Investment Opportunities Right Now (w/ Dan Rasmussen & Greg Obenshain)
DAN RASMUSSEN: That's great. Well, let's return, I think, back to the beginning of this conversation, Greg. You've been watching the markets very closely. What's your advice to investors right now at this moment? How do you think they should be positioning their portfolios? How should people be reacting to this market? Is it time to panic? Is it time to sell? Is it time to buy? And then if you are selling or buying, what should you buy? What should you sell? How do you see the lay of the land? What are you thinking about right now? GREG OBENSHAIN: Obviously, I'm watching the high end markets very closely right now. And I think there's enough opportunities now coming up in companies about what you don't need to be that concerned. Even if you cut off cash flows for three months or you think that we're going to fundamentally change how we live based on what's going on right now, there's still plenty of companies out there-- DAN RASMUSSEN: Two of the companies you mentioned, which were Netflix and Match, I can stay safe watching Netflix and doing online dating, even more now that people are working from home. GREG OBENSHAIN: So, I think those are the opportunities where you're seeing decent yields. And I don't think that's a hard investment to make when it wasn't available to you six months ago. There was no place you could go get a really good 5% or 6% return. If I were a pension fund right now and I were thinking about this and said, I have a problem. I know I have these liabilities. I know what I've assumed on my returns. It's still high. I can go lock a lot of this stuff in. I think part of it is just don't wait too long. You're not going to have this particular opportunity. By the way, it might get a lot cheaper. In 2008, it did get cheaper, and would have gone down about another 15% from here. So, there was still downside from where it had fallen to on the high yield market. That's the broad high yield market that went down that much. So, in all of the other crises, though, you would have been fine. And even in 2008, by the end of the year, you would have been flat. So, I think this is an easier place to start. And for investors in this market, I think it's a very difficult market. This is not me predicting this market at all. We have no idea what's going to happen. There's certainly going to be a lot of bad news coming out. I'm not saying it's fully priced. I'm not saying I have any crystal ball. But I do know that, with debt especially, it's a much more tractable problem. Can they pay that off? DAN RASMUSSEN: I think the problem many investors are facing today is this psychological barrier, right? You've got these two contrarian things going on, right? On one hand, you're saying, gee, everything- - the sky is falling, markets are panicking. You're looking at every decision that you've made over the past few years, and virtually all of them, for most people, are looking like bad decisions relative to buying, say, cash or long duration treasuries, right? That works in your portfolio. Whatever perceptions that was, looking great-- everything else probably looks like a mistake right now. You're probably at the low point in your confidence in your own investment decisions as a result of that, and yet at the same time-- at the same time, you know that at any time-- you've ever read that book by Warren Buffett-- Warren Buffett's letters or the biography of Warren Buffett, it always says, buy when there is a crisis. Once in a decade opportunities, be greedy when others are fearful. And you're looking around and saying, everyone's fearful now, I know I should buy, but I just can't do it. I can't pull the trigger. And I think what I like about your argument, Greg, is that pulling the trigger on high quality, high yield bonds just feels a lot easier right now than waiting for the equity market and the amount of uncertainty that we're feeling. And I think that that's, I think, a really good way to start saying, hey, it's time to ease my way into the market. Let's start by doing something that I really couldn't do for a long time, which is build an income portfolio, right? I think that was virtually impossible for the past few years to build a reasonably attractive income portfolio. That's no longer true, right? And I think now is the time where you don't have to go into private credit and do dodgy lending to private equity funds to get a 6% or a 7% or an 8% yield. You can do it in Netflix or Match Group or other pretty high quality corporates. So, I think it's a great thing for folks to be thinking about as they consider what to do with their investments and how to react to this volatile market.