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023: What are Some Bond Alternatives?
Episode 2312th October 2022 • Retirement Equals Freedom • Josh Bretl
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If you’ve been impatiently waiting for another installment in Host Josh Bretl’s compelling tutorial about all things bonds, then this episode of The Retirement Equals Freedom Podcast is for you! In addition to recapping how today’s bond market differs from what we’ve seen over the past 40 years, Josh is explaining everything you need to know about alternative investments, the bases these investments should ideally cover (risk reduction and a decent rate of return) and some of the specific vehicles you might want to explore (Christmas wreaths are not among them). The guys also give a shout-out to educators who inspired and shaped them and the edgy senior project Co-Host Dave Schmidt produced while in art school – including a secret blooper reel featuring Josh that might somehow find its way into the public domain. So sit tight and enjoy this roller coaster of a bond ride. And, no, we’re not talking 007. (Sorry. Too tempting to resist.)

Are you ready to chat with Josh? You can schedule your complimentary 15-minute checkup call at this link.

Brew your own Cometeer Coffee at home with $25 off your first order: Just click here!

Click here to learn more about or listen to previous episodes of The Retirement Equals Freedom Podcast.

Don’t miss out on the show’s exciting weekly email, which you can subscribe to at this link. And if you feel like chatting, join the lively conversation at our private Facebook group, which you can find here.

Transcripts

Josh Bretl:

So as interest rates rise, bond values

Josh Bretl:

mathematically have to fall.

Josh Bretl:

So we're losing some of this downside protection and we

Josh Bretl:

also have ultra low interest rates still, so they're

Josh Bretl:

not paying much interest.

Josh Bretl:

And you could deal with not getting much interest

Josh Bretl:

when we weren't worried about the values falling

Josh Bretl:

out from underneath of us.

Josh Bretl:

So we've been talking to clients for a couple years

Josh Bretl:

about bond alternatives.

Josh Bretl:

What other options do we have out there?

Dave Schmidt:

The day has finally come.

Dave Schmidt:

Today we talk all about bond alternatives.

Dave Schmidt:

Josh is here to explain everything you need to know

Dave Schmidt:

about alternative investments, the bases these investments

Dave Schmidt:

should ideally cover, i e risk reduction and a decent

Dave Schmidt:

rate of return, as well as some of the specific vehicles

Dave Schmidt:

you might wanna explore.

Dave Schmidt:

Just when you thought you couldn't learn anything else

Dave Schmidt:

about bonds, here we are, talking about bond alternatives.

Dave Schmidt:

This is The Retirement Equals Freedom Podcast.

Dave Schmidt:

Your host, Josh Bretl, is the owner of FSR Wealth Strategies.

Dave Schmidt:

For the last few decades, he's been helping fine folks like

Dave Schmidt:

you thrive in the retirement.

Dave Schmidt:

And me?

Dave Schmidt:

Well I'm Dave.

Dave Schmidt:

Josh's long time friend, co-host and fan of

Dave Schmidt:

older Tim Burton movies.

Dave Schmidt:

So now let me, let you, let me end this introduction

Dave Schmidt:

so we can start the enthralling conversation

Dave Schmidt:

about bond alternatives.

Dave Schmidt:

FSR Wealth Management is a registered investment advisor

Dave Schmidt:

located in Elmhurst, Illinois.

Dave Schmidt:

Information and opinions contained in this audio

Dave Schmidt:

have been arrived at by FSR Wealth advisors.

Dave Schmidt:

All information herein is for informational purposes

Dave Schmidt:

and should not be construed as investment advice.

Dave Schmidt:

It does not constitute an offer, a solicitation or recommendation

Dave Schmidt:

to purchase any security.

Dave Schmidt:

FSR is not providing legal, tax, accounting, or financial

Dave Schmidt:

planning advice in this audio.

Dave Schmidt:

These views are as of the date of this publication

Dave Schmidt:

and are subject to change.

Dave Schmidt:

Awe shucks, thanks.

Josh Bretl:

Oh, darn it.

Josh Bretl:

Did you read through the show notes, Dave?

Dave Schmidt:

Yeah.

Dave Schmidt:

None of it makes sense to me.

Dave Schmidt:

So I'm just going to...

Josh Bretl:

Dave is truly flying by the seat of his pants today.

Dave Schmidt:

Yeah.

Josh Bretl:

So Dave, I told you.

Josh Bretl:

Are we-

Dave Schmidt:

Yeah, we're recording.

Dave Schmidt:

Go ahead.

Josh Bretl:

Are we good?

Dave Schmidt:

Yeah.

Josh Bretl:

You're just going to mess with your headphones?

Dave Schmidt:

Yep, that's what I love about these headphones.

Josh Bretl:

So we are such epic podcasters that yesterday

Josh Bretl:

I went and helped somebody else do their podcast.

Dave Schmidt:

Yeah, yeah.

Josh Bretl:

And I texted you during, it was pretty cool.

Josh Bretl:

It was Jeff Mauro of the Food Network.

Dave Schmidt:

Okay.

Josh Bretl:

Now Missy and I are Food Network dorks.

Dave Schmidt:

Yep.

Josh Bretl:

We love watching the Food Network.

Josh Bretl:

I have watched way too many and if you give me a food

Josh Bretl:

cooking competition, A Top Chef, a Iron Chef, even

Josh Bretl:

Netflix during the beginning of the pandemic had something

Josh Bretl:

where these world chefs were competing all over the place.

Dave Schmidt:

Oh yeah.

Dave Schmidt:

Yeah.

Josh Bretl:

I will watch any food competition.

Josh Bretl:

And a couple years ago, which is 10 to be precise, we were

Josh Bretl:

watching the Next Food Network Star, which is on Food Network,

Josh Bretl:

and Jeff Mauro was the winner and I thought he was so funny.

Josh Bretl:

He's a local Chicago guy and he could cook, but he was truly,

Josh Bretl:

authentically personable.

