Markets Are Crashing: How To Survive The Coming Storm (Uncut) 03-14-2025

Markets Are Crashing: How To Survive The Coming Storm | Michael Venuto

Recession risks are growing. We’re talking about how to protect your portfolio against a possible recession. We’re talking about how to protect your portfolio against volatility, which is the theme of the week for markets.

Michael Venuto joins us today. He is the portfolio manager at FIRE ETFs. Welcome back, or welcome to the show, rather.

I’ve spoken to you a long time ago, but I think it’s the first time on my new program. So welcome to the show. Good to see you, Michael.

How are you doing? Good to see you, David. Yeah, I think the last I was officially on, we were talking about blockchain, because I also run BLOK, the blockchain ETF. That’s right, but we’re talking about FIRE ETFs today, a very interesting product, and very timely for this week’s news.

So let’s recap this week’s news. Trump’s tariffs on Canada and Mexico went into effect. Actually, there’s been a pause on some tariffs on Mexican goods.

We’ll talk about that. But anyway, the Dow is in freefall once again today. We had a bit of a rebound earlier, middle of the week, but now on Thursday, as we’re speaking, Dow is dropping more than 500 points.

The S&P hits its lowest since early November. And the VIX is spiking, as you know. Gold is nearing $3,000.

Bitcoin’s down 1% on the day. And crude oil prices, it’s at three-year lows. So walk us through what is going on, what the volatility is responding to, and then we can go from there.

Yeah, so markets like certainty. So if they knew that there’s going to be tariffs that made sense on Canada and Mexico and China and whoever else, it could get over it, right? Because it can say, okay, we know this, but we also know there’s tax cuts coming, we know this is coming, we know that’s coming, we know there’s a crypto summit tomorrow, all these things. But the problem is we just don’t know anything.

The market is reacting to the fact that the tariffs come on, then they disappear, then they’re back, then they’re paused, then they’re back again. So until we get some clarity as to a path, it’s very difficult for people to take risk and make good investment decisions. Tariffs have been implemented before.

Trump’s first term saw tariffs. Trump has telegraphed tariffs for a long time. And so the issue of tariffs is not a new concept.

And I’ve talked about this on my show, telegraphing the implementation of tariffs and actually seeing them executed. Is this time different though from 2027 and 2018, or 2017 rather, and 2018 otherwise? Why are markets behaving the way that they are? I think in 2018, 2019, it’s not like the markets did well when these first sets of tariffs were being implemented. But we didn’t think there was a quid pro quo or anything attached to the tariffs.

We just heard there’s a trade imbalance we’re being taken advantage of, I’m going to fix it through tariffs. Okay. We also didn’t use the word inflation back then, right? In 2018, it had been 30 years since we had real inflation, so we weren’t feeling it.

Now we know that tariffs can bring that big eye back, right? And it’s not like the prints that we’re getting suggest that we’re not seeing inflation right now. So I think the fact that today we don’t know the purpose of the tariffs, they’re not as clear to us, they’re harder to swallow. They create that chaos in the traders’ minds.

Yes. Okay. Let’s talk about 2018 and 2019, both pretty bad years for the markets.

Both dips saw rebounds shortly after. Now, I think, if I recall correctly, every time Trump announced new tariffs on China back then in his first term, the markets threw a little hissy fit, but they were short-term corrections. Take a look at my screen, for example.

2018, around January, we saw a decline in the S&P by the order of nearly 12%. 2019 was slightly worse towards the end of the year 2018, and into the early parts of 2019, the S&P dropped 20%, so well into an actual bear market, V-shaped recovery thereafter until we had COVID. So is this looking a lot like the beginning of 2019 all over again, Michael? Are we seeing the same signs if we were to flip back to present day? I mean, I think that it’s a little bit different because the economy was the main goal back then, and it seems like there’s a lot more other things being tied up into economic decisions, like discussions about fentanyl or immigration or avocados.

