Episode 27: AI Stock Selloff — Why Asset Allocation Makes You Financially Bulletproof
AI stocks just had their longest losing streak since 2008. The better question isn't what the market does next. It's why you should care.
In this solo episode, Joe Withrow starts with the selloff in artificial intelligence (AI) stocks and uses it to make the case for asset allocation.
The trigger is debt and interest rates. Big tech is on pace to spend roughly $700 billion this year building AI data centers, and a large share of that money is borrowed. At the center of the pullback is CoreWeave, which rents out computing power to AI firms and carries a mountain of debt.
As rates rise, the market worries that capital spending will slow, data center projects will be delayed, and CoreWeave will struggle to pay its lenders. One of its bonds hit a yield of about 16%, while the U.S. government can borrow for ten years at around 5%.
Joe explains what a gap like that tells you. He also puts the selloff in proportion: the broader credit markets barely moved and the Dow Jones Industrial Average rose on the week. This is worry, not panic, but it's the first real crack in a trade that has carried the market for years.
Is it the AI bubble popping or a healthy shakeout? Joe's answer is that nobody knows, and that the answer has little effect on how the Phoenician League invests.
The financial media is built on predicting what the market does next. Joe thinks the better question is why you should care at all. If you hold 60 to 80 percent of your money in stocks, you have to care. If you follow asset allocation, you don't.
Joe explains why most people have the wrong idea of diversification. Owning many stocks across many industries isn't diversification, because in a real drawdown they fall together. Real diversification means spreading money across different kinds of assets.
He walks through a $100,000 example: with 80% in stocks, a 30% market drop costs you $24,000. With 10% in stocks, the same drop costs you $3,000, and you probably don't lose sleep over it. Joe draws on his time in the loss mitigation department at Wells Fargo after the 2008 crash, and what he saw financial stress do to people's decisions.
He also explains why the old 60/40 and 80/20 portfolios looked like a strategy. They rode four decades of falling interest rates, from around 20% in 1982 to near zero in 2022, a once-in-history tailwind that ended in 2022.
Then Joe lays out his layered model. The foundation is savings: gold, Bitcoin, and max-funded life insurance, also known as infinite banking. On top sits the investment layer, with stocks, cash-flowing assets such as real estate, mortgage notes, music royalties, and private lending, and an optional slice of private investments once everything else is in place.
Joe shares how he tracks his own allocation each month, why he doesn't rebalance, and how his model tells him where he's light right now and where to focus next.
The episode closes with homework that takes 10 to 20 minutes: document everything you own, work out the percentage in each category, and see where you're overconcentrated or light.
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In this episode:
- Why AI stocks fell for days in a row, and what the selloff says about debt and interest rates
- Why CoreWeave's bonds sold off, and what a 16% yield signals about the market's fear of non-payment
- AI bubble or healthy shakeout? Why Joe's strategy doesn't depend on the answer
- Why diversifying across stocks and sectors isn't real diversification
- A $100,000 example comparing an 80% stock allocation with a 10% allocation in a 30% drop
- How asset allocation protects you from the market and from your own decisions under stress
- Why 60/40 and 80/20 portfolios were a lucky passenger on four decades of falling interest rates
- The layered model: gold, Bitcoin, and max-funded life insurance as the foundation, with stocks, cash-flowing assets, and private investments on top
- How Joe tracks his allocation, why he doesn't rebalance, and how the model sets his priorities
- Homework: a 10-to-20-minute exercise to map where your money sits
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Want help building your own asset allocation? The Phoenician League has a process for it, and Joe will cover it in the next strategy session. It isn't scheduled yet, but one more is planned before 2027. Subscribe below to be notified when it opens.
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