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Speaker 1: So yeah, the institutions and Dowmans foundations have been in

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this space of alternative investments for the last thirty forty

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in some cases fifty years. Some of those positions are

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now becoming available to retail investors. In fact, let's talk

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about one for a minute. One that I like a lot,

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and that would be one that holds both student housing. Right,

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you are.

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Speaker 2: Listening to Carrie Letz's Financial Survival Network, where you get

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valuable information you just can't find anywhere else to thrive

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in today's trying times. You need the Financial Survival Network

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now more than ever. Go to Financial Survivalnetwork dot com

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and get your free newsletter and gift. Financial Survival Network

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now more than.

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Speaker 3: Ever, and welcome. You are listening to and watching the

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Financial Survival Network. I'm your host, Carrie Letz. Well Wall

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Street is crumbling before your very Is is it time

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to take the quick exit out. I'm talking about jumping

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out the window and letting the rest work itself out?

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Or is there hope do we hold on? Is it

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going to be just a dip and a brief crash,

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which is what we've experienced so many times in the past,

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For the last forty years, just about since nineteen eighty seven,

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so I take it back thirty seven years. John Brace

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is with us now. John, always great to have you

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on your take on the current crash. Is it tran

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I'll use fed speak. Is it transitive or is it

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is it a trend?

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Speaker 1: Well, I mean, no one can see the future, right,

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and I think the best way to put it is

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preparation trump prediction, all right, So let go of trying

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to predict what's going to happen when and see what

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you can to be ready. And you know what, Carrie,

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we should really learn from the animals. Notice what the

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animals don't do when there's a flood or a hurricane.

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They don't say, hey, Carrie, I'm going to ride this

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one out. They go and they don't look at the

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prettiest or the best dress or the one with the

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biggest house. They look to the smartest animals and they

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go to higher ground. So my point is, don't drown,

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turn around, turn your assets around, and figure out what

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your exit strategy is, because who knows that this is

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just the beginning, If it's just going to blow over.

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Everybody wants to be optimistic and say, well, we just

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know this will blow over, keep buying the dips. But

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you know sometimes things turn awry very quickly, and now

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it's how low can we go? So to our way

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of thinking, rather than try and predict what might happen,

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because you could just be right or wrong either way

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you cut it, how do you prepare so that you

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can survive and thrive no matter what happens, whether it's

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in Washington, DC or the economy around the world. And

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the one two punch that we advocate Carrie is active

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management number one and diversification number two. So active management

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simply looks like most by comparison, Most investment accounts, mutual funds,

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exchange traded funds keep the portfolio five percent cash, ninety

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five percent invested. So in a two thousand and nine

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or twenty twenty three that was terrific, but twenty eight

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into twenty two, twenty twenty two not so much. Hid

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In two thousand and eight markets off thirty seven many

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of the passive all stock portfolios were all over forty

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percent in that calendar year, and then here comes twenty

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twenty two mark is off twenty to thirty percent. So

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that's what the that's what the indexes did for those

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who had their portfolios strategically set up so that we

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limit the losses, as opposed to insult you by saying, Jerry,

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you have to live with the losses. No, let's not

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stay static. Five percent cash, ninety five percent invested. In fact,

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let's see what we need to do on a daily

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basis to answer this question, is a risk on or

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risk off?

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Speaker 3: In eight?

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Speaker 1: Systematically throughout two thousand and eight, you wanted to take

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shares off the table off the Titanic. And what I

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mean is you didn't move from this stock to that stock,

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or this bond to that bought. That's kind of like

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rearranging the deck chairs on the Titanic the state ship

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sank or we don't want that to happen. So let's

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move out of risk assets and into cash risk off.