Josh Bretl:

And I am involved here with the community bank in town

Josh Bretl:

and the History Museum here in town and he was doing a

Josh Bretl:

thing at the History Museum and they asked if I would

Josh Bretl:

help because he was going to record his podcast live there.

Josh Bretl:

And it was so fun to go watch and actually meet him.

Josh Bretl:

He was a super nice, he was just as authentic and personal

Josh Bretl:

and funny and in person as I had hoped he would be.

Dave Schmidt:

Well, that's awesome.

Josh Bretl:

And I learned a few things that I want to

Josh Bretl:

do and I don't want to do.

Josh Bretl:

And you've been talking about a live podcast for a while.

Dave Schmidt:

Thank you.

Dave Schmidt:

I didn't want to interrupt you, but I'm hoping that you really

Dave Schmidt:

liked it and you're thinking, "Yeah, you know what, this Dave

Dave Schmidt:

guy, he may be onto something."

Josh Bretl:

Well, if we do a live podcast, you're

Josh Bretl:

going to need a new shirt.

Dave Schmidt:

Shoot.

Dave Schmidt:

Well, if, look, here's the thing, if we do a live

Dave Schmidt:

podcast in the fall, my wardrobe is far more expansive

Dave Schmidt:

than my summer wardrobe.

Josh Bretl:

So I have an idea.

Josh Bretl:

If I gave Carla a gift certificate and I just said,

Josh Bretl:

"The only thing this can be used for is shirts for Dave,"

Josh Bretl:

do you think she'd do it?

Dave Schmidt:

No.

Dave Schmidt:

I would take it and go to California Pizza Kitchen.

Dave Schmidt:

I mean, look, there's a chance you could sneak out of the

Dave Schmidt:

house without me knowing, but I think we're on something here.

Dave Schmidt:

I like it.

Dave Schmidt:

No.

Dave Schmidt:

Okay.

Dave Schmidt:

But you did say if any of one of our episodes hit 500 downloads

Dave Schmidt:

that we would do a live-

Josh Bretl:

I did.

Dave Schmidt:

Episode.

Josh Bretl:

We're not quite there yet.

Dave Schmidt:

No, we're not quite there.

Dave Schmidt:

We're getting closer.

Dave Schmidt:

My question would be, we would do at the beginning of a big

Dave Schmidt:

client event and those who were privy to be invited would

Dave Schmidt:

actually get to see us record?

Josh Bretl:

Yeah, I think so.

Dave Schmidt:

That'd be kind of cool.

Josh Bretl:

We invite all the podcast audience, so...

Dave Schmidt:

Wow.

Josh Bretl:

It's been a lot of fun.

Josh Bretl:

The last couple weeks we've had a few client events.

Josh Bretl:

We've had even some new just regular events that we do.

Josh Bretl:

The number of people that have brought up

Josh Bretl:

the podcast is amazing.

Josh Bretl:

And Erin actually had an appointment with somebody who

Josh Bretl:

was brand new to our office, came into one of our seminars

Josh Bretl:

and he heard the podcast.

Josh Bretl:

And you and I have been self-conscious about this

Josh Bretl:

part of the podcast where we talk back and forth to each

Josh Bretl:

other and relive our glory days of high school basketball

Josh Bretl:

and do all that fun stuff.

Josh Bretl:

And so the people who know us, like our moms, they

Josh Bretl:

really like this part.

Josh Bretl:

But I do wonder, do other people enjoy it?

Josh Bretl:

And so when I get a chance, people who don't know us, I

Josh Bretl:

ask them or Erin will ask them or Sean will ask them and the

Josh Bretl:

guy's response yesterday was kind of, "I like it, but I've

Josh Bretl:

learned how to listen to it on one and a half time speed."

Dave Schmidt:

oh no!

Josh Bretl:

So you and I probably sound like

Josh Bretl:

a chipmunk to him.

Josh Bretl:

We're talking really fast.

Josh Bretl:

We don't have time to speak.

Dave Schmidt:

And since we sound like school girls,

Dave Schmidt:

it's probably like...

Dave Schmidt:

So I'm guessing this guy, this guy and Dave Milburn

Dave Schmidt:

are probably BFFs because they both feel the same.

Josh Bretl:

Well Dave, just fast forwards through this,

Josh Bretl:

so he's not hearing this at all, but I do think Dave would

Josh Bretl:

come to a live recording.

Dave Schmidt:

Oh, absolutely.

Josh Bretl:

We'd make him listen to this part.

Dave Schmidt:

Oh yeah.

Dave Schmidt:

Dave's a huge fan of ours.

Dave Schmidt:

Now what's really cool is today and today alone, we

Dave Schmidt:

had two separate people com into your office asking me to

Dave Schmidt:

brew them a Cometeer coffee.

Josh Bretl:

That is pretty cool.

Dave Schmidt:

I thought that was really cool.

Dave Schmidt:

One's not a client, one is a client I think.

Dave Schmidt:

And I mean one of them thought that you and

Dave Schmidt:

I owned the company.

Dave Schmidt:

That's why we promoted it so much on the podcast.

Dave Schmidt:

Maybe one day we will.

Dave Schmidt:

Cometeer.

Josh Bretl:

Cometeer.

Dave Schmidt:

This is not Cometeer.

Dave Schmidt:

We did have Cometeer earlier today.

Josh Bretl:

This morning we did.

Josh Bretl:

Yeah.

Dave Schmidt:

Yeah.

Dave Schmidt:

This goes out to our favorite local coffee shop.

Dave Schmidt:

Brewpoint coffee.

Josh Bretl:

Yeah.

Josh Bretl:

We were doing local restaurant little plugs here, but we do

Josh Bretl:

like our Brewpoint coffee here.

Josh Bretl:

Yeah.

Dave Schmidt:

:

Brewpoint is the best.

Dave Schmidt:

:

They have that the little, the works...

Dave Schmidt:

:

What do they call it?

Dave Schmidt:

:

They have a cool new, a-

Josh Bretl:

Like a shared office space type thing.

Josh Bretl:

I forget what they call it.

Dave Schmidt:

Yeah.

