Wealth Actually

Few investors become so well known that they earn a nickname.

BILL GROSS was known as the "Bond King.".

A natural polymath, Bill ascended to the throne with his novel total-return approach to managing bonds and his outsized personality.  He built the PIMCO empire through hard work, ingenuity and cult of personality.  Some say he lost the throne through a mixture of hubris, distraction and bad calls.

A new book by former Bloomberg reporter, MARY CHILDS, describes it all.

Now the reporter and host of NPR’s PLANET MONEY, Mary has written the book: “The Bond King: How One Man Made a Market, Built an Empire, and Lost it All.”  It's out now via Flatiron Books.

https://www.amazon.com/Bond-King-Market-Built-Empire/dp/1250120845

Mary’s Background

Where did the impetus to write the book come from?

Access to Bill Gross

What is he like?

"Making" the Bond Market-

Take us through his background

Duke, Navy, Card Counter, Stamp collector, Golfer, Provoker of neighbors

What was the sandbox he played in?

Not just using bonds, but options, futures and derivatives

Buy and Hold vs Total Return

What was going on around him?  (Milken- HY Bonds; Icahn and corporate raiders)

How did he use technology to amplify his edge?

Building the Empire

How did he hit scale?

How did his Macro bets work?

The 2008 bet

Pet theory was that his interest rate calls were inside information-

Once he had scale- how did he help bend the markets to his whim.

Losing it all

What happened?

2014 interaction with Mohamed El-Erian

80s bro culture catching up with him?

East Coast / West Coast?

Distractions?  Bad Habits?

In your final analysis , what do you think of him-

How do we keep track of Mary?

NPR PLANET MONEY

LINKEDIN

https://twitter.com/mdc

https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

"JUST KEEP BUYING" by Nick Maggiulli

https://youtu.be/wjPxxUk8D_Y?si=lqJTkK2LrvnRoLsW

https://youtu.be/pFmWTHlPTUY?si=GcQqujewbCPqTxSK

Generationally low interest rates, inflation, unthinkable geopolitical risks, the speed of information and the prevalence of noise challenge our long-held conventional wisdoms. Many investors are at a loss as to how to save and invest to meet their goals.

https://www.amazon.com/Just-Keep-Buying-Proven-Wealth/dp/0857199250/

Against that fearsome backdrop, Nick Maggiulli, joins us to talk about his book “Just Keep Buying” due out in April on Harriman House Publishing.

Nick is the creator of the successful OF DOLLARS AND DATA blog and is the Chief Operating Officer at RITHOLTZ WEALTH MANAGEMENT.  

His book challenges many widely-held investment beliefs, and recasts them with a data driven analysis for a modern investor.

Background-

The sequence that:

Got Nick to Stanford

Led to the development of the blog / Nick's role at RWM

What problem did Nick want to solve with book?

Good slot to talk about your powerful introduction

Comfort with data to analyze “rules of thumb” and other bromides

The Decision to Analyze Saving vs Investing

The problems with saving advice

What did the data uncover?

How does this relate to spending?

The problems with investing advice

What is one of the typical sayings that the data doesn’t support

“Just keep buying”

How should investors reach “escape velocity” past their liabilities?

The importance of time horizons and liquidity cushions

Cash Flow vs Asset Growth (strong personal balance sheet)

How do you think about investing to maximize one’s income vs the growth of the balance sheet?

How do you get people’s brains/emotions out of the way of data driven choices?

How do you think about guardrails or insurance around 1% events either in the market or personally?  Function of cash?  Allocation vs barbell approach?

We’re in the midst of a big market test right now . . . what Nick's advice for:

Current Investors

New Investors / When should parents get their kids involved?

https://www.youtube.com/watch?v=wjPxxUk8D_Y&t=4s

How do we buy the book?  How do we stay in touch?

BLOG: OF DOLLARS AND DATA

HARRIMAN HOUSE PUBLISHING

https://twitter.com/dollarsanddata

https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

PERTH TOLLE: An Emerging Market Portfolio Manager with a unique methodology-

INTRODUCTION

Perth Tolle is the founder of the Life and Liberty Indexes and portfolio manager for the emerging market ETF with the ticker: FRDM

Perth was born in Beijing and moved to the United States at age 9. After college, she lived in Hong Kong for a year and significant experience in China

PERTH'S FREEDOM FACTOR PROCESS

As opposed to the blunt market cap approach to getting emerging market exposure, Perth built an index that sought leading indicators in countries that valued freedom and non-autocratic features.

