THE TRUTH ABOUT YOUR FUTURE with Ric Edelman

Episode: Is it Time to Rethink Bonds? These Two ETFs Offer an Answer

Date: December 13, 2024
Host: Ric Edelman
Guest: David Cowan, President of the Museum of American Finance

Episode Overview

In this episode, Ric Edelman discusses the evolving landscape of bond investing amid falling interest rates and introduces listeners to two innovative ETFs from Invesco that address the need for income and diversification in a changing market. The episode then shifts focus to a thoughtful conversation with David Cowan, president of the Museum of American Finance, about America's financial history, the museum’s mission in promoting financial literacy, and the relevance of historical artifacts in understanding personal finance today.

Key Discussion Points & Insights

1. Rethinking Bonds and Exploring Two ETFs (00:33 – 05:02)

• Market Context:
  Ric opens by highlighting the present drop in interest rates and the opportunities this creates in the bond market.

  “Is it time now to rethink bonds? Rates are dropping again for the first time in years. That's creating new opportunities for the bond market.” (00:45)

• ETF Spotlight 1: Invesco Total Return Bond ETF (GTO)

  • Actively managed, intermediate-term bond fund (85% U.S.).
  • Seeks maximum total return through a blend of income and capital gains.
  • Employs both macro and bottom-up security selection, with over 60 sector-specific analysts.
  • Tactical, thematic asset allocation aimed at consistent, repeatable outcomes.
  • Strong performance up, risk modulation down.

  “The Invesco Total Return Bond Fund ETF…is one of the largest fund ETFs in the country. GTO Max seeks maximum total return from both income and capital gains.” (01:41)

• ETF Spotlight 2: Invesco MSCI EAFE Income Advantage ETF (EFAA)

  • Provides international diversification; utilizes a combination of passive developed equities and an options overlay.
  • Strategy: covered calls and cash-secured puts on equity holdings (Europe, Australasia, Far East – excluding U.S./Canada).
  • Aims to reduce volatility and avoid duration risk of traditional bonds.
  • 21 developed market exposures (Switzerland, Germany, France, UK, Japan largest).

  “You get the combination of a passively developed market equities approach with an options overlay. So even though this is for income, this is really rethinking bonds.” (03:09)

• Why use these ETFs:

  • Options overlays to generate income and downside protection.
  • International diversification without traditional bond risks.
  • Professional management makes it practical for ordinary investors.

  “It's not the kind of a combination I think that ordinary investors are going to be able to do on their own. It's something you need Wall Street professionals to handle and that's why people turn to Invesco for that.” (04:24)

2. Ric’s Personal Update and Transition (06:02 – 07:44)

• Announcement:
  Ric shares his impending retirement from podcasting at year’s end (December 27th, 2024), following a 35-year broadcast career.

  “The end of this month is my final podcast. December 27th, my long 35-year run is coming to an end. Bittersweet for sure.” (06:03)

• Focus on Philanthropy:
  Ric intends to devote more energy to philanthropic activities, specifically the Museum of American Finance and its financial literacy mission.

3. The Mission and Fascination of the Museum of American Finance (07:55 – 22:24)

The Museum’s Purpose & Initiatives

• David Cowan introduces the museum’s three pillars:

  1. Preserving America’s financial artifacts
  2. Exhibiting financial history
  3. Teaching financial literacy

  “Our core mission boils down to preserving, exhibiting and teaching about our nation’s finances and financial history.” (08:24)

• Collections Highlight:

  • 14,000+ record locators, including artifacts from the founding era and Alexander Hamilton.
  • Traveling exhibits and robust educational outreach, including programs with the New York Public Library and a Museum Finance Academy for high schoolers.

  “We are aligned with the New York Public Library for two eight part sessions…One of them is on retirement and Rick Edelman kicks it off every year.” (08:38)

• No barriers to entry:

  “Everything is free.” (09:36)

Artifacts That Bring History To Life

• The Stamp Act Stamp:
  • Stamp was required under British law to tax colonists, sparking major revolutionary discontent.

