Investing for Ourselves: Clem Miller

A portfolio can look “wrong” on paper and still be rational in real life. We pull back the curtain on what we actually hold, why one of us is willing to sit on a huge cash position, and how a downside-first investing philosophy changes every decision. If your main goal is staying in the game through market volatility, this conversation is built for you.

We dig into practical portfolio allocation: why bonds may fail as diversification when interest rates and duration drive prices, and why cash can be an intentional risk management tool rather than a lack of conviction. From there we get specific about how we evaluate equities using valuation and sentiment signals like the forward PEG ratio and short interest. The lens stays simple: protect the downside, stay flexible, and don’t confuse activity with skill.

Geopolitical risk is the real-time backdrop, pushing a tactical tilt toward energy stocks. We explain how choosing companies with lower exposure to conflict regions can matter, why refiners can benefit through stronger refining margins, and what the crack spread says about profitability when oil prices move. Just as important, we spend time on the part most investors skip: the exit strategy. Clear sell rules can turn good picks into realized gains.

We also revisit gold and why it may not behave like a textbook safe haven if sovereign sellers need liquidity for reconstruction. If you want a grounded framework for investing psychology, defensive portfolio construction, and disciplined selling, listen through to the end. Subscribe, share the show with a friend, leave a review, and tell us: what’s the one rule that drives your allocation decisions?

Straight Talk for All - Nonsense for None

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Disclaimer - These podcasts are not intended as investment advice. Individuals please consult your own investment, tax and legal advisors. They provide these insights for educational purposes only.

Transcript

Welcome And Why Get Personal

Steve Davenport 0:26

Hello everyone and welcome to Skeptics Guide to Investing. I'm here with Clint Miller, and today we kind of want to take a different approach than having guests or talking about some particular issue with um, you know, that's in the news. And we want to get personal with you. And what we want to try to talk about is our own investment allocations and what we invest in and why, and try to talk about how we built our portfolios um to satisfy what our invest what our needs are financially. And I want everybody to understand that this is strictly for educational purposes. And what we're trying to do is just go through the thought process, you know, the psychology of investing, as if we were, you know, writing a book chapter chapter here. And that psychology has flaws and it has strengths. And um, each of us has to kind of make these decisions in our lives. And we're near, you know, we've been making these decisions for a while now that we're in our 60s. So we think it might yield something for people who are trying to fit all of these ideas around investing into how do I live my life and how do I invest my own account? Because each individual is different. Each individual has potentially a partner or family or kids, and everyone has a slightly different picture. And so, Clem, if I was to just get at, you know, whether it's your returns forecast or whether it's your family or whether it's the percent that you eventually want to be able to take from your portfolio, how do you look at your holdings and look at your allocations and come up with um what to do with your money?

Clem Miller 2:19

Okay, so I think the most important thing is that I try to make money by not losing money. Uh and it's very, I don't think of things uh exclusively in terms of trying to beat any kind of a benchmark. Uh, I try to not lose money in down markets. And I try to, you know, I try to make money, maybe not as much money as the index as the market uh during an up market, but I'm certainly trying to protect on the downside. So I'm very sensitive about trying to protect on the downside. So I'm not, you know, I'm not trying to to slightly beat the index in all markets. Uh I'm trying to protect myself on the downside. And so to that, um to that uh degree, to that point um or objective, there are a few things that I do look at uh in terms of deciding which stocks to add to my portfolio. So one thing is I look at the forward peg ratio, uh, which is the uh ratio of the current PE ratio, price to earnings ratio, uh divided by forward uh three to five year earnings growth. And so I use that. And you know, the the lower that number is, uh the less expensive, the more attractive a stock is. So, you know, I like to see, you know, ideally I like to see forward peg ratios of below one or one point five, although, you know, I I will go higher at times, uh, but you know, I want to see very attractive uh forward peg ratios.

Steve Davenport 4:19

Uh I also like to see uh I mean can you make it simpler for people? Because I I think it's you're you're talking about in your specific equities.

Clem Miller 4:29

Yes.

Steve Davenport 4:30

But do you want to talk a little bit about the fact that you don't use bonds and the overall allocation at top first, or do you want to build up from the bottom up into how you go on equities and then cover the allocation later?

