September 5, 2024 • 42 mins
It's finally happened. We see clear signs of a changing investing environment on Wall Street. Hosts John and Giuseppe chart the path from the recent Bulls to its inevitable end. Also, the upcoming fed meeting, buyback strategies, and more on our next investor workshop on October 2nd. The Wise Money Guys.
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Episode Transcript
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Speaker 1 (00:00):
The Wise Money Guys Radio Show is brought to you
by One Source of Wealth Management SEC licensed three one
nine zero seven eight. For disclosures and more information, visit
our website One Source WM dot com or call nine
one six nine six seven thirty five hundred.
Speaker 2 (00:16):
Hello and welcome to the Wise Money Guys radio Show.
I'm your co host, John Scambra, and I'm here with
my partner What's up in Wisconsin. We're certified portfolio Managers,
which means we're investment experts that specialize in helping people
who are retired are about to retire manage their money.
If you like our show and you have a question
or want to come in for a no obligation consultation,
(00:38):
or want to register for our October second workshop, which
is little less than a month from today. It's at
the Old Spaghetti Factory on Sunrise in Roseville from six
to seven thirty pm. Call and call now, because we
always end up getting more people registered than we have space.
(00:59):
So if you're at all concerned about everything that's going on,
maybe you're concerned about the election and what the outcome
will do to investments. Maybe you're concerned about inflation because
you've seen your purchasing power go down in retirement when
you buy groceries or get gas, or pay your utility
bills or pay for insurance. You know, maybe you're just
(01:20):
concerned about your legacy and your overall wealth. Whatever the
reason is, call us at nine one six ninety six,
seven thirty five hundred. Again, if it's just a question, fantastic,
Or if you want to get on our calendar because
you can't make the October second Retiree Dinner Workshop, which
(01:40):
we hope you can, call us again at nine one
six nine six seven thirty five hundred. So big show today.
Lots of information, lots of things happening DUSSEPPI, lots of headwinds,
lots of things that are really taking us from potentially
turning this bull market into potentially a market for stocks. Yeah, anyway,
(02:02):
September and October, lots to look out for. Yeah, we've
been in a bowl market since around October of twenty
twenty two, certainly in an up trend since then, but
lots of indicators suggested we were in a new bull market,
you know, starting then, and now we're starting and we've
(02:24):
been talking about this for some time now, months and
months and months that the strategy, and so that's what
this show is typically about, strategies that we utilize to
help our clients manage their money and or actual investment
ideas that we'll talk about a couple in fact at
the end of this show, but mainly the strategy and
(02:47):
the principles of money management, which we talk about weekend
and week out, which come from our combined almost fifty
years of experience helping people in various types of financial
services or financial services needs can't be replaced. You can't
do this part time, you can't have specialized and done
(03:10):
something your whole lives. And then in retirement, you know,
you're just going to go ahead and you know, be
able to make the right non emotional decisions when it
comes to your investments and your retirement income, so on
and so forth. And that is a lot of what
this show is about is to help people, you know,
(03:31):
make better decisions. And if you can't and have started
to realize that based on you know, all the things
that have changed are ready just in the last few years,
I mean and certainly since I mean.
Speaker 3 (03:44):
Been a wild ride.
Speaker 2 (03:45):
I mean, if you go prior to twenty nineteen, right
twenty twenty, so prior to twenty twenty, going back to
twenty ten, of course, everybody thought they were, you know,
an investment expert, a chief investment officer of their own money,
because you basically could buy any old, non diversified, vanilla,
(04:10):
low price, non tactical you know, mutual fund and make money,
or index fund or index fund. Quite frankly, but we've
shared studies where if you make the wrong decision, even
buying an index fund over a long period of time,
you know, you could actually run out of money or
lose money. Index funds, albeit cheap, aren't the catch all
(04:33):
be all that people think they are, especially when we've
had you know, gosh, every kind of now and every
kind of thing thrown at us, but one new thing.
You know, Over my thirty plus year career, I never
had a pandemic. Certainly bad economic times, recessions, high interest rates,
(04:54):
low interest rates, and then the pandemic was something that
was some to test most people's metal. And quite frankly,
our clients enjoyed one of the best years ever in
twenty twenty. And if you're looking at something like that
and you didn't have a great year from an investment return,
(05:17):
perspective in twenty twenty. Why not if you didn't have
a great year or a better year than what the
S and P or the bond market returned in twenty
twenty two. Why not if you're now seeing your portfolio,
you know, because you haven't been listening to the show
or heeding the advice of this show in twenty twenty four,
(05:39):
why not. Well, those are some of the things that
we hope to help you answer at our workshop at
the Old Spaghetti Factory on October second. And by the way,
we were talking that, I think our commercial says October fifth.
So if you've already registered because you listened to the
show and you've heard the commercial, it's October second, not
(06:01):
October fifth. But we'll fix that right away. And certainly
when you call in, Kathy would say, if you heard
it from the commercial versus the radio show, oh no,
it's on October second. So I don't know how I
did that. But so, if you're retired and or you're
about to retire, or you just have accumulated wealth that
(06:23):
you're concerned about, you know, come to the workshop. If
you haven't, you know, accumulated any sort of investments, you know,
we would love to help people as much as possible,
but at the end of the day, you know, our
specialty is portfolio construction. It is actively managing, you know,
(06:44):
portfolios of money to help people either get the income
off of it they need, or the growth off of
it they need, or a combination of both. And that's
where I would say that we're second to none, UH
in the area certainly, and we prove it at the workshop.
So last time on this UH subject, at least for
(07:06):
the next few minutes, call nine six ninety six, seven
thirty five hundred to register and and do it before
we have to turn you down. And we always feel
bad about that. So what are some of the some
of the things I mean, I know we've got the
FED meeting still what a couple of weeks out which
we'll we'll dive into that a little bit more, because
(07:27):
there's something pivotabal, pivot pivotable say that pivotal.
Speaker 3 (07:34):
Well about that, we're.
Speaker 4 (07:35):
Still in the seasonality of volatility, which, as we mentioned
before in previous episodes, back half of July into the
first week of October. But September and October there's a
few rists there's there's multiple head.
Speaker 2 (07:50):
Well typically September is going back to nineteen sixty four,
not a great month for return on investment on stocks
to be.
Speaker 4 (07:58):
Of course, it's the worst month a few If you
average it out, the average return is negative point seven.
Doesn't seem like much, but there's some months in some
years that are much worse, and there's drawdowns within that month.
But how many times in a given year September turned
out a positive month forty five percent of the time.
Speaker 3 (08:18):
Wow.
Speaker 4 (08:19):
Outside of that, though, the other components that are going
to be a drag on the stock market or potentially
support an increase in volatility is declining share buybacks. We
can dive into that a little bit more, and what
that means we get the presidential election, and typically the
(08:39):
trend is volatility picks up September October, just prior to
the election. And then you've mentioned it FOMC meeting and
we have some more economic data.
Speaker 2 (08:51):
You know, I listened to the president's speech to the
New York Economic Club that he also spoke at when
he ran in twenty sixteen, and he spoke at it,
you know this this last week, and you know, the
(09:12):
who's who of industry and and and and economic positions
like Paulson, Steve Minuochin, you know, former Treasury Secretary Jamie
Diamond was there. I mean, we're talking the global you know, uh,
industry leaders of financial services companies, and of economic councils
(09:37):
and and and and treasury positions and former former chairman
Reserve chairman's and so on and so forth. And Trump
laid out a six point plan that I don't know
how if you've been in this country, you know, one generation,
ten generations, and you love this country, how you could go, Boy,
(09:59):
I don't like that six point economic plan. You compare
and contrast it to you know, and I don't even
want to say the other people's names because I get
a little vomit.
Speaker 3 (10:09):
In my mouth. How many point plans have?
Speaker 2 (10:12):
Their point plan is how to benefit the world and
destroy America financially literally destroy the dollar, you know, destroy
personal wealth, destroy the middle class, you know, so on
and so forth. Now this isn't a political show, but
politics definitely affect investments. And it's as simple as that.
