On this week's Stansberry Investor Hour, Dan and Corey welcome their colleague Alan Gula back to the show. Alan is an editor and member of the Investment Committee for The Total Portfolio and Stansberry's Forever Portfolio, as well as a senior analyst for flagship newsletter Stansberry's Investment Advisory.

Alan kicks off the show by analyzing a chart of the S&P 500 Index since 1957. He notes that the index is running 35% above its long-term trend, which is high but not a historic extreme. Focusing on just the past 15 years, Alan discusses the current secular bull market and whether artificial intelligence ("AI") could usher in a dot-com-style boom. He also goes in depth on The Total Portfolio's investment philosophy, what kinds of assets are in the portfolio, how the portfolio has outperformed this year, and the difficulty with being truly diversified...

A lot of times, you're going to have these periods where you just hold stuff that is so out of favor. I know international stocks now are starting to catch fire this year, but man... those have just been dead weight... So you sort of have to live through the periods of underperformance in some of these individual categories.

Next, Alan talks about managed futures and why their negative correlation with the S&P 500 makes them "the ultimate portfolio diversifier." As he explains, almost all investment advisers simply follow trends nowadays, so The Total Portfolio is one of the only places you can find truly diversified recommendations that'll protect you in any outcome. He then shares why he believes the traditional 40% allocation to bonds is dead, recommends two better ways to invest in this space, and explores where we are in the current bull market...

Maybe we're in the seventh inning... Expected returns are lower [moving forward]. But yeah... you can't get too defensive or too bearish. You just have to sort of play the market that's in front of you. And, again, that speaks to the balanced approach that we have.

Finally, Alan advises bearish listeners to keep looking for opportunities. He says you can't predict the future, but you can set up win-win scenarios. This leads to a conversation about real estate investment trusts, sector correlations, strategies for picking stocks, and both the pros and cons of AI replacing human jobs. As Alan brings up...

It's going to be interesting to see how young kids coming out of college are able to enter the workforce. Because I feel like a lot of companies are going to say, "Well, why would we hire these entry-level people?" Because they [can] just have AI do it. But then you run into the problem where your junior-level employees eventually gain experience and become senior level. So then you don't have that pipeline. That could be a problem.

Click here or on the image below to watch the video interview with Alan right now. For the full audio, including Dan and Corey's post-interview thoughts, click "Listen" above.

Additional past episodes are located here.)

This Week's Guest

Alan Gula is an editor and member of the Investment Committee for The Total Portfolio and Stansberry's Forever Portfolio, as well as a senior analyst for Stansberry Research's flagship newsletter Stansberry's Investment Advisory. After graduating from Villanova University, Alan joined Goldman Sachs as a financial-database expert in the Investment Banking division. While there, he witnessed a merger-and-acquisition boom. Later, at Barclays Investment Bank, he had a front-row seat to the financial crisis on various trading desks. Alan was also a statistical arbitrage trader at an independent proprietary trading firm. He joined Stansberry Research in 2016.

Alan has been a CFA charterholder since 2011. He also has a Master of Business Administration with a specialization in quantitative finance from the Stern School of Business at New York University.

Dan Ferris:                 Hello, and welcome to the Stansberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and The Ferris Report, both published by Stansberry Research.

Corey McLaughlin:    And I'm Corey McLaughlin, editor of the Stansberry Daily Digest. Today we talk with our colleague, Stansberry Research senior analyst Alan Gula.

Dan Ferris:                 Alan is our colleague and friend. Great guy. Very, very smart. We're lucky to have him with us. So, rather than waste any more time talking about him, let's talk to him. So, let's do it. Let's talk with Alan Gula. Let's do it right now.

                                    Alan, welcome back to the show. Pleasure to see you as always.

Alan Gula:                  Yeah, thanks for having me.

Dan Ferris:                 So, for our listeners' sake, overwhelmingly we invite guests on the show and we say, "Five, four, three, two, one, go," and we just talk. And every now and then, on a rare occasion, we exchange an e-mail or two and they want us to prepare – like that's a thing.

[Laughs]

And so, Alan and I, we – and Corey and I – exchanged some e-mails and Alan definitely has something on his mind here. And we specialize on this show in letting people talk and tell us their ideas and make them crystal clear. It's less about what Corey and I think and more about what our guest thinks. So, Alan, that said, you do have some very specific things on your mind and you've provided us with charts, which is another thing that hardly ever happens. And you're concerned about the long-term trend and you're interested in talking about the long-term trend of the S&P 500 and the boom in capital spending among Big Tech companies, the secular bull market. So, I'm curious to hear what you have to say about all this. So, let us have it, man. Give it to me. What do you got?

Alan Gula:                  Yeah, just – I always think it's helpful to back up and take a long-term perspective. And I'll just run through these charts pretty quick. The first chart is of the S&P 500 since 1957. That's when the index expanded to 500 companies. The upper pane has a log scale, or else this would look like a giant curve. And that red line is the long-term trend with the benefit of hindsight. It's basically a 7.5% compound annual growth rate. And the lower pane shows the deviation from trend. And in the late 1970s, early 1980s, you could see the index was running about 50% below the current trend and it got down to 50% below trend again during the Global Financial Crisis, briefly. And something else that really stands out on this chart is the tech bubble, the peak in 2000. The index was 100% above trend. And so, today, the S&P 500 is about 35% above trend. So, we're running hot, but it's not at a historic extreme. So, that's the long-term perspective.

