Brett Rentmeester, founder of Windrock Wealth Management, says the classic 60/40 portfolio may be dangerously outdated, and it’s time to look into alternative investments to protect your wealth. In this conversation with Maggie Lake, he explains why investors must rethink diversification as we enter a new era of higher inflation, rising interest rates, and currency uncertainty. This isn’t about abandoning traditional assets but about complementing them with smarter, more resilient strategies.
You’ll learn:
- Why future returns from stocks and bonds could disappoint
- How to defend your purchasing power, not just grow your portfolio balance
- 3 essential “crisis-resilient” assets Brett recommends for long-term safety
- The role of farmland, gold, silver, and Bitcoin in protecting wealth
- Where the real growth is: private lending, venture capital, and innovation-driven opportunities
- How tokenization could unlock liquidity in traditionally illiquid investments
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Brett Rentmeester 0:00
We’ve been in a 3040, year cycle of rates coming down, and we’re probably turning the corner. I think what most people really want, that are trying to protect wealth, is to hedge against what do I do if central banks can’t print money anymore, or there’s a currency crisis like what kind of assets historically have gotten people through a crisis from beginning to end where they’ve ended up with most of their purchasing power intact.
Maggie Lake 0:29
Hello and welcome to wealthion. I’m Maggie Lake, and I’m joined by Brett rent Meester, Founder and Managing Director at wind rock wealth management. Hi, Brad. It’s great to see
Brett Rentmeester 0:37
you. Nice to see you as well. Thank you for having me. So today
Maggie Lake 0:41
we are going to focus on alternative investments and the role they can play in better diversifying our portfolios. But let’s start with this concept of diversification itself. I think it’s a term that’s thrown around a lot. But what does it really mean to have a well diversified portfolio? How do you define that? Yeah,
Brett Rentmeester 1:02
it’s a great question. I mean, diversification, a lot of people view that as kind of a boring topic, until you get into really trying times and you wish you had more of it. You know, I’d say before, how we define it is a little different than maybe how the market defines it. I’d say the market has, historically, in the US, defined it as this mix of stocks and bonds and kind of this traditional, whatever you want to call it, 60% stocks, 40% bonds. And I think part of that is because we’ve been spoiled in the US. We’ve been in an environment since the early 80s where interest rates came from double digit rates down to zero, literally zero during COVID and at the same time, in the early 80s, the P E ratio on stocks with single digits, and it’s come all the way up. So we’ve, we’ve kind of been spoiled by this idea that this mix of stocks and bonds in recent history, this round of investors, has been very good, and it hasn’t really pushed people to go outside of that boundary. But we can get into it more, but we’re a little more students of history, and we recognize that there are plenty of environments where stocks can get hurt and be down for many, many years. Same with bonds, and sometimes together, both stocks and bonds losing money, and that’s clearly the kind of environment that would trouble investors.
Maggie Lake 2:18
Yeah, we certain, certainly are not used to that, and you’re right. We tend to think of them as offsetting each other. So what are you seeing now that makes you think about those periods in history, what’s happening that? What’s the parallel? Or what’s happening that makes you think we’re entering another period where we could see them both go down together, or some sort of, you know, sideways, paltry returns.
