PracticeCFO’s Diversified Approach to Investing - with Brandon Hobson, CFA®, CPA

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Welcome back, everyone, to another episode of the Dental Boardroom podcast. My name is Drew Phillips and I'll be the host of today's episode. We have our esteemed colleague, Mr. Brandon Hobson on the show again to continue our investment and economic outlook podcast series. And we have a lot of hot topics to discuss today. There's been plenty of new press releases, plenty of things that are potentially altering or changing the economic landscape that we're coming into for the short and intermediate future. We have Brandon, our investment director here at Practice CFO on the show to help us decipher and uncover the insights and what they actually mean and how they relate to you specifically. So join me in welcoming Mr. Brandon Hobson back on to the show.

Thank you, Drew. I'm happy to be here. It's been a while, maybe over a year, since we've actually done one of these recordings, so I'm looking forward to it.

Likewise. So there, as I mentioned, there's a lot of topics. The debt ceiling, the jobs report that was just released. Of course, artificial intelligence is creating a lot of buzz right now. What topic should we start with, Brandon?

I think we could keep it like we have historically and maybe start with discussion around the Fed and what the outlook for the Fed is and how that relates to the unemployment picture in the economy. What do you think?

Let's do it. So why don't you give us a brief overview of your general synopsis and outlook as it relates to the Fed, and then I'll chime in as needed.

You got it. Yeah. So I'll kick it off with just sticking to the facts here, not really providing my spin on things, but just in terms of what the Fed's expected to do and what the market broadly anticipates here. The Fed is about to meet in the next week. I believe it's actually going to be around June 15 that they meet, and it's broadly expected that they are going to actually pause for the first time in this rate hike cycle. And so we're sitting at about between a 5.25% overnight rate right now, and that's after a significant amount of hikes over the last roughly year and a half or year and four months. And then the Fed is finally now going to take a pause. And as they're looking to pause, we're starting to see a little bit of a tick up in unemployment. And it's looking like inflation has started to come down. It's still too high, but there's been some progress made there. And so it doesn't mean the Fed's not going to hike again in the future. It just means that they're looking to pause. In fact, in July there are some expectations emerging that the Fed might actually do another quarter basis point hike at that point.

So in the immediate short term, if I'm going to summarize that correctly, we should expect another rate hike in July. I know they're meeting again in June, right. Like on June 14th I believe is the 11th time that they have the FOMC meeting has been held since they started raising rates. And so we think maybe not in this round, but in July we could see another rate hike. Is that fair?

That's fair and that's in line with what the market's anticipating as a whole. And so, yeah, I would expect some Fed members to come out. They're probably going to say something along the lines of we're going to take a pause. The reason that we're going to pause is because we want to make sure that the rate hikes that we've already done up to this point have a little bit of time to trickle through the economy and take hold. And at this point we're not comfortable with where inflation currently is. However, we're going to pause and let those rate hikes catch up and revisit in July and look at the data at that point. So that's what I'm expecting them to say in June and then in July. If there's anything that has come out that shows inflation is getting hotter or the job market isn't softening as much as they'd like to see, then certainly start to see another quarter basis point hike getting priced in. At that point.

Taking a pause isn't necessarily inaction, as you mentioned, it's allowing things that they've actions that they've already taken to materialize within the market so that we can see what those true effects that they've created. And if you're sitting on the sidelines like we, you're looking at the data coming in as frequently as we are and there is still a lot of conflicting information in terms of where we are and how much of an impact there previous rate hikes have had on the economy and their job to taper inflation on one end. The jobs report that came out I would say was pretty much positive. We have on a three month trend. We've increased jobs every single month for the last three months. 236,000 jobs three months ago, 294,000 jobs two months ago, and then the most recently, 339,000 jobs were created. Wage inflation, although is tailing behind real inflation at least as the government says, around 5% in wage inflation would extrapolate out, based on the most recent jobs report, to about 3.6% annually. And the other piece to this too is we still have almost every single yield curve that we pay attention to is inverted at this point still, except for the 10 and 30, which would signal that the economy's still potentially heading to recession. What data points do you tend to look at and which ones do you feel are the better predictors at this point in time, given this sort of somewhat conflicting information? Because I think to the Fed's point, their actions may not have had enough time for some of these other indicators to catch up and show exactly what some of these other leading indicators that may be a better predictor right now are showing.

Yeah, so you kind of got, you got two things. You've got the Fed trying to tame inflation, and to your point, you're speaking on the probability of a recession versus the Fed's rate hike cycle, which typically those coincide with each other, meaning it's pretty uncommon for the Fed to actually hike rates and have a soft landing. And we've talked about that a little bit in our last podcast. The expectation has been that during this rate cycle, at some point we're going to enter a recession. But that's not necessarily. That doesn't have to be that way. And the more the data that's currently coming out, even though it seems like it would be a mix and it is rare historically, it does seem to trend that maybe the Fed has or at least moved closer to being able to achieve that soft landing. And the reason for that is what metric do I look at that kind of tells me that one of them is global GDP or even US GDP growth. But just today the World bank came out and Revised their global GDP for 2023 upwards. I think it was like in the 2% and now it's somewhere around 3. It didn't go up a significant amount, but it didn't go down. And it's still like a healthy growth number. Even though 3% doesn't seem like a lot when you're talking about the aggregate economy as a whole for the entire world. That's a pretty good number and probably one that's sustainable. It's not significant growth, but it's certainly a year over year. That's a sustainable number that we should probably expect the economy to grow at. That's what the US GDP growth is usually pinned on is about 3% year over year. And that's not in a recessionary period, obviously. Another thing that I look at, Drew, that tells me that we might not be headed for that hard crashed landing that recessions normally bring after a rate hike cycle is companies earnings are doing well, they're growing, companies are paying dividends and buying back stocks. The consumer's strong. All of this can change on a dime. Right? Because when things start to shift in the economy, consumer spending can dry up really fast. But we just haven't seen it yet.

Those are the positive things that you can look at and say, wow, it really looks like the Fed is going to maybe achieve this soft landing that they've been targeting for the last year and a half.

