097 Allan Roth: How A Second Grader Beats Wall Street

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welcome to fun with annuities with your

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host me stan the annuity man america's

0:09
annuity agent can annuities be fun can

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contractual guarantees be fun

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absolutely they can find out the brutal

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facts about annuities with no sales

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pitches or high pressure nonsense just

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the brutal and factual annuity truth

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which is all you need to hear

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let's have some fun with annuities and

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let's have that fun start right now

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[Music]

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welcome to fun with annuities i'm your

0:41
host stan the annuity man america's

0:42
annuity agent license in all 50 states i

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am so glad that you joined us on all

0:47
major podcast platforms and also on the

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fun with annuities youtube channel where

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you can see the dashingly good looks of

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me and my celebrity guest that's joining

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us today i'm so happy that he's he's

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doing that i'm a big fan of his

1:01
newsletter and i'll give you all of that

1:03
information where you can sign up his

1:04
name is alan roth let me tell you a

1:05
little bit about him he is a both a

1:07
financial planner and a writer he writes

1:09
investment columns for publications such

1:11
as and you've read them in arp

1:13
barons etf.com advisor perspectives the

1:16
list keeps going

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and he's been an adjunct finance

1:20
finance professor and faculty member at

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colorado college university colorado at

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colorado springs and the university

1:27
of denver

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he's quoted in all everything you're

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reading whether it's wall street journal

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new york times he's been there he's been

1:33
on tv he's the founder of a firm called

1:36
wealth logic llc

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which is a full financial planning firm

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based in colorado springs colorado i

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would encourage you to go there i'll

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like with all of my guests i'm going to

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have a page on my site that has all

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their links etc

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um

1:52
he's he's been doing this a while and i

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think his approach is very very good

1:57
he's a licensed cpa

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uh he's also a certified financial

2:01
planner he got his mba from northwestern

2:03
university

2:04
and um

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he claims like i claim to keep investing

2:08
simple like i keep annuity simple and

2:10
his goal is to never be confused with

2:11
jim cramer

2:13
with that being said

2:15
welcome

2:17
to the show alan roth thank you so much

2:19
for being with us

2:21
oh thank you stan that was a very nice

2:22
introduction i appreciate it you you've

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earned it deserved it and i didn't even

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go into you know a tenth of what you've

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done which is is a lot um what i wanted

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to jump in is some just kind of your

2:35
approach you know how do you approach

2:37
um

2:39
financial planning kind of give us the

2:41
oversight of of that and i think maybe

2:44
you could start i think you have a

2:47
investing in eight words i read

2:49
something that where you wrote an

2:50
article about that can you talk about

2:52
those eight words and then drill down on

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those those eight words as well

2:55
sure my pleasure

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um in eight words investing is

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minimizing

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expenses

3:03
and emotions

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maximizing diversification and

3:08
discipline

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so let me explain what i mean by this

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okay

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you know minimizing expenses you know

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the example that i give is when people

3:18
come back from las vegas i asked them if

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they won money and roughly two and three

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say they did but we all know they're not

3:25
building those billion dollar casinos to

3:28
give money away same thing comes to

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investing everyone says they beat the

3:32
market but we don't live in lake wobegon

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where everyone is above average we live

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in the real world so if the market earns

3:39
10 percent

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and we pay

3:44
2 in the way of fees to an advisor to

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the funds that they pick or a

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combination of all of them then on

3:51
average they're going to get an eight

3:52
percent return

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so minimizing expenses

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you can have funds as low as your 0.03

4:01
uh even lower than that you're going to

4:03
get the market return

4:06
next is minimizing

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the emotions that's a tough one that's a

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tough one alan

4:12
it is a very tough one i i

4:14
and i know a lot of people that have

4:15
very low cost wonderful portfolios but

4:18
they still panicked and sold in in 2020

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because in 2020 in

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in 33 days between february 19th and

4:26
march 23rd

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the stock market lost 35 percent in only

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33 days

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and you've got to have the emotion

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emotional fortitude

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to

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stay the course and not panic and sell

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and

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uh emotions cause us to

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weigh underperform what funds

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do and we typically chase performance

4:51
kathy woods ark arc innovation fund has

4:55
been in the news a lot and it had

4:56
stellar performance

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and then

4:59
money poured in just in time to see it

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do horribly so even though the fund is

5:04
way up since inception

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the average investor has lost money so

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those are the minimizing the two e's

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nexus is maximizing the two deeds and

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diversification is the first and i have

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people that come to me and they have

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pages and pages and pages in their

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financial statements and they're

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incredibly undiversified

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what works a whole lot better is i have

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a total stock index fund that owns as

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close as possible to every company based

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in the united states

5:36
and a total international that owns as

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close to possible to every other company

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based outside the united states so with

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those two funds i'm diversified in

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stocks i own over 10 000 companies

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across the

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planet

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and then the discipline

5:54
to develop a plan and stick to it

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not only did i not have to panic in

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march of 2020

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but i had to follow my discipline that

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said i'm going to be at a certain asset

6:06
allocation and if i'm outside that range

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i've got to rebalance so i had to buy

6:13
stocks in march of 2020 when they were

6:15
on sale

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and

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duh that's easy to explain to any

6:19
eight-year-old while you're buying when

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it's on sale but it's very hard for a

6:22
human it's very very hard for me to buy

6:25
more stocks then so again investing is

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minimizing expenses and emotions

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maximizing diversification and

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discipline and the two hardest ones on

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that in my opinion and i want to hear

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your opinion are emotions and discipline

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am i right about that i think you're

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right but they also you know the

6:44
emotions lead us to by

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you know the the expensive funds and um

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um

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you know the the undiversified so

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they're all related but yeah the the

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motions are everything that really led

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us to survive as a

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species you know our instincts our human

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emotions fails us when it comes to

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investing

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in fact a sign you're doing something

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right

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is that it hurts

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a sign you're doing something wrong it

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would have felt wonderful

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to get out of stocks on you know march

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23rd of 2020 and it would have been the