Dave Schmidt:

They have a cool-

Josh Bretl:

Something catchy and hip, trendy.

Josh Bretl:

I mean something we're not allowed to be in the

Josh Bretl:

financial services world.

Dave Schmidt:

That's true.

Dave Schmidt:

I can go there cause I'm super cool.

Josh Bretl:

But yeah.

Josh Bretl:

And we don't let you touch people's money.

Josh Bretl:

So that's better that way.

Josh Bretl:

So I've started coaching Alex's soccer team this year and I did

Josh Bretl:

it because Alex loves soccer.

Josh Bretl:

He really enjoys playing.

Josh Bretl:

And a couple years ago he had the world's greatest coach.

Josh Bretl:

This guy was awesome.

Josh Bretl:

Coach Adam here in Elmhurst.

Josh Bretl:

He knows soccer, he plays soccer.

Josh Bretl:

Actually I found out he also owns his own watch company.

Dave Schmidt:

Oh that's cool.

Josh Bretl:

Farr and Swit Watches.

Josh Bretl:

It's really, he's got cool watches, but I've seen

Josh Bretl:

him around a few times.

Josh Bretl:

F A R R and S W I T.

Josh Bretl:

Swit or sweet.

Josh Bretl:

I don't know what it is.

Josh Bretl:

But anyways, coach Adam was awesome and he

Josh Bretl:

got Alex so pumped up.

Josh Bretl:

He taught him a ton.

Josh Bretl:

And the following year he had a coach who was not very

Josh Bretl:

good and actually kind of was depressing towards the kids.

Josh Bretl:

And I said to myself, I can't complain because

Josh Bretl:

I didn't volunteer.

Josh Bretl:

If you don't volunteer to coach, you can't complain

Josh Bretl:

about the volunteer coach.

Josh Bretl:

So I decided I was going to volunteer and coach this year.

Josh Bretl:

And as kids get older, they become tougher to coach.

Josh Bretl:

Especially your own kid.

Josh Bretl:

Now the kids are really enjoying it, I'm proud of

Josh Bretl:

what I'm doing with him.

Josh Bretl:

But it is a challenge.

Josh Bretl:

It's been fun.

Josh Bretl:

We're a few weeks in now and they're learning something.

Dave Schmidt:

That sounds fun.

Dave Schmidt:

Did you know Carla was the head basketball coach for

Dave Schmidt:

Landon's team last season?

Josh Bretl:

Well, that would make sense.

Dave Schmidt:

Yeah.

Josh Bretl:

She's a great basketball player and she

Josh Bretl:

knows how to coach kids.

Dave Schmidt:

Exactly right.

Dave Schmidt:

Yeah.

Dave Schmidt:

And now she's been the assistant baseball coach for

Dave Schmidt:

every team since he started.

Dave Schmidt:

So okay, there's a competition brewing.

Dave Schmidt:

Coach Adam versus any CPA that works with taxes, who's Al

Dave Schmidt:

going to hang out with a soccer coach or guy who knows taxes?

Josh Bretl:

He'd probably hang out with Coach Adam

Josh Bretl:

and talk to him about taxes.

Josh Bretl:

I mean that's how great Alex is.

Dave Schmidt:

Win-win.

Josh Bretl:

And Adam looked at him like, "You crazy."

Dave Schmidt:

Do your kids ever read those

Dave Schmidt:

"Who Would Win" books?

Josh Bretl:

Oh, all the time.

Dave Schmidt:

Yeah.

So who would win:

:

taxes or soccer?

Josh Bretl:

So Dave, today's topic is one that I talk

Josh Bretl:

about a lot with clients.

Dave Schmidt:

Coffee?

Josh Bretl:

Nope.

Dave Schmidt:

Food?

Josh Bretl:

Nope.

Dave Schmidt:

Taxes?

Josh Bretl:

No, not even taxes today.

Josh Bretl:

We talk about it so much that this is the third time

Josh Bretl:

we're going to do kind of a major representation to it.

Josh Bretl:

And it was actually, this is Erin's recommendation

Josh Bretl:

because we've spent two podcasts in the past talking

Josh Bretl:

about bonds and then talking about the 60-40 portfolio.

Josh Bretl:

And I have a rule in the office that if you come to me with

Josh Bretl:

a problem, you better also have a proposed solution.

Josh Bretl:

And I feel like in those two episodes I told you

Josh Bretl:

guys, "Hey, bonds are having problems right now."

Josh Bretl:

And I never gave you a solution to it.

Dave Schmidt:

But they were intentional cliffhangers

Dave Schmidt:

for today's episode.

Josh Bretl:

My life is one intentional cliffhanger.

Dave Schmidt:

Says the non movie buff guy.

Josh Bretl:

I haven't seen a movie in four years.

Dave Schmidt:

Yeah, there's no cliff hangers in your

Dave Schmidt:

food competition shows.

Josh Bretl:

If any of our friends were listening

Josh Bretl:

to this, they're going to be like, "You watch TV?"

Josh Bretl:

It's like, no, we don't watch what everyone else is watching.

Josh Bretl:

I've never seen the Lord of the Rings.

Josh Bretl:

I've never seen any of that stuff, but I know every cooking

Josh Bretl:

competition known to man.

Dave Schmidt:

Love it.

Josh Bretl:

I also know all local news personalities.

Josh Bretl:

Okay, so you want to go there?

Josh Bretl:

I gotcha.

Dave Schmidt:

I prefer not.

Josh Bretl:

So let me recap here a little bit

Josh Bretl:

as to what we talked about in the previous episode.

Josh Bretl:

And we always, what the purpose of bonds are.

