Markets, Politics, and Debt: Insights with Rich Weiss

Rich Weiss, CIO of Multi-Asset Strategies at American Century, brings 40 years of investment experience to discuss market reactions to global turmoil and why the VIX index remains surprisingly calm despite international tensions.

• Markets appear to be undervaluing risk despite geopolitical conflicts and economic uncertainties
• Economic consensus forecasts predict 1.5% growth this year, avoiding recession but not stellar
• Manufacturing and housing sectors show concerning weakness while consumer data remains resilient
• Bond vigilantes could reject the "Big Beautiful Bill" and drive up interest rates if deficit concerns intensify
• Fed Chair Powell maintaining independence despite political pressure for rate cuts
• Companies likely to pass tariff increases directly to consumers in coming months
• Congressional Budget Office estimates tax legislation could add $2-3 trillion to deficit over next decade
• U.S. interest payments as percentage of GDP have reached approximately 4%, comparable to struggling economies
• Gold has overtaken the Euro as the second most popular central bank reserve asset globally
• Diversification remains "the only free lunch in investing" during uncertain times
• Short-term investment thinking resembles gambling more than actual investing
• High-quality corporate bonds may provide better security than treasuries in the near term

For more insights on navigating market uncertainty with a balanced approach, subscribe to "Ask Rich" on Mondays at 4:00 PM or follow the Skeptic's Guide to Investing.

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Chapters

• 0:00 Introduction to Rich Weiss
• 10:39 Market Response to Global Turmoil
• 18:57 Trump, Powell, and Fed Independence
• 30:35 Examining the "Big Beautiful Bill"
• 39:30 Investor Attention Spans and Strategy
• 46:07 Gold's Place in Asset Allocation

Transcript

Steve Davenport: 0:26

Hello everyone and welcome to Skeptic's Guide to Investing. Today we're fortunate, Clem Miller and I have a guest, Rich Weiss. Rich is the CIO Chief Investment Officer of Multi-Asset Strategies at American Century, and to say he has a lot of people who listen to him and who follow his advice and his insights on markets is a large understatement. I listen to Ask Rich on Mondays at four o'clock and I think it's one of the best half hours in the markets. Listen to Rich because Rich is a balanced, even-handed, very measured and doesn't get involved in the emotions and some of the other things about some of these political events. He is from the Bronx and I do hold out a little bit against him that he's a Mets fan.

Steve Davenport: 1:23

But we all have to learn to work with diversity and I think today will be a test for my diversity training as to whether I can work with it. But,Rich, it's great to have you on board. As we talked about in the pre. How do you think about today and the actions of today and the markets in terms of do you stay calm, cool, collected at all times, or is there ever a time when you get a piece of news that says, hey, bunker busting bombs have been dropped in Iran. That's going to be the explosion point of like. What makes you worried, or how do you feel about what's happening in the world today?

Rich Weiss: 2:06

Sure. Thanks,Steve, and first of all Clem. Steve, thanks for having me on Love your podcast. Oh, it was Brooklyn, by the way.

Steve Davenport: 2:14

Oh, brooklyn, sorry yeah.

Rich Weiss: 2:15

Sorry. Yeah, we take that very personally, you know.

Steve Davenport: 2:20

I went to Columbia and I know what Manhattan is, but I, you know, I went over one time to a Mets game and I went over to watch the tennis once, and I couldn't go to Yankee Stadium. Though it's just like as a Red Sox fan, I think some part of me would die.

Rich Weiss: 2:43

Yeah, the Yankees-Mets rivalry and the Islanders-Rangers rivalry. There I mean, there's more fights outside the rink than there are in ZML. But hey, in response to your question, you know I've been in the investment management business for 40 years now, a little over 40 years, so it's hard to get riled up. You know it changes the norm. Get riled up, you know it changes the norm. And, granted, you know things like pandemics and acts of man, like wars, are jarring on a personal level, but this is standard fare for the markets. You know, what is amazing is, even with all this perceived turmoil, whether it's geopolitical or on the financial front or the budget, I'm sure we're going to hit all the major topics. But you know the VIX index is kind of like Alfred E Newman from the old Mad Magazine. What me? Worry If you remember that. Sorry, I'm dating myself, but VIX index is hanging around 20, which is not too far above its long-term average. So the market's taking it in stride.

Steve Davenport: 3:49

But I don't know. I think the market's missing something here. I think the market is undervaluing risk and, as a derivatives trader and derivatives, I look at the VIX and I think it's mispriced. So I'm buying protection, but I don't think we have a real good transfer mechanism to what I just look at society and the protests in LA and the assassinations in Minnesota and like things that would normally be. You know, like this Indian plane goes down, 240 people on it. Okay, that's item number six in the list of things that are happening today.

