AWM Insights Financial and Investment News

The regular season is over for most of Major League Baseball, and this off-season comes with a question nobody can answer yet: when does the next paycheck arrive? 

With the collective bargaining agreement expiring December 1, Justin Dyer and Mena Hanna explain why uncertainty makes an off-season financial plan more important, not less. They walk through the six-month spending window AWM builds for clients in short-term Treasuries, why you should plan your financial off-season the way you plan your training, and why a compressed career turns every season into a "lion year" that magnifies good and bad decisions alike. Then they turn to Warren Buffett, whose discipline, modest lifestyle and patience show what decades of compounding can do, and why athletes who start in their 20s and 30s hold a real head start.

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Chapters
00:00 Preview: Lockout uncertainty, a compressed career and living in lion years.
00:48 Intro: The end of the MLB season and why the off-season needs a financial plan.
01:54 The CBA And The Last Paycheck: Moving from contributions to distributions as the CBA expires.
03:43 Plan It Like You Train: First principles, and why the financial off-season mirrors the physical one.
05:03 The Six-Month Spending Window: Short-term Treasuries set aside for off-season spending.
07:04 Control What You Can Control: The costs of veering from the plan.
08:16 A Compressed Earning Window: Why a short career magnifies good and bad decisions, and why every season is a lion year.
10:19 The Buffett Lesson: Discipline, living within your means and letting money compound.
12:28 Your Time Advantage: Why athletes in their 20s and 30s are in a fortunate position.
15:01 Wrap-Up: Plans for the off-season and for left-tail events.

Creators and Guests

Host
Justin Dyer
Chief Investment Officer and Chief Operating Officer at AWM Capital
Host
Mena Hanna
Senior Investment Analyst at AWM Capital

What is AWM Insights Financial and Investment News?

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.

Mena Hanna: We don't know when the next
cash flow is actually going to start.

You know, we're all hoping that
there isn't a prolonged lockout.

It's likely on December the first that
there is going to be no resolution

in place, so we're gonna get a
lockout in some way, shape, or form.

Justin Dyer: You are earning hopefully
a very substantial amount of money in a

compressed period of time, sometimes it's
the amount of money someone earns over

an entire career, 40, 50 year career.

Sometimes it's way more than that,
but it's really, really compressed.

And what that does is, magnifies
your decisions, magnifies your good

decisions, magnifies your bad decisions.

Mena Hanna: It's like instead of a
person, you are living in fast-forward.

Lions live ten to fifteen years, so you
can think about every single one of your,

call it, career years as a lion year.

Justin Dyer: Hey, everyone.

Welcome back to another
episode of AWM Insights.

It's your host, Justin Dyer, chief
investment officer here at AWM Capital,

joined as always by Mina Hanna,
portfolio manager here at AWM Capital.

And today we're gonna talk about the
end of the Major League Baseball season.

Um, not for everyone, right?

Those, those lucky teams that are--
they're still going hard in the playoffs.

But, um, we've turned a corner, starting
to think abo-about the off-season.

Obviously, a lot of folks, a lot of guys
have plans around their physical, mental

health, and we're gonna challenge you all
to make sure you have a, a plan in place.

Uh, and certainly we do, but just remind
you all there's a plan in place for,

for the off-season from a, a financial
health side of things as well, and

just talk through why that matters,
uh, how to think about that, and

really set yourself up, up for success.

Um, it will be potentially an interesting
off-season with the c-CBA expiring here

in, in the, uh, not too distant future.

Um, and so that's the,
the plan of attack today.

Let's jump right into it.

Mina, um, right, like I, like I just said,
there's-- it's an interesting off-season.

There's the, the collective
bargaining agreement expiring.

But just because of that, you
know, I guess the, the kind of

simple low-hanging fruit question
is: Should that change anything?

Should that change-- Should
that mean you don't need a plan?

You do need a plan?

Like, is that at all
different from any off-season?

Mena Hanna: Uh, I think it just puts
a little bit more emphasis on the

plan in place and just making sure
that you are following the plan.