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wrong thing to do and i felt like puking

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as i was buying more stocks right

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back then

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right that's that's the that's the

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correlation of working out versus

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sitting on the couch right

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um it is what it is hey before we we're

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gonna we're gonna dive in i want the

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listeners and viewers just to hang in

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there but alan i want you to explain

7:39
wealth logic and your approach to

7:42
financial planning which is very very

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unique i do encourage people to go to

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his site which is you're going to love

7:47
this dare2bdull.com

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just like it sounds i'll have that on

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the site but can you explain

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to the people saying hey you know kind

7:55
of like what allen's talking about i

7:57
might want to interview him tell him how

7:58
that process works

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yeah well first first of all i want to

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brag you know it's not easy to be as

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dull as i am

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i dare to do it but yeah the way i work

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is i do a one-time plan um i'm not cheap

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at 450 an hour and even a simple plan

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takes at least

8:18
10 hours or so but it's a one-time plan

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i don't make any money off of one

8:22
recommendation of the other rules going

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forward and then i'm sorry to brag on

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your podcast but i've got the worst

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retention

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uh record of any advisor out there i do

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a one-time plan with the goal of being

8:34
fired i love that because it's so purely

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objective and transparent

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i've never heard of anything like that

8:43
maybe there's other people like not at

8:44
your level of course but i just think

8:46
that is fascinating what led you to go

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in that direction what was the fork in

8:51
the road moment for that decision to run

8:53
a financial planning firm on a national

8:55
basis like that

8:57
well you know every profession on earth

9:00
for the most part anyways is fee for

9:02
service

9:03
right and if i go to a doctor and the

9:06
doctor cures me i'm going to stop paying

9:09
them

9:09
you know so it's a combination of that

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and plus you know i don't know what the

9:14
market's going to do next year

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if you ask me that next year i won't

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know what the market's going to do the

9:20
year after so it's a combination of

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rules

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um

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and the financial planning part is

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complex once you get to the

9:30
simpler financial plan you know running

9:32
it is fairly easy it should take

9:34
somebody you know one or two hours a

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year

9:38
once we've developed the plan

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well and and um i i laugh because

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i know that a lot of the firms i used to

9:46
work for all the major firms they had

9:47
the cookie cutter you know punch in the

9:49
number plan and then you got the binder

9:50
and you go here's your plan

9:52
that's not what we're talking about okay

9:54
allen does a deep dive in which is why

9:57
he charges what he charges but i always

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tell people you get what you pay for you

10:01
really do so um

10:03
we were talking the other day and you

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were saying that um 2020 and 2021 were

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really hard years for people writing

10:08
about finances

10:10
because as you said very very

10:12
appropriately markets exist to make

10:14
fools of us all can you expound on just

10:16
the 20 2020 and 2021 and i i'm assuming

10:19
we're going to see that same type of

10:20
writing in 2022.

