Episode 339 - 2024 Year-End AMA Pt 2

24:17The index, the equities in general, will start to reflect that if it made sense to do so. A micro strategy is going to be an interesting microcosm of how that plays out, I guess, although they're doing it a little extra. Yeah. There's some interesting financial engineering going on there. What do you think, Dan? Anything, Dad? No, not on the Bitcoin side. And we'll get to that a little later. There is another question about how we answer questions about Bitcoin from clients. So I may have a little more to say about that. Okay. I'll read the next one. How should Canadian investors adapt their investment strategy if the United States imposes a 25 % tariff on Canadian goods?

24:53I mean, the main thing that I would think about there is that to the extent that's going to have an effect on asset prices, it's already happened. If the probability of it actually happening increases, it'll be reflected in asset prices as we get closer to that. Unless you have a very specific prediction on whether that's going to happen, you probably don't need to do anything to try and get ahead of it. Even if you do have a specific prediction, that doesn't mean you're going to be right. It doesn't mean you can trade on it. I probably wouldn't do anything now. If we could have predicted that would happen a while ago, we could have shorted the Canadian dollar maybe, but it's already happened.

25:27Canadian dollars already fallen relative to the USD. I don't think there's much to do there. Yeah, I agree. I mean, there's always some kind of economic news that looks like a signal and most of the time it's noise. And to your point, it's priced in very, very quickly. So even if you predict this correctly, you can't predict the market reaction to it. B, you might not predict it correctly. So at the end of the day, now you're just making an active decision based on some frame of view, based on a bet that you're going to make on A, the binary event happening, like yes, it happens or no, it doesn't.

25:55And then how the market reacts to that. So I haven't done anything with my own portfolio. I haven't even looked at it. Neither have I. Yeah. If you're going to adapt your investment strategy to every piece of economic news like that, it's a very slippery slope and pretty soon you're just becoming an active. Well, then you're just day trading, making massive returns, right? Exactly. So, I mean, it's tempting, but I mean, the boring answer is do nothing. Tune it out, carry on. Yeah. All right. I'm going to read this one. This is a good question for both of you guys. When does it make sense for a not yet incorporated high income professional, so probably a physician, maybe a lawyer or something like that, to borrow to max out a tax-free savings account and front load our ESPs?

26:37If they're not yet incorporated, they've got a high income, but maybe not high enough to max all the accounts out, should they borrow to max out all the registered account room? Why is the not yet incorporated part fundamental to the question? If the person had no plans to ever incorporate or was already incorporated, would it fundamentally change our answer to this question? So there might be an implication there that once they're incorporated, they wouldn't use these accounts because they would just defer tax through their corporation. Like I've seen people with that mindset that once I incorporate, I'm going to leave everything in my corporation, pay myself the minimum salary I need to meet at my objectives.

27:10I'm going to use the corporation as my taxable vehicle. That could be it. We don't know. Okay. And not use a TFSA. We wouldn't agree with that. No, we wouldn't agree with that. I mean, I certainly wouldn't. It creates a massive concentration risk from a tax perspective. And we just saw that come to life with the new capital gains inclusion rate changes, right? So that's a good question, though. And so borrowing to invest, one, if you borrow to invest in registered accounts like TFSAs and RESPs, the interest that you pay on that loan is not going to be tax deductible. Whereas generally speaking, if you borrow to invest in a non-registered account, you at least get a deduction for the interest paid.

27:45So a high income professional, assuming top tax bracket, and if we call it 50%, is losing the tax deductibility of that by using it to fund RESPs and TFSAs. Borrowing to invest alone is a fairly contentious topic. I know there's some research out there on the kind of life cycle investing that suggests that younger people should kind of smooth out their savings that way by borrowing to invest. But there's a cost and there's a risk, right? I don't know when we do plans for people I don't think I've seen a plan where it's like look the only way that you're going to meet these objectives is if you go and take a loan right now and put it in your TFSA and do the same for your RESPs right like we can just backfill those accounts later as your income goes up or your other debts get paid down and your cash flow situation improves or if you incorporate we can look at other strategies but I can't think of off the top of my head a scenario where it would be obvious to me that borrowing to invest in those accounts is optimal.

28:34I'm not saying it doesn't exist, but that's not something that I would generally look at for somebody like that. Yep. I would agree with that. Never seen a situation where I would have recommended it and have never recommended it to a client. Yep. We've even looked at cases where in the debt swap scenario where someone has a taxable investment account that's sufficient to pay off something like their mortgage loan. And so we explained them, well, hey, if you paid off the mortgage with taxable account and then reborrowed to invest, it would make the interest deductible. People are like, oh, that's really exciting.

29:02You go through the mechanics of it and load it up in financial planning software. What we found typically is that the difference in the long-term outcome is really not that significant. That's between just paying off the mortgage completely versus leaving it in place, whether it's tax deductible or not. In theory, there's cases where leverage is optimal and maybe it makes sense for young people to borrow to invest sometimes, but unless you're using a lot of leverage, the impact in the long run, it's not that crazy and you're taking a whole much more risk. Yeah. And let's assume too, that if you're going to borrow to invest, you better be investing in something that has a much higher expected return than the interest rate on the loan.

29:40And so you basically need to be a hundred percent equities. Now for a TFSA, for the longterm, that might be entirely appropriate. Most people are not going to go a hundred percent equities in an RESP, at least not after the beginning, depends how old your kids are or whatever. So yeah, if you're going to borrow to invest in a 60, 40 portfolio, you know, it doesn't look very good. Your expected return has to be much higher. Yeah. Now there's the grants, which is interesting. But in this case, they're talking about front loading the RESPs. So that's obviously... So you won't, yeah, you can't front load the grants, right?

30:12Yeah, exactly. So those grants have to be kind of captured over time. But it's a good point now too, because your cost of borrowing is not the interest rate that's posted today. Like every loan in Canada is variable to some degree, mostly because even mortgages are usually five-year fixed mortgages. I think there are 10-year mortgages, but you are going to be subject to interest rate risk over the life of that loan. And you might have a prediction that rates are going to stay stable or come down. That might not be true. And if rates right now on even like a secured line of credit on a home are probably in the neighborhood of still 6 % even with the interest rate cuts.

30:43So for a TFSA, that's your hurdle rate before you're even profitable, right? So you're taking on a guaranteed cost for a variable outcome. And I just don't think that's a great trade-off in a lot of cases. I would say that in financial theory, it might make sense to lever up the 60-40 portfolio, something that I've always struggled with. But we do the same thing as you, Dan, where if someone comes to us and they have, say it's a 60-40 portfolio and they want to borrow to invest, the first thing we would do is say, okay, well, let's look at if we just changed your asset allocation to be more aggressive.