(10:34):
And so some of the strategies that we've talked about
are so crucial given the times that we're in, and
we're going to talk about what those are you're listening
to John Scambray to Seppi Vescani, the wise many guys,
and we are certified portfolio managers. That makes us investment
experts that specialize in helping people who are retired, are
about to retire, manage their many And I never get
(10:58):
tired of saying that because we love what we do
and we love helping as many people as possible. And
right now, lock in some profits on stocks, take advantage
of high interest rates and buy bonds. Don't buy bond
funds by individual bonds, because you know what you're gonna
pay for the bond, you know what rate of return
(11:19):
you're gonna get on the bond, and you're guaranteed to
get your money back and get that interest rate. And
in fact, when interest rates go down, bond prices go up,
which means there could also be appreciation of your longer
dated maturity bonds as far as over the price that
you paid. So that was strategy. You know that we've
(11:43):
been talking really since the beginning of this year. When
A rated bonds triple B plus are better and most
were A rated or even higher, some A plus, some
double A. We're paying you know, five six in percent,
they're still paying in the fives. And we haven't got
(12:05):
the interest rate cut yet. But the interest rate cuts,
there's a study that you know, we're gonna you're gonna
talk about hi which is crucial. So again, strategy right
now for not losing a lot of money, you know,
with so much uncertainty in stocks and whether or not,
(12:29):
you know, our economy does slip into recession or not.
And we're going to talk about that as far as
it relates to the interest rate cuts coming and what
those mean for the stock market as well. But right now,
the bond market, what has the bond market traditionally done
in any period of declining rates? That's what that study
(12:52):
in essence says.
Speaker 4 (12:53):
Yeah, we're we're coming up on the Fed meeting here
in a couple of weeks, so jerme Pal's gonna have
a speech on September eighteenth. It's anticipated he's going to
cut rates. Is it going to be a quarter percent?
Is it going to be half percent? We can dive
a little bit more into that later, but the big
question is, well, what happens to stocks and bonds when
(13:14):
the fit when the cut cycle starts to begin. So
when you look at the past rate easing cycles or
when they start cutting rates, going back to June nineteen
eighty nine, nineteen ninety five, September nineteen ninety eight, January
two thousand and one, a lot of these recessionary times.
(13:35):
September two thousand and seven, this is when the first
rate cuts took place, August of twenty nineteen, before the
COVID crash happens. Bond prices looking at you know, six months,
twelve months, twenty four months out.
Speaker 2 (13:51):
After the first after the first start of the cutting cycle.
Speaker 4 (13:54):
Yep So six months out you know, from the range
of those period of times that I just mentioned.
Speaker 2 (14:00):
Which is what was the oldest one nineteen eighty nine,
so not going back to which istill now.
Speaker 4 (14:06):
During that radizing cycle, yep So, anywhere from a point
two percent price increase, which is very low, that's kind
of an outlier that was in September ninety eight, but
really anything from three and a half to almost seven
percent rise in prices. That's six months out of the
bond of the bonds, the price to the bond, so
the value of the bond. So if you look at
(14:27):
your statements you have and these are these are core bonds,
core fixed income. And you look at the value of
your bonds and what that value is, and you look
at your statements six months from now, it's increasing ywhere
from I'd say three and a half to almost seven
percent in value. Twelve months out it goes anywhere from
(14:48):
like two point six at the very very lowest. The
highest is over ten percent. This is in the bond price,
just the value. These are starting to sound like stock
market like gain in price, which is why we have
been telling people for months by beaten up cheap bonds
(15:08):
of great companies, individual bonds, individual bonds exactly go on
twenty four months out the lowest which the lowest and
all returns of September nineteen ninety eight for for whatever reason,
and mainly I would suspect because they did a rate
hike and they dropped and they start hiking, right. That
was the only time that in that period of time,
(15:30):
all those periods from nineteen to ninety and now that.
Speaker 2 (15:32):
By the way Feds were. I was in the industry then,
and I remember that clearly, and we had we and
oh my god, don't remind me of the hair. If
I had that hair again, I would have a man
bun like these guys have I hate man buns. I
would do it just flaunting it, not just because I could,
and I would throw that around. I'd probably even feather
(15:53):
it because he's so happy.
Speaker 3 (15:57):
I know it was.
Speaker 2 (15:57):
I'm not happy your hair well air of it. So
what were the what were the increases? Twenty four months?
Speaker 4 (16:04):
So twenty four months out the lowest lowest returns of
the period was at ninety eight And the reasoning is
what I just mentioned. And that was again the only
time that the Feds were successful engineering.
Speaker 3 (16:15):
A soft landing. By the way, all other times they weren't.
Speaker 4 (16:18):
They failed seven point lowest highest price return twenty one percent.
Speaker 2 (16:26):
Ladies and gentlemen, if you don't understand what we're talking about,
well ay, that's a reason to call us and get
on our calendar. Now, don't procrastinate any longer. You are
not a bond expert. It takes a massive amount of
time to filter and dive into the yield curve and
(16:46):
search and find quality bonds at the right price with
the right cupon and the right maturity and the right
industry so you have the least you know amount of
possible default risks, so on and so forth. This is
something that you don't do when you're sixties, seventies and
eighties in retirement, enjoying your retirement. You're gonna sit at
(17:09):
your screen going, oh yeah, let me, let me, let
me connect with some of the big bond desks around
the world and really run some screens and some filters
to really build me a portfolio of whatever percent of
my portfolio is going to be in fixed income. This
is something that you can't do alone. I mean, technically
you can, but highly recommend that you don't. Don't let
(17:32):
this opportunity for stock like potential price appreciation in the
bond market pass you by, and it is passing you by.
Call nine one six ninety six seven thirty five hundred
to get on our calendar or to come in for
and sit down for our free retiree dinner workshop. No
(17:55):
obligation ever. We will show you what we do. We
will show you how we're different. We'll take a look
at what you've done. We never bad mouth what people
have done for themselves or what other people have done
for you. We just know we can make it better,
we can make it stronger. We can help you accomplish
your goals more consistently. That's our track record, that's our confidence,
(18:19):
that's our belief. So that's what you will learn when
you come in for a no obligation consultation or come
in for that October second workshop at the Old Spaghetti
Factory on Wednesday from six to seven thirty pm. Another
thing tied to this, which is significantly different, which is
also why when you get less buybacks and when you
(18:43):
get interest rate cuts. You know, if you've got a
seventy sixty seventy eighty percent stock weighted portfolio right now,
we believe, especially if you're retired, that it should be
less than that. That a balanced, you know, approach would
be far better and maybe even you know, not even
(19:05):
fifty to fifty. Maybe it's ten percent alternatives, fifty percent
you know, fixed income, ten percent cash or money market,
and only thirty percent stocks right now to reduce you know,
that stock market potential risk to your portfolio, especially if
you only need a six or seven eight percent return
(19:28):
to be successful in in retirement or on the growth
of your money. And that's what accomplishes your goals and objectives.
That's some of what we help you determine from a
from a benchmark or a measuring success what that actual
rate of return needs to be, and the.
Speaker 4 (19:45):
Balanced portfolio is actually back to doing what it should
be doing. In twenty twenty two and twenty twenty three,
you didn't really see that. So when you had bonds
in your portfolio, you weren't getting that ballast effect with
bonds helping to buffer the blow when there's polity stock market, they.
Speaker 2 (20:02):
Paid nothing and the and the prices were going down.
Speaker 4 (20:06):
Yeah, but now they're back and exactly where we just
pointed out. You know, when the FED rates, the FED
start cutting rates and what happens now it'll have an
impact on your over a portfolio and a balance.
Speaker 2 (20:18):
So let's summarize that. In the first six months, the
lowest gain in price was point two but that was
point two, and twenty four months later the biggest gain
in price of core bonds was what twenty one percent?
Speaker 3 (20:34):
Yeah, twenty point zero.