10:22
well if i only knew what the markets

10:24
were going to do for 2022 and i'd have

10:26
beaten jeff bezos into space so that's

10:28
right

10:29
that's right

10:31
yeah you know and

10:32
if we look at the combination of the

10:34
full year 2021 and 2022

10:38
the the total stock market meaning the

10:40
vanguard tesla stock market index fund

10:42
gained over 52 percent

10:46
look at what happened

10:48
you know

10:49
no one had heard of coronavirus

10:52
i hadn't even heard a zoom video by the

10:54
way at

10:55
that point

10:58
we have had you know massive

11:00
unemployment uh

11:02
incredible deficit spending issuing so

11:05
much debt

11:06
um the political divide

11:09
and unrest is high much much higher than

11:12
i've ever seen it we've had social

11:14
unrest it's just been two

11:17
horrible years

11:19
uh

11:20
and covet just won't seem to go away i'm

11:23
a pessimist by nature but i wasn't

11:25
nearly i was way too optimistic on this

11:27
coronavirus so you know i admit if i had

11:31
a partial crystal ball

11:33
and knew all this was going to happen i

11:35
might have gotten out of the stock

11:36
market and what would have been the

11:38
incredibly wrong thing to do as

11:40
mentioned stocks went up over 52 percent

11:44
in spite of all of that

11:46
bad news it would have been a whole lot

11:48
easier for headline writers to explain

11:51
why markets dropped by 52

11:53
then went up by 52

11:56
so markets really do make fools of this

11:58
all and that's why rules work so much

12:01
better

12:02
i had to rebalance because my rule said

12:04
i was out of tolerance and had to

12:06
buy more stocks

12:08
yeah and that's why you keep you keep

12:10
coming back to the core foundation of

12:11
what you do which is minimizing expenses

12:14
and emotions and then maximizing

12:16
diversification and discipline

12:18
i think you i mean that's the

12:19
foundational floor of your planning and

12:23
and

12:24
making sure people understand that

12:26
um

12:28
no one knows i mean we're not predictors

12:30
here but we're commentators and we have

12:32
a lot of um you know decades and decades

12:34
of experience

12:36
inflation's a tough one right now and

12:38
interest rates allegedly are going to be

12:40
raised anytime the fed says hey we're

12:42
going to raise rates x amount of times i

12:44
look at them because i've been around

12:45
like you going uh-huh let's see it let's

12:48
see what happens

12:50
that half crystal ball that you

12:51
sometimes have what are you thinking

12:53
right here not that it's a per night

12:54
it's a pound of tail prediction but

12:56
what's your gut feel tell you

12:58
my gut feel is almost always wrong which

13:01
is why i ignore my gut feel but first of

13:03
all

13:04
the the federal reserve controls only

13:07
one rate

13:08
and it's called the fed funds rate

13:11
it's the shortest of the short term it's

13:13
an overnight rate

13:16
markets control intermediate and long

13:18
term rates

13:20
the fed doesn't they they tried to

13:22
influence it by

13:24
buying back its own debt otherwise known

13:26
as quantitative easing

13:28
and let me explain you know in 2008 we

13:31
did a lot of quantitative easing

13:33
and then the government announced that

13:35
you know qe1 qe2 qe infinity they were

13:38
finally going to end it and all the

13:40
economists said bond bubble bond bubble

13:42
because when when the fed tries to buy

13:44
back its own bonds they're trying to

13:46
keep interest rates low so when they

13:48
stop

13:49
people are going to want a higher return

13:52
and you know i wrote a piece saying you

13:54
know on bond bubble don't be so sure

13:56
markets aren't stupid markets no that

13:58
knew that the government can't be buying

14:01
back its debt forever and lo and behold

14:04
interest rates actually dropped

14:07
so

14:08
the the intermediate and long-term bond

14:11
market you know that's controlled if we

14:13
all knew that interest rates were going

14:14
to go up when the fed has its

14:17
treasury auction this week we would bid

14:20
less money to get a higher return and

14:22
rates already would have gone up

14:25
and

14:26
the the top economists have called the

14:28
direction of the 10-year treasury bond

14:31
right meaning up or down

14:34
30 of the time over the last 50 years

14:36
less than a coin flip and by the way

14:38
that study was incredibly disappointing

14:40
to me because

14:42
before then i thought i was uniquely

14:44
qualified to forecast interest rates

14:46
wrong i just knew that i didn't have the

14:48
ability to forecast interest rates and

14:51
didn't

14:52
move on it but it turned that was really

14:54
disappointing because it turns out i'm

14:55
up there with the

14:56
top that's a crazy stat 30 of the

15:00
they're batting 300 i guess if you're a

15:02
baseball player that's okay but if we're

15:03
talking about money that's not okay

15:06
well a coin flip is 50

15:08
yeah

15:09
it's the it's the monkey throwing the

15:11
dart right it's that whole scenario and

15:14
these are i guess the smart people room

15:16
that's when i heard janet yellen say

15:17
well this inflation might be transitory

15:20
i'm like

15:21
you have absolutely no clue what you're

15:23
talking about you might think you do but

15:26
i mean it doesn't look like

15:28
looks like this inflation transitory

15:30
means it's going to be around a while in

15:32
english and southern

15:34
um

15:35
it looks like it's going to be here for

15:37
a while don't you think

15:39
well argumented val's gonna have a

15:41
different perspective on that

15:44
um yeah the way i learned economics in

15:46
college

15:47
when there's more money chasing the same

15:49
amount of goods and services that's

15:51
going to cause inflation

15:54
but japan has been printing money far

15:57
faster than the us

15:59
and over the last 30 years has been

16:02
fighting deflation

16:05
and yeah i remember back in 1981 when

16:08
interest rates were 12 by the way i can

16:10
explain why those were horrible times

16:12
um

16:14
because we had high inflation we had a

16:16
stagflation sort of

16:18
economic environment

16:22
but um

16:25
you know if

16:26
markets believe that we were going back

16:29
into that area then interest rates would

16:31
have gone way up i know you're reading

16:33
the headlines interest rates surge but

16:37
those headlines are incredibly

16:38
misleading if you take a look at over

16:40
the last 40 50 years it's a little blip

16:43
and we've had blips larger than this and

16:46
quite frankly

16:48
you know i don't know whether we're

