0:00

Hello, and welcome to the show. You're listening to the advisors of Kirsten

0:03

Wealth Management Group, Kevin Kirsten and Brad Kirsten. Happy to be with you

0:07

today as we digest the month of April and the returns that we saw in

0:10

the month of April for stocks. We'll go over that here. We'll go

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over that here in a second, and also digest the Fed Reserve meeting which

0:17

just recently happened, and we got some pretty big market movements as a result

0:22

of that meeting, both the meeting and then the comments that came afterward.

0:26

I thought some interesting comments did come out of that meeting, though, Brad,

0:30

I mean, the market initially responded pretty positively to the initial report,

0:36

and then when Chair Powell came up and spoke, came back down to earth

0:42

a little bit and finished down slightly on the S and P five hundred.

0:46

And of course, we had our first sort of down period of time for

0:49

twenty twenty four in the month of April right before that, but it was

0:53

really first down month since the September and Octo August and September period and the

1:02

worst months since going all the way back to over a year. So the

1:07

month of April was kind of what you would expect out of a correction.

1:14

What was up the most, sold off the most, and things that weren't up at all were actually up over this last two month period. And even

1:21

in the month of April a few sectors two of the of the eleven up,

1:26

But over the last two months you have five of the of the eleven

1:29

sectors up over that period, and it's the defensive sectors. You would expect

1:33

energy, utilities, consumer staples kind of leading the way, the defensive areas,

1:38

but they're really only ever leading the way in the last three years when

1:42

the market is a little skittish like April, or in a period of time

1:46

like twenty and twenty two, when you have this ten month selloff, it's

1:51

the only thing kind of holding up and not down as much or even up

1:55

when the case of energy. But what do you want do you would if

1:57

you're going to be a buy and hold those areas, you're going to be

2:00

disappointed more than you're happy over the last three years, five years, ten

2:05

years. It's only periods of time where the market is giving you no performance

2:07

that that's outperforming the rest of the time. It's all the gross sectors leading.

2:13

So the Fed today acknowledge the fact that the getting down to the two

2:19

percent target they have has been more difficult than they expected. But at the

2:23

same time, they also closed the door on raising rates further. Pal said

2:27

the bar is extremely high for them to raise rates any further. And that

2:30

was sort of a concern that started creeping in in the last few week, few weeks and a few months, is that they may have to raise that

2:37

maybe started some of the volatility that we saw in the month of April,

2:40

but they kind of closed the door on that. And it's really down to

2:44

the fact is where will there be one or two cuts this year, or

2:49

any cuts at all. I mean, certainly there's a meeting in June,

2:52

there's a meeting in July, there's a meeting in September, and then there's

2:54

November and December. Possibly not going to do anything till after the and do

3:00

one. I think that's where we are now. Yeah, And he was asked that question directly about raising rates, and you know who knows on the

3:08

the minute to minute movements, but I was watching the markets at the time

3:13

he was asked that question, and he said this, It was it's a

3:15

very high bar. Basically, we're not close to raising rates anytime soon.

3:21

And that's what the market really needed to hear, because you started the meeting

3:24

with if we're looking at the dow, the Dow up about one hundred at

3:28

the start of the announcement and his talk, it goes from up one hundred

3:32

to within fifteen minutes of that question getting asked and answered, the Dow being

3:37

up four hundred, and then just kind of giving it all up and ending

3:40

the day where we started the day with the Dow up but the other two

3:44

indices kind of down a third of percent, so you kind of go all the way up and then retrace and go all the way back down to kind

3:50

of write where you start. So that puts this out of four and a

3:52

half percent sell off from high to low kind of right where we finished April.

3:57

And you look in the month of April, Brad Little it worse for

4:00

small caps in mid caps. Sort of a story that we've seen over and

4:04

over again on corrections here in the last six or seven years. The economic

4:11

sensitivity of small caps in midcaps to rising rates, you know, reared its

4:15

ugly ahead again in the month of April. Growth and value styles were kind

4:18

of similar though on the selloff in the month of April. Both indexes lost

4:23

four point three percent in the month of April, and utilities and energies you

4:27

kind of touched on that those were the leaders in the month of April.

4:30

That on the defensive side. Healthcare in real estate typically has a little bit

4:35

of defense in it, but those actually lost more than the S and P

4:40

five hundred. The International index fell but held up slightly better than the US

4:45

index, only a two and a half percent loss for the month of April,

4:47

so that's interesting to see a little bit of outperformance there, and the

4:51

Emerging Markets index actually gained for the month of April, up four tenths of

4:56

a percent, So something to keep an eye on with the verse vacation and

5:00

what's going to start outperforming the S and P five hundred. Is it going

5:03

to be small caps and mid caps? Is going to be international? We're

5:06

starting to see a little bit more of that, especially on the international side,

5:10

in the last month. So yeah, I want to touch just before

5:13

we move on completely from the FED on why the negative news is out there

5:18

around the FED, and all of it has to do with the economy being

5:23

too strong inflation being stubborn. But why is it stubborn. It's stubborn because

5:27

people are still spending money. And so all of the metrics that would tell

5:30

you that things are slowing down and the FED might have to cut to stimulate

5:34

are not. Are they've come down a little bit. The economy is not

5:39

growing at such a rapid pace, but still growing. Jobs are not.

5:42

We're not getting three hundred thousand jobs a month, but we're still getting close

5:45

to two hundred thousand. Everything looks pretty good. And the reason it's that

5:49

the negativity around the FED not cutting early is because things are too good now.

