PodcastForward GuidanceJared Dillian

The Portfolio Built To Survive Every Crash | Jared Dillian

The guest warns of elevated yen intervention risk that makes shorting the currency around 155 hazardous and highlights a Fed willing to let long rates rise—an intentional curve steepening tied to Kevin Warsh's market‑first approach. He sees US growth indicators as softer than headlines and emphasizes a clear divergence between market‑priced hikes and his expectation of no further tightening. On allocations, he outlines a low‑volatility 20%‑each 'Awesome Portfolio' and points to bank strength and signs of real‑money inflows as stabilizing market forces, while flagging specific technical levels for gold.

Investment StrategyRisk ManagementMarket VolatilityCurrenciesGoldFixed Income

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Key Takeaways

The guest argues the Fed (following Kevin Warsh’s approach) deliberately allowed the long end of the yield curve to rise to tighten financial conditions and create room to ease later, a stance consistent with Warsh’s preference for a smaller Fed role and markets doing the heavy lifting.

A run of soft US indicators—payrolls, CPI, PPI, PCE and JOLTS—underpins the guest’s view that policy will not tighten further (he expects zero hikes or easing), creating a clear divergence versus market-implied pricing that still shows about 1.7 hikes priced through next June.

Market internals look constructive: three consecutive S&P up days without intraday pullbacks point to real-money inflows, and major banks (XLF, JP Morgan) trading near highs argues broader corrections are less likely while banks remain strong, supporting a stabilization view.

The guest emphasizes risk of investor complacency: persistent retail optimism that 'stocks continuously go up' could amplify losses if a discrete systemic shock occurs—he cites Feb 27, 2007 (ABX gap and China RRR move) as an example of how a single day can presage broader crises.

GEO-POLITICS

Yen Intervention — The guest highlights a rare, explicit Treasury FX intervention—'they sold euros and were closely aligned with the BOJ'—and warns experienced FX interventionists are active in Japan. Because of that elevated intervention risk, shorting the yen around levels like 155 is risky since an expert operator could step in and take the opposite side.

“I think the first outright explicit move from the Treasury in something like 30 years, they sold euros and were closely aligned with the BOJ.”—

TECHNOLOGY

Shorter Books — The guest documents a secular shortening of published books: his first book was 135,000 words while his new book is about 50,000 words. He says the historical average has fallen from roughly 85,000 words to about 70–75,000 words.

“Well, the interesting thing about the publishing industry is that books are getting shorter.”—

ECONOMY

Curve Steepening — The guest argues the Fed (via Kevin Warsh's approach) intentionally allowed the long end of the curve to rise—'the long end got obliterated'—which pushed up long-term and mortgage rates and produced an immediate tightening effect. He says this was done to create room to lower short-term rates later and expects the curve to steepen over the next 6–12 months.

“I had the complete opposite view. I think this was completely intentional. 100% intentional…”—

Soft US Data — The guest points to a run of weak US indicators—payrolls, CPI, PPI, PCE and JOLTS—and notes some people say GDP excluding AI may be negative. He implies underlying growth is softer than headline prints.

“We got, you know, we've had a lot of weak data which nobody is talking about. The last payroll number was bad. CPI was soft. PPI was soft…”—

MARKETS

Awesome Portfolio — The guest describes a 20%‑each 'Awesome Portfolio' (stocks, bonds, gold, cash, real estate) that returned about 9% annualized since 1971 with a Sharpe ~0.6. It has roughly half the volatility of an 80/20 equity/bond mix and limited drawdowns (worst −12% in 2022), trading about 2 percentage points lower annual return versus the historical stock market for much smoother returns.

“I came up with this portfolio that was 20% stocks, bonds, gold, cash and real estate…”—

Banks Stabilizing — The guest notes that financials (XLF) and major banks like JP Morgan are trading near highs and argues broad market corrections rarely happen while banks are strong. He interprets bank strength as a stabilizing market factor.

“If you look at a chart of XLF it's on the highs JP Morgan is on the highs all the big banks are on the highs And my experience is…”—

2007 Warning — The guest identifies February 27, 2007—when the ABX gapped down and China raised reserve requirements—as the 'starting gun' for the financial crisis. He notes how a discrete shock (S&P down ~4% and a doubling VIX that day) can presage broader systemic risk.

“I specifically remember this day, February 27th, 2007 was kind of like the starting gun for the financial crisis…”—

FORECASTS

Gold Levels — The guest sees gold as 'bottoming and basing,' expects one more small test below 4,000 before the base completes, and says a move above 4,250 would be a 'blue sky breakout' likely taking gold back to prior highs. Those are the explicit technical levels he recommends watching.

“I like it. I like the tentacles. I think we're we're bottoming and we're basing.”—

Intro

Intro and banter introducing Jared Dillian and his upcoming book The Awesome Portfolio, explaining why he wrote it and when it releases.

The Awesome Portfolio

Dillian outlines the Awesome Portfolio: a five-way 20% allocation to stocks, bonds, gold, cash and real estate that historically returned ~9% with low volatility.

Why Investors Misunderstand Risk

He explains why investors and advisors cling to 60/40 despite superior risk-adjusted alternatives, citing behavioral resistance to gold and cash allocations.

Warsh’s Intentional Policy Shift

Dillian argues Kevin Warsh intentionally allowed yield-curve steepening, preferring market-driven tightening that raises long rates while keeping short rates available to cut later.

The Yield Curve Meets Weak Data

Discussion of weak recent US data versus GDP headlines and how rising long rates create immediate tightening despite headline softness.

Markets To Do The Heavy Lifting

The guest explains how markets must do the heavy lifting under Warsh’s approach, including bank strength and market-first policy reducing Fed intervention.

Treasury Enters The Currency Fight

They analyze Treasury’s recent yen intervention alongside BOJ coordination, warning that shorting yen near 155 is hazardous given active FX intervention history.

The Bear Market’s Starting Gun

Dillian calls the day of the market unwind the bear market’s starting gun, comparing it to early crisis price action and identifying overlevered funds as catalysts.

Defensive Stocks, Oil And Gold

Final allocation and sector views: defensive bias toward staples and healthcare, trimmed energy exposure, bullish technical outlook for gold with key levels to watch.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

No Guarantees: Past performance does not predict future results; investing carries risk.

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