Steve Davenport: 4:29

I just find it to be you know my daughter just got back from South Korea my wife was like I was worried every moment. She was there and I just feel like we're at a heightened sense of awareness. But the market seems to be like what is? It Is today, tuesday or Wednesday.

Rich Weiss: 4:46

Like you know, it doesn't care Wholeheartedly agree I mean the market's we would agree in our positions, you know, for potentially more downside than upside at this point. And you know, here I go again dating myself. But remember the what was it? The good, the bad and the ugly with Clint Eastwood. There's always that layout in the markets. But the good news, at least for right now the consensus of economists for real growth this year is somewhere around one and a half percent, which is not stellar, but it ain't no recession.

Rich Weiss: 5:43

The bad news the so-called soft economic data, the surveys, the PMIs these are all the expectational data. They're pretty negative. Most of them are pretending a recession at this point. And then the ugly is some of the hard data. It is and has been pretty negative To your point. Housing sector again this morning, some stats there really in the dumps, and the same is true for manufacturing. But I think the reason the market is holding up so strong to this point is that the core of the so-called hard economic data that is relating to the consumer hard economic data that is relating to the consumer, which we all know is the mainstay of the US economy, is still relatively healthy. Right that consumer sales, income, personal income and spending for May is going to come out this week, but that data still shows resiliency, and the same is true for the jobs market, the labor force data. So all of this nervousness, all of the surveys that you know are looking for a recession or something close to that, it has not come through. Now to your point, steve. It may be around the corner, and you know.

Rich Weiss: 7:04

On the inflation front, I definitely agree. Uh, we cannot call the war on inflation over yet, that the tariff induced inflation. Just that data hasn't come through yet and I think that that chairman, uh powell, mentioned it in his comments the other day. Let's, let's see what happens in june, july, because all of that front loading on inventory building that's allowing, because all of that front loading on inventory building that's allowing the companies to keep prices low. But now that tariff increase is going to start coming through. There was a recent New York Fed report showing that most companies are going to pass all or most of those tariffs right on to the consumer. So we should be starting to see that in June and July and I think that's probably the biggest problem ahead right here is that inflation could be problematic. Lunar KING, federal ADVISOR.

Steve Davenport: 7:54

FEDERAL ECONOMY AND INDUSTRY CONGRESSMAN, congressman. Federal ECONOMY AND.

Clem Miller: 7:58

INDUSTRY CONGRESSMAN LUNAR KING, federal ECONOMY AND INDUSTRY CONGRESSMAN expectations and perhaps the markets expecting and your views on GDP growth. How are you positioning your multi-asset portfolios? Also, I was curious what are the asset classes that you actually have in your multi-asset? I mean, how do you define your asset classes, because everybody defines them a little bit differently.

Rich Weiss: 8:30

Right. Well, overall, I'm happy to say we have been this year, and remain, positioned fairly conservatively or defensively. And you know, as you know, all those stocks have now done a full 360,. Right, they're back where they started this year, but bonds at least, as measured by the Bloomberg Aggregate Index, still outperforming the S&P year to date by a few basis points. Sectors in the stock market like utilities and consumer staples, which are very defensive sectors, tend to do well in downturns or recessions. They are leaders in the market. And, of course, non-us equities, significantly outperforming US equities both in local and dollar terms, in part because of the dollar being weak this year. So, being defensively positioned in fixed income, at the margin and outside the US and in the more defensive sectors, that's been a winner this year for us and that's where we remain.

Rich Weiss: 9:35

Oh and Clem, as far as asset classes, it includes all the usual suspects US and non-US equities, emerging market equities, fixed income all sectors of fixed income, non-us, of course, as well and a variety of other asset classes TIPS, treasury, inflation, protected Securities, real estate, investment trusts. I'd say the only things not typically found in our main multi-asset strategies are cryptocurrency at this point still, we find that somewhat problematic and private markets. We don't have them in the mainstream strategies, although we certainly would offer them or work with them for clients who desire it. So public investments non-crypto, it's pretty much the whole game. Yeah, public investments non-crypto it's pretty much the whole game.

Steve Davenport: 10:28

Yeah. Do you think that this whole argument with Powell and Trump, I mean, do you think it cements the Fed against some of what he wants to show their independence? Or do you think? I've been believing in REITs? When the rates come down, I think there's going to be a boost to REITs. I love REITs for non-taxable accounts to be there generating the four to eight and giving me some upside in principle, and I just think that they should be almost a separate asset class, like preferreds and other high yield debt. They don't necessarily pick my fixed income, they don't necessarily fit in equity, but they're in what I call the messy middle. Do you think this thing is going to get resolved between? Do you think that this process will work and that they will make the best decision they can for the economy and Trump will accept whatever that decision is? And won't? You know, reek? I heard he took in the big beautiful bill. He took out all the salaries for the Fed. I mean, it seems like these two can't keep going like this, Can they?