31:13Treat the leverage as a negative position in bonds. Let's net that out and just map out your expected financial outcome in that scenario. Typically, increasing the equity allocation looks about the same in a projection as adding leverage. Yeah. No, that's a great way to frame it, right? The idea that the bonds, you're basically a lender. And if you're going to be a lender and a borrower, maybe you net that out and just put the difference in equities, right? Yeah. So that's one of the scenarios that we'll model out when we're talking to people about, or when someone approaches us about leverage.

31:45The other comment I'll make there, Ben, you mentioned sort of a debt swap or an asset swap where you convert non-tax deductible into deductible debt. And I've gone through this with many clients over the years. And in every single case, they never borrowed the money back to invest because the feeling of getting rid of the debt was psychologically so empowering. And it happened to me personally, I did the same thing. I had non-deductible debt and I went to pay it off and borrow it back. And once it was paid off, I just never got around to borrowing it back. So I was kind of like, you know what, like just minimizing my required fixed monthly costs by not having that debt payment, even if it might not be optimal on paper, just felt good enough.

32:18Right. So as people thinking about borrowing to invest might actually feel different once they have interest payments that they have to make on those loans. And they might decide, you know what, like, I don't like this at all. And they may pay it off quickly, which is obviously a good thing. But I think you don't know until you've actually experienced being leveraged and having an aggressive portfolio, what that feels like. Yep. I've had that conversation many times and I have seen people actually take leverage, but I would say in the vast majority, probably 90 % of cases, it's the exact same thing that you just described where we're like, okay, here's the strategy.

32:49And they're like, that's really smart. let's do it. And then you pay off the loan and we're like, okay, the next step is to reborrow so we can invest. And they're like, yeah, no, I'm kind of feeling good without the, I've had a couple of people who are just like hyper smart, like too smart for their own good, arguably. That's like, no, this is optimal. We must proceed. And then they've been fine. I've had one case that I can think of where they reborrowed and then their financial situation changed in a way that made the leverage really uncomfortable. And it was like, this was one of risks, they ended up being fine.

33:18But yeah, always an interesting conversation. Okay. Next one. I'll read it. Assuming it is an issue, is the problem with index funds that they overvalue individual stocks or overvalue the entire market? Is the solution to switch from the S &P 500 to a total market index? Why? The answer is yes. Yeah. This is a pretty common question. And I would say, if you're going to talk about a cap-weighted index. I think you have to say that cap-weighted index overweights overvalued companies and underweights undervalued companies. It can't overvalue all of them. And then the second part of the question, I mean, S &P 500 is not an ideal index, but it's not a terrible index and it doesn't solve the problem one way or the other.

34:05But I'm sure you guys have more advanced way of approaching it. It's one of the big questions that we talked about with Mike Green and Randy Cohen about, is there a cross-sectional impact, which is like, is it affecting individual stock prices or is it a market-wide impact? That's one of the things that Randy was pushing Mike on. I don't really know if we got to a good conclusion there, but there's like in one world, adding money to an index fund has a disproportional effect on larger stocks, like a flow into the index has a disproportional effect on larger stocks because they have lower price elasticity.

34:40That's the argument anyway. Every time new money flows into the index, it has a bigger price effect on the larger companies. Then as there's more indexing, that it gets exacerbated further. That's the story anyway. How true it is is another question or how worried we should be about it. Then the other alternative is that money flowing into the index just pushes the whole market up and affects valuations all the same. I don't know what the truth is. I don't know if anybody does. There's different research and different opinions on this, but there's no like, this is factually what is happening. This is a pretty new area of serious research.

35:13There are some papers coming out that suggest different things, but I can't conclusively say this or that at the moment. It is a solution to switch from S &P 500 to total market. If you believe in the cross-sectional story, if you believe that flows are disproportionately overvaluing the larger stocks and that's going to continue to be a problem going forward, S &P 500 is 80 % of the US market capitalization, mostly in the largest companies in the US market. In that cross-sectional story, in the event of outflows, the opposite would be true where large companies would be disproportionately affected in the other direction.

35:48Their prices would go down more so than smaller companies. If you're worried about that, if you're worried about flows reversing, then yeah, total market could be a solution. I would argue total market's a better solution anyway. Why the S &P 500? I don't think there's a great argument for that. Yeah, that's where I'm at on that. We don't know. Is it cross-sectional or the total market effect from indexing? We don't know the answer conclusively. People should probably be total market instead of S &P 500 regardless though. This is largely a US phenomenon, is it not? A US equity phenomenon? In theory, I guess it would affect every country, but the overvaluing of US stocks, how expensive stocks are, it's largely a US story right now.

36:30If you go to other developed and emerging markets, the stocks of those countries are not quite as expensive as the US, right? No. Another phenomenon, I have some notes on this for the after show, but one of the discussions in the rational reminder community right now is, is the small cap value premium a thing of the past? There are people showing data from the last 18 years in the US that, hey, this thing's dead. That's basically because large cap growth has done so well, pushing up the US market and small cap value being a relatively small portion of that hasn't really kept up. If you look internationally, over the same 18-year period, small cap value done great.

37:02And large cap value has not been so crazy like it has in the US. So I think indexing is bigger in the US market. The other interesting thing though, is that as the US market has become increasingly important relative to other markets, it's 65 % of global market cap right now, which is crazy. Because 11 years ago, it was, I don't know, 35%. It's crazy how much it's changed. And even though other countries aren't indexing as much to the extent that they are, like global cap-weighted indexing, they're allocating increasingly more to US stocks, which could further be affecting the issue. Anyway, there's so much speculation on this topic, lots of strong opinions.

37:43I think for now, it's safe to assume everything's going to be okay eventually. I do question seven. When to buy a house in Canada or how to think about buying a house in general from a personal finance perspective. We should do a whole episode on rent versus buy. That's a good idea. That is a good idea. Where to begin with this one? 20 years ago, I guess. Yeah. I can take a quick crack at it. I don't know. I think probably the biggest point that I've always wanted to make on housing is that renting isn't throwing money away. That's super important for people to understand. It doesn't mean that renting is always better, but I think people start from the premise that renting is always worse and that leads them to make certain housing decisions like buying a house when maybe they're not ready to buy a house or buying a starter home with the idea that they're going to climb up the property ladder over time.

38:29I don't think those are always good financial decisions. It doesn't mean renting is always good and people have different reasons for why they don't want to rent. But I think that's starting point is renting is a perfectly reasonable financial decision. And when you model it out, renting can work out just as well as owning. But when should you buy a house? I think you have to expect to live there for a while because there is price risk in real estate that can be pretty substantial. There's also really high transaction costs. If you're going to live somewhere for two years, personally, I would say that you probably shouldn't be buying.