Speaker 2 (20:35):
So we're talking a two tents of one percent to
a twenty one percent potential if history you know which
you know, history isn't, you know, guarantee of future results. However,
when you cut rates, it's an inverse relationship. Bond prices
go up. So if you're already in bonds. You potentially
(20:56):
could have anywhere from two tents of one percent to
twenty one percent potential appreciation in bond prices over that
twenty four month period. Not guaranteed, But what is guaranteed
is the cupond. Not all bonds either, not all bonds
are the same. But what is guaranteed is the coupon
and what price you pay and what principal amount you
(21:18):
get back. And that's why it's so crucial to come
in now called nine one, six ninety six, seven thirty
five hundred. You know some of the headwinds we've been
talking about, and then of course the strategies to take
advantage of those headwinds, one of which is the share buyback.
Explain what that is, why it is, and what sort
(21:40):
of contribution share buybacks had to the overall returns of
the market. And then how the decrease in buybacks may
you know, drive our I guess, our strategy, our recommendations
to our clients even further to be my your portfolio
(22:02):
based on what's going on. So what is essentially a
share buy back?
Speaker 4 (22:08):
Yeah, So to back up a little bit again, we're
in volatility season and what's going to be unique about
September and October. Like I said, is one of the
three risks that are out there is declining share buy back.
So there are periods of times where corporations can buy
back their own shares. Why do they want to buy
back their shares? They got more money than they know
(22:30):
what to do with exactly. Corporations will earn a profit
and they could do one of three things. They're going
to either redistribute some of that and share the wealth
with the shareholders in the form of a dividend, which
we're big fans of dividend paying stocks, especially if you're
retired and wanting a cash flow from your portfolio. The others,
they could take that pot of money and they can
put it towards R and D, research and development, building
(22:52):
new you know, goods and services.
Speaker 2 (22:55):
Hut too many people hiring right could be be or.
Speaker 4 (23:01):
They you know, buy more of their very own shares.
And why would they want to do that? Well, it
helps to drive for their demand for their stock, which
then obviously will increase the price increase the price over time.
The other selfishly for executives is you know, half of
their inteative typically is going to be based.
Speaker 2 (23:20):
Off actually many is more, could be half or even all.
Their incentives stick typically in stock options or stock restricted
stock units because they don't want to pay income tax,
they rather pay capital gains tax.
Speaker 4 (23:34):
Right, and they want to try and drive the EPs
earnings per share number up. And when you're buying more
if something, you know, if.
Speaker 2 (23:44):
This stock, well, if you have less shares outstanding, that too,
and you you just use simple math and you use
that in relationship to your earnings, Well, your earnings per
share is going to go up, your return on equity
is going to go up, your stock price is going
to go up because there's less shares outstanding, and so
on and so forth, right, and that equated to what
(24:05):
as far as a contribution towards the overall because it
was massive, and that's this year and last year.
Speaker 4 (24:10):
Right at the point when corporations buy back their shares,
it's okay, well, how much does this actually driver contribute
to the growth of the S and P five hundred overall?
And there's a study that's out there and looking at
the different metrics. Forty point five percent is when you
break down the overall returns of the S and P
five hundred, forty point five percent is strictly from shared buybacks,
(24:34):
seven point one percent is from dividends, a little over
thirty one percent is from earnings, and twenty one percent
is from multiple expansion.
Speaker 3 (24:41):
So the windows closing.
Speaker 4 (24:43):
So there's declining of shared buybacks going into the back
half of September. So it doesn't mean that it's going
to you know, well let me, let me break.
Speaker 3 (24:52):
But it's not. It's not providing that tailwind.
Speaker 2 (24:54):
Yeah, well that's a lot more than a tailwind if
you think about it. The average person who you know,
manages their money themselves, the average advisor, which woefully is
underskilled and unknowledgeable of how these things impact, you know,
the markets and people's money, because most of the time
(25:15):
they just put you in a basket of mutual funds
or ETFs where you know, they just are one hundred
percent correlated to whatever the indices are doing, and they
just you know, sadly always say, oh, stay the course,
even because they don't know any of this stuff going on.
And you just said that twenty one percent of the
indices is from multiple expansion, right, that's how the majority
(25:39):
of advisors and people make money on stocks or bonds
or mutual funds, or ETFs, it's from multiple expansion. They
don't know it, but you know, they may be following
some other things. But at the end of the day,
that's what the average person is is is going to
make money off of You just basically said almost eighty
(26:01):
percent of making money is not from multiple expansion and
forty percent. Half of that eighty percent is from share buybacks,
which means if you take share buybacks out of the
equation from these masses companies that from a weighted perspective
drive the S and P you're gonna find level that
(26:23):
so many people who take a passive approach to investing
in the market with index funds aren't going to experience
what they've experienced in twenty three and twenty four, and
it may be more like twenty two, you know, or
even twenty or other periods of a of a changing trend,
(26:44):
a different tide. And so again that's just I can't
stress enough if these are things you don't understand or
know or follow or research you know before may in
an investment decision with your money, or if you're not
confident that your person who's helping you with your money
(27:08):
and your retirement and your trust and your wealth or
whatever the case may be, then you absolutely need to
either get on our calendar or come to our retiree
dinner workshop on October second. If you can't make that date,
just get on our calendar. The window for some of
these strategies, like going from stocks to bonds, where bonds
(27:31):
have the ability to potentially appreciate as much as stocks
have in any given year is closing rapidly. Called nine
one six nine six seven thirty five hundred to register
now for that October second workshop or to get on
our calendar for a no obligation consultation. So the other
(27:53):
thing that again, I mean talk about one, two punches
and now a knockout punch. We already said the election,
we've talked about share buybacks, we've talked about you know,
the cutting environment that we're in. But now let's talk
about how pivotal and what a surprise difference in assumption
(28:15):
to rate cuts could actually signal and mean, you know
for the markets at this upcoming September eighteenth is seventeenth and.
Speaker 3 (28:24):
Eighteenth, right, yeah, eighteenth, he's gonna have that meeting.
Speaker 2 (28:27):
So it's expected and the probability the CBOE has a probability.
Speaker 3 (28:36):
What's the word.
Speaker 2 (28:36):
I'm looking for a probability indicator on the FET and
those things never existed, by the way before that. And
you know you've heard me rant and rave about this man.
This this position has way too much unelected political power,
too much financial power, not only for the United States
(28:58):
but for the world. And you know, no person unelected
should have this much power, but he does, and and
the position does. And here we are that this decision
coming out of the FED, which you know, you you
hope to believe that is not politically motivated. You hope
(29:18):
to believe, but it's hard to believe when they constantly
revised the data, the data that he come out with
and say is you know, one month, one year later,
oh magically that that that data they came out with
that study, those numbers were completely wrong. And so my
trust is like zero with anything government, of course, But
(29:42):
here we are and this this q so a quarter
of a percent, I think does nothing. That's not what
it's a nothing burger. It just says, hey, we're being preemptive.
We think the economy is still strong. We don't want
to trigger you know, inflation reversal to going higher. And
(30:04):
but what happens, and this has happened before, and and
there's another study, and there's there's reports out there of
when during a new rate cut cycle the Fed cuts
more than what that what the market has anticipated, and
what that actually means. What could that actually mean if
(30:26):
Jerome Powell, uncle uncle Powell, as we say, turns around
and instead of it being a quarter, it's a half
or one percent or three quarters of one percent, what,
in your opinion, which is really our opinion, do you
think would happen.
Speaker 4 (30:40):
Well, the market's actually betting for more. The markets actually
betting in there and they're wanting more.
Speaker 2 (30:45):
Well, the market's not betting, but the analysts, pundits, economists strategy.
Speaker 4 (30:51):
There's a there, and there's there's a one percent by
the end of the year. If you look at the
averages of what does a stock market do you know,
once rate cutting cycles takes place in previous period most
recent previous periods, not in the first six months, but
it goes up about seven percent. Okay, that's the averages.
(31:12):
And then and then it goes down and it can
go down about twenty percent.
Speaker 2 (31:15):
Yeah, as far as the stock market, twenty three percent
was the study that the market typically sells off in
the first six months, you know, during the first you
know that that change from more aggressive exactly if it's
more aggressive than what was you know, being predicted or anticipated,
(31:36):
And because.
Speaker 4 (31:36):
Then that just flags that they are concerned of something
happening within the economy that they have to start stimulating
it more than they thought.