It doesn’t seem to be a singular message of economics, but we’ll see if that’s just smoke and mirrors and the economics are the main goal. I don’t think that the AI story is dead. I don’t think that the crypto story is dead.

I think that there’s a lot of amazing things that are going on globally that can make stocks cheap, but it’s really hard to commit to them when you don’t know what’s going to happen from day to day, or you can be woken up with a tweet that changes the entire direction of the markets. Yes, I understand. Okay, so what is your outlook for markets? Are you prioritizing stocks? Are you prioritizing bonds? And generally, which asset class do you think is going to have the best chance of surviving whatever volatility and uncertainty this phase may bring? Yeah, so it’s funny because I think that this will be a year of volatility, but I think volatility is not necessarily a bad thing.

Saylor always references the volatility of Bitcoin being a feature, not a bug, right? And the way that I tend to invest and have done it for many years, and I always tell people I’m the most transparent out there. All of my personal accounts are on public and on Blossom. Everything I do, I publish.

Not only can you see what I’m buying inside the ETFs that I manage, you can see what I do with my personal account. So what do I do? I believe in wild diversification for the bulk of my portfolio. And then I love speculating with highly volatile assets like Bitcoin.

Gold is in there now too, right? I love it. And all kinds of interesting ways to approach investing, that tends to be about 30% of what I allocate to. And the bulk of what I allocate to is what we were going to talk about today is the FIRE kind of concept that we built, a permanent portfolio that’s massively diversified.

Yeah, I believe if I correct me wrong, it’s 25% equities, 25% commodities, 25% bonds, and then 25% cash and alternatives. So it is pretty diversified. We’ll talk about that in a bit more detail.

But let’s take a look at what’s going on with the US 10-year yield. This is a chart on my screen. Let me just refresh it.

So yeah, a big rally in bonds over the course of 2025. I doubt it. I do think that what’s happening here is actually a good thing for all the debt that needs to be refinanced in the US, right? I’ve seen it speculated that perhaps these indecision that is making it difficult for the stock market is making it easier for the Fed to cut rates.

And I mean, this is a massive rate cut by the market, right? Like to go from 4.8 to 4.3 is massive, right? And to be able to refinance the wall of treasury debt that needs to be refinanced in the next 18 months, it’s a huge difference at 4.3 versus 4.8. And if we could get a rate cut, that actually would affect the 10-year. We don’t even know if it will, right? Like they don’t have that full control, but it does appear there is a flight to safety here. And it’s actually a good thing for the refinancing of debt in America.

Okay. So are you more bullish in bonds than equities then? Or I guess equal weight? Yeah. If I’m speculating, I’m in equities or some sort of derivative instrument of equities.

Okay. That’s just, I’m not a trader. I love owning ETFs that are active underneath like Guyad stuff or things like that, because I’d rather let the traders trade and do it in an ETF where I don’t have to pay taxes, right? I like that part.

So I tend to really focus on massive diversification and then allocating to people that I think can do the trading part well. Like Jerry Parker is also a client of ours and he’s got two funds that do trend following on our platform and things like that. And I’d rather let them do the trading.

So long-term it’s equities, but that’s for my speculative part. For the bulk of my money, it’s everything and as diversified as possible and as disciplined as possible and not letting one thing become the big part of the portfolio. So Michael, do you think we’re getting a recession this year? I do not.

I think that the markets may see some serious volatility. We may have a down year, but I think the economy is resilient and it can handle whatever’s coming from these tariffs or the various different rhetoric that’s going on. I think there’s amazing things happening with AI, with crypto, with all kinds of businesses really having a deregulation.