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And in some cases clients started eight five percent cash,

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but into the end of two thousand and eight fifty percent,

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seventy percent, sometimes one hundred percent cash. That by that

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way of working, we can see the evidence that these

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folks who went that route were off no more than

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actually less than twenty percent. In two thousand and eight, again,

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the market thirty seven, the index funds over forty, so

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you know, and it took a year or two to

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get back to even, whereas the passive accounts took four

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to five years to get back to eat it. So

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we're going to suggest that we do what we can

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to live at the losses again through active management. And

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number two is greater diversification. And let me ask you this, Kerrie,

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in terms of greater diversification, to kind of get some

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sense of what that looks like. If you're looking at

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the Yale endowment forty point seven billion dollars, if I'm

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not mistaken, what do you imagine? You don't need to know,

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because again it's I think it's a good conversation. Hat

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Yale might have as a percentage in US stocks, I

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would say two thirds two thirds? Okay, yeah, I think

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see the securities industry has encouraged all of this, no

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matter what we're trying to do. To think in terms

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of making big bets forty percent bonds, sixty percent stocks

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to hear it stocks, those are big bets. What blows

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my mind every time I look and they Yale does

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a report ball once a year. They're and they're pretty uh.

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They describe a lot about what they used to do

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in the eighties and how they're not doing that anymore.

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In the eighties, it was a portfolio that was there

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like seventy five percent US stocks, bawns and cash. Today

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it's less than ten percent US stocks here.

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Speaker 3: A year ago.

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Speaker 1: Yeah, what I was looking for the details, all I

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could find was three percent of forty point seven billion

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dollars in US stocks. I mean that's like nothing, right,

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I mean forty billion, that's a whole lot, but it's

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not thirty percent. It's not forty percent. Okay, So we

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can't do what the major endowments do, but we can

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learn from the best in the brightest, and I think

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one of the things we can learn is that we

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have more legs under our portfolio stool. That makes for

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a firmer sit for your life savings. As opposed to

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being on two legs, which can wobble and break. You

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got four or five legs under that portfolio, and now

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you're probably in a position where you might yield a bit,

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but you won't break. And that's what we want, right,

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We want to bounce, not break. So again, yeah, it's

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active management and greater diversification outside of traditional asset classes

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that we think are the answered no matter how this

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market turns.

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Speaker 3: Okay, So where is Yale putting their money if it's

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not in the stock market. Well, let's see. It's like LASSI.

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Speaker 1: Look, it's about four percent to bonds, about ten percent

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to cash. They like alternative investments like credit programs and

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real estate investment trust. They are pretty well diversified. So

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it's and I'm not saying this is not a template.

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You see what I'm saying. I mean, in other words,

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we're not Some people say, oh, is this what you

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do with their clients. No, we can't. We're retail investors.

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We don't have the kind of capability that they have,

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and they think of their funds as perpetual. We don't, right,

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So they they're they're doing a lot with the money.

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We can't do exactly what they can do. What I'm

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saying is the majority of us get overly comfortable. We

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become smugly complacent. Really in this favorite stock that you like,

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the bond that you like, too much cash. You're sixty

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percent of your portfolios in real estate. So what I'm

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saying is there's no there's no bible, there's no right way,

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there's no wrong way. The question is what's your way

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and figure out how to know what you own and

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also make sure that you have some defensive strategies in

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your portfolio. Every team has offense and defense. The Olympics

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are going on, they've got to have both, whatever the

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game they're playing. So as investors, most of us are

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very authensive looking for all those gains. What do we

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have in our bag of tricks, if you will, that

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will keep our losses limited so that we don't need

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a hell Mary pass just to get back in the game.

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Speaker 3: Yeah, well, at times like these, you got to be

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more concerned about return of capital or return of investment

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than rather than turn on investment. Right.

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Speaker 1: I couldn't agree more. And you know, if we can

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learn from some history, Carrie, we can look at two examples,

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one being the US after the Great Depression and the

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other one being Japan. Right, many of us know with

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the Great Depression, Well, first we started the twenties right

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as the rowing twenties and then ended with a Great Depression.