I think you would probably agree that one of the biggest proponents of why the economy has stayed fairly strong and resilient even though the Fed has continued to increase rates over the last 11 FOMC meetings is the consumer spending piece. The stimulus money that was introduced during the pandemic, the savings account balances that stimulus money created. But I think even more importantly, and something that's getting ready to come up here fairly soon is the pause on student loan payments and the excess consumer spending that pause has created. And I think that we have 45 million people that have federally backed student loans that have been experiencing this pause. And the Biden bill to reduce student debt by $20,000 for eligible student loan holders is still sitting in the Supreme Court, which makes up about 25 million of the total 45 million people that currently are under student loan payments. And I'm just curious what you think when that switch is flipped back on, in which it could be as early as August 29th. So basically September is when payments will likely resume for most of these student loan borrowers. And the average student loan payment across all 45 million people is $600, which when you think of that on an after tax basis is pretty material. So I'm just curious what you think that could do from a consumer spending perspective and how that was going to relate to the economy and how you're building that into your forecasts.

Yeah, that's a really good question. And that was actually negotiated in the current debt ceiling when they rose the debt ceiling this last negotiation cycle. So it does look like student loan payments are going to be kicked back on. I think they gave it 60 days from June 30th. So like you said, the end of August is when we expect those to back on. When I'm thinking about this, what I Try to think about the Fed has hiked rates, like I said, they're sitting at 5% and five and a quarter between that right now, 5% to 5.25% of the overnight rate. And that hasn't done much to dent consumer spending. And if you would have asked me a year ago basically what consumer spending would look like after the Fed hiked that much, I would have thought that there would be a massive change in spending habits. But to your point, they have been very strong, partly due to the stimulus that was pushed out into the economy during COVID And so at what point does that dry up in trying to quantify the impact of the student loan payments? I would say that's probably somewhere around maybe equivalent to a quarter percent hike. If you're trying to figure out relative to these hikes, how much of an impact that's going to have, I don't see it being a drastic amount, but I do see that being part of the reason that the Fed's got to look at all of these things when they're making these decisions. And, and you got to believe that the student loan payments are getting turned back on here soon. Maybe that's a better case for a pause this time around because they know that's going to be equivalent to probably a quarter percent of a hike. Now, is that going to change consumer spending significantly? Probably not, but it's a little hard to measure. Even though the expectation is that could be a quarter percent hike right now, once it happens, it could turn out to have the impact of say a half a point or a 3/4% hike. And we just really won't know because this, this is unprecedented and it's never really been paused. We're going on, I think over three years now where student payments have been paused. And if you want to think about some of the things that are feeding inflation, pausing student loan payments is absolutely feeding into inflation. If you just think about how consumer spending would change from an individual basis, say you had a loan for $800 a month and that got paused for three years and you just happened to need a car because you've been using the same car for say 10 years. And that's absolutely going to determine whether or not possibly drive, whether or not you get that new vehicle now or you have to wait. And so a lot of people probably made the choice to buy that vehicle or whatever else they possibly needed. And that's fed into this runaway inflation that we're seeing now. So when you start to pull back some of that money and have to apply it to debt, which is by definition debt is services that have already been consumed that need to be paid on. In other words, nobody's really getting a value out of paying off debt in today's numbers that's been racked up based on some benefit in the past doesn't provide a whole lot of benefit for the current economy when you think about it in that way.

And student loan payments make up 27 billion annually, at least for the pause payments that we're talking about. It's an average $600 a month payment on 45 million people. That's going to be $27 billion a month. That's $324 billion annually, but still a pretty small drop in the hat when you consider that in relationship to the annual GDP in America. So maybe to your point, maybe not as significant as some people think, but still would ultimately play a role.

From a jobs perspective, especially with our client base being in the dental healthcare business. I think there was something like 30, 39 million jobs created last month for in the healthcare space. But all of our clients.

And not just our clients, the market at large really are experiencing some pretty painful staffing woes. Staff members demanding increased wages well above the wage inflation rate we're experiencing. And in the aggregate or across other industries, there are also hardly any new market entrants for to take on these job postings, these new jobs that we've created. And I'm just curious, why do you think that the dental industry specifically is being maybe more intensely impacted by this labor market?

Yeah, that's an interesting question and it's a good point because you look at the overall unemployment rate, which is low, you look at the jobs numbers, which are coming in strong, and there's definitely disparities on an industry by industry basis. Like you said, it seems like the dental industry is really struggling to hire. And that's probably true for a lot of industries right now, but especially true for dental. And there could be many things impacting that. I would say one of the things that probably impacted that a lot specific to dental would be a lot of people left the job market when Covid hit. And if you think about who that was, if you really dig down into the numbers, a lot of it was working moms, partly because of the way it impacted public schooling moms. Women couldn't work even if they wanted to because now their kids couldn't go to school. And so they just pulled out of the job market and didn't come back at all. I don't Know, off the top of my head, the percentage of women that are employed in the dental industry, but I would probably say that it's a higher percentage than your typical industry. And so that's definitely having a factor. And I think there's also a lack of training or education, if you will, to get people into that, into those jobs like we talked about earlier offline today, there's a lot of programs out there that will help people get into these dental specific jobs that don't require a ton of training or a ton of time commitment. But people aren't aware of them and they may be okay in their current job and happy or at least making it, and they're not aware that there's these other options out there for them to go out and get these credentials or certificates that can maybe put them into a better job that pays a better hourly wage. I think that's just really a problem as a country, and probably not just this country, but every country is probably dealing with is education and helping people, not only for certificate programs, but if you think about college, making sure people are actually going to college, building the skills that we need in the workforce to be able to sustain our economy. And it is a real threat because if we don't have people in the right jobs at the right time, gdp, those numbers that we were just talking about, employment, unemployment and all of those numbers are definitely impacted by that.

Yeah, that could be an entire show of a conversation there. Math and science being such a critical piece to the future and our country's a little bit lagging behind in getting people into those types of programs. But anyway, yeah, I think that you're absolutely right. The ADA has made some strides too to reduce the educational and time requirements necessary to get a da, an RDA license, license, or even a dental hygienist license. And there are new programs emerging that are taking advantage of these accelerated timelines and courses. And I think that to your point, it really is maybe just a little bit of a lack of education around these programs even existing and how short the timeline is and the relative wages that they can earn compared to where they are today. And I think that over time we should see the labor market in the dental space specifically start to make some strides to a better situation. Let's switch gears slightly here. It's all sort of everything's related, right? Everything's interdependent on one another in this world. But for the market and what you're seeing more recently, I'm going to, we want to try and help people Understand what they're seeing from a short term perspective, but also help them understand what our expectations are more long term. And so we can expand on how our portfolio design is suited for the long term, which is, I'm sure you can cover, is probably a better approach to sound investing. We'll start with artificial intelligence. We can start with obviously interest rates impact that and what we've just discussed about the Fed and what they expect to do with rate hikes moving forward and how those directly impact growth stocks, which AI is more tilted towards. But we have seen a pretty big bump, right, recently, at least in these tech stocks that have overshadowed some other maybe value plays or dividend paying stock plays that historically have played out better in the long term. So just give our listeners an idea of what you're seeing and how we're managing their portfolio given the information at hand.