16:50
going to have higher inflation whether

16:52
we're going to go back into double-digit

16:54
inflation or it really is going to be

16:57
transitory and

16:58
in a year year and a half we're back

17:00
down to the 2 federal target anything

17:03
can happen

17:07
here's a hard pivot

17:08
alan um

17:10
should people reframe their social

17:12
security decision

17:15
yeah i i think so um

17:18
you know our natural instinct is we've

17:21
been paying into social security for so

17:23
long that when we have the ability

17:26
to

17:27
start collecting we want to get it

17:31
um but what i do is i explain to people

17:35
um what they're giving up over let's say

17:38
between ages of 66 and 70 or

17:42
and

17:42
what they are getting in the way of a

17:44
higher payment and it is the single best

17:49
inflation protected u.s government

17:52
backed

17:53
uh annuity on the planet you got it

17:56
you can't buy this anymore but insurance

17:58
companies used to offer

18:00
a single premium immediate annuity or a

18:03
deferred immediate annuity that had a

18:06
cola that had a inflation code they had

18:09
it had to see they do still do it but

18:11
they had also the cpi this cpi increase

18:14
which is no longer you can't buy an

18:16
annuity with the cpiu

18:18
consumer price index for urban consumer

18:21
index increase

18:22
and also too

18:24
just to interject here annuity companies

18:26
don't give that away okay they just

18:28
lower the price

18:29
or make you pay more money for that

18:31
whereas the government that's a

18:32
political football that's the best

18:34
inflation annuity on the planet so go

18:35
ahead

18:37
yeah

18:38
you're right you can't buy that anymore

18:41
with a cpiu which hedges against

18:44
inflation why because

18:46
the actuaries don't want to take that

18:47
risk i don't blame them

18:51
so yeah when you're delaying social

18:53
security

18:54
um

18:55
you're getting the best

18:56
inflation-adjusted annuity on the planet

18:58
and back when you could get it by the

19:00
way i would do the calculation and show

19:02
it to the client

19:03
that they could buy this

19:05
inflation-adjusted annuity

19:07
or delay social security which is like

19:10
buying the same thing with a 40 discount

19:14
exactly no exactly you're exactly right

19:16
it just i think the last carry was a few

19:18
three four years ago that was finally

19:20
pulled to cpiu

19:23
in a cola option that you could attach

19:26
at the time of application so those are

19:28
those are gone i know that when you do

19:30
financial planning you know everyone is

19:32
different it's a customized plan for

19:33
every single person

19:35
and retirement is is a broad-based word

19:38
that

19:38
needs to be drilled down for the

19:40
specific person that you're speaking

19:41
with

19:42
but in your opinion in what with your

19:44
background

19:46
what would you consider a safe spin rate

19:48
for someone looking at retirement or

19:50
maybe describe what that is so that they

19:52
understand it

19:54
okay well when you're calculating a safe

19:56
spend rate

19:57
um you're looking at the value of your

20:00
portfolio and to that by the way i would

20:02
add something like the value of your

20:04
house

20:06
i would not put cars or furniture things

20:09
that are depreciating

20:11
and let's say

20:12
you know somebody has just to make a

20:14
number easy a million dollars between

20:16
the value of their house and their

20:18
portfolio how much can they safely spend

20:21
and by the way the reason they use the

20:22
house is later on in life they could

20:24
always downsize

20:26
um

20:28
rent sell the home

20:30
take out a reverse mortgage

20:32
so they can tap that equity so if

20:35
somebody had a million dollars

20:37
what percent of that can they spend each

20:39
year and they have to increase it with

20:41
inflation by the way because if you

20:42
don't increase it with inflation

20:44
you're cutting your

20:47
and lifestyle

20:47
answer to this question is it depends

20:50
and it depends on

20:51
a few things number one how old you are

20:54
and what your life expectancy is so

20:56
somebody that's 50 years old is going to

20:58
have a much lower safe spin rate than

21:00
somebody that's 90 years old sure and

21:03
the next is how it's invested

21:06
and it turns out that if you have an

21:08
incredibly conservative portfolio or if

21:10
you have an incredibly aggressive

21:12
portfolio that cuts down on the safe

21:16
spin rate and then finally fees matter

21:21
so for instance one percent in fees cuts

21:23
that safe spin rate down by about 0.4

21:26
percent

21:28
so for somebody um

21:30
you know i've done a lot of modeling on

21:32
this and

21:33
morningstar came out with an incredibly

21:36
good study

21:37
on safe spin rates looking at all of

21:39
these factors and just a nice chart on

21:42
how you're invested how many years you

21:44
need the portfolio to last of what that

21:46
safe spin rate and it turns out that a

21:49
50 50 portfolio of somebody that

21:52
that wants to want it to last for 30

21:55
years comes out to about 3.3 percent so

21:58
that means 33 000 on that 1 million

22:01
dollars and then increasing each year

22:03
with inflation

22:05
and and that comes to

22:07
a

22:09
90 probability that the

22:12
the money would last for the 30 year

22:14
period but again that assumes you're

22:17
minimizing expenses and emotions

22:19
maximizing diversification and

22:21
discipline otherwise

22:23
it's going to be a lower safe spin rate

22:25
and then finally

22:27
i recommend

22:29
developing a budget and developing that

22:32
budget put every line item in

22:36
in a discretionary or non-discretionary

22:39
meaning that is stocks tank and stay low

22:41
and just last year the japanese stock

22:43
market got back to where it was in 1989

22:46
so we've had teddy bears so far

22:49
the this century that they've recovered

22:51
very quickly and we don't know that the

22:52
next one will

22:55
so

22:56
be ready to cut if things aren't going

22:58
so well and and by the way to that you

23:00
can add social security or by the way if

23:03
you're delaying social security i would

23:05
say you could go ahead and spend what

23:08
you would have received

23:10
had you taken social security today

23:12
because really what you're doing is

23:14
buying that inflation-adjusted

23:16
deferred annuity

23:19
correct and i just keep going back to

23:21
your to your foundational statement of

23:23
minimizing expenses and emotions and

23:25
maximize diversification discipline

23:27