That said, the recession possibility is higher two, three years out, depending on once we’re done with whatever the reason is for these tariffs and things, do we get tax cuts? Do we get pro-growth deregulation that we’ve been promised? Do we get the things that the crypto industry has been asking for? Does AI really start to scale and change things? So I think we’re okay in terms of an economy for this year, even if the market may not reflect it. And what do you think commodities are signaling? With gold nearing $3,000, is that signaling higher inflation, economic slowdown, some sort of contraction or slower growth or both or neither? What do you think? I think it’s the same thing that the chart we just had up on the 10-year treasury shows. There’s a flight to safety.

There’s a flight to assets that are separate from the system that are not as subject to the whims that are changing each day. Okay, Mike, let’s talk about fire ETFs, the construction. We talked about the allocation previously.

Can you give us a breakdown of let’s say the equities component, and then we’ll get into the other components? Yeah, so the fire idea was that these are people who are looking for financial independence, retire early, 90% of them just buy VTI and shill or VOO and shill. And days like today, that doesn’t feel that good. And things like this that persist, they’re pretty painful, and it can make people make bad decisions.

With ours, we’re approaching it with the permanent concept. So that 25% that’s in equities, we’re using ETFs, right? So we’re an ETF shop. And we’re primarily using ETFs of the clients that work with us.

So Tom Lee has the Granny Shots portfolio. It’s done amazing. It’s been out there for many years.

And he turned it into an ETF about four or five months ago. It’s almost a billion dollars already, which is amazing growth for an ETF. Another well known name, Joel Greenblatt at Gotham, we use his value ETF.

So we’re kind of using Tom for the growth end and more Joel for the value end. So that’s a GVLU. We also have a fund in there called DARP, D-A-R-P, which is Disruption at a Reasonable Price.

It’s the Grizzle guys who are, they’re Canadian folks that are focused on hard money and various different tech things. It’s kind of meant to go after the same things that Cathie Wood does, but look for price and quality as well in that process. So they’ve been really good at being ahead of things like Nvidia and various crypto miners and things like that.

And then we have some cheap beta in there. So SoFi, who’s one of our clients has SFY. It’s essentially their version of the US large cap 500.

It’s got a growth, slight growth tilt to it as five bips. So it’s nice and cheap, our version of cheap beta in the portfolio. Now, these things will change if I see opportunities, but more or less it’s broad based equity exposures with a couple little spicy ideas thrown in there.

But it’s primarily a, I would say a cyclical or risk on kind of portfolio side or is it more defensive? Absolutely risk on because the whole idea is at any given moment, one of those four quadrants should be doing well. And when that quadrant is doing well, I want to do better than just voo. Okay.

What is the philosophy of equal weighting equities, commodities, fixed income and cash? Yeah, so this goes back to the 1970s. Harry Brown came up with the concept. It actually is a lot of what was used to move towards risk parity.

So the original concept was these economic conditions are what push things. It was a very heavy weight towards concerns about inflation during the seventies, obviously. When Ray Dalio really developed the idea of risk parity, he said that he’s going to wait a different.

He said, instead of waiting these things equally, I’m going to wait them on their volatility. It’s a different approach, requires leverage. It’s got its own pluses.

Actually Ray Dalio launched an ETF of the all weather today. The concept though is more disciplined than anything, right? This is definitely going to underperform owning VOO or the S&P 500 for 20 years, but there’s going to be three drawdowns during those 20 years where the S&P drops 30, 40, 50%. And this is not going to drop 30, 40, 50%.

This is going to drop five, 10%. And that’s the whole concept is keeping you invested, keeping the dry powder. Even in like, we were just looking at bonds.

There’s a substantial 25% in bonds that most people wouldn’t think was going to be in there. In the commodity portion, we have a huge weight in gold. We have a small weight in Bitcoin.

We have managed futures and we have real estate. In the cashing and alternatives section, we have actual short duration fixed income. We have SPAC arbitrage, which is a way of getting that low risk fixed income.

And then we have a tail risk fund from Cambria from MEB that essentially owns bonds, but buys puts on the S&P. So you start to think of putting all of those things together. You can see how on days of uncertainty, it’s a great way to not have the knee jerk reactions and the downside.