39:05If you want to live somewhere for 10 years or longer, it probably makes a lot of sense to buy. I think there's also real financial challenges for people who want to buy a house now that real estate prices are so high that the cost of a down payment is pretty significant. That can pose a challenge and then might change the equation on when it makes sense to buy or whether it makes sense to buy what do you guys think i don't think there's a good rule of thumb for this either and like ben we've talked about this before but i hate owning real estate and if i could get a 99 year or like a perpetual one-way lease on a property i would just never never own real estate again to make it somebody else's problem right but like just the costs and the maintenance and everything else alone are a pain but there is a lot of utility from owning a home you can do what you want with the home and to your point earlier you're kind of hedging against future housing costs.

39:46I think there is some utility there, but it also depends on the kind of viewpoint that you have. Like a lot of people think that the next logical step after getting a adult job is they must now buy property. It's like, it's been laid out for them as the pathway to success is you must now buy property. And I just don't think that's true. And a lot of that comes, I think there's a lot of cultural aspects behind it. A lot of that comes from how you were kind of raised and how this issue is addressed in your family. But also I think it presupposes that that will get you a good return on your money.

40:16And it might, and it might not, right? To your point, and as we've discussed in the past, very few people properly account for all of the costs of owning a home. And once you factor all of that in, it becomes much less obvious that this is some past the way to wealth. It's really just the leverage playing out over time, right? You've leveraged a very, very expensive asset that's not very liquid, not very volatile because you don't see the price very often. And it's a forced payment mechanism to pay a mortgage. So if you can overcome all that, And I think buying a place or renting is just totally fine.

40:46I just don't think there's a rule of thumb. Like unless they're talking about like what economic conditions should exist, like they're making a kind of housing market timing question, but I don't think that's a reasonable way to look at it either. Yeah, I think you have to look at this one. I mean, we've talked about it so much, but I mean, if you can distill it down, it comes down to if you purchase a home that you can comfortably or at least with only a slight amount of discomfort afford and you enjoy living in it, it's the right decision for you and your family, it's a great decision. If you buy a house because you think it's an investment and it's something that you must do or you will be left behind, you're probably going to be making a poor decision.

41:23I will say that, and we have a question on this somewhere in here today, I'm going to mention it now that when I modeled this out for the episode that we did earlier this year, one of the things that really jumps out is that you have to do a lot right to be a successful renter financially to match the wealth of an owner in the long run. So you have to have low fees, you have to be well-behaved as an investor, not buying it when things have done well, like not buying Bitcoin at the peak after it had a run up or not buying US stocks after they've had their best year in a long time, all that kind of stuff.

41:56You have to save with a lot of discipline. So low fees, disciplined saver, well-behaved as an investor. And that's not always easy for people to do. If you don't trust your own ability to do those things, to be an emotionally consistent investor and to find good low-cost investments, which is easier said than done, especially for people that aren't listening to this podcast, then buying a house maybe is a pretty good idea. For the average person that's not that financially literate, buying a house is probably not a bad idea. That's the question that I was talking about is what have you changed your mind about in 2024.

42:33That's definitely something for me. All right, next one. It's a variation of one that we had earlier. Well, I'll read it out and then we might get through it quickly, but I'm nearly 34 and saving for retirement. With my long time horizon, what would be the best way to increase my risk exposure? I own a condo and have access to a line of credit, so leverage is an option, but are there other options I should consider? Yeah. It's another one of those cases of people get into a comfortable situation. I mean, in the last AMA episode, I talked about how I I'm a terrible angel investor and I've gone to zero on two different investments.

43:03But I was in the same kind of position where I was feeling pretty comfortable and I had some extra money kicking around at the end of the month for the first time ever. And people were like, yeah, I want to take a lot of risk because they imagine all of the wealth that's going to come from doing that. But you've got to be very careful of the types of risk that you take. My example is an extreme one where I invested in two companies that ended up going under and that sucked. But I took a lot of risk. It could have also paid off. I think that applies just more generally where if you borrow a bunch of money to invest in some risky thing that it could work out, it probably won't, but it could.

43:35And then if you think about the risk of just owning the stock market through index funds, that's a risk with a positive expected return. You're probably going to get a good long-term outcome, not guaranteed, but probably. I don't know if you like maybe tilting towards small cap value stocks has a positive expected return. But again, it could suck for 20 years like it has for the last 20 in the US. So I don't know. And then leverage too. Leverage is a double-edged sword. If you borrow to invest in something, it could make you worse off. It's a really good point because you can take more risk, but that doesn't necessarily mean that you should expect higher returns.

44:10You can take more risk by reducing diversification in your portfolio and buying one stock. But that's not increasing your expected returns necessarily over the long run. It's increasing your risk, but what are you getting for that increase in risk, right? I mean, we don't know what their risk level is. I mean, assuming they're like 100 % equity, the really important thing that people kind of forget is that although risk and return are like inextricably correlated and you cannot separate one from the other, that doesn't mean by taking more risk, you get higher returns, right? You might expect higher returns over very long periods of time if you take smart risks, but you're certainly not guaranteed higher returns over any timeframe by taking more risk.

44:44So I'd kind of just maybe push back if this was a client of mine saying like, why do you want to take more risk in the first place? Are you trying to increase your returns? And if so, what do you have now? And are there risks that we can take that would allow you to increase your expected returns over the long run? Or are you already in like a great portfolio and maybe those dollars should actually be spent on paying down the mortgage on your condo or something, right? Yeah, that would be my first question to someone who asked this is, are you already a hundred percent equities? Cause that's number one, we touched on a little bit earlier.

45:14And it seems obvious to us, but I think there are a lot of people who might have a portfolio that's 60 or 70 % equities and then talk about, I want to leverage, I want to take more risks. Okay, let's take more risks and go 80, 90 % equities, go 100, start from there. And then ask yourself too, this is a question that I talk to young investors a lot, especially those who have quite a bit already saved. Why do you want to take more risk? Well, I want to increase my rate of return. Okay. So let's have a couple of projections here based on what you're saving now and what your expected return is currently.

45:49And then ask yourself, is that going to be enough money for you when you retire? And my guess is most of the time, it's much more than they imagined and much more than they will need. And then you just say, well, why do you want to take more risk in order to achieve a goal that isn't even really a goal, right? Like usually this is done with just a kind of vague idea that I want better returns, not I need to reach X number of dollars by retirement and I'm going to fall short unless I take extra risk. So if you try to tie that risk appetite to a person's actual life goals, sometimes there's a mismatch, you know, where you can say to somebody, listen, you can accomplish all of your financial goals and just take a moderate amount of risk.