Perth scores every country in the Emerging Market space across 79 categories. Of the 26 emerging-market countries, 11 make it onto Tolle’s index, including Taiwan, South Korea and Poland. 

Her exclusion of China and Russia in the portfolio have been huge calls.

We talk about her process and how she thinks about countries like Taiwan that score well but have invasion risk from less friendly neighbors.

Finally, we talk about the business of setting up a fund and competing against “the big boys.”

Disclaimer:  This is not investment advice – this is an interview with a  portfolio manager with a new way of thinking.

OUTLINE

-Emerging Markets- what is the scope of that world?-How does your fund differ from the others?-What are some of the freedom criteria?-Not having China and Russia must have been a boon recently-What happens if you are "right" about Taiwan, but its bigger neighbor does something that craters values?  Was Ukraine an example?The business of a fund . . . where are you now and what have been the highs and lows?

ESG IMPLICATIONS

HOW DO WE STAY IN TOUCH?

https://www.lifeandlibertyindexes.com/

https://freedometfs.com/

https://twitter.com/Perth_Tolle

https://www.linkedin.com/in/perth-tolle-7757b745/

https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

Conservation Easements with MICHAEL ENGELHART

With Joe Biden's recent initiative to conserve nearly a third of US land by 2030, conservations easements have come back into the headlines.

According to the NCED Database, a conservation easement is a voluntary, legal agreement that permanently limits uses of the land in order to protect its conservation values.

Also known as a conservation restriction or conservation agreement, a conservation easement is one option to protect a property for future generations.

The government has supported the logic that donating productive land for environmental purposes is a worthy cause.  As a result, many taxable benefits can accrue to the donor.

However, the conservation easement is also rooted in controversy (and deep IRS scrutiny). Unscrupulous promoters have focused on the conservation easement and used unrealistic and unsupported valuations to sell these transactions tax breaks to high earners who are usually unrelated to the actual land. 

But has this IRS scrutiny killed the conservation easement? Is there room for a transaction with such a beneficial purpose?

To help us understand the current state of conservation easements, I spoke with MICHAEL ENGELHART. 

Based in Stamford, CT, Michael’s practice, works with high net worth clients and family office in the areas of in the areas of tax mitigation and insurance planning. His practice has been involved in many client land situations and he is an expert in the space.  

Outline

Definition of Conservation Easement

Why are they useful?

Where is it pointed in the law?

What makes it controversial?

Why is it a listed transaction?

Role of valuations

Role of formalities

What's the difference between a syndicated vs a direct easement?

Solar vs Mineral vs Golf Course/Real Estate Development /others?

Who is the ideal "client"?

How do they reach you to find out more?

Resources

MICHAEL ENGELHART LINKEDIN

HUMAN CAPITAL RISK MANAGEMENT ADVISORS

JOE BIDEN'S PUSH TO CONSERVE NEARLY 1/3 OF US LAND BY 2030

NATIONAL CONSERVATION EASEMENT DATABASE

https://www.conservationeasement.us/about/

https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

International and Cross-Border Planning have been a major issues for high net worth clients for as long as there have been borders.  It's an enormous topic.

Jobs, new family situations and geopolitics often send people to different countries for different opportunities.  All of this can have tax implications around an estate plan . . .

Add in the complications of new asset classes and confusion around citizenship, residence and tax obligations. There is a lot to consider- especially for U.S. citizens with connectivity abroad.

Here to help us think about that is BRENT NELSON . . .

Brent is a Partner at the RIMON LAW FIRM in Tuscon, AZ and represents a variety of cross-border clients. 

He hosts the popular Wealth and Law Podcast, and co-edits the Arizona Estate Planning and Probate Handbook (Thomson Reuters),

He has been elected to or served as:

Fellow, The American College of Trust and Estate CounselChair of the Probate and Trust Section of the State Bar of Arizona

OUTLINE

-What constitutes cross-border planning?