Speaker 2 (31:46):
And again, here would be a tremendous mistake if you
start and this is why I think it should only
be a quarter of one percent. And I think you
need to wait and see what that quarter of one
percent does from an inflation perspective, because if you start
(32:06):
making too much you know, change and flooding too much
liquidity into the market. Let me tell you, the inflation
that we just saw, which was so terrible, you know,
dating back to the seventies, will create a new paradigm
that says, oh this, this is the worst inflation since
(32:27):
the twenty twenty two's. I mean, it'll be a new
because it will be such a monumental, huge mistake. The
dollar will literally collapse, you know. I mean there's been
movies where I forget there was one with John Ritter,
and I hope somebody you know calls from email police company. Yeah,
(32:48):
and it was he was the president of the United States,
and this was a movie in the eighties, and he
walked into a coffee shop and he goes, eh, let
me have you know, just a large coffee, whatever it is,
and he's with his security detail and everything's basically gone
to hell in a basket and they go oh, and
realize a cup of coffee when this movie was made,
(33:10):
was probably about seventy five cents, and it goes, oh,
that'll be twenty four to fifty, mister President. And that
is the type of inflation that we could potentially see
if they cut rates too fast.
Speaker 3 (33:24):
Too they get it wrong again.
Speaker 2 (33:26):
If they get it wrong again, Think, did anybody ever
think that a cup of coffee would could be seven
or eight dollars?
Speaker 3 (33:34):
Right now? Right?
Speaker 2 (33:35):
You go into Starbucks and you get one of these
fancy flip rubble bubble frappuccino thingies, and but they're seven
eight bucks for the large.
Speaker 3 (33:45):
Crazy.
Speaker 2 (33:46):
Now, we've already told you and have been telling you
to buy bonds, and we've been signaling and predicting and
telling you that there would be volatility, there would be
sell off, there would be corrections, all of which have
already happened this year, and we're telling you there will
be more. That being said, there is always opportunities to
(34:11):
still make money on the portion of your money that's
in stocks. It's that simple. And you know, we like bonds,
we like alternatives, we like many different things. But nothing's
more fun and nothing's more impactful to people's overall wealth
than potentially making money in stocks. I mean, that's just
(34:32):
as simple as it gets. And so that's why we
reserve this portion to give you some investments that we like,
that our clients might have, that we might have.
Speaker 3 (34:44):
Or both, and in this case, I believe it's both.
Speaker 2 (34:47):
And so it's no secret that I love energy investments,
and I love energy of every type, and I love
every ancillary service and and company and product around the
energy industry. In fact, sometimes I like the things that
(35:09):
aren't you know, when I say energy, like you know,
a utility company or an oil company. It's something that helps,
you know, get energy to market or to or to
the consumer. And so you know, here we are again
where I'm liking and buying and adding to Frontline PLC
(35:31):
again f RO. So if you haven't heard this show before,
FRO is an oil tanker stock. They own seventy six
tankers and they're never empty. I mean, you know, especially
when the United States is a net exporter of oil
to our own detriment, by the way, and that's a
(35:51):
whole different you know, show on energy independence and the
cost of energy, and you know, so on and so forth.
But in the twenty twos, you know, somewhere around twenty
two forty twenty two point fifty whatever the price is
that it closed at, you know during the week was
(36:12):
pain or is pain Or projected to pay about a
ten percent dividend, actually over ten percent, and the target
price is thirty four dollars per share, and the fifty
two week high is twenty nine dollars per share. So
here we are something in an industry that the world
has to have the product that they're delivering. The price
(36:36):
is off of its highs. The target price by all
the analysts following it are is much much higher, and
the dividend you receive on top of it while you
own it is double digits. Ladies and gentlemen, I caution
you not to put all your money in it, quite frankly,
because some people might go, oh my gosh, I can
(36:58):
make twenty thirty forty percent in price appreciation and I'll
get paid a ten percent. I'm dumping, you know, all,
No Marga House, do not do that. Use We use
a prudent rule called the five percent rule, which typically
we start with a five percent position if you already
have it. You know, consider what percentage of your portfolio
(37:20):
already is before you add to it. Because let me
tell you, anything that is any too much of anything,
no matter how good it is, could still be too
much of it. So be cautious. But again, I believe
it's a great time to buy it. And and for
all the reasons we've just talked about. And then on
(37:41):
top of that, now there's a couple of other things
that we like that I still think we need to
regurgitate because I just I just bought some uh TLT
options because I think TLT, you know, again, based on
the kind of the data you're going to throw out
(38:02):
there about TLT.
Speaker 3 (38:04):
Is a great time to buy. Now.
Speaker 2 (38:06):
This is on the bond side. This is a bond ETF.
It's the twenty year Treasury ETF. Is that correct?
Speaker 3 (38:14):
Correct?
Speaker 2 (38:14):
And give us some of the numbers that this thing
was could be. And again this goes with the strategy
of rates going down and if you can't, you know,
if you don't have the resources to buy individual bonds.
But if you do, call us nine one six, nine
six seven thirty five hundred. But if you don't, TLT
(38:36):
is a good ETF that could benefit greatly over the
next twenty four months. If we are in you know,
and going towards recession and we continue to cut rates
and make rates you know less, then this will really benefit.
In fact, historically, what has this thing look like and
where it is right? Where is it right now?
Speaker 3 (38:56):
Right now?
Speaker 4 (38:56):
It's it's just under one hundred dollars. Yeah, and you know,
I think we talked about a couple episodes around ninety six,
so it's already gone up you know, five bucks.
Speaker 2 (39:05):
Yeah, it's like what ninety eight, ninety nine, ninety seven nine,
where was it ninety nine and fifty a couple of
weeks ago, ninety six, okay, and then so it's our
under one hundred bucks.
Speaker 4 (39:17):
And that's that that's per share of the ETF. But
where has it been in the past. It's been you know,
one oh five, one ten and twenty twenty three before
the rate cutting cycle started.
Speaker 3 (39:30):
Happening.
Speaker 4 (39:30):
In twenty twenty two, it was up to one hundred
and fifty bucks. So this this is a play with
two parts. One, it could be potentially defensive because.
Speaker 3 (39:44):
If we oh, it's definitely defensive, I mean, well, in
twenty twenty two, definitely wasn't.
Speaker 2 (39:48):
Well, no, but but we told people to put your
money in bonds in twenty twenty two.
Speaker 4 (39:53):
But with the radiusing cycle and the fed's going to
cut if they're successful and in a soft landing, that
means there's still gonna be cut happening. This is going
to improve the price action of the ETF. If they
are wrong once again and they break something and they
have to do more, you know, be more aggressive with
(40:13):
the rate cuts, those things will go through the room.
This is just gonna spike the price up even more.
Speaker 2 (40:18):
And let's say it just Stave's flat. I believe you
get around a high three percent dividend projected dividend on
top of it.
Speaker 3 (40:26):
Yeah, it was around four business the price has gone up,
it'll be less. It'll be three, seven to five somewhere
around there. Right.
Speaker 2 (40:33):
But again, the point is is that we're helping you,
you know, take advantage and listen to what we're saying.
In turmoil, in during times of volatility, during times of
of headwinds, there's always money to be made. And so
(40:55):
here is a couple of ideas that are very timely
from what's going on right now now, and that could
be a good part of your portfolio. If this is
beyond you know what your thought process is when you're
buying investments or the investments that you've already have that
(41:16):
maybe you haven't made changes to, or maybe your advisor
hasn't made changes to, you should be you should be
making changes to your portfolio. Active management is crucial right
now versus passive management. So call us at nine one
six nine six seven thirty five hundred, come in for
(41:40):
a no obligation consultation, or if you're retired or about
to retire, register for our workshop. Do it now. I
know it's a month away, but when it's a week
away or a couple of days away, we're going to
be turning people down and that always is a bad
feeling for us. You know, the room only holds about
fifty people, and we get to that fifty pretty darn quick.
(42:04):
So there's still time to register for our October second retiree,
absolutely no obligation. We serve you some great food. I
promise you the information is going to help you no
matter what you decide to do. So call us at
nine one six nine six seven thirty five hundred. Leave
a message for Kathy with the K She'll get back
(42:26):
to you during the week and she'll get you on
our calendar or get you signed up for that workshop. Well,
I hope you enjoyed this episode of the Wise Money guys.
