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A bite sized discussion on timely financial news and investment topics, to help you maximize your net worth and wealth for the next generation with Justin Dyer and Mena Hanna of AWM Capital.
Justin Dyer: the U.S.
debt has just hit a substantial
milestone of 100% of GDP
the last time we were even close to
this amount of debt in the United
States was around the Second World War
Mena Hanna: This is kind of a
flashing and shocking number
we had a 13% rally in the S&P 500,
where pretty much the entire gain
has actually been generated by
twenty of the five hundred names
Justin Dyer: when you're
overly concentrated
you are putting your hundred-year
family, your priorities at risk
Mena Hanna: not even a hundred-year
family, think twenty-six and a half
year family If you look at the number
of companies that were in the top ten by
market cap in the year 2000, there's only
one of them that's actually there today
blind diversification is actually
what hurts a lot of people
Justin Dyer: What's going on, everybody?
Welcome back to AWM Insights.
It's your host, Justin Dyer, chief
investment officer here at AWM,
joined as always by Mina Hanna,
our portfolio manager here at AWM.
And we're gonna turn the
conversation a little bit back to
just some more, uh, current events.
There's, there's been some
continued exciting, uh, news.
Mena Hanna: 2026
Justin Dyer: has been a
very, very interesting one.
Um, and talk about maybe not, not
necessarily the most pos-positive
news on the one hand, the US debt
has just hit a pretty substantial
milestone of 100% of GDP.
We'll go into exactly what that means,
how we're thinking about that, how
the 100-year family, the 100-year
investor should digest all that.
And then the, the current market rally,
you know, it wasn't too long ago, too
many of these episodes ago, that we were
talking about extreme volatility, largely
due to, uh, the closure of the Strait of
Hormuz, a conflict in the Middle East.
And fast-forward to today, here
we are, markets at all-time highs.
Um, certain parts of the market
have just been on a tear.
So gonna cover all of those topics
today and really, again, help people
digest how should the 100-year family be
thinking about current events, headlines.
Um, some are a little bit more
attention-grabbing, others are fairly
substantial, which, uh, we'll, we'll jump
into around the debt piece of it, right?
That is no small, uh, feat, uh, if, if
you wanna call it that, where the last
time we were even close to this amount
of debt in the United States was around
the Second World War, effectively.
Um, so, uh, here we are, just hit
this, um, you know, in- significant
but not for any s-specific reason
other than that it's a, uh, you know,
a nice round number of 100% of GDP.
And, and Mina, before I turn
it over to you, I'll just
do a quick kinda definition.
Uh, so GDP is effectively like simple
rubric or way to think about that
is the income o-of the United States
or what the United States produces.
Uh, equivalent could be
one's household income.
And then the debt is, is
pretty straightforward.
I think we all know what that is.
But we have now reached a
number where it is 100% of GDP.
So effectively, it's as though a
household was borrowing 100% of
what their take-home, uh, um- uh,
earnings were each and every year.
Now, you might, uh, you might observe and
say: Well, actually, a lot of people have
more debt than they're actually earning
in each and every year through a mortgage
or something like that, and that's true.
But, um, governments and countries are
different than, than households, and this
level of, of debt is generally viewed
to be, um, a pretty unhealthy level.
You know, where we go from
here is, is any-anyone's guess.
I mean, we'll, we'll comment a
little bit about what may or may
not happen, but yeah, I mean,
I'll, I'll turn it over to you.
Give us the, the, the, the level deeper.
What, what-- Where are we?
What, what does it mean?
And then most importantly, we'll,
we'll turn to a conversation around
how we think about it and, and
investing for the hundred-year
Mena Hanna: for The 100 Year Family.
Yeah.
The 100% level is a little bit arbitrary.
I think it's one of those levels that
just sticks out because it's a nice,
clean, even number, but it is arbitrary.
You brought up the example of
household debt versus income.
Most people, uh, most normal people
have way more debt than they do income
if they have a mortgage, if they, you
know, have a car that they're paying off.
There are, there are reasons, good reasons
to take on debt and pay it off over time.
Now, where this sort of deviates is our
GDP is not going to move probably like the
salary of a 25 to 30-year-old individual.
So that's where vigilance comes in.
Another point that people have,
have sort of quoted is 120%.
That's where a lot of economists kind
of draw the line and say, "All right.
This is an unhealthy level versus,
uh, something that we can sustain."
Probably the more reasonable way
of looking at it is we have this
national debt on a yearly basis.
What's the actual interest expense,
and how sustainable is that relative
to our just budget in general?
Think we're, we're getting up there.
This is kind of a flashing and shocking
number because we haven't been at this
relative level since the Second World
War, which is a long, long time ago.
But there are oth-other governments.
Japan's a great example.
Japan's roughly at 250% right now.
Um,
and-
Justin Dyer: And has been at,
at high levels for quite a
Mena Hanna: For a long time, yeah.
They have an aging population.
They're in a, they're
in a different realm.
But this isn't sort of a, a death sentence
for an economy, at least I would say.
Yeah.
