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[Music]
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welcome to the best interest podcast
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hosted by Jesse Kramer where we discuss
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today's best ideas in personal finance
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and investing the best interest is a
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personal podcast meant for entertainment
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purposes only it should not be taken as
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Financial advice and is not prescriptive
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of your financial situation
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here's your host Jesse
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Kramer hey guys what's up welcome back
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to the best interest podcast my name is
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Jesse Kramer it has been a few months
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since I've gotten behind the podcast mic
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and uh yeah you know for some good
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reason at least I think so back in
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September I went to bcon in Austin and I
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was inspired by a ton of cool ideas
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about different directions to
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potentially take the podcast so I wanted
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to pause for a little bit and and
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brainstorm some ideas give that some
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thought and then in parallel with that
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I've recently gone through a pretty cool
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career change was an engineer full-time
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now I'm working in uh the financial
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planning wealth management industry
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full-time for an Raa a registered
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investment adviser here in Rochester and
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so I wanted to understand a little bit
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more about what my career would look
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like I wanted to flesh that out a little
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bit before I continued on my podcasting
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journey I still am not 100% sure where
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the podcast will end up what it will
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look like in a month in a year from now
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but uh I was inspired to get behind the
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mic today and just chat a little bit uh
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some people on Twitter offered up some
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topics they wanted me to talk about I've
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got some topics that I thought of on my
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own that I I think are cool to talk
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about so this is just going to be a
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little bit of a ask me anything slash
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Jesse talks about money ideas
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episode I can't seem to speak now you
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never talk to my words come out
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right okay topic one inflation inflation
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uh as the headline dour everybody's
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talking about inflation inflation
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numbers for December came out I think
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they were maybe around 7% and that means
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year-over-year about a 7% growth you
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compare uh December of 2020 against
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December of 2021 the CPI which is the
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Consumer Price Index grew by about 7%
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yeah personally I see it my grocery bill
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is up my gasoline bill is up outside of
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that I'm sure there are expenses that
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are that are higher than last year
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they're a little bit hard to see they're
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not quite as noticeable uh so the CPI
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though it measures a a basket of goods
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they say they look at the the prices for
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a whole bunch of different goods and the
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weighted average of those cost increases
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is about 7% so some things in the basket
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are way more affected than other things
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in that basket good example would be uh
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housing and cars the housing and cars
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right now if you compare their prices to
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December of 2020 they are way higher
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than just 7% above where they were last
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year so so if I were buying a house
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right now which I'm not then uh
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inflation would have a an extra- large
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effect on me if I were buying a car
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right now which I'm not but I might be
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soon then inflation would have a a heavy
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effect on me so it really depends
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the way inflation affects you personally
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uh it really depends on what you're
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spending money on right now it takes all
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of my money just to eat and pay my rent
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I got the
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blues got inflation
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BL um next topic the 2021 stock market
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so 2021 was about a a 90th percentile
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year in the stock market no matter how
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you cut the cake whether it's overall
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returns whether it's the lack of
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volatility whether it's the lack of any
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big uh drop any big decline in the
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market 2021 was a 90th or 95th
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percentile year a great year and it was
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a great time to be an investor I mean
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right now the economy is hot uh
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unemployment is low businesses are
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thriving right their earnings business
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earnings corporate earnings corporate