Brett Rentmeester 2:42
Yeah, I think, Well, part of it is, I mean, our story is not to abandon stocks and bonds. It’s simply to think outside of just the simple stock and bond paradigm. And I think, you know, what’s making us think about this? A couple things. One is what I just mentioned, we’ve been on this amazing trajectory since the early 80s of falling interest rates. And interest rates have the impact of falling. Interest rates tend to boost all asset values, including stocks, including bonds, including real estate, but we went to down to 0% rates during COVID. You can’t go any lower in Europe, things went negative, which almost defies logic. And so yes, we’ve bounced a little, but what we’ve learned about bond markets, and what we believe, is they go through generational cycles. So if interest rates tend to drive things, bond markets tend to go through 30 to 40 year type cycles. Meaning, you know, we’ve been in a 3040 year cycle of rates coming down, and we’re probably turning the corner. The last time we saw raising a rising rate environment in this country was the 1950s all the way to 1980 and that was a three decade period where bonds lost money as far as relative to inflation or purchasing power. And we’ve had similar episodes in the stock market that normally coincide with rising interest rates and things like that. So we’ve had two periods in the US in modern history where stocks are down, and it’s taken you 16 years to get back to even on an inflation adjusted basis. So you know, take your age today, add 16 years and tell me if you’re really committed to investing for the long run. And that was, of course, the famous 1929 through the Depression, but also 1966 to 1982 so we see it in the US, and we’ve seen even more dire outcomes like that outside the US. Yeah,
Maggie Lake 4:26
I like that, that period of the 60s that you’re referencing, because we all know the depression was terrible, and we hope we can avert something like that. But it doesn’t have to be in that extreme situation where you can have this really long period of underperformance that people aren’t just used to. I heard you mentioned twice inflation. And I think this is important, because if you think about getting out of that zero interest rate environment, um, then you’ll think, well, you know, savers got screwed during that period. And okay, higher interest rates means you can put money in the bank and get get it, you know, get some money back on that. It’s good. For savers, there’s this idea, but the inflation part matters a lot, right? Can you touch on that a little bit? Yeah,
Brett Rentmeester 5:05
it does, because, of course, it feels a lot better today getting 4% on a short term US Treasury than it did getting close to zero. But if we’re getting 4% but inflation is really running, you know, maybe CPIs at at something lower, but our real basket of goods is going up 8% a year. We’re not getting ahead, we’re falling further and further behind. And so yeah, I think for most investors, the game is really not just to go up every year, it’s to increase your purchasing power. And I think a lot of people are feeling the pain of inflation. Of course, inflation, as we talk about it, is a year to year growth rate. But the prior inflation didn’t go away. So a couple years ago, when we had that big spike of inflation that’s still represented in most costs. That’s why, even though people feel like their investment balances are up, you look around and homes seem really expensive, vacations seem really expensive. You know, go down the list, most people haven’t really kept up.
Maggie Lake 6:01
I think that’s so incredibly important, what you what you just said, because we’re kind of trained to look at returns. That’s when we open our our portfolio or our statement, we see, year to date return, and that’s what we tend to grab on to. And we feel pretty good if it’s up there. But you’re, you’re the idea of growing your purchasing power as the goal that you should be looking for. I think it’s just such a great clarification for everyone. So there are going to be some people who listen to this and say, Okay, well, I understand diversification is important. I’m diversified. I own defensive names in stock market. I’ve moved from growth and tech to something more safer and more defensive, or I’ve gone up the quality in bonds, you know, only investment grade, and that’s diversification. Is that how you see it? Or why is it necessarily necessary to think kind of outside the world of stocks and bonds?
Brett Rentmeester 6:50
Yeah. I mean, there’s certainly an element to that. I mean, diversification can be done at many levels, and there is something about within an asset class, are you taking a lot of risk? Are you more defensive? But I think what we’ve seen is, if you’re in a really bad market environment, like, let’s just take April recently, when the market was down, it mattered what kind of stocks you had, but on average, you were probably down with it. If you were in US stocks, or in a period where interest rates are rising rapidly, you can have a variety of bonds, but on average, most bonds are going to get hurt in that environment. And again, I think we’re a little spoiled in the US. We’ve had not only this period of falling interest rates, but we’ve also had massive intervention by central banks. And this is really a global story, and it feels good in the near term, but what they’ve done is essentially, when there’s market weakness, they pump money in the system, and that kind of reprops everything up, right? We had that during COVID. We had that during oh eight. But it also creates high valuations in both stocks and bonds and more of a risk. We believe that if any tenants of that break, you’re more in an environment where stocks and bonds can go down together. And you know, you can certainly look even to recent history, the European financial crisis, you had countries like Greece within the last decade that lost in a very short period, 90% of the value in the equity markets and 70% or more in the bond markets. So there are times crisis periods where stocks and bonds can go down together. And irrespective of like which stocks you have, you’re probably going down with that if your main exposure is there.
