Episode Details

Jared Dillian ran Lehman Brothers' ETF trading desk right up until the firm collapsed in September 2008 — then launched his own research letter a month later. Joe sits down with Dillian, editor of The Daily Dirt Nap and author of the new book The Awesome Portfolio, to talk through what he saw inside a dying Wall Street firm and the five-asset allocation strategy he built in response: 20% each in stocks, bonds, cash, gold, and real estate, rebalanced once a year.

Jared opens with the view from inside Lehman as it died — management insisting the firm would turn it around while hedge fund clients had been calling bankruptcy inevitable for months. From there, the conversation turns to why index funds have grown from 2% to 56% of assets under management since 1997, and why that concentration is exactly what turned a routine 2020 selloff into a 35% liquidity trapdoor. 

Jared walks through the mechanics of the Awesome Portfolio — backtested to 1971 at roughly 9% annual returns with about half the S&P's volatility — plus how Sarbanes-Oxley pushed companies to stay private longer, a striking Finland-based dataset linking IQ to market-timing skill, and why he thinks avoiding a severe drawdown is worth more than the extra return you might give up to get there.

In this episode:

- What it was actually like running Lehman Brothers' ETF desk as the firm collapsed in 2008 — and why internal messaging didn't match what clients were saying

- Why Jared is glad Lehman wasn't bailed out, and how most of his colleagues kept their jobs anyway when Barclays bought the broker-dealer for $2 billion

- How index funds grew from 2% to 56% of assets under management since 1997 — and why that concentration is the risk, not the protection

- The mechanics of the Awesome Portfolio: 20% each in stocks, bonds, cash, gold, and real estate, rebalanced once a year

- Why gold's zero correlation to stocks does more to cut volatility than most investors expect

- How an independent linear-optimization study, done by an analyst with no connection to Jared, arrived at nearly the same allocation

- Why Sarbanes-Oxley pushed companies to stay private for years longer — and what that means for retail investors buying IPOs like Uber and Snowflake

- A dataset from Finland's mandatory military service linking IQ scores to real brokerage account performance

- Why Jared argues "if you don't have something in your portfolio you hate, you're not diversified"

- The real case for a lower-return strategy: avoiding years of psychological toll from a severe drawdown

Guest: Jared Dillian, editor of The Daily Dirt Nap and author of The Awesome Portfolio

🌐 Website: https://jareddillianmoney.com
📖 Book: The Awesome Portfolio - https://www.amazon.com/Awesome-Portfolio-Jared-Dillian/dp/1804094080

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