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revenues for 2021 we're at historic
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highs
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um the Federal Reserve policies are
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certainly helping that right now but if
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you're not aware there's strong
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speculation that those policies might
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soon reverse or might soon change what
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are those Federal Reserve policies so
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right now it's very easy to borrow money
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at low cost the Federal Reserve sets
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that rate and then Banks fall in line
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underneath or or above that rate okay so
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what does that rate mean that rate means
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it's very easy right now to borrow money
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for next to no cost and for that reason
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it's hard to find a good investment
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return right now from one of those
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lowrisk assets something like a treasury
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bond if you wanted to go out and buy a
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treasury bond you would get something
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like a onee or a 1% annual return for a
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10-year bond in fact I can look it up
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right
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now right now the 10-year treasury is
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yielding
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1.79 3% about 1.8% per year so that's
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the risk-free that's the that's the
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10-year risk-free rate I know that the
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more commonly quoted risk three rate is
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for the three-month Treasury and that
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right now is at about
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0.12% a tenth of a percent 12 12 basis
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point okay so it's hard to find a very
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lowrisk investment right now that has
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any sort of good return plus it's easy
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right now to borrow money at a cheap
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rate so those two facts are
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intrinsically tied together right they
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they have the same cause which is the
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Federal Reserves interest rate policy
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and those two facts are also both
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leading investors to pour more money
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into the stock market okay it's easy to
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borrow money for cheap and it's hard to
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find a low-risk investment therefore
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more money is getting poured into the
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stock market and that's why stock prices
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go up but it's also why in the long run
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stock return s don't look that appealing
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because the stock prices are so high
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part of investing is finding assets that
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will return a good yield over the long
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run for a reasonable price Now Stocks
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companies businesses they might have
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strong revenues for the next 5 10 15
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years but if you're overpaying for them
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today then that investment isn't that
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good the metaphor that I'd like to use
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is is let's think about cars a Honda
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Civic is a great car it's reliable good
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gas mileage gets you from point A to
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point B and if you can buy a new Honda
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Civic for $15,000 $20,000 maybe even
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$25,000 that that's probably a good deal
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that's probably a good investment but if
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someone came in and wanted to charge you
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$50,000 for a Honda Civic well you'd
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probably say no it doesn't mean that the
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Civic isn't a good car it just means
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that at that price it's not a smart
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investment and there might be something
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similar going on with the stock market
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in general right now or at least that's
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what happens to stock markets to markets
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in general when money is easy and when
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uh assets get get priced up what you end
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up seeing is that certain companies are
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being priced kind of like an overpriced
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Honda Civic some investors right now are
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paying $50,000 for a $25,000 car and in
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the long run that will that will bite
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them that will bite them they will see
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that they won't get a return on their
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investment even if the company ends up
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being a quote unquote good company over
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the long run even if the company has
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strong revenues even if the company pays
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strong dividends if you pay too much for
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it upfront it's it's not a great
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[Music]
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investment that's a price too high to
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[Music]
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BU a price too high a price too high a
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price too high a price too high a price
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too high a price too high a price too
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high a price too high okay well what
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happens if the Federal Reserve reverses
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some of their policies and they increase
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interest rates now it's something that
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we hear might happen in the next few
