Modern Bucket Shops

SPEAKER_00 0:05

Your guys do a really great financial future. Tom and Don are talking real money.

The Rise of Bucket Shops

SPEAKER_02 0:13

Back in the 19th century, and I know this was before most of you were born, except maybe Tom. I had to do it. I'm sorry you do it to me all the time. He's not that old. He's pretty friggin' old, but he's not that old. Back in the 19th century and the early 20th century, a lot of folks wanted to get involved in the early stock market. They wanted to participate. They wanted to uh bet on stocks, but they couldn't afford to buy stocks because back then, to buy it stocks, you had to buy a round lot. That was a hundred shares. So five dollar a share stock, five hundred dollars in the late 19th century, early 20th century, we're talking real money, serious money. That was the uh an annual wage for a lot of people. So they couldn't participate in the stock market. So what they did, what some entrepreneurs did was they got a ticker tape from Western Union or ATT or whoever, the little globe machines with the tape coming out. Pull the tape, come, yeah. And they had a chalkboard and they had some seats and they had spittoons and called bucket shops, I believe. Bunch of old guys would come in and uh they would place bets on the market, and then there'd be a guy reading off the tape, going, Oh, oh, this one's up, okay, you win. But there was never any kind of security traded. You just bet on what it was doing.

SPEAKER_03 1:41

It was like a what was going to happen to that particular stock at a particular time.

SPEAKER_02 1:45

Yep. It's called a bucket shop. Today we have something well, strikingly similar coming into play.

SPEAKER_03 1:54

Which is very surprising considering the other things that are out there that you can make basically bets on every day, too.

Tokenized Securities Explained

SPEAKER_02 2:01

And the reality is if you want to get in a into a stock, you can buy fractional shares of stock. You don't even have to buy a whole share anymore. You could put a couple of bucks into a stock through Schwab or whomever. So there's really no need for these except for the crazy desire of traders, aka gamblers, to be able to move in and out of stock positions or bet on the market on market movements or stock movements 24 hours a day, seven days a week. And what am I talking about? Tokenized securities. Trevor Burrus, Jr.

SPEAKER_03 2:37

Now, speaking of old, uh if you said token to me takes on a whole different meaning. I uh you could see your whole portfolio going up in, shall we say it, smoke, uh or smoke gets in your eyes. You knew that was coming, right? One token over the line.

SPEAKER_02 2:52

Uh not gonna sing it. I expected that. I was I was hoping you wouldn't sing the song. I will not. By the way, the song is one toke over the line. Thank you. Who made that song famous?

SPEAKER_03 3:07

I you've told me twice, and I still can't remember.

SPEAKER_02 3:09

Who made one who performed one toke over the line? Well, I had to look it up because I had no clue. By the way, it it was number 10 on the building. Right after the big show with Lawrence White. It was released in 1970 on an album called Tarchio. I'm sure you all have that in your collection. You betcha. Uh 1970 album by uh Brewer and Shipley.

SPEAKER_03 3:38

Brewer and Shipley, sure. Why not?

SPEAKER_02 3:40

Who, by the way, a little little bit of a little bit of Brewer and Shipley trivia. In 1970, they were they were asked to perform not in a concert, no, not no on the Lawrence Sawelka show.

SPEAKER_03 4:00

Great to have them on.

SPEAKER_02 4:01

They were introduced as mo as the song was introduced not as a pot song, but as a modern spiritual.

SPEAKER_03 4:07

Very spiritual out of the case.

SPEAKER_02 4:09

Because they said, well, one toke over the line, sweet Jesus.

SPEAKER_03 4:12

Oh, right.

SPEAKER_02 4:12

That's made it a modern spiritual. Okay. And apparently uh Lawrence had a no idea what a one toke means.

SPEAKER_03 4:21

Especially after he met in the back studio and had the one toke over the line. Uh okay. All right, let's let's try to get to it. Oh my gosh.

Understanding Blockchain

SPEAKER_02 4:31

They even had uh an accordion accompany them to the list of the Lawrence Wolf show.

SPEAKER_03 4:36

Yeah. It's uh um I gotta go watch that video. So these are okay, to to go back to the tokenized stock. These are publicly traded companies on the blockchain, right?