                                    If we could maybe zoom in on the last 15 years, this is also a chart of the S&P 500 on a log scale. This is a different trend line. This is just the trend line since 2010. And we've been in what a lot of technicians call a secular bull market since 2009. And there have been two cyclical bear markets, the COVID-19 crash in 2020 and in 2022 from the inflation shock. And, of course, the official definition of a bear market is a 20% or more drawdown on a closing basis. And then we've had three near bear markets, one in 2011 during the European sovereign debt crisis, another in late 2018, and then we just had yet another near bear market, another 19% decline. And in my opinion, these 19% declines are – they're effectively bear markets for all intents and purposes. We even got there on an intraday basis.

                                    And so, we'll return to this, but if you had a truly diversified portfolio, this latest 19% drawdown wasn't really all that painful. And so, now the big question is whether the secular bull market continues. Could the AI boom help carry us even further above trend? It's certainly possible. Could it even cause a 1999-style bubble? Sure. And so, given the parallels between the Internet, the rise of the Internet and generative AI, both touted as these revolutionary technologies and with undeniably rapid adoption, it might even be strange if we didn't see another further melt up. And then, on the other hand, could the secular bull market be on its last legs? Of course. Could the market go sideways and be choppy for 10 years? Sure. And I actually think that that would be – that would probably cause the most pain for the most amount of people. And so, I think this is why investors should have a balanced approach, a bit of yin and yang in their portfolios. You want your so-called "get rich" securities but you also want your "stay rich" securities to help manage the downturns.

                                    And then the last chart. So, the market, we're now sitting almost at all-time highs in the S&P 500. Again, the market has ripped higher since the April lows. And so, I think people are just realizing that – and the earnings announcements reinforce it, but the underpinnings of the AI boom and the AI trade are intact. And one big driver of that is tech capex [capital-expenditure] spending. So, Microsoft, Alphabet, Amazon, AWS [Amazon Web Services], Meta Platforms, Oracle, and I've even thrown in CoreWeave – the upcoming AI hyperscaler that's going to do about $20 billion of capex this year. So, these large tech companies, they're likely to spend nearly $350 billion combined of capex this year. That's up 40% from 2024, which was up 70% from 2023. And so, it's just a gargantuan amount of spending. A lot of this is going into data-center construction and buying chips. There just doesn't seem to be an end to this, at least not yet. So, it's unclear whether this capex will have a good return on investment, but I'd rather ride the waves than fight the tide on this trend.

Dan Ferris:                 Sure. And overall, lots of investment in a new potentially wonderful technology is a good thing. Nobody – I mean, this is how capitalism works. Everybody gets excited. They want to invest in something. I mean, it goes without saying that not all the investment will produce a great return, but I bet some of it produces a fantastic one. Right? I mean…

Alan Gula:                  Yep.

Dan Ferris:                 So, it sounds like you're cautious. You're aware of the trend and so, then you have your stay-rich securities. And I've said this a bunch of times: Don't run out and sell all your stocks. Hold those great businesses. And it sounds like you're in the same place overall.

Alan Gula:                  Yeah, exactly. And, yeah, so basically – and I alluded to it earlier – if you have a fully diversified portfolio, you basically weren't all that worried during the April downdraft. And that's because people are saying, "Well, the 60/40 is dead." And the 60/40 is the 60% stock benchmark, 40% bonds. And what they're really saying is, "Oh, we hate bonds." But I'm not sure if the 60/40 is dead. I just think that traditional asset allocation, traditional diversification, having 40% of your stay-rich sleeve in bonds, that's over. So, with The Total Portfolio, our goal is to build wealth over the long term with a balanced, universally diverse portfolio that's less volatile than the S&P 500. So, I contribute to our flagship newsletter, Stansberry's Investment Advisory, and then I'm also on the Investment Committee for The Total Portfolio, which is – I'm sure we'll get into it.

Dan Ferris:                 Yeah, so no, let's get into it. The Total Portfolio is for subscribers. So, we're not going to give away all the names, but maybe you can just characterize for us what's in the Get Rich [portfolio] and what's in the Stay Rich [portfolio]? What are some Stay Rich ideas that might wind up in there?

Alan Gula:                  Yeah. Well, first let me – yeah, I think there are a number of things that make this product special, and one of them is securities selection. And so, maybe we could talk about that first.

Dan Ferris:                 Sure.

Alan Gula:                  We have a lot of various publications at Stansberry Research and that can sometimes create confusion as to what our subscribers should buy and how large positions they should hold. And The Total Portfolio is really the solution to that. We have an Investment Committee made up of myself, Director of Research Matt Weinschenk, Brett Eversole, Whitney Tilson, David Eifrig, and we review all of the recommendations across our firm and pick the most compelling, best risk-reward recommendations. And so, to give the audience an example – and Dan, I want to give you some props here... So, back in 2020, you recommended Comfort Systems in Extreme Value. Do you remember that?

Dan Ferris:                 Sure do.

Alan Gula:                  Right. So – yeah, so for our viewers who may not be familiar with the company, Comfort Systems is a construction contractor that specializes in heating, ventilation, air conditioning – so, HVAC – and then electrical and plumbing, as well. And this is – these are not the guys that come to fix your AC in your house. This company works on large commercial projects. And it's sort of one of the lesser-known beneficiaries of the U.S, construction boom. It helps build lower-tech facilities like hospitals and warehouses. But also, in the last few years, it has done a lot more data centers and even semiconductor fabs [fabrication plants]. And so, its business is booming. It even has a $7 billion backlog.

                                    And Dan, you recommended the stock in [Extreme Value] [in August] 2020. It went into The Total Portfolio in early 2021, and we've held it ever since. We've trimmed the position. And we're up something like 700% on it. And it's the second-biggest winner in our portfolio behind bitcoin. And so, that's a great example of when our process knocks it out of the park. You did a great write-up on that. And I think Austin Root, who was our director of research back then, he put it in the portfolio. And so, that's a great example of how the securities selection, how that works.