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months uh part of the reason why is that
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the economy is so hot right now is so
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stimulated there's so much money moving
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around the economy which is good that is
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good it keeps everybody employed that
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keeps everybody uh with paychecks coming
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in it's also one of the causes of high
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inflation the Federal Reserve wants to
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help us on the inflationary front one
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thing they could do is increase interest
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rates right it makes it harder to borrow
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money it's more expensive to borrow
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money businesses in general slow down
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the economy slows down a little bit you
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don't want to have a hyperactive economy
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so if the Federal Reserve reverses some
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of those policies if interest rates go
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up we will likely see money leave the
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stock market businesses will have lower
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returns in the future they'll have lower
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revenues in the future new issuances of
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Treasury bonds will become more
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appealing because the interest rates are
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higher there'll be a higher guaranteed
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return on those treasury bonds giving
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stocks more competition for investors
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dollars less demand for stocks will lead
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to lower stock prices but lower stock
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prices if you zoom out 10 20 years lower
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stock prices will tend to lead to better
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stock returns because investors will be
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paying a more appropriate price for
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those stocks today so in the short run
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we're inclined to feel like a hike in
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interest rates is a bad thing we're
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going to see our investing dollars go
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down uh headlines will we have a big
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frowny face on them but but that's just
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a short-term thinking in the long run
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it's likely a good thing uh in the long
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run it's likely going to stabilize the
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economy hopefully it will reduce
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inflation
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and if you're a stock market investor if
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you're a dollar cost average investor
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someone who's retiring in 20 years and
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putting away a little bit each paycheck
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into your 401k shouldn't bother you too
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much that the stock market might go down
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today or this week or this month or this
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year right your your your goals are 10
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20 30 years out in the future you
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wouldn't mind a lower stock market right
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now so if that happens if the US
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Treasury I'm sorry if the US Federal
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Reserve lowers interest interest rates
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don't be surprised if stocks fall in
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2022 this isn't a macro prediction right
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a million different things could happen
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uh but this is just one potential cause
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and effect that sounds like is likely to
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happen in 2022 uh but don't look at that
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as a bad thing right keep a long-term
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view it's just part of the process uh I
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like thinking about new fun analogies
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kind of like my Honda Civic analogy and
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and fun metaphors one thing I think
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about is the fact that we've had 12
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years of mostly sunny beautiful skies in
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the stock market it's been a gorgeous
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day a change in fed policy it might
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bring about a rainstorm for a few months
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or a year or a couple years I don't know
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but it might get a little stormy but
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then I ask myself is a storm so bad I
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don't think so it's a storm as normal
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the rain brings new life with it so just
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batten down the hatches make yourself a
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cup of tea ignore the gusts of wind
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outside ignore the the shower the rain
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showers battering your windows because
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we know that in a bare Market there will
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be plenty of blustering and fear right
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with a bare Market comes all those
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negative headlines with a storm comes
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some wind and some rain we'll just ride
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out the storm because tomorrow the sun
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is probably going to come back out your
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your grass outside is going to be
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thankful that that rain came through and
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gave it necessary water overnight it's
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it's just the weather it's just part of
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the weather it's part of the natural
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cycle of weather just like be Bull and
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Bear markets are part of the natural
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cycle of of capital markets it's all
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part of the
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[Music]
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process um I was asked to talk a little