SPEAKER_02 4:46

Okay, and nobody even knows what a block is. Most of our listeners go, blockchain. Is that the thing that breaks on my bicycle once in a while? Exactly. The chain block, yeah.

SPEAKER_03 4:55

Um Well, let's hear your explanation of the blockchain.

SPEAKER_02 4:58

Aaron Powell No idea. It's just an accounting method. It's really just an idea. It's a way of keeping track of something electronically, and the blockchain, the reason it works is because the records aren't kept in one place. The records are distributed among tens of thousands or even millions of computers, and they compare notes with each other to make sure that the proper ownership is applied at the proper time.

SPEAKER_03 5:22

What do you own? You don't own the company. No. You just own, I guess, kind of the token, uh which I don't know what that really represents. In other words, I don't know what that means by your trading. And by the way, the other thing that's I guess good wouldn't be for me, is that you can trade this 24-7. So if you wake up, you know, Sunday morning at 3 a.m. and say, ah, wait a minute, I gotta I gotta see what I'm going on right now with Boeing stock, I can trade that because here's what's happening in the world that might affect the price of that, uh, which is not the stock, it's the token that represents the stock. I mean, this gets very confusing to me.

SPEAKER_02 6:03

Okay, so yeah, technically, and this is the tech this is the part where we can get tripped up in the realities because remember, we're talking about money, an area where people have been known to lie, cheat, steal it, obfuscate, hide, complicate. Right now, technically, you a tokenized share is repri it's a the it it creates a blockchain token, then that token holder is then recorded on the blockchain as the legal or beneficial owner of that share of stock or that bond.

The Risks of Tokenized Investments

SPEAKER_03 6:49

And by the way, it doesn't have to be a full share. It could be fractional ownership again, right? And again, this gets traded 24-7. And again, it could get settled more quickly than if you actually buy and sell a stock on an exchange. So that's an advantage, I guess. Again.

SPEAKER_02 7:04

Yeah. There's a there's a custodian somewhere along the way that supposedly holds the actual shares. And then the token doesn't represent the share itself, the token represents your claim on that a portion of that pool. So you own an interest, but you don't own the security. And I know that seems like a distinction without a difference or a difference without distinction. I think it's the other way, yeah. Yeah. Uh but i if if you own stocks now, you own an interest through a street name account through through DTC. But it does to my mind, it's uh not necessary because it introduces a level of risk that doesn't we don't know if it exists or not, but history has shown that sometimes it sneaks up on you and you don't know it until it's too late. Trevor Burrus, Jr.

The Future of Trading?

SPEAKER_03 7:59

Yeah. By the way, we mentioned stocks, but I I think you can go to JP Morgan now and own tokenized money market funds. Uh again, I don't know why you would do that. I don't understand other than the benefit. That uh just trading it all the time, I guess. Um and they've already, I mean, some digital tokens tracking popular stocks have deviated wildly from underlying prices. Why? Well, because guess what? They're far more thinly traded there than you would get on a major exchange. So again, this is one of those, this is like an answer in search of a problem. Uh we had somebody, I think, call us about this a while back or write us and say, it's all about the tokenization of securities in the future. Uh, this is gonna be the future is where it's gonna happen. And I am I'm not a trader, so it doesn't really matter to me, nor is it significant, I think, to you, as people are not traders either. Although we just had one call the radio show, I think, recently, too, so we did.

SPEAKER_02 8:56

But then you talked about cars.

SPEAKER_03 8:57

You sorry, that's right. He wanted to sell Donna used car. Um, you know, it always still reminds me of that famous quote from Nobel Prize winner Eugene Fama, who said very eloquently that investments are like soap. The more you handle them, the less of it is. Uh it just disappears right down the drain. I've always believed that, and so I I'm not a guy that thinks you need to run out and and and and delve into this. Well, you bet you basically can't right now, but it's coming, I think, and it probably will happen. It's being examined at the highest levels, the people that make these decisions.

SPEAKER_02 9:32

Um so It just strikes me as a level of complexity that provides little or no advantage to anybody except gamblers. I really, that's it. I think it's a vehicle designed for gamblers, which is why we felt we had to discuss it. And then for investors, immediately dismiss it as a gimmick.