5:55

We need to get past this today bad news. So the concern is

5:59

always this late seventies early nineteen eighties situation where we had declining economic growth and

6:04

inflation. They call it stagflation, and he even mentioned, well, we

6:08

don't have the stag part or the flation inflation party. Stagnant would be either

6:14

not growing zero percent GDP or contracting GDP negative GDP, and the inflation part

6:20

would be certainly an inflation level higher than the mid three percent level that we

6:25

see today. Their goals too, but mid threes is not run away inflation

6:29

at the moment. So I think there's just a lot of negativity out there

6:32

that needs to really change. Even on inflation. You know, core PCE

6:36

is two point eight and regular PCE, that is what everybody talks about,

6:41

is still in the mid three. We've come down from we go back.

6:45

It's the cumulative effect, Brad, it is. It is the reason people

6:47

have that negativity. Now, are you talking about market participants? Are you

6:51

talking about the American people? Well, it's a little bit overlap, I

6:55

understand, but I agree, But is it slowly down spending? It's not.

6:58

People are angry about inflation because of the cumulative effect of eight percent eight

7:03

percent and then three day to day purchases where you don't get that gasoline is

7:10

the same as it was, is lower than it has been for half of

7:14

the last fifteen years. Well, I hate to break the news to people

7:17

about inflation. It just yes, we can get it under control. But

7:23

you don't go back to the You don't want an environment where we go back

7:27

to that. Well, that would be a catastrophic, you know, economic

7:30

collapse. You have the Goldilock scenario right now where the economy has slowed down

7:32

a little bit, but it's still growing. Jobs are have have kind of

7:36

disappeared a little bit, but you still you don't have ten million open jobs,

7:40

but you got six and a half seven and you're still adding jobs,

7:44

and you get wage inflation, but it's not runaway wage inflation. You're almost

7:48

to the perfect scenario where stocks and bonds potentially you almost you could throw a

7:55

dart and you could you could do either one and be okay. And it's

8:00

as long as you're not overly concentrated in your stock sectors, you can do

8:03

just about anything and you're going to be happy. Well, and I'm going

8:07

to touch on more of these things, but I saw a article that talked

8:09

about ten years from now. You know, just think to yourself where certain

8:13

things are going to be ten years around. One of the things that it

8:16

was Ben Carlson who put in this ten years from now was inflation or prices.

8:22

And since nineteen hundred, the consumer price index, in the inflation index

8:26

that we all look at, has been higher ten years later ninety three percent

8:31

of the time, and the only time it was lower was during different ten

8:35

year periods throughout the Great Depression. Okay, since World War Two ended,

8:39

there has not been a single ten year period where prices fell. So I

8:43

know we all long for that cumulative effect to go away from inflation rising so

8:50

much and we want to go back to where prices were. But really,

8:52

the best you can hope for considering that since World War Two ended, we've

8:56

never had a ten year period where prices fell, So that includes think about

9:00

that, that includes after a double digit inflation period in the early nineteen eighties.

9:07

If you would look at inflation at the very peak and look ten years

9:11

later, it was still higher. It was still higher. So you're not

9:15

going to get it. The best you can hope for is average or below

9:18

average for the next ten years. Since World War Two, there's never been

9:22

a ten year period where prices have fallen. So yeah, people have to

9:26

come to that realization. However they're going to come to it. Usually it's

9:28

over time. But that cumulative effect really probably will affect the election more than

9:33

anything bred But the reality is you're not going to get prices to go backwards

9:39

unless the economy collapses in a nineteen thirties depression style collapse. And I think

9:46

anybody showing a chart or doing anything to say that it could and should or

9:50

we should be rooting for it, or it's going to happen and cause a

9:56

decade long recession. They're looking too far back. We do not need to

10:00

look at great Depression ninety year ago figures to come up with it. I

10:05

saw another one on home prices where somebody said, we're kind of locked into

10:09

home prices always go up, but you're only looking at the last seventy five

10:15

years and not the seventy five years before that. And their ridiculous chart that

10:18

I saw on Twitter was, yeah, we've gone up at a pretty steady

10:22

pace since nineteen fifty, but what if you look at eighteen sixty to nineteen

10:28

fifty, places were pretty flat for home prices. Oh really, when eighteen

10:33

sixty to nineteen fifty is what we want to look at for a comparison to

10:37

our current market, I think looking beyond nineteen fifty, and I even think

10:43

looking beyond really nineteen eighty is looking back too far. We are different economies.

10:48

You can't look at home prices from eighteen fifty to nineteen hundred, and

10:54

you can't look at the stock market from nineteen thirty to nineteen fifty and make any comparisons to what we're talking about today. The company different the sectors are

11:01

different. The economy is growing at a much more rapid pace because it's made

11:05

up of growth companies that grow at a more rapid pace. And I would

11:07

make the argument even looking at PE ratios and comparing it to past PE ratios

11:13

when the economy was made up of low PE sectors versus high PE sectors,

11:20

is looking at something that is not a comparable. I think that if the

11:24

US economy is thirty percent tech that trades at a high multiple, eight percent

11:28

communication services that trades it a high multiple, fifteen percent community consumer discretionary that

11:33

trades a high multiple, and compare that to a nineteen fifty's economy that was

11:37

made up of railroads and insurance companies. And the only way you'd be able

11:43

to do it is to equal weight those sectors and compare it. That'd be

11:46

the only fair way to do it. Yeah, and equal weight or equal

11:50

weight growth to value whatever you want to do. So yeah, it it

11:54

to go back. I mean even on housing as an example, that was

11:58

in this ten year a chart from Ben Carlson looking at ten years from now,

12:03

housing prices will be higher or lower in all ten year rolling periods over

12:07

the past one hundred years, ninety seven percent of the time it's higher.