46:36Why do you want to jeopardize that? Why do you want to introduce the possibility that you might fall short of your goal when you don't need to? Yeah, that's a great point. What are their goals? What are they actually trying to achieve by taking more risk? I think that it is super common for people because they're in a position to do so to think that they should be taking more risk because it'll give them more wealth. But for what? I think getting to that for what is super important. I agree in a lot of cases, it'll completely change how somebody's thinking about it. I got into this exact argument with somebody on Twitter yesterday.

47:05They were quote tweeting somebody like, I think Nick Majuli from Retold's Wealth. And Nick's post was saying, maximizing your 401k, which is kind of the equivalent of a group RSP here in Canada, is not always the optimal decision. And the post he was referencing was a Reddit post where this individual shoveled as much money as possible into the 401k, but then was unable to buy a home because that money is essentially blocked away or pre-tax. and this individual was saying you know nick mcjooley is an idiot the 401k would have ended in higher terminal wealth i'm like no that's not what it's about like optimizing your terminal wealth is not the name of the game it's achieving your financial objectives so you can't say that the optimal use of these dollars if the goal was buy a home in five years and you recommended to this person to put it in an illiquid account where they were unable to meet that goal you have now failed your client and given them poor advice so i don't think it's about optimizing terminal wealth Your story, Dan, why are we increasing returns in the first place?

47:58If we're able to meet all of our objectives on this path, why are we trying to optimize for terminal wealth when taking more risk just increases the dispersion or the probability that you're not going to meet those goals, right? Terminal wealth is a really interesting one because, I mean, if you're really crass and you phrase it to a client, is your goal to die with as much money as possible? I've never met anybody who's told me that that's a financial goal. And yet, occasionally, that is a metric that people will use in financial planning. It's like, I get it. If leaving a large estate is an important goal for you, and it is for many people, fine.

48:32But I wouldn't start from the assumption that most people's number one goal is to have as much money as possible the day before they die. So yeah, to your point, terminal wealth is only one of many possible financial goals, and it's rarely the most important one. And often, it's not even really the goal, right? right? Like if you probe further, like I want to die with as much money as possible. Why is that? Well, I want to make sure that my kids are taken care of. Well, okay, that's your goal. You want to make sure that your kids are taken care of. It's not about dying with as much money as possible.

48:59So now we can look at options for what does that mean? What is taking care of your kids? Is it allowing them to purchase a home? Is it creating an annuity income for them for life after you pass away such that their basic needs are met? Like we can math all that out, but it doesn't necessarily mean optimizing terminal wealth, right? And so I think people have trouble creating meaningful financial goals. And it's just so easy to anchor it to like some number. Like I'll retire when I have$5 million. Why is that the number? Like, well, that just sounds nice in my head. I talk to this guy on Twitter all the time.

49:26He's like, 10 million, then I'm done. I'm like, why, why 10 million? He's like, I don't know. It just sounds like a great number. I mean, sure it does, but like, is that too much? Is it too little? Like we just don't know. So setting smart goals in the first place. It won't be enough when he gets there. No, for sure. I've seen it a thousand times. Yep. Yep. I've done the same personally. So if we were actually to answer this person's question though. They could increase concentration in high expected return assets. So if they're 60-40 stock bond, they could increase their equity weight. So they're taking more concentrated equity risk.

49:56They could add other sources of expected return. So they could invest in riskier stocks. Although even defining what that means is kind of tricky. There are many, many different ways to say that these stocks are riskier than those, like value stocks, small cap value stocks. and there are tons of other ideas, research-based ideas with varying levels of research supporting them. I think it gets pretty tricky pretty quick. Could take completely other types of risk outside of the stock market. They could use other asset classes like we talked about earlier, private equity and private credit. I don't think those are a great way to do it because the costs tend to eat up most of what's there.

50:34Then they could use leverage. Between those two things, is between increasing portfolio concentration, adding other sources of expected return and using leverage. There's probably some optimal combination of all of them. If you really wanted to have the highest expected return possible, theoretically, it's probably like some equities, some other sources of expected return levered up to some optimal amount. I think getting that right is really hard. That's probably the answer they were looking for, but it's also probably not what most people should do. Yeah. Or maybe they have some skills, they can start a business or something.

51:02There's other ways to look at risk, but that kind of risk is very difficult to quantify too, right? Because it's just such a big, no one, a lot of businesses fail. We'd also don't know what skills they have, but they have to give up their job to do that. And is their job a source of income that they need to make their mortgage payments? In which case that risk might not be worth taking, but I agree with the other risk. Yeah. Next one's pretty similar, but let's try it. I work with a lot of younger clients that have high incomes and are looking to save aggressively and retire early and take on the risk.

51:27If you were to play this out and actually give them factual based advice, how would you do it? For example, would you just encourage larger small cap value allocations? Yeah. So there's a post that was circulating on Twitter that was like a quote from Reddit. And I think many people get obsessed with the concept of fire, financial independence, retire early. And when they get there, they're just really bored. And so this post on Reddit was this guy who's 40, I think he had something like$2.6 million in liquid assets, no kids, wife is still working full time nine to five job. And this guy's retired.

51:58And all he does all day is sit around eating THC edible candy, and playing video games. And his wife is just so disappointed. And it's like calling him a loser and stuff, right? And he just kind of like doesn't really know what to do with himself anymore. And this, I guess, is probably not his ideal view of retirement. Like when he was starting his fire journey, like maybe in his mid 20s or something like that. I don't think he was probably like, yeah, I want to sit around all day and use drugs and sit on the couch and play video games. Like that's not usually everybody's goal. So I think a lot of people who have this expectation of what early retirement might look like just need to be very careful with that because it's not always as rosy as it seems.

52:35I totally get the desire for financial independence, right? Like you want to be in control of your calendar. You want to hit that point where you have a work optional lifestyle and that's fine. But I think to answer the question, we already largely answered it, right? Like how is the portfolio set up now? What reasonable risks can you take that are going to increase your expected rate of return? And is there anything else that you can do to increase your total portfolio value over time? Like, can you save more? Right. But I don't know that like somebody who's already doing that a hundred percent equities, saving everything they can.

53:04There's not a ton that makes sense to me that would jump out as go do this thing now. It's a tough thing too. Like if you're talking about somebody who is saving aggressively and wants to retire early versus someone who is saving aggressively and wants to retire later, If your goal is to retire early, meaning, I don't know, five, 10 years from now, regardless of your age, you got to be careful about how much risk you take with your portfolio, right? You don't want to be in 100 % equities three or four years before you retire. So those goals might be incompatible, right? Usually young investors have the risk capacity, right?