Yeah. So what's in the headlines today? It's definitely AI, right? There's a lot of fear over whose jobs are going to be lost, what jobs are still going to be around. They've even had shows or talk shows and people talking about the possibility of humans becoming obsolete as a result of some of the stuff we're seeing now. There's fear and then there's also an exuberance that's associated with trying to capitalize on this potential technology that could absolutely change the way we do everything in the world. And so what typically happens is that certain stocks, in this case probably about eight stocks that are driving the major stock performance, which are your mega tech companies. And this is the same story. It happens over and over again. If you remember a few years ago, it was AR augmented reality and also this idea that Meta had with putting the glasses on and there was going to be this whole oh, and the metaverse, right. There was a lot of talk about the metaverse. And so these terms get thrown around and when they do get thrown around, it's very difficult to quantify the actual revenue streams that are going to be associated with some of these new technologies. And oftentimes stocks can run up as a result of just people not being able to quantify that. It's almost just a momentum trade. Nobody wants to be the one sitting on the sidelines if this thing really does take off because they're thinking that it could be the next.com explosion. And but what we're seeing now is very similar to the dot com bubble in a lot of ways. Really. When that happened, when the Internet kind of came around in the late 90s, there were a Lot of companies that benefited from that, obviously, Google, Microsoft being two of the big ones that are still around today and doing very well. But there were a lot of companies that had.com in their name that went bankrupt far more than what benefited. You have that now, I feel, where companies are just getting a massive amount of shares bought, running the stock price up, and nobody really knows who the winners are going to be. Nobody really knows what AI, what impact AI is really going to have. And until that becomes clear, who knows how far this momentum trade can go? I will say what I'm talking about is starting to hit mainstream right now. So there's a lot of people, and by mainstream, I'm talking like cnbc, headlines and big news media starting to report, hey, these stocks have really run up quite a bit in price. It's very difficult to quantify this new technology. And it's unknown if this will ever be profitable to the level that people are expecting. Is it time that we call this a bubble, essentially? And so you're starting to hear a lot about the bubble talk. What we've done is stick to the strategy of value investing, which when interest rates are high, value investing has outperformed technology stocks because technology stocks always trade at higher multiples. Typically that's pretty common of a technology stock. They grow more than other stocks, but they trade at higher multiples and they don't have as much cash flow payout in the form of dividends. And those stocks typically perform worse in a rising rate environment. So we're not chasing the momentum trade. We're ignoring that noise. And actually, ever since the jobs report last week, you started in some of these negative headlines. And bubble talk that I'm talking about just started to really emerge last week. People in the mainstream media started mentioning that this might be looking a little bit frothy, maybe seeing a bubble here. There's only eight stocks now that make up 30% of the S&P. Eight stocks make up 30% of the S and P. And that includes Apple, Microsoft, Tesla. When that happens, what we call breadth, breadth by definition in the stock market is looking at how many stocks are advancing. And so you want good breadth, meaning if the stock market's performing well, you want to see more stocks in the market gaining than just those few, those eight stocks that I'm talking about that have been driving the performance. So this has been a very unhealthy rally. In fact, probably the most unhealthy rally that we've ever seen in terms of how many stocks are carrying the market and typically when this happens, it reverses. And it can reverse pretty quickly. When you're thinking about a long term investment objective or long term investment approach, none of this really matters as much. That's the good news. You just got to stay disciplined and ignore all the noise and keep doing what you're doing. And as those stocks get hit, what you don't want to do is you don't want to be on the sideline when these stocks run up and then say, hey, I'm jumping in now. Because if you do that, you miss the run up, then you jump in and that's about the time that those stocks start to peel back those gains. So not only did you now miss the run up, but you're now exposing yourself to the losses as that bubble starts to pop. And that's what you want to avoid is that type of irrational, erratic behavior. So just staying disciplined and sticking to the strategy, even though it sounds boring, that is the right thing to do. And that's what we're focused on here at Practice. Cfo.

Maybe expand a little bit more on why we have created our strategy and why we feel strongly that it will be the strategy that outperforms over the long term.

Yeah. So our strategy is really, it's based on sound fundamentals and diversified investing. So what do I mean by that? We don't put all of our money in the US Stock market. A lot of people, when they look at the stock market, they tend to look at their home country. There's actually a term for that. It's called home country bias. Of course, when you're investing your money for the long run, that would be in the US economy is less than 50% of the global economy. If you were to only invest in the US Market, you're missing out on a significant portion of equity in the rest of the world. What we try to do is invest equally in proportion to the world economy. Now when the US market's outperforming, it's easy to look at a diversified model and say, oh, I should have just put all my money in the US Stock market because the S and P is up. And people tend to forget that last year the S and p was down 20%. So when they see it up 10% this year. And developed markets, international developed markets, excluding the US right now, they've done well, but they're only up say 8% or 8.5% this year. So they're still lagging the US market year to date and emerging markets are actually down. They're not down, they're up, but they're down to about a 3% return on the year. So it's really easy to look at that and say in hindsight that you should have put all your money in the US Economy because the US has done better than those. But the reality is with stock market investing, you don't want to look back in hindsight and beat yourself up over that, because there's no way in hindsight 2020. Everything's 2020 in hindsight, vision wise. So it's very clear that if we would have done that, we would have been successful now in hindsight, but in moving forward, there's nothing that says we're not going to end the year with international developed markets up much higher than US Markets and emerging markets really highly dependent on China's rebound from COVID and the coronavirus shutdowns. There's nothing that says that those aren't going to be up double digits by the end of the year. But if you're looking at it in a silo and where we are today, it's easy to make that kind of criticism that, oh, we should have put all of our money in the US So the reason that our investment approach is superior to that type of strategy where you're putting all your eggs in one basket is because the reality is you just don't know what's going to outperform in any given year. Some of our listeners may be familiar with the periodic table of returns, and it's similar to your scientific periodic table, but instead of having all the scientific stuff on there, it's showing the performance of the various international markets, including small caps, international bonds. And if you look at that, in fact, it'll look something like this.

