The Diversification Delusion | The Risk that Leaves Both Stocks and Bonds Exposed

In this episode, Jack and Matt revisit one of the most debated topics in investing: the fate of the classic 60/40 portfolio. Drawing on insights from some of the smartest minds in finance—Bob Elliott, Adam Butler, Warren Pies, Rick Ferri, Jared Dillian, Andrew Beer, and Cliff Asness—they explore whether the traditional stock/bond mix still makes sense in today's environment or if investors need to rethink diversification, risk, and portfolio construction entirely. With perspectives ranging from strong defenses of simplicity to sophisticated alternative strategies, this episode is a deep dive into what investors should consider in building resilient portfolios going forward. Topics Covered: Why the 60/40 portfolio worked—and why it might not anymore The impact of inflation, liquidity, and regime change on asset allocation Risk parity and quadrant-based frameworks for understanding market environments The argument for real assets: real estate and commodities An overview of the Awesome Portfolio and its performance profile The rise of managed futures and how they improve diversification The psychology of investing in alternatives (and sticking with them) Rebalancing and the importance of sizing when adding alternatives Cliff Asness on high-volatility alternatives and long-term risk-taking How to think through alternatives as your portfolio grows Timestamps: 00:00 – Is the 60/40 portfolio really dead? 02:00 – Behind-the-scenes banter and podcast evolution 03:00 – Why talk about 60/40 now? 04:00 – Bob Elliott on historical macro conditions 08:00 – Inflation/deflation: how often do extremes really happen? 11:00 – Adam Butler introduces the quadrant framework 13:00 – Two legs of the 60/40 stool are gone 16:00 – Portfolio imbalance: stocks drive risk 17:00 – Warren Pies and the “Golden Age of Dip Buying” 21:00 – Rick Ferri's simple case for low-cost indexing 24:00 – Complexity vs simplicity in portfolio advice 27:00 – Jared Dillian’s “Awesome Portfolio” breakdown 31:00 – Financial vs hard assets 33:00 – Permanent portfolio and inflation protection 36:00 – What are “alternatives” really? 39:00 – Andrew Beer explains managed futures 41:00 – Why managed futures work when stocks don’t 45:00 – Rebalancing and return enhancement 46:00 – Cliff Asness on high-vol alternatives 50:00 – Risk, volatility, and rational portfolio design 54:00 – The psychology of sticking with non-traditional strategies 57:00 – Final thoughts: there’s no one-size-fits-all portfolio