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That's quite a decade, right, Many people do know that

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stocks were off about eighty eighty five percent of the

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Great Depression. What many people don't know is that it

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took twenty twenty five years to get back to even

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assuming this is foy it in. Yeah, you stayed in

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one hundred percent. You did not sell a share, You

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didn't need any money for twenty twenty five years. Now,

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what do you even know if doesn't need any money

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for twenty twenty five years. And then New York real

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estate about a year later, the capital of capitalism, right,

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New York City dropped seventy percent, and the realtors, oh,

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it always comes back, Yes, it did. That only took

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forty years, that's right, four decades. So stocks took twenty

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twenty five, New York real estate took forty and the

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average age of death at the time, if we were adults,

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was fifty seven. Yeah, you see what's happening here. Neither

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the stocks nor you're a real estate in New York

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got back to EVA while you were still here, So

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that means you died with regret. And guess what the

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same thing is happening with Japan. There's the NIK two

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two five twelve, twenty ninety nine. PETE dropped eighty percent

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in about twenty two months or so.

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Speaker 3: A year later.

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Speaker 1: Japanese real estate sound familiar. Yeah, dropped seventy percent, okay,

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and I love to ask which one's back to even

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for a long time the question. The answer was neither.

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From what I can tell, it looks like both the

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nie K in Japan and the residential real estate market

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has finally recovered. But let's see, you placed that bet

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thirty five years ago. Are those bets right? And you

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took it for five years? Yeah, just to get back

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to where you were. So you were thirty five, then forty, right,

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and now you're seventy seventy five. I mean really, I

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And that's my point. You know it may not come

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back fast enough, so let's take the time to figure

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out how to limit our losses.

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Speaker 3: Yeah. Hey, well you know, risk management as an individual

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investor is really your most important job, and it's something

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that most of you out there know the least about. Right,

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this is true.

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Speaker 1: Yeah, we get I like to say, Carrie, we get

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high on the hopium right wherever I throw the darts,

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as long as it goes up in value, then see

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how smart I was?

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Speaker 3: Any questions might have been better with the darts this

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time around. Uh So, non traditional investments you think are

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going to be the place to be for the foreseeable future.

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I do.

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Speaker 1: I actually believe that's investors salvation. And the interesting thing

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is for retail investors that sounds new. You might be

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kind of like, you have a thirty year old car.

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It doesn't have electric windows. Now you can't buy a

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car without electric windows, right, automatic soap wipers, right, just

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work for you? Like sure?

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Speaker 3: So yeah.

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Speaker 1: The institutions and Dowmus foundations have been in this space

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of alternative investments for the last thirty forty in some

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cases fifty years. Some of those positions are now becoming

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available to retail investors. In fact, let's talk about one

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for a minute. One that I like a lot, and

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that would be one that holds both student housing right

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with clients. He's a rocket scientist, she's a broker. They

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own property near USC. They tell me that USC has

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eight thousand rental units with a waiting list of forty

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thousand people.

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Speaker 3: Wow.

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Speaker 1: Yeah, so many people were paying money every month to

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keep their kids room during COVID when the kid was

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at home. So I liken this kind of investment as

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a cash cow. And a lot of the schools are

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moving out of the owning and the management of residential properties.

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Transferring that responsibility to companies. So now you have the

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company that does the work as opposed to the school

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that gets to blame. So yeah, I do like that space.

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The other piece of the puzzle I like a lot

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is data center infrastructure. That's the three hundred thousand square

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foot buildings, and I'm not even sure they have the

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bathroom because you know, everything's electronic and you have all

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of this technology has to work twenty four seven, three

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sixty five with three or four systems back up without water,

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by the way, outside of California, that are just going

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to keep chugging a log. So again, to me, this

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looks like something that will hold up no matter what

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happens in DC, what happens with the economy both here

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and around the world.

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Speaker 3: I like it. I like it. Hey, so what about AI?

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Now we talked about data centers. Is there another way

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to play AI? It might be even more advantageous.

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Speaker 1: Well, you know, the only way you're going to know

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it was more advantageous is when after the fact, right,

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So I can't I don't foresee that. I don't foresee

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what might be more advantageous. I would say, if you're

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you know, in a stock for example, that's probably more exciting.

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And if you like assitement, then any one of your

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stocks that feature work and intelligences is going to be

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you know, well, we watch. We watched those stocks, just

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like we watched the tech stocks back in two thousand,

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all right, they were the ones that ran off to

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the moon and had separation. In other words, it was

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you know ten that time, is about seven stocks this time.