And if you look at that and you analyze it over the last, say, 20 years or however far you want to go back, you're going to find out that even though in hindsight it seems like we can predict these things, there's really no way to predict them. So that's why the best strategy is to stay diversified, to not change your strategy. When you have the US Markets outperforming, if you change at that moment, there's typically going to be a mean reversion at some point. So when you change your strategy because something's happening, outperforming, and you want to ride that momentum, unfortunately what happens a lot of times is that momentum reverses at about that exact time when you start to put all your eggs in that basket, and then you really are in a dilemma because then you have losses, then you don't have conviction and then you sell because you realize, oh, I shouldn't have sold and moved into this strategy. I did it at the worst possible time. We try to avoid all that as we stay invested through the down times and we invest more. We encourage our clients to invest more when things are down because those present buying opportunities. And historically, markets always rebound. And so as long as we're keeping a diversified market portfolio, we're not putting all of our eggs in one basket. And the global economy is growing, which it is, population is growing not as fast as it used to, but it's growing. Then we should end up on the better side of things.

You talked about, I would maybe colloquially call it sort of the macro distribution or allocation across internationals, US equities, et cetera, or equities more generally. But then within those macro buckets we have, we'll use US equities, for example, you've got growth, you've got value. And then so just maybe just to round out that point that you made, explain a little bit further how we within those buckets, how do we allocate to those individual areas within those macro buckets?

Yeah. If you're trying to break down the equity between growth and value, there's certainly periods of time where growth can outperform value and vice versa, where value outperforms growth. However, over the long run, value, and by that I mean over the last 100 years, value has outperformed growth over the long run. Like I said, 10 year value increments, if you break it down, they'll be like, for example, the last decade, 2010 through 2020, and even the first part of this, probably 2021 and 2022 was the big reversal year for growth. That was last year where tech absolutely just got hammered. But before that, from 2010 till I think 2021, that was the place to be. But then when you go more macro and expand it out and extend your time period, you end up at being value is always the best option. Right. So when you're trying to figure out where to allocate between value and growth, we do a little bit of that through sector rotation and adjusting our exposures. Your typical value sectors, financials, industrials. Right now, energy is a huge value play right now because it's just been beaten up over the last decade or more. And so those are the areas where stocks seem relatively cheap. And so we do have more of our allocation tilted towards those industries, less towards technology, which technology is synonymous with growth. Right. When somebody's Talking about investing in growth, it's typically either communication services, which nowadays includes Google. So Google is actually considered communication services. So is Facebook. Microsoft, I believe is still considered technology, but they certainly have a component of communication services in the way that they do their businesses, like teams, chats, which we use here internally at practice cfo, there's ways that we can reduce our exposure to technology and essentially reduce our growth exposure so that we're more tilted towards value at this point in time in terms of how we're investing stocks, or a practice cfo. I'm not trying to time industry sector exposures. We do some of that from time to time. But at this point we're more focused on value exposure over growth and that does end up tilting us more towards those value oriented industries. But I'm not necessarily picking industries, I'm picking value stocks. And if that just happens to be in the industrials, then that's where we're going to invest. If that happens to be in financials, then that's where we're going to invest. And the reason for that is because interest rates, when they're higher value stocks outperform even more relative to growth stocks. So I was saying that the outperformance of value over growth over the long run, it's always been there. But when rates are high like they are right now, and some of the highest rates we've seen in a very long time, then value has even a higher probability of outperforming. Hence why we've parked most of our equity allocation and value stocks at the moment.

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So when you mentioned that we take the approach that we were using and saying what percentage of the global GDP does international or China represent and that's ultimately how we're building that sort of macro portfolio allocation. But you're saying, I think based on what you just mentioned that we're not necessarily taking that same approach. We're not looking at what percentage of US GDP does value stocks represent relative to growth stocks to determine that allocation within that bucket, less association and more association with just the trends historically and in which stocks have outperformed better long term. Is that fair?

Yeah. Yep. Because if we did that, then we would be a pure indexed approach, meaning if we just made our US Equity allocation mirror the broad indexes, that would be purely passive investing. And we are passive in a lot of the ways that we manage our portfolios here at Practice cfo, but we actually utilize a combination of passive and active. And the active component comes from exactly. What we're talking about here is tilting a little bit more towards value when we feel the probability of success for value stocks is higher. And if we can capitalize on that, then that's what we're trying to do from an international perspective. Back to that allocation and how it's determined. I will say that our allocation isn't going to exactly mirror global gdp. And there's many reasons for that. One of them is because if you think of any large US company like Apple, for example, and they are in these ETFs that we invest in, Apple is certainly in there. And when you look at them, that's not a US Equity only stock anymore because they have significant exposure to India, significant exposure to China and various other countries. So basically, when you're looking at determining the international broad market allocation for our portfolios, we're going to undershoot that a little bit. It's not an exact science, right? But let's say international equities make up 30% of the global equities market. And these are just numbers I'm throwing out there, it's probably slightly more including emerging markets. So if you were to look at international stocks including emerging markets, that's going to make up well over probably 40% of the total GDP out there. And our allocation to international equities in emerging markets is more like 30%, 32%. It's not going to be quite that high. So there's a couple reasons is because there's some overlap between US Equity investments and international markets, some of the stocks that we put in the US allocation bucket do give us international exposure. And so instead of trying to quantify that, we simply decrease our international broad market allocation to compensate for that. Another thing is emerging markets are extremely volatile. So while it would be nice, emerging markets make up 20 to 25% of global GDP, probably. While it would be nice to have that much of our portfolio exposed to emerging markets, the reality is that the volatility is a little bit too much for the average investor to handle. So we might knock that down to 18% or 22% instead of 25%. Again, it's not a huge difference. It's not an exact science, but we're making those adjustments in the way that we manage our portfolios so that we're not getting too much risk or not taking on too much risk. Because what we want to avoid is a client completely aborting the plan at the worst possible time. When does that happen? It typically happens when there's a down market and the client has taken on too much risk than what their risk appetite could handle. Then they say, I lost too much money and I want to move to cash. And that's what we want to avoid.

What would you consider in terms of length of time would be a full market cycle?

That's a good question. It's definitely variable. I will say that I read today that this is the longest bear market in months that we've had. I think it was in 80 years, because we've been. And you think about that and you're like, wow, I didn't really realize that the stock market has been down that long. And it has. We've been in a bear market for, I think, over 15 months now.