Rich Weiss: 11:41

Yeah, I guess marriages do exist like this but not I'm very pleased to see that Chairmanaron powell is is, you know, remaining strongly in favor of an independent fed and resisting the pressure, uh, to just cave here.

Rich Weiss: 11:57

And and remaining true to their mandate, their dual mandate. Now, whether president trump will accept that, uh, I, I, I don't know about that, but it may resolve itself this way, because a couple of the Fed governors recently have come out unofficially and hinted that the Fed's kind of closer to reducing rates than many think. I think Fed funds futures are still expecting two rate cuts this year, but not till the end of the year this year, but not till the end of the year. But those two governors came out and hinted that it may be coming sooner, depending on what comes out on these inflation reports. So it may resolve itself in that Chairman Powell and the Fed will lower interest rates, maybe June or July, as soon as June or July, and that'll resolve the conflict there. But they'll do it for the right reasons, not because of the pressure but because their dual mandate demands it.

Steve Davenport: 12:55

Yeah, I mean I've seen some people say that they're a point and a half 150 basis points behind. So I think that they could calm down the whole discussion by taking it down 50 and saying wait and see and I think that's a good way for this to get resolved he gets a cut. I don't think it really does much for real estate because I think it's kind of like 50 basis points when you're at four is you know it's meaningful, but it's not quite the same as when you were at zero and you went up 50. So I think there's a magnitude as a percent of the total that somehow gets involved here. But I guess the reason we really wanted you on this call is I've been just kind of epileptic about this big, beautiful bill. I think that it's the most important thing that's going to happen this year in terms of the markets, because if it goes the wrong way meaning it doesn't get passed I think the market has no expectation of that and therefore it will be blindsided. Just don't look at the votes and count the votes and see that they're going to be able to make all the adjustments they want to please the Senate, and the House is just going to roll over and say thank you very much. Give me some more.

Steve Davenport: 14:18

I think that the House and the Senate are completely different and I think that if we say they're both being directed by Trump, I'd say both of them would tell you that you know. I mean, they have their own opinions about Trump and I'm not sure they're just going to vote because this is Trump's big beautiful bill. And I don't know, maybe I'm idealistic and I think that people base things on good data and facts and they make good decisions when they're informed. And they make good decisions when they're informed. I mean, I don't know. I think this big beautiful bill is one of those things that people will look back on and say he should have started that before he started the tariffs.

Rich Weiss: 15:18

You know you may be right there. You know I hate to underestimate the president's strong arm ability, you know, to basically browbeat the Senate and the House to get in line and pass something that's a compromise. But yeah to your point about maybe should have started here instead of tariffs. That's a tricky one because in part I believe the administration's argument is that the tariffs pay for some of this deficit-increasing big beautiful bill which many are still arguing needs to go on Ozempic and lose a little more weight. Right, because I think the latest estimate by the CBO, the Congressional Budget Office, is that it's going to add $2 trillion to $3 trillion to the deficit over the next 10 years. Now I know the administration will argue back that that does not factor in the positive effects of the income tax cuts which will spur economic growth and remove that deficit. But that's all on the come. I think going by the CBO's estimate is the right way to go. That's the way we've always gone and it looks like it's going to increase the deficit. And the only way to prevent the deficit-busting bill that's not quite BBB, but deficit-busting it's DBB, I guess, but is to get those tariffs through.

Rich Weiss: 16:42

Now I won't get into the whole issue of who's paying for it. I mean, it's pretty clear between the tariffs and the bill itself. It's a redistribution of income, but that's a social comment, not an economic one, right? It's sort of reverse, robin Hood, you're taking from the poor and giving to the rich. The way that works. Because tariffs are regressive in nature. They hit lower income more so than upper income and the income tax code, of course, is progressive. So when you lower taxes there you're benefiting at the margin the higher income. So it's somewhat regressive in nature, but still it can get paid for. Tariffs are all implemented, it's just who's paying for it.

Steve Davenport: 17:29

Yeah, just the assumption that this tax extension can be done with a $3.8 trillion impact on the economy and the government and it doesn't count as increasing the debt.

Steve Davenport: 17:46

I mean, I've heard people make you know I've been sold islands in the stream and I've had people tell me to buy property in Florida, but I can't believe that anybody's looking at extending a tax cut in perpetuity not for four years, not for eight years forever and it doesn't have any impact on the budget. It looks like $3.8 trillion is $3.8 trillion, no matter how you slice it.