War Risk And Raising Cash

Clem Miller 4:43

So I don't think in terms of allocation, uh, in the sense that uh, well, in one sense I do, and in another sense I don't. So I don't like bonds because I think bonds do not take into account what's going on with corporate earnings uh and with the growth of the economy. Uh I don't think your cap do bonds capture that. I think what bonds react to are changes in uh mainly changes in interest rates. And actually, I feel like it's very difficult to make predictions based on uh make predictions of where interest rates are gonna go. And and yet interest rates are such a determinant of bond prices. You know, interest rates can go down a percent and bonds could go down five percent, you know, given the uh the multiplier effect of duration. So, you know, I don't and I don't see I don't see that bond movements are necessarily a diversifying uh element to uh to stock price movements. I don't see that that's that that's always the case. Sometimes stocks and bonds move down together uh or move up together. Uh so it's not it's not clear to me that there is a diversifying, uh that there's a clear diversifying element associated with bonds. So I'm you know, I do not like bonds. Now, I do like cash. Uh I like cash because it helps me, it helps me have a defensive portfolio at times. Uh and also I like cash because it gives me a lot of so-called dry powder to put to work when I see opportunities that uh that make some sense. So I like cash. So in terms of allocation, I like cash. Um, there was a time last year uh when I like gold a lot. And you know, I'm I made quite a bit of money off of my gold holdings. Uh, then I sold that. I bought it briefly and then sold that again. Uh, but I made overall I've made a lot of uh a lot of money on gold. Um, so there's that. Um, but mainly I am in cash and in stocks. And the stocks I, you know, as I said, the stocks I want are sort of more defensive stocks. Uh a lot of times low beta, uh, but certainly uh lower peg, lower forward peg. And uh ideally I like to see lower short interest as well. You know, short interest is uh is an indicator of uh of whether you've got speculators out there uh speculating against a stock. Uh you know, they they think the stock is gonna go down, and I really don't want to go long in a stock when you've got a lot of folks out there who think it's gonna go down, right? So uh so there's that. Now, that all being said, you know, conditions change, and I don't view my portfolio allocations, you know, the stock allocations, as being something that you know I fix, you know, for year after year after year. I just that's not how I act, right? I do have uh I do react to macro conditions. Um I don't see myself as a day trader, so to speak, right? But I do react to macro conditions. And what we've seen with the you know, the current war in the Gulf has certainly influenced my uh you know my willingness to invest in certain things and my cash and my uh my sector holdings. So so I do react to to macro disruptions. So with the energy, with the uh Gulf uh situation, uh I have upped my cash even more than I had before. And um because I'm concerned about I'm concerned about the market going down 15, 20 percent. It's already down about nine, something like nine. Um, but it could go down even.

Steve Davenport 9:35

So so what where where do you typically keep your cash? And where is your cash today as a sample of you know well right now looking at my uh looking at my uh let me look at my my weightings here I just mean generally club I don't have to have an example. I know, I know.

A 68% Cash Snapshot

Clem Miller 10:04

So right now, believe it or not, I'm at 68% cash. Yeah, I'm at 68% cash, which has really helped me a lot with the downturn in the market. Uh I have a number of energy companies that I've moved into. Uh and uh, you know, we can talk about each of those if you want, but just uh, you know, I've got Petrobras uh in Brazil, I've got ENI, I've got Power Pacific, I've got Kodiak Gas, Shell, Kanico Phillips, Phillips66, Chevron, and Valero Energy. And um, you know, I have reasons to buy all of those, specific reasons to buy all of those. I'm sure some of them you probably haven't heard of. Um uh, but some of them uh I've got reasons to hold all of those.

Energy Picks With Low Gulf Risk

Steve Davenport 11:02

Um let's go with Petrobas. Just maybe tell us your thoughts on why you don't think now is a good time for Petrobas.

