July 2025
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Ep. 144 Value vs. Cost: How to Evaluate Advisory Fees
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When it comes to fashion, are you more of a silver person or a gold?
I think I tend to lean on the gold side, but not like the traditional yellow gold. Like my wedding ring is white gold. And even then, I'm not a huge jewelry guy. I think this is the extent of what I would wear as the watch and the ring.
So a silver watch and a white gold ring.
I think that's where I would sit. Yeah, not much more than that though.
I mean, personal fashion. I'm sort of antique gold. I'm one of those weirdos. I like silver or platinum. I think gold is beautiful. It looks nice, but I don't know. I've always been drawn to silver. But we're going to we're going to talk about gold today and how it might fit in somebody's portfolio. So like when you think about gold, like, why should we invest in gold and how does it protect somebody's portfolio?
I think gold is a great portfolio diversifier for someone and something that can move opposite of stocks and bonds. So you never want your entire portfolio to always move in one direction at the same time. This is something where you know, if you're in a higher inflation environment or several other factors that we'll get into, gold can really help someone's portfolio.
I mean, when I think about gold, I think about just a store of value. I mean, for a long time, gold has been perceived as as a currency and was used for a number of years, as currency. I know that the U.S. walked away from the gold standard, what, back in the 70s. But if you just think about gold and its store of value, I mean, the dollars that I have in my pocket, they can't purchase the same amount of goods and services today as they could 20, 30, 50, 70 years ago.
But like an ounce of gold 100 years ago, it could buy a really nice Italian suit. You fast forward today an ounce of gold that was $3,500 an ounce.
Think it was 3350 when I checked this morning. So it could have moved a little bit.
Right. So that can still buy a really nice Italian suit. So gold from a store of value perspective, when most people have their entire net worth tied up in dollars or their home currency, gold becomes attractive for those reasons. And, I think you even did some research here recently. And thank you for doing all the research that you do.
But in 2008, when stocks were down, gold actually finished the year up. Is that right?
Yeah. The gold ended up outperforming traditional stocks. And that was mainly because of the environment that we were in. And that's where gold can be a much better producer than traditional equities.
And in addition to that, I mean, some of the research that you did was referring to traditional stock and bond portfolios, like a 60% stock, 40% bond mix, that if you had gold in the portfolio as well, it reduced your volatility by at least 3%.
That's right. Yeah. Traditionally, in that 6040 split, it would be about 10% volatility. It lowered it to about seven which doesn't sound like a lot, but it actually is quite a bit even in the planning world that I live in, if we just change the growth rate on some of these investments just by a percent over time, it makes a huge difference.
And people oftentimes make investing... react to their investments based off of volatility. So gold can be something that produces less volatility. People are more likely to stick to their investment plan. I mean, I've been in this business for about 16 years now in terms of giving advice, and it's been interesting to the reaction for some people in terms of whether or not they like gold or they don't.
Some people don't like gold. They don't like it because it doesn't produce any income. It's hard to value. I mean, it's not like it's a business. And you see profits or earnings go up over time, and gold can be a little volatile. And so our viewpoint is you should own gold because you need a store value long term.
But it might be better to own it in a safe as opposed to seeing it on a brokerage statement. So I always find it interesting as to people's likeness or dislike towards owning or investing in gold itself. Let's talk a little bit about what's going on in the world today and why gold actually really makes sense. Right.
So what are your thoughts in terms of why gold makes sense in this, in this environment economically?
I think economically we're in a higher inflationary environment. Things are costing more. The dollar's depreciating more as well. And so gold, like you said, kind of has that store of value for people where if we go back to your even your suit example, it can still hold that purchasing power that somebody has and can help somebody's portfolio.
Yeah. So I mean you think about inflation, you think about tariffs. Do you think about, loss of purchasing power, central banks around the globe printing money and increasing the money supply? So that the loss of purchasing power of your dollars. Gold's great for that. I mean, one thing that I think that people often forget to take a look at is how much central banks around the globe are actually purchasing gold today versus in the past.
And it's a big number.