Have a wonderful weekend, and that's all we have.
Speaker 4 (42:39):
Might I have at you again and help to sue
you at the workshop
The Wise Money Guys Radio Show is brought to you
by One Source of Wealth Management SEC licensed three one
nine zero seven eight. For disclosures and more information, visit
our website One Source WM dot com or call nine
one six nine six seven thirty five hundred.
Speaker 2 (00:16):
Hello and welcome to the Wise Money Guys radio Show.
I'm your co host, John Scambra, and I'm here with
my partner What's up in Wisconsin. We're certified portfolio Managers,
which means we're investment experts that specialize in helping people
who are retired are about to retire manage their money.
If you like our show and you have a question
or want to come in for a no obligation consultation,
(00:38):
or want to register for our October second workshop, which
is little less than a month from today. It's at
the Old Spaghetti Factory on Sunrise in Roseville from six
to seven thirty pm. Call and call now, because we
always end up getting more people registered than we have space.
(00:59):
So if you're at all concerned about everything that's going on,
maybe you're concerned about the election and what the outcome
will do to investments. Maybe you're concerned about inflation because
you've seen your purchasing power go down in retirement when
you buy groceries or get gas, or pay your utility
bills or pay for insurance. You know, maybe you're just
(01:20):
concerned about your legacy and your overall wealth. Whatever the
reason is, call us at nine one six ninety six,
seven thirty five hundred. Again, if it's just a question, fantastic,
Or if you want to get on our calendar because
you can't make the October second Retiree Dinner Workshop, which
(01:40):
we hope you can, call us again at nine one
six nine six seven thirty five hundred. So big show today.
Lots of information, lots of things happening DUSSEPPI, lots of headwinds,
lots of things that are really taking us from potentially
turning this bull market into potentially a market for stocks. Yeah, anyway,
(02:02):
September and October, lots to look out for. Yeah, we've
been in a bowl market since around October of twenty
twenty two, certainly in an up trend since then, but
lots of indicators suggested we were in a new bull market,
you know, starting then, and now we're starting and we've
(02:24):
been talking about this for some time now, months and
months and months that the strategy, and so that's what
this show is typically about, strategies that we utilize to
help our clients manage their money and or actual investment
ideas that we'll talk about a couple in fact at
the end of this show, but mainly the strategy and
(02:47):
the principles of money management, which we talk about weekend
and week out, which come from our combined almost fifty
years of experience helping people in various types of financial
services or financial services needs can't be replaced. You can't
do this part time, you can't have specialized and done
(03:10):
something your whole lives. And then in retirement, you know,
you're just going to go ahead and you know, be
able to make the right non emotional decisions when it
comes to your investments and your retirement income, so on
and so forth. And that is a lot of what
this show is about is to help people, you know,
(03:31):
make better decisions. And if you can't and have started
to realize that based on you know, all the things
that have changed are ready just in the last few years,
I mean and certainly since I mean.
Speaker 3 (03:44):
Been a wild ride.
Speaker 2 (03:45):
I mean, if you go prior to twenty nineteen, right
twenty twenty, so prior to twenty twenty, going back to
twenty ten, of course, everybody thought they were, you know,
an investment expert, a chief investment officer of their own money,
because you basically could buy any old, non diversified, vanilla,
(04:10):
low price, non tactical you know, mutual fund and make money,
or index fund or index fund. Quite frankly, but we've
shared studies where if you make the wrong decision, even
buying an index fund over a long period of time,
you know, you could actually run out of money or
lose money. Index funds, albeit cheap, aren't the catch all
(04:33):
be all that people think they are, especially when we've
had you know, gosh, every kind of now and every
kind of thing thrown at us, but one new thing.
You know, Over my thirty plus year career, I never
had a pandemic. Certainly bad economic times, recessions, high interest rates,
(04:54):
low interest rates, and then the pandemic was something that
was some to test most people's metal. And quite frankly,
our clients enjoyed one of the best years ever in
twenty twenty. And if you're looking at something like that
and you didn't have a great year from an investment return,
(05:17):
perspective in twenty twenty. Why not if you didn't have
a great year or a better year than what the
S and P or the bond market returned in twenty
twenty two. Why not if you're now seeing your portfolio,
you know, because you haven't been listening to the show
or heeding the advice of this show in twenty twenty four,
(05:39):
why not. Well, those are some of the things that
we hope to help you answer at our workshop at
the Old Spaghetti Factory on October second. And by the way,
we were talking that, I think our commercial says October fifth.
So if you've already registered because you listened to the
show and you've heard the commercial, it's October second, not
(06:01):
October fifth. But we'll fix that right away. And certainly
when you call in, Kathy would say, if you heard
it from the commercial versus the radio show, oh no,
it's on October second. So I don't know how I
did that. But so, if you're retired and or you're
about to retire, or you just have accumulated wealth that
(06:23):
you're concerned about, you know, come to the workshop. If
you haven't, you know, accumulated any sort of investments, you know,
we would love to help people as much as possible,
but at the end of the day, you know, our
specialty is portfolio construction. It is actively managing, you know,
(06:44):
portfolios of money to help people either get the income
off of it they need, or the growth off of
it they need, or a combination of both. And that's
where I would say that we're second to none, UH
in the area certainly, and we prove it at the workshop.
So last time on this UH subject, at least for
(07:06):
the next few minutes, call nine six ninety six, seven
thirty five hundred to register and and do it before
we have to turn you down. And we always feel
bad about that. So what are some of the some
of the things I mean, I know we've got the
FED meeting still what a couple of weeks out which
we'll we'll dive into that a little bit more, because
(07:27):
there's something pivotabal, pivot pivotable say that pivotal.
Speaker 3 (07:34):
Well about that, we're.
Speaker 4 (07:35):
Still in the seasonality of volatility, which, as we mentioned
before in previous episodes, back half of July into the
first week of October. But September and October there's a
few rists there's there's multiple head.
Speaker 2 (07:50):
Well typically September is going back to nineteen sixty four,
not a great month for return on investment on stocks
to be.
Speaker 4 (07:58):
Of course, it's the worst month a few If you
average it out, the average return is negative point seven.
Doesn't seem like much, but there's some months in some
years that are much worse, and there's drawdowns within that month.
But how many times in a given year September turned
out a positive month forty five percent of the time.
Speaker 3 (08:18):
Wow.
Speaker 4 (08:19):
Outside of that, though, the other components that are going
to be a drag on the stock market or potentially
support an increase in volatility is declining share buybacks. We
can dive into that a little bit more, and what
that means we get the presidential election, and typically the
(08:39):
trend is volatility picks up September October, just prior to
the election. And then you've mentioned it FOMC meeting and
we have some more economic data.
Speaker 2 (08:51):
You know, I listened to the president's speech to the
New York Economic Club that he also spoke at when
he ran in twenty sixteen, and he spoke at it,
you know this this last week, and you know, the
(09:12):
who's who of industry and and and and economic positions
like Paulson, Steve Minuochin, you know, former Treasury Secretary Jamie
Diamond was there. I mean, we're talking the global you know, uh,
industry leaders of financial services companies, and of economic councils
(09:37):
and and and and treasury positions and former former chairman
Reserve chairman's and so on and so forth. And Trump
laid out a six point plan that I don't know
how if you've been in this country, you know, one generation,
ten generations, and you love this country, how you could go, Boy,
(09:59):
I don't like that six point economic plan. You compare
and contrast it to you know, and I don't even
want to say the other people's names because I get
a little vomit.
Speaker 3 (10:09):
In my mouth. How many point plans have?
Speaker 2 (10:12):
Their point plan is how to benefit the world and
destroy America financially literally destroy the dollar, you know, destroy
personal wealth, destroy the middle class, you know, so on
and so forth. Now this isn't a political show, but
politics definitely affect investments. And it's as simple as that.