-Common inbound issues?

-Common outbound issues?

-Use of trusts or other entities?

-Opportunities for advisers- helping advisors develop an ecosystem around complicated topics.

How Do We Stay in Touch With Brent?

BRENT NELSON

WEALTH AND LAW PODCAST

BRENT NELSON TWITTER

Here's a link to my appearance on Brent's podcast:

https://wealthandlaw.com/2022/02/16/preserving-generational-wealth/

https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

https://www.youtube.com/watch?v=ViEKPjkjEWI

JOHN FICHTHORN, now a two-time "Wealth Actually" interviewee, joins the podcast to discuss his new documentary, "Gaming Wall Street".

Directed by Tobias Deml, the two-part documentary debuts on March 3rd on HBOMax. Gaming Wall Street chronicles the 2021 GameStop short squeeze that drew in the retail investor community and galvanized a movement against the traditional financial services industrial complex. It also underscores the complicated and often unfair nature of Wall Street. To add to the intrigue and character of the documentary, Succession star, Kieran Culkin, narrates the story.

Outline

You were last on when BETTING ON ZERO came out- your documentary on the Herbalife trade. Now you have the new documentary- what got you focused on Gamestop?

-Take us through what happened here

            -Who were the players?

                        -EP1 Wall Street Bets – Gabe Plotkin/Melvin -Robin Hood

                        -EP2 Payment for order flow Citadel – Robin Hood

                        - How can you have more short interest than outstanding shares?

                        - Another Long Term Capital Management?

            -Who got outfoxed?

            -Gamestop and AMC and others?

            -Who made out like bandits and who got destoryed

-Why was this different? 

-The middle finger to Wall Street?

-What happened to “the market can remain rational longer than you can remain liquid?”

-Pulling the plug on Robin Hood

-The Effect of Margin

-Bitcoin analogy

-What are the lessons learned from Gamestop?

-What is the fallout?

-What is the media’s obligation here?  The SEC?

-What's next? Any more documentaries?

Where to find "Gaming Wall Street"

https://collider.com/gaming-wall-street-trailer-kieran-culkin-documentary-hbo-max/

HBOMax

https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

Occasionally we get a court case that has ripple effects across the fiduciary, asset management and investment management industries.

In this episode, we’re going to look at the Potentially massive implications of the recent Supreme Court case, Hughes vs Northwestern

The original issue before the Court was whether or not the 403(B) plan participants had properly plead their case in their complaint.

The lower courts had dismissed the case, relying on a concept known as the “menu of options” defense.

The basic argument of the “menu of options” defense has been that plans satisfy their fiduciary duties under ERISA as long they offered a mixture of investment options-- even if some of those investment options would be considered imprudent under applicable legal standards.

In a unanimous 8-0 vote, the Court rejected the “menu of options” defense.

The implications of this case could be far-reaching and include investment fiduciaries of all stripes including trustees and potentially RIA’s and other wealth management firms.

To help us understand the case and its impact on ERISA matters and the fiduciary landscape in general, I’m going to speak to JAMES WATKINS.

Jim provides all manner of fiduciary counsel-

He is a Certified Financial Planner® professional, owns the Watkins Law Firm out of Georgia, and has been an attorney since 1981.

His career also includes serving as a compliance officer with several national brokerage firms and as the director of financial planning quality assurance for the advisory division of an international insurance corporation.

Finally, he is the creator of the Active Management Value Ratio™, a metric that allows investors, investment fiduciaries and attorneys to quickly and easi!y calculate the prudence of actively-managed mutual funds.