Corey McLaughlin:    Yeah, wow. Bitcoin and Comfort Systems, Dan. That's pretty – there you go.

Dan Ferris:                 That's right. If you just owned those two, you'd be great.

Corey McLaughlin:    Who would have thought? Who would have thought? But that's the point. That's – when you have all these – we do – I mean, we hear from subscribers all the time about all the different publications. And we send a lot of recommendations, and what Alan's talking about is really the solution to putting all of that together on a risk-reward basis and through everything. So, if you haven't checked that, you should check it out.

Dan Ferris:                 Yeah, I was really happy when they started doing these. There are other portfolios as well, because it's true, we overwhelmingly, like across Stansberry, we all like to recommend better businesses, generally speaking. Generally speaking. So, you've got all these publications that are trying to find the best business in some particular industry or another or just generally, and you get a few dozen or several dozen picks every year, let's say, if you're an Alliance member, and what the heck do you do with them? And these Portfolio products tell you the answer to that. How do I navigate all of these recommendations? And obviously, Alan and the committee have done a really great job. People say you can't invest by committee. Well, maybe you can.

Alan Gula:                  Right.

Dan Ferris:                 And aside from the inclusion of Comfort Systems, I just feel an affinity towards this one just because I think – did you use the – maybe you used the word "fully diversified," Alan. I've honed in on the term "truly diversified," but it all means the same thing. You're really diversified because if you just hold a bunch of tech companies or something, maybe you're not really diversified. So, what makes – in The Total Portfolio, I'm really curious to get to what makes you fully or truly diversified.

Alan Gula:                  Well, so broadly, we have – so, we have individual stocks, we have ETFs, we have our U.S. exposure, U.S. equity exposure, we have foreign equity exposure, we have some fixed income, we have bitcoin, and then we can get into some of the other things. It's – basically, it's modern asset allocation. It's modern diversification. And so, we basically, how we think of it is, like I said, we put these picks into two buckets. There's the Get Rich [bucket] and there's a Stay Rich [bucket]. In the Get Rich section, that contains the positions that are really going to benefit from that continued secular bull market. These are higher risk, higher reward. In there, we have our capital-efficient stocks, we have our compounders, small and midcaps. That's where – this is where we have our AI beneficiaries like Comfort Systems. Get Rich is where our international emerging market exposure is. And then again, we have bitcoin.

                                    And then we have our Stay Rich, and these are the more – this is the more defensive securities. These will help you preserve your wealth while still providing a solid rate of return, a solid real rate of return above inflation. And we have – we do have some fixed income through some bond ETFs, but we also have property and casualty (P&C) insurers, consumer-staple stocks. This is where we have our gold exposure. There's typically some cash. And Stay Rich is also where we have our managed futures ETFs, [which] we can get into a little bit. So, I think these are sort of the ultimate portfolio diversifiers. So, that's how we sort of think about it.

                                    Now, they're all together, but that's just how we categorize them. And then we also – we consider – it's not just a list of stocks or a list of positions that we find compelling... It's also how they're going to interact. What are their correlations? How are they going to perform under different scenarios? There's different circumstances. High inflation, low inflation, rising yields, falling yields. And yeah, so that's how we're able to really provide universal diversification.

Dan Ferris:                 Yeah, so you're prepared for whatever the market might throw at you, it sounds like.

Alan Gula:                  Yeah. And so, because of that balanced approach, our benchmark is not the S&P 500. It's the 60/40 benchmark. And specifically, it's the Vanguard Balanced Fund, which is essentially a 60/40 fund. Since The Total Portfolio, the inception in 2017, we've produced a 157% total return. That's about 12% annualized. And meanwhile, the Vanguard Balanced Fund, that has returned about 100%, so that's 8.6% annualized. So, we've outperformed the benchmark and we've had much lower risk than just a portfolio full of stocks.

Dan Ferris:                 When you say much lower risk, are you simply characterizing the risk that you see in the securities in some kind of way? Or are you measuring it by lower drawdowns or something like that?

Alan Gula:                  Well, to give you an example, again, the S&P 500 was down 19% in April. The Total Portfolio was down 9%, so less than half of the drawdown of the S&P 500. And right now, year to date, I think the S&P 500 is up 4%. We're up 8%. So, we're outperforming. And more importantly, we're outperforming the benchmark, too. But we're outperforming with much lower volatility [compared with] both the benchmark and the S&P 500.

Dan Ferris:                 It's dreamy, man. It's dreamy. It's like, "Give me some more of that."

Alan Gula:                  Well, it's – no, that's one of the problems with diversification. So, a lot of times you're going to have these periods where you just hold stuff that is so out of favor. I know international stocks now are starting to catch fire this year, but man, we haven't had – we recently increased our international exposure last year, but those have just been dead weight. So, that's really – so, you sort of have to live through the periods of underperformance in some of these individual categories.

Dan Ferris:                 Of course. I was fooling around with you. I know everybody likes to talk about a really great recent long-term performance or short-term performance, but it's the long term that counts. But your long term is really good, so there's that, too.

Alan Gula:                  Right.

Dan Ferris:                 So, managed futures. Let's talk about that a little bit. I have that in The Ferris Report. Why include that? What's so good about that?