Rich Weiss: 18:18

You know, again, this is very much political. I'm not sure why we're looking at a tax year. We're not in a recession. We don't need that fiscal juice or stimulus. One can argue right. It's more political than it is economic. You would think that whichever party was in charge, they'd be looking to reduce that deficit and lower our debt. The fact is, you know, if you look at our interest payments as a percentage of GDP I just saw this in a report and confirmed it online but it's scary Our interest payments as a percent of real GDP, I think, are somewhere around 4%, depending on which source.

Rich Weiss: 19:01

You look at 3.5%, 4%. You look at 3.5%, 4%. And that puts us just under the interest percentage rate of countries like Pakistan, kenya, angola and, believe it or not, ukraine. Those kinds of countries have that kind of interest expense, that kind of fiscal problem. I'm not saying we're like Ukraine by a long stretch, but we're up at a level we've never been at. It's far higher debt burden than any other developed nation in the world. You know, even worse than Greece and some of those.

Rich Weiss: 19:41

You know countries in Europe that have had perennial problems fiscally. So it needs to be tended to. This administration with the big beautiful bill is not particularly paying attention to it, at least in the near term. Now again, you can argue growth over the next 10 years may mitigate that problem. But that's all on the come, and this interest expense is a big burden. It'll continue to be. It's been weighing on the US dollar, the value of the US dollar. Countries have been migrating at the margin away from the US dollar as the reserve currency of choice globally. That's not a good thing for us in the long term.

Clem Miller: 20:41

So Rich. There seems to me to be sort of a logical inconsistency between the budget and the tariffs, in the sense that you know with if you're going to have a trade surplus or a lower trade deficit, that means there's less money coming in from abroad to finance the US. That means less money coming in from abroad to finance the US budget deficit, right? So if the US budget deficit goes up at the same time that the trade deficit goes down, that necessarily is going to imply higher interest rates for government debt. That's the way I look at it. It's an inconsistency, and so hopefully there will be negotiations on the external front that will lead to lower tariffs and sort of a recognition that trade deficits aren't necessarily bad. Budget deficits are much worse.

Rich Weiss: 21:42

I couldn't agree more. And of course we need to distinguish between the trade in manufactured goods versus services, where I don't think we're in a deficit with services. But the president in particular, this has long been one of his bugaboos, you know, to fight against this manufacturing trade deficit, which in and of itself is not a bad thing. To your point, it's painfully elementary or rudimentary to just say we need to export more than we import. It's very naive economics. I know the president went to Wharton for a few years. I can't believe he learned that there, because that's not what they teach there. That you know, that's where I was schooled. Trade deficits in and of themselves are not bad because they have beneficial results. And by the way, to a point earlier about the dollar and the reserve currency, when you are the world's reserve currency.

Rich Weiss: 22:41

By definition, you're going to have a trade deficit.

Rich Weiss: 22:44

I mean that's what it means, and that's a status you want, that's a cachet you want. That's not something to fight against, so it has its benefits. It's just naive and somewhat misleading, I feel, to just argue against manufacturing trade deficits. Now, granted, though, if you or your household work in that sector and it's been hurting you and your family, that's a different story. Right, there are definitely sectors of the economy which have been harmed by our exports versus imports, our trade deficit in certain industries. So it's a social issue as well as a political one, and that you know. I don't have a fight in that or an opinion on that. But overall trade deficit, not bad, trade surplus not good in and of themselves, yeah, yeah.

Clem Miller: 23:44

Yeah.

Steve Davenport: 23:45

Well, go ahead.

Clem Miller: 23:48

No, oh, I was just going to add. You mentioned that you don't have cryptocurrency in your asset allocation, which, by the way, I happen to agree that cryptocurrency shouldn't be in an asset allocation. But I'm wondering you know there are those that have it and you know, I imagine, there are arguments for and against it. Um, what would you characterize as the arguments for and against having a crypto allocation?

Rich Weiss: 24:12

sure, uh well, hell, uh, for for crypto. Just look at the returns. Right, it's hard to argue with that now. It is highly volatile. They are highly volatile if we're just going to use Bitcoin as the representative, but the returns have been spectacular. So it's always hard to argue against that.

Rich Weiss: 24:38

But the arguments against and well, I don't know if you saw, maybe a year or two old the CFA Institute, which tends to be fairly objective in their analyses. The CFA Institute, which tends to be fairly objective in their analyses, that's Chartered Financial Analyst Institute came out with a very detailed overview of cryptocurrency in general and they had a chapter in that report that went through five or six different methodologies for valuing Bitcoin, much like you would a stock or a bond how do you value these things? And they looked at it a number of different ways and the results were and maybe I'm exaggerating a little, but it was on the order of something like it could be valued, depending on the methodology, anywhere from zero to $600,000 per coin. Now, I mean, with that kind of range of valuations where you could drive a truck through, it just doesn't have the status or the class of a viable asset class. It's highly speculative.