53:37They can go 100 % if they want to because they have a very long time horizon. But early retirees don't have a very long time horizon, at least to the retirement date. Of course, they need to make their portfolio last for a lot longer, which is why, I don't know, this then becomes a difficult asset allocation decision, doesn't it? Because on one hand, you need to make your portfolio last for 50 years instead of 30, which means you should probably be more aggressive. But if you're more aggressive, then it's harder and harder to draw down the portfolio during those negative years. So yeah, I don't know.

54:12Fire is a difficult financial planning question for sure. It's got a number of problems as well as the lifestyle issues, which you touched on, Mark. It doesn't appeal to me, which is good because I'm no longer young, but it never would have. I can't imagine having retired at 40 and not had that to do for the rest of my life or my career. I don't think I'm so focused on work that it's my whole identity, but it's certainly something that gives me purpose. Listen to this, Dan. I'm going to argue that you actually did fire because you did the same thing as so many of the fire people did, is that you left one career and then started giving other people advice on how they can to retire.

54:55That's literally like every fire blogger out there. Yeah, except I work twice as much now as I did when I was 30. So do the fire people. Yeah, maybe. They travel around, they write books, they blog however many times a week. It's no joke. I always found that funny about the whole concept is that so many of the influencers at least in that space, and maybe there are people who actually follow the principles without being influencers. But so many of the influencers say like, yeah, I retired early, I quit my job. But then meanwhile, they're making however much money by doing something else, a different job.

55:26It's not retirement. It's just a career change. I think you're right about that. And then a lot of cases, and maybe there are people that are very quietly actually retiring early and we just don't hear from them because they're doing things that they love. Maybe there are people like that, but you don't have - Because they're on the couch. Those aren't the ones you hear from. I will say on this one too, actually, that in that fire space, there are a lot of pretty wacky investment ideas that have come out of there to try and deal with the problems that you were talking about, Dan. I've seen all kinds of weird strategies with funny names that are supposed to solve those problems, but I think typically they probably exacerbate them as opposed to solving them.

56:02But yeah, it is for sure a hard problem. All right. Move on to the next one. All right. Given the potential benefits of rental properties for portfolio diversification and income generation, how should Canadian investors balance their allocation between traditional retirement savings vehicles like RRSPs and TFSAs and real estate investments to create a more robust retirement strategy in the face of economic uncertainties expected in 2025. I think we could drop that final clause from the question and just say to create a more robust retirement strategy in general. I'm not sure that the answer is going to change based on the fact that it's 2025.

56:44I think we've talked about in past episodes that buying direct investments in real estate is in many ways buying yourself a second job. And you can maybe earn extra income by working that job, but it's work. It's no joke. If you're just building a diversified portfolio of real estate assets, I think you can just do that through real estate investment trusts. If you look at the evidence on does private direct real estate investment perform better than REITs? No. Publicly listed REITs tend to perform better. I don't think you're gaining much other than maybe access to leverage and maybe an avenue to exercise your human capital to earn some income, which is unique to direct investment compared to a REIT.

57:24I don't find real estate investing to be a particularly attractive asset class or job. I hate it. I sold my rentals. worst i had two and like we held for four maybe five years and i just got to a point where i was just like why am i doing this this sucks like this is awful i hate it i hate the stress of it and it is work and i had property managers but then you're just managing the property manager who's managing the tenant like you're still communicating a lot you still have to make decisions you still have to pony up money there's just still problems with it and i was like what are we doing i just liquidated everything as soon as i could after i made that decision so So yeah, it's just not obvious to me that there are de facto benefits to owning rental properties, especially to your point, Ben, when you can just go out and buy a very, very low cost, liquid, no work portfolio of rentals in like three clicks, right?

58:14Yeah, you're not going to get the leverage, which can work for and against you. And you could, in theory, go get leverage against that position. But I don't think it creates a more robust retirement strategy. People don't understand the risks of rentals. Every time I talk to somebody, they factor in zero vacancy rates in their projections. Like really, there's never going to be a month where there's like a tenant turnover. And yes, we have very, very high rental demand in Canada. But to assume that you're perpetually never going to have a zero cash flow month, I think is just bad, bad planning.

58:42It could be vacant for reasons other than not being able to find the tenant. There could be a problem with the unit that you have to take a couple months to fix or whatever. Yeah. That guy I was talking about earlier, he wants 10 million. he owns something like 14 or 15 rentals and he has some really really bad tenants and a few of them have absolutely i think he's kind of like a slumlord to be honest like i don't think these places are like the nicest places in the nicest areas but like just some of the nightmare stories told me about and he sent me pictures like tenants just absolutely trashing the place and like the cleanup and fixing costs and everything like so that's work but there's also like a massive financial economic risk that most people just totally discount and just to go oh real estate goes up, I should buy real estate.

59:18That's the extent of their analysis. I'd just add two things to that. Just to focus on the specific question when this person has asked, how should Canadian investors balance their allocation between traditional retirement savings vehicles and real estate? I mean, number one, max your RRSP and TFSA before you even think about buying real estate. I mean, that would be my first reaction to that. So I would not, for example, purchase a rental property instead of investing in an RRSP and a TFSA would have to only come after those accounts are maxed. And the last thing I would say about this one is I still personally feel exactly the same way as you guys.

59:58I would never buy real estate as an investment. I have zero interest in it. I'm not convinced that it has a higher expected return than a more liquid portfolio. But one of the things I have come to understand over time in talking to people is that, remember, we do this every day, but there are a lot of people out there who find investing in equities in particular, completely alienating, confusing. You will even hear comments like the stock market is just a big casino, right? So it's people who are clearly not comfortable with investing even in a diversified equity portfolio. And so for those people, I understand it.

1:00:35If somebody said to me, the idea of investing in the stock market just terrifies me, I want something that I can understand like buying a condo and renting it out and generating income. I'm not going to argue with that. I mean, that's a behavioral argument. It's not a mathematical one, but I respect that it's a legitimate position for people to have. Yeah. Good stuff. Next one. I'll read it out. What do you think is the most overlooked behavioral bias or misconception about investing that continues to harm individual investors, even among those who consider themselves financially literate? It's a great question.

1:01:08I think it's an easy question. For me, overconfidence. Yeah, I mean, I don't know if it's overlooked. I mean, I guess people who are overconfident overlook it themselves. I think most of the rest of people realize that especially people who consider themselves financially literate are most likely to be overconfident and just start to think that you know more than the market. This is really easy. All of these decisions are easy to carry out. And then you realize you don't necessarily know as much as you thought you did. So that continues to haunt everybody, I think, to some extent. Yeah, mine's related.