Alan Gula:                  Yeah, so I think the general gist of say, like, asset-class-level diversification is you just – you want to put a bunch of assets in there that have low correlations. So, when something zigs, something else zags. And gold is a good portfolio diversifier on that measure. There's relatively low correlation with stocks and bonds. But the managed-futures strategy is even better. So, you had Andrew Beer of Dynamic Beta Investments on your podcast in 2021, and Andrew is really a pioneer in this area of providing – of giving access to alternatives to retail investors. And so, there are managed – there are hedge funds and commodity trading advisers ("CTAs") that employ trend-following strategies, basically systematic, model-driven, price-trend-following strategies. And what Andrew does is he statistically analyzes the performance of the Managed Futures Index, a hedge-fund index, and he infers how the funds are positioned in aggregate. And then he replicates those positions by being long or short futures contracts and puts that in an ETF wrapper. And it has a reasonable expense ratio and it's really a great way to replicate this hedge-fund strategy in your brokerage account. And so, we hold one of Andrew's ETFs in The Total Portfolio and another one from another ETF provider. But those are great.

                                    So, when you look at the long-term performance of the index, of the Managed Futures Index, its correlation with the S&P 500 is actually slightly negative. And that's sort of the holy grail. It's very rare to be able to find something that has negative correlations over a long period of time, because even what we've seen, and especially with bonds recently, even bonds can have a positive correlation with stocks, and that has caused some problems recently. But yeah, this managed-futures strategy is just – it has a low correlation with all the other stuff in the portfolio. It's the ultimate portfolio diversifier. And so, we have a relatively big allocation to these two funds. And that's something I think that, again, this is what makes The Total Portfolio special. How many financial advisers are going to have exposure to alternatives, like trend-following exposure to bitcoin, individual stocks, ETFs? So, that's – this is another thing that makes The Total Portfolio special.

Dan Ferris:                 That's a great point. Almost nobody is going to do this for you. Nobody's going to put that list of assets together that you just named. And it's for reasons that maybe we could agree are kind of silly. They have mandates and restrictions and limits and things and there are rules about what can go in this or that fund. And hedge funds have their charters and things. But in the end, none of that matters. None of those mandates and charters and restrictions matter. A lot of large institutions won't buy a stock under $10 a share. It's like, "What?" It doesn't mean anything. Or under a certain market cap. Warren Buffett doesn't buy stocks under a certain market cap because it doesn't move the needle, so that's legit. But otherwise, you basically have to come to somebody like Stansberry in order – who's independent of all of that to get you and the other guys on the committee putting together a truly diversified portfolio like this. I mean, it makes me wonder where are the other places? Off the top of my head, I don't know a money manager that does it.

Alan Gula:                  No, I think some people are coming around to it. Recently, it's more of a push into private credit and stuff like that. But yeah, the trend-following – and also, you've had Meb Faber on. He's a big trend-following proponent. I also saw, which kind of shocked me yesterday – so, Ric Edelman runs a – he founded a $300 billion registered investment-adviser firm and he just put out this white paper saying, "You should have anywhere from 10% to 40% of your portfolio in bitcoin," or in crypto.

Dan Ferris:                 Forty [percent]? Whoa!

Alan Gula:                  And 10% to – yeah, depending on your age and risk tolerance. I think financial advisers are coming around. That was kind of shocking. It was really provocative. But he's saying that basically the 60/40 is dead because people are going to live a lot longer going forward. The lower growth in the 60/40 is not going to get you there. You're going to run out of money before you die and you need to be looking at more high growth areas. Crypto is one of them. I don't know, I just – I think that – again, the kind of – that allocation is kind of shocking but it sort of validates what we've done. We've held bitcoin since 2020 in The Total Portfolio. We have a – it's a relatively small position, but yeah, it's – I think a lot more financial advisers are going to come around to it.

                                    [Crosstalk]  

Dan Ferris:                 Yeah, so just an example of what I'm talking about is the old Permanent Portfolio, which has morphed over the years. So, now it's like gold, silver, Swiss franc assets, real estate and natural resource stocks, aggressive growth stocks, dollar assets. And they've been doing this – I think Terry Coxon and then Harry Browne founded that thing in 1980-something. Early '80s. '82. 1982. So, they've been doing it a long time. No crypto. And, for what it's worth, I don't know, maybe I'm trying too hard to sell folks on The Total Portfolio but I'm just – I really am that enamored by it. And it really is my style of investing, personally.

Corey McLaughlin:    Yeah, and Alan, to these points, I mean, you mentioned before that the bond portion of the 60/40 portfolio you think is dead. So maybe explain a little bit about why you think that is the case because I think that's – maybe people are looking at what alternatives there may be to that. I think that's part of the reason a lot of people are thinking about bitcoin more and more, too, is it – rightly or wrongly. But just, why do you think the bond portion is – or bonds aren't what they used to be?

Alan Gula:                  Well, since 2022, bonds have disappointed. Treasurys have disappointed as a portfolio diversifier. Look at what was happening in gold the past few years. So, people are coming around to gold. You want to have – you don't just want to have bonds. You want to have a good – you want to have an allocation in gold as well that sort of offsets some of that risk of inflation and inflation shock. And then bonds, right now, I actually think with long-term interest rates at the high end of their 20-year range, with Treasury inflation-protected securities ("TIPS") providing real yields – so, 10-year TIPS – providing a real yield of 2%, and then MBS, "mortgage-backed securities," that's another area to look at, where MBS trades at a relatively wide yield premium to duration-equivalent Treasurys. So, it's just having a 40% allocation to the Barclays Aggregate Bond Index. I think that that's over. That's not to say that the 60/40 is dead. It's just that traditional asset allocation, 40% to the Barclays Ag, I think that that's an anachronism. But yeah, the 60/40 has died. People have just declared it dead for a long time. It still does fine. I still think we need bonds in our portfolio, but not just bonds. We should have some gold. We should have some trend-following. We should have some good, healthy allocation to property and casualty insurers, stuff like that. Consumer-staple stocks. And yeah, so it's just – that's how you – I think that's how you're going to outperform going forward.