That’s really the concept behind it. Okay. And so let’s suppose we have a really bad year like 2022 when all asset classes are down.

What happens to the fund then? Yeah. So 2022, if I just do like a back test of the asset classes, it’s probably going to be the year ever for this kind of structure. But it’s still going to be much better than 60-40 was because gold and cash did not do as bad as bonds and stocks.

It’s rare that you have two of these components down double digits in a year. I can’t think of another time other than 2022 where you had bonds and stocks down. So bonds were down 13-ish and stocks were down 18-ish.

So 60-40 was down 15-14-ish. This I would say would have been more like 10. More important though is something like in 08.

In 08, stocks were down 50, but treasuries rallied. Gold was okay and cash did just fine. So in an 08, this did extremely well because bonds went up so much as the flight to safety.

So there is no silver bullets, right? Diversification is not really how people get rich. You get rich on concentration. And that’s why VU has worked so well for those who want to buy it and chill.

Most people who own it, who are in that fire movement today, have never seen a real bear market. I think it’s possible that we see one. It’s feeling that way right now.

I know we started on a pretty rough note. I’m less concerned really about the one that the market this year. I think it’s the market two or three years out that we really need to worry about.

Let’s just back up and talk about this fire movement. I believe it stands for financial independence, retire early, correct? Financial independence and retire early, those are typically mutually exclusive concepts, but then we’ve kind of mixed them together here in this movement. What does it take for somebody to have financial independence and to retire early? Do they need a lot of wealth, Mike? That’s the first thing that comes to my mind and most people’s minds.

Yeah. So this movement’s been around about 20 years. It’s definitely, call it mutated and has had forks.

There’s fat fire and there’s various different versions of fire. I would say at the core, there’s kind of two important elements. Number one is live within your means.

They think of money in terms of time, right? So if I’m going to buy a pair of shoes that cost way more than I need to, how much time do I have to work more for that, right? So that’s one end of the spectrum. So it’s a ratchet that they spend a lot of time talking about on Reddit and on all the forums and figuring out how to help each other buy time back. I can’t help too much with that, right? I’m on the investment end.

So on the other end, there’s put your money to work for you, right? So their concept is invest, dollar cost average, and then figure out what it costs you to live per year. So let’s say you’ve done your fire, you’ve done all the work to figure out that I can live a comfortable life off a hundred K a year. They say, take that number, multiply it times 25, and that’s how much you need to have your financial independence.

Retire early has also changed, right? Most of them don’t really retire. They’re just free from needing to go to a nine to five job and usually have some sort of side gigs or run an Airbnb or do some consulting or board work and things like that. It’s really that financial independence that’s the important part.

The other ETF we built was for the, once you hit your fire number to help them take income out, they come up with that 25 times number because it can say, if you take 4% out each year, that’ll give you the thing you need. I thought of it and said, instead of taking 4% out, let me have something that has a stable nav and yields at least 4%. So that’s our second fire fund.

Um, so that’s, that’s how we’ve tried to interact with the fire movement. If someone were to retire, um, and look into, you know, um, how to retire and how to protect their portfolio into retirement, what do you think for the average retiree in America, what do you think their financial priorities should be? Wealth preservation, growth, beating inflation or something else? Yeah. So I’ve always looked at it as a glide path, right? They, you know, you go to most of your 401ks and they say, you’re young, you’re all in equities, you’re old, you’re all in bonds.

I don’t believe in that. I think that’s silly. Um, because bonds have volatility too, as we saw in 2022.

And then other times when they don’t have volatility, they have like no yield and no return. So that glide path might work if you’ve got a 200 year time horizon, those glide paths have really been designed for endowments and things like that, that do have 200 years to think through things and have things work. So the way I’ve always approached it is, if you’re at the beginning of your journey, you should be mostly equities because you’ve got time for it to work.