It is a big number. I think a lot of that came out of the Russia-Ukraine war when people kind of just cut them off and they were like, oh, we can be cut off from the system. I'm going to start buying more and more gold. And so central banks, if you look, I think in 2020 to 2021, 2022, it like doubled and has kind of held consistently up there since then.
Well, I mean gold... the research that you did was talking about metric tons. So one metric ton is around 2,200 pounds. But back in 2020, central banks were buying about 254 metric tons.
And then in 2021, it was 450. 2022, over 1081 metric tons. And even in 2023 and 2024, it's still above over a thousand metric tons that central banks are buying.
And that's a lot of large purchasing power. And it wasn't just somebody that kind of seized assets from Russia, it was the US. It was our way of retaliating against Russia, saying, hey, we don't like what you're doing to Ukraine, so we're going to seize your assets. We can't go take their real estate and their cars and their yachts, right?
What did we take? We took away their U.S. treasuries. And so people that are not our allies looked at that and said, well, if the US doesn't agree with me and they can just seize the US treasuries, I'm I'm potentially vulnerable. So that is likely a catalyst for speculation because no one's confirmed it. But that's probably a big catalyst as to why central banks are, you know, offloading some exposure to the US Treasury market.
We've got $34 trillion worth of debt. We're on track to, on pace to have an extra $20 trillion worth of debt over the next ten years. So they're selling treasuries and buying gold. I mean, this is an asset class that some of the largest institutions in the world own, but the retail investor wants to turn away from it.
And it's always interesting, for me as to why.
Yeah, I think the debt ceiling is kind of a big thing to talk about. 37 trillion. That's a lot. People are afraid and they want to turn to something that is safer where they can put their money so they're not fully invested just in dollars, like you mentioned before. And gold's a good option for them to do that.
And that's one of the economic risks that we're talking about. And then the just the geopolitical stuff that's been going on, I think I feel like for, for many years now, people are afraid.
And so if you're going to invest in gold, like what's the right sizing or allocation that you think that somebody should have. And I don't want the lawyer answer, like it depends. I mean, what do you think?
I think it's always good that somebody has some in it. Let's start there. First of all is to just have a certain amount into it. I think here at Morton we like, somewhere around the 10% range, but that might include also other natural resources as well. So I think somebody who doesn't like volatility in their portfolio might lean to the upper end of that scale.
And maybe somebody that doesn't mind it as much, maybe they have a little bit less. So it is kind of not a cookie-cutter type situation where hey, for everyone across the board, it makes sense to have X amount in gold. But I think it depends. I know that's, the answer you didn't want, but it does kind of depend on their own situation and what their risk tolerance is.
And, maybe how much they're even invested in the dollar at all.
Look, other assets have done well in terms of maintaining their purchasing power or store value over time. Think about real assets like real estate stocks tend to do, you know, well over the long term, the long run with keeping up with inflation or, you know, growing over time. But if your entire net worth is exposed to the US dollar, you think about your house, your stocks, your bonds.
I mean, I just think it makes sense to have some exposure or something that like gold will hold its value over time. So, you know, having a 4 to 5% position in gold itself, another 2 or 3% position in like gold miners, sort of like a leveraged play on gold, taking a little bit of business risk.
But if gold mining companies can take out gold at $1,400 an ounce, turn around and sell it for 3400, that's a huge profit margin, right? And so right now with gold priced at where it is, they're probably cranking up production, trying to, you know, dig out as much gold as they possibly can. And the supply is still somewhat limited, especially with buyers of a thousand metric tons.
It's incredible. Yeah, it's not a finite amount, but there's only so much you can pull out of the ground, and gold only exists where it exists as well. It's not like you can just go in your own backyard and pull it out.
So we agree that people should own some form of gold. The percentage could be anywhere from a few percent all the way upwards to 10% or more. If you really sort of, you know, skeptical on the world, you might want to own more of that. But then I'd argue you'd be better off owning farmland, maybe know how to farm.
But from that perspective, what other commodities should we be interested in investing in or looking at investing, and what's our viewpoint on that?
Yeah, I think that gold isn't the only commodity that someone should own. I think traditional oil and gas is still something that everyone should own because, I mean, people still own automobiles. I know there has been a transition to more renewable energy sources. If you look out here, we're in Southern California. How many Teslas do you see on the road right now?