12:11

Okay, housing prices can fall, but it's a rare occurrence for it to

12:15

happen nationwide for over a decade. The only times national home prices declined over

12:18

a ten year period, we're following the Great Depression and then also two seven

12:26

people who just bought from two thousand and six and seven to twenty sixteen and

12:31

twenty seventeen. It's the only time it ever happened. And so that being

12:35

said, yeah, what could slow that down? Because people want to get

12:39

in on these houses. You only don't look at eighteen sixty. How can

12:43

you compare the housing market then to today? It's simple, folks, it's

12:46

supply and demand. If there's more houses available to buy and there's more houses

12:52

than people looking. Right, if you're out there looking for a house and

12:56

it's you against ten people for one house, guess what price is going up.

13:01

But if you're out there looking for a house and they're sitting on the market for three months and you're you're the first better and you have five other

13:07

ones to look at, yeah you're going to get a better price. So

13:11

that could happen. I mean, obviously the baby boomers are an aging population

13:13

brand they either will be downsizing or passing away, and their and their houses,

13:20

you probably see an even bigger drop when they pass away, because their

13:24

beneficiaries wouldn't be as attached to the price of that house as they would be

13:30

at their downsize. And yeah, they don't want to They don't want to hang on to it for the extra tax and insurance payment or just the work

13:35

out, willing to take the lower place. So you could see that.

13:37

I mean, the baby boomers right now are between the ages of sixty two

13:41

and seventy eight. You could see in the next decade or so more and

13:46

more houses coming on the market to help those housing prices. But those are

13:50

much more logical things to look at in terms of what's going to bring housing

13:54

prices down. Then, Oh, let's look at this chart from eighteen sixty

13:56

when housing prices weren't very good. Just searching for a negative out there,

14:01

Yeah, it's and we have that in all headlines. Is let me just

14:07

find a chart that I can have a negative. There's too much negativity out

14:09

there for as good as its economy. Let me close this out with the

14:13

rest of this ten years from now, because I think this is a valuable

14:16

tool to say to yourself when investing. In any time we talk about the

14:22

economy, housing prices seem high, inflation seems high, stock prices seem high,

14:26

government debt seems high, and people get worried. These are all cyclical

14:31

and the lines can go up and to the right forever. Bear markets,

14:33

financial crises, recessions are all features we cannot do away with. But if

14:37

you focus a little bit longer term and look ten years from now, long

14:41

term returns are the only ones that matter. So you look at these questions

14:43

I mentioned how I mentioned housing ninety seven percent of the time, and only

14:48

two different periods in the Great Depression and right before the Great Financial Crisis in

14:54

eight did you lose money? How about stocks? On a rolling ten year

14:56

period over the past one hundred years, SMP five hundred has been positive ninety

15:01

six percent of the time. There have been lost decades, It's not out

15:05

of the realm of possibility. The only time the stock market has been down

15:09

over a ten year period since World War Two was the ten year period after

15:16

the dot com bubble burst. Okay, so very good chance in a decade

15:22

if you're investing stock prices will be up. I mentioned inflation, I mentioned

15:26

housing. How about the US economy as a whole over the past eighty years,

15:30

there hasn't been a single ten year window when GDP didn't advance, not

15:35

once in eighty years. GDP growth over any ten year window going back to

15:39

the end of World War Two was a gain of more than thirty percent.

15:43

That was the lowest. That was the lowest. What's our economy now,

15:48

twenty trillion, whatever it is. Yeah, the worst ten year period was

15:52

thirty percent on top of that. Yeah, So for a ten year period,

15:56

Yeah, and that was you know. So, so if you can't

16:00

ignore the risk completely, but if you step back and give yourself the benefit

16:03

of time, that certainly is an advantage. So when you look at the

16:07

next ten years, you can say with a fair degree of certainty. You

16:11

can't be one hundred percent certain because you look at history and certainly there are

16:15

periods of time where it didn't happen. Stock markets higher, housing prices are

16:18

higher, inflation's higher, the economy is bigger. You can't guarantee any of

16:23

this, there's no such thing. But the point is you need to make

16:27

money, You need to earn money. And you need to save money and

16:30

invest that money because that's the only way to keep up with that those rising

16:34

prices. When people freak out about inflation and those rising prices, that's something

16:41

you can't change. You can't change that, Yeah, but what you can

16:45

change is investing so that you keep up with it. And the thing that

16:48

keeps up with it, that has the best batting average for beating it are

16:52

stocks. And there is too much negativity out there for as good as its

16:57

economy is, and don't let the negative keep you on the sidelines. We're

17:00

not in that environment anymore. We just got our first five percent sell off.

17:04

There is no reason now to think we're just gonna keep lopping five percent

17:08

months on top of each other. There's too many good things out there.

17:12

We get back from the break, Brad. It is first part of May.

17:15

Let's talk about the old adage sell in May and go away. Starts

17:19

popping up probably on people's search engines when they're looking at financial topics. You're

17:22

listening to money sents, Kevin and Brad. Kirsten will be right back and

17:26

welcome back. You're listening to the vices of Kristen Wealth Manage for group brand

17:30

and Kevin here this morning. If we're going to follow along with anything that

17:32

we've been talking about, you can find a lot of this stuff on our website under publications the market commentary. This week, what do we have?

17:40

Remember if I even well, it was it was a pivotal week. We

17:42

had a lot of different things that came out, and that's what the Market

17:45

commentary talks about. Brad looks at GDP, the good and the bad.