Maggie Lake 8:24
So what? What is a better path for diversification these days, if we’re in this new era, we’re moving out of that 30 to 40 year cycle, and we’ve got this intervention that’s created froth and overvaluation. What should investors be looking at? What should diversification look like?
Brett Rentmeester 8:44
Yeah, well, again, this is not a recipe to abandon stocks and bonds altogether. It’s really just to broaden a perspective beyond that. I think the first, the first, there’s kind of two segments of alternative investments. I would say the first is, how do I really prepare myself if we have a crisis, what are the reasons we could have a crisis? Well, war is a crisis like World War Two, another crisis can be caused simply by Central Bank intervention. We’ve printed all this money. It’s driven everything up to an unsustainable level, and now it’s got to come down. And then the third related to that is about every 100 years there’s a change in the currency system in a major way. And so you can look back in history, and it was, you know, it’s been the dollar, but it’s a little long in the tooth. It’s over 100 years prior to that. It was England, prior to that, Spain and Portugal. So we’re kind of also nearing this point where currency markets might have some changes ahead, and people talk about that. So I think one element is can, what is a piece that can get me through a crisis? And when you really boil it down to simple logic and look at history across different countries, you can say, well, what are basic necessities for people? One. One is shelter, I’d call that the right kind of rental real estate. One is food. I’d call that the right kind of productive farmland. And third is some kind of sound money, or something you can save in and believe the value is going to hold. And historically, that’s been gold and silver, and I think more recently, people are open to the idea that Bitcoin might be playing a role in that. So it’s kind of this triangle of necessity goods that can weather a lot of storms. And all those things share one characteristic, they’re all some sort of hard asset that just can’t be printed out of thin air. I mean, even Bitcoin, maybe you can’t call it a hard asset, but it has a limited number of Bitcoin that will ever, ever exist. So I think that’s important.
Maggie Lake 10:41
Yeah, certainly, certainly has an appeal for people who consider it borderless and sort of, you know, more global as we’re looking at increased geopolitical threats. So it’s interesting. I want to back off for a second, because when you when I hear alternative investments, I by nature think that they’re fringy, maybe, and, uh, riskier, sure, but it doesn’t sound you’re you’re talking about them as the ultimate safe havens. Yeah.
Brett Rentmeester 11:04
Well, you know, I’ve described the first bucket of how we view alternatives. The first bucket is, how do if I want to diversify, but I’m diversifying to protect wealth against the really bad events that history can dial up. That’s probably not going to be just stocks and bonds. I mean, stocks and bonds are going to Ying and Yang and weather a storm, and maybe if stocks are down 20% maybe you’re down only 10 with bonds. But I think what most people really want, that are trying to protect wealth is to hedge against, what do I do if central banks can’t print money anymore, or there’s a currency crisis, like, what kind of assets historically have gotten people through a crisis from beginning to end, where they’ve ended up with most of their purchasing power in tax so that, yeah, you’re right. It’s it’s not talking about the risky stuff, and it’s really hunkering down. What kind of things should I consider now, there is another side to it, which is the opportunity of alternatives. Oh,
Maggie Lake 11:58
that. So that’s really important. So alternatives as as safety and then. But there is another part, if you’re thinking about diversification of a way to try to look for opportunity or grow reach for that yield, right? So what’s in that bucket?