Dan Ferris:                 What's the most aggressive – and again, I'm not asking you to give away the secret sauce or whatever is in The Total Portfolio, but besides bitcoin, what's the most aggressive thing in there?

Alan Gula:                  Well, we have some AI-related stocks. One of them we just added in the past few months. It's a semiconductor-equipment manufacturer. So, Taiwan [Semiconductor Manufacturing] is the largest, most important –  that's not the stock, but Taiwan Semi is the largest, most important semiconductor foundry in the world. And this company is Taiwan Semi's largest supplier, largest single supplier. And so, this company benefits from the AI boom. But it's also – just over the long term, it's a great business. It's not – the valuation is reasonable. So, that's – it's not as sexy as bitcoin or some of the high flyers, but yeah, I think that's a really great position in our Get Rich sleeve.

Dan Ferris:                 So, I saw a presentation recently at the [Intellectual Investor] Conference in Vail[, Colorado] that I go to every year. And there was a guy there who said he owns all the big semiconductor-equipment companies, like [Applied Materials, Lam Research], ASML, Tokyo Electron, [KLA], all of them, because basically, all those five companies, they own the whole industry. And that industry, he painted a favorable picture of the outlook for that industry, which of course ties in with the enormous capital spending and AI boom that we mentioned earlier, that you just mentioned again. So, I was a little – I was like, "Wow, he owns all of them. That's amazing." But it made a little bit of sense because they all kind of own pieces of the industry. So, it doesn't surprise me at all that you – that that was the answer to my question.

Alan Gula:                  Yeah, well, it's – yeah, they're all – most of those have great businesses. We did recommend ASML in our – in the flagship newsletter in 2022, I believe, or 2023. That has been a big winner. But yeah, it's – you don't have to – you can still have exposure to the AI boom and not be over your skis and not be taking on too much risk.

Dan Ferris:                 Right. And what I've mentioned here and there – maybe in Extreme Value or someplace – is that if you own a bunch of really good businesses, nowadays especially, they're going to be – you can't – everything is a tech company almost. That's not literally true but the point is pretty clear. You own a great business, it wants to stay a great business, they're going to use artificial intelligence some way to remain competitive, maintain their competitive advantage, become more efficient, etc. So, it's almost – I mean, you can go AI-specific, you can buy semiconductor equipment or semiconductors or something else. But I'm amazed that in Extreme Value we've been able to do that. We've been able to take advantage of this trend by not even hardly trying. It's so ubiquitous. It's so necessary for a lot of people in a lot of industries, provided you don't buy one of the companies that's going to be seriously disrupted. You can't escape it, I guess, is my point. It's hard to get away from it, for what it's worth.

Alan Gula:                  Yeah.

Corey McLaughlin:    And that is what has been pushing the overall stock market higher, to that point. That's just – every time somebody thinks AI is over, it's not. Or questioning it. It just – we just learn more and more new things every day. So, it's – yeah, it's definitely fascinating. To that point, where do you think, Alan, that we may be in this secular bull market in terms of – do you have a view on – do you care? Do you have a view on where endings-wise we may be in this secular bull market? I mean, they're typically – what are they, 15, 20 years or something like that on average or something like that? But – maybe longer. Where are we in this one? If we go back to your chart, we're coming out of 2010, the start of the current run we've been on.

Alan Gula:                  Yeah, maybe we're in the seventh inning. I think when you look at valuations – and that long-term trend chart is – it's a sort of proxy for valuation. And so, the S&P 500 overall is very expensive relative to its history. We actually have a free-cash-flow yield valuation indicator that I look at, and it's – the market is, I would say, very expensive. Not a bubble, but – maybe there's some disagreement there, but yeah, it's – I think longer-term returns, expected returns are lower. But yeah, it really matters what are we going to have in the next two or three years? You can't get too defensive or too bearish. You just have to sort of play the market that's in front of you. And that's – again, that speaks to the balanced approach that we have.

Dan Ferris:                 Yeah, you can't sell everything and head for the hills. It's just dumb. Everybody says, "Dan, you're so bearish. You're so bearish." I'm like – in the past four years or five years, I think I've made a hundred long picks or something. I mean, the amount of long picks I've made, it's just like, sometimes I'm making them three at a time in one of my newsletters. You can't mistake what's going on here. But anyway…

Corey McLaughlin:    But you're bearish. But you're bearish, Dan.

Dan Ferris:                 I'm so bearish. Yes.

Alan Gula:                  I think that gets back to my point, I think when I came on the podcast a few years ago – we should always be looking for opportunities. No matter how bearish we are, just always be looking for opportunities. And look –  I think we could probably have a debate as to where interest rates are going to go. So, a lot of people think interest rates are going to head much higher. We have debt problems. There's a huge deficit. I don't know if that's – if it's all that productive to try to forecast what's going to happen there. But look, we can set up win-win scenarios. So, we can look at where – we just recommended a real estate investment trust ("REIT"). And so, REITs are – it's an interest-rate-sensitive group because of borrowing costs and how interest rates impact property valuations. And so, it's no surprise that REITs are a hated industry group.

                                    And so, we just recommended a REIT that is down 25% since its all-time high. It's now trading at a significant discount to its five-year valuation based on price-to-funds from operations ("FFO"). It currently has a 5.5% yield. It's growing FFO at a 5% rate and it has an A-minus credit rating from S&P [Global]. So, if rates decline, if long-term rates decline, this thing is going to rip higher. And even if long-term interest rates do continue to rise, this stock is going to do fine because of the yield, because of the growth. It has a solid balance sheet, high investment-grade credit rating. And so, no matter what happens with interest rates, I think this is going to be a solid investment.