1:01:44I was going to say a bias for action. People feel like they should do something and they have to do something. And when the market changes, when the tariff thing or Bitcoin goes up or US stocks outperform Canadian stocks, people feel like they have to do something. And that's usually the wrong time to do something. And I mean, usually doing something is wrong in general, but especially after some big thing happens, responding to it right afterwards is not usually the right thing to do. That bias for action I think is huge. People who know more in a lot of cases, not in all cases, but in a lot of cases, people who know more will suffer from it worse because they'll think they understand what's going on and they will understand what's going on.

1:02:25That seemingly makes it more obvious that they should do something. Usually, doing nothing is really hard, but it's usually the wisest thing to do in investing. Have you guys heard about the study that they did about soccer goalies on penalty kicks. It was to demonstrate this idea of action bias. And I may not be summarizing as accurately as I should, but the basic idea was most soccer goaltenders would have been best if they had just stood on the spot for a penalty kick. But if they just stood on the spot and the shooter kicked it into the corner, they would look like a fool. Why didn't you dive?

1:02:59So they dive on every shot. And anybody who's ever watched a penalty kick or a shootout is seen, you know, half the time you dive in the opposite direction. And once it looks ridiculous, sometimes when you dive to the right and they shoot to the left, but you say, well, he had to do something. And so there's that action bias in there as well. And yeah, you know, to your point, it feels often like doing nothing when you have a long-term buy and hold strategy. But the way I like to frame it to clients, I said, we're not doing nothing. We came up with a thoughtful, long-term approach, and now we're sticking to it with discipline, that's not nothing.

1:03:38That's the opposite of nothing. Yeah. I mean, doing nothing is action, right? It is a decision that you are making. And this is why I always tell people don't check their portfolios because every time you do, whether you're consciously doing it or not, you're making a decision to buy, hold, or sell. And the more you look at your portfolio, the more interactions you're giving yourself where you have to make this buy, hold, sell decision, right? And people don't do well with that. And I think to summarize my thoughts on it. I think recency bias, which plays into the other two, but I think recency bias is a really, really dangerous one too, right?

1:04:08We all have clients who just, why should I not go a hundred percent us stocks? Why should I not go a hundred percent Bitcoin? Why did you not own this asset class that did the best last year, right? People have a really, really difficult time looking far back in the past and looking for into the future. Like, I think we tend to live our lives in these one or two year kind of goalposts, if you will. So it's really, really difficult to understand that you have maybe a very, very well diversified, very evidence-based, logic-based portfolio when you see stuff like, oh, Bitcoin's up 104 % last year.

1:04:40Why didn't you do that? And I've lost to clients over that in the past where it's like, you got a balanced 60-40 portfolio, but the S &P 500 was up 20 % last year. Why didn't you outperform the S &P? It's like, okay, well, if you're going to benchmark to whatever went up the most last year, then you're just going to be continuously disappointed for your entire life. I'm sorry there's nothing we can do about that so I think recency bias plays into that a lot one quick aside your story about the soccer penalty kicks down I found really interesting there's a book and I can't remember what it is but it talks about how in the NBA if your three point throws were and Ben you might know about this but if you did like the granny style like underhand the percentage of making the three point shot goes up like x like by a huge amount and so it's actually way better to shoot that way but nobody will do it because it's just so embarrassing to do right and I think there was one coach who like tried to get I think it was a women's team actually like an olympic u.s women's team or a college team to start shooting that way and they were practicing that way and then when they went to play their first game nobody shot that way because they were just so embarrassed to actually look kind of foolish in shooting that way so just funny that's hilarious probably free throws not three-point shots or maybe it was yeah yeah i think you're right i think it was yeah i think it was free throws i don't know basketball that's funny though ben have you ever thrown a granny style three-pointer in my life probably yes in a game.

1:05:51No, never. And I would be pretty embarrassed to do it. I'm a decent free throw shooter. I don't know if my percentage would be better with the granny shot unless I started practicing with it. All right, next one. What percentage of your personal portfolio is allocated to stocks and what influenced that specific allocation decision? Personally, I'm 100 % in stocks. What influenced it? It was already at that level before the Scott Cederberg paper that if anything, increased my conviction in that, at least for now. Why was it there? I don't know. Young enough, I can take equity risk. Very comfortable with stocks and how markets work, not at all concerned behaviorally.

1:06:32I think I have the capacity. So my behavioral loss tolerance is there. I can handle volatility. I have the capacity to take risk. And yeah, I guess that's it. I'm very comfortable where I am with 100 % stocks. Do you ever expect to change that allocation as you get older? Honestly. When you look at the Scott Cederberg research, it would suggest that nobody should ever hold bonds throughout their entire life cycle. I'm not saying that's what people should actually do, but that research does support that. I don't know. I think about it sometimes. I think I would be comfortable carrying on the way that I'm set up now, but I'm not anywhere near retirement.

1:07:10It's hard to think about it. mark you're triple leveraged obviously tqqq baby all day it's up so much too it's like by far the best performing position that i have over the past whatever it is six months i'm talking about recency bias and we talk about fomo and stuff you just kind of look at it sometimes you're like maybe there's something there right but otherwise yeah no i'd say 100 stocks like my liquid like rsps you have to say non-registered portfolios and dan my kids are esps are all 100 global equity I do have a bit of Bitcoin that's not a recommendation I'm just saying I do have some Bitcoin and I've had it for a long time it started as like a totally meaningless amount of money but because of Bitcoin's performance since I think about it in 2016 2017 it has become something I think like three to five percent of my overall portfolio that doesn't include the value of my home I'm just talking about investments but for me that's just purely speculative and I don't really think about that as part of my portfolio because in my head it could go to zero at any time.

1:08:06But otherwise, yeah, I don't anticipate ever not being 100 % equity for my investment portfolios. But older Mark might feel totally different about that. Older Dan feels different about that. Yeah. I started when I first saved my first$50 biweekly pack in my first job, it was with 6040 portfolio, and I knew very, very little. And then I eventually increased it to 8020 and then 200 % equity. So I didn't always have 100 % equity that developed over time. Yeah, I think it was sort of the same. And when I started saving and investing, I just used a traditional balanced portfolio and I've never moved away from it.

1:08:42And going back to the point about earlier about the terminal wealth and take as much risk as you need, I'm perfectly content with the expected return on a balanced portfolio. I don't think I need any more and it wouldn't enhance my life to have higher investment returns at the cost of greater volatility. and I think the other part of it is to you have to always be considerate of what you do for a living and our business and my income is intimately tied to stock market returns and so if my personal portfolio was also 100 stocks and you guys are in a similar situation that would be more risk than I would be comfortable with one more question then maybe two because this one's gonna be quick do you believe in bonds I put that one in there because I thought it was a funny question now I've never actually seen a bond personally.