17:49

What where do the growth come from in terms of, you know, the

17:56

biggest contributors to GDP. We got a lot of inflation numbers that we talked

18:00

about in the previous segment with the personal consumption Expenditures index which was three point

18:06

seven annualized, up from two percent in the fourth quarter. That kind of

18:10

goes into what happened in the FED meeting and then just talking about the implications

18:15

for the federal reserves, and then earnings. Eighty percent of earnings have beaten

18:18

so far this quarter. This is all on our Market commentary on our website

18:22

Kurston Wealth dot com. Sixty three percent have beaten by more than one standard

18:27

deviation that that's getting in the weeks. Eighty percent have beaten. Yeah,

18:32

and the average upside surprise is over eight percent. And then we have big

18:36

earnings reporting this week as well in Nvidia Apple. Not a recommendation to buy

18:41

yoursell, but they do report this week. So that's in our market commentary,

18:45

just kind of a nice Cotsite Tice report for everyone to follow along with

18:48

the things that we're talking about in this entire show. But also we're putting

18:52

out a client letter this week that talks about a lot of these things.

18:55

Because there's so many positives out there that no one is talking about. We

18:57

want to point out to people how good things are. And one of those

19:02

things that is always put out as a negative that we're mentioning in the client

19:04

letter is selling may and go away. Now, what if somebody said sell

19:08

and May and go away, It would have you believe that the May to

19:11

October period, that six month period that they want you to go away,

19:15

is that six months five months period, it is a six month period is

19:21

negative historically, and it's not. The average is one point eight percent positive,

19:26

and so not exactly, especially in this period of time where we've had

19:30

a decade long very low interest rate environment where everyone would have said one point

19:36

eight percent six months. I'll take it, sign me up every year. And yet the media would have you believe sell and May and go away is

19:42

full proof to avoid negative returns, and it's not true. Well, there's

19:45

only one month that averages a negative return since nineteen fifty, and that is

19:51

September. And what's interesting to me about the selling May and go away crowd

19:55

is that July is one of the best months historically of the year, and

20:02

May and June are kind of average months historically. I mean, if you

20:07

annualize, if you annualize May, it's still a decent number. It's about

20:14

what about three percent annualized if you annualize the month of May. And if

20:18

you really wanted to pick a time period to be out, which this is

20:22

just you know, historical measures, you can't. Really it's long enough,

20:26

it's nineteen fifty. It's much more logical looking at this chart to sell on

20:30

July thirty first, Yeah, and it happened last year. July thirty first

20:33

was a relative high point. We went down for two almost two straight months,

20:37

and then we finished higher than July. But again, it's like it

20:41

really is July thirty first to like the third week in October. If you

20:47

look at it historically, but there's no rhyme that I can make for sell

20:52

on July thirty first, by by October fourteenth or twenty third. There's no

20:56

alliteration that sounds neat right. But the problem with all of that sell and

21:00

get back in mindset is the average person who's doing it is not prepared for

21:07

what the news cycle will look like. If you get exactly what you hoped

21:10

for. I mentioned on the last week's show, the market last year was

21:14

up twelve, then down ten, then up ten to get to be up

21:18

twenty at the end of July, down twelve, so we're only up eight,

21:22

then finished the year up twenty four. Okay, including divns a little

21:25

bit more than that. The news cycle, when we're up twelve before the

21:29

down ten is all positive, and then once the down ten happens, it's

21:33

all negative. You have to be prepared to buy when things look worse.

21:36

You're up twenty, everybody says everything's great on July thirty first. Two months

21:41

later, everybody says everything's terrible, and that's the time to buy. What

21:45

do you think they're saying in the last two weeks. They're not saying,

21:48

Hey, remember how I warned you about a five percent solif might come no,

21:52

because they weren't. What are they saying after the five percent happens?

21:56

It could be fifteen, could be twenty. But then what do we do?

21:59

Do we rally? We rally right off of it, and we're up

22:03

two and a half percent from that five percent sell off. So here we

22:07

are normal correction. Do they say ring the bell and buy? No?

22:14

Same thing with selling. May they see it as a opportunity to save you

22:18

from negative returns even though historically it is positive returns. And if you're going

22:22

to do it, fine, but you better be prepared to be buying back

22:26

in when things look worse, because when the stock market goes down, everything

22:32

out there they will tell you, they the media, mostly everything's bad.

22:37

And that's the time you need to be buying. If there's a bell that's getting wrung at the bottom, it's the bell of maximum negativity. And if

22:44

there's a bell at the top, it's maximum positivity. That's what the bell

22:48

sounds like. It sounds like I can't find anybody to say anything good about

22:51

the economy. Is the bell at the bottom, And so that's what you

22:55

have to be aware of, is it's too hard, it's too hard to do, and it's not worth it any way, because the next six months

23:00

are historically positive and that's all you need to know. Buy and hold when

23:06

you look at long term charts is the recipe for success. Well, and

23:10

that's the same as sitting out for six months from May to November, or

23:15

even the presidential cycles. If you look at the presidential cycles and you say,

23:18

I'm only gonna buy stocks for Democrats and I'm only gonna buy stocks for

23:22

Republicans, Okay, the people who did that are both sides are much worse

23:30

off than the person who held the entire time. Yes, yes, so

23:33

think about that. The completely party agnostic person who invested throughout all presidential cycles

23:40

no matter what made the most money, and the person that was partisan and

23:45

wanted to be out for whatever their various candidates were. They why Because it's