eerily similar to my pill acronym that's

23:29
print you buy an annuity for either

23:31
principal protection income for life

23:32
legacy or long-term care

23:34
that's it if you don't need to

23:35
contractually solve for that then don't

23:37
buy an annuity

23:39
i like your simplicity simplicity of

23:41
that thought of the the minimizing

23:43
expenses you know it's interesting

23:45
people people hear that but i don't

23:48
think they really run that number of how

23:50
it eats away

23:51
at what you have um in a in a brokerage

23:54
and banking

23:56
advisory world where those people are

23:58
being forced to wrap

24:00
these accounts with advisory fees um you

24:03
know i just know that

24:04
that does work in some situations not

24:07
all just like everything else but the

24:09
diversification and discipline

24:11
you know that's where the plan comes in

24:13
now when you going back to kind of your

24:15
the wealth logic and your company and

24:16
your planning and your strategy and what

24:18
you do which is so unique and good

24:21
i'm i'm assuming that when you're done

24:24
you're handing people a i mean a thick

24:27
legitimate easy to understand

24:29
or is it thin legitimate and easy

24:31
understand folder

24:33
you brilliant it's the latter it's the

24:35
thin it's

24:37
i thought so

24:39
i thought i was hoping so because

24:42
i had someone actually send me their

24:44
financial plan from someone and

24:45
literally alan it was two inches thick

24:47
and i was like that's too much

24:49
i don't know what they're selling you

24:51
but that's too much so it's really you

24:53
script it down even from the retirement

24:56
planning standpoint right yeah when i

24:58
started this about 20 years ago i looked

25:01
at so many different pieces of software

25:04
right

25:05
that produced the two inch thick

25:07
and all i can say is it was garbage it

25:10
was making incredibly

25:13
horrible assumptions you know underneath

25:15
in the engine

25:16
and it was so precise on what every

25:20
um

25:21
asset class was going to return ignored

25:24
fees you know just made a whole bunch of

25:26
you know horrible assumptions

25:29
uh you know monte carlo simulation

25:31
you garbage in garbage out i'm a big

25:34
believer in monte carlo simulation but

25:36
realistic assumptions then you'll get

25:38
realistic answers correct it's like the

25:40
back tested numbers that people get in

25:42
the annuity world that show seven

25:44
percent nine percent returns i'm like

25:45
come on now you gotta you gotta have

25:47
your you can't be the sucker at the

25:49
table you know uh annuities don't work

25:51
like that mark that's the reason you

25:52
need people like alan in the non-annuity

25:54
world

25:55
managing managing your money um and i'm

25:59
assuming they can just go to dare to be

26:00
dull.com

26:01
there's places that sign up there

26:03
there's i if you do one thing listeners

26:05
and viewers sign up for his newsletter

26:07
you talk about gold that is good stuff i

26:10
i've been reading that for

26:13
10 years i bet you

26:15
can people just sign up and get your

26:16
newsletter yeah it's a sign up it's a

26:19
double opt-in sort of thing so check

26:21
your spam filter

26:22
you know it's free there's a zero cost

26:25
that's unbelievable your viewers i'm

26:27
willing to give a 20 discount to that

26:30
to the free

26:32
that's phenomenal that's phenomenal so

26:35
20 off free

26:37
that's a lot alan dry sense of humor and

26:40
also just

26:41
if you're listening to him talk

26:43
you know there's a lot of iq behind

26:45
there and you know there's no agendas he

26:47
does this because he's good at what he

26:49
does

26:50
um which i just i just love his approach

26:53
i i ask people like you and sometimes

26:56
they get mad sometimes they don't so i

26:58
apologize up front if you say i don't

26:59
want to talk about that

27:01
i don't want oh okay

27:03
crypto

27:06
yeah

27:08
people are kind of shocked that i own

27:10
some bitcoin

27:12
really and the reason i own some bitcoin

27:14
is i wrote about it

27:16
for aarp roughly three or four years ago

27:19
okay

27:20
and in order to uh see

27:23
it it was bitcoin basics how you go

27:26
buying it etc i wanted to back check it

27:28
and see if it actually worked the way

27:30
the expert said it worked and so that

27:32
that's why i bought a little bit of

27:34
bitcoin well when i say a little bit i

27:35
mean two hundred dollars there you go

27:38
um so you know bitcoin

27:40
you know i i

27:42
they're they're pros and cons you know i

27:44
think that it does

27:46
serve a need for instance if i buy

27:50
something from amazon or walmart i think

27:53
the two largest u.s retailers and use my

27:56
credit card i'm going to get two percent

27:58
cash back

28:00
and you know that

28:02
that the credit card company is charging

28:05
the largest retailers more than two

28:07
percent sure so with crypto you can

28:09
disintermediate the bank and

28:13
buy things with

28:14
with bitcoin etc another benefit of

28:17
bitcoin is that it um

28:21
you know

28:21
there's a finite i think it's 24 million

28:24
coin out there to be mined and some of

28:26
it by the way has already been lost

28:27
people lost their

28:29
their codes to their wallets

28:32
etc you know with that said

28:35
um i i wouldn't put more than one

28:37
percent

28:38
in bitcoin we don't know whether

28:42
you know there's well over a thousand

28:44
cryptocurrencies those points are

28:46
started as a joke

28:48
um

28:49
has significant value i'm thinking of

28:51
starting rothcoin can i advertise it on

28:53
youtube absolutely

28:55
absolutely rothcoin but the problem is

28:56
people would think it's called roth iras

28:59
they mix it up and mess it up i'm going

29:01
to read something to you somebody sent

29:02
to me the other day which is a

29:04
prediction that i made early on which is

29:06
a no-brainer if you think about it the

29:08
biden administration is preparing an

29:10
executive action to ask federal agencies

29:13
to regulate digital assets such as

29:15
bitcoin and other cryptocurrencies as a

29:17
national security matter and create a

29:20
regulatory framework to cover cryptos

29:22
stable coins and non-fungible tokens as

29:25
per as a person familiar with the plan

29:27
told one of your places barons

29:30
this effort would involve the state

29:32
department treasury department national

29:33
economic council council of economic

29:35
advisors the white house national

29:37
security council and all those people to

29:40
develop a more coherent government

29:42