Josh Bretl:

Bonds are a part of a lot of people's portfolios and bonds

have two major components:

one is for downside protection.

have two major components:

So as part of a portfolio, whatever positions you have

have two major components:

allocated to bonds hopefully are going to protect you

have two major components:

when the market goes down.

have two major components:

The second reason is that they're going to

have two major components:

pay you a decent interest rate, there's some minor

have two major components:

growth potential there.

have two major components:

And it's done that pretty much forever.

have two major components:

But the problem with bonds is that bonds operate

have two major components:

what they call an inverse relationship to interest rates.

have two major components:

So as interest rates fall, bond prices rise.

have two major components:

Now for the last 40 years, we've seen interest rates

have two major components:

pretty much start at 15, 16, 18% and fall down to near zero.

have two major components:

Well, we are now seeing interest rates start to rise back up.

have two major components:

And so the converse or the inverse of that is true.

have two major components:

So as interest rates rise, bond values

have two major components:

mathematically have to fall.

have two major components:

So we're losing some of this downside protection and we

have two major components:

also have ultra, ultra low interest rates still, so they're

have two major components:

not paying much interest.

have two major components:

And you could deal with not getting much interest

have two major components:

when we weren't worried about the values falling

have two major components:

out from underneath of us.

have two major components:

But now we kind of have this worst of the world.

have two major components:

So we've been talking to clients for a couple years

have two major components:

about bond alternatives.

have two major components:

What other options do we have out there?

have two major components:

Does that make sense?

have two major components:

Does that ring a bell?

Dave Schmidt:

Oh, how could I forget this stuff?

Josh Bretl:

That glassy look in your eyes when you go,

Josh Bretl:

"What is he talking about?"

Dave Schmidt:

No, that's just because I stayed up too

Dave Schmidt:

late last night celebrating the Buffalo Bills' first

Dave Schmidt:

victory this season.

Josh Bretl:

You're still a Bills fan?

Josh Bretl:

I grew up, I mean the only reason I knew Buffalo

Josh Bretl:

existed as a city when I was a high schooler was

Josh Bretl:

your love of the Bills.

Josh Bretl:

So we've been talking about bond alternatives Maybe

Josh Bretl:

there's some really proactive podcast listeners out there.

Josh Bretl:

Maybe they Googled bond alternatives to see what this

Josh Bretl:

kid was talking about over here.

Josh Bretl:

And they're going to list all sorts of different things.

Josh Bretl:

They're going to list REITs and preferred stocks, dividend

Josh Bretl:

stocks, high yield savings, all sort of different things.

Dave Schmidt:

Did you say wreaths as in Christmas wreaths?

Josh Bretl:

REITs as in real estate investment trust.

Dave Schmidt:

Oh.

Josh Bretl:

So now I'm not recommending any of those, but-

Dave Schmidt:

No, sure because it's Halloween season.

Dave Schmidt:

You go Halloween wreath, not Christmas wreath.

Josh Bretl:

True.

Dave Schmidt:

We're on the same page.

Josh Bretl:

We are.

Josh Bretl:

We're on the same page.

Josh Bretl:

So before we look at this, I want to look at some

Josh Bretl:

different options from the two things we're looking for.

Josh Bretl:

If you remember, for a bond alternative, we're looking

Josh Bretl:

for risk reduction, trying to protect on the downside

Josh Bretl:

and to pay you a decent interest rate along the way.

Josh Bretl:

So one of the first things that we've looked at is we

Josh Bretl:

look at cash, I mean cash is a very real option.

Josh Bretl:

Maybe for a portion it could work.

Josh Bretl:

Now the problem with cash, cash will protect on the downside.

Josh Bretl:

Great protection on the downside.

Josh Bretl:

Right now it's paying you virtually zero interest.

Josh Bretl:

So it could come back in a little bit, but it only

Josh Bretl:

provides one of those two options as there.

Josh Bretl:

So we do use it in some spots.

Josh Bretl:

CDs can be also there.

Josh Bretl:

Unfortunately right now, CD rates have really

Josh Bretl:

dropped precipitously.

Josh Bretl:

And Erin did a quick little Google search for us today and

Josh Bretl:

the best rates she could find as of we're recording, this is

Josh Bretl:

September 9th, 2022, the best CD rates out there for a one year

Josh Bretl:

were like 2.7 and up to three and a half but you got to lock

Josh Bretl:

it up for five years for that.

Josh Bretl:

So even then when we're throwing inflation numbers in the

Josh Bretl:

high single digits, that's a tough pill to swallow there.

Dave Schmidt:

Sure.

Dave Schmidt:

And you look at CD rates and I know we've talked about I Bonds,

Dave Schmidt:

you'd almost be like you'd put your money in an I bond instead.

Josh Bretl:

Yeah, I bonds, the episode we did on I Bonds

Josh Bretl:

is a great bond alternative.

Josh Bretl:

You can't put that much into it if you're looking

Josh Bretl:

at a bigger portfolio.

Dave Schmidt:

That's true.

Dave Schmidt:

That's true.

Josh Bretl:

There's only so much you can put in.

Josh Bretl:

We'll also look at what we call alternative investments,

Josh Bretl:

what I call a bond alternative.

Josh Bretl:

But an alternative investment is something that's nontraditional.

Josh Bretl:

And the reason we do that is for a lack of correlation.

Josh Bretl:

So a correlation is how tied to an index an investment is.

Josh Bretl:

So think about the S&P 500.

Josh Bretl:

It's a index of 500 largest US companies.

Josh Bretl:

And a perfectly correlated investment, if the S&P goes up

Josh Bretl:

10, the investment go up 10.

Josh Bretl:

If S&P goes down 10, the investment would go down 10.

Josh Bretl:

They would say that has a correlation of one.

Josh Bretl:

Okay, It's a perfect correlation.

Josh Bretl:

If the S&P goes up 10 and the investment goes up 20,

Josh Bretl:

that's a two correlation, it's a double correlation.

Josh Bretl:

So what we look for actually is close to a zero

Josh Bretl:

correlation as we can get.

Josh Bretl:

So the movement of the S&P or whatever index it

Josh Bretl:

is not correlated to the movement of the asset price.

Dave Schmidt:

I see.

Josh Bretl:

And so if you have a net worth north of a

Josh Bretl:

million, $2 million, being able to allocate some money

Josh Bretl:

to this can really help do those two things - reduce

Josh Bretl:

risk and help provide a decent interest rate comparison there.

