investors can be reasonable in assuming returns in line with historical averages over the long term, over the entirety of their retirement, but they should be prepared for negative returns or at least kind of a period of flat returns for a period of years. I think that's a real possibility.
- [26:44]
Amy Arnott
Is there any commonly dispensed retirement advice that you disagree with or you think that retirees can misinterpret?
- [26:55]
Adam Grossman
I think that there are a lot of rules of thumb out there that can be helpful, but it's important to take them with a grain of salt and to make sure that they really apply to your own situation. So there's a common one, for example, to set your asset allocation in relation to your age. And so as you get older, your portfolio should become more conservative. And that makes sense in theory. But I think about Bill gates, he's about 70 years old. Should he have the same asset allocation as his 70 year old neighborhood? Of course not. And so I think it's important to consult rules of thumb, but also to make sure that they fit right, because everybody has factors which are unique to them. It might be that one person could expect an inheritance, someone else might have a rental property, one person might be married and someone else isn't. And so I think that it's important to take rules of thumb with a grain of salt.
- [27:54]
Christine Benz
I Wanted to follow up on your comments about Social Security, Adam. And we often hear that people should delay if they can, especially if they think they have average or longer than average life expectancy. Do your clients receive that advice well, or do you sometimes get pushback from them that they want to claim earlier?
- [28:14]
Adam Grossman
One of my little mottos is that there are two answers to every financial question. There's what the math says, and then there's how you feel about it. And I think Social Security is very much in that category. What the math says is that pretty much everybody should wait until age 70, because if you wait until you maximize your benefit, then, you know you have to live a certain number of years to make back the years that you didn't claim. But over time, you should exceed that and come out way ahead. So that's what the math says. But, you know, everybody has different considerations. I remember once someone saying to me, she said, I've been paying into the system, sending money to Washington since my first summer job when I was 14 years old, and by golly, I want to see them sending me a check for a change. And so I think that it's important to balance what the math says and how you feel about it. And I think if you have other assets, if you're married especially, and then there's a natural hedge there, then I think those are reasons why one spouse might claim earlier. So I don't think that it's a rule that people have to wait till 70. I think also another misunderstood aspect of the Social Security claiming decision is that it has to be on your birthday. So a lot of people think in terms of I'll claim at 67 or I'll claim at 68, but in reality, you can claim at any month. So if you want to claim at 68, six months, you're free to do that. So the benefit increases with each month that you wait. And I think that that makes the decision easier, and it's probably easier to split the difference.
- [29:56]
Amy Arnott
One topic we've been reading a lot about and hearing from a lot of our guests about is how some retirees underspend relative to what they could spend. Is this something that you've experienced with your clients, and have you found any good ways to kind of encourage people to loosen up the purse strings a little bit?
- [30:21]
Adam Grossman
It's a really interesting question. You know, to be sure, overspending is a much bigger problem. But when it comes to underspending, I see the. The thinking, which is that people shouldn't unnecessarily deprive themselves in retirement after saving their whole lives, they shouldn't have to live on ramen noodles if the numbers say that they really don't have to. But I think that there's a little bit of a conundrum there, which is that people who are frugal by nature are people who will tend to accumulate significant portfolios. And so they're the people who can afford to spend more in retirement, but it's just not in their DNA. So it is harder for those people to spend. And my perspective is it's good to look at the numbers, it's good for folks to understand what they could be spending. But personally, I don't think we should berate people for underspending because it might actually make them unhappy. You know, if someone's naturally frugal and you tell them, you know, don't buy the Honda, don't buy, you know, go buy the Mercedes, they may not want to do that. And so even though the numbers say that they can afford to, it wouldn't be productive. Where I think it is helpful though, is to point out other opportunities for using financial resources. So some people might not be interested, say in buying a fancy car. But if you suggest that they could make gifts to their children to help them with some of the their expenses or to give to charitable causes that are important to them, they might be more open to that. But I really think that people's spending decisions are largely driven by how they're hardwired and it's really hard to change that. And seeing numbers on a piece of paper often doesn't change people's mindset.
- [32:10]
Christine Benz
Are you having more of those lifetime giving conversations? And I'm curious if you bring it up or if your clients do, about giving more earlier versus leaving a bequest.