Justin Dyer: Now,
Mena Hanna: on
Justin Dyer: on the flip side, it's
also not a rosy picture, right?
I, I-- and I think that's why you're
starting to-- And you-- We've been
hearing, I shouldn't say starting.
We've been hearing
Mena Hanna: rumblings
Justin Dyer: around the debt situation
here in the U-US, whether it be
economists, um, politicians during
the election cycle, and then of
course, politicians don't talk about
it when they're actually in office.
Oh, yeah.
Yeah, right.
They like to spend that money.
So, um, yeah, it, it's not-- it,
it doesn't set us up as a country
and, and the knock-on effect there
is potentially The markets over the
long term for great returns, right?
Now, is that going to be the dominant
force in markets over the, the next,
you know, call it, uh, long-term
period of time, 10, 20, 50 years?
Or, or is it valuation or
is it something else, right?
And that's like, that's the
difficulty and, and really
interesting part of the markets.
There's so many variables that go into
calculating returns or expected returns
going forward that you can't-- You can
have opinion on one- each one in its
own right, but acting on that opinion,
we know is just not a recipe for, for,
uh, for professional investing, right?
And a professional investing to support
that 100-year family, your priorities,
what's most important to you in life.
It could be that the debt, you
know, five years from now, the debt
keeps creeping up and it, and it
does hit some unsustainable point.
But again, to the, to, to your
point, there's no magic number.
It's kind of gonna be this
slow burn, if you will.
Or alternatively, right now, you
know, we do have higher valuations
here in the United States.
I say all that not to scare people
and say, "Hey, y- you know, US
is not a great place to invest."
It obviously still is.
I mean, as I alluded to it
in the, in the intro, right?
Like markets are doing fairly well.
They did well, very well last year.
It's a good year this year.
I say all this, uh, with respect to
US specifically to give us comfort and
to really underscore diversification.
Uh, tried and true diversification.
You th-- you talk about, uh, everything
that's going on in the world right
now, and one of the best, most
comforting approaches to investing,
in my opinion, is, is diversification.
'Cause the path from here is so uncertain.
Picking who is going to win,
the country that's going to win,
there's, you know, you name it.
Diversification i- becomes a, a
very, very, very compelling out-
answer in, in, in our opinion, my
opinion, the most compelling answer.
Um, alternatively or in addition,
l- let's talk a little bit
about portfolio construction.
So how, how do we think about that?
How we think about the fixed income side?
'Cause really, when we're talking about
the US debt, the biggest impact it will
likely have, immediate impact, is on
US bonds, US Treasuries, the, you know,
tried and true, backed by the full
faith and credit of the US government
investment, um, instrument that we use.
Mena Hanna: Yeah.
And I'm so glad you brought up
diversification because in fixed
income, diversification is great and
everything, but blind diversification
is actually what hurts a lot of people,
and we've seen that in the past.
If you think about the...
And we were just talking about this,
but the schedule of when a lot of
these bonds are actually due, if we
actually hit a debt crisis, it's not
going to be short-term fixed income,
which is the part of, call it the, the
bond market that we like to invest in.
It's not going to be the US'
short-term obligations that
we're not gonna be able to meet.
It's going to be those 10, 20, 30-year
bonds, and we've talked about this for...
We've talked about this a
couple of times on this podcast.
We don't invest in long-term treasuries.
This is actually one of
the reasons for that.
The other reason I think is more
tied to the 100-year family.
30-year capital is better invested
into equity markets, in risk-on markets
that could weather storms like this.
So when you think about kind of where
we're actually investing this capital,
we're investing in a part of the market
that is a little bit protected from
potentially the storm that is to come.
We're not going to...
The US government is going to probably
restructure 20-year, 30-year debt.
They're not going to restructure
the one to two-year debt that
primarily we're purchasing.
So playing that game, I think helps
us be a lot more comfortable and,
and also just kind of taking two
steps back and, and one step forward.
If we do get into a situation
where debt becomes unsustainable,
typically what happens is inflation
will increase substantially.
Now, you're not going to feel
those effects as significantly.
Rates are also gonna rise.
You're not going to feel those effects as
significantly if you're invested on the
short part of the interest rate curve,
and we're actually kind of already seeing
that based on how people are pricing these
bonds and how some of these, uh, auctions
are going, where shorter term debt and
shorter term vehicles are being priced
in a much more favorable way because the
market just has more certainty that the
US is going to pay that off versus s-
the 20 to 30-year section of this curve
is significantly elevated because there
is a risk premium associated with it.
So that's not necessarily
capital or diversification that
we involve ourselves in at all.
20 to 30-year debt that is gonna make
you four and a half percent is not where
we wanna, where we wanna make money.
We wanna make for those
extended periods of time, money
in public and private equity
Justin Dyer: markets.
Yeah, that's right.
That's, that's super helpful.
And there was some, uh, inside
baseball, pun intended, kinda
terms thrown in there, right?
Curve, yield curve, things like that.
All we're talking about is it's a,
it's a plot or a chart of the points of
maturity of various US government bonds.