Obviously, at, at the time of recording,
our clients are going to get their last

paycheck this Friday, so that is going
to be the last of the contributions

to your portfolio unless you have
potentially other signing bonuses,

playoff shares, all of that stuff.

And it's a transition to the distribution
side where, you know, all of our clients

do have a plan in place on how much is
allocated to be spent in the off-season.

The difference and why I would say
there's a little bit more of an emphasis

on the importance of this off-season
is we don't know when the next cash

flow is actually going to start.

You know, we're all hoping that
there isn't a prolonged lockout.

It's likely on December the first that
there is going to be no resolution in

place, so we're gonna get a lockout
in, in some, some way, shape, or form.

But outside of that, uh, we just
don't know when both sides are going

to agree and when our clients are
going to get potentially paid again.

Whether or not you have a contract in
place, you have guaranteed money, or

you're potentially hitting free agency
or looking to sign with another team.

Justin Dyer: Maybe even ta-taking a step
back, excuse me, uh, a little bit here.

Uh, let's just talk about
why, why you do have a plan.

Um, hopefully that question's a
really, really, really basic one, but

hey, let's not make any assumptions.

And, and, and, you know, as I always like
to say, certainly here internally, and

I think I've mentioned on the podcast,
let's, let's go to first principles

with whatever topic we're talking about.

Make sure everyone's on board with, with
what those kind of commonly agreed upon

facts, beliefs, et cetera, might be.

Um, like I said, there's, there's
definitely an off-season plan

around the physical side of things.

Hopefully, there's also something
around the mental side of things, right?

Uh, th- and this conversation
extends to any sport.

Right now we're talking about baseball,
but hey, baseball just wrapped up a

grueling, very long season as we all know.

You need to recover mentally, you need to
recover physically, but then you need to

start getting yourself in, in the right
shape, assuming there is a season, right?

You're not gonna make that assumption
that, oh, you know, it's not

gonna happen, so I'm just gonna go
let myself get fat on the couch.

You're, you're, you're definitely gonna
go and do it with a plan in place.

And the same logic applies to
the investing side, does it not?

I mean, walk us through that a little bit.

Mena Hanna: Yeah.

You have to, you have to have a plan
in place to, you know, meet all of the

obligations that we constantly talk about.

The plan in place that we use for
our clients is a six-month spending

window where we allocate capital.

It's invested in really short-term
treasuries, and it's very accessible

to meet your spending needs over this
off-season when a lot of our clients are

not making money, unless you obviously
have significant endorsement income.

So the need for a plan is there just
based on if you're a professional

athlete, you play in the MLB, you know
when you're gonna get paid, and you

know when you're not gonna get paid.

So you have to plan accordingly for
that window of time where you don't have

inflows and you don't have paychecks.

I would say that's,
that's a critical piece.

The fact that there is no backdrop and
no end in sight for this, call it end of

the plan, makes it a little bit more…

Yeah, makes it a little bit more
important to follow that plan.

We put the plan in place for a reason.

We set amounts, and that's why we
communicate back and forth with our

clients just on all of the little things,
spending, what you actually wanna use

your money for, and making sure that
all of that is in alignment, especially

at the start of this off-season,
because we don't know when we might

get bailed out of this situation.

And if you get into a situation or a
position where there is overspending,

there's potentially new things
that you wanna do with your money,

that, that could mix things up.

We take the conservative side here
and, you know, there's no market

risk for that pool of capital
that's set aside for the off-season.

If, yeah, if, if you're looking
into the markets as well, you would

know that, you know, some treasuries
have also done very poorly recently.

We make sure that we invest in
shorter-term treasuries that don't

move with interest rates at all.

Very good point.

Yeah.

Yeah, so that you have that money
irregardless, but it's about

following, following the plan
and not blowing out of the plan

because that leads to, leads to some

Justin Dyer: Yeah, and, and I mean, said
in a different way, and this is really

repeating a conversation we just had.

W- what all of our listeners ne- really
need to remind themselves is, "Hey, I

need to control what I can control."