Josh Bretl:

The problem with that is there is some market risk to those

Josh Bretl:

and there's also some liquidity.

Josh Bretl:

It's not an issue, but it's a risk that's there.

Josh Bretl:

So that's why I wouldn't recommend those to

Josh Bretl:

everyone under the sun.

Josh Bretl:

For some people they can be a nice part of a bond alternative.

Dave Schmidt:

Wait, what was it called?

Dave Schmidt:

What was it?

Dave Schmidt:

What were you talking about?

Josh Bretl:

The alternative investments.

Dave Schmidt:

Oh, okay.

Josh Bretl:

Yeah, the non-correlated assets.

Dave Schmidt:

Okay, because I'm sitting here thinking I did

Dave Schmidt:

some research before our show.

Dave Schmidt:

Do you know what the correlation is of the Retirement

Dave Schmidt:

Equals Freedom podcast?

Dave Schmidt:

It's like four to one.

Dave Schmidt:

It's incredible.

Josh Bretl:

Oh, that's incredible.

Dave Schmidt:

I have no idea what that means.

Dave Schmidt:

We're like way in the S&P two.

Josh Bretl:

You're just pulling numbers out.

Dave Schmidt:

That's what I do.

Josh Bretl:

I mean there's other financial advisors that pull

Josh Bretl:

numbers out just like that too.

Josh Bretl:

But some examples of alternative investments, they could be

Josh Bretl:

REITs, R E I T, Halloween REITs.

Josh Bretl:

There's some precious metals, private equity, hedge funds.

Josh Bretl:

There's all sorts of different things that

Josh Bretl:

could be utilized there.

Dave Schmidt:

Rewind precious metals like gold and silver?

Josh Bretl:

Yeah.

Dave Schmidt:

Oh.

Josh Bretl:

Yeah.

Dave Schmidt:

I didn't think that was still a thing.

Josh Bretl:

They still exist and for some higher

Josh Bretl:

net worth investors you'll see them in there.

Josh Bretl:

But it's not common anymore.

Dave Schmidt:

Because I have a few gold teeth.

Dave Schmidt:

Would that count?

Josh Bretl:

Oh yeah.

Josh Bretl:

Your mother was very proud of that when you were a kid.

Dave Schmidt:

Totally.

Josh Bretl:

When she knocked those teeth out of your

Josh Bretl:

mouth, she said "David, were putting the gold ones in."

Dave Schmidt:

"David, did you eat the last

Dave Schmidt:

Markey Day sandwich?"

Josh Bretl:

"This is what you get for eating

Josh Bretl:

the last puddin' cake."

Dave Schmidt:

No, back then it was those poppy seed bagel dogs.

Josh Bretl:

Oh my god.

Dave Schmidt:

Full size bagel dogs.

Josh Bretl:

You used to leave the dirty plates

Josh Bretl:

in my car for weeks.

Dave Schmidt:

Oh man.

Dave Schmidt:

I'm surprised my mom never made me go to paper plates.

Dave Schmidt:

She would get so mad because you would leave five glass

Dave Schmidt:

plates in your trunk at a time.

Dave Schmidt:

"David, we're running out of plates.

Dave Schmidt:

The family needs plates."

Josh Bretl:

I'm also surprised that was like a convertible.

Josh Bretl:

We put the top down a lot.

Josh Bretl:

And you used to put it back where the top would go down.

Dave Schmidt:

No, I thought I threw it in the trunk usually.

Josh Bretl:

Oh did you?

Dave Schmidt:

And then it would just stink.

Dave Schmidt:

The smell would aggregate and then it would just

Dave Schmidt:

knock your brother out when he would open it.

Josh Bretl:

Oh,

Dave Schmidt:

REITs, man.

Josh Bretl:

REITs man.

Josh Bretl:

Now let's move on.

Josh Bretl:

Another bond alternative.

Josh Bretl:

This is becoming a little bit more popular.

Josh Bretl:

Technologically, there's something called buffered ETFs.

Josh Bretl:

And now buffered ETF, it's a way to give you a hedge

Josh Bretl:

against market downturns.

Josh Bretl:

Instead of incorporating bonds, your portfolio, you can utilize

Josh Bretl:

some of these strategies.

Josh Bretl:

It takes a little bit more knowledge to get into those,

Josh Bretl:

but they've become more and more popular that's out there.

Josh Bretl:

Another one that we've been using, we use quite

Josh Bretl:

a bit in our office, are actually some different

Josh Bretl:

annuities that are out there.

Josh Bretl:

Now when I say "A" word to some people that are

Josh Bretl:

like, "Yeah, that's great."

Josh Bretl:

Some people are like, "No, annuities evil."

Josh Bretl:

And again, they're not for everybody.

Josh Bretl:

And I always tell people there's no investment that's

Josh Bretl:

inherently good or bad.

Josh Bretl:

But when I look at the purpose of why we do it, if

Josh Bretl:

we are looking for downside protection and to pay you a

Josh Bretl:

decent interest rate, as a bond alternative, there are certain

Josh Bretl:

annuities that can be quite valuable in that situation.

Josh Bretl:

And then we do see those in some people's portfolios.

Josh Bretl:

But one of the nice more common will utilize in certain

Josh Bretl:

situations are different annuities as a bond alternative.

Josh Bretl:

So I do feel like in a few years we'll be able to put

Josh Bretl:

them back into portfolios like we normally would.

Josh Bretl:

It's been fun to look and utilize different alternatives.

Josh Bretl:

It makes managing someone's assets not so cookie cutter.

Josh Bretl:

I mean there's a lot of just cookie cutter portfolios, but

Josh Bretl:

this makes it a little bit less cookie cutter as we go in there.

Dave Schmidt:

Why do some people have a bad

Dave Schmidt:

relationship with annuities?

Josh Bretl:

There's been press out there.

Josh Bretl:

There are some of them that have really high fees.

Josh Bretl:

There's been some bad sales people out there.

Josh Bretl:

We should probably do a whole annuities good,

Josh Bretl:

bad, ugly podcast.

Dave Schmidt:

I like it.