Dan Ferris:                 Right. And to Alan's point, everyone, we don't spend our days looking at charts of the S&P 500 trying to figure out where to short it. We spend our days looking at securities, doing securities selection, bottom up, one company, one industry at a time, trying to find attractive situations. So, yeah.

Corey McLaughlin:    Yeah, it's hard to short the S&P at all-time highs. That's not – probably not a great idea.

Dan Ferris:                 No. And you just don't want to – just generally, that whole thing. But, Alan, you mentioned forecasting. Have you read a book called The Humble Investor by Dan Rasmussen? He has been on the show a couple of times. It's a fairly new book. Yeah.

Alan Gula:                  No, I haven't read it. I know Dan. Yeah, I read his work and it's great.

Dan Ferris:                 So, he tells the story – and he told it on the show – of some guy in the military. Maybe it was during World War II or something. I forget when. But this meteorologist studied the Army's weather forecasting ability and he said, "These forecasts are always wrong." And he put out a report and it made it up to the general and the message came back from the general and it said, "We appreciate your report on the forecasts and we know they're wrong but the general needs them for planning purposes." So, that's the value of forecasting. It's like, "How bad do you want to delude yourself?" So we don't do that. We just – what you said reminded me of Howard Marks' viewpoint. It's like, where do we stand, basically? How do things look right now? How attractive is the environment right now? And regardless of the environment, we're still going to look at securities one at a time, day after day after day. It's practically a secret of life to do this. It's practically the ultimate investing secret. Forget about all this macro stuff and just find great businesses. I mean, it sounds so simple. Why doesn't everybody do it?

Alan Gula:                  Yeah.

Corey McLaughlin:    Yeah, and that REIT sounds like the perfect example. Whatever happens with interest rates, it's going to help it out. And I guess the key – maybe you could talk a little bit more about the layering on the stock selection, just the correlation part of the portfolio, like lower correlated assets and going back to the managed futures being negative. I guess you could find – it's fairly easier to find lower correlated assets to stocks than negative, correct?

Alan Gula:                  Right. Yeah, most – well, even REITs have a relatively high correlation to the broader market. But yeah, I think it's really a matter of finding when the risk/reward is favorable. A lot of times it's after a big period of underperformance. But yeah, we look at the sector exposures that we have. We look at the factor exposures we have. The factors would be value, momentum, and growth. And we just – it's hard to do the correlations with individual stocks, but we look at those sector and factor exposures a lot and just make sure that we're not out of whack anywhere, that we'll – that the portfolio will be resilient in a number of different environments.

Dan Ferris:                 Let me ask the question a different way. When you're building The Total Portfolio for Stansberry, do you say, "Well," – either in specific, precise, or rough terms or any term – do you say, "Well, we want to have about so much percent of the portfolio zero or negative correlated"? Do you do that?

Alan Gula:                  No.

Dan Ferris:                 You just wind up – how do you do it then? How do you say, "Well, we want to have this asset because it's negative correlated or zero – zero or negative"? Do you just sort of find them one at a time and then you say, "Hey, here's one"? I mean, how do [the positions] wind up in there, then? You just want to have them, I guess?

Alan Gula:                  Well, like I said before, we have the managed-futures ETFs in there. That's our largest single exposure if you add them up. And yeah, the rest is just – it's not always a quantitative endeavor. It's just, we're looking at the best – we're looking at what's out of favor. We're looking at the best risk-reward opportunities out there. And yeah, it's –

Dan Ferris:                 That warms my heart, by the way. I just want to – if you had said, "We've got to have X percent," I would have gone, "Oh, OK."

Alan Gula:                  No, it's no – there are no set buckets or brackets or levels. We have about 30 to 35 positions, typically. And that sounds like a lot, but when you consider – OK, we want – so we have two trend-following ETFs. We want healthy exposure to P&C insurance, property and casualty insurance. We don't want – so, we have, say, 6% to 10% typically in property and casualty insurers but we don't want that all in one [company], so we break that up. So, that might be two or three individual positions. We have a couple consumer-staple stocks. We also have a consumer-staple ETF. And then we have two – so for gold, you could have just a straight exposure to gold. We have two – right now, we have two gold royalty companies and that's how we've chosen to have our gold exposure. Basically, they give us a little more beta to the movement of gold. And also those stocks, when you look at gold stocks relative to the underlying precious metal price, the gold stocks have – they haven't really moved as much as you would expect during this massive gold bull market. So, we have two of those. And so, when you add up all these individual exposures and positions, we get to about 30 to 35.

Dan Ferris:                 So, folks, AI isn't replacing our committee anytime soon here for The Total Portfolio. It's a group of real humans who know what they're doing. For which there will be no substitute indefinitely, I am certain.

Alan Gula:                  Yeah, it's a science. Yeah, there's some science, but it's also an art. It's not just quantitative. And yeah, that's – you have to adapt to the environment. And yeah, it's tough.

Dan Ferris:                 Well, now that I've broached the topic, I'll ask both of you, actually, if you have a view on the singularity of the idea that AI is rapidly approaching or will approach at some point the ability to outthink humans or think like a human and think better than a human. Alan?

Alan Gula:                  I don't know if we're going to see AGI [artificial general intelligence] soon, but look, when the CEO of Amazon last week came out and said, "Look, AI is taking – we're going to cut our workforce. Eventually, people are going to be doing different things. But in the short term, AI is going to – is doing some things that a lot of people did, so we're going to reduce our workforce." And I just – I think that it's a really big deal. It's going to be interesting to see how young kids coming out of college, how they're able to enter the workforce, because I feel like a lot of companies are going to say, "Well, why would we hire these entry-level people, because you [could] just have AI do it?" But then you run into the problem where you have your junior-level employees and they eventually gain experience and they become senior level, and so, then you don't have that pipeline. That could be a problem.