You can't control markets.

We can certainly build a portfolio
that supports your plan in a very

robust way, but as soon as you start
to veer from that plan, there are

potential costs or consequences to that.

No different than, "Hey, I'm gonna
commit to eating in a certain way in

the off-season to maintain a weight
or to get to a weight, and I'm gonna,

I'm gonna combine that with, uh, um,
with an exercise plan or physical plan

or what- whatever the case may be."

If you veer from that, there are
costs, there are consequences.

The financial side of
things is no different.

You can control what you can
control, and that's the mindset

you need really all the time.

I th- I think we say that plenty,
but we-- you need that in all

aspects of life, certainly on
the financial s- side of things.

I think this off-season is unique in, in,
in all the reasons you just highlighted,

the potential CBA for, for our, our
Major League Baseball clients out there.

Um, but it's also important, especially
for the professional athlete, to think

about their, their earning window and
their margin of safety or, or margin of

error, however you wanna define it, right?

You're, you are, are earning hopefully
a very substantial amount of money in a

compressed period of time Sometimes it's
the amount of money someone earns over

an entire career, 40, 50 year career.

Sometimes it's way more than that,
but it's really, really compressed.

And what that does is magnifies
your decisions, magnifies your good

decisions, magnifies your bad decisions.

So this idea of controlling what you
can control in this off-season and

throughout your career is incredibly
important and really, you know, what

we wanna, uh, bestow upon all of the
listeners certainly going in-in-into the

Mena Hanna: here.

Yeah.

I wanna emphasize that last point,
especially like our clients have

such a compressed earnings window.

It's, it's like instead of a person,
you are living in fast-forward.

Lions live ten to fifteen years,
so you can think about every

single one of your, call it, uh,
career years as, as a lion year.

It goes by so much faster than the
normal person that's earning money

potentially for fifty and sixty years.

So that does kind of make
this all the more serious.

It makes the planning piece
so much more impactful.

It does make, yeah, like you said,
it magnifies the impact of the bad

decisions, but it also magnifies
the impact of the good decisions.

You could be saving money during
potentially a down market and investing

more on the rally up, which, you know,
expands wealth at a much faster clip

than someone who's, you know, getting
a normal paycheck, uh, every two weeks.

So that is, yeah, there's,
there's pros and cons to that.

Uh, it's definitely not
all, not all cons, though.

If you do follow the plan, you
can really magnify the impact of

your, your just early s- early

Justin Dyer: savings.

Yeah.

A-and may-- I'll draw a, an analogy
here, uh, side by side Warren Buffett.

Warren Buffett, uh, for those
of you who are relatively young,

uh, world-famous investor.

Hopefully, you all do know that
name, um, just kind of being

students of, of, of markets.

Um, definitely someone who
is legendary in our industry.

But it's a great example of what
discipline and controlling what you can

control can do and, and, and in a way
highlighting the benefits of a compressed

earnings window and, and more importantly,
the age at which you're earning that

compressed set of income, where Warren
Buffett, I think he started with a, you

know, arguably a good amount of money.

It was something like a million
dollars, a couple million dollars.

I don't remember the numbers exactly.

But he started investing in a very
disciplined way, controlled what

he can control in his thirties
and lived within his means.

You know, the famous, uh, uh,
example of that is I think he lived

in the same house in, uh, Omaha,
Nebraska, for sixty some odd years.

And, you know, it was like three
thousand square foot house or

something like that, right?

I'm, I'm, um, I'm completely, uh,
messing up all the specific statistics,

but the general, the general history
here, uh, the general story here

is one hundred percent correct.

He started investing early, taking
advantage of, of discipline, taking

advantage of markets, letting things
compound over time, not getting freaked

out if there is adverse, uh, uh, market
movements, which definitely can happen.

They could happen in
off-- this off-season.

We don't know.

We can't predict the future.

But he, he had that plan in place.

He didn't all of a sudden pull half
of his money out of the market because

he needed to go buy a new house or
whatever the case may be, right?

You don't wanna do that.

You certainly don't wanna do
that without planning ahead.