23:51

so much more important to have that time in the market, yep, than

23:55

it is to get it just right based on whatever political idea you think is

24:00

going to be the market all the time. When somebody comes to us who's

24:03

done nothing, but I put my money in my four to one K and I never thought about it, and I can't believe how much I have,

24:07

and now I'm nervous because I have so much, Versus the person who says

24:11

I looked at it every day. One every day I thought about what I

24:15

was going to change, and I may changes all the time. The performance

24:18

is sometimes a fraction. If you're buying a good diversified portfolio, one of

24:25

the best strategies is neglect yes, yes, because over time it kind of

24:32

all works. The only early couple ways to screw it up. It's to

24:36

watch the news too much and react, or to buy an individual stock or

24:41

a company stock that decimates the portfolio because it goes to zero or it doesn't

24:45

keep up with the overall market. Well, I'll give you another one that

24:48

I hear too, is that the higher rates will ruin market returns. One

24:53

reader asked, I don't work in finance. This is for the Wall Street

24:57

Journal, but I know enough matth me in trouble. All else equal,

25:00

A higher discount rate should mean lower value for earnings. I know all is

25:06

not equal, but with rates rising again, the prospects for higher for longer

25:10

firmly on the table for interest rates. Shouldn't that be ahead wind for stocks?

25:12

Let's take a look at history. Let's take a look at history on

25:15

the market, Brad. When one year forward returns are from when we're where

25:25

we are, which is four to five percent, we're in the high fours. One year forward returns are eighty three percent of the time positive. It's

25:34

pretty good, better than the overall YEP, about five year returns of the

25:40

time positive? Huh where we sit? So are we in a goldilock scenario

25:44

for interest rates? Why are we wishing for them to drop? Okay?

25:47

When did they drop? When does the Fed have to cut when they see

25:49

problems? So here we are, there are no problems. If you had

25:53

to pick one on the interest rate side of things, Brad, that was

25:57

the worst. It doesn't get below historical averages until you are seven percent or

26:07

higher on the ten year treasury. This is the ten year treasure. It's

26:11

gotta be the extremes. It's got to be the really high and the really low. Am I Right? When we're at seven percent? The one year

26:18

return on average is eight percent, so that's a little below the long term

26:22

average, and the total return for five years is fifteen percent. When you're

26:26

between seven and eight, okay, the actually the best, Brad, is

26:32

is less than two percent. Less than two percent has a five year return

26:36

of one hundred and seventy seven percent. That's the best one. But when

26:38

you go all the way from two to eight percent, here, okay,

26:42

the worst five year return is that fifteen percent. The best is one hundred

26:45

and seventy seven. The worst one year return is let's see, from three

26:55

to four percent. That's a five percent return. So there you're on your

26:57

way down because the Fed's cutting because they see problems. And once you get

27:02

to the bottom, now your stock prices are already low. So your four war return is good, but on the way down. While the Fed feels

27:07

like they need to cut and push interest rates down. Things aren't looking good,

27:11

So be careful what you wish for. We might be in the goldilocks

27:15

scenario for rates, for the economy, for a lot of things. Well,

27:19

it certainly is easier to say that because we've often been perplexed by the

27:25

negativity that's out there. Because your starting point is positive. The whole thing

27:32

leans positive. Yeah, markets go up over time. It's a strange position

27:37

to be in, to be negative because if you had to pick, I

27:41

mean, I hate the casino references because people shouldn't invest in. But if

27:45

there were two sides of a casino and a line down the middle, and

27:48

one side you made money seventy six percent of the time, about right with

27:53

that, and the other time you made money twenty four percent of the time,

27:56

that's the losing size, would any It's that side so crowded, right

28:02

right? If there were two lifeboats getting off of the Titanic, and one

28:04

set we're gonna make it thirty percent of the time, and the other set

28:07

we're gonna make it seventy plus percent of the time, why is one lifeboat

28:12

that's gonna have a much better chance of getting home empty? Yeah, and

28:18

the other one is crowded? Well, I don't understand in your analogy the

28:22

negative people just stay on the Titanic, right right, You're right, You're

28:25

right. The lifeboats are seventy percent chance, and staying on is I'm not

28:29

gonna even participate. Yeah, so, I mean, but the thing is,

28:32

it's a strange thing. And it's not that we want to be on

28:36

this show and be crazy positive all the time, but you feel like it

28:38

has to be a little bit of an offset because not only are you offsetting

28:44

just the general pundits that are either on TV or posting articles Brad, which

28:48

definitely skew negative. But then you also have to offset the salespeople out there

28:52

that are trying to sell people products, and there's only one way to sell

28:57

when it comes to investments. Yeah, the world. What if what if

29:02

two thousand and eight happens again? What if this happens again? And what

29:06

you should be asking yourself is what if it doesn't. What if we're two

29:08

thousand and nine not two thousand and eight, because we just had a big

29:11

downturn. We have the fifth worst downturn of all time in the worst bond

29:15

market year of all time in two thousand and twenty two, both in the

29:18

same year. And yet here are all the fear makers saying, what if

29:22

it happens again? One, like you said, a lot of it's a

29:25

sales thing to once in a generation event. What if we get two in

29:29

three years? Okay, that's not very likely, So why don't we go

29:33

with some likely scenarios. And if anybody is listening to this show for the

29:37

first time, go back and listen to what we were talking about the first week of February through two weeks ago. We were saying a correction, a

29:45

normal market correction, is likely. We made accounts slightly more conservative. We

29:51

got away from our very extreme overweight to large growth sectors and got more diversified,

29:57

added a little bit to short term bonds, and for new dollars,

30:00

we held off putting it to work until we got a little bit better pricing,

30:04

and once the selloff happened, we were fine adding those dollars in over

30:08

the last two weeks, three weeks. We're not always bullish, but once

30:15

should get exactly what is normal a normal market correction after a run up?