SPEAKER_03 9:55

And you know we're gonna get the calls and the emails about this now because not as many as cryptos. Well, yeah, but this is uh uh again, this is great for crypto too. You can stay up all night and trade your little heart away or your money away, um, any day, any time. And and so they're gonna say that's the future. You should be able to trade all the time. Yeah, but you know, I don't know why.

SPEAKER_02 10:17

I heard the future back in the early 2000s.

SPEAKER_03 10:21

Yeah. What was that?

SPEAKER_02 10:22

About collateralized debt obligations.

SPEAKER_03 10:24

Yes, of course it was, sure.

SPEAKER_02 10:25

Where you know, why are you buying just a plain old mortgage bond when we can slice and dice this thing into absolutely safe or higher yielding securities that were our mortgage back there totally safe until they weren't. Until they weren't. Then they were gone. Yeah. Right. Some of them were gone completely. They really basically took down the economy or nearly took down the economy for a while. Yeah. So could this do the same thing? I don't I don't know that it will get that popular, but the potential is there. This is not stuff you as an investor need to even think about.

SPEAKER_03 11:01

And for those of you who don't think you're getting enough from Robin Hood at all, that this is they'll be having this offering, I'm sure, soon. For those of you who don't think that, you know, the prediction markets are enough, Calci at all. Now here's another way for you just to, as I said, stay up late and trade because it's a very exciting business. I don't think it's a good way to make money, but it's probably exciting.

Listener Questions Begin

SPEAKER_02 11:21

Now that we've gone, all podcast all the time here on Talking Real Money, no more radio show. It's all podcasts. We wanted to figure out a way that you could call us and ask questions. And we decided, well, let's just keep our 855 number that we use for the show, 855-935 Talk. So now you can go to 855-935 Talk anytime and ask a question. It's so easy. Just go there, do that, and then we'll get you on the show like this. Hey Tom, welcome to Talking Real Money. Thank you.

Evaluating Life Insurance Needs

SPEAKER_01 11:53

Thank you for having me on the show. I appreciate it. Love you guys. Thank you, sir. What's up? We have a term life insurance policy, two term life insurance policies, my wife and I. And so I'm one is for 250, the uh thousand, the other is for 350,000. And I'm questioning whether or not I should continue paying for those premiums given the fact that we're both uh with Social Security eligible. We're not drawing yet. I'm 69, she's 67, we're at full retirement age. And I looked at the survivor benefit, it's 3,600 for me, 3300 for her in the event that one of us passes. We we have a a fairly significant amount of assets. I I calculated about$1.9 million in our portfolio. 941,000 of that is in Roth. Roughly split evenly, about$470,000 each in Roth and$676,000 in in brokerage. And our the house is uh we have a house that's paid off, we have two condos that are paid off. And I don't know why I'm You're questioning you're questioning why you have life insurance? Yeah.

SPEAKER_02 13:07

Why I have why I have those term policies and I'm paying for them. I I'm questioning the same thing. I'm wondering why you have them. The purpose of of any kind of life insurance policy is to make sure that a need is met should the insured, the person upon the who the policy is written, uh dies prematurely, leaving that other person with without enough income. Without an without the assets necessary to continue to live comfortably. So you are at a point where b either of you, if either of you passed, you would be able to live comfortably, right? Yeah. Then get rid of those policies. They're a total waste of money. Right now, they're merely it's like a death lottery. You're paying money, betting that you might win if one of you dies prematurely. But remember those premiums are going to get more and more and more expensive as time goes by because your odds of dying increase. Right.

SPEAKER_01 14:05

So I would absolutely get rid of them, Tommy. You would, okay. One of them terms out in 2029 and the other one in 2031 anyway, so we're kind of close to that.

SPEAKER_02 14:14

Yeah, I would just you know, that's extra money that you can enjoy or put into your retirement savings for when you do actually sit, you know, you stop taking or you you you start taking your social security. I I would just use that for other purposes. That's think of it as found money.

SPEAKER_01 14:31

Okay. I I just want a confirmation and I I appreciate uh the advice, expert.

Selling Assets and Rebalancing

SPEAKER_02 14:37

We appreciate you. Thanks so much for being a part of the program. Take care. You too. Thanks.

SPEAKER_03 14:42

And we still take your questions and calls from talkingrealmoney.com. You can speak. On the contact form. The contact form. Don will uh take your calls there. I will kill as many trees as I can get to create paper to uh print out those questions like this one from David in Kenmore, Washington. That's near Seattle.