Rich Weiss: 25:40

There is no underlying value to that asset. It's supply and demand. Underlying value to that asset is supply and demand. And, granted, if governments, namely the US government, decides to get in full bore with a what they call what is it? A central bank crypto CDBC I forget the acronym for it If the US treasury decides to issue a digital coin with the US backing, now, there's something which would substantiate, validate it and possibly move it into the realm of a viable, respectable asset class. But right now, bitcoin as it stands, it can go from its current level of what? Somewhere around $110,000 to $50,000 tomorrow. Right, it's got that kind of volatility. That's not something we want to expose most of our clients to in the short term, right?

Clem Miller: 26:33

Yeah, yeah.

Steve Davenport: 26:36

I mean Rich when you're in charge of multi-asset. I mean, there's always been this argument. I'm from the equity side, clem's from the equity side, so we believe that what we're doing somehow is you know, I mean, is very accurate and on the point. But the bond vigilantes seem to be a group who get more respect than the equity and I guess I wonder how you feel about do you think the bond vigilantes is a real thing or do you think that they look at things in a more risk-adjusted way? I kind of think they do, and they're very hard to shake.

Steve Davenport: 27:15

And it seems to me that the one reaction we haven't talked about is will the bond vigilantes take this bill when they see it close to passing, and say you know, this sends the wrong message and it causes everything to go the other way, meaning higher rates in the US, it's inflationary, it's too much stimulus, yada, yada, yada. And all of a sudden, our national debt we're paying 5% to 6% instead of 3% to 4%. That, to me, immediately caused a recession. Do you think the vigilantes have it in them? They're not as smart as us equity guys. Their CFA's right.

Rich Weiss: 27:57

Well, there are many good points you make. The fixed income markets are much more mathematical and they are less expectational in many ways than stocks. You know the stock valuations can vary significantly or have a very wide degree or range of values, whereas a fixed income, you know it tends to be more mathematically matrix driven on the pricing. But I am definitely fearful of the bond vigilantes and, to your point, and even if the Fed were to lower short-term interest rates, it's very possible the bond vigilantes can come in and blow up the long end of the curve Because they are, again to your point, angry about what the administration is doing to the deficit, and so they will sell, and they have done it in the past. Administration is doing to the deficit, and so they will sell, and they have done it in the past.

Rich Weiss: 28:51

Um, uh, for those of your listeners they probably know, but you know that dates back what? To the mid 80s, I think, when that, uh, that term was coined. But it was james carville, I believe, uh, a former advisor to president clinton. He, I'm gonna paraphrase, may botch it, but he said something like you know, I used to think that if there was reincarnation I wanted to come back as the president or the pope or you know, a 400 baseball hitter. But now I'd like to come back as a bond market vigilante, because you can intimidate anybody. I mean, that's the story behind it, right, and they have done it and they can do it in the past. It'll be real interesting to see if and when this big beautiful bill passes, what the final outcome of it, what the specifications are in its final form, and if it does blow up the deficit and debt to the tune that the CBO is saying it is, I have no doubt long-term interest rates will move up, no matter what the Fed does, because the inflation expectations will ratchet right up.

Steve Davenport: 29:58

Yeah, I just have a feeling that we're not taking all the data points, because right now, I mean, this is my opinion and don't take it personally but I believe a lot of investors' attention span has gone from minutes to seconds and we don't focus on the secondary, tertiary or other effects. So therefore, when we look at problems today, we're so focused on Iran and Israel that we kind of forget about Taiwan and China. And when we're focused on the you know what's happening in the US tariffs and we're ignoring the big beautiful bill, I kind of feel like we're you know, it's an attention, it's your attention span stupid and that's what we need to kind of lengthen. And so I want to ask the secondary and third and fourth question, because I think eventually, that's kind of as a chess player that's what I think you've got to do in order to get through the board and at least risk and beat your opponent by as much as you can, and beat your opponent by as much as you can. Is the short attention span hurting us as investors now?

Rich Weiss: 31:16

And will we be rewarded for just being patient here? I believe strongly in what you said about strategy and looking over the intermediate and longer term. That's the way that's investing at its core, in my opinion. What you get a lot of times in the media CNBC has really perfected it now but this minute-to-minute tick-to-tick and when they use verbs like how do you play this market or what are you betting on?