(10:34):
And so some of the strategies that we've talked about
are so crucial given the times that we're in, and
we're going to talk about what those are you're listening
to John Scambray to Seppi Vescani, the wise many guys,
and we are certified portfolio managers. That makes us investment
experts that specialize in helping people who are retired, are
about to retire, manage their many And I never get
(10:58):
tired of saying that because we love what we do
and we love helping as many people as possible. And
right now, lock in some profits on stocks, take advantage
of high interest rates and buy bonds. Don't buy bond
funds by individual bonds, because you know what you're gonna
pay for the bond, you know what rate of return
(11:19):
you're gonna get on the bond, and you're guaranteed to
get your money back and get that interest rate. And
in fact, when interest rates go down, bond prices go up,
which means there could also be appreciation of your longer
dated maturity bonds as far as over the price that
you paid. So that was strategy. You know that we've
(11:43):
been talking really since the beginning of this year. When
A rated bonds triple B plus are better and most
were A rated or even higher, some A plus, some
double A. We're paying you know, five six in percent,
they're still paying in the fives. And we haven't got
(12:05):
the interest rate cut yet. But the interest rate cuts,
there's a study that you know, we're gonna you're gonna
talk about hi which is crucial. So again, strategy right
now for not losing a lot of money, you know,
with so much uncertainty in stocks and whether or not,
(12:29):
you know, our economy does slip into recession or not.
And we're going to talk about that as far as
it relates to the interest rate cuts coming and what
those mean for the stock market as well. But right now,
the bond market, what has the bond market traditionally done
in any period of declining rates? That's what that study
(12:52):
in essence says.
Speaker 4 (12:53):
Yeah, we're we're coming up on the Fed meeting here
in a couple of weeks, so jerme Pal's gonna have
a speech on September eighteenth. It's anticipated he's going to
cut rates. Is it going to be a quarter percent?
Is it going to be half percent? We can dive
a little bit more into that later, but the big
question is, well, what happens to stocks and bonds when
(13:14):
the fit when the cut cycle starts to begin. So
when you look at the past rate easing cycles or
when they start cutting rates, going back to June nineteen
eighty nine, nineteen ninety five, September nineteen ninety eight, January
two thousand and one, a lot of these recessionary times.
(13:35):
September two thousand and seven, this is when the first
rate cuts took place, August of twenty nineteen, before the
COVID crash happens. Bond prices looking at you know, six months,
twelve months, twenty four months out.
Speaker 2 (13:51):
After the first after the first start of the cutting cycle.
Speaker 4 (13:54):
Yep So six months out you know, from the range
of those period of times that I just mentioned.
Speaker 2 (14:00):
Which is what was the oldest one nineteen eighty nine,
so not going back to which istill now.
Speaker 4 (14:06):
During that radizing cycle, yep So, anywhere from a point
two percent price increase, which is very low, that's kind
of an outlier that was in September ninety eight, but
really anything from three and a half to almost seven
percent rise in prices. That's six months out of the
bond of the bonds, the price to the bond, so
the value of the bond. So if you look at
(14:27):
your statements you have and these are these are core bonds,
core fixed income. And you look at the value of
your bonds and what that value is, and you look
at your statements six months from now, it's increasing ywhere
from I'd say three and a half to almost seven
percent in value. Twelve months out it goes anywhere from
(14:48):
like two point six at the very very lowest. The
highest is over ten percent. This is in the bond price,
just the value. These are starting to sound like stock
market like gain in price, which is why we have
been telling people for months by beaten up cheap bonds
(15:08):
of great companies, individual bonds, individual bonds exactly go on
twenty four months out the lowest which the lowest and
all returns of September nineteen ninety eight for for whatever reason,
and mainly I would suspect because they did a rate
hike and they dropped and they start hiking, right. That
was the only time that in that period of time,
(15:30):
all those periods from nineteen to ninety and now that.
Speaker 2 (15:32):
By the way Feds were. I was in the industry then,
and I remember that clearly, and we had we and
oh my god, don't remind me of the hair. If
I had that hair again, I would have a man
bun like these guys have I hate man buns. I
would do it just flaunting it, not just because I could,
and I would throw that around. I'd probably even feather
(15:53):
it because he's so happy.
Speaker 3 (15:57):
I know it was.
Speaker 2 (15:57):
I'm not happy your hair well air of it. So
what were the what were the increases? Twenty four months?
Speaker 4 (16:04):
So twenty four months out the lowest lowest returns of
the period was at ninety eight And the reasoning is
what I just mentioned. And that was again the only
time that the Feds were successful engineering.
Speaker 3 (16:15):
A soft landing. By the way, all other times they weren't.
Speaker 4 (16:18):
They failed seven point lowest highest price return twenty one percent.
Speaker 2 (16:26):
Ladies and gentlemen, if you don't understand what we're talking about,
well ay, that's a reason to call us and get
on our calendar. Now, don't procrastinate any longer. You are
not a bond expert. It takes a massive amount of
time to filter and dive into the yield curve and
(16:46):
search and find quality bonds at the right price with
the right cupon and the right maturity and the right
industry so you have the least you know amount of
possible default risks, so on and so forth. This is
something that you don't do when you're sixties, seventies and
eighties in retirement, enjoying your retirement. You're gonna sit at
(17:09):
your screen going, oh yeah, let me, let me, let
me connect with some of the big bond desks around
the world and really run some screens and some filters
to really build me a portfolio of whatever percent of
my portfolio is going to be in fixed income. This
is something that you can't do alone. I mean, technically
you can, but highly recommend that you don't. Don't let
(17:32):
this opportunity for stock like potential price appreciation in the
bond market pass you by, and it is passing you by.
Call nine one six ninety six seven thirty five hundred
to get on our calendar or to come in for
and sit down for our free retiree dinner workshop. No
(17:55):
obligation ever. We will show you what we do. We
will show you how we're different. We'll take a look
at what you've done. We never bad mouth what people
have done for themselves or what other people have done
for you. We just know we can make it better,
we can make it stronger. We can help you accomplish
your goals more consistently. That's our track record, that's our confidence,
(18:19):
that's our belief. So that's what you will learn when
you come in for a no obligation consultation or come
in for that October second workshop at the Old Spaghetti
Factory on Wednesday from six to seven thirty pm. Another
thing tied to this, which is significantly different, which is
also why when you get less buybacks and when you
(18:43):
get interest rate cuts. You know, if you've got a
seventy sixty seventy eighty percent stock weighted portfolio right now,
we believe, especially if you're retired, that it should be
less than that. That a balanced, you know, approach would
be far better and maybe even you know, not even
(19:05):
fifty to fifty. Maybe it's ten percent alternatives, fifty percent
you know, fixed income, ten percent cash or money market,
and only thirty percent stocks right now to reduce you know,
that stock market potential risk to your portfolio, especially if
you only need a six or seven eight percent return
(19:28):
to be successful in in retirement or on the growth
of your money. And that's what accomplishes your goals and objectives.
That's some of what we help you determine from a
from a benchmark or a measuring success what that actual
rate of return needs to be, and the.
Speaker 4 (19:45):
Balanced portfolio is actually back to doing what it should
be doing. In twenty twenty two and twenty twenty three,
you didn't really see that. So when you had bonds
in your portfolio, you weren't getting that ballast effect with
bonds helping to buffer the blow when there's polity stock market, they.
Speaker 2 (20:02):
Paid nothing and the and the prices were going down.
Speaker 4 (20:06):
Yeah, but now they're back and exactly where we just
pointed out. You know, when the FED rates, the FED
start cutting rates and what happens now it'll have an
impact on your over a portfolio and a balance.
Speaker 2 (20:18):
So let's summarize that. In the first six months, the
lowest gain in price was point two but that was
point two, and twenty four months later the biggest gain
in price of core bonds was what twenty one percent?
Speaker 3 (20:34):
Yeah, twenty point zero.
Speaker 2 (20:35):
So we're talking a two tents of one percent to
a twenty one percent potential if history you know which
you know, history isn't, you know, guarantee of future results. However,
when you cut rates, it's an inverse relationship. Bond prices
go up. So if you're already in bonds. You potentially
(20:56):
could have anywhere from two tents of one percent to
twenty one percent potential appreciation in bond prices over that
twenty four month period. Not guaranteed, But what is guaranteed
is the cupond. Not all bonds either, not all bonds
are the same. But what is guaranteed is the coupon
and what price you pay and what principal amount you
(21:18):
get back. And that's why it's so crucial to come
in now called nine one, six ninety six, seven thirty
five hundred. You know some of the headwinds we've been
talking about, and then of course the strategies to take
advantage of those headwinds, one of which is the share buyback.