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bit about International and Emerging
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Markets or I guess what what my personal
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views are on International and Emerging
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Markets so if you didn't know uh you can
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probably find an index fund wherever you
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invest and that Index Fund will
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specialize Li in international Andor
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Emerging Markets the international
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term sometimes refers to anything that's
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outside of the US but is a relatively
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developed economy think something like
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England
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Japan um Germany most of the western
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most of Western Europe Falls in that
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boat Canada uh and then maybe they
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contrast that with Emerging Markets
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Emerging Markets are are newer economies
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uh something that maybe maybe 50 years
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ago was still part of the third world
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and 25 years ago was getting itself out
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of the third world and now is is that
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economy's trying to find its way into
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the first world people like to invest in
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international and emerging markets for a
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couple reasons one it provides some sort
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of diversity to your overall Investment
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Portfolio because International and
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Emerging Markets tend to be uncorrelated
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in some form or fashion come to be
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uncorrelated with us markets and for
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that reason
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it from a portfolio management portfolio
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Theory point of view it's nice to have
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uncorrelated Assets in your portfolio
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when some are going up others tend to be
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going down when some are going down
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others tend to be going up it reduces
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your overall portfolio volatility that's
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the whole reason why people preach
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diversity that whole you know you don't
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want to have all your eggs in one basket
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at the end of the day your your
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portfolio becomes a lot more stable if
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you have different eggs in different
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baskets and especially as you approach
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retire en it's nice to have a stable
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portfolio it's no fun if you're if
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you're making or losing millions of
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dollars in a very short time span when
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you're trying to plan for your
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retirement it's a little stressful so
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anyway what do I think about
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International and Emerging Markets yes
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some of my investing dollars are in an
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international stock index fund for the
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reason that I I laid out before it's
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part of a diverse portfolio construction
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I learned that through reading books
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like a bogleheads guide to investing and
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random walk down Wall Street some Modern
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investment thinking suggests that having
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100% of your money in US Stocks provides
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all the international exposure you need
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and I'll pause and I'm going to say that
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again some Modern investment thinking
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suggests that having 100% of your money
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in US Stocks provides all of the
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international exposure that you need so
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it's it's a weird sentence own nothing
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but US Stocks yet get exposure to to
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International econom in international
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business and how does that happen well
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let's look at a company like Coca-Cola
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Coke is a US Stock yet only 35% of
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Koch's Revenue comes from North America
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outside of that the other 65% comes from
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a couple little subsidiary businesses
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but it's mostly from International sales
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it's an international corporation its
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profits are subject to the economic
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forces and the governmental policies of
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the rest of the world now there are tons
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of companies just like Koch they're
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us-based companies they have US
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headquarters they're listed on the US
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Stock Market and yet they have
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significant exposure to International
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economies and international marketplaces
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so the argument goes if you want
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exposure to International markets if you
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want exposure to Emerging Markets you
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can just own those us companies those
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International us companies so why not
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just own a total us stock market index
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now it it makes sense I I get the
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argument it does make sense now
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personally I'm not spending 60 hours a
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week on investment analysis digging into
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this kind of stuff so I don't really