Josh Bretl:

And go into the details because our industry

Josh Bretl:

has some shady people in it.

Josh Bretl:

So you just want to be cognizant of why you're doing things

Josh Bretl:

and the purpose behind them.

Dave Schmidt:

Yeah, makes sense.

Dave Schmidt:

Cool.

Josh Bretl:

Dave?

Dave Schmidt:

Yeah.

Josh Bretl:

I've talked a lot.

Josh Bretl:

What do you think?

Josh Bretl:

Oh yeah, that's what I'm thinking, Dave.

Dave Schmidt:

Hey, Mr.

Dave Schmidt:

Josh, let's take a break.

Dave Schmidt:

You've been talking for so long and my ear's are sore.

Dave Schmidt:

Let's not make them snore.

Dave Schmidt:

Listening shouldn't be a chore.

Dave Schmidt:

So let's get to know Josh and Dave and watch our ratings soar.

Dave Schmidt:

Oh yeah.

Dave Schmidt:

Dave Mauro, am I saying his last name correctly?

Josh Bretl:

Mauro.

Josh Bretl:

Mauro.

Josh Bretl:

Mauro.

Dave Schmidt:

Eat your heart out.

Dave Schmidt:

You don't have a get to know Josh and Dave

Dave Schmidt:

segment on your podcast.

Dave Schmidt:

However, I am open to new podcast producing opportunities.

Dave Schmidt:

Email me at...

Dave Schmidt:

Just kidding.

Josh Bretl:

He actually has a ton of sound effects and spends

Josh Bretl:

time like singing them in his basement and stuff like that.

Dave Schmidt:

Does he really?

Josh Bretl:

Yeah.

Josh Bretl:

It's pretty cute.

Josh Bretl:

You'd enjoy it.

Dave Schmidt:

Oh.

Josh Bretl:

It was called, "Come On Over" was the

Josh Bretl:

name of the podcast.

Josh Bretl:

It was pretty cool.

Josh Bretl:

"Come on Over" by Jeff Mauro.

Dave Schmidt:

I like it.

Josh Bretl:

It was really cool.

Josh Bretl:

I actually bought his cookbook, the "Come On Over"

Josh Bretl:

cookbook because I like people coming over to our house.

Josh Bretl:

Come on over.

Josh Bretl:

We'll cook something.

Josh Bretl:

I don't know what I'm going to cook yet, but

Josh Bretl:

I'll cook something.

Dave Schmidt:

I love when you cook for me.

Josh Bretl:

I know you do.

Dave Schmidt:

So yeah, the music just played that catchy beat

Dave Schmidt:

that's top 10 hits on Spotify.

Dave Schmidt:

Get to know Josh and Dave Song by Dave Schmidt.

Dave Schmidt:

What you got for us today, buddy?

Josh Bretl:

So the question I have for you today, I told you

Josh Bretl:

before, I picked the card and I went a little sentimental.

Josh Bretl:

All right.

Josh Bretl:

Did you have a favorite teacher or a teacher who made

Josh Bretl:

a big impact on your life?

Dave Schmidt:

Oh, my relationships with teachers

Dave Schmidt:

was a bit rocky at times.

Josh Bretl:

I only knew you in high school, I didn't

Josh Bretl:

know you younger than that.

Josh Bretl:

And I could tell you, you were probably not many high school

Josh Bretl:

teachers favorite student.

Dave Schmidt:

Definitely not.

Josh Bretl:

And it has to be hard.

Josh Bretl:

I mean, you married a teacher.

Dave Schmidt:

Josh, you actually helped me with this idea.

Dave Schmidt:

So I will give you some credit.

Dave Schmidt:

But Coach Jim Prunty.

Josh Bretl:

I know him well.

Dave Schmidt:

Absolutely.

Dave Schmidt:

You should know him well.

Dave Schmidt:

My senior year, your junior year was his first year coaching at

Dave Schmidt:

York and he was just awesome.

Dave Schmidt:

It was night and day from the previous coach who

Dave Schmidt:

I also liked, but very different coaching style.

Dave Schmidt:

And Prunty just kind of got us.

Dave Schmidt:

He was very mild mannered, even keeled.

Dave Schmidt:

And to be honest, he wrote the play "Snap Four" just for me.

Dave Schmidt:

So how could I not love the guy?

Josh Bretl:

He seemed to understand you quite well.

Dave Schmidt:

I only remember one moment when

Dave Schmidt:

he got really, really mad at quote unquote his "bigs"

Dave Schmidt:

because we couldn't rebound.

Dave Schmidt:

He was referring of course to me and Mark and Mark was one of

Dave Schmidt:

the league's best rebounders.

Dave Schmidt:

So he was really referring to me.

Dave Schmidt:

And it was one game, we were just, I think by Central, we

Dave Schmidt:

were just getting outrebounded.

Dave Schmidt:

And he went in the locker room and he goes, he probably

Dave Schmidt:

cursed a few times and-

Josh Bretl:

Oh, he didn't put me in the game.

Josh Bretl:

So I mean, it wasn't that bad.

Dave Schmidt:

It wasn't that bad.

Dave Schmidt:

I know.

Dave Schmidt:

yeah, Coach Jim Prunty.

Dave Schmidt:

Josh, how about you?

Dave Schmidt:

Do you have a favorite memorable teacher?

Josh Bretl:

I actually have lots of teachers who

Josh Bretl:

I really, really like.

Josh Bretl:

I'm going to go way.

Dave Schmidt:

Nerd.

Josh Bretl:

I know, I know.

Josh Bretl:

I'm going to go way back to, actually, my

Josh Bretl:

kindergarten teacher.

Josh Bretl:

Mrs.

Josh Bretl:

Porter, Trilby Porter.

Josh Bretl:

I had her, oh man, I don't know how many ever years ago.

Josh Bretl:

I love school.

Josh Bretl:

I thought it was fun.

Josh Bretl:

And I think she was part of it.

Josh Bretl:

But she was in Elmhurst as a kindergarten teacher forever.