Explain what that is, why it is, and what sort
(21:40):
of contribution share buybacks had to the overall returns of
the market. And then how the decrease in buybacks may
you know, drive our I guess, our strategy, our recommendations
to our clients even further to be my your portfolio
(22:02):
based on what's going on. So what is essentially a
share buy back?
Speaker 4 (22:08):
Yeah, So to back up a little bit again, we're
in volatility season and what's going to be unique about
September and October. Like I said, is one of the
three risks that are out there is declining share buy back.
So there are periods of times where corporations can buy
back their own shares. Why do they want to buy
back their shares? They got more money than they know
(22:30):
what to do with exactly. Corporations will earn a profit
and they could do one of three things. They're going
to either redistribute some of that and share the wealth
with the shareholders in the form of a dividend, which
we're big fans of dividend paying stocks, especially if you're
retired and wanting a cash flow from your portfolio. The others,
they could take that pot of money and they can
put it towards R and D, research and development, building
(22:52):
new you know, goods and services.
Speaker 2 (22:55):
Hut too many people hiring right could be be or.
Speaker 4 (23:01):
They you know, buy more of their very own shares.
And why would they want to do that? Well, it
helps to drive for their demand for their stock, which
then obviously will increase the price increase the price over time.
The other selfishly for executives is you know, half of
their inteative typically is going to be based.
Speaker 2 (23:20):
Off actually many is more, could be half or even all.
Their incentives stick typically in stock options or stock restricted
stock units because they don't want to pay income tax,
they rather pay capital gains tax.
Speaker 4 (23:34):
Right, and they want to try and drive the EPs
earnings per share number up. And when you're buying more
if something, you know, if.
Speaker 2 (23:44):
This stock, well, if you have less shares outstanding, that too,
and you you just use simple math and you use
that in relationship to your earnings, Well, your earnings per
share is going to go up, your return on equity
is going to go up, your stock price is going
to go up because there's less shares outstanding, and so
on and so forth, right, and that equated to what
(24:05):
as far as a contribution towards the overall because it
was massive, and that's this year and last year.
Speaker 4 (24:10):
Right at the point when corporations buy back their shares,
it's okay, well, how much does this actually driver contribute
to the growth of the S and P five hundred overall?
And there's a study that's out there and looking at
the different metrics. Forty point five percent is when you
break down the overall returns of the S and P
five hundred, forty point five percent is strictly from shared buybacks,
(24:34):
seven point one percent is from dividends, a little over
thirty one percent is from earnings, and twenty one percent
is from multiple expansion.
Speaker 3 (24:41):
So the windows closing.
Speaker 4 (24:43):
So there's declining of shared buybacks going into the back
half of September. So it doesn't mean that it's going
to you know, well let me, let me break.
Speaker 3 (24:52):
But it's not. It's not providing that tailwind.
Speaker 2 (24:54):
Yeah, well that's a lot more than a tailwind if
you think about it. The average person who you know,
manages their money themselves, the average advisor, which woefully is
underskilled and unknowledgeable of how these things impact, you know,
the markets and people's money, because most of the time
(25:15):
they just put you in a basket of mutual funds
or ETFs where you know, they just are one hundred
percent correlated to whatever the indices are doing, and they
just you know, sadly always say, oh, stay the course,
even because they don't know any of this stuff going on.
And you just said that twenty one percent of the
indices is from multiple expansion, right, that's how the majority
(25:39):
of advisors and people make money on stocks or bonds
or mutual funds, or ETFs, it's from multiple expansion. They
don't know it, but you know, they may be following
some other things. But at the end of the day,
that's what the average person is is is going to
make money off of You just basically said almost eighty
(26:01):
percent of making money is not from multiple expansion and
forty percent. Half of that eighty percent is from share buybacks,
which means if you take share buybacks out of the
equation from these masses companies that from a weighted perspective
drive the S and P you're gonna find level that
(26:23):
so many people who take a passive approach to investing
in the market with index funds aren't going to experience
what they've experienced in twenty three and twenty four, and
it may be more like twenty two, you know, or
even twenty or other periods of a of a changing trend,
(26:44):
a different tide. And so again that's just I can't
stress enough if these are things you don't understand or
know or follow or research you know before may in
an investment decision with your money, or if you're not
confident that your person who's helping you with your money
(27:08):
and your retirement and your trust and your wealth or
whatever the case may be, then you absolutely need to
either get on our calendar or come to our retiree
dinner workshop on October second. If you can't make that date,
just get on our calendar. The window for some of
these strategies, like going from stocks to bonds, where bonds
(27:31):
have the ability to potentially appreciate as much as stocks
have in any given year is closing rapidly. Called nine
one six nine six seven thirty five hundred to register
now for that October second workshop or to get on
our calendar for a no obligation consultation. So the other
(27:53):
thing that again, I mean talk about one, two punches
and now a knockout punch. We already said the election,
we've talked about share buybacks, we've talked about you know,
the cutting environment that we're in. But now let's talk
about how pivotal and what a surprise difference in assumption
(28:15):
to rate cuts could actually signal and mean, you know
for the markets at this upcoming September eighteenth is seventeenth and.
Speaker 3 (28:24):
Eighteenth, right, yeah, eighteenth, he's gonna have that meeting.
Speaker 2 (28:27):
So it's expected and the probability the CBOE has a probability.
Speaker 3 (28:36):
What's the word.
Speaker 2 (28:36):
I'm looking for a probability indicator on the FET and
those things never existed, by the way before that. And
you know you've heard me rant and rave about this man.
This this position has way too much unelected political power,
too much financial power, not only for the United States
(28:58):
but for the world. And you know, no person unelected
should have this much power, but he does, and and
the position does. And here we are that this decision
coming out of the FED, which you know, you you
hope to believe that is not politically motivated. You hope
(29:18):
to believe, but it's hard to believe when they constantly
revised the data, the data that he come out with
and say is you know, one month, one year later,
oh magically that that that data they came out with
that study, those numbers were completely wrong. And so my
trust is like zero with anything government, of course, But
(29:42):
here we are and this this q so a quarter
of a percent, I think does nothing. That's not what
it's a nothing burger. It just says, hey, we're being preemptive.
We think the economy is still strong. We don't want
to trigger you know, inflation reversal to going higher. And
(30:04):
but what happens, and this has happened before, and and
there's another study, and there's there's reports out there of
when during a new rate cut cycle the Fed cuts
more than what that what the market has anticipated, and
what that actually means. What could that actually mean if
(30:26):
Jerome Powell, uncle uncle Powell, as we say, turns around
and instead of it being a quarter, it's a half
or one percent or three quarters of one percent, what,
in your opinion, which is really our opinion, do you
think would happen.
Speaker 4 (30:40):
Well, the market's actually betting for more. The markets actually
betting in there and they're wanting more.
Speaker 2 (30:45):
Well, the market's not betting, but the analysts, pundits, economists strategy.
Speaker 4 (30:51):
There's a there, and there's there's a one percent by
the end of the year. If you look at the
averages of what does a stock market do you know,
once rate cutting cycles takes place in previous period most
recent previous periods, not in the first six months, but
it goes up about seven percent. Okay, that's the averages.
(31:12):
And then and then it goes down and it can
go down about twenty percent.
Speaker 2 (31:15):
Yeah, as far as the stock market, twenty three percent
was the study that the market typically sells off in
the first six months, you know, during the first you
know that that change from more aggressive exactly if it's
more aggressive than what was you know, being predicted or anticipated,
(31:36):
And because.
Speaker 4 (31:36):
Then that just flags that they are concerned of something
happening within the economy that they have to start stimulating
it more than they thought.