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have a strong opinion one way or the
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other that is to say if you want to get
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International exposure I don't have a
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particularly strong opinion between
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owning an international fund versus
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owning a US fund that has International
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companies in it I'm just trying to
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understand the arguments and describe to
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you guys listening what those arguments
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are personally I am content with my
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strategy which is owning an
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international stock index that fund owns
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german-based companies and UK based
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companies and Japanese and Korean and it
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owns all these companies that are based
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in those other countries outside of the
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US I also own a US stock index with
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companies just like Coca-Cola inside of
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it where I'm getting additional
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International exposure and at the end of
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the day I think it's an interesting
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argument or if you want to call it a
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debate sure go ahead call it a debate
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but I'm not sure it's that fruitful of a
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debate I think we're splitting hairs if
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there's a difference between the two
00:17:33
strategies I think it's probably a small
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difference and I think both strategies
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will likely provide the long-term
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investing success that you're hoping a
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diverse stock portfolio will
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provide
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take
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[Music]
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away's that 100 men or more could ever
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do I bless the rain Down in
00:18:01
Africa going to take some time to do
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the okay next topic yes uh I wanted to
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touch on my career change a little bit
00:18:12
pretty exciting uh it's not it's you
00:18:14
know it's it's exciting and evolving so
00:18:16
for the last seven years I was a
00:18:18
mechanical engineer working on uh
00:18:21
satellite telescopes and for the last
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three years I've been running the best
00:18:25
interest as a a uh time consuming side
00:18:29
Hobby and small business you know it's
00:18:31
been earning some Revenue over the last
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year the last 18 months and most
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recently within a last three or four
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months I uh started having some
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conversations with some local financial
00:18:42
planners local wealth management firms
00:18:44
looking for ways that I could go even
00:18:46
more dedicate even more time to this
00:18:49
passion of mine which is personal
00:18:51
finance investing helping people with
00:18:53
their financial goals and uh yeah I
00:18:56
ended up getting a job with a really
00:18:58
cool cool firm here in Rochester that's
00:19:00
an RA it's a registered investment
00:19:02
adviser it's a fiduciary meaning it's
00:19:04
it's legally uh bound to act in its
00:19:07
client's best interests which hey the
00:19:10
best interest you know that appeals to
00:19:12
me so I think uh it's a really cool
00:19:14
company we do really good work with
00:19:15
interesting clients we help people reach
00:19:18
their financial goals and we reduce
00:19:21
their financial stress along the way so
00:19:23
those are things that I really believe
00:19:24
in you know some people out there they
00:19:27
want to do all the
00:19:28
Financial work themselves totally get it
00:19:31
I mean personally right I do most of my
00:19:32
financial work myself I'm very Hands-On
00:19:34
with my finances I want to know how the
00:19:37
math works I want to know why the math
00:19:39
works I want to know why decisions make
00:19:42
sense for me or don't make sense for me
00:19:44
it's one of the reasons why I enjoy
00:19:46
talking into this microphone and typing
00:19:48
on this keyboard is to explain how and
00:19:50
why things should make sense to you but
00:19:52
one thing I've realized in my work with
00:19:54
the best interest is that very few
00:19:57
people have as much of an interest in
00:20:00
personal finance and investing as I do
00:20:02
or have as much interest as some of my
00:20:05
other blogging and podcasting friends do
00:20:07
now see the average person they care
00:20:10
very much about their hard-earned
00:20:12
dollars they care very much about
00:20:14
hitting their retirement goals about
00:20:16
setting their children up for Success
00:20:18
about leaving money behind for their
00:20:19
children they care very much about
00:20:22
retiring to that cute little house in
00:20:24
Florida and only spending the summer
00:20:26
time in New York p yes there's a foot
00:20:28
and a half of snow outside right now the
00:20:30
average person cares about their
00:20:32
financial goals but the math and the
00:20:36
spreadsheets and the tax codes and the
00:20:39
planning those things either don't
00:20:41
interest them at all or intimidate them
00:20:44
or some combination of both right I find
00:20:47
the stuff interesting very few other
00:20:49
people find it interesting we all find
00:20:51
the goals interesting but the process
00:20:54
the process itself many people say I
00:20:57
want help with the process proc in some
00:20:58
form or function I want help with the
00:21:01
process well I enjoy helping people and
00:21:04
that's what I'll be doing with my new
00:21:06
job which is really exciting for me I'll
00:21:08
be helping people with the process of
00:21:10
getting them from point A today where
00:21:12
they say I have these goals I know where
00:21:14
I want to be but man the process scares
00:21:17
the out of me well I'm going to
00:21:20
hold their hand and say this is fine
00:21:23
let's get you through the process I'll
00:21:25
explain to you anything that you want
00:21:27
explained or if you really don't care to
00:21:29
have it explained and you just want to
00:21:30
see at the end of the year where you
00:21:32
stand and where we think you'll be in 5
00:21:34
years and 10 years and 20 years we can
00:21:36
do that too hands on hands off it's your
00:21:39
call as the client but uh either way
00:21:42
we're helping you get to your goals
00:21:44
that's pretty cool that's what I'll be
00:21:46
doing that's why I'm excited about this
00:21:47
career change and seeing what's ahead
00:21:49
yeah just wanted to give you guys a
00:21:50
little update on that winter spring
00:21:54
summer
00:21:57
fall now all you got to do is
00:22:02
call and I'll be there yeah yeah
00:22:06
[Music]
00:22:09
yeah next topic uh defi decentralized
00:22:13
Finance the new era of
00:22:16
cryptocurrency web 3 nfts all that stuff
00:22:22
just wanted to touch on it now I follow
00:22:25
this stuff on the internet I do my best
00:22:27
which is to say you know a couple hours
00:22:30
a week I'm reading articles trying to
00:22:32
understand the newest trends other
00:22:34
people right now are dedicating their
00:22:36
lives of the stuff to the cryptocurrency
00:22:37
space and the decentralized finance
00:22:40
space and and uh web 3 nfts it's like
00:22:45
watching a volcano erupt that that's
00:22:47
what I think right now watching the nft
00:22:49
space or just watching I should say
00:22:51
watching the crypto space right now is
00:22:54
like watching a volcano erupt you you