Rich Weiss: 31:42

These are gambling terms, right, and Steve, as you well know my weekly calls, you know I have to prepare them. Since they happen on Monday, I prepare them on Saturday and Sunday and sometimes that's not even. You know recent enough data, the way the market's been moving. I literally have to rewrite it Monday morning because it's moving so fast. On this micro, these micro issues which really, if you're setting their investment strategy appropriately, you should be looking past some of these short-term items and to the bigger issues which could really affect in a dramatic way investments like the deficit, right, not not that that the Middle East conflict and what it may pretend on a human level, much less a financial level for everyone, but in terms of oil and other things, but that could be important potentially. But the tick to tick, minute to minute maneuvering that you read and hear about. I think it's unfortunate for many lay investors in particular, who think that's the way you should be investing. That's a roulette table. That's not the stock market for me.

Steve Davenport: 32:57

Yeah, I mean, I think when we look at what Robinhood has gotten into betting on events and betting on sports betting like I watch the NBA finals and I see all these ESPN bets and I kind of feel like I mean, I'm not a puritan, I'm not a, I don't. I believe in. You know, if you want to put a wager, you put a wager, but it's a completely different decision when you're investing and I guess I'm I'm kind of like when did society change? Like, was it the stimulus payments where they said, hey, this $1,500, you don't need it, you're just going to get it and you spend it on whatever you want?

Steve Davenport: 33:35

And everybody went and said I'm going to start to use call options. And so I started to study the call options that were being traded and I'm like these people don't understand it. Like most of the volume was in ones with a higher volatility and they were buying calls. Why would you pay a higher vol that's, paying a higher price for the call up and then I realized these people don't care, they just wanted to put their $2 on the table and let it roll. Yeah.

Clem Miller: 34:04

Rich, I got well, sorry, go ahead. Role, you know, yeah, rich, I got well, sorry, go ahead. I was going to say I was going to ask you uh, what? How do you, how do you feel about thematic investing? And also a separate question uh, how frequently should an individual investor consider reconsider their asset allocation?

Rich Weiss: 34:29

If I could take the second part first, it's not necessarily calendar driven. Like you know, I'm going to retool or rebalance every Wednesday. I'd say it's more market driven, right? So if there are major moves in the market that drive your asset allocation away from its long-term strategic levels, then perhaps you should think about repositioning. And generally the benefit of doing that is you'll be buying low, selling high If stocks have a good run as they have. It generally means most people will be overweighted in equities relative to their appropriate level, whatever that is, and therefore you should sell equities to get back in line, which means, again, you're selling high and presumably buying low on the in the other investments. So I think market driven rebalancing, uh, is appropriate. That's not to say you should be trading every time the market moves a few percentage points and you're out of line by a percent or two or three. But when your asset allocation for most retail investors gets out of line by more than 5%, 10%, maybe it's time to look at it, of course in a tax-s sensitive way, right, if it's a taxable account.

Rich Weiss: 35:49

On the issue of thematic investing we're fans of that. We have strategies that tend to do that. I don't know if you consider sustainable investing, thematic or not, but we have many strategies that follow that line of thought. It makes sense as long as you can stick to it, right. I mean, sometimes the themes don't play out in the short term and you have to resist the temptation to abandon the reason you got in it in the first place and wait for it to pay off, if you will. But if you can stick with a theme type of investing or strategy that offers that, a theme type of investing or strategy that offers that, and you realize that's the way. That's why you bought it in the first place, buy it and hold it and wait for it to pay off, I think it's a very valid way to do it. But overall, nothing beats diversification. That is essentially the only free lunch in investing, or one of the only ones. Diversification is smart, it's prudent, whatever that means to you and you'll forgive me, I'm not a very religious person, but I tend to quote the Bible on this one, because it turns out it's in the Old Testament, I think, ecclesiastes.

Rich Weiss: 37:05

I think they attribute it to Solomon, I forget, but it goes something like divide your portion to seven or even to eight, for you do not know what misfortune may befall the earth. That's a biblical quote. I think that says it all. Diversify your investment board Now. Back then, of course, they were talking about goats and, you know, sheep, but today they were talking about goats and sheep, but today we're talking about stocks and bonds, and it still makes sense today to do so. Don't put all your eggs in one basket. I guess that's the Mark Twain modern version of it. Or, as I think Tony Soprano said or maybe it was Al Capone, you can put all your eggs in one basket and then kill anybody who tries to take them. But something like that.

Steve Davenport: 37:51

I think that's a good idea. I mean, how do you feel about gold in your allocation decisions and how does that? You know? I don't know if you listened, but Clem is in that space and I've said, if it makes sense, it makes sense. I mean, where does the yellow metal fit in your places of safety? Robert?