Speaker 2 (31:46):
And again, here would be a tremendous mistake if you
start and this is why I think it should only
be a quarter of one percent. And I think you
need to wait and see what that quarter of one
percent does from an inflation perspective, because if you start
(32:06):
making too much you know, change and flooding too much
liquidity into the market. Let me tell you, the inflation
that we just saw, which was so terrible, you know,
dating back to the seventies, will create a new paradigm
that says, oh this, this is the worst inflation since
(32:27):
the twenty twenty two's. I mean, it'll be a new
because it will be such a monumental, huge mistake. The
dollar will literally collapse, you know. I mean there's been
movies where I forget there was one with John Ritter,
and I hope somebody you know calls from email police company. Yeah,
(32:48):
and it was he was the president of the United States,
and this was a movie in the eighties, and he
walked into a coffee shop and he goes, eh, let
me have you know, just a large coffee, whatever it is,
and he's with his security detail and everything's basically gone
to hell in a basket and they go oh, and
realize a cup of coffee when this movie was made,
(33:10):
was probably about seventy five cents, and it goes, oh,
that'll be twenty four to fifty, mister President. And that
is the type of inflation that we could potentially see
if they cut rates too fast.
Speaker 3 (33:24):
Too they get it wrong again.
Speaker 2 (33:26):
If they get it wrong again, Think, did anybody ever
think that a cup of coffee would could be seven
or eight dollars?
Speaker 3 (33:34):
Right now? Right?
Speaker 2 (33:35):
You go into Starbucks and you get one of these
fancy flip rubble bubble frappuccino thingies, and but they're seven
eight bucks for the large.
Speaker 3 (33:45):
Crazy.
Speaker 2 (33:46):
Now, we've already told you and have been telling you
to buy bonds, and we've been signaling and predicting and
telling you that there would be volatility, there would be
sell off, there would be corrections, all of which have
already happened this year, and we're telling you there will
be more. That being said, there is always opportunities to
(34:11):
still make money on the portion of your money that's
in stocks. It's that simple. And you know, we like bonds,
we like alternatives, we like many different things. But nothing's
more fun and nothing's more impactful to people's overall wealth
than potentially making money in stocks. I mean, that's just
(34:32):
as simple as it gets. And so that's why we
reserve this portion to give you some investments that we like,
that our clients might have, that we might have.
Speaker 3 (34:44):
Or both, and in this case, I believe it's both.
Speaker 2 (34:47):
And so it's no secret that I love energy investments,
and I love energy of every type, and I love
every ancillary service and and company and product around the
energy industry. In fact, sometimes I like the things that
(35:09):
aren't you know, when I say energy, like you know,
a utility company or an oil company. It's something that helps,
you know, get energy to market or to or to
the consumer. And so you know, here we are again
where I'm liking and buying and adding to Frontline PLC
(35:31):
again f RO. So if you haven't heard this show before,
FRO is an oil tanker stock. They own seventy six
tankers and they're never empty. I mean, you know, especially
when the United States is a net exporter of oil
to our own detriment, by the way, and that's a
(35:51):
whole different you know, show on energy independence and the
cost of energy, and you know, so on and so forth.
But in the twenty twos, you know, somewhere around twenty
two forty twenty two point fifty whatever the price is
that it closed at, you know during the week was
(36:12):
pain or is pain Or projected to pay about a
ten percent dividend, actually over ten percent, and the target
price is thirty four dollars per share, and the fifty
two week high is twenty nine dollars per share. So
here we are something in an industry that the world
has to have the product that they're delivering. The price
(36:36):
is off of its highs. The target price by all
the analysts following it are is much much higher, and
the dividend you receive on top of it while you
own it is double digits. Ladies and gentlemen, I caution
you not to put all your money in it, quite frankly,
because some people might go, oh my gosh, I can
(36:58):
make twenty thirty forty percent in price appreciation and I'll
get paid a ten percent. I'm dumping, you know, all,
No Marga House, do not do that. Use We use
a prudent rule called the five percent rule, which typically
we start with a five percent position if you already
have it. You know, consider what percentage of your portfolio
(37:20):
already is before you add to it. Because let me
tell you, anything that is any too much of anything,
no matter how good it is, could still be too
much of it. So be cautious. But again, I believe
it's a great time to buy it. And and for
all the reasons we've just talked about. And then on
(37:41):
top of that, now there's a couple of other things
that we like that I still think we need to
regurgitate because I just I just bought some uh TLT
options because I think TLT, you know, again, based on
the kind of the data you're going to throw out
(38:02):
there about TLT.
Speaker 3 (38:04):
Is a great time to buy. Now.
Speaker 2 (38:06):
This is on the bond side. This is a bond ETF.
It's the twenty year Treasury ETF. Is that correct?
Speaker 3 (38:14):
Correct?
Speaker 2 (38:14):
And give us some of the numbers that this thing
was could be. And again this goes with the strategy
of rates going down and if you can't, you know,
if you don't have the resources to buy individual bonds.
But if you do, call us nine one six, nine
six seven thirty five hundred. But if you don't, TLT
(38:36):
is a good ETF that could benefit greatly over the
next twenty four months. If we are in you know,
and going towards recession and we continue to cut rates
and make rates you know less, then this will really benefit.
In fact, historically, what has this thing look like and
where it is right? Where is it right now?
Speaker 3 (38:56):
Right now?
Speaker 4 (38:56):
It's it's just under one hundred dollars. Yeah, and you know,
I think we talked about a couple episodes around ninety six,
so it's already gone up you know, five bucks.
Speaker 2 (39:05):
Yeah, it's like what ninety eight, ninety nine, ninety seven nine,
where was it ninety nine and fifty a couple of
weeks ago, ninety six, okay, and then so it's our
under one hundred bucks.
Speaker 4 (39:17):
And that's that that's per share of the ETF. But
where has it been in the past. It's been you know,
one oh five, one ten and twenty twenty three before
the rate cutting cycle started.
Speaker 3 (39:30):
Happening.
Speaker 4 (39:30):
In twenty twenty two, it was up to one hundred
and fifty bucks. So this this is a play with
two parts. One, it could be potentially defensive because.
Speaker 3 (39:44):
If we oh, it's definitely defensive, I mean, well, in
twenty twenty two, definitely wasn't.
Speaker 2 (39:48):
Well, no, but but we told people to put your
money in bonds in twenty twenty two.
Speaker 4 (39:53):
But with the radiusing cycle and the fed's going to
cut if they're successful and in a soft landing, that
means there's still gonna be cut happening. This is going
to improve the price action of the ETF. If they
are wrong once again and they break something and they
have to do more, you know, be more aggressive with
(40:13):
the rate cuts, those things will go through the room.
This is just gonna spike the price up even more.
Speaker 2 (40:18):
And let's say it just Stave's flat. I believe you
get around a high three percent dividend projected dividend on
top of it.
Speaker 3 (40:26):
Yeah, it was around four business the price has gone up,
it'll be less. It'll be three, seven to five somewhere
around there. Right.
Speaker 2 (40:33):
But again, the point is is that we're helping you,
you know, take advantage and listen to what we're saying.
In turmoil, in during times of volatility, during times of
of headwinds, there's always money to be made. And so
(40:55):
here is a couple of ideas that are very timely
from what's going on right now now, and that could
be a good part of your portfolio. If this is
beyond you know what your thought process is when you're
buying investments or the investments that you've already have that
(41:16):
maybe you haven't made changes to, or maybe your advisor
hasn't made changes to, you should be you should be
making changes to your portfolio. Active management is crucial right
now versus passive management. So call us at nine one
six nine six seven thirty five hundred, come in for
(41:40):
a no obligation consultation, or if you're retired or about
to retire, register for our workshop. Do it now. I
know it's a month away, but when it's a week
away or a couple of days away, we're going to
be turning people down and that always is a bad
feeling for us. You know, the room only holds about
fifty people, and we get to that fifty pretty darn quick.
(42:04):
So there's still time to register for our October second retiree,
absolutely no obligation. We serve you some great food. I
promise you the information is going to help you no
matter what you decide to do. So call us at
nine one six nine six seven thirty five hundred. Leave
a message for Kathy with the K She'll get back
(42:26):
to you during the week and she'll get you on
our calendar or get you signed up for that workshop. Well,
I hope you enjoyed this episode of the Wise Money guys.
Have a wonderful weekend, and that's all we have.
Speaker 4 (42:39):
Might I have at you again and help to sue
you at the workshop
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