00:22:57
think that it's in all within your view
00:23:01
right and and maybe if you're far enough
00:23:02
away you can kind of look at it and be
00:23:04
like oh it's it's all there but then the
00:23:07
closer you get to it you realize a um
00:23:11
it's absolute
00:23:12
chaos and B uh there is more growth
00:23:16
going on than you can possibly consume
00:23:19
it's overwhelming growth um so if you
00:23:22
want to you can zoom in on one little
00:23:23
part of the explosion and try to get a
00:23:26
really good view of that but it's really
00:23:28
hard to zoom in on all parts of the
00:23:31
explosion and have a really good
00:23:33
understanding of that so you can either
00:23:34
kind of go through the wide lens view
00:23:36
where you're zoomed out or you can do
00:23:38
the narrow view where you're zoomed in
00:23:40
there's just so much happening and from
00:23:42
that point of view it also means in my
00:23:44
opinion that there's uh plenty of
00:23:47
opportunities for some legitimate
00:23:49
projects there are many opportunities
00:23:51
for illegitimate projects which is
00:23:53
another way of saying scams griffs those
00:23:55
kind of things um so it's it's just
00:23:58
confusing it's just a confusing space
00:24:00
it's something that I'm watching but I
00:24:03
have no uh monetary interest in I just I
00:24:07
don't you know should I buy an nft
00:24:09
should I buy a board ape some of you
00:24:11
right now might not know what a board
00:24:12
ape is a board ape is a I mean how do I
00:24:15
even describe what a board ape is I'm
00:24:17
not I'm not sure I can just Google board
00:24:19
ape Yacht Club so anyway Bard ape Yacht
00:24:22
Club
00:24:23
nfts uh people are spending half a
00:24:26
million dollars on an nft a non-fungible
00:24:30
token of an ape of a picture of an ape
00:24:34
and there's site effects to it you get
00:24:36
access to this club you get you get some
00:24:39
exclusive things on the blockchain and
00:24:41
on the one hand I look at it and say
00:24:43
okay it's it's kind of like being a
00:24:45
member of the Pablo Picasso Art Club you
00:24:49
know Pablo Picasso he only made a a
00:24:51
limited number of paintings and if you
00:24:53
own the painting well you you can be in
00:24:55
a club with other people who own
00:24:57
paintings and it's probably pretty cool
00:25:00
but with nfts you know it's just it it
00:25:03
starts to Boggle the mind because you
00:25:04
can say oh well why doesn't another
00:25:07
Picasso come along in nft space and make
00:25:10
their own Apes which by the way tons of
00:25:13
people are doing and it it reminds me in
00:25:15
some way of the uh the car industry in
00:25:18
the early 1900s there were something
00:25:20
there were like hundreds if not
00:25:21
thousands of individual car companies
00:25:24
all around the United States you know
00:25:26
there was the the Rochester car company
00:25:28
and then there was the the greater
00:25:29
Syracuse automobile company and buffalo
00:25:32
had three and all these different car
00:25:34
companies of of people legitimately
00:25:36
trying to build a better car capitalism
00:25:40
at work business people entrepreneurs
00:25:43
wanting to build cars to fill the
00:25:45
consumer need by 1950 there were
00:25:48
basically three big car companies um in
00:25:51
the US and they and they dominated the
00:25:53
US car industry for for decades there
00:25:55
was General Motors Ford and Daimler
00:25:58
Chrysler that's it that's it three big
00:26:01
car companies everything got
00:26:03
Consolidated all those brands that
00:26:05
you've heard of you know Dodge and
00:26:07
Plymouth they all fell under one of the
00:26:09
big three now there's Toyota and Hyundai
00:26:12
and Kia there there's some New Kids on
00:26:14
the Block but still you have something
00:26:15
like 10 car companies in the entire
00:26:17
world 12 major car companies in the
00:26:19
entire world and I just I have to think
00:26:22
that in some way that consolidation is
00:26:24
going to happen in the cryptocurrency
00:26:26
space so what does that mean well it
00:26:28
means it's really hard to know what
00:26:31
cryptocurrency projects to invest in
00:26:34
right now at least in my opinion because
00:26:37
five years from now 10 years from now 20
00:26:39
years from now which ones are going to
00:26:41
be left which car companies at the
00:26:42
beginning of the 1900s should you have
00:26:45
invested in I mean yeah if you invested
00:26:46
in Ford and General Motors you would
00:26:49
have done extremely well for yourself
00:26:51
but if you invested in the Rochester car
00:26:52
company that thing might have gotten you
00:26:54
know shot out of business by the 1930s
00:26:58
and you would have Z to show for your
00:27:00
investment in it I think there's
00:27:02
something similar with crypto at least
00:27:04
that's that's how I view it and and why
00:27:05
I choose to uh to watch the volcano
00:27:08
exploding Without Really uh getting too
00:27:10
close to it because uh yeah I think some
00:27:14
some projects are going to get
00:27:16
obliterated by the ongoing explosion and
00:27:19
uh other other projects might make it
00:27:21
out clean and then there's this
00:27:25
overshadowing question in the whole
00:27:27
crypto base that is still on my mind
00:27:30
despite uh despite everything I've
00:27:31
learned about crypto despite the fact
00:27:33
that I have some money in uh ethereum
00:27:36
and Bitcoin mutual funds through uh
00:27:39
grayscale through a company called
00:27:40
grayscale I own I have exposure to
00:27:43
bitcoin and ethereum and I still have
00:27:46
this question on my mind which is
00:27:48
Underneath It All Is there a intrinsic
00:27:53
value
00:27:54
proposition when you own a stock but you
00:27:57
really really own is a business and that
00:27:59
business is trying to generate profits
00:28:02
by creating a product that its customers
00:28:05
want customers will pay for the
00:28:08
product the company will generate
00:28:10
revenue from the customer's payments
00:28:12
some of that Revenue will be profits
00:28:14
some of those profits get shared with me
00:28:16
the stockholder and thus the stock has
00:28:19
this intrinsic Revenue engine to me and
00:28:23
that's intrinsic value that's what the
00:28:26
intrinsic value is by owning a stock I
00:28:29
own a business the B business will give
00:28:31
me some of its profits year over year
00:28:34
over year over year from now to infinity
00:28:37
and that's why I pay for a stock and
00:28:39
that's why other people will pay for
00:28:40
stock and that's why stock has value
00:28:43
okay now let's do that for
00:28:46
cryptocurrency it gets a lot harder to
00:28:48
do I own a Bitcoin okay that's good is
00:28:52
owning a Bitcoin am I going to generate
00:28:55
profits year over year over year over
00:28:57
year by by owning Bitcoin I'm not sure I
00:29:00
don't think I am I think what I'm hoping
00:29:02
with Bitcoin is that next year there's
00:29:06
more demand for Bitcoin than there is
00:29:07
this year and that might be true that in
00:29:10
10 years and 20 years and 50 years
00:29:12
there's way more demand for Bitcoin than
00:29:15
there is right now why would that happen
00:29:17
well because we expect economies all
00:29:21
over the world to start using Bitcoin as
00:29:24
a medium of
00:29:25
exchange I think that's the reason why
00:29:28
that's the reason that I've heard it
00:29:30
might happen it seems to be happening
00:29:33
more and more same thing goes for
00:29:35
ethereum that we expect people economies
00:29:39
all over the world to start using the
00:29:42
ethereum blockchain as some sort of
00:29:44
store of value or some sort of exchange
00:29:47
of value to start designing programs on
00:29:50
the ethereum blockchain and to start uh
00:29:53
designing their own sub coins on the
00:29:55
ethereum blockchain that solve specific
00:29:57
problems when you solve problems then
00:29:59
all of a sudden you provide value when
00:30:01
you provide value something has has has
00:30:04
value to investors and thus investors
00:30:06
have a reason to pour their money into
00:30:08
that investment so again that's what
00:30:09
we're hoping happens with ethereum and
00:30:12
Bitcoin at least that's my understanding
00:30:13
of it but will that happen
00:30:17
so kind of uh digressed down the rabbit
00:30:21
hole as it were those are just some
00:30:23
thoughts I have on Defi and uh and
00:30:26
cryptocurrency in general I think it's
00:30:27
interesting I pay attention to it I try
00:30:29
to understand it there's way more to
00:30:32
understand than I could possibly grasp
00:30:34
in my limited time and for that among a
00:30:37
couple other reasons I choose to more or
00:30:39
less not invest but if you have another
00:30:41
opinion on it let me let me know what
00:30:43
you
00:30:43
[Music]
00:30:46
[Applause]
00:30:46
[Music]
00:30:50