Refining Margins And Crack Spread

Sell Rules And Exit Discipline

Clem Miller 11:10

Well, not just Petrobras, but uh a few of the others have no Gulf exposure. So I I wanted to have I wanted to have either um either low or no uh Persian Gulf, Arabian Gulf uh exposure companies. Shell has a little bit, but a lot of these companies, you know, Chevron, Phillips, uh ENI, certainly Petrobras, have no Gulf uh exposure. And so I wanted to be able to take advantage of higher oil, oil and gas prices, but without uh without actually having um uh the impacts of disruptions uh you know from production coming out of the Gulf or exports coming out of the Gulf. So that's that was one logic that I applied. And another logic that I applied to my selections here uh is that in an environment of high crude oil prices, uh oil companies can increase their refining margins. And there's this term of art called the crack spread. Have you heard of that, Steve? The crack spread? So so basically it's it's uh the crack spread is two times the price of gas, gasoline, plus one times the price of diesel, uh, minus three times the price of crude oil. So that's what gives you the crack spread. And and higher crude oil prices allow companies to actually expand, interestingly, expand their their refining margins, their crack spreads, because they can charge more, you know, more, even disproportionately more to their uh to their consumers. And so that's why uh you see benefits to uh to companies uh like uh like Par Pacific and Valero. Valero has the benefit actually of being able to use some of this new Venezuelan gas that is coming out, by the way. Um but you know, so you got you know, you got Phillips66, that's a refining company. You know, you got some of these others like Chevron and E ⁇ and Conico Phillips that Chevron that are you know not just crude oil producers, a lot of crude oil from outside the Gulf, but also are refiners and can benefit from that from that increased refining margin. So I have a lot of oil companies uh that uh have been helping me out now that crude oil prices have been going up. And um they there actually seems to be also a um they also there also seems to be a kind of a lag where these companies' stock prices don't go up right away when oil prices go up. They they there seems to be a lag. So when oil prices go up, you've got you know some period of time in which to make an additional additional money off the individual stocks. Now all that being said, Steve, all that being said, uh one of the things I'm grappling with is you know, I need an exit strategy from those oil companies. Uh and I haven't, you know, I've been thinking, well, uh, you know, about putting uh limit limits in here where I sell at certain share prices. And I haven't actually put them in yet because I'm waiting for the invasion to take place first before uh before before I decide to put on limits. Um who knows if uh an invasion of carg island will take place? I don't know, right? Uh but if it does, then uh uh and if if oil prices soar at that point, I may even I may either sell or put on some limit orders to a number of these. So you can see that in the current environment, I'm being tactical. Uh uh as opposed to being sort of strategic. Uh, and um although I'm still, you know, I'm still looking at things like the peg ratio and and the peg ratios, Ford peg ratios for these oil companies are still pretty attractive. Um, I would say most of them anyway are pretty attractive. I I have only two. Let me just finish. I have only two. Right now I have only two technology-related stocks. Uh, I had a lot more before, but I only have two right now. Uh I even got rid of my favorites, Broadcom and uh Arista. Uh I sold those. Uh, but right now I have Micron and Sandisk. And they're both memory companies. And um You used to like progressive insurance too, didn't you? I used to like progressive insurance. Then it uh then it started to run into some problems, but it had a very long positive run. Uh, and I sold uh that one near the top, which you know actually brings me to an important point. You know, you can hear it from what I'm saying about the current portfolio with the oil companies, is it's just as important to have an exit strategy, or at least to think about an exit, than it is about when to buy. Right. Um you can you can spend 99% of your time thinking about what stocks to buy. And if you don't have a if you don't have a way to get out or uh or thinking about when to get out, then you know what's the point, right? It's useless. So you need to know you need to know what to buy and you need to know when to sell. And uh and when you do that, when you when you have a uh a cell discipline, uh I think you're naturally going to have a higher cash level.

Steve Davenport 17:38

Uh I mean, can you just tell us in the same way you talked about the you know um the ratios for the peg? What is your cell how do you typically come up with your cell decision? Let's talk about progressive. How did you decide when to sell progressive? Was it something about the ratios that changed? Was it something about you know the the environment or the you know, you you went through a five percent downturn and you said this could go this could go on?

Clem Miller 18:11

Or let's try to play so so typically okay, so there would be three things not all three have to apply, but there are three things that would lead me to uh uh to sell. Uh one would be uh the price earning the forward peg going up a lot and hitting higher levels, which would indicate that it's becoming expensive. Another one would be a sharp increase in the in the short ratio. So I would uh I would look at that as you know, potentially the short short sellers are seeing something wrong with the company, so I should get out. Uh, so I see that. Uh and the other one would be uh after a long surge in the price, uh seeing it start to turn down uh in in but and not in a way that reflects beta to the market, in a way that reflects a changing alpha.

Steve Davenport 19:16

That is uh So specific things to the company versus macro things to the environment?

Clem Miller 19:22

Exactly. You know, like if a if a company is starting to go down, but it's still going down less than what the market is, I'm not gonna sell it, right? If it's going, if it's if it's going down much faster than the market, then I will consider it. I'm not gonna sell right away. Uh, but you know, I look at uh you know, I'm not one, I'm trying I fight back the behavioral tendency of trying to say, well, I'm gonna hold this until it goes back up to where it had been. I don't do that, right? I don't hold a stock that's been falling to expect it to go up again. I will sell if I see it going down. Um, you know, after a long run where I've made you know a lot of gain, I will sell it. I'll lock in that gain, put it into cash, maybe put it into other things. Um, that's what I'll do.

Steve Davenport 20:16

Um you talk about doing a partial sale versus a wholesale. Like, do you are you a digital person? You're either 100% in or you're zero.