policy overseeing the digital assets

29:44
here's my thought on that i think they

29:46
want in i think they want u.s coin or

29:48
whatever they want to call it and i

29:50
think they want to tax this real time

29:52
because the underlying technology of

29:53
crypto is is blockchain technology which

29:56
is a legitimate technology what's your

29:59
comment on

30:00
you forget biden it could have been

30:01
anybody i mean any the government itself

30:04
stepping in and and muddying up the

30:06
works well you know what this is a list

30:09
of well he's holding that for the for

30:11
the podcast listeners which is 95

30:13
percent he held up a sheet of paper

30:16
for the other people watching phone with

30:17
annuities it's hard to see so just kind

30:19
of tell us what you held up it was a

30:21
blank sheet of paper that's all the

30:23
politicians that that i endorse

30:27
so i'm not going to get into politics

30:29
but yeah i suspect

30:31
um

30:32
the government wants to

30:35
wants its share of taxation for

30:37
transactions for uh gains etc

30:42
just like

30:43
they capture on everything else

30:46
so yeah i suspect that's what's going on

30:50
i think they want to try to clamp down

30:51
on you know some of the legal sure

30:53
activity

30:54
sure such as what was the pipeline that

30:57
was shut down and got the uh

31:00
bitcoin yeah yeah there's some there's

31:01
some nefarious stuff but still most of

31:03
the fraud's done with hard dollars i

31:05
mean that's that's a fact so um i just

31:07
think i think it's one more power grab

31:10
um i know crypto is the wild wild west

31:12
but it's interesting to get your take on

31:13
it

31:14
um obviously i'm sure people ask you

31:16
about that all the time one of the

31:17
things that cracked me up is um you

31:19
listed somewhere and i wrote it down

31:21
i'll probably surprise you with this

31:23
which and you wrote

31:24
that you charge a lot of money to

31:27
clients to tell them that you don't know

31:29
certain things and you listed five

31:30
certain things i wrote them down if you

31:32
don't have them on your head but if you

31:33
have them

31:34
give those f give those five things that

31:36
you don't know about

31:38
uh sure clients asked me

31:40
what do i think the stock market is

31:42
going to do next year and my answer is i

31:44
haven't a clue number two what's number

31:48
two if we can't even explain why the

31:50
market's gone up 52 in the last two

31:52
years what makes us think we can

31:53
forecast the future i love it i love it

31:57
what's the second one will international

31:59
outperform the us finally international

32:02
has way underperformed the u.s over the

32:05
last dozen years or so and

32:08
lo and behold this year in the first few

32:11
weeks international is doing better or

32:13
less bad than u.s and now i'm getting

32:15
people coming to me saying should i have

32:17
more international

32:19
uh and the answer is you know based on

32:21
the whole four-week trend

32:23
um you want to pick an asset allocation

32:26
and stick to it because i don't know

32:27
whether international is going to

32:28
outperform

32:30
what styles and sectors you know tech

32:32
has been hot large cap growth has been

32:34
hot what's going to do better over the

32:36
next year i don't know which is why my

32:38
total stock index fund owns large

32:41
companies small companies

32:43
mid-sized companies

32:45
you know value growth core

32:47
every industry every sector

32:50
which stocks will outperform

32:53
boy if i knew

32:55
which stocks were outperformed as i

32:57
mentioned i'd have invested

33:00
jeff bezos into space and maybe even

33:02
landed on mars by now

33:04
um

33:04
and then what will happen to rates and

33:06
bonds you know i've known for a long

33:08
time i have no clue of what's going to

33:11
happen to rates i have all these

33:12
instincts on all five of these by the

33:14
way sure and i have to work very hard to

33:17
ignore those instincts

33:19
i want to stop for a second and have the

33:21
listener viewer just think for a second

33:23
about what he what allen just talked

33:24
about

33:25
here are the ques here is how will

33:26
stocks perform next year will

33:28
international finally outperform the u.s

33:30
what styles or sectors will outperform

33:32
which which stocks will perform what

33:34
will happen to rates or bonds every

33:36
single yahoo advisor out there that you

33:38
ask they're going to have answer that if

33:40
you ask jim cramer who allen will never

33:43
be mistaken with

33:44
they're going to they're going to jump

33:45
in and and they have no clue

33:48
that's the that's the refreshing part

33:51
about what alan does and the reason i

33:53
encourage you to go dare to be

33:56
daredell.com which is his site think

33:58
about this he is one of the best

34:00
financial planners in the country and he

34:03
named his site which i love dare to dull

34:06
once again we'll have that on our site

34:08
but i just think it's refreshing alan

34:10
that

34:10
you're not trying to be a master of the

34:12
universe

34:14
like most people

34:15
investing is boring and look

34:17
if they gave me a tv show my first

34:20
episode would be those eight words

34:23
my second episode would be see episode

34:25
one

34:27
i wouldn't watch the show it would be so

34:29
boring so you know

34:31
if you're looking at investing as

34:33
entertainment and by the way i carve out

34:35
a tiny little bit of money to have a

34:37
little fun with there's nothing wrong

34:38
with that as long as your future isn't

34:40
based on that because you know it

34:42
exercises a piece of my brain that index

34:45
funds and discipline low cost boring

34:47
investing doesn't exercise

34:52
i wanted to pivot one more time this is

34:54
a good this is all my pivots are good

34:56
ellen but this is a really good one alan

34:58
has written a book called how a second

35:00
grader beats wall street

35:03
why don't you think about that for a

35:05
second that is

35:06
fantastic

35:08
um and you can go to you know you can go

35:10
to his site and look that he actually

35:12
has a a secondary site for that book

35:14
that we'll have up as well

35:16
called second graderportfolio.com

35:20
but tell us a little bit about that book

35:23
and before you start in

35:25
one of the things and you know our team

35:27
did the research

35:29
um you know

35:31
you had 13 golden rules of a second

35:34
grader to beat the market which i

35:37
thought were just

35:38
hilariously good and factual

35:42
if you have enough time let's go through

35:43
those 13.