Bear market. Just maybe give them a short definition on what you mean by a bear market.

Yeah, good point. So bear market is when we get a decline of 20% in the stock market. So if the S and p is down 20%, then that's technically the start of a bear market. The NASDAQ down 20%, that's technically the start of a bear market. So the NASDAQ could be in a bear market while the S and P isn't, and the Dow. These are all just major indices that we're referencing here. But when they're all in a bear market, which did happen at one point, in fact, the S and P is almost out of a bear market, meaning in order to get out of a bear market, you gotta have a 20% gain. So it's the opposite. It's like a bear market's 20% loss. When you climb out of the bear market and you hit a new bull market, you have a 20% gain. And we're, I think, less than a percent away from being there because the S and P has finally recovered that 20% loss that it had last year, or nearly, when you think about it in that regard. Some of these indices, you got to take them with a grain of salt because like I was saying, the largest stocks, eight of them, make up 30% of the S and P now. So the S and P is not very diversified anymore. When you start to try to figure out how long a market cycle can last, it really has to do with how long those bear market cycles last because you don't start a new bull market until you exit that bear market cycle. And also the more developed we as a country, which we're only getting more developed, you could probably start to expect some of these cycles to be longer and longer, whereas an emerging market economy might have a shorter cycle probably on average. I'm not 100% sure how long that market cycle would last, but I would probably say usually between three to five years somewhere in there. The last bull market was extremely long, the longest one that we've ever experienced. It was definitely an anomaly and I think people got used to that. But it's not uncommon to have a recession every five years.

It can be difficult as you can imagine, right. You're not as client facing because you're super busy analyzing everything that we're talking about right now and making sure that our clients portfolios are protected from all the changes that we expect to happen. And my job is to more or less understand that and communicate that to them and so on the front lines is what I call myself. It's hard at times to explain to clients how our strategy is superior long term, when long term is could be 10 to 15 years before they see both a bear and bull market materialize and then come out on the other side. And so these long term data metrics that we speak to actually are reflected in their portfolio percentage rate of return. What I've found, especially with some of my older clients who have been through little more than two full market cycles. Right. So 25 plus years being an investor, they understand, they get it, their emotional intelligence is a little bit more dialed in. They don't get as spooked by short term market fluctuations. But to explain that to maybe a new practice owner, like 30 to 35 years old, maybe this is the first year that they've ever invested money, ever to see your money going down while your favorite stocks that you pay attention to, maybe just more generally are flying pretty well. That can be difficult to explain to someone that doesn't really have obviously nearly as much experience in education as you do in the space. So what advice would you give to maybe some younger early stage investors to help with that emotional tug and pull that happens in those early years.

Yeah, I would definitely say the key is to getting a good advisor and one that they trust so that they're not questioning every piece of advice that they get. They want to get an advisor that does have their best interests at heart. And so when things do get rough and like you said sometimes things will move in the opposite direction as what advisors anticipate. And when you're using the hindsight, look back and you're going, wow, you told me not to invest in these growth stocks that are AI oriented or whatever the case is. And they've really run up a lot and I could have made a lot of money. When that reverses, which it will, if there's a true bubble there, they're going to look back and they're going to say, wow, you were right. And it might look like you could have bought those stocks and sold them before they fell. And that's easy to think, right? But that's very difficult to do in practice. So the key is to make the right decisions, to think from a buy and hold perspective as opposed to, I'm going to try to ride this momentum, trade, sell at the right time and then I can buy into whatever else after. But when you really have conviction in your adv and you have that trust, there's a lot less of that questioning going on. And it usually takes one market cycle or at least one recession for an investor to really get comfortable because they're going to go through that and they're going to say, they're going to question everything, they're going to say, oh, I should have bought this, I should have bought that. And then when it goes down, they're going to say, wow, that advisor that I relied on really gained credibility through this cycle. They helped protect that nest egg that I worked so hard to build. And next time we go through this together, hopefully then I'm going to be in a very, a much more trusting position. And that's how it works for everybody, even investment managers. It's like the more experience that you have going through recessions as an investment manager, the easier it is to stick to the strategy. Even though you're doing this for a living, it really does build. And then once you've done that a few times, you realize all this strategy works and you start to not question it as much. And that's where the value investing strategy really plays well. Because there could be all kinds of new technologies and things that go bubble and bust and some things that do great. It's just so hard to predict all of these things that it's the tried and true method of consistency and sticking to the strategy and not changing your strategy based on any one thing happening. In a six month window. You want to invest over 10, 15, 20 years and in order to do that, you really have to take a long term mindset and focus on the things that matter, which are earnings and sustainable growth. That's what I would say is for anybody that is investing is really understanding their risk tolerance as well, goes a long way because a lot of times investors overestimate their risk tolerance. They think that they can take on significant declines until it happens. You might even ask one of your clients, how much money are you willing to lose before you want to move to cash? And they say, oh, I could go down 25% and then 10% declines take place. And they're like, oh, I want to move to cash. It's easier when you're talking about it and then when you actually feel it and you see that money dissipating in your account every day.

