The Portfolio Reset: Episode 3

Bitcoin

Across the shows: 13 speakers in other episodes, 9 bullish and 3 bearish calls, past 30 days

• Charlie Morris · ByteTreeNeutral

  A small Bitcoin sleeve paired with gold cuts collapse risk while keeping much of Bitcoin's upside.

  Morris argues that combining Bitcoin and gold in the right proportions, rebalanced by volatility, produces a 'magic' effect. Bitcoin's swings are offset by gold, which is more defensive, so holding both lowers the odds of a collapse in either while keeping a good share of the upside of holding one alone. He proposes replacing the gold portion of a portfolio with a roughly 80% gold / 20% Bitcoin mix, and says this is not a case for an all-gold-and-Bitcoin portfolio. The case is about portfolio role and diversification, not a directional price call.

  “There was magic between the assets because you put these two assets together”at 10:19

US stock market outlook

• Barry Ritholtz · Ritholtz Wealth Management

  Equities should deliver about 7-8% after inflation, versus 1-2% for bonds, so young investors may skip bonds.

  Ritholtz compares the expected returns of the two asset classes. Bonds generate about 1-2% after inflation, while equities are expected to generate about 7-8% after inflation. On that basis he argues that people with decades ahead of them do not need bonds until their 50s or 60s, or until they have specific income needs. Bonds become useful only when the money is needed soon or the investor wants to avoid equity-level risk. The argument rests on the spread between the expected real returns of stocks and bonds.

  “Why do I need something that's going to generate 1% or 2% after inflation when I could have an asset class that's going to generate 7% or 8% after inflation.”at 7:34

• Simon Evan-Cook · Downing Fund Managers

  Good active managers are moving into cheap small and mid-cap stocks away from the concentrated mega-caps.

  Evan-Cook argues that index concentration in the biggest companies has created opportunities away from them. Investors in smaller and mid-cap businesses have spent years watching large companies rise while theirs lagged, and those smaller businesses are now significantly cheaper than the big ones. The best active managers, willing to back their own views, are moving into these areas, where he sees strong companies at cheap valuations. He ties this to fund-manager discipline: buying quality companies at prices that make sense relative to their value.

  “They are moving towards these smaller and mid cap areas where you've got amazing companies at cheap valuations.”at 24:12