1:09:35I'm pretty sure they're real, but I'm not 100 % sure because I've never actually seen one other than on a computer screen. What do you guys think? Are bonds real? Do you believe in bonds? Are they a myth? Do I believe they exist? I do believe they exist. I haven't seen one, but I do believe they exist. I don't know. It's a tough question, right? Traditional financial models in theory are all just invest in bonds up to your risk tolerance your risk capacity it's a non-correlated asset it's going to reduce expected returns and volatility somewhere on a sliding scale from zero to 100 percent in equity the rest should be in bonds and that just makes sense it's intuitive it's kind of easy to accept and i think once you start looking at other research like cedarburg stuff or anything that really points out that inflation is largely the biggest risk that a lot of people are going to face especially in retirement personally i think the argument for bonds mathematically becomes a lot less compelling I think from, and Dan, you just touched on this, but like behaviorally, I think there's a good argument for in some cases why bonds might make sense.

1:10:32I don't own any bonds. I don't expect to, but I do believe they're real. And I do believe they serve a purpose in a portfolio depending on your risk capacity and profile. But I do think it's very worthwhile to point out to people who are buying bonds that over the long run, inflation is really, really dangerous and bonds can't hurt you there. So that's an interesting, you know, because it comes up a lot, right? And a lot of people will say that history shows us that equities have a far greater expected return than bonds. And so bonds don't make any sense. But bonds were never in a portfolio to enhance return.

1:11:08So the question becomes, I guess, A, are you comfortable with the volatility of 100 % equities? To which the corollary question there that I will say to clients, how would you feel if you lost half of your life savings in six months? because this has happened before, it will probably happen again. And if your answer is, I would not be comfortable with that, then what do you do? So how do you reduce volatility in a portfolio if it isn't with bonds? And I'm not saying that there are no other ways. I'm just saying, how would you do it? I don't know, GICs and cash, something like that. I don't know if that's a fundamentally different risk profile than holding bonds.

1:11:47But I mean, I do think we have to why are bonds in the portfolio? They're there to reduce the volatility of an equity portfolio. That's like 90 % of the reason this idea they generate income. Okay, they do, but I'm not sure that that's primarily why they're there because equities can generate income too. Lots of other investments can generate income, but they are a way of dampening volatility and they do have historically some negative correlation with equities. So if you're not going to use them, what are you going to use instead, assuming that you're not 100 % equities? It's super hard to think about because I agree, they've in many cases had low correlations with stocks, but they've gone through periods of high correlation and it's varied through time.

1:12:29The stock bond correlation, it's this moving thing. Then the other really interesting thing that I find about bonds is that they for sure reduce nominal volatility. If you compare real drawdowns, like in real terms, adjusted for inflation, a portfolio of stocks and bonds can have drawdowns that are about as bad as equities or at least pretty close because bonds tend to get hit really, really hard during periods of high inflation. So you can have that, but to your point, Dan, you don't see that. You might feel it, but you won't really see it in your portfolio. So I think from the perspective of sticking with it, bonds do still help.

1:13:05And then the other thing that I find really interesting about it is just for a long-term investor, one of the things that really matters is how stock returns or asset returns in one period are related to asset returns in another period. With stocks, when you have a period of really bad returns, it tends to be followed by a period of better returns more often than not. With bonds, it's actually the opposite. If you have a period of really bad returns, it tends to be followed by more really bad returns. I think that's driven by inflation again. Stocks have negative auto correlation in returns, which makes them less risky at long horizons.

1:13:36Bonds have the opposite, which makes the more risky at long horizons. So it's really hard. I've got a video that I've been working on on sequence of returns risk, which is the idea that a volatile portfolio is risky because if you get a bad sequence of returns, if you get a bunch of bad years in a row, it can really damage your ability to fund your consumption in the future. If you're spending from that portfolio, there's an important piece of that. And so it's like, okay, so we add bonds. But the problem is because of their positive autocorrelation, sequence of returns risk can actually be worse in bonds than in stocks for someone who's spending down their portfolio in retirement.

1:14:10I don't have the answer, but I think it's not as straightforward as it's often framed as bonds just being a less risky asset. They're less volatile asset in nominal terms. That is true, but that's not the end of the story. It's a topic that probably doesn't get enough attention in general. Okay, last one. What have you changed your mind about in 2024? for. I'll go first. I really do think doing the modeling of historical outcomes for renters and owners in Canada over the period 2005 to 2024, and then playing with sensitivities around savings rates, investment returns, investment fees. I was like, man, it's really sensitive to all that stuff.

1:14:51And most people are probably going to screw it up. So I think it's important to be able to tell someone that and be like, listen, if you're not going to screw this up, If you're listening to this podcast and you're super disciplined and you're going to have low investment fees and you're not going to time the market and all that stuff, renting is a perfectly viable option and you'll probably have a good outcome or you've got a good chance of having a good outcome. But if you're not listening to this podcast and you're just the average person with low financial literacy and you're subject to all the same behavioral errors that people make without having the knowledge to combat them, buying a house is probably a pretty good idea.

1:15:22So I don't think I've ever said that everyone should rent, but I've been a proponent of renting as a viable option for housing, I think for a lot of people, owning is probably better because you have to do a lot of stuff right to be a financially successful renter. I hate to parrot the same thing, but I would say that that is the one idea that stuck with me the most over the last year or so. And just specifically focusing on this idea that for as long as I can remember, the folk wisdom was that buying a home is forced savings. And it always seemed like something that was trite, that was just something people said to encourage you to buy a house.

1:15:59But again, like you said, once you looked at the analysis and you realized that forced savings is incredibly valuable because unforced savings, which is what renters or people who don't own a home must do, is just way harder. And I think looking at that and thinking it through really reinforced just how true that is, just how much it's important to put people on a track where they basically have no choice but to save. If you're investing in the markets and you're doing it voluntarily, it's way more difficult. I didn't learn anything this year, so I don't have a good answer. You're just too stubborn to change your mind about anything.

1:16:36That's right. I'm a grumpy old man now. I don't change my mind about anything. It's tough. I didn't pre-read that question, so I didn't have a response prepared for it. I think I'm sure I've changed my mind about a ton of things this year. I just don't know that I my finger on anything that was like really jumps out to me from like a financial planning standpoint i've talked about this a little bit before i was quite against bitcoin for a number of years i bought bitcoin in 2017 and i started buying it and i was like this is really dumb and then i listened like to the crypto series man that you guys did and i was like yeah it has absolutely no utility i don't like this at all and i started kind of dunking on bitcoin twitter a little bit and then they were like well have you done any research in it and i was like uh well maybe not as much as i should so you recommend me all these books and i'll go read them and i did read a number of books.