- [32:20]
Adam Grossman
You know, life is expensive for young people. I mean, the cost of housing, of childcare, of tuition, those numbers have increased far beyond the rate of inflation. So life is hard for young adult. And so, yes, I always encourage folks to think about giving during their lifetimes rather than leaving dollars as a bequest. And it can be hard because there's the challenge. You know, there's the old story about Charlie Munger that a friend once asked him, so Charlie, are you planning to leave your fortune to your children? And he said yes. And friend asked, but aren't you worried that that will impact their work ethic? And Charlie said yes. And so his friend said, well then why are you, why are you doing that? And he said, well, because otherwise they'll hate me. And it's funny, but I think it gets at a fundamental challenge, which is that we all want to help our children. We recognize that there is a challenge there. And so it's a balance. But I do think that it's something that a lot of folks want to do because they recognize that the expenses can be really, really brutal in a lot of cases. And the numbers just don't add up for folks early in their careers.
- [33:35]
Amy Arnott
Is there a good way for people to figure out a good balance of, you know, helping their kids but not helping them too much?
- [33:46]
Adam Grossman
You know, years ago, there was the book the Millionaire Next Door, and he really stated in strong terms that it was a bad idea to help children too much. He talked about economic outpatient care, making children dependent. And I see that. I think that a good way to approach it is to take it incrementally. And so what I've seen a lot of families do is they'll start small and they'll give a gift, say, around the holidays. And that really has a lot of benefits, I think, because it allows them to collect data. Right? You can see, you know, if you give a child a gift, I joke about, you know, do they put it into savings, they put into a Roth ira, or do they go to the Ferrari dealership? And it also is a benefit to the recipient, you know, because children can receive a small gift and kind of get their sea legs, so to speak. You know, see how it feels to have a little bit of a surplus in their budget, and then parents can adjust over time. And I've seen folks increase gifts very, very substantially over time once they've collected data, and everyone has kind of gotten some experience with it and they feel like the gifts can be used more productively.
- [34:57]
Christine Benz
I wanted to switch gears. You've written quite a bit about artificial intelligence. It's ubiquitous in our workplaces today, and it's also a constant source of discussion. So what do you think its major utility will be for financial advisors like you?
- [35:13]
Adam Grossman
You know, we're seeing it already, and advisors, like a lot of professionals are using it for research. It's very helpful, say, for inputting data from a PDF file. So all of those uses. But where we're also seeing it and where I think it's enormously helpful, is that clients are putting questions into AI and then bringing us the output and asking us to respond to it. So someone brought us, for example, the other day, the Social Security claiming question, and he had put it into AI and it gave him a certain answer. And then it was Great as a starting point for a conversation. Other folks have put Roth conversion questions into AI and it's given them output. And then, you know, we've kind of run it through our own numbers. And so I think it's very, very helpful because it's. It can be a terrific educational tool and, you know, terrific, terrific way to gather an initial set of numbers and to start a conversation. So I'm not in the AI doomer camp. I think that it's a terrific productivity tool for almost everybody.
- [36:21]
Amy Arnott
How are you counseling your own children to approach their careers with respect to the potential impact of AI?
- [36:31]
Adam Grossman
Most of my children are around college age, so it is tricky. One of my sons is planning to go into medicine. And I've heard some radiologists, for example, talk about how AI is now better at reading an X ray than a human, than a radiologist can read an X ray. I'm not sure if that opinion is universally held, so there is a potential risk there. But I'm in the camp that there will always be a role for human judgment. I have a friend who runs a software company, and there's a lot of concern that AI will put programmers out of business. And his view is. He said, I view it like power tools, you know, for construction workers. Said, you know, construction workers, if you ask them, are probably much happier having electric drills and electric screwdrivers than they were using manual tools. And so I think that that's the way to think about it, is that work will change, but I don't see mass unemployment. And frankly, I think everybody's happier riding in a car than in a horse and buggy. I think that we're happier with computers and with email and phones rather than little pens and carrier pigeons.
- [37:47]
Christine Benz
I was looking through your writings on Humble Dollar and on the Mayport website. It includes a lot of references, especially to history. It seems like you're a big reader. Can you talk about what the best book that you've read recently is?
- [38:02]
Adam Grossman
One of my favorites is called your Perfect Portfolio by Cullen Roche. And what he does is he looks at 20 different investment strategies. And so it's part history book to talk about the origins of different strategies. And then he talks about the pros and cons and where each strategy might work and for what type of person each strategy might work. And I find it very, very helpful because the overall point is that there is no one perfect portfolio and that we're all different. I sometimes think about it like choosing a place to live. Some people like to live in the city, some people like to live in the suburbs. So there's no one perfect home. There's a home that is perfect for you. And I think it's the same with choosing an investment strategy. And so frankly, you know, if I were teaching an investments one on one course, I think that that book would be the centerpiece of a course like that.