30:19

What are you waiting for? If you're an investor and not a gambler,

30:22

you should be fully invested at this point. And if you're worried about the

30:26

election, fine write down your rules. The rules should be okay, if

30:30

I get any kind of correction before the election or no matter what happens after

30:34

the election, I need to be fully invested or partially invested, whatever your

30:38

your whatever you're fully invested is write it down and do it. Because you

30:42

can't be watching the news cycle to give you the all clear, because it'll

30:47

it'll scare you any time you're turning it on. It's all fear out there

30:49

and it doesn't need to be. Oh right, Let's take our next pause

30:52

to talk about a few more of these market movers and a little touch on

30:56

earnings. Earning has been pretty good and really nobody's talking about it, and

31:00

I think it's worth mentioning how good it is. And the sectors that are

31:03

kind of beating the most are the I think the areas of growth over the

31:07

next five years, no matter who gets elected, and that's important thing to

31:11

point out. You're listening to Money Sense theydvises us Akerston Wealth Management Group.

31:14

We'll be right back and welcome back. You're listening to advisor christ and Wealth

31:18

Management Group, Rad and Kevin here this morning. As a reminder, we

31:22

are financial advisors in Perrysburg, Ohio. Give us a call anytime if you need us to give you a second opinion on our portfolio, or especially if

31:27

you have one of those life changing events retirement, death, divorce, anytime

31:32

where money it needs to be in motion, you have a big decision to

31:34

make. That's really what we're here for is to kind of help guide you

31:37

through those life changing events. Kevin I was mentioning earlier in the show that

31:44

the correction we got was very typical. The size was typical, I mean

31:48

a little bit less actually than the average correction for a year. But you

31:52

get a few five percent sell offs every year, and you get one that

31:56

approaches ten in a positive year, and so here we got our five and

31:59

a hal a half percent correction out of the way. What was even more

32:02

typical is what ran up the most in the prior six months and eighteen months

32:08

sold off the most. That was really with one exception, real estate really

32:14

wasn't up very much, and it was the worst sector over the last two

32:16

months, down seven point six two percent over a two month that ended yesterday.

32:22

But the other things, technology, consumer, discretionary, healthcare, things

32:28

that had had a nice run sold off a little bit more than the market.

32:32

And the things that weren't up at all last year and certainly weren't up

32:36

in the first two months of this year held up not just a little bit

32:39

better, but we're pretty positive over the last two months. Utilities up nine

32:44

point zero three, energy up eight point one point nine, staples up two

32:47

point one four. But even the SMP, if we look at a two

32:51

month instead of a high to low, not too bad, negative one point

32:54

eight two It kind of goes to show you two different things. One,

33:00

we don't need to look at monthly statements, right, it shouldn't be that meaningful. Let's look at quarterly statements. Look once a year, you're probably

33:06

going to be happy much more often. But the reason to be diversified is

33:12

that here we are with in a negative period of time, with five of

33:15

the eleven sectors positive. And if you're one of those people that says I

33:20

hear the market's overvalued, hey go find something that's not overvalue. There's really

33:24

only half the market, ever that is overvalued. If the market's overvalued,

33:30

the other half probably didn't participate in the prior year or two and it's probably

33:34

undervalue compared to its historic norm. Utilities are a perfect example of that.

33:38

The leading sector over the last two months up nine point oh three. It

33:43

was negative over the prior year, it was negative in the year of twenty

33:45

twenty three. You don't have to look too far to find something that's not

33:50

overvalued if you're worried about valuations. But over the long term, and over

33:53

the last ten years, fifteen years, twenty years, it's been those gross

33:57

sectors that when they sell off a little bit more than the market have historically

34:02

been a buying opportunity for you, because when the market is growing, when

34:07

the economy is growing, it's gross sectors that are becoming a bigger portion of

34:10

the economy because they're they're the stocks that are growing. They're the companies that

34:15

are growing, and they need to be a growing part of your portfolio.

34:19

So if you're making decisions to add or subtract, it's a tough thing to

34:22

do. One way to do it is just to buy the indexes. It's

34:25

going to do it for you anyway. Most of the major indices, not

34:29

the dial, but everything else is market cap weighted. You're going to end up with more of the things that are working. So if you're one of

34:35

those people that says something like I need to have more AI in my portfolio,

34:37

hey buy the index. The index is going to do it for you.

34:40

It's going to have all those companies that are adding AI even when you

34:44

don't know that they are, or it's going to have new companies that you

34:47

never even thought of, and before long it'll be a top twenty holding,

34:51

top fifteen holding, and you didn't even know about it. Nvidia is a

34:54

top ten holding in the s and P five hundred and the Nasdaq, and

34:57

ten years ago nobody even knew what it was. And if you just own

35:00

the index, you ended up with more and more and more of it. It's possibly reason why the index has done well. Yes, because it's more

35:07

and more of the portfolio. And as long as we don't have these fits

35:12

and starts in the market, which has not been typical, you have this

35:15

momentum that works. And the reason that index investing is working for more people