The closer you get to your end of your journey, you should be mostly wealth preservation, which is what we’re trying to do with the, the, the, FIRS, the fire fund. And then once you’re into retirement, you should be more into income. So that wealth preservation portion should come down and your income generating portion should go up and your income generation should not be just bonds.

It should be options, income, derivatives, income. Uh, there’s all kinds of things out there now that can be used to generate income that don’t have that duration risk or credit risk. That’s very, very dangerous.

Um, so yeah, that’s, that’s the way I’ve always approached it. This is a more philosophical question, but at one point, because we’re talking about entering retirement, at what point should somebody look at retirement as an option? In other words, um, is there a metric or some sort of financial, um, indicator that they could look at that could signal to them? Okay. I am financially ready to retire.

Yeah. I mean, the math isn’t that hard. You take, Hey, this is what I’m going to plan to spend each year.

And, uh, this is how much I can generate from my portfolio and I’m comfortable. That’s not really the hardest part. It’s the mental part, right? Like what do you do if you don’t go to work every day? Um, like, you know, what are you going to be passionate about? Is there a charity you want to work with? Is there a way to work with the community? Should I, should I start a, a YouTube channel? I talk about, you know, uh, how I’ve got to retirement, right? Like there’s tons of that out there.

I think that there’s like millions of like Mr. Money mustache and, and, uh, Austin, there’s a bunch of guys who have these calculators that you can go and put in. Here’s my expenses. Here’s what I’ve got saved.

Can I retire or how much longer do I gotta go to retire or how much more do I need to save each month to make, you know, my fire date come a year earlier? Like you can find those all over the internet. I think more important is that quality of life. It’s kind of like, you know, generative AI.

Great. When we get this, um, general purpose, AI is going to be different because that’s like, most of us don’t have a job anymore. What do we do? Well, that’s the same thing as retiring early when you don’t have a job anymore and you’re 45 years old.

What do you do instead of, uh, are we ready for a life of that’s like a utopia? It’s a, it’s going to be a hard question that hopefully we actually do get to face in the next 20 years. Uh, tell us about the commodities component. What’s, what’s in the, um, allocation for commodities.

So in the commodities pool, the bulk of it is gold. Um, we have a little bit of Bitcoin using a stacked product that uses, um, essentially you put $1 in, you get a dollar gold and a dollar Bitcoin. So it lets us allocate with almost a form of leverage.

Uh, we’ve also got a managed futures product in there and foot from a partnership we put together between, uh, Jerry Parker and Meb Faber. And then finally we have residential real estate. And I think that’s been a really good play for us.

There’s been, um, you know, hiking of rents and things like that. So those are kind of the four things that we’ve got going on in the portfolio for commodities today. I’m curious what you think about cash and cash equivalents and whether or not real yields will still stay positive, uh, given inflation and given where, uh, yields are headed, which is down.

Yeah, I don’t, I think that, um, you’re probably going to get less out of cash, but for the last 30 years, you got nothing out of cash. Um, so we use some alternatives in there. Like I said, we use a SPACs fund, you know, that’s buying SPACs that are announced that they’re not going to do a deal.

So you get that little spread. Uh, we also, as I mentioned earlier, use a tail risk on T A I L, which is bonds, but puts on the S and P purchased with the yield from the bonds. So it gives us that real intent, which is when things go wrong in the other buckets, I get dry powder from the cash and cash alternatives buck.

Okay, great. Mike, uh, where can we learn more from, uh, from you and about, uh, fire ETFs? So I’m easy to find on Twitter. Just type in Michael Venuto.

Um, that’s usually the easiest way to catch me on fire ETFs. It’s a pretty straightforward website. If you search this, you’ll find it, but it’s fired dash ETFs.com. Okay.

We’ll put the links down below. So make sure to follow Mike and fire ETFs down there. Thank you very much, Mike.

Appreciate your insights. And we’ll speak again soon. Take care.

Thank you, David. And thanks for watching. Don’t forget to like, and subscribe.