Absolutely, that's a great point. I have an example, a quick one that I want to share. I had a client who was a little reluctant to have his funds managed by an advisor because he had been in the S and P index exclusively for a period of about five years, starting in 201314 timeframe. So up until about right before the pandemic in 2020 happened. And every time that we would meet talk about the dental practice that he owned and managed, we would revisit that topic, sometimes a few minutes, sometimes a half hour, about the offense and defensive strategy that we play with our portfolio compared to the pure offensive play that he was currently participating in by being 100% allocated in the S&P 500. And his points were valid in terms of his experience in the market, is that I've gotten 10, 12% year over year compound annual returns. And you want to charge me money to invest these proceeds. Why would I do that when I'm getting such great returns just being in the S and P? And finally, I don't know what it was that clicked for him specifically, but he was lucky, right? Timing. Some people can a lot of things. I'd rather be lucky than smart at times, right. But he got lucky and listened to me and we moved out of s and P500 exclusively and then reallocated across our entire portfolio, which, as we've alluded to earlier, contains a whole lot more than just the S&P 500. And then about three to six months later, the market went into a bit of a panic, so to speak, and a lot of the gains that the S and P experienced were erased. And I think I've never found a client to become such a believer so quickly as he did. We limited his downside exposure by probably more than half. And so anyway, point being Is that until you, to Brandon's point, until you experience a market downturn, you really won't understand the fruitful nature of being diversified the way that, the way that we are. One thing that I would say that I really enjoy as an advisor with our specific set of clients in the sense that we manage both their business strategy, their personal investments, their personal financial plan, their personal tax plan, all of them are very interrelated and connected and can be optimized to benefit all of them the most that we can. And what's great to see is when you're in a silo, when you're just an investment advisor, you're not their business advisor or you're not their tax, you're not helping them with their tax plan. You're looking at everything from one optic, one viewpoint, one vantage point, one perspective. And you don't really see the activity of the possibilities that are on the business side. And so they could be sitting down with their investment advisor and say, hey, let's every free cash flow dollar that you have that you don't need for your lifestyle, let's invest that right? And they were probably telling them the right thing based on their understanding of their financial situation. But then you move into our realm where we have such a lase focus and such an in depth understanding of where they are not only today in their business, but what opportunities they have in front of them to continue to scale and grow that business so that we can redeploy and redirect capital both also to the equities market in form of 401 s and taxable brokerage accounts, Roth IRAs, et cetera, but also having this eye for some really great exceptional returns that they can get by redeploying capital within their own business. By being able to balance those two things and have a better understanding of where you're best place for your capital can be. I think it's been such a, it's been a treat to be able to see that entire system end to end and have that much insight end to end with our clients. And I think what it ultimately is going to do is it's what not ultimately would lead to because I'm seeing it right, it's the exceptional returns both for the capital redeployed in the business, but also for the passive earnings that they're earning in the markets with us. And so that blend together is propelling them, accelerating them to this financial independence goal that we have in a really short timeframe. It's been incredibly, incredibly awesome. And all it's going to lead to is their ability to invest more in the future than they otherwise would have from that siloed perspective and vantage point that so many people do today. So anyway, just wanted to give a little bit of my experiences on the advisor side as it relates to this discussion and some pretty cool things that I've taken away in my time here. But what are the topics, Brandon? There's so many. We could talk about the real estate market, a lot of developments there. I would love for that. That me personally, I would love for the real estate market here in California to take a nosedive so we can things here. That would be great.

Set up to buy a house, right?

Yeah, like let's, let's bring the American dream back to California. That would be really freaking cool. But yeah. What other topics do you find right now to be maybe most important or maybe you're just even stoked to talk about?

Maybe we could dive a little bit into the banking sector instability. And that's it's interesting is that this like 30 days ago, 60 days ago was a massive topic and it's crazy how quickly things fade out of the news headlines. But definitely maybe just revisiting that, talking a little bit about what drove that weakness, which ultimately was bonds, the decrease in the value of bonds. And I also wanted to talk a little bit about bonds. The rates on bonds have increased substantially, obviously with the rate hikes that we've seen from the Fed and that has resulted in some capital losses which has hurt those banks. That's what kind of drove some of those failures. But I wanted to clip that on its head and talk about the positives of those increases because in the long run that's actually going to be a healthy thing for a diversified portfolio, meaning we now have bonds that are paying something more than half a percent. That's great. Maybe we could talk a little bit about banking and bonds and how it relates to all of that starting on.

The banking crisis side. I say crisis, maybe we avoided one, but maybe the systemic downfall hasn't really fully materialized either. So yet to be seen. But I think the point that you made about news, how fast news becomes old news, is pretty interesting considering just how important that situation really is. So anyway, let's start with the why you mentioned bonds and the devaluation of those bonds, but maybe expand on that and just give us an idea of why you think that crisis happened.

Yeah, so for the most part, out of the banks that did fail and the ones that are really struggling right now, it does look like a lot of the worst is behind us. But there are some banks that are going to have a good period of time, maybe years, maybe five plus years before they recover. And if you could pin it down to one thing at least based on this cycle of failures that we're seeing now, this doesn't mean that the Fed can't break something else. With more hikes in the future and some other bond bank crisis kind of emerges. But this crisis was solely, almost solely driven by the duration risk that banks took. And by duration risk, I mean these banks were primarily invested in long term bonds. And the way it works with these bonds is the long term bonds get hit the hardest when rates rise.

And let's just maybe do a quick example, not necessarily real numbers, but like in terms of the interest rate exposure, let's say 2000, I get a bond, a 30 year note, a mortgage rate. Mortgage. Right, like a 30 year mortgage fixed at 3%. And then tell us what happens when rates rise to say what they are now.

Exactly. So yeah, let's break it down to a simple example. And that's a good one, would be as consumers, me and you, we typically say, oh, 3.25% rate or 2 and 3 quarter percent, 30 year fixed rate. Heck yeah, give me that, that's awesome. I'm locking it in and I'm never selling my house. And that's what's been happening. Now the banks get the opposite side of that. So this crisis was really, the consumer really made out and the banks really are the ones that took the brunt of it. And the reason is because as rates rose, which mortgage rates as of today are around 7%, that bond that they gave you or that loan that they gave you for that house has lost value. Because the way bonds work is they have to adjust to the current market rate. And so if they could lend money, if they didn't make that loan to you a year and a half ago at 2.75, they could invest that money today at 7 and get a 7% return over 30 years as opposed to 2 and 3/4 over 30 years. And it might seem small, but that's a massive impact. And not to get too technical, but there's a discount in cash flow mechanism that a dollar today is discounted, it's worth more than a dollar tomorrow. So dollars in the future have to get discounted back to determine what their present value is. The longer the bond, the more that discounting mechanism actually impacts the value of that bond. So if you have a five year bond for example, versus a 30 year bond. That bond that's five years is going to expire and you're going to have the ability to reinvest it at a higher rate. Right now. That longer bond isn't going to expire for much longer. And so you've really locked in those short term rates or those low rates for the long term. And that's where the value of those bonds really gets hit as rates rise because those bonds, the value of the bond today decreases to compensate for all of the interest that they're losing based on current market rates.

It makes sense too.

