Speaker 1 (01:06)

Hi. As we sit in late August of 2023, we're in an odd economic and market dynamic. If you look around,
there's a lot of things that are unexpected and uncertain. And if you're paying attention to CNBC or
Twitter or just to your friends at dinner parties or something like that, there's a lot of questions about
what's happening now in the US in terms of markets and the economy and so forth. The questions you
hear might be, will there be a recession? There's been this long period of predicting a coming recession.
Will the Federal Reserve keep raising interest rates? That's an important question to a lot of parts of our
economy. Even more things out there that are further out like, will a dollar be replaced by something
else? These are interesting questions, but these are not the right questions to be asking, I think. I think
the answer to those questions is impactful in the short term and maybe they're very unpredictable. So
better questions, I think, lead to better insights. So the better question, given what we do know about
the current market situation, is maybe what investments are likely to help me reach my objectives for
growth or income given the current set of circumstances in the market?

Speaker 1 (02:40)
If there are some extraordinary and unique factors about this time, about this period in history, what are
those opportunities and risks? Where are they? Where can we find them? Can we spot them given what
we know about these markets and economic conditions? Well, if we go back in history. And I finished my
graduate degree in finance in 1996. I came into the world just as the dot com bubble was really heating
up. In fact, things went straight up in the stock market all the way into 2000. And then, of course, we
had the big dot com bust and meltdown, and then we had another market event in 2002. Then I entered
into this personal finance career in 2008, right in the midst of the Great Recession and all the events that
led up to that. If we look back at those periods of time from a perspective now, there are a lot of things
we couldn't have predicted about those periods of time. But there are also some things that we could
look at and say, Man, there were some big glaring, obvious dynamics about environments, about those
markets, whether it was in the dotcom era, the valuations of any company that associated itself with the
World Wide Web being just astronomical, or the real estate prices in 2007 and 2008 leading into the big
bust, there were things that we can look back now and say, Man, we couldn't predict what was going to
happen, but we could certainly see that these big, extraordinary, odd things were happening, and we
could have made better investment decisions at the time.

Speaker 1 (04:33)
I know that I certainly look back and wish I had acted more aggressively or maybe more cautiously based
on those circumstances. Instead of asking, What's the Federal Reserve going to do? Or, Is there going to
be a recession? Let's ask a better question and say, Knowing what we know about the extraordinary
things happening in the world today, what should we be looking at? Are there some things that would
lead us to extraordinary risk or extraordinary opportunities? If I think about that, maybe I can ask that
question in another way. If I'm sitting here looking back from the year 2033, 10 years back into August of
2023, what are those big obvious things that I said, Man, I wish I'd acted on that because it would seem
so clear that that proposed a risk or an opportunity. I think that's a much better question to ask than
what the Federal Reserve going to do in their next meeting, or will there technically be a recession in the
US or not? If I ask that question, there are a few things that pop up. There's a lot of things, but I want to
share with you three today where you might find risk and opportunity in those things.
Speaker 1 (05:51)
The first is interest rates. Starting in about March of 2022 and still going on today, the Federal Reserve
has taken the interest rates from a point of about zero to over 5%, and we're not sure yet if they're
done. That is an extraordinary pace of rising interest rates that we haven't seen in more than 40 years.
In fact, by some measures, it's the most extreme and most rapid pace of interest rate increase that
we've actually ever seen in the US economy. That is one of those big, extraordinary things that's
happening right now that creates both risk and opportunity. What would potentially be an opportunity?
Well, think about where you park your assets. A couple of years ago, if you had money at the bank or at
a money market fund or a CD or something like that, you were lucky to make 0.25% or 0.1%. Now we
can park money in safe assets like a money market account and make 5%. Now that 5% is higher than
the rate of inflation. That is this short-term opportunity that we haven't had in a long time. But that
rising interest rate also creates risk in the environment.

Speaker 1 (07:17)
If you think all of the businesses in the world, in the US, the world, but also more specifically in the US,
that are going to have to reprice their debt at levels that were much lower to levels that are really high,
there's going to be an extraordinary amount of default on corporate debt, on personal debt. All that's
going to be coming through the economy. Now, we don't know when or we don't know how severe it's
going to be, but if I'm saying 10 years from now, if I look back at this situation, the change, the rapid
change in interest rates has certainly created some extraordinary opportunities and some risks. Let's
look at a second one. Demographic shifts in... And this has to do with the aging baby boomers, which
was the largest, wealthiest population ever in the history of humanity. They are moving into retirement
very rapidly, either by choice or simply because for health reasons or whatever it is, they are definitely
moving into retirement. We have behind it Gen X, which is one of the smaller generations, and then we
have the next population bubble, which is the millennials. These are extraordinary events that are
unusual.

Speaker 1 (08:36)
We have to say 10 years from now, if we look back at this situation and we didn't act and think through
what opportunities and risks that creates, then we're missing out on something that I think that we can
take advantage of. What are the potential opportunities of this shift or this movement of these big, huge
bubbles of population as they age? Well, specifically thinking of the baby boomers, there's a huge
transfer of wealth. They're going to be selling their businesses. They're going to be passing wealth down
to their children and to their grandchildren. They're going to be spending money.

Speaker 2 (09:23)
In healthcare services. That's just a given. There's no way around that. If you think about the millennials,
household formation, buying their first home, having their first children, all the things that come along
with that. If you think through that, there's lots of opportunities for investments that follow those
trends. What about on the side of risk? Well, a couple of things that come along with that. Baby movers
have been fueling the market for the last 20, 30 years in terms of putting money into their 401(k), saving
money and buyingout, pouring money into the S&P 500 indexes and saving and all the stuff that they've
been doing, that's going to shift. That's going to pull back. That creates some risk in market dynamics.
What about in terms of labor shortages? If you have all this talent and all of the roles that the baby
boomers have filled forever, like starting to step out, that's one of the reasons that we're having labor
shortages. Those are the two big things. The third one that I would say maybe even the most dominant
is just the role of technology. Clearly, the most current one that everybody's talking about is the impact
of artificial intelligence with the introduction of ChatGPT and the rapid advancement and adopting of
that technology.

Speaker 2 (10:54)
Clearly, that's going to have a huge impact on the way that we work and the way that we live. That's
really just one area. There's, of course, robotics and genetics and all sorts of other sciences that are
rapidly advancing, even along with artificial intelligence. Clearly, that creates opportunities, massive
opportunities to invest early in those companies that are pouring research dollars and generating this
next wave of technology. But it also creates risk. Let's go back to... It's analogous to the development
and introduction of the World Wide Web back in the 90s. You think about some of the firms that did
fantastic, and and some that didn't, and we can't identify what they are now. The risks are you invest in
a company like Cisco. Cisco was a fantastic technology company, but if you bought it in 1988 or 1999, 25
years later, you still have not recovered back to the price that it was selling it. The risk in an environment
like this is you overpay. Maybe that's what NVIDIA is. We don't know, right? But then the opportunities
are the next Uber, Apple, that just blossomed after the introduction of the iPhone. That's what I wanted
to bring to you today.

Speaker 2 (12:26)
These are the things that we're thinking about, the thinking about the change in the current
environment. Ask better questions. When you ask better questions, you get better insights. You stop
thinking about, Am I worried about my investing because of what the Fed is going to do next week? If
you think about these bigger questions, you're going to find all sorts of opportunities. You're going to be
able to identify where are some of those extraordinary risks. We're always happy to help you think
through those things. We would just encourage you to keep your eyes open, stay invested, stay
diversified, and appreciate you listening today.