35:20

is momentum is is a is a strategy that has been working. And when

35:25

the market is growing and it grows more than it shrinks, you know,

35:29

average sell offs to the market are kind of what we got in twenty twenty

35:32

two. Twenty twenty two had a ten month sell off. Sell Offs for

35:37

over the since nineteen fifty are only barely longer than a year, but rallies

35:42

since nineteen fifty last six years. This rally is only a bit more than

35:47

eighteen months old, and so this is not typically a stopping point for a

35:52

bowl market. They usually go much longer than that. Well, along those

35:57

lines, what we said in the previous segment too, Brad, where negativity

36:00

sells a big place we see it is the quote unquote gold IRA or people

36:07

selling physical gold. It's all over all of the conservative media, which you

36:12

know a lot of our listeners listen to as well, and it's sold a

36:15

lot of times based on fear mind longering. You know the market I want

36:20

out there says, do you think it's more likely this dock market goes up

36:23

or do you think it's more likely to crash? I think we know the

36:27

answer. I'm like, well, I do. I don't think that we're

36:30

on the same page there. Yeah, but that's a lot of times it's

36:34

imminent stock market crash. The government's going to confiscate your ira. Ye,

36:38

you have to do the gold IRA. So I do like some of the

36:42

warnings you've done them on this show before that Finra puts out which is March

36:46

twentieth to twenty four Investor bulletin tend things to ask before buying physical gold or

36:52

silver. So we've done it for clients. We do it with almost no

36:55

markup. And that's one of a couple one of the many things that you

37:00

should be looking for. So, first of all, should I respond to

37:04

an aggressive metals dealer who calls or emails me with an attractive offer. I

37:07

saw one that said we'll give you twenty thousand of free silver. Does that

37:10

sound too good to be true? It should, Yeah, exactly, so

37:15

be wary. So the first warning from FINRA on physical gold and silver is

37:20

never respond to cold calls, unsolicited emails, late night commercial or infomercials,

37:24

social media posts, or pop up dealers who sell at public events. How

37:29

do you find a regular dealer? Well, one of the things you can do is go to somebody more local and deal with someone face to face.

37:36

You can do that if you wanted to hold time. I saw recently even

37:38

Costco was selling gold bars. Brad. Yeah, I'm pretty comfortable that Costco

37:45

is not going to have a huge markup because the thing is Costco probably bought

37:50

that gold and had no intention of making any money on Yeah, what do

37:53

they want you to do? They want you to buy other stuff. The

37:57

gold's just getting people in the doors, right, So yeah, and the

38:00

markup is the whole thing. If if it's marked up ten percent on the

38:04

buy and marked down ten percent on the cell, you could get it exactly

38:07

right. But if you don't make more than twenty percent by buying it at

38:10

the right price, and selling it the right price. You haven't made any

38:14

money, and that's the problem. We'll get to that unregulated market. We'll

38:16

get to that. I mean number three is is the salesperson a registered commodity

38:21

trading advisor or investment professional. Uh. The gold IRA label. A lot

38:25

of people want to use that label as well. We offer gold irays.

38:30

Yeah, we like that. That's a thing. That's like that. You

38:34

know, the irs created one and only certain people can sell. There are

38:37

no gold diarrays. There are just an ras that you put gold in.

38:40

Yes, that's like saying, would you like a stock ira? Brad right,

38:45

would you like it? Etf IRA? Are you interested in a bond

38:47

diarray? How about a CD IRA? Gold is just an investment. The

38:52

IRA is the account. You can put anything in it you want. And

38:55

so don't let the marketing material fool you that a gold iray is differ than

39:00

the IRA you already own. That's right. So big thing here, huge,

39:05

probably the biggest thing that you mentioned it a little bit. What's the price? What's the spot price? The cash price for immediate delivery of the

39:12

physical metal should be easy to get from a financial news or quote providers.

39:15

If you go out and see you know, roughly, let's say gold's two

39:19

thousand an ounce. Okay, do the math. What are you buying it

39:22

for? Are you buying it for twenty three hundred an ounce, twenty four

39:27

hundred ounce, twenty two hundred an ounce? Is that the markup? Because

39:31

that's the spread. The company will say, no fees, no fees to

39:36

buy this gold IRA. But if the current price is two thousand, and

39:40

you pay twenty two hundred. See, people, especially when they're taking physical

39:45

possession of the gold brand it's not in an IRA, they don't even do

39:47

the math because they ignore it because it feels great. Look at this thing.

39:51

Look at this thing I got. Look at this thing I got. I'm gonna put it in the safe. It looks pretty. You do the

39:55

math because in some cases it's ten to twenty percent both ways, which means

40:02

if you bought it for twenty two hundred, held it for six months,

40:06

and went to sell it back to them and the price didn't move, more

40:08

than likely the price to buy it back is eighteen hundred. Yeah right,

40:14

yeah, you could lose money buying and selling it the same day. That

40:17

If people don't realize that's what's called the spread, so other things that Fender

40:22

puts out there. What else should I consider? Now, if you're doing

40:25

it in IRA, there will be storage costs because you can't take physical possession

40:30

in the IRA. Everybody's gonna have storage costs, So make sure those are

40:34

reasonable. And know the difference between all the different you know, coins and

40:38

bars. What's the difference between bullion and all these other things. Do your

40:43

research on that as well, and just make sure you know all the different

40:46

ways to own precious metals. Maybe you look at all this physical gold and

40:51

silver stuff, Maybe you look at that and say, boys, a lot

40:53

of expense, storage fees, and all I really want is the exposure to

40:59

gold prices. Okay, there is a real cheap way to do it.