                                    But yeah, I just think AI is – everyone needs to adapt. Everyone should try to be using it in their work, in their daily – augmenting their daily routines because it may not be AI that's going to take your job but someone using AI I think will take your job. And I think ultimately it could be a huge deflationary force, disinflationary force, where you just don't have that wage growth because we'll need less people. Companies will just hire less people. And then, in the next recession, I think it's going to be interesting to see. I don't know when this will occur, but in the next recession we're going to have layoffs. And then, are those companies going to hire people back? Or are they just going to say, "Well, we could do this with AI automated"? I don't know, it's a long – maybe a long – I didn't really answer your question. It's a long answer.

Dan Ferris:                 No, it was a good answer. It was a good answer. So, basically, it sounds like next week, Stansberry is going to say, "Dan Ferris is fired. Alan Gula gets a raise. The whole Total Portfolio Investment Committee gets a raise. And Dan's out of here." So, Corey, where do you stand on all this?

Corey McLaughlin:    And Corey, too. Yeah. And Corey, too. He's done, too.

Dan Ferris:                 You're gone. Just gone.

Corey McLaughlin:    I mean, I think that AI obviously and already is eliminating some jobs. It's also going to create a lot of new ones that don't exist yet, as far as interacting with the AI itself, I think. And just like the Internet – I mean, literally what we're doing right now wouldn't have existed 20, 30 years ago, very easily. Or at all. It couldn't have existed in the form we're doing now. So, that will happen with AI. For somebody who grew up writing words and started their career writing words for a living, that is concerning because in some ways I think AI can do the same thing. I don't think it can ever, and I hope it can't ever, create original thought. I mean – maybe that's the next thing coming with generative AI, but for now at least, I feel like it won't completely replace humans. And if it does, what are we doing at all on Earth? What will we end up doing? Hopefully we won't let it get to that point because the possibility is probably there at some point, but that's kind of where my head's at right now.

Alan Gula:                  Yeah, I think it's easy, it's really easy to envision this dystopian future where AI just – yeah, AI takes a lot of jobs. You even have – and you have an AI tax and then the funds like UBI (Universal Basic Income) or something like that where – and companies that use AI for 50% of their output, they're going to somehow tax companies this way. And there's going to be much, much more unemployment. I think it's really easy. I can see the optimistic viewpoints, but yeah, it's really easy to have a sort of pessimistic take on this.

Dan Ferris:                 Yeah, it is. It's probably too easy to go either way with it, but my thought is that I just don't feel like you can – you can't replace human beings. Maybe I'm too conceited, it's too much hubris about the value of human life or something like that, you could say. So, I can understand that viewpoint. But humans have been really – well, when I think of myself from day to day, maybe you could say that 99% of my thoughts are useless, but I can't see how there's a machine that could do this. You know what I'm saying? A machine is not this crazy. A machine does not entertain this much insanity. A machine would probably come up with all kinds of things that I might not come up with and try to act on them. You can see these scenarios where the machine takes over and says, "Oh, the answer to this is to declare nuclear war on so-and-so," or to wipe out the human race or something like that.

                                    But other than that kind of thing, I just – there's something about human beings that I just can't probably articulate very well. I think about the way we live. Would a robot have a dog? I mean, would a robot really appreciate having a dog? Can robots love? Can machines love and ever really feel emotions? They could be made to imitate them to some degree, I suppose, but would they ever feel them? I just – I have a hard time with this idea that they're going to overtake humans in some important way and somehow make us redundant. They're going to get people fired, I guess. That's – there's a redundancy there, isn't there? But overall, throughout history, technology has tended to make people more productive. Even if all the weavers get fired and the loom makes the workers who are left more highly productive, I have to keep believing that that's the way it's going to go. Even if these transitions aren't easy... but I have to believe that's the way it's going to go. Anyway, just for whatever that's worth to anybody. I couldn't help asking.

                                    But we've made it to – time for our final question. And it's the same question for every guest. As a previous guest, you've answered it before, Alan. And no matter what the topic, nonfinancial, any topic, identical question. If you've already said the answer, feel free to repeat it. There's no harm in that. And the question is simple. If you could leave our listeners with one thought, one takeaway today, this is your big chance, tell them what the takeaway is that you want them to have today.

Alan Gula:                  Well, I think I touched on it throughout. I think investors should go through their portfolios and make sure they're diversified. If you don't have any international stocks, if you don't have some gold, you don't have some bonds, if you're young and you don't have at least a little bit of crypto exposure, you don't have AI exposure, if you don't have managed futures in there, you're not fully taking advantage of diversification. I think diversification is going to be really important going forward. And that's – so, that's my advice.

Dan Ferris:                 Amen, brother. I couldn't agree more. This is the time for that message more so than any time in my career, in my life, probably. Thanks, Alan. It's always a pleasure to talk with you and I hope we can do it again soon.

Alan Gula:                  Yep, great to be here. Thanks guys.

Corey McLaughlin:    Thanks.

Dan Ferris:                 Always a pleasure to talk to our friend and colleague, Alan Gula. I like talking to Alan because there's a whole bunch of folks like him that we work with. We've had Bryan Beach on recently. Many others. Mike DiBiase. Too many to name. And I really, honestly, truly – this is not just self-serving – I'm not just kissing up to the boss, but it's a joy to work with people who are basically smarter than me and better than me at all the stuff we do. It's super valuable. I don't know what I am to them but they're super valuable to me. And I know they're valuable to our listeners, too. Always fun to talk to Alan.