Brett Rentmeester 12:13
Yeah. So for us, in that bucket of things we actively invest in are a couple things. One would be private lending. So we talked about how interest rates have come up, and you can get 4% in a short term Treasury today, but if you’re willing to take a little bit of illiquidity, there are plenty of opportunities to lend money to businesses against assets where maybe you’re getting double or more of from that, you know. But you’ve got to have the right people that know the space, and you’ve got to, you know, understand what you’re getting into. But private lending would be an idea of that. So maybe I don’t want to be sitting in normal bonds, but maybe I do get comfortable with lending money into, you know, unique niches. So that would be one category, you know, I think a second category would be something along the lines of venture capital. It could be private equity, but let’s call it venture capital startup companies. Can I get access to a group of startup companies that might be disruptive years from now? And I can tell you right now, through some of the accelerators we’re involved with, these groups that, you know, mentor and fund young entrepreneurs, that so much of it now is AI, and not just broad based AI, like people that have domain expertise in one vertical area, and they want entrepreneurs that can use AI to disrupt whatever that area is. So that would be a second one, a higher risk category, and you’ve got to tie up your capital for a longer period of time, but it allows you to be part of the entrepreneurial community that’s made America so great. And then you also have, of course, things like other cryptocurrencies, beyond Bitcoin, I mean, including AI, there’s decentralized artificial intelligence projects that are being tokenized. And there’s so many things going on in that world that we think are interesting, that many investors are either scared away from or they have advisors that just aren’t willing, you know, to look out in those kind of areas. And then finally, there are things that kind of are in between, like energy type assets, which can range from pipelines and energy infrastructure all the way to, I mean, should I own, you know, nuclear energy and natural gas plays so pretty wide range, honestly,
Maggie Lake 14:21
yeah, it’s fascinating stuff. You mentioned illiquidity, and I just want to come circle back to that, because it sounds like one of the one of the appeals. And I think one of the reasons that so many people are heavily reliant on equity exposure is because, of course, ETFs and all the innovation that Unleashed. You can jump in and out. It’s very liquid. You know, you can make a decision and change your mind and get out of something. And there’s a certain comfort with people that what do we need to understand about duration diversification when we’re talking about some of these alternatives? Yeah,
Brett Rentmeester 14:55
well, it’s a great point, and I think you have to be very careful about your liquidity needs. So what we tend to see is, you know, for younger people, sometimes there’s an opportunity to take some illiquidity risk in an IRA. You can actually do a fair amount of private investing in an IRA. And for young people, the mindset is, well, I’m not going to take this money out until my 70s anyway. So they have a long horizon that can kind of set it and forget it. It feels more comfortable as people retire, there’s generally a feeling like I’m retiring. I’m 65 and I need to hang on to all my money. But the reality is, they still might have 30 or 40 years to invest for. So I think it’s all about managing, really, what your lifestyle is and what your needs are relative to these opportunities. I will say some of the, what I call illiquid investments, we do might have six months of illiquidity, and some go up to 12 years. So there’s a very wide range out there that, you know, at least we help people manage. Yeah,
Maggie Lake 15:50
and it sounds like, correct me if I’m wrong, but it sounds like we’ve got to kind of adjust our thinking to diversity around duration, because, you know, the idea that you can get invested in something like an Nvidia and get 100% return, you know, return on that, not return, but see 100% gain and and still be in this super liquid, super, you know, that type of growth isn’t something that’s always available in a vanilla Stock market that we’ve kind of been through an extraordinary time. I don’t think we should benchmark our expectations based on that.
Brett Rentmeester 16:27
Yeah, I totally agree with that. And you know, that’s one of the risks. Of course, when we talk about US equities, as good as they’ve been, as excited as people are about AI, and we are too. We have to be very careful about valuations. And when you really look at some of the measures, everybody’s got the preferred measure of long term historic valuation, I think when you’re really looking back decades, you look at things like the Shiller PE ratio, and what you conclude is, other than the tech bubble, we’re at one of the highest levels ever in those kind of historical measures. We, you know, exceeding where we were in 1929 and clearly, you know, when this gets really elevated and we’re at high levels, historically, the future returns, the next 10 years are now not as great. So I think it’s also you’ve got to think about where you are in a cycle, and it’s hard to shift gears, but once you’ve had great run ups, you’ve got to shift into a gear that says, hey, maybe we need to take some risk off the table and play it safe here, and when markets are down, you’ve got to do the opposite. You’ve got to fight your kind of normal emotional hesitation to buy when things are you know, there’s blood in the streets.