Rich Weiss: 38:14

R. In various strategies we have, we have used commodities generally speaking, not always specifically precious metals like gold and silver, which, as we all know, are great safe havens in times of economic or geopolitical panic. Right, and it's proven out that gold has been one of the best performing asset classes in the world what over the last year or so, maybe outstripped only by Nvidia and Bitcoin, perhaps, but it makes a lot of sense in portfolios as a safe haven. Now, of course, it can, and has gone dormant for years, if not a decade or more at a time, but it does pay off in times of panic and in defense of gold as a strategic investment going forward.

Rich Weiss: 39:09

Gold as a strategic investment going forward uh, I just saw the data that came out and we were talking again about world reserve currencies. Certainly, the dollar is still number one, far and away number one, but number two uh, just which just overtook the euro, is gold. Um, central banks around the world now have more invested in gold than they do in the euro, which formerly was the second place currency reserve. So gold has a legitimate place in portfolios, as it's just as needed now or depended on as the euro or any other currency in the world.

Steve Davenport: 39:45

Yeah, I think it's a little ironic that we criticize individual advisors. When I bring up the idea of gold, it's like I'm some kind of a devil worshiper. They say it's a dead asset, it doesn't do anything for you, it doesn't produce anything for you, it's no income from it. Therefore it's not an asset, and I've gone down this path with people. But then I look and I say wait a minute, aren't the people in these central banks? You know they're sitting there and they could buy something else that would earn, you know, one, two percent return, but they've chosen to own gold. So are the researchers at the central banks different than what we should do for our clients if they think it's an asset that should be held as a secure value? Why do we tend to be more in need of cash flow than the governments around the world?

Rich Weiss: 40:44

Great Again, in times of panic, it's there. I don't know if this analogy will work. It just came to mind, steve, as you were talking. But if investing were like a car, everybody wants to just pedal to the metal, throw it all in stocks, because those are the things that have the highest return generally, whether it's emerging markets or tech stocks. But gold to me is like the brakes in a car. Yeah, they don't make you go faster, they actually stop you, but they are sorely needed at times. Right, you don't buy a car without brakes because they don't make you go faster. You need brakes in a car. So to me that's kind of like gold. At times, brakes are very important. I'm not pretending always to know when that might be, but having a small allocation to gold or other commodities in general makes a lot of sense, oil included, right, you never know which way that's going.

Steve Davenport: 41:44

Do you guys have an allocation to gold or oil in your current or have you ever had allocations to it in your multi-strat?

Rich Weiss: 41:51

Yes, our global allocation fund a couple of years ago had it and we can and do use it occasionally in our multi-asset strategies on a tactical basis. So it's not necessarily in our target date funds but in some of our target risk funds. You'll see it, commodity exposure in general is expensive to hold strategically over the long term, but on a tactical basis could make a lot of sense.

Steve Davenport: 42:22

That's great. So the last part of the big beautiful bill that we haven't talked about is really the first thing that's going to be a problem, which is the debt ceiling. And if this thing starts to take longer and the debt ceiling becomes more of an issue, I mean, will they have to strip it out and do it so that they get something done? Will they say, oh, it feels like an all or nothing bet. This is either going to work or it's not going to work. And yet we are 90% in the opinion that it's going to work. And I look at the debt ceiling and I think Rand Paul is not alone in saying, hey, adding $5 trillion to that, that's kind of a big number. And why do we say now versus other times? I mean, do you?

Steve Davenport: 43:11

think the debt ceiling is ever useful or is ever a thing that helps us?

Rich Weiss: 43:18

Well, yes, I think it's a good guide and I know every administration just keeps raising it. You know, because administrations like to spend money and please consumers and goose the economy, I think the bill will pass in some form. Like its current form. I think it'll be detrimental to the debt and deficit to some degree because I believe the administration will get it passed in some form. The administration will, they'll get it passed in some form. As far as it being problematic in the very short term, I don't know about that. You know, again, we have the luxury as the world's reserve currency. You know, to simply print more money. It'll be inflationary, it's.

Rich Weiss: 44:02

You know the US is not like a household. Certainly, if you were a household and you just blew up your debt, you're going to get in trouble. Right At some point the collectors are coming and you have to sell your house and I mean there's all kinds of problems when you get into too much debt. But you know this president in particular is a big fan of debt. Right To you know, a user, sometimes an abuser, I mean to a fault. So I don't think the president's afraid of taking on more debt. He's done so many times in his prior personal and business lives, so I don't think he's fearful of it. At some point there's going to be a comeuppance. You can't just keep taking on debt, saying the level doesn't matter. Even if you are the US dollar, we're going to have to pay for it, and the price comes in terms of inflation, recession or loss of status as a currency reserve. There will be a payback at some point. Don't know exactly when or where that's going to occur, but it has to. Can't just keep printing money.