Yeah. So basically it really poses the question as to how did these banks make all of these long term bond investments without hedging themselves in some ways knowing that the Fed was hiking rates and the Fed got a lot of heat for possibly breaking something, Which I actually think that a lot of the blame goes on to the bankers in this area. And the reason for that is the Fed's been extremely transparent in the way that they've hiked this cycle. Arguably more transparent than any Fed has ever been. I can't think of a time where the Fed has been more transparent than it has has over the last year and a half and even longer two, three plus years ever since Jerome Powell has been there, he's been very transparent to the point to even he's told the banks that we're going to be hiking substantially and the purpose of that was for them to be able to adjust their investment portfolio, their bond portfolio. Instead they doubled down and said, no, the Fed's saying this, but we think they're going to cut, but we think they're going to cut sooner than what they're telling us. So we're just going to continue to do it our way. And that could have actually happened. There could have been a cut. If we hit a hard recession, there could have been a cut. But that hasn't been communicated by any means at all whatsoever by the Fed. And so when they try to say that the Fed's at fault for a lot of the banking crisis that we experienced, the small hiccup that we experienced there for a while, I think most of the blame needs to go back on the bankers. And it was really a mismanagement of funds at those that caused their own crisis. It was a self inflicted wound, if you will.

Couldn't agree more. Who knows what's going to happen five years from now, let alone tomorrow even. And coming out of 2008, we had all of this regulation reform, Dodd Frank, the consumer Financial Protection Bureau, the Volcker Rule, Financial Stability Oversight Council, all these things, these things that were ultimately designed to make sure that banks didn't over allocate too far down on the yield curve without having enough reserves in the event that the economy made a jarring move one direction or the other. And so I just think that they got caught, with lack of a better word, with their pants down. And that was bad planning. So I agree. I don't think it was the Fed's rate hikes that were the underlying issue. Maybe it was the catalyst to why they failed, but it was lack of strong long term planning.

I think that in general a lot of this is behind us at this point when this all happened. There was a lot of anxiety from our clients, of course, but also just in the investment industry as a whole. Charles Schwab is really a bank at the end of the day, but they custody a lot of assets and a large part of our client assets. So people just started to think worst case scenario, which is what happens when a crisis hits. I said from the very beginning when it all happened, that if we can get a quiet period where some of this stuff, when you have a bank going down every two weeks, even if it's only three banks and it's three banks in six, seven weeks, then people will continue to freak out. But if we can get a period of stability, and we have had that now where it looks like things have started to stabilize, the Fed is not going to hike another, hopefully the Fed is not going to hike another 5% in the next 18 months. This rate hike cycle has been the fastest and swiftest rate hike cycle that we've ever experienced. So that did exasperate that impact, meaning that helped obviously accelerate those bond losses. So we probably are not going to experience bond losses at this level again for a very long time, if ever, because it was the inflation that drove the rate hikes. And hopefully once we get inflation under control, we won't have this type of runaway inflation again in our lifetimes. Hopefully.

And look, with the industry that we operate within, which is the dental space, right, for the most part, or privately owned medical practice space, which could be plastic surgeons, it could be veterinarians, but for the predominantly it's our dentists and our dental clients who are by and large pretty recession proof. Now of course some cosmetic sides of the business may take slight tapers off, but point being is the, that whenever we're facing a recession and you're in more or less a recession proofed industry, you should welcome that because what is happening while the entire rest of the economy's buying power is going down, yours is exponentially growing. And your ability to take that buying power and take advantage of the downturn in the market and buy assets at a discount, that's a pretty cool place to be and definitely not unique. Unique solely to your industry, but one benefit that you guys do have. And so I just wanted to reference that point.

That's a good point.

Taking the banking crisis a little bit further, what do you think? Are we out of it completely? I know it's been maybe a little almost two months, a little over two months since the headlines went away from this side of it. But what do you think? What's the future hold for the banking industry?

Yeah, there are certainly some banks that are struggling out there that have significant losses on their bond portfolios. And I wouldn't say that there's not another failure that's going to happen. It does look more likely than not that the worst is behind us. A lot of times when these things happen, bigger banks buy up the smaller banks and it becomes like you were saying for the dental industry is if you're in a strong balance sheet position when turmoil hits, which JP Morgan happened to be when this happened with some of these banks and they were able to swoop in and buy, then they did really get a good deal on those assets. And by swooping up one of these failed banks. Now, I guess the main thing to consider is if something does happen in the future, that's going to be the playbook that's used. Banks can go down and unless you're holding that one individual stock in that bank, you're probably not going to lose everything. Right now if you're holding the bank that collapses, your equity is getting wiped out, which is why we preach diversification.

Banks do collapse. No doubt the industry as a whole is going to go down in value in the short term, but once it stabilizes, typically what we're seeing now is financials got hit really hard. Not just the stocks that went under, but the entire industry gets hit when something like this happens because everyone freaks out and they don't know what's going to fail next. And so the entire industry gets nailed. JP Morgan is actually trading much higher now than it was was six, eight months ago. And so when you start to look under the hood, it's not all terrible. And there's a lot of room for consolidation in this country. Even though we do have very large banks relative to other developed nations, our banking sector is very Fragmented. And so just, I do think the worst is behind us this round. But if there are failures in the future, it doesn't mean that there's no way that we're going to recover from that or that it's an imminent recession on the way. What's more likely is that that one of these big banks are going to get bigger, which obviously isn't the greatest thing. Right. We don't want to have too big to fail. Banks continue to get larger, but at this moment in time, it's not a huge risk in the banking sector, the financial sector that I'm seeing, or that even many of the other financial experts are talking about right now. Most of this has been contained to what we've seen already.

That's a good segue. And like, what message are we sending? Because. Because truthfully, is Silicon Valley bank really too big to fail? In this case they were, but they're a relatively small bank. I always worry if the Fed, by increasing rates to some extent, they are trying to break things. That's ultimately what's going to curb the inflation. When you bail banks out like svb, really a free market at that point, what do you think that does, short and long term?

Yeah, it's a good question. And I think when you think about bank bailouts, the first thing that comes to mind in a lot of people, mine is the 08 crisis. And that in my mind was like a true bank bailout. And that was these banks were given the ability to take unnecessary risks. When they got caught and lost a bunch of money and lost a bunch of other people's money, the government stepped in and actually helped and prop them up. Those banks and in some cases gave them money that got paid out down the road as CEO bonuses and VP and executive bonuses. It was sad to watch taxpayer dollars get abused and used in that way. That was just a really bad bailout. What we saw with Silicon Valley bank in my mind was a little bit different in that the only people that got bailed out were the depositors, if you think about that, because they removed the FDIC insurance limit, which was 250,000, which, by the way, a great metric to look at when you're trying to determine whether or not a bank is going to be subject to a run on the bank is how much of their deposits are uninsured.