Short-term, meaning those are bonds
that are coming to maturity or g-
getting paid back in the short term,
call it, you know, 12 months from today.
Then there-- you can go out five years,
10 years, 30 years, like you talked about.
Those 30 year or 10-plus year bonds
move around quite a bit and are a
little bit more sensitive to what
we're talking about here today.
Mena Hanna: about here today.
Um- I'll throw a graphic up right here.
And the average portfolio right now
that I've seen is invested roughly
at seven and a half to 10 years.
So there is some, call it timing risk by
being that far out on the curve, I would
Justin Dyer: I would say
Yeah.
Right.
Awesome.
All right.
Let's, um, move away from fixed income
or the bond side of, uh, portfolio,
which is super interesting, but probably
only for us finance nerds, and talk
a little bit about equity markets.
So like I, like I said again in the
intro, um, yeah, it's been a wild
month, wild four or five weeks.
Uh, April was a phenomenal
month, best month since 2020,
I think was the statistic.
Um, that rally has continued
here into the first week of May.
We're on the back of earnings season.
Just give us an overview of
Mena Hanna: happening.
Yeah.
And it's been such an interesting year.
You sort of said this.
We had the year start off strong.
The war in, in Iran happened, where
equity markets tanked, and especially
some of these big names really tanked,
Microsoft being the most notable.
And ever since then, we had a 13 rally
in the S&P 500 where pretty much the
entire gain has actually been generated
by twenty of the five hundred names.
And the rally in general, we're
currently close to all-time highs.
It's been the narrowest rally
that we've seen in recent memory.
What that means is the number of
companies that are at all-time highs
is not as many as we usually have.
So it shows that we are in...
We've talked about the
K-shaped economy before.
We have a few winners in the portfolio,
and this is why diversification matters.
A few winners in the index, I should
say, and a lot of companies that
are kind of flat to down, but those
winners are doing so well, and they're
typically on the larger side that
they're propelling the entire index up.
Justin Dyer: they're
propelling the entire index up.
Yeah.
And I, I like that you talked about
or brought up this idea of K-shaped
and kind of limited number of winners.
And I would say a, a natural
question potentially is like, "Oh,
I wish I was in all the winners."
Yeah, of course you do,
hindsight being twenty/twenty.
Mena Hanna: But
Justin Dyer: for the hundred-year family,
you actually shouldn't have that mindset
because when you're overly concentrated,
yeah, you can get lucky and catch the
right stocks, right names, right companies
on the way up and you look brilliant,
but guess what happens on the way down?
And there will be a way
down at some point in time.
It just is the natural progression
and natural cycles of, of markets.
Who knows when that actually happens?
But the problem for the hundred-year
family, when that, when you're
exposing yourself to basically
just increased volatility, v- and
volatility is both ways, up and down,
you are putting your hundred-year
family, your priorities at risk.
You have less certainty in protecting
what is most important to you,
the, the flourishing family, right?
That is what we
Mena Hanna: talk
Justin Dyer: about and preach time
and time again, and we want to build
portfolios that give us the highest
level of confidence to support
those and optimize returns to do
that and outperform where we can
Mena Hanna: but we're
Justin Dyer: we're never gonna
over-concentrate and s-- and, and
chase, for that matter, uh, a very
small isolated part of the market
'cause it's just not a sustainable
way to support that hundred-year
Mena Hanna: Totally.
And this is a shameless statistic
that I like to plug all the time.
Not even a hundred-year family, think
twenty-six and a half year family.
If you look at the number of companies
that were in the top ten by market
cap in the year 2000 there's only one
of them that's actually there today,
and that's Microsoft, who hasn't
had the greatest time this year.
Every other company, if you would've
concentrated in all of these
companies, I'm just gonna list
a few, General Electric, Nokia.
If you concentrated in Nokia,
I can promise you you're
not doing all that well.
Uh, Deutsche Telekom, these are not
companies that have maintained their
s- yeah, maintained their status as
the bi- the best and biggest companies.
So when you sort of take a step
back and, and think about what
the strategy should actually do,
this is only a twenty-six-year
period of time, Toyota's on here.
You have to diversify away
from just those large names.
Now, do you still wanna hold them?
Definitely, at the right weight, but you
can't over-concentrate in them because
markets change, economies change, new
companies emerge, and you want exposure
to those new companies as they grow.
You don't wanna just be invested
in the S&P five hundred.
You want the Russell three thousand,
which is not five hundred companies,
it's three thousand, and you want
exposure to the private markets as well.
That's how you truly build exposure to
as many businesses that have a chance
of succeeding as you possibly can.
Justin Dyer: can.
Right.
And we do that to support
the hundred-year family.
That's an awesome place to end.
Um, as a reminder, definitely
shoot us your questions, topics,
Mena Hanna: random thoughts.
Six two six eight six two zero three
Justin Dyer: three five five.
Uh, we love having more and more, um,
you know, material for us to talk about,
and, uh, we, we enjoy getting those
questions, so keep, keep them coming.
Uh, but until then, own your wealth,
make an impact, and always be a pro.
Appreciate you all listening.