- [38:58]
Amy Arnott
What about with shorter firm writing like blogs or substacks? Now that Jonathan Clements has passed away, do you have any kind of go to investment writers that you like to follow?
- [39:12]
Adam Grossman
There's probably a long list. Every Saturday morning I'm greeted by Jason Zweig's column in the Wall Street Journal. It's the best way to start the weekend.
- [39:20]
Christine Benz
Same.
- [39:21]
Adam Grossman
I'm also a big fan of Mike Piper's the Oblivious Investor. He's terrific. You know, recently Bill Bengan, the father of the 4% rule, the 4% guideline, he came out with a new book. And, you know, that research started 30 years ago, and he's still at it and refining it and looking at it through new lenses. And so I love Bill Bengan's work. I also follow a lot of academics, so Aswap demodoran at nyu and Derek Horsemeyer is always doing new experiments. And Hendrik Bessembinder, who developed the research that shows that just 4% of stocks have accounted for all of the outperformance versus treasury bills over time, he is continuing to refine that research. Roger Lowenstein, who wrote Ingenious Failed. He has a substack, which I really, really enjoy. And I actually have a new project I've been putting together, something I call the Investor's Bookshelf and have been trying to put a kind of a new approach together for curating investment writing because there is so much out there I think you could spend your entire week reading.
- [40:32]
Christine Benz
Yeah, that's a good list. Reflecting on your own work on Humble Dollar, what's been your most popular piece to date based on feedback that you've gotten from readers? And I'm also curious whether that one that really resonated was hard to write or whether it was easy to write.
- [40:50]
Adam Grossman
You know, the most popular one, for Better or for Worse, was a tribute to Jonathan Clements. So after he passed in September, I reached out to many of his longtime friends and colleagues, and they each submitted remembrances. So Bill Bernstein and Alan Roth and Jason Zweig, his longtime friend Peter Mallouk, who he collaborated with, and the collection there, I actually didn't contribute to it all. So in a way it was easy for me, but it was very, very popular because I think all of Jonathan's readers felt that they knew him. But this really provided a kind of more personal set of reflections. And so that was very, very popular, sad to say, because I really miss Jonathan. But that was, I think, something that readers really enjoyed.
- [41:41]
Amy Arnott
What about your own favorite piece that you've written for Humble Dollar or elsewhere? Do you have an article that you thought was particularly helpful?
- [41:54]
Adam Grossman
So back in the 1930s, there was a fellow named John Burr Williams, and he wrote a book which is pretty obscure. It's called A Theory of Investment Value. And in that book there's a poem, and to my knowledge, it's the only poem in the world of finance. And the poem goes something like, you know, an orchard for its fruit and bees for their honey, and by extension, stocks for their dividends. And the point that he was making was what we call now intrinsic value, which is that you should buy an investment because it's productive. And I think he goes on to say, you know, you wouldn't have a B for its buzz, right? You know, that's just sort of like an extraneous characteristic. What you buy it for is its productive capacity. And so for me, that's a reason why things like gold are not valid investments, because they don't have any intrinsic value. They're worth only what the next person will pay for it. And also, again, maybe it's heresy, but I'm not a believer in Bitcoin because I think it's just, you know, some people call it digital gold. It has no intrinsic value, and so therefore there's no logical reason why the price couldn't be zero. So to me, that investment poem is really, really important.
- [43:17]
Christine Benz
Well, Adam, Amy and I love reading your work and we've loved having the chance to talk with you today. Thank you so much for being here.
- [43:25]
Adam Grossman
Thank you, Christine, and thank you, Amy. It's a pleasure to speak with you.
- [43:28]
Amy Arnott
Thanks, Adam.
- [43:35]
Christine Benz
Thank you for joining us on the Long View. If you could please take a moment to subscribe to and rate the podcast on Apple, Spotify or wherever you get your podcasts, you can follow me on social media at Christine Benz on LinkedIn or ristinebenz on X and Amy Arnott on LinkedIn. George Cassidy is our engineer for the podcast. Jessica Bebel produces the show Notes each week and Jennifer Garrett copy edits our transcripts. Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us@thelongvieworningstar.com until next time. Thanks for joining us.
- [44:18]
Morningstar Disclaimer/Announcer
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- [45:59]
Amy Arnott
Sa.