Clem Miller 20:28

Uh I will go, I will I will shave off some uh sometimes, but usually it's uh it's either or. It's by it's binomial, right? It's usually either or. Uh so I like to have that cash available to uh to buy new things. And um I think when you have a lot of cash, you can also you can also dabble a little bit in certain things that you know meet your criteria. And um you know you can put a little bit uh in here and there to be able to do that without being um without uh without actually disrupting the fact that you've got a defensive portfolio. So I guess right now uh right now I know I have those allocations to Sandisk and uh and Micron, and those are stocks that it that had been doing really, really well and haven't been doing well recently because they're higher higher beta. But I feel like I can hold on to them because the rest of my portfolio is so either defensive or energy oriented. And um, you know, today the market is up. I'm doing less well than the market because the market overall is up. It's my cash that's holding me back. Not the energy companies. Energy companies are doing very well. It's the um, it's the rest of the market, or it's the it's my cash that's holding me back. But you know, that's today. That's after Trump makes an announcement that, or there's a there's news out that Trump told his advisors that he he might be willing to to stop the war without opening the state of hormones. So that helped the market go up. But you know, it could just as well be that tonight he invades Carg Island or tomorrow he invades Carg Island and the market will go down again. So I right as of right now, I'm not you know, I'm not making a bet in favor of of uh peace breaking out. Right.

Gold Theory During Wartime

Steve Davenport 22:37

I I think that's what a lot of people are trying to figure out is what's that key moment. Can I just ask one final question? You had a lot of success with gold last year. Yes. You got out of gold. Gold has since corrected some. Do you feel the urge to get back into gold? Or is it have to go to a certain level before you would reinvest? Or like I'm trying to decide between, you know, when if things hit bad, will gold go up where your cash might, you know, might not.

Clem Miller 23:12

So there's a theory out there about gold right now, uh, during the war. That makes a lot of sense to me. And would argue against buying gold right now. And that argument is that is that the Gulf states that need to do reconstruction and Iran that needs to do reconstruction will sell their gold holdings. Or are selling their gold holdings in order to raise cash for uh for for that. Now, these are you know, these are countries that have uh sovereign wealth funds, but they also have a lot of gold. And so, you know, they may be selling gold, or there may be an anticipation that these countries will sell gold in order to uh in order to finance uh reconstruction. So that is the theory as to why gold is not doing as well, even though gold is traditionally uh a safe haven.

Steve Davenport 24:17

Okay.

Clem Miller 24:18

I just wanted to understand, you know, kind of your thought process, and I appreciate you know your insights on my my my before I heard that theory, which makes sense to me, as I said, you know, my theory was the standard theory that you know gold is a safe haven and in geopolitical uncertainty. And so I liked that. Um I like that fact. I mean, last year when I was buying gold, I was operating not under a geopolitical uncertainty assumption, uh, but under sort of a general Trump uncertainty assumption, plus the fact that China was buying um, you know, a lot of gold consistently month after month after month. And I think that was putting um you know, putting a floor under prices. Uh now with what's going on, I don't think gold necessarily is the safe haven that um uh I that you know everybody thinks it is. I think I think energy is the place to be, has been for the last you know month. Yep. Um but you know that's going to end too. And so, like I said, that's uh you know, one of the things that's in my mind is when do I sell? Yep. And uh and so I'm very mindful of that. Just like I sold gold very quickly when gold started coming down. If if we really see, if we truly see an end to this conflict and oil prices starting to come down sharply, uh, I may sell those, uh I may sell those stocks. I I probably will not do it the day they start falling a lot, right? Because the next day there could be a reversal, right? So it may be a few days after they start falling. But besides the stock prices of these energy companies, they don't they don't adjust exactly in line with what um oil prices are doing.

Steve Davenport 26:16

Uh there's if you're taking a unique strategy, and I think uh, you know, I really appreciate you sharing it with the listeners. Um I think your approach is more active than most, but your background and your experience in international give you a unique view of markets and a unique way to uh to look at how how to invest. And uh I mean, um I'll leave you the last word, but I appreciate what you're doing to uh help investors and to help people understand markets better with each and which each and every decision you make. Thank you.

Clem Miller 26:50

Yeah, I would just I would just say, Steve, that I think we should do, you know, we should do these portfolio discussions more frequently. You and I are gonna do one about your portfolio um in a few days. Uh, but I think these are useful and uh and they're gonna change. You know, once this war is over and it will end, uh, and you know, after you know, looking at opportunities for investing cash and so on, uh, I'm gonna have a portfolio that looks somewhat different or a lot different uh than than what I have now. Uh but um I don't know when that'll be. Uh, but in the meantime, I'm gonna keep plugging along with what I've got.

Closing And Listener Feedback

Steve Davenport 27:32

Okay. Thanks, uh Clem. I really appreciate what you're doing, and uh I really appreciate you know you sharing your insights. And for all our listeners out there, we're gonna continue to try to give you the most up-to-date ideas around what's happening in Iran and what's happening in general with the U.S. markets. And uh we appreciate um you listening, and we'd like you to please send us a send us a note, let us know what you think and what you'd like us to do differently. But um, thanks everybody for um coming in today and listening, and uh we look forward to uh working with you again later this week. Thanks. Thanks, Dave.