SPEAKER_02 15:02

You know, you get more with a Kenmore.

SPEAKER_03 15:05

Thank you. Whatever happened to that brand anyway. I guess it's still out there, right? Somebody's selling it somewhere.

SPEAKER_02 15:10

Somebody bought it.

SPEAKER_03 15:11

I'm sure they did.

SPEAKER_02 15:12

Uh I think Whirlpool bought it. I think yeah, Whirlpool bought it.

SPEAKER_03 15:15

Okay. Uh that was the one thing I thought Cyrus still had at the end. Did you, this is the question. Did you suggest a caller sell his biggest loser? Would he later be buying more of his biggest winner? Wouldn't he simply sell as needed to maintain his allocation? Now, David obviously heard us make this comment or what he believed was some sort of comment on someone who called. Um and the answer to that would be no. I wouldn't be telling you to sell something after it gone down, except for a tax loss. That, or if you need the money. Yeah. And everything's gone down. Let's say it's a year like uh I think I even said this at retire meet. It's 2023 after 2022. Bonds and stocks went down, right? And yet you needed income. So you had to sell something that had gone down. But generally, a year like this, if you're rebalancing, you're selling stocks, right? Because they went up a lot in 2025. You may be refilling your bond allocation a little bit, sort of rebalancing but putting the other money in your pocket to pay the bills. But no, I wouldn't be saying sell low and buy high. That doesn't make sense. I think it got trampled in something about income creating selling something you had to sell to create income. I could see that as an explanation. But otherwise, no, that would not be something we'd advocate because you do that a few times and you start running out of money. It doesn't work.

SPEAKER_02 16:40

We've always been advocates of buying low and selling high.

SPEAKER_03 16:44

And I can give you an example of that in the spring of 2020 after stocks went down about 30% in a very short period of time due to something called COVID. And bonds, again, generally went up by about 10% in that same period of time. Then we were selling the bonds and buying stocks. We looked like really smart people. We weren't. We were just had a disciplined approach. Stocks turned around, went straight back up. And remember, you just added more money to your stock portfolio. Again, you look like a really smart person, but uh it's just having a disciplined approach. That's the approach you want. You don't want to be sitting around looking at things every day and think, saying, here's what I think is going to happen next, therefore I'm selling something and buying something else. Don't act that way. Have a disciplined rebalancing approach. Selling the things that have gone up, buying the things that have gone down. It's counterintuitive, but it's been the better approach over the long haul. I'll put it that way.

SPEAKER_02 17:38

Yeah, to uh to paraphrase Jack Bogle, may actually be to quote him. Don't do something, just sit there.

SPEAKER_03 17:45

Yeah. And in most cases, that will be a far better approach for you. So thank you for the question.

Closing Thoughts on Investing

SPEAKER_02 17:51

Yeah, we don't do that. All right. Well, thank you all for your participation in the program. Remember, we are always welcoming your questions written, spoken, or called in to 855-935-Talk. Go to talkingRillMoney.com to uh call those in. If you need a little help from a real life, honest to goodness, 100% fiduciary advisor, we've got some at our company, Appello Wealth, and uh they have some of them grudgingly. No, they've agreed to work for free.

SPEAKER_03 18:20

No, they like it. Uh uh they like talking.

SPEAKER_02 18:22

Tom loves it.

SPEAKER_03 18:23

I do. Uh I take all of those I can get. We do a full portfolio review that it gives you a look at you know how much you're paying others, what sort of risk you're taking, how diversified you are. That's all free. Then you get some time with an advisor to kind of talk about those questions you have. I love doing it. I love having those conversations.

SPEAKER_02 18:40

Truly, truly, truly, truly, truly without a high-pressure sales pitch. You are not going to come in and go, Oh, it's like a timeshare pitch or an indexed annuity pitch. It's not that. Well, there's no stake. That's why. Sorry. Yeah, we have no stake in it.

unknown 18:56

Uh uh.

SPEAKER_02 18:57

Got it. Got it. Bad joking. All right. All bad joking aside, I think it's time for us to uh close out another exciting episode of Talking Real Money. Thanks so much for being a part of it. Please tell others about the show and uh keep listening every single weekday or whenever you listen to Talking Real Money.

SPEAKER_00 19:19

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