35:45
yeah well it's not beat the market but

35:47
it's beat most investors okay so when

35:50
when my son was eight years old you know

35:52
i was teaching him

35:55
lessons that we all teach our kids that

35:56
i'm realizing people

35:59
violate when it comes to investing and

36:02
then kevin my son when he was eight

36:04
years old

36:05
money didn't mean anything to him so

36:08
the emotions

36:10
were out of the picture you know money

36:12
at that time might have meant a candy

36:14
bar or something like that he's 24 now

36:16
money's meaning more to him so he's

36:17
losing

36:18
some of his

36:19
advantage and by the way i'm asked why i

36:21
haven't written another book and i blew

36:24
my wad with that buck

36:26
when i wrote it everyone was talking

36:28
about you know income portfolios master

36:30
limited partnerships sure market value

36:33
things that that that all blew up not

36:36
alan roth not alan roth allen roth wrote

36:38
a book called how a second grader beats

36:40
wall street

36:42
so you know the the 13 golden rules are

36:45
you know number one just arithmetic

36:47
we've already talked about it 10 minus 2

36:49
equals 8. the more you pay in fees the

36:52
lower your returns are going to be

36:56
the the next is

36:58
don't put all your eggs in one basket

37:02
apologize i thought i had that on do not

37:04
disturb

37:06
don't put all your eggs in one basket

37:07
but i see people violate that all the

37:09
time we're all in muni's we're all in

37:12
uh a handful of stocks

37:16
if you drop that basket you're gonna

37:18
lose everything yep um

37:21
you know number three that's my number

37:23
three is my favorite one so go slow

37:25
okay okay you don't watch too much

37:27
financial tv

37:29
true story

37:34
i i'm embarrassed to say i i had kevin

37:36
when he was eight years old

37:38
watch

37:39
uh five minutes of kramer

37:43
now he thought it was a joke he thought

37:44
it was like some sort of adult uh

37:47
back then he was really wild you know

37:48
blowing horns and whistles sure sir

37:52
in all of that but he couldn't believe

37:54
that people were

37:56
that this was real that people were

37:59
taking advice from him

38:02
number four don't act silly when

38:04
something is important what's that

38:07
well

38:08
if you think about it now that stocks

38:10
are down maybe about 10 percent or so

38:12
i'm starting to see people

38:14
panic and sell

38:17
now you try to explain to any

38:18
eight-year-old why you're going to buy

38:20
something when the price is high and

38:23
sell it when the price is low and

38:25
they're going to think that is really

38:27
silly

38:28
and you want to do the opposite but

38:31
again money didn't mean anything to him

38:32
back then so duh that that's a whole lot

38:36
easier

38:37
you know number five

38:40
know the odds of the game before you

38:42
play

38:44
and

38:45
you know your odds of beating the stock

38:47
market over any one year aren't

38:49
horrible

38:50
but over

38:51
longer periods of time 20 30 40 years

38:55
are are less than one percent so don't

38:58
play a game that you you're virtually

39:00
guaranteed to lose

39:03
number six was something that i i failed

39:05
to get across to kevin and and for the

39:08
most part he was right

39:09
um

39:11
you know there could be a better way

39:13
owning some asset classes that have

39:15
lower correlations

39:17
that might zig when the market zags

39:20
could add some value but it also has to

39:22
be low cost sorts of things very easy to

39:24
find asset classes with negative

39:26
correlations but they also have negative

39:28
expected

39:30
returns so real estate investment trust

39:33
precious metals and mining

39:36
stock funds had lower correlations but i

39:40
couldn't talk kevin into it and lo and

39:42
behold he's been right quite frankly

39:45
um

39:46
number one number seven i love this is

39:49
fantastic the way you phrase it go ahead

39:52
well let me get a number

39:53
yeah oh okay yeah um

39:56
yeah i'm sorry bonds yeah

39:58
you know don't lend money to someone who

40:00
can't pay you back you know there was

40:02
always i mean

40:04
honestly honestly alan

40:06
that goes for annuities as well um

40:08
clinton's paying suspendability the

40:09
carrier claims paying ability of who

40:11
you're lending the money to in this case

40:13
a bond so if someone's hitting you up

40:14
with a this yield that's just incredible

40:17
right

40:19
i mean uh eight year old a second grader

40:22
is saying can they pay you back right i

40:24
mean that's just common sense forget the

40:26
yield but everybody gets mesmerized by

40:29
the by the percentage yeah well you want

40:31
a high credit quality when you lend

40:34
money to somebody when you buy an

40:35
annuity when you buy a bond or a bond

40:37
fund

40:39
etc but there's by the way a second

40:41
trick

40:42
uh

40:43
for instance i'll have clients that come

40:45
to me thinking they're making four or

40:47
five percent on muni bonds and what

40:49
they're doing is they're buying them at

40:51
a premium yes and most of the payment is

40:54
just return of their own principle it's

40:56
the same thing is true on a single

40:57
premium immediate annuity

41:00
five percent

41:01
it's not like a cd that's paying five

41:03
percent a lot of that return is is is

41:06
your own principle i always tell people

41:08
that there's other sites that try to

41:10
compete with neon but they can't and

41:12
they'll put up like five percent payout

41:13
rate or six percent payout rate i'm like

41:15
that is so fraudulent

41:17
because annuity payments for lifetime

41:19
income is combination return of

41:20
principal plus interest and the value

41:22
proposition is the annuity company will

41:24
pay forever like social security but i

41:26
digress by the way number eight is good

41:28
too and you got to explain number eight

41:31
number eight is

41:33
it's okay to lend money to somebody if

41:35
the teacher guarantees you're going to

41:36
get the money back the teacher who's the

41:39
teacher ellen

41:40
in this case well it was the teacher in

41:43
this class but

41:44
for us adults it's money that's backed

41:47
let's say at a bank or credit union at

41:49
the fdic or ncua

41:52
that now is not the greatest time for

41:54
cds versus bond funds but sure

41:57
for a long long time you could earn more

41:59
than bonds

42:01
and

42:03
you know no default risk as long as you

42:05
kept below those

42:07
fbic or ncua maximums

42:11
number nine

42:13
don't bet your lunch money i offered

42:15
kevin a bet

42:18
uh he he took his i forgot what it was

42:21
maybe a a dollar

42:24
back then for his

42:26
lunch

42:27
and i said i'll make you a bet we'll

42:28
flip a coin if you win we'll give you

42:31
three dollars if you lose you give me

42:33
back that dollar but then kevin said but

42:36
then i won't get lunch today i said yep

42:38
that's right he didn't take that bet

42:40
but a lot of us adults we've won the

42:42
game we have enough money

42:45
to

42:45
preach it preach that loudly yes go

42:49
yeah as william bernstein put it when

42:51
you've won the game quit playing doesn't

42:52
mean get out of stock completely just

42:54
quit playing but if you have enough

42:56
money you know to support the lifestyle

42:59
that you need

43:00
you don't want an aggressive risky

43:03
portfolio you want a fairly conservative

43:05
portfolio i've won the game my portfolio

43:08
is 45 stocks

43:10
55

43:12
fixed income and the fixed income by the

43:14
way is a combination of cds and bond

43:16
funds

43:18
i tell people don't chase yield if you

43:20
don't have to chase shield don't chase

43:21
it but everyone they'll they'll put

43:23
their money at risk for 200 basis points

43:25
english 2 percent

43:27
for

43:28
for no reason they don't need to do that

43:31
well i'll see people do it for 50 bits