think take you away take you
00:30:53
[Music]
00:30:56
to
00:31:00
my friends over at Tick Tock life cool
00:31:03
blog by the way Tik Tock life if you
00:31:05
haven't checked it out Jenny and Chris
00:31:07
they're young uh they retired early I
00:31:10
think they're in their mid-30s they
00:31:11
retired early they write cool articles I
00:31:14
I enjoy their writing style and I enjoy
00:31:16
what they choose to write about they
00:31:17
just have a cool cool mindset and some
00:31:19
cool thoughts to share when it comes to
00:31:21
uh being retired early when it comes to
00:31:24
their investment philosophy which is you
00:31:25
know a very index fun on the
00:31:28
philosophy and they uh they wanted me to
00:31:32
talk about what they call surprise
00:31:34
dividends which they uh which came about
00:31:37
for them it sounds like because they
00:31:38
were holding index funds in uh taxable
00:31:41
accounts and yeah that that can happen
00:31:43
to anybody when you have investments in
00:31:47
a taxable account you might get
00:31:49
surprised by some dividends from time to
00:31:51
time it's a good surprise and and in
00:31:53
some cases it can be a a bad surprise it
00:31:56
sounds like that's what Jenny in Chris
00:31:57
we're alluding to but real quick so
00:31:59
let's talk about right taxable accounts
00:32:01
versus uh tax advantaged accounts so
00:32:04
right now uh some of you listening in
00:32:07
the USA you might have a 401k you might
00:32:10
have a Roth IRA those are tax advantaged
00:32:13
accounts when you hold an index fund in
00:32:16
one of those accounts every year the
00:32:19
stocks inside that Index Fund those
00:32:22
businesses might be paying a dividend
00:32:24
the dividend goes to the fund and a
00:32:28
portion of that total dividend gets
00:32:30
passed on to you the investor but
00:32:33
because you're holding that investment
00:32:35
in a tax advantage account you don't
00:32:37
have to pay any taxes on those dividends
00:32:39
that's not true if you have a taxable
00:32:42
brokerage account which some people have
00:32:45
in addition to their tax advantage
00:32:46
accounts I have a taxable brokerage
00:32:48
account every year the investments in my
00:32:51
taxable brokerage account might be
00:32:54
paying me a dividend you know each
00:32:56
company has has the option of paying a
00:32:58
dividend or not and dividends are
00:33:01
taxable so if I get $1,000 worth of
00:33:03
dividends in my taxable brokerage
00:33:06
account uh Fidelity will send me a$ 1099
00:33:09
form saying Hey Jesse you got $1,000 of
00:33:11
dividends and I have to pay taxes on
00:33:13
them according to us tax code dividend
00:33:17
policies some dividends you have to pay
00:33:19
more taxes on than others there are a
00:33:21
few rules and regulations behind behind
00:33:24
which dividends you pay taxes on and how
00:33:26
much
00:33:27
so it sounds like uh Tik Tock Life
00:33:30
Sounds like Jenny and Chris they were
00:33:31
holding uh some index funds in a taxable
00:33:34
brokerage account which totally makes
00:33:36
sense right if you hit your investment
00:33:38
limits in your tax advantage account it
00:33:40
makes a lot of sense to open a taxable
00:33:42
account to then continue investing but
00:33:45
you might get hit with a dividend
00:33:47
related tax bill at the end of the year
00:33:49
if you're prepared for it it's fine you
00:33:52
you keep some money in cash in your bank
00:33:54
account dedicated for that tax bill and
00:33:57
when it comes time to pay you pay the
00:33:58
tax bill no worries but sometimes you
00:34:01
can get surprised you can get caught off
00:34:02
guard let's say you have a million
00:34:04
dollars in a taxable brokerage account
00:34:06
which I am far away from there but but
00:34:08
some of you listening might not be far
00:34:10
away from there at all you have a
00:34:11
million dollars uh you own an index fund
00:34:14
that on average the index fund has a 3%
00:34:17
dividend yield over the course of the
00:34:18
year that means that you got
00:34:20
$30,000 in dividends over the course of
00:34:23
the year and depending on whether
00:34:26
they're qualified dividends or not
00:34:27
depending on your tax bracket you might
00:34:29
pay something like a 15 or 20% rate on
00:34:33
those dividends so what's 20% of a three
00:34:36
of a $30,000 dividend 20% is six grand
00:34:41
you might have a six grand tax bill on
00:34:43
those dividends if you aren't prepared
00:34:46
for it if you didn't have six grand
00:34:48
sitting on the sidelines waiting for
00:34:50
that tax bill well you might end up
00:34:53
selling a bit of your million dollars in
00:34:56
stock to help pay for the tax bill it's
00:34:58
not the end of the world but most
00:35:00
investors I know would prefer not to
00:35:03
sell stock in order to pay taxes in that
00:35:05
way you are interrupting compounding
00:35:08
unnecessarily which is something that
00:35:10
Charlie Munger warns us against so
00:35:13
that's probably the downside or that's
00:35:15
probably the real surprise that Chris
00:35:17
and Jenny were talking about when they
00:35:18
asked me to talk about a surprise
00:35:20
dividend tax bill it's that you want to
00:35:23
have money set aside you want to prepare
00:35:25
for it ahead of time to know oh I'm
00:35:27
going to have a $6,000 tax bill at the
00:35:28
end of the year I'm going to keep some
00:35:30
cash here so that when it comes I'll pay
00:35:33
it with that cash rather than having to
00:35:35
sell your Investments to to cover the
00:35:37
tax
00:35:38
[Music]
00:35:41
bill for her nose take her down to
00:35:46
sloppy CH for beer and
00:35:49
stew them are the
00:35:53
facts after
00:35:55
tax
00:35:57
you uh what else what else
00:35:59
recommendations any other thoughts
00:36:02
random stuff for my personal life I'm
00:36:04
using an app called n that's pretty cool
00:36:07
n
00:36:08
oom n uh it's a diet app it's a it's
00:36:13
helping me it's helping me make better
00:36:15
food choices it's encouraging me to
00:36:17
track my weight day by day with the goal
00:36:21
of uh being healthier well first off
00:36:24
just over the long term being healthier
00:36:26
uh and looking good on my wedding day
00:36:29
getting married in September of 2022
00:36:32
pretty excited for that we're wedding
00:36:33
planning right now wedding planning is
00:36:36
quite involved if you haven't done it
00:36:38
yet but anyway I'm using this app called
00:36:40
n not sponsored by them at all but uh so
00:36:44
far it's good I enjoy the app uh their
00:36:47
whole thing is uh helping you with
00:36:49
psychology helping you with a psychology
00:36:51
of food choices and and all that jazz
00:36:54
and uh I'm a big psychology guy I enjoy
00:36:56
eny reading about psychology I think
00:36:58
there's a huge aspect of psychology in
00:37:01
personal finance and investing right our
00:37:03
brains are brains are so much more
00:37:05
important than we maybe think they are
00:37:09
um or if you think your brain is
00:37:10
important you're probably
00:37:12
underestimating its
00:37:13
importance so anyway uh n helps my brain
00:37:17
make better decisions with food so far
00:37:20
so good so far so good down a few pounds
00:37:23
since starting it and uh just got to
00:37:25
stick with it keep on keeping on it's a
00:37:28
long-term Journey uh and yeah it's
00:37:30
actually funny there are so many
00:37:31
parallels I think between uh food and
00:37:35
dieting and weight
00:37:37
loss so many parallels between that and
00:37:41
personal finance and budgeting and
00:37:43
investing and anyway it's it's cool it's
00:37:46
it's helping my brain uh it's helping me
00:37:49
it's helping my health right at the end
00:37:50
of the day an investment in health it's
00:37:52
hard to beat an investment in health uh
00:37:55
would you rather be a billion
00:37:56
millionaire who dies at 40 or a
00:38:00
comfortable middle class potentially
00:38:04
millionaire who dies at 90 I think
00:38:06
everybody would probably choose to die
00:38:08
at 90 but anyway it's just an opinion n
00:38:12
n interesting interesting app check it
00:38:15
out uh other stuff you know one article
00:38:18
that I read a few weeks ago that I've
00:38:21
really uh sent to a lot of people shared
00:38:23
with a lot of people is called No More
00:38:26
side quests it's by a guy named Josh
00:38:28
Brown who runs uh RIT Holtz wealth
00:38:30
management if you're a money nerd you
00:38:33
might know Josh Brown if you're not a
00:38:34
money nerd you might not have heard of
00:38:35
them but I'm going to link that article
00:38:38
in the show notes I highly recommend I
00:38:40
think it's probably a f minute read no
00:38:42
more side quests and then also you know
00:38:45
a lot more people have heard of Morgan
00:38:47
howel who wrote a book called the
00:38:49
psychology of money Morgan recently
00:38:52
wrote an article called does not compute