41:01

There are indexes where you can buy that for very very low cost with no

41:07

store, with a penny spread. And when I say a penny spread, a penny spread on the on the GLD today where it's trading at two hundred

41:14

and fifteen dollars. A penny on two hundred and fifteen dollars is fractions of

41:20

fs. We're talking about hunt, what we're talking about, You're talking about

41:23

five one thousands of a percent and so it's it's virtually zero markup. And

41:29

then the last thing infiner doesn't put this on there. But the last thing

41:31

I would just tell people is, you know, we're not We're not gold

41:36

people. I just want to make sure if people are doing it, they're doing it without getting ripped off. Okay, I don't think it's a good

41:40

long term investment. However, if someone is insistent and you're going to do

41:45

it the proper way you can do physical, we would do it, okay,

41:49

but it has to be part of your diversified portfolio. Okay. To

41:52

me, you can't have more than ten to fifteen percent in these precious metals.

41:58

Yeah, it's too much of a long term dragon good performance. It

42:01

is a hedge against catastrophe. Fine, but it is too much of a

42:06

drag on long term performance. I mean, gold in nineteen eighty was four

42:12

hundred dollars an ounce. It's two thousand dollars an ounce. Okay. The

42:15

Dow in nineteen eighty was one thousand. Today it's thirty eight thousand. And

42:20

now I'm not even counting the dividends. It's not even close. Gold doesn't

42:23

pay a dividend, so yes, it's higher than where it was in nineteen

42:28

eighty okay, And by the way, if you had bought it in if

42:31

you had bought there's different periods of time where you went twenty or thirty years

42:36

without making any money, unlike the stock market, which is very rare to

42:39

have a one ten year period where you lose money. So it has to

42:43

be right size. That's the other thing. Right size as a percentage your

42:45

portfoliou be the other thing that you need to consider if you really want that

42:50

exposure. I would probably try to talk anybody out of the exposure. But

42:52

if you're going to do it, do it at the lowest cost possible.

42:54

I think there's one other thing to mention. If this is supposed to be

42:59

again for the catastrophe or if it's that way, I have something to sell.

43:02

If the stock market's down, this should be up. Are you ready

43:07

to do that? Because I think a lot of people have these things in the portfolio that say this is non correlated. And if I need money in

43:13

a two thousand and eight per style market or a twenty twenty two market where

43:16

stocks and bonds are down, are you ready to sell the thing that's working.

43:21

You have to to have that work. Okay, if you need money

43:23

in twenty twenty two and stocks are down and bonds are down and you have

43:27

gold in the portfolio, my guess is you know we will be saying you

43:31

need to sell what's working well. And that's the other advantage. Just to

43:35

close this out, that's the last That's the other advantage of the index style

43:39

is that you have much quicker liquidity too. We're gonna take our last pause.

43:43

You're listening to Money Cents, Kevin and Bradhurston will be right back.

43:45

Welcome back to the show. We're in our final segment here, Brad,

43:49

and we only got a couple of minutes left, soone just fire out some

43:51

interesting stats. Some of them are related to tax changes as well, coming

43:57

up, both with the Trump's tax cuts expiring and also even just proposals that

44:01

are in Biden's Budget Act as well. One of them is Biden's budget proposal

44:07

for twenty twenty five, increases the tax on buybacks four fold to four percent,

44:14

raises the corporate income tax from twenty one to twenty eight. He did

44:16

propose that it won't pass, but that gives you an idea if Biden wins.

44:22

Where they're going to go on that. So he also I saw on the campaign trail he guaranteed you your taxes are going up because he's going to

44:29

make sure the tax cuts expire. And as most people should know, the

44:34

lower brackets had the biggest percentage decrease and therefore will have the biggest percentage increase

44:39

to their tax The sentiment surveys were out this week, and of course we

44:42

had a down month of April, so it's not surprising, but it went

44:45

south pretty quick, Brad. The bullish sentiment is thirty two point one percent

44:51

of investors. The bears sentiments thirty three point nine. The first time the

44:57

bears the bears are the ones who think the market's going to go lower.

45:00

The bulls are the ones who think the market's going to go higher. First time since November two that that has flip flopped more more bears than bulls.

45:07

Is that a good time to buy or a bad time? We have to kind of remind people that would have been an excellent time to buy a five

45:13

month rip your face off rally where everything went up for three of those months

45:19

and then it was just kind of large cap us for the tail end of

45:22

that, but a great time to be a buyer. When the bears outweigh

45:27

the bulls. So a couple other things that are out there talking. Biden

45:31

is talking about increasing capital gains long term capital gains to forty four zero point

45:37

six percent. I can't believe that is higher than even Carter's proposal. Would

45:42

be the highest capital gains rate since nineteen twenty. What amazes me is on

45:45

the campaign trail when he says stuff like that We're going to raise the capital

45:50

gains to forty four percent, Everyone's like, yeah, okay, yep,

45:53

you don't realize you have capital gains. I guess yep. So another one,

45:58

how about this higher rates, lower seats. In response to another proposed

46:01

tax height on capital gains, the study from the Wharton School found that,

46:04

without a change in the treatment of stepped up cost basis at death, higher

46:08

capital gains rate would actually result in a revenue decline of thirty three billion dollars

46:14

compared to the baseline. That makes perfect sense. If I'm gonna have capital,

46:17

I won't sell. I'll hold it forever. I'll sell to death.

46:20

I'll wait till I pass away. Un till I pass away, I won't

46:23

sell. So sort of an interesting. I mean, obviously people sometimes have

46:28

to sell, but Wharton School did the study and it would actually result in

46:31

a revenue decline. We want money in motion, and one way to do

46:34

what we did decrease the capital gains so that people get off the fence on

46:37

things they've been waiting on. That's right. Thanks for listening everyone. We'll

46:40

talk to you next week. You've been listening to Money since brought to you

46:47

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46:52

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47:12

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