And that's going to tell you how many people in that bank are above that $250,000 limit. So with Silicon Valley bank, it was something like 90% of their deposits were uninsured which is economically high relative to irrelevant, extremely high. And so when you look at some of the largest banks in the country, we're talking 40% uninsured. It's vastly different amount of uninsured deposits at Silicon Valley Bank. That was based on the nature of their business, which we all know was more around private equity and investing in tech companies and things like that, or incentivizing tech companies to put their money there. That didn't really turn a profit. When things got rough, they all needed their money and drew out of that bank and hence the collapse. That's one of the metrics to look at. What the government did is they said, we don't want to penalize depositors and have their money just evaporate overnight. They came in and said, we're basically going to insure all deposits at this bank. And within a couple of days people were able to get their money out. I think that was absolutely necessary. It's unfortunate that it had to happen. But if they didn't do that, if the government didn't back those deposits, then it would have just trickled throughout the entire small regional banks all throughout this country, and you would have seen a lot more failures. So I do think it was the right move. I also think it was the right move move to not save the bank because it did go down and the stock did go to zero. So who's left with holding, I.e. the equity holders. And when we're investing in equity markets, that's the risk we're taking. And we often don't realize it, but any company that makes a misstep, a technology company, can go to zero just like that bank did. And when that happens, even though it's. That's not the best answer, but it does make sense from a capitalist perspective. Somebody has to lose. And if you're asking me who it should be, I would say if you're trying to decide should it be the depositors or the equity holders, I would say equity holders all day. I think that by backing the depositors, making sure they got their money and leaving the equity holders to hold those losses was really the best option that, that the government had in a very undesirable situation.

I don't disagree with anything that you just said. I think there could be an argument that depositors should have been more prudent in diversifying their holdings to other banking institutions as opposed to being centralized into one bank and bailing them out. Therefore, it's going against free market policy. But anyway, I think that it was in the long run, it was the same one thing I found pretty interesting. I read it. It was not even something. It wasn't even a popular article.

But.

But like Rippling was pretty. I don't know if everyone's familiar with Rippling, but Rippling's a up and coming, pretty big company at this point. What was interesting is that like leading up into the SVB crash, they had already started to move their holdings to other institutions, almost as if they knew. And I think that you could watch banking activity. I think. I don't know if it's reported or not, but if it. Obviously they had this information. Write the article on. But if you're able to watch how companies move their funds around to different institutions, maybe that could be another leading indicator that people could tap into. But yeah, I thought that was a very interesting piece that Rippling had the foresight to diversify their banking relationships leading up to that SVB crash. But anyway, banking crisis. And the last thing that you wanted to talk about were bonds and how those. I know that was part of our banking piece, the bonds. But was there anything specifically on bonds maybe unrelated to the banking crisis that you wanted to talk about here?

Yeah, I just wanted to put a positive spin on the. Because we've had this decrease in bond values and typically the reason that you have a diversified portfolio that's made up of stocks and bonds is because they tend to move in opposite directions. So they're not correlated. Meaning when stocks go up, bonds typically can go down and vice versa. When bonds go up, stocks go down. That's not always the case. And last year was an anomaly where both stocks and bonds went down. And that makes it hard. That makes it hard for a diversified portfolio. Sales pitch. Luckily, the stock market got hit much harder than bonds. The NASDAQ was down over 30% last year, S&P down 20, and bonds down maybe around 15% on the AG. If you still had bonds in your portfolio, you definitely made out better than being 100% equities because they fell further than bonds. But unfortunately everything fell in that year. When we talk about equities and bonds. So what's the positive to that is that when rates rise, bonds have to fall. Just like we talked about. These banks got caught and they lost a lot of money on their holdings because when rates rose, the value of the bonds in today's terms go down. But as time passes, you now have a higher interest rate on those bonds. And so as you collect the coupon, you get to reinvest it at that Higher rate rate. So before the Fed started hiking rates, at one point the 30 year treasury was like in the 1% range. It was even less than 1%, I believe. So we're negative in a lot of countries and that's just unheard of. And there's no reason to invest in bonds when the rates are negative. You're losing money to put your money into a bond. And that was a really hard time to justify bonds. You can't really justify that. And in order to have a lot of people that are in retirement that want to take less risk, usually the answer is bonds. Okay, you don't want to take a whole lot of risk. You don't want equity market volatility. Let's put your money in a bond. You're going to get a lower return, of course, but risk equals reward. So you're taking less risk. You're okay with that trade off and getting less of a reward. In the reward being the terms, the return on that bond being lower than the equity market return. That trade off is acceptable. When your nest egg is big enough. As long as you have enough money invested to generate cash that is sufficient for you to live on, then that's a good trade off. For a long time there, bonds weren't yielding anything or very little. And that wasn't very good, especially for retirees and people that didn't have a high risk appetite. Now bonds have lifted off and they're paying. You can get a 5% or 6% yield not only on a short term bond, but on intermediate term bonds. That's a very positive, a positive turn to bond prices declining last year. Yeah, those losses all get packed into one year when they decline so rapidly and when rates rise so rapidly. But we've really set ourselves up here in the future for some decent bond returns now that we didn't have for a decade or more. And that's really going to help in the diversified allocation models that we're invested in. In is now you're getting a healthy 4% to 5% bond yield, maybe even 5 to 6% bond yield on shorter term maturities right now. And that coming from a position of being maybe 1% to 2% before for a very long time, you can imagine that's going to have a pretty large impact on the overall investment portfolio. Even if you're at a 10 to 20% bond allocation, if you're squeezing out 3% to 4% return more than you were before for the next five, 10 years, then that's a positive development. So I think the main takeaway there is that bonds declined in value as rates went up. There's a lot of things that were bad about that in the moment. We lost a lot of value on the bonds. Bonds lost value. But going forward, you're going to benefit from higher rates, which is a trade off for bonds to actually have higher rates. You're going to have declines in those bond values at the time that those rates rise. So it's overall a really good thing for diversified portfolio investing.

Couldn't agree more. And even when we had poor bond returns, they still aided, maybe not as directly, but indirectly, to better portfolio returns by being that source of liquidity to buy in volatile time periods that if you were all in equities, you wouldn't otherwise have that option or ability to do so. But I definitely agree your real rate of return on the portfolio side should definitely benefit from the new bond situation that we're in. Brandon, as always, so much fun, so many things to talk about. We could talk for literally five years straight and never have a dull moment. But really appreciate you coming on the show again. Hopefully we'll have another one before year end, but yeah, thank you again.

Yeah, you bet. Thanks for having me me drill.