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But what you're looking for, or what we should be seeing,

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is breadth. That's with a D right where you've got

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whatever the index is five hundred stocks with S and

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P the dolls thirty. But the top seven you don't

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like the top seven separating from the rest of the

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of the of the prop We want tom We want

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all the stocks to go up at the same time.

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That's a lot of volume, that's a lot of breadth.

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But when we see this separation happening, it's not uncommon

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for those those stocks that ran off to the moon

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turn around and now all of a sudden it looks

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like widely eat coyote and the road rudder. How low

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can we go? So that's why, you know, we're always

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anxious for people to see what kind of volatility can

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you accept because sometimes people love all of the upside volatility,

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but they don't like it when it moves against them.

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And I think we can agree savvy investors hate losses

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more than they love gains, so they're more interested in

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limiting their losses and that's what vote.

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Speaker 3: So what kind of time frame should you be looking

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at investing now? You know, because long term, you know,

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sounds dangerous, right, well.

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Speaker 1: I mean, you know, some of these things are always

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what's the definition of long term? And the way we

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look at it is long term is lifetime. And if

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you're sixty five, we believe we plan as though we

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expect to live through age one hundred. So we want

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to see what needs to happen so that you know,

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there's a significant other both a couple that both parties

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can get to one hundred, and both of them can

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see the kind of income that they need. That's the question.

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How can we make sure this income is very consistent

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and with traditional retirement accounts, we have to recognize that

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the withdrawals must be taken and the withdrawals must increase

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thanks to the infrom of revenue service every year for

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the rest of your life, So you know, it might

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be three four percent when you're in your seventies. Stick

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around to your nineties, it might be north of eight percent.

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And every year that withdrawal rate just creeps up a

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little bit and there's no way you can you can

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stop it from a traditional retirement account. So it makes

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sense to look at how can I build a portfolio

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differently than when I was younger. You know there were

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two fifty percent losses on the same decade. Well, if

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you were making contributions, that was a wonderful thing, but

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if you were taking withdrawals, that was a terrible thing.

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Speaker 3: So it all depends on where you are.

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Speaker 1: What you're trying to get accomplished, really irrespective of age.

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But we want to make sure people figure out what

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it is they're trying to do and maybe design their

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portfolios so that the portfolio actually performs within their limitations.

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You know, if the market's off twenty or thirty in

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twenty twenty two, and you said you could live with

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a twelve percent loss, but your account was down ten percent, Okay,

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what do they say, right?

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Speaker 3: If you buy you some of the ditch, stop digging? Yeah?

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Speaker 1: Ten you didn't go to your limited twelve I would

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say that's good. And you didn't get to twenty or

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thirty on a million bucks, that's what two three hundred

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thousand dollars just like that. You didn't want to go there,

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and you didn't, And if the money had been where

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it was before, you would have gone to being off

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twenty or thirty percent.

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Speaker 3: All right, Well, it sounds like interesting times are ahead. John, Hey,

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tell us how do we find you? How do we

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connect with you on the web?

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Speaker 1: Yes, well we're at Westlake Financial Advisors or YB poor

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either way, we'll connect to our site. Our phone numbers

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eight oh five, four ninety five, two zero seven seven.

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And love talking with folks about what it is they're

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afraid of and what they'd like to prepare so that,

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as I say, we can, we can avoid running out

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of money before we run out of time.

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Speaker 3: Yeah, that's the important thing. Everyone's a great fear. Hey,

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got a question for John and myself? Shoot me an

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email kl at Kerrie LEDs dot com. We'll get you

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an answer quick. You'll find a link to john site

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in the show notes of this interview on Financial Survival

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Network dot com. We just asked when you're there, please

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sign up for a free newsletter John always a pleasure.

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Thanks for coming by my pleasure carry see you next time.

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Speaker 2: Thanks for listening. Carry Lets this financial survival Network your

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solution to today's trying times. For the latest, go to

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Financial Survivalnetwork dot com. Financial Survival Network now more than ever,