Retire Smart's David Brooks talks about the recent topsy-turvy stock market

Episode Transcript

Speaker 1 (00:00):
Yesterday we talked quite a bit about how the stock
market and it's really poor opening some of the trends
that maybe we were seeing and try to understand a
lot of people probably get a little bit antsy about
what those four oh one k's in your investments look
like a little bit of a rebound. It looks like
from the untrained, I like mine today and I figured,
if we're going to really talk about this, we need

(00:20):
somebody who can really help us out, and from my
friends are retire smart David Brooks joining us on the
phone lines. David, first of all, thank you so much
for being on the show today.

Speaker 2 (00:27):
Hey, my pleasure, Emory. Hope you're doing well. So it's
interesting times. We've got crazy political seasons going on where
we have people that have never received a voter now
a major party candidate. We've got political tensions around the
globe where we have you know, countries like Venezuela where
people don't win elections are staying in power at the moment,

(00:49):
and you know, tensions with Israel and it's surrounding countries,
et cetera. There's a lot of turmoil out there and
it can wreck havoc on markets like it's done, and
then we've got deteriorating economic data ray here at home.
And that's really the gist of why we had such
a sell off yesterday. A couple of big things are
happening in the world, so we are most likely going

(01:10):
to be moving to interest rate cuts and probably rather
aggressively with the Federal Reserve here in the US. And
what a lot of people may or may not understand
is that when we do interest rate cuts, and we
do them fast and furious, it weakens the US dollar.
So just the opposite occurred about two years ago when
we were hiking interest rates and the dollar got very
strong against other currencies, in particular the Japanese yen. And

(01:35):
so one of the things that caused the great sell
off yesterday both here and in Japan, which had a
twelve percent down day yesterday, was what's called the undoing
of the carry trade. So large institutions, pension funds, hedge funds,
they see how strong the dollar is, they take it
over and buy the yen, and they were able to
buy equities in a different market and get the price

(01:56):
appreciation at a discount. Well, when interest rates start to
go down as they are, they have to unwine that trade,
and they got caught aultra and unwinding at the same time,
creating a pretty ugly day Yesterday. On top of that,
we had pretty ugly job data coming out, and that's
going to lead most likely to more turmoil. So you
are correct. We did have a nice rebound today of
about one percent off over all major indices, but realistically

(02:19):
that's probably short lived and we probably have much further
downside to go here as we kind of end up correcting.
The stock market is probably overvalued by most metrics today
and we're going to have more job losses coming. I mean,
we had the sad news of John Gear shipping thousands
of jobs across the border there in Iowa away down
to Mexico, and then we just had the news this

(02:40):
week here Kellogg's plant shutting down and we're losing six
hundred jobs right here in Omaha. So the news is
not terrific out there. So people should take heed and
maybe check their portfolios, maybe change the risk tolerance of
their accounts. We can't make any specific recommendations that people
are not our clients as we act as a fiduciary,
but broad stroke recommendations you could probably put some money

(03:02):
into treasures right now, lock in these interest rates before
they go down, and basically get a risk free return
from the US government. And as interest rates go down,
those bonds will appreciate in value, and so bonds will
probably outperform stocks over the coming months. And so that
maybe one way that retirees or pre retirees could at
least consider taking some risk off the table.

Speaker 1 (03:22):
Yeah. So we're speaking with David Brooks from retire Smart.
We talk about retire Smart and how you know, kind
of you guys operate, and like you said, you know,
we want to be very careful about giving that kind
of information for information for somebody like me. And I'm
not anywhere close to retirement. We're talking like thirty plus years.
I got a long ways to go. I'm probably a
lot less concerned about what's happening tomorrow in the stock

(03:45):
market or a week from now, or two weeks from
now or five months from now than many people that
are closer to retirement age. Could you tell us kind
of where that you know, the people age range wise
or retirement thought process wise, where they really are probably
sweating about this a lot more than somebody like me.

Speaker 2 (04:04):
Yeah. Absolutely, And typically once you're within about ten years
of what you think is your perceived retirement date, and
the reality is a lot of people decide in this
day and age, in this economy to work longer thany
originally thought. But about ten years out you really want
to start thinking about it and start putting together an
actual retirement plan, just not an investment plan. You're right,
if you're twenty five, thirty five, forty five years of

(04:26):
age and plan on working another two decades or so,
you can probably stay pretty aggressive with your investments. In fact,
when you see the market's decline, you should probably increase
what you're contributing because you're going to dollar cost average
in and end up with a lot more dollars you know,
on the backside. But if you're within that decade of retirement,
already retired, you don't really have a luxury of you know,

(04:46):
waiting on time to rebound. You know, the last major
two major recessions, the market declined over fifty percent. This
was the dot com bubble and then in two thousand
and nine the housing collapse. And so if you were
to lose half of your retirement dollars to day into
in market to clients, you don't have the luxury if
you're in that window of retirement of waiting to get
the assets back up to the level that may support

(05:07):
your needs in retirement. So you really just want to
have a plan, and we do have an opportunity. This
is no obligation and nothing for our firm, but we
actually were executive produced a movie called The Psychology of Retirement,
and we actually are doing an exclusive showing for our
clients this coming Monday, and we will let ten of
your listeners attend the show free of charge if they'd

(05:29):
like to. They would just need to give get ahold
of our office and you know, and if sorry, I'll
give them the number of O two three six nine
and seven seven seven seven. But it's a great documentary
done by an economist named Morgan Housel that just explains
what you need to be looking out for. It's no
sales pitch whatsoever. It's just a fantastic movie to understand
the dynamics if you are that person thinking about our

(05:51):
heading into retirement. Can you give the number one more time,
David Sure four O two three six nine seven seven seven,
And we're going to be premiering that movie this coming Monday.

Speaker 1 (06:03):
Night. I love it. And you can also find more
information about retire Smart and David Brooks and all of
the awesome people that are over there trying to help
you out at retire smart Omaha dot com. David as
always a great chatting with you. Thanks so much for
this information, very important at this time, and we'll talk
to you again sometime soon.

Speaker 2 (06:18):
All right, man, enjoy this cooler weather finally.

Speaker 1 (06:20):
Yeah, for sure, definitely going to be doing some yardwork today.