Josh Bretl:

My uncle who's 20 years my senior had her,

Josh Bretl:

my sister had her.

Josh Bretl:

She was great.

Josh Bretl:

In fact, there's many, many children in Elmhurst

Josh Bretl:

that will have a Mrs.

Josh Bretl:

Porter story and it's pretty cool.

Dave Schmidt:

That's cool.

Dave Schmidt:

And you know what, I remember you telling me about her because

Dave Schmidt:

she made you feel okay that you weren't potty trained and that

Dave Schmidt:

you'd wet your pants every day.

Josh Bretl:

She was very understanding.

Dave Schmidt:

Yeah, I knew it.

Josh Bretl:

My sister teaches kindergarten right

Josh Bretl:

now and that probably isn't that far of a joke.

Josh Bretl:

I've heard from her stories.

Josh Bretl:

There's kids in different stages.

Dave Schmidt:

Absolutely.

Dave Schmidt:

Yeah.

Dave Schmidt:

Different stages.

Dave Schmidt:

What are you going to do?

Dave Schmidt:

Yeah.

Dave Schmidt:

So Josh, I was sitting here, we were talking about get to know

Dave Schmidt:

Josh and Dave and I thought about Dave relates to retirees.

Dave Schmidt:

Yeah.

Josh Bretl:

Do you think when you're older and you're

Josh Bretl:

actually retired, you'll look back at this and go, "Man,

Josh Bretl:

I didn't relate at all."

Dave Schmidt:

My goal is to relate less and less

Dave Schmidt:

to make your job harder.

Josh Bretl:

Good.

Josh Bretl:

I can't wait to see what's coming today.

Dave Schmidt:

I went to the Illinois Institute of Art.

Josh Bretl:

You did.

Dave Schmidt:

We've talked about this a few times.

Dave Schmidt:

My senior project, we got to pretty much choose anything

Dave Schmidt:

that we wanted to do.

Dave Schmidt:

It's art school.

Dave Schmidt:

You really had to try to get a B.

Dave Schmidt:

It's really hard to not get A's.

Dave Schmidt:

So my idea was to come up with an entire marketing

Dave Schmidt:

plan for a made up movie called "The Empty".

Dave Schmidt:

You're holding back your laughter because

Dave Schmidt:

you remember it.

Dave Schmidt:

So originally the scope of my senior project was to

Dave Schmidt:

develop a website, a poster.

Dave Schmidt:

Back then it was an interactive CD Rom, which

Dave Schmidt:

was a lot of fun to make.

Dave Schmidt:

They're completely irrelevant now.

Dave Schmidt:

And I finished all that within the first two weeks

Dave Schmidt:

of the trimester or quarter.

Dave Schmidt:

And I thought, I think I'm going to actually make a film now.

Dave Schmidt:

So how this is relating to bonds is because I

Dave Schmidt:

chose an alternative path.

Dave Schmidt:

See what I did there?

Dave Schmidt:

I could have just been happy with what I made,

Dave Schmidt:

but I said, "No, I'm going to make the film."

Dave Schmidt:

So that was one of the few moments I've ever

Dave Schmidt:

overachieved in my life.

Dave Schmidt:

Instead of writing a script and hiring actors from a

Dave Schmidt:

local college, I relied on my good friend, Josh, Kevin,

Dave Schmidt:

Carla, and Jackie, to be the actors of this film.

Dave Schmidt:

The end result reflects this.

Dave Schmidt:

It is one of the worst things you will ever watch.

Dave Schmidt:

However, we did come away with a blooper reel, which I'm going

Dave Schmidt:

to post on our Facebook group.

Josh Bretl:

No, no.

Dave Schmidt:

Oh, I am.

Josh Bretl:

No, no.

Dave Schmidt:

Oh, I am.

Dave Schmidt:

Josh was the imaginary evil spirit slash bad guy.

Dave Schmidt:

And you're going to see Josh in action folks.

Josh Bretl:

Oh, please, God.

Josh Bretl:

You promised this was never coming out.

Dave Schmidt:

Well, I promised that if you weren't

Dave Schmidt:

going to run for office which I don't think you are.

Dave Schmidt:

So that's how I relate to retirees.

Dave Schmidt:

The retirees are sitting here like, "Man, I need a

Dave Schmidt:

good alternative to bonds."

Dave Schmidt:

And I'm like, "Yeah, I need an alternative to

Dave Schmidt:

just my senior project.

Dave Schmidt:

I'm going to make a film baby."

Dave Schmidt:

Remember I was heavily inspired by Tim Burton even

Dave Schmidt:

though this film has nothing to do with Tim Burton.

Dave Schmidt:

So Josh, I would like you to relate "The Empty"

Dave Schmidt:

to bond alternatives.

Josh Bretl:

Dave.

Dave Schmidt:

Yeah?

Josh Bretl:

I didn't laugh for a lot of it because I

Josh Bretl:

kind of had an idea where you were going with all of it.

Josh Bretl:

And I'm thinking to myself, good God, how am I going

Josh Bretl:

to be able to relate this back to bond alternatives?

Dave Schmidt:

To me that's mission accomplished then.

Josh Bretl:

And it's going to be difficult and I'm going

Josh Bretl:

to change your story a bit.

Dave Schmidt:

Insert "Full House" music.

Josh Bretl:

The reason retirees need an alternative to bonds

Josh Bretl:

is because the bonds aren't living up to the purpose that

Josh Bretl:

they are supposed to provide.

Josh Bretl:

Now I'm going to assume that your senior project

Josh Bretl:

of a website, CD rom, and poster was okay work.

Dave Schmidt:

It was great work.

Josh Bretl:

But the purpose was it didn't

Josh Bretl:

fulfill you internally.

Dave Schmidt:

Thank you.

Josh Bretl:

And so you needed something else to

Josh Bretl:

fulfill you internally.

Josh Bretl:

And so you created this visual masterpiece-

Dave Schmidt:

Thank you.

Josh Bretl:

That I am utterly embarrassed to be a part of.