1:17:14And I thought they were very, very fascinating. And so I haven't gone from like a full disbeliever to like a Bitcoin maximalist or anything like that. But I'd say on that spectrum, I did kind of move where my position is. And again, that's not a recommendation to anybody, but after reading certain, and I think Ben, you think the books that I read are absolutely ridiculous and they're just a joke and they're all wrong, but they're very well crafted stories. And I enjoyed them very much. And I started just thinking like, oh, I might be wrong about this. So that's probably one of the bigger attitude shifts I had.

1:17:43Again, not a recommendation. The books aren't wrong. They're just Bitcoin is an ideology more than it is anything else. And so if you believe in the ideology and if you agree with the ideology, then Bitcoin's really interesting because it expresses a certain way of thinking about the world and social interaction and economic interaction. I mean, that's kind of cool. And the fact that Bitcoin did that is kind of cool. I don't think that makes it inherently a good thing. And I think all the talking points in support of Bitcoin are ideological and they're not true or false. They're just a way of thinking about the world.

1:18:17And if that's how you think about the world, Bitcoin does solve some pretty cool problems in some pretty cool ways. And clearly a lot of people at the moment think that that's worth something. I agree with exactly that. That's why I think it's actually interesting is because my own worldview could just be wrong and I don't really realize it. We don't know how things are going to change in the future. But to your point, if you start from the premise that the world works a certain way, then it's a really, really interesting asset. Right. And so for me, that's also the main risk of it. Right. It's like, what if the way that Bitcoin sort of ideologues think about the world, what if they're really, really wrong, then this thing has very little actual value over time.

1:18:52And I just don't know if I'm right or wrong on anything. And so I was like, you know what, maybe I should just own a little bit and hedge my own stupidity. I had some for a bit too, not a recommendation either. But when I thought about it, The amount that I had wasn't tiny, but it was enough where if it 10X, it wouldn't change my life. And I was like, what am I doing? This is not even worth the time to have in my head that I own it. So I got rid of it. Has it 10X since then? No. No. Okay. Just curious. All right. We have a few more great questions, but we got to move on here to the after show.

1:19:25We'll save these remaining four questions we had set aside for today for a future episode. Let's go to the after show. We've got a couple of reviews here. I'll read the first one. We can just each do one maybe. Shaped my worldview is the headline. I started my investing journey in April and came across the Roush reminder after finishing the Canadian Couch Potato podcast. That's cool. I spent the next four months listening to every episode with each episode building on what would be my worldview on investing. The podcast keeps me centered when the human in me starts to waver and I'm thankful every time the episode comes up.

1:19:57And that's from Kevin, the loaf investor. It's kind of a variation of the couch potato, I guess. from Canada. That's awesome. I'll read the next one. Incredible information available on demand. Ben, Cam, and Mark consistently deliver thoughtfully crafted podcasts that are a joy to listen to. As a Canadian CPA, this show not only helps me make decisions, but also inspires me to think more creatively about how to make an impact as I approach financial freedom. Thanks to PWL Capital for having the long-term vision for producing this content. I had not heard of PWL, and now I hold your organization in high esteem by Simply Jackson from Canada as well.

1:20:32it's pretty cool they haven't even got to the dan area yet of rational reminders that's what i was thinking too just wait still we get reviews that are just like ben and cameron now more and more my name is starting to sneak in there so you can just kind of tell that people are either they don't like me or they're just going through the back catalog and haven't caught up yet right so dan your reviews are yeah then the reviews are going to take a turn i know it's a one star i doubt that all right well let's read the next one here so thank you for a life-changing podcast It's difficult to add anything new to the glowing reviews.

1:21:01After listening to three or four of your episodes in the summer of 2023, I paused all other content starting from the beginning. And last month, I have come out on the other side, including reliving COVID quarantine through your show. I fired my financial advisor who did the standard, I pick the best stocks, and went with a U.S. advisor who is much for Align and references you. I agree that the podcast and overall financial literacy makes for a better client. My advisor and I spend less than 10 % of our time together speaking about the market. We focus on specific actions to increase happiness and satisfaction and to reduce risk so my family and I can live our best lives.

1:21:40I appreciate the Canadian content. It's nice to hear how other countries deal with universal problems such as mortgages, education, and old age income. Cheers from Russ in the USA. That's very cool. Yeah. A couple of good reviews. You're at episode 339 now. To go back to the beginning, like I actually, that's a project I want to do as well, is actually go back to the very beginning. I've been basically a listener since the very beginning, but I haven't caught up. And especially when I kind of joined, I stopped like obviously going back and listening to the podcast. So I'm a few episodes behind myself, but I do have a plan to do that.

1:22:14And it just seems like such a massive undertaking, right? Like it's a pretty long podcast and some episodes are in one hour, two hours. In some cases, you're at 339 episodes. so you're talking like easily three to five hundred hours of content that you need to get through and like the average person works what two thousand hours a year call it 50 weeks at 40 hours a week so it's like taking like a part-time job it would take you a year at like two and a half hours a day basically to go through all that's insane yep i'm always very impressed when people say that they've gone back and listened from the beginning it's like man that's a lot of content and this person did it in the summer of 2023 right like this person did it in just over a year like they They started in the summer of 2023 and in a year and a half.

1:22:52So they've listened to probably an hour and a half a day on average. I did that with one podcast, the Bitcoin Uncensored podcast, which you can't get. It's not on any of the podcast platforms anymore. I downloaded it all. I found like a random link buried somewhere in a Reddit post to a Dropbox that had all the episodes in there. I mean, I learned a ton about Bitcoin from listening to that incredible podcast. Highly recommend it. That's the only time I've ever done that though. Okay. Good reviews. real quick. In the rational writer community, there's been a pretty good discussion on small cap value stocks and whether the premium has gone away.

1:23:26I think the main point being made is that for the last 18 years, small cap value in the US is dead. Should we even care about this anymore? I would say the main counterpoint is that over that same period, international developed and emerging markets have actually had a pretty significant premium. There's lots of interesting discussion on is that international premium just due to country over and underweights in small cap value relative to the cap weighted market? Is it due to industry overweights? Does that matter? If you're nerdy enough to care about small cap value stocks, pretty interesting discussion, maybe worth checking out.

1:23:58Other than that, happy new year. Welcome to 2025. Hopefully you enjoyed the AMA episode. We'll be back with a guest next week and then we'll be back into the routine of things after that. We actually recorded this in mid to late December so that we'd have a bit of a holiday. But yeah, I guess that's it. Anything else from you guys? I don't think so. No. Looking forward to a full year with you guys this year. Yeah. Yeah. Likewise. It's going to be great. All right. Thanks for listening.