  “We have the stamp from the original Stamp Act. That was the match that lit the American Revolution.” (10:38)

  • David explains its context:

    “We’re going to make [colonists] buy a stamp to put on all printed material…Boy, did that not sit well. There was a huge pushback.” (11:36)

• Alexander Hamilton’s Public Credit Report:
  • As foundational as the Constitution in shaping U.S. finance; museum possesses the original document.
• George Washington’s Treasury Bonds:
  • Used to pay Continental Army troops, preserved as national relics.
• JFK’s Blank Check:
  • Kennedy provided the Secret Service with signed blank checks for family purchases; one such check from the day of his assassination ended up at the museum.

  “...he would give the Secret Service a blank signed check...this check is drawn on...National Citibank...the backstory...it actually was in possession of an agent in Dallas when Kennedy unfortunately was assassinated...he sold it at auction, and then someone bought it and donated it to our museum.” (15:13)

Making Financial History Relatable

• Conquering Financial Intimidation:
  Ric:

  “Most are intimidated by the subject of money or they're bored by it or just flat out mystified. And this helps make it very human, very real.” (16:00)

• Hamilton’s Enduring Legacy and Pop Culture Crossover:
  Museum’s popularity soared after the musical “Hamilton.”

  “I’ve been at the museum 15 years. Nobody cared about Hamilton. It wasn’t until Lin Manuel Miranda came along…Now I have 8 year olds that finish my sentences about Alex Hamilton.” (16:22)

• The First National Bailout:
  • Hamilton's “assumption” plan and its revolutionary approach to honoring national debt.

    “Hamilton says we should assume it. A really powerful idea, but the Virginians don't want to do this. This is being stymied in Congress…In the first great bailout in American history, we are going to assume all of this debt as well as the state debt and put it on the books of the United States and reissue new U.S. treasury bonds that actually have a direct line to today's $36 trillion worth of debt.” (17:32)

  • Notable summary:

    "Why we should do it: the price of liberty." (18:30 – Hamilton’s reasoning, paraphrased by Cowan.)

Connecting American Finance to Personal Finance

• Three Ps:
  David:

  “I call it the three Ps, public finance, private finance and personal finance…The things you’ve taught for decades, Rick. Budgeting, risk investing, credit. It’s the same whether the United States or you want to buy a car.” (19:50)

• Financial Literacy Efforts and Challenges:
  Half of states mandate financial literacy in high schools. The museum’s mission is to grow this vital skill and confidence.
• Bridging History with Present Financial Security:
  Learning from past financial crises and decisions prepares individuals to navigate their own money matters.

4. Memorable Quotes & Moments

• On the relevance of financial history:

  “Money is never really talked about. And yet without it, none of this would have happened.”
  — Ric Edelman (13:35)

• On inflation, then and now:

  “Hyperinflation takes place right here in America during the Revolutionary War. There’s a great letter from George Washington...‘a wagon full worth of money will not buy a wagon full worth of provisions.’”
  — David Cowan (13:46)

• On making finance fun and accessible:

  “One of the jobs of our museum is to make it understandable, fun, easy, and a lesson at the same time.”
  — David Cowan (18:54)

• On financial literacy for all:

  “If you are more financially literate, you will have a better financial well-being.”
  — David Cowan (20:28)

5. Timestamps for Key Segments

• Rethinking Bonds and Two ETFs Overview: 00:33–05:02
• Ric’s Transition and Philanthropy: 06:02–07:44
• David Cowan & Museum of American Finance Interview: 07:55–22:24
  • Museum’s mission & archives: 08:24–09:36
  • Stamp Act and artifacts: 10:22–12:21
  • Hamilton & the National Bank: 12:30–15:13
  • Making money matters engaging: 16:00–19:22
  • Financial literacy and modern lessons: 19:22–21:09

Additional Resources Mentioned

• Museum of American Finance: moaf.org
• U.S. National Debt Clock: theusdebtclock.org
• Invesco ETFs: invesco.com

Summary Takeaway

Ric Edelman makes a compelling case for rethinking traditional bond investing—introducing listeners to sophisticated ETF solutions designed for today's markets. The episode seamlessly transitions into a celebration of America’s financial past and its ongoing relevance, through the work of the Museum of American Finance. The spirited discussion with David Cowan spotlights how financial literacy, preserved history, and well-chosen investment options can empower individuals and society alike.