You most definitely don't
wanna do that with, with in a

pretty poor market environment.

Um, and then, you know, over time, he
just kind of let this really disciplined

approach, control it-- controlling the
controllables mindset turn him into one

of the world's wealthiest individuals,
just letting money compound over time.

But he didn't really get to
that stature until he was in

Mena Hanna: sixties.

Yeah.

Justin Dyer: Yeah.

Really, really hard to do, um- Many
of you listening are in a super

fortunate position in that you're in
your twenties, thirties, sometimes

forties, and your ability to let
markets work for you if you're

disciplined, if you focus on what you
can control, is exceptionally powerful.

Could be really hard to
really envision that.

But, you know, in, in my relatively
short career, which I've seen a decent

amount, uh, and, and getting older each
and every day, certainly older than a lot

of the team here and a lot of, uh, the--
you folks listening, I, I've seen this.

I've seen the power of markets.

I know the power of markets.

I have outright confidence that, that,
that will continue on, and I think that's

Mena Hanna: great

Justin Dyer: great
reminder for people to, to

Mena Hanna: with them

Yeah, we see it every day.

We see it when we're looking through tax
lots, and we see positions up one to three

hundred percent, uh, that were purchased,
you know, not all that long ago.

So markets do work for you
if you let them work for you.

Some interesting stats
on the stat guy today.

Warren Buffett only hit a
million dollars at thirty.

Yeah.

And in-- adjusted for inflation, because
everyone's gonna make that point,

that's nine point three million dollars.

I'd say-- Yeah, today.

I'd say a lot of our clients are
either there or potentially ahead of

that on an inflation-adjusted basis at

Justin Dyer: 30

Or on

Mena Hanna: that trajectory.

Or on that trajectory, definitely.

Um, he hit twenty-five million
dollars at thirty-nine.

He hit three hundred
million dollars at fifty.

He hit a billion dollars at fifty-three.

Probably, uh, some pretty good
investments and, and market movements

and, and growth that happened there.

So at fifty-three, between thirty
and, and fifty-three, he went from

one million to one billion- Yeah

Justin Dyer: which is amazing.

Now, I-- the last point I will
make on this, um, again, n- not

with specific numbers in mind.

You would hear that and you're like,
"Oh, he must have just outperformed

and absolutely killed it."

I think there were some periods of that.

But if you look at Warren Buffett's
overall performance, there are

various ways or various places
where you can look this up.

It's very, very similar
to the markets overall.

So this doesn't take a, you
know, a one in a million or one

in eight billion type investor.

This takes discipline, this takes
controlling what you can control,

and you can see very similar
re-results over the long term.

Certainly, uh, uh, that's
what we've seen historically.

Um, I think that's a, a good
place to wrap unless you

Mena Hanna: another stat.

No, that was, that was way more optimistic
than we went from lockup to, uh, becoming

Justin Dyer: billionaires.

Yeah, there

Mena Hanna: There you go.

Take

Justin Dyer: but it, it's
a great reminder, right?

There's a plan in place.

I think that's a perfect, perfect,
uh, segue to, to wrap here.

There's a plan in place
for the off-season.

There's even a plan in place
to deal with, you know, we call

them left tail events, right?

Things that are, that are unknow-unknown
at this point in time, right?

We don't know exactly what's gonna
happen to the lockout, and we have

a, a way of protecting your asset,
your portfolio, and your hundred year

family with respect to those outlier
type events, those unknown events.

There's a plan in place just for
pure off-season spending to get

you where you need to be on the
other side of this off-season.

But it takes discipline, it takes
you sticking to the plan, it takes

you focusing on what you can control,
and us certainly focusing on what we

control, and, and that's what we're
committed to do to support you all, uh,

certainly on the baseball side o-of the
equation throughout this off-season.

Hopefully, this was helpful.

Definitely shoot topics and questions

Mena Hanna: way.

Six two six-eight six
two-zero three five five

Justin Dyer: Awesome.

And until next time, own your wealth,
make an impact, and always be a pro