OUTLINE

What are the fiduciary responsibilities of the providers of a fiduciary plan?This falls within ERISA . . . help us understand thatCodification of Restatement of TrustsWhat was at issue in Hughes vs. Northwestern?What happens going forward in this case?With this ruling, there will be a big increase in scrutiny in the stewardship of these plans- what does this look like?Increase in cases (401K and 403B)- against 401K and 403B and BY plans vs advisers. (404A each investment must be prudent)Increase in discovery (and other issues like kickbacks?)Increase in costs for plans?  Fewer providers? E&O Coverage +++Reduce cost of planReduce optionsMonitor planA change in the way investments and stewardship are analyzed and deemed appropriate?Menu doesn’t work anymoreProof of a manager selection process?A new Cost/benefit analysis? (Actively Managed Value Ratio)Who could be liable?  Plan Trustees? Investment Consultants? others?How could this spill over into other areas?Restatement 3rd Sec. 90 Prudent Investor RuleDiversificationCost-EfficiencyCase Law (Tibble et al . . . )Other trustees / fiduciaries?Personal trustsInvestment fiduciariesFoundationsActive vs Passive (Proliferation of cost benefit analysis- AMVR?)Investment consultants giving opinion letters?Private Investments?Intersection with SEC, FINRA other regulatory bodies?  Prudent Investor Rule?

LINKS:

Hughes vs. Northwestern

(https://www.supremecourt.gov/opinions/21pdf/19-1401_m6io.pdf)

Faegre Drinker Summary

https://www.faegredrinker.com/en/insights/publications/2022/1/supreme-court-decides-hughes-v-northwestern-university

Jim Watkins on Rick Ferri’s Podcast

https://www.podbean.com/ew/pb-k2fbd-1169847

How do we keep in touch?

investsense.com.

https://iainsight.wordpress.com/

Twitter: @investsense

https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

The world of property and casualty insurance is undergoing a significant business model change-

Emerging risks to HNW clients include the impacts of COVID and climate change to their businesses and assets.

Additionally, there are two relatively new frontiers of risk: cybersecurity and social media.

These lightly understood risks can pose a threat to clients’ assets, businesses and reputations.

Helping us learn about the shifting landscape of personal risk is AHMET BIDAV-

Ahmet is an insurance executive specializing in the high net worth space.

His company, LUX-STR, specializes in insuring the personal and commercial assets of successful families & individuals across the USA

Bio

Background

A little bit on your acting career!

A general understanding Risk for the HNW person

The State of the Property and Casualty Market

Trends

Role of the Broker

Cybersecurity

Social Media Exposure

Good practices in dealing with big tech

Your experience in developing your business and brand

How do we stay in touch?

LUX-STR

LINKEDIN: AHMET BIDEV

YAHOO ARTICLE: SOLVING MEANINGFUL PROBLEMS IN HOME INSURANCE

https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

All of us have become more reliant on technology and software to solve problems and improve our lives. 

However, many of us understand less and less about the programming that goes into these solutions. 

Further, we forget or ignore the human element of this problem solving.  

In this episode, I speak with ANDY HUNT who has devoted his life to these issues.

Andy Hunt is a programmer turned consultant, author and publisher. He’s authored a dozen books including the best-selling “THE PRAGMATIC PROGRAMMER,” was one of the 17 authors of the AGILE MANIFESTO and founders of the Agile Alliance, and co-founded the PRAGMATIC BOOKSHELF, publishing award-winning and critically acclaimed books for software developers. He’s currently writing science fiction (see conglommora.com) and experimenting with The GROWS Method®.

We talk about his early days of programming and the power of community and process in the world of software design as we go into his experience with broader consulting at the enterprise level.

Further on, Andy dives into what he considers to be important in the future of programming and advice for young programmers.

Finally, as a consummate Renaissance Man, Andy discusses how his hobbies in writing science fiction, music production and woodworking excite his brain and inform his problem solving ability.

Andy started in the do-it-yourself days of CP/M and the S100 bus, of Heathkits and Radio Electronics. Andy wrote his first real program, a combination text editor and database manager, for an Ohio Scientific Challenger 4P. It was a great era for tinkering. Andy started hacking in 6502 assembler, modifying operating systems, and wrote his first commercial program (a Manufacturing Resources Planning system) in 1981. He taught himself Unix and C, and began to design and architect larger, more connected systems.

Working at large companies, Andy kept an ear on Usenet, and started his early email habit via a direct bang-path to ihnp4. Next he settled into electronic pre-press and computer graphics, and worked on that wondrous eye-candy that was Silicon Graphics machines. By now a firm command of several flavors of Unix, from BSD to System V, led Andy to try consulting in the early 1990’s.

His knack for stirring things up really began to come in handy, and it soon became obvious that many of his clients each suffered similar problems—problems that Andy had already seen and fixed before.