00:38:55
that was uh that was really good and
00:38:56
it's been shared around a little bit you
00:38:58
know I I found out about it because
00:38:59
other people were sharing it and the
00:39:01
idea behind does not compute is that
00:39:03
when you look at when you look at the
00:39:05
world in general and when you look at
00:39:07
investment markets specifically there
00:39:09
are some things that are going to be so
00:39:12
irrational that it does not compute for
00:39:15
your rational mind and your first your
00:39:18
first instinct the first instinct of all
00:39:20
humans speaking of psychology when when
00:39:23
something does not compute to our
00:39:24
rational Minds we reject it and we say
00:39:27
you know what it's clearly irrational I
00:39:29
don't get it it must be
00:39:31
Morgan's argument in this article is
00:39:34
that just because something does not
00:39:35
compute with you doesn't mean that it's
00:39:38
wrong it might mean that the world is
00:39:40
irrational that is the way the world is
00:39:43
and you're better off trying to
00:39:46
understand that irrationality than
00:39:48
rejecting that irrationality because at
00:39:51
the end of the day the irrationality is
00:39:53
real you can reject it if you want but
00:39:56
it's kind of like an ostrich sticking
00:39:57
its head in the sand we know it's not
00:39:59
rational we know it does not compute
00:40:01
with our rational minds but it's still
00:40:04
real you're better off accepting reality
00:40:07
for what it is than rejecting re reality
00:40:10
For What It Isn't So anyway I'll link
00:40:13
that as well does not compute by Morgan
00:40:16
howel uh books on the books point of
00:40:20
view I actually haven't read a finance
00:40:23
book in a few months but I did recently
00:40:26
read a great psychology book it's called
00:40:29
influence by Robert calini it's a book
00:40:32
that um I think was written in the 80s
00:40:36
maybe in the
00:40:37
90s and as you read that book you are
00:40:40
going to realize that he
00:40:43
predicted social media two decades
00:40:47
before social media existed like that
00:40:50
book is a blueprint for the way social
00:40:52
media Works in terms of things going
00:40:54
viral in terms of people liking and
00:40:57
sharing and commenting and retweeting
00:41:00
and and why it affects our brain the way
00:41:01
it does the way people sell on social
00:41:04
media anyway if you are involved in any
00:41:07
sort of practice where you're trying to
00:41:11
convince another person of an idea it
00:41:14
might be sales it might be it might be a
00:41:18
leadership position where you're you're
00:41:20
just leading a team of people it might
00:41:23
be that you're a content creator kind of
00:41:25
someone like me someone who writing or
00:41:27
podcasting either way this book
00:41:29
influence I think will will open your
00:41:31
eyes to the way the world can work in
00:41:35
the in marketing and advertising and
00:41:37
selling and those kind of things and
00:41:39
yeah even if you're not involved in any
00:41:41
of those roles I do think that it's a
00:41:43
very interesting book it'll open your
00:41:46
eyes to the way your own brain works and
00:41:48
the way that marketing works on you that
00:41:50
that's a subject I've written about
00:41:52
recently the way marketing works on me
00:41:55
now I know that social media works on me
00:41:58
I I can feel it as in I can feel when uh
00:42:03
I can see it firsthand when I get sucked
00:42:05
down the rabbit hole of YouTube and I
00:42:06
spend you know 45 minutes watching
00:42:09
random videos on YouTube that is social
00:42:11
media working on me that is the design
00:42:15
of YouTube working on my monkey brain
00:42:18
the way YouTube intended it to right I'm
00:42:21
a sucker for their algorithm my monkey
00:42:24
brain cannot handle
00:42:26
and it it falls victim to their Wy ways
00:42:30
okay social media works on me similarly
00:42:34
uh food design works on me what I mean
00:42:37
by that is that many of our Foods today
00:42:39
are designed with specific amounts of of
00:42:41
fat and sugar and salt in them to make
00:42:44
them uh perfectly appealing to us and
00:42:48
yes I eat fat and sugar and salt it
00:42:51
works on my monkey brain right potato
00:42:54
chips didn't exist out on the Savannah
00:42:56
but if they did you better believe that
00:42:58
our ancestors would have been looking
00:43:00
for those potato chips because they are
00:43:02
packed with important calories and
00:43:05
energy and they taste delicious well
00:43:08
guess what I can go get potato chips at
00:43:10
the grocery store and when I do I eat
00:43:12
them all because my monkey brain has
00:43:15
been if you want to call it addicted
00:43:17
call it addicted to sugar and fat and
00:43:21
salt okay marketing I think is the same
00:43:25
just like social media just like food
00:43:28
design marketing works on my monkey
00:43:31
brain I just can't always put a finger
00:43:34
on how and that's a little scary what I
00:43:36
mean by that is you know why did I buy
00:43:38
this Apple computer that I'm recording
00:43:40
into right now why did I buy a Toyota
00:43:43
car and not a Ford or not a Honda why do
00:43:46
I make the purchasing decisions that I
00:43:48
make I would like to believe that I'm
00:43:50
autonomous and I make them of my own
00:43:53
accord thanks for that stie but I think
00:43:57
because of the way I know my brain is a
00:43:58
victim s stop barking because of the way
00:44:01
that I know my brain can be tricked for
00:44:04
lack of a better term by social media
00:44:06
and food I know my brain can also be
00:44:09
tricked by marketing I know that I can
00:44:12
make purchasing decisions based on some
00:44:15
external force that I don't even realize
00:44:17
is there and this book by Robert chelini
00:44:21
reinforces that idea in me that
00:44:23
marketers out there there's a ton of
00:44:25
them there are a ton of marketers and
00:44:27
they're really smart and they know how
00:44:29
human brains work and you better believe
00:44:32
that they design their advertisements
00:44:34
they designed their email campaigns they
00:44:36
designed their TV commercials to tweak
00:44:39
and trick and Pull and tug and push on
00:44:43
your human psychology and on my human
00:44:45
psychology and it might not be very
00:44:47
obvious how they're doing it but over
00:44:49
the long hul they are influencing us
00:44:53
just like Robert Chini would say they
00:44:55
are are influencing Us in some way to
00:44:58
likely make purchasing decisions it's
00:45:00
hard to figure out how they're doing it
00:45:02
it's hard to pinpoint how they're doing
00:45:04
it but if you're aware that it's
00:45:06
happening somewhere in your subconscious
00:45:08
I'm convinced you're likely going to
00:45:10
make better purchasing decisions in the
00:45:12
long run you're going to start asking
00:45:14
yourself questions like oh why do I
00:45:16
really want this Tesla so bad is it for
00:45:19
a whole bunch of rational reasons maybe
00:45:21
or is there some sort of irrational
00:45:23
marketing uh reason involved that is
00:45:26
quite possible too why do you want the
00:45:28
$200 Nike shoes instead of the more
00:45:32
reasonably priced $40 off brand shoes is
00:45:36
there a marketing influence involved
00:45:39
probably so it's those kind of things
00:45:41
that the book influence might make you
00:45:43
think of and uh that's why it's my
00:45:48
[Music]
00:45:49
recommendation but I know I got to
00:45:54
do
00:45:56
[Music]
00:45:59
okay guys that is a long- winded episode
00:46:03
that's a lot of my voice to listen to if
00:46:05
you listen to the whole thing thank you
00:46:07
really appreciate you guys being here
00:46:09
it's fun getting back behind the podcast
00:46:10
mic and uh and let me know you know if
00:46:13
if if you enjoyed this if you liked
00:46:15
listening to it let me know drop me a
00:46:17
line uh if you're on Twitter at
00:46:21
bestest JC or you can email me Jesse
00:46:26
tinter interest. blog let me know what
00:46:29
you think uh because it would be fun
00:46:31
it'd be fun to start doing this again
00:46:33
assuming uh my time allows assuming that
00:46:35
my my new career path allows that to
00:46:37
happen and uh and as always yeah send me
00:46:41
your questions I enjoy answering your
00:46:43
questions I enjoy riffing off them and
00:46:45
and talking into the mic writing about
00:46:47
them uh because after all you know at
00:46:49
the end of the day life is nothing but a
00:46:50
big question and answer we are looking
00:46:53
to build our our knowledge base cuz as
00:46:55
Benjamin Franklin said and investment in
00:46:58
knowledge pays the best interest so
00:47:00
thank you for listening to this episode
00:47:02
number 38 of the best interest
00:47:16
[Music]
00:47:24
podcast make my way back home
00:47:30
[Music]
00:47:37
iar