Maggie Lake 17:30
It’s hard, right? I know we say that all the time, but it’s so hard when we’re talking about allocation. I’m sure there are going to people sitting here listening to this, thinking, Okay, this makes sense, but how do I know? How much should I have in these how diversified should I be? It’s hard. Everyone’s needs are individual. So I know it’s impossible to answer that question. But generally, is there are any general rules of thumb when we’re talking about allocation, and should you have all of these different types of alternatives, or do you need to look at your needs and and just have having some is okay?
Brett Rentmeester 18:08
Yeah. I mean, really is so client specific. Because, you know, you could have someone that has a portfolio but is going to need all the money for living expenses of retirement. You can have others that have money that might last a number of generations. And so there can be different mindsets. I think, you know, in general, the idea of the crisis bucket of like owning gold and silver and some bitcoin, some hedges to a currency, we believe that should be everybody, other things like farmland and venture capital, and that’s really you’ve got to have the time horizon and maybe belief in the thesis to want to do some of those things, private lending is kind of in the middle, you know, I think there’s opportunities where you’re not locked in for that long, necessarily. So I think it is very dependent. But, you know, I would say in general, most of these allocations, if you do anything less than a couple of percent, probably isn’t meaningful. But anything that pushes 10% is a large position. So, you know, a lot of these are going to be in the, you know, two and a half to 10% type range. For people, that’s a
Maggie Lake 19:11
that’s a great role, that’s a great sort of, I think, at least beginning point for people, yeah, it’s a starting point. You need a starting point, right? It’s otherwise, it’s sort of, it’s very daunting to think about making those changes when you just have no idea if you haven’t been allocated in these areas. I just want to finish up. I’m so interested and intrigued to hear talking about tokenization and blockchain how, what kind of risk profile does somebody have to be to be in that? And I asked that with a bias, because I think many thought, and maybe still think, that it’s a super risky area, but there’s a huge amount of financial innovation going on. If you sort of take the word crypto out of it, you just think about financial innovation. I mentioned ETFs before, right? There was a time when we didn’t have them, and we think nothing of it now. And so. So, you know, how do you think about that in terms of a risk profile before, you know, introducing that idea to a client?
Brett Rentmeester 20:05
Yeah, well, it’s changed. I mean, we’ve been, we were one of the first advisors in the country that we’re aware of, recommending cryptocurrencies, and we did our early writing on on some of these topics back in 2012 2013 so we’ve been in the space a long time. In an earlier days, it was higher risk clients that were willing to do something that seemed like a technology that was unproven but had potentially big upside. I mean, it still is a technology, but when you look at it and you compare it in an adoption curve like any other technology, whether cell phones or the internet, we’re tracking above where the internet is in adoption globally, and so it puts us in internet terms around 1997 So think back to 1997 that’s when we never would have believed anybody would put, you know, make a purchase on the internet or be able to watch a video or stream anything. And so today, it’s a different philosophy. I’d say our belief is even for conservative clients, they should have some exposure to at least the core cryptocurrencies like Bitcoin, but in small magnitude, right? Whereas a riskier client that wants to take more risk, they have larger allocation, but they’re also probably broadening out into other tokens. And you know, it actually what I was saying about the illiquid investments, private investments largely being illiquid. There’s also an exciting future. I don’t know if it’ll happen. I think it will where slowly, some of these illiquid assets get tokenized, so that in the old days, I might have been in a private real estate investment and I was tied up for seven years. Now, it becomes tokenized two years from now, and I can trade my shares to somebody else. So some of this illiquidity might go away.
Maggie Lake 21:43
Amazing stuff. This has been a fascinating conversation. Just a final thought to leave folks with, because it sounds like, from what I’m hearing you say, you know, we are really this isn’t a moment in time. We’re in a kind of regime shift, and we all have to rethink the way that we’re approaching our portfolios.
Brett Rentmeester 22:01
I think that’s right.
Maggie Lake 22:04
Great stuff. Brett, thank you so much. Appreciate your time.