Andy joined up with Dave Thomas and they wrote the seminal software development book, The Pragmatic Programmer, followed a year later by the original Programming Ruby: The Pragmatic Programmer’s Guide, which introduced the Western world to this new language from Japan. Together they founded The Pragmatic Programmers and are well known as founders of the agile movement and authors of the Agile Manifesto, as well as proponents of Ruby and more flexible programming paradigms. They founded the Pragmatic Bookshelf publishing business in 2003, helping keep developers at the top of their game.

Andy is a founder of the Pragmatic Programmers, founder of the Agile Alliance and one of the 17 authors of the Agile Manifesto, and author of a dozen or so books on programming, agile methods and learning, as well as science fiction and adventure. He is an active musician and woodworker, and continues looking for new areas where he can stir things up.

Comments from Andy on his early career-

-Where did your initial interest in programming develop?

(The Do-It-Yourself days)

-What were the types of problems that attracted your attention?

-What languages did you gravitate toward? 

Working for larger, more complex situations

-What were the big lessons you pick up in those work environments?

-Programming considered by laymen as a solitary pursuit- was there an adjustment in delegating work or collobroating?  When does management of strategy get in the way of execution?

-The role of community in the world of programming and larger system development

-Where does the role of compromise and creativity manifest in the problem-solving process?

-How did this inform your contribution to the Agile Manifesto?

Pragmatic Programmer

-How did you meet Dave Thomas?

-How did that turn into the book?  What was that writing process like?

-Describe the leap from programmer to author to publisher at Pragmatic Bookshelf

-In building the publisher “by programmers, for programmers”, how do you identify the next generation of authors?

Agile Mainfesto

-How did this come about?  https://agilemanifesto.org/history.html

-General principles:  https://agilemanifesto.org/principles.html

-Individuals and interactions over processes and tools-Working software over comprehensive documentation-Customer collaboration over contract negotiation-Responding to change over following a plan

-Resolving frictions; not letting perfect get in the way of the good . . .

Future of the Programming

-What are the themes that are interesting to you right now?

-As you think about the landscape of languages out there

-Advice to younger programmers- what languages form a good early curriculum? Broad exposure vs specialization? What is the best way to stay current / state of the art.

-Hiring and WFH- is something lost in not having an in-person culture?

Andy the “Renaissance Man”

-Music

-Fiction

-Woodworking

How do we stay in touch?

ANDY'S LINKS:

THE TOOL SHED

PRAGMATIC BOOKSHELF

MUSIC AND WRITING

https://twitter.com/PragmaticAndy

https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/

In this slight detour for the show, I spoke with New York-based political commentator, DEROY MURDOCK..

We have an invigorating chat about INFLATION and GUN CONTROL, two topics that are galvanizing investors today. 

We later focus on the implications of these issues for the 2022 and 2024 elections.

Deroy has been a Fox News Contributor since 2012, a Contributing Editor with National Review Online and a Senior Fellow with the Atlas Network, which supports and connects some 500 free-market policy groups in the USA and 95 other countries.  Throughout his career, Deroy has appeared on CNBC, CNN, C-Span, MSNBC, among many media outlets.

A first generation American (his parents were born in Costa Rica), Murdock received his bachelor's degree in Government from Georgetown University in 1986 and his MBA in Marketing and International Business from New York University in 1989. His MBA program included a semester as an exchange student at the Chinese University of Hong Kong.

Background

First Generation American

California upbringing

International Experiences

Inflation

How did the country lose control of the inflation narrative?

What can be done about it?

Gun Control

New York City's fulcrum point on gun control

Eric Adams, NYC's new mayor

The Role of Police

New York Politics

Recent NewYork Post Op-ed on his lawsuit challenging the New York's new foreign citizen voting bill:

https://nypost.com/2022/02/13/im-suing-to-block-nycs-racist-foreign-citizen-voting-bill/

The National Elections in 2022 and 2024

Who is going to be important?

What should we be worried about geopolitically?

How Do We Stay In Touch?

NY POST

FOX NEWS

NATIONAL REVIEW

https://www.amazon.com/Wealth-Actually-Intelligent-Decision-Making-1-ebook/dp/B07FPQJJQT/