43:33
0.5 percent they take a ton of risk and

43:36
lose their principle

43:38
number two your fifth income should be

43:40
the most boring part i agree

43:43
portfolio it's the dullest of the dole

43:46
by the way that in my world that's my

43:47
guess that's just a fixed-rate annuity

43:51
so it is what it is number ten i love

43:53
this why do investors love to pay taxes

43:55
question mark answer that one

43:57
yeah well i've always said investing is

43:59
simply never said taxes were and and by

44:02
the way that's the majority of what i do

44:04
in the planning part is all on the tax

44:07
side but we do all sorts of things to

44:10
increase our taxes by active funds that

44:12
that trade

44:15
and

44:16
that we we locate assets in the wrong

44:19
place for instance i mentioned my

44:20
portfolio was 45

44:22
55 fixed income right you look just at

44:26
my

44:27
um my ira and in 401k the traditional

44:31
not the roth you'll see i'm 100 in fixed

44:33
income if you look just at my taxable

44:35
account you'll see i'm very aggressive

44:37
in stocks and that's because if you

44:39
think about it if you own the stock

44:41
funds in the ira

44:43
then you're converting what would have

44:45
been a long-term capital gain into

44:47
ordinary income because when you pull it

44:49
out to live on that's ordinary income so

44:52
no i'm not saying that

44:54
that that kevin understands the tax code

44:56
i don't think anyone understands

44:58
even the people even the people that

44:59
write it don't know

45:01
all right number eleven

45:03
uh nightmare off wall street

45:06
uh you know there are lots of products

45:08
out there

45:09
uh and these are

45:11
as an example not what you sell or i'm

45:14
sorry what you have on your site but

45:16
these are the you know incredibly

45:18
complex

45:20
um annuities with the ryla's the buffer

45:23
annuities yeah all that stuff's messy

45:26
messy

45:28
and i i tell people here's

45:30
you know if somebody hands you i want

45:32
you to buy this and it's two inches

45:35
thick

45:36
don't bother reading it just don't buy

45:38
it because i promise that the attorneys

45:41
and the actuaries didn't write it to

45:43
protect the

45:44
the purchaser no doubt and i i do yeah

45:47
you have the second greater look i

45:49
always tell people if you can't explain

45:50
it to a nine-year-old don't buy it no

45:52
offense to nine-year-olds

45:53
i i mean that's what i tell people if

45:55
you can't walk up to nine-year-old and

45:56
then understand conceptually what you're

45:58
buying don't buy it yeah i would say if

46:00
you can't explain the whole strategy

46:02
you're doing something wrong no i no i

46:05
agree all right number 12.

46:07
number 12 is pick the low-hanging fruit

46:10
you know i see lots of people that have

46:11
cash earning 0.01 percent you know at

46:14
least earned 0.5 percent i've still got

46:16
a savings account at one percent

46:19
um

46:20
you know if you want to earn

46:22
you know two and a half to four percent

46:25
risk-free then take that cash and pay

46:28
down your mortgage with it you're you're

46:30
not doing something like i don't want to

46:32
put more money in your house i'm not

46:33
suggesting you uh do an addition to your

46:36
house i'm suggesting you finance it

46:38
differently so there are lots of things

46:40
that can um

46:42
increase return while actually

46:44
decreasing risk and that's low-hanging

46:46
fruit and we've got to fight the inertia

46:49
to get those stuff

46:51
that stuff done

46:53
last one is finally number 13. is that

46:55
the band is that the band that i saw in

46:57
concert as a young teenager

46:59
[Laughter]

47:01
that's a little different yeah yes

47:04
simple stupid and no i'm not calling you

47:06
or my client stupid but i love that

47:08
phrase yeah and by the way yeah the more

47:10
complex we build something the lower

47:12
returns are likely to be

47:14
and by the way that kiss principle works

47:16
in most things in life

47:19
and actions would be the one exception i

47:21
agree and in low interest rate worlds

47:23
that mean you have been seen cycles of

47:24
during our during our um life out here

47:27
in the financial world

47:28
that in low interest rate worlds that's

47:30
when firms start creating complex

47:33
structured products that no one can

47:34
understand

47:36
well they're always out there but again

47:38
you know i think i mentioned that you

47:39
could earn 12 back in 1981

47:42
but think about it you invest a hundred

47:44
thousand dollars you get 12 000 in

47:45
interest

47:46
a third of it went to taxes you're left

47:48
with 8 000 or 8 percent and inflation

47:51
was at 14 then you lost six percent of

47:54
your spending power

47:56
as bad as rates are now they were worse

47:58
back then even though it felt so much

48:00
better back then

48:03
alan we're about we're about up on the

48:05
edge of time but i want to close it out

48:07
but i want to remind people and once

48:09
again we're going to have all of alan's

48:11
stuff on our site

48:13
and who you've been listening to is one

48:14
of the smartest guys in the country when

48:16
it comes to finances and financial

48:17
planning his name's alan roth and um you

48:21
know he is

48:22
a master in my opinion of the simplicity

48:26
of

48:26
financial planning he's written a book

48:28
called how a second grader beats wall

48:30
street you can go to his site at

48:32
daretobedull.com

48:34
and look at all of his stuff and if you

48:36
do one thing

48:37
today is go to his site and sign up for

48:39
his news newsletter it's literally gold

48:43
and you should be reading it

48:45
and i would encourage you to engage in

48:47
and speak with alan and see if

48:50
if you you know you want to hire him to

48:52
put together a legitimate financial plan

48:55
under his eight

48:57
very simple world words of minimizing

48:59
expenses and emotion and maximizing

49:01
diversification and discipline i think

49:04
that's tattoo material in my opinion

49:06
so with that being said

49:09
alan

49:10
and this is your mic drop moment

49:13
any parting words for the for the

49:16
thousands and thousands of listeners out

49:17
there and viewers

49:19
of the fun with annuities podcast

49:22
you know i think you've summarized it

49:24
beautifully for me again stick to those

49:26
eight words look at your own

49:28
portfolio see whether you're meeting

49:32
those eight words or not and then make

49:34
changes if if you're not

49:37
ladies and gentlemen that is alan roth

49:39
of wealth logic smart guy in the room

49:41
for sure and so glad he joined us today

49:44
and hopefully he'll come back on the

49:45
number one annuity podcast on the planet

49:47
just happens to be called fun with

49:48
annuities i'm your host stan the annuity

49:50
man

49:51
and i will see you

49:52
next week

49:58
thanks for listening to fun with

50:00
annuities please hit the subscribe

50:02
button and make sure to go to my site at

50:04
the annuityman.com where you can run

50:07
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50:10
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50:12
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50:15
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50:17
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50:20
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50:22
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50:25
encourage you to schedule a one-on-one

50:27
call with me stan the annuity man so we

50:30
can have a full discussion of your

50:32
specific situation it will be the best

50:35
brutally factual and truthful advice you

50:38
will ever get and that's one guarantee

50:40
you should definitely take advantage of

50:42
so join me next time for the number one

50:44
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50:47
fun

50:48
with annuities

50:52
[Music]

51:03
you