Steve Davenport: 45:13

Len, do you have anything to add or want to wrap up with our final thoughts?

Clem Miller: 45:16

Let's wrap up. I don't have any more questions. I think I've covered a lot of territory. I think we've all covered a lot of territory today.

Steve Davenport: 45:25

Yeah, I mean, I kind of want to just end on what I see and what I see as the place to be for the short term, you know the next three to six months and I know that's not part of the, you know, cfa regimen, but I feel that there could be some times where some people in the next three months are going to get pretty scared, that there could be some times where some people in the next three months are going to get pretty scared and I believe that we will have a problem with the deficit and we will have a problem with the bond vigilantes.

Steve Davenport: 45:54

So my thing is, I don't have the confidence Rich has in treasury and the ability to print money, because I think we're already seeing some people politicize owning treasuries and I think that if we had Japan and China and some of these big holders who didn't react the way they normally do, which occurred recently and bonds could go down and stocks are going down, which I don't think people are comfortable with, because they've always been told in the 60-40 world, your 40 is there when your 60 isn't, and I think it's been a little bit simplistic because it's worked in the past and I'd say the past is one indicator of the future, not the only, and so I believe in corporate bonds right now.

Steve Davenport: 46:44

I like a J&J, I like the AAA companies that are the US economy, because I believe they're going to be able to allocate, take advantage of tariff, take advantage of asset location and take advantage of whatever the Trump administration puts out. And I think that there are great companies that are at bonds and I would look at their balance sheets and say this looks as good as, or better than, for the short term, what the government is doing with treasuries.

Clem Miller: 47:16

And.

Steve Davenport: 47:16

I think that for us, sometimes we have to look at these sacred cows. I was told that we never invest in things that we know are going to have a negative return. Yet for two years, when interest rates were near zero, I don't see anybody in the financial service industry who said let's get rid of our bonds.

Steve Davenport: 47:39

They were basically saying this isn't going to keep up with inflation, You're going to lose value, but we want you to stay here. Going to keep up with inflation, you're going to lose value, but we want you to stay here. I thought that was the anti of what we were taught. I thought we were taught to make wise decisions so that you always have positive returns. But that's what happens in this world. Sometimes You're given a situation you're just not comfortable with. I think we're in a situation we should not be comfortable with, and so I would like to say hey, if you have any reservations, go to the sidelines.

Steve Davenport: 48:14

You got a nice rebound from the April 8 lows. Take some chips off the table. I think that it's not a zero probability event that next year's tax rates are higher than this year. It's low. I agree with you, Rich, If you're talking about the majority. Majority is still in favor of the bill gets passed but my point is that you can't always bet or invest in a way that is going to be aligned and make sense. Sometimes things happen that are events outside our control, and I think you have to sometimes prepare for them as well as the ones in your control. So what do you think for the future three to six months, Rich or Clem or whoever wants.

Rich Weiss: 49:07

Yeah, rich. We are, I would say, prudently and cautiously positioned, not necessarily misaligned with your comments, steve, but defensive sectors of the equity market non-US equities as much as US equities, and in the fixed income arena, definitely high quality, whether it's treasuries or corporates. And in terms of duration, actually we're hedging our bets being short and long because we're really not sure if the Fed is going to yank rates down or we're going to come into a slowdown here which might benefit long-term rates. So I think we're well diversified. We are not taking on a lot of risk over the next three months, three, six months, and that's where we've been so far this year. Again, that's worked out pretty well so far this year, even with the rebound in the high-flying US equities more recently even with the rebound in the high-flying US equities more recently.

Clem Miller: 50:16

So Rich, as Steve knows, I'm focused very heavily on well gold, as well as on equities with a significant cash portion. But within the equities I'm pretty defensive. Defensive I look at low peg ratios, I look at low beta and something that a lot of people, I think, don't look at, which is I tend to favor low short interest. So the combination of those three, I think, is pretty protective as far as equities are concerned.

Steve Davenport: 50:45

So it also looks at glass door ratings by employees, which I think is another quality measure.

Steve Davenport: 50:52

So I really appreciate you coming on, rich. You did a great job. I really like your insights and I like the way you talk about this market. I wish I had your patience and I wish I could be as even keeled. I just need to listen to you more. Probably maybe I should start trying to imitate the Brooklyn accent, and maybe that's what people here in the South, every time they meet me, they say you're not from around here, are you? And I don't know whether to take that as a positive or a negative, but I've enjoyed having you in the show, glenn. Thanks again, and we look forward to all of our listeners. Please like, share and try to take what we think with a grain of salt and use it to make your financial IQ and wellness better. All right, everybody, thank you.