But a lot of just traditional things run on oil and gas. And so that's definitely part of the portfolio we want to include when talking about other natural resources. And then those renewable energies think about like wind turbines. And, you know, electric cars that people are buying. Now, those are also things that people are now turning toward.
And that is also included in that commodities bucket when we talk about that, usually when people are buying different types of metals like copper, usually have to buy a futures contract the way we like to look at it is in another fund where you don't necessarily have to buy that, but they're investing in maybe different companies that will invest in that, type of stuff.
Yeah. So silver, other types of natural resources, I mean, just basically looking at the way that the world consumes energy and natural resources, we should be exposed to that ourselves. And that's the dynamic shift from one area to another. We should be invested in a way that's malleable and can adjust from there.
Yeah, I think so. I think that's perfect.
Yeah, it's just fascinating. I know that Jeff and I are going to, you know, have a finance episode in a few weeks talking about gold and silver and other things. You know, gold's obviously had a pretty good run in 2025, but also the last several years. And, you know, the main theme has to do
around the amount of debt that the US and central banks have.
And really the easiest path to exiting this debt is to let inflation run so your purchasing power of your dollars becomes less and then you wake up ten, 20, 30 years from now and you say, oh, 34 trillion is not a lot of money, because the last thing that they want to do is actually directly impose a tax to then pay down the debt, letting inflation run and a devalued currency.
I guess it helps them get elected better, which is a scary thing.
Yeah. It's like the time value of money, you know, a dollar now and a dollar tomorrow aren't worth the same amount.
That's kind of why mortgages are so interesting. You get a 30 year mortgage. Let's say it's $4,000 a month. Well, on day one for $3,000 a month feels like a lot. By year 26 or 27, $4,000 doesn't seem like very much money. So, you know, having long term debt at a fixed rate with a depreciating currency, you can get in, you know, you can afford a lot.
So let's talk a little bit about optimistic or pessimistic questions. Right. So the US has... the US national debt is over $34 trillion. And it's growing fast. Are you optimistic or pessimistic or pessimistic that we will manage it responsibly?
I'm always the optimist. So I will say I'm optimistic about it. Even though some people might disagree with me on this. We've never defaulted or really gone down, you know, in the history of the United States. But I think there's a stat I think it's been going on for a few years that we're spending more just on interest debt than we are just on our military.
If you look back, that tends to not be good. Yeah. But I think going back to what you were talking about and, you know, letting inflation run a little bit and try to grow out of this situation, I'm going to cross my fingers and hope that that is going to be the real situation.
I hope you're right. Normally I'm the optimist. Yeah. In this case, I'm not so sure. Yeah. I mean, we have $9 trillion worth of U.S. debt that needs to be refinanced this year. I mean, most of this 9 trillion was at a very, very low interest rate. If you look at where interest rates are today, much, much higher.
Our debt servicing costs is getting a little bit out of control. And so that's one of the reasons why I'm a proponent of gold and not thinking that we're going to solve this debt issue anytime soon. All right. Another one, gold is held its purchasing power for many, many years. Are you optimistic or pessimistic that this will keep up?
Do you think gold will maintain its purchasing power over time?
I do think it will. I'm going to be an optimist on there as well, because we can go back more than 100 years. Gold's been around and it has. It's held up just like your suit. Your example, which is a real example. When I was doing some research before it came up several times. So it wasn't just something that you say it must be a...
I got it from Jeff. I stole it from Denver. Wasn't even me.
Yeah. So I think I'm optimistic on that. It will hold its value.
I'm optimistic too. From the Lindy effect perspective, which means that if something has been around for X amount of years, there's a higher likelihood and probability that it will be around for that next same period of time. So let's say gold's been around, as you know, a currency for 300 years. There's a high probability that it will be around and hold its purchasing power for the next 300 years.
It's always an interesting dynamic. But when I think when I talk to people and generations over time, there is a belief that gold will continue to, to do well or there is a value to it. Besides just having it as jewelry, necklaces, watches, other things. But there is a firm belief, especially outside the United States, that gold is a powerful tool.
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