Corey McLaughlin:    Yes, these are all of the people behind all the publications that we do. And yeah, no, to me, I started in journalism, straight-up journalism, and literally you didn't really have anybody on your team in that profession other than if you could develop it over time. But nobody on your side in the company, so to speak.

                                    So, then when I got into this industry, I was like, "Wait a second. I can do this. I can be writing things and learning things along the way, too, but with the help of all of these people that know what they're talking about and are like – they want to share their opinions and expertise and everything." And so, that's really what – and I think media has gone that way generally lately, too. But – anyway. In our world – I mean, to your point, yes, these are the people that are the experts. Including yourself, Dan. Don't sell yourself short. I know you're being like that but I'm not – you're one of the people I'm talking about, too.

Dan Ferris:                 Thanks.

Corey McLaughlin:    But the other point I wanted to make just off that interview was it takes a person to actually do what he's doing, what we do with The Total Portfolio and the Portfolio Management Solutions. It's not something you can easily do yourself. It takes a lot of time to do it the right way. I mean, you can do it the wrong way yourself very easily, but it takes a lot of time to do it right and come up with the allocations and how much to put into each bucket or sector like he was talking about. And it's not an exact science for this approach.

Dan Ferris:                 Thank goodness.

Corey McLaughlin:    And so, that's what I'm talking about there. A lot of people – I mean, I do this, too. I manage my own stuff and I'm able to carve out time to do it but a lot of people aren't. And so, if you're looking for a solution for all of the recommendations and whatnot that we have, this is it, what he's talking about. So, you should check it out.

Dan Ferris:                 Yes. And it's a special pleasure for me to talk about it because, like I said during the interview, this is kind of my personal style. This is how I want to manage my own money and it's what I think everybody should do. And I'm glad Alan made the point at the end: This is a particularly great time to make sure you are what I would call truly diversified, what he called fully diversified. And it just means having some assets that go up when other stuff goes down or stay the same when other stuff goes down. And buy other stuff, of course. I mean, all those stocks everybody owns, which are mostly S&P 500. And most of that is in the top 10 – or, a huge chunk of it is in the top 10, not most of it. But that to me is – boring as it may seem to talk about diversification and different assets and bonds and stocks and all this stuff, just to have in your portfolio, maybe one day we'll find a way to make it sexy, but it's super important. Let's just – since we can't find a way to make it sexy, we'll have to say just explicitly this is very, very, very important for investors, especially at the current moment.

Corey McLaughlin:    Yeah, why do you say that? You think it's more than you've ever seen at this moment?

Dan Ferris:                 Yeah. Yeah. And Alan touched on some reasons for that, too. He said we could see a melt up. We could see a sideways market, which he – I agree with him, that would be a really brutal thing for a lot of people. At the end of the sideways market from like '66 to '82, nobody was going, "Buy the dip, man. Buy the dip." They were saying, "Please, God, let the market go up one more time so I can sell everything." So, that would be really rough for folks. And a crash – and a huge melt up, which could create he suggested another dot-com-like deviation above trend, or super high valuations, pretty much the same thing, you'd get a big crash, of course, after it and nobody wants to go through that.

                                    So, yeah, diversification is really important. And it has been really important for some years now, at least since 2020 when the 10-year Treasury was bottomed out at 0.4% or maybe just below 0.4% yield annually for a 10-year Treasury. And of course, then in the wake of that, people were – banks were actually buying those, and in the wake of that, we finally wound up with, what, three of the four largest bank failures in U.S. history? So, it's consequential when these things occur and you need to be fully or truly or however diversified you can be to get through them. It's like Alan talked about with security selection: Nobody would have looked at 0.5% Treasury yields and said, "Yeah, man, give me more of that." Your security selection process would have said, "No, thanks." So, that's – I don't know if I answered your question, but –

Corey McLaughlin:    Yeah, no, you did for sure.

Dan Ferris:                 OK.

Corey McLaughlin:    We saw it in 2022 when – the other end of it, when rates went higher and the 60/40 portfolio actually – what was it, what we talked about at the time, the worst in, I don't know, 100-something-plus years or more than that. And bonds was, like, since the pen and quill days. So, that was – that's the other reason why.

Dan Ferris:                 And if you want to look at this, people, get a chart of ticker symbol TLT [iShares 20+ Year Treasury Bond Fund], the long-term Treasury ETF, and get a five-year chart. It's down by, I don't know, 47%, 48%, 49%. So, cut in half, basically. It was cut in half. For Treasurys. The safe thing. So, not much –

Corey McLaughlin:    You can find a lot of things that get cut in half.

Dan Ferris:                 Not much of a diversifier, huh? And during that time, other things like bitcoin and gold and stuff did great. So you were well served to have those things in your portfolio during that period of time. And I think it's – I think Alan's right: For the next several years, you're going to be well served by it again. So, yeah. Huge message, hugely important. Glad Alan came on and really sort of put some foundation under that idea for us.

                                    So, that's another interview and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as we really, truly did. We do provide a transcript for every episode. Just go to www.investorhour.com, click on the episode you want, scroll all the way down, click on the word "Transcript," and enjoy. If you liked this episode and know anybody else who might like it, tell them to check it out on their podcast app or at investorhour.com, please. And also do me a favor, subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts. And while you're there, help us grow with a rate and a review. Follow us on Facebook and Instagram. Our handle is @InvestorHour. On Twitter, our handle is @Investor_Hour. Have a guest you want us to interview? Drop us a note at feedback@investorhour.com or call our listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. For my co-host, Corey McLaughlin, until next week, I'm Dan Ferris. Thanks for listening.

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