Josh Bretl:

So when I refer to bond alternatives, they're looking

Josh Bretl:

for this option that can provide something for them,

Josh Bretl:

the fulfillment, if you will, to their needs of protection

Josh Bretl:

and a good interest rate where you were looking

Josh Bretl:

for fulfillment to your educational, academic desires.

Dave Schmidt:

And my art skills.

Josh Bretl:

Yes, you're very artsy.

Josh Bretl:

But they're a little different.

Josh Bretl:

But I do kind of see where you are going with that.

Dave Schmidt:

I appreciate it.

Josh Bretl:

I appreciate you.

Dave Schmidt:

I've had the idea of sharing the story

Dave Schmidt:

of "The Empty" for a while.

Dave Schmidt:

I just kind of needed something, just even the slimmest of

Dave Schmidt:

things that I could relate to.

Josh Bretl:

And you said, "He's going to talk about

Josh Bretl:

bonds for a third time."

Dave Schmidt:

I mean, yeah.

Dave Schmidt:

So yeah, it was a perfect fit in my mind.

Josh Bretl:

"We're going to embarrass the snot out of him

Josh Bretl:

by talking about 'The Empty'."

Dave Schmidt:

I mean, who's more embarrassed, you or Jackie?

Dave Schmidt:

Lets be honest.

Dave Schmidt:

Or me for making it?

Josh Bretl:

Definitely Jackie.

Josh Bretl:

Without a doubt.

Dave Schmidt:

Yeah, I think so.

Josh Bretl:

Yeah.

Josh Bretl:

Poor Jackie.

Dave Schmidt:

But she can watch it and get a

Dave Schmidt:

good laugh out of it.

Josh Bretl:

That is true.

Dave Schmidt:

Oh man, Josh.

Dave Schmidt:

So bond alternatives.

Dave Schmidt:

Yeah.

Dave Schmidt:

We talked about REITs, which I learned is not a

Dave Schmidt:

Halloween or Christmas wreath.

Dave Schmidt:

I learned about bond, what you call these things?

Dave Schmidt:

Alternative...

Josh Bretl:

Investments.

Dave Schmidt:

Investments.

Josh Bretl:

Non correlated assets is another way

Josh Bretl:

to think about it.

Dave Schmidt:

You learned that the "Retirement Equals Freedom

Dave Schmidt:

"podcast is a four to one correlation in the S&P two.

Josh Bretl:

True.

Josh Bretl:

True.

Dave Schmidt:

Yep.

Dave Schmidt:

So what do we have planned here for future episodes, Josh?

Dave Schmidt:

I kind of want to whet people's appetite now because since we

Dave Schmidt:

are going biweekly, every other week, I kind of want to set the

Dave Schmidt:

stage for future episodes now.

Josh Bretl:

Well, we talked about doing a annuities

Josh Bretl:

good, bad, and ugly.

Dave Schmidt:

Yeah.

Josh Bretl:

I also, we're approaching the end of the year

Josh Bretl:

here and there's some really key things for end of the year

Josh Bretl:

tax planning, end of the year investment planning that you can

Josh Bretl:

do that are very time sensitive.

Josh Bretl:

I'd like, Dave, I'd like to interview somebody too.

Dave Schmidt:

Before the year ends.

Josh Bretl:

Before the year ends.

Dave Schmidt:

Sure.

Josh Bretl:

Maybe that can be our final 2022 podcast.

Josh Bretl:

We interview your mom.

Dave Schmidt:

Oh, you think Becks-

Josh Bretl:

you think Becks would want to do it?

Dave Schmidt:

Oh, for sure she'd want to do it.

Josh Bretl:

Yeah, I think it would be fun.

Josh Bretl:

Let's just interview Becks.

Josh Bretl:

Yeah, I mean, why not.

Josh Bretl:

Dave, at the end of every podcast we've done, we've

Josh Bretl:

asked our listeners to do something for us and we're

Josh Bretl:

going to do something a little bit different this time.

Dave Schmidt:

What?

Dave Schmidt:

Did you run this by me first?

Josh Bretl:

No, sorry.

Josh Bretl:

But bond alternatives are actually important and looking

Josh Bretl:

at your portfolio is important.

Josh Bretl:

And if you look at your portfolio and you see, "Hey,

Josh Bretl:

I've got 10% bonds, 20% bonds, 40% bonds, 80% bonds," whatever

Josh Bretl:

it might be, it should be listed right there on your

Josh Bretl:

first page of your statement, it's time for you to talk.

Josh Bretl:

And if you talk to your advisor and ask them about it, great.

Josh Bretl:

If you have questions, you want to talk to me about it.

Josh Bretl:

Wonderful.

Josh Bretl:

We'd love to talk to you and see if an alternative

Josh Bretl:

might be a right fit for your situation or not.

Dave Schmidt:

Excellent.

Dave Schmidt:

And on the FSRwealth.com/podcast page, at the very bottom

Dave Schmidt:

there is an embedded calendar.

Dave Schmidt:

So you can actually book a free or complimentary

Dave Schmidt:

15 minute call with Josh.

Josh Bretl:

Whoa.

Dave Schmidt:

Yeah.

Dave Schmidt:

Did you know that?

Dave Schmidt:

Did you know the calendar was on there?

Josh Bretl:

Yeah, yeah.

Josh Bretl:

No.

Dave Schmidt:

Oh yeah.

Dave Schmidt:

I'm going to add a second calendar if you want to

Dave Schmidt:

come in for a complimentary cup of Cometeer coffee

Dave Schmidt:

brewed by yours truly.

Dave Schmidt:

I won't put a calendar up there, but you can request when next

Dave Schmidt:

time you come in the office.

Josh Bretl:

And with that Dave, thank you for sitting

Josh Bretl:

down recording with me today.

Dave Schmidt:

Bond alternatives baby.

Dave Schmidt:

We got some exciting stuff coming up Josh.

Dave Schmidt:

Thank you.

Dave Schmidt:

And we'll end this show by saying bye.

Josh Bretl:

I actually think that was a decent show.

Dave Schmidt:

That was fantastic.

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