September 19, 2024 • 45 mins
Government spending, borrowed money, and high interest rates are all reasons the United States owe trillions in debt payments. Hosts John and Giuseppe tell us what that means for your investments. Plus, the Fed Rate cuts and a history of how the market has reacted to past cuts, possible relief in the mortgage market, a golden nugget, and our 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
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our website One Source WM dot com or call nine
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Speaker 2 (00:16):
Welcome to the Wise Money Guys Radio Show. I'm your
co host, John Scambray and I'm here with my partner Justepa, Visconsin.
And we are certified Portfolio Managers, which means we are
investment experts and planning experts that super duper enjoy helping
people who are retired are about to retire manage their money.
If you like our show, please give us a call
(00:37):
at nine one six nine six seven thirty five hundred,
especially if you want to come in, which we highly
suggest come in for a absolutely no obligation consultation.
Speaker 3 (00:49):
Uh.
Speaker 2 (00:50):
Please call Kathy with the K at nine one six
nine six seven thirty five hundred. Get on our calendar.
We'll spend about an hour with you or so or
however long it takes getting an you getting to know us,
and we'll see if what we do is a fit
for you and if it is great. If it's not,
we certainly aren't gonna pressure you to join us if
(01:13):
it doesn't make sense. So more importantly, you can also
call right now because I'm super excited to say that
we still have some space. But we had a lot
of sign ups for our last of the year. At
least at this point it's the last of the year,
but you never know, but probably is because usually we
(01:36):
don't do retiree workshops in November and December, so our
last workshop of the year for people who are retired
or about to retire, especially if you're concerned about all
the stuff going on and how that might affect your
investments and more importantly, your ability to not run out
of money through the rest of your life because of
(01:58):
how much the cost of everything is going on. Up call,
come in, you'll see us live at the old Spaghetti
Factory in Roseville from six to seven thirty pm on Wednesday,
October second. To get on that list and register for
you and your spouse or significant other or guest, called
(02:18):
nine one six ninety six seven thirty five hundred. Again
that number is nine one six ninety six seven thirty
five hundred to register for the October second workshop.
Speaker 3 (02:30):
So and we got to talk about wow the Federal
Reserve and the surprise raatecut.
Speaker 2 (02:36):
I that you I specifically didn't want a rate cut.
I think that it was political. But more importantly, what
I've been saying all along, and I'm not the only
one saying it, is that when you look at the
(02:57):
debt and that over this next year and the following
year you have five trillion and then another five trillion
coming due that the Federal Reserve has to pay off
of the federal debt, so ten trillion dollars over the
(03:17):
next two years they need to be able to refinance
that debt at a much lower cost. And then in
twenty twenty six they have another I believe it's twenty
trillion coming due, and so they had no choice. So
really it was a government internal government political move. Certainly,
(03:40):
the timing around an election to help maybe boost up,
you know, the stock market certainly appears to be kind
of obvious, But really it has to do with refinancing
the debt. That's why I believe, and many a con
miss out there also believe the same thing. I heard.
(04:02):
I can't tell you former Fed presidents, former Federal Reserve chairman,
many economists and market strategists like Giuseppe and I all
said they had no choice. They've got to be able
to refinance the debt that's only going to get bigger.
Right now, the cost of our debt is literally more
(04:25):
annually than the cost of our military, and that is
just ridiculous.
Speaker 3 (04:30):
So that, well, I think the other thing is it
could you know. The sad thing is what Jerome Powell
said in a speech. You listen to it, but then
you're trying to look, you know, reading between the lines.
So look for cues and clues because you can't take
what they say directly verbatim and then use that to
(04:53):
help forecast what you should be doing with your investments
moving forward. Reason being is they're in the camp of
this is where we think we should be. Here's where
our forecasts are for the future, and we think inflation
is going to do X and y, and therefore we're
going to act in this manner. They've been wrong on
(05:14):
the forecast many of times, and they were wrong when
they were saying that it was transitory, and so we're
going to believe them with one hundred percent certainty that
they're going to engineer soft landing. Is it possible? Yes,
it is, And they did it in the mid nineties,
but more times than not they've either waited too long
(05:36):
to act and instept what they do is react too
late and they break something in the system. So the
other thing is maybe they did the fifty basis points
or the half point rate cut because they needed to
jump the gun. Maybe after some of the downward revisions
of the job numbers, they decided, you know what, we
should have cut a quarter percent in July, and then
(05:58):
we could have cut a quarter percent now, and now
they're trying to get ahead of the curve. The other is,
if the economy is so strong, like they're saying, then
why cut a half a percent?
Speaker 2 (06:12):
Well, and the real five hundred pound gorilla, And this
is where working with Giuseppe and I comes in. We
are contrarian often to what is being said by the FED.
In fact, we couldn't be more right in the moves
that we've been making and have been making going back
(06:32):
to prior to twenty twenty two. And the reality is,
as Giuseppe said, more times than not, the FED is wrong.
They were wrong in twenty twenty two. They tried to
keep you know, the long term bond market stable mainly
because the reserves that they convinced banks to put their
(06:54):
depositors' money in was long term treasuries. And if they
were wrong on inflation, you saw what happened when they
convinced banks that they had to put their money in
long meaning their client's money, their depositors' money in long
term treasuries with no fear that inflation wasn't going to
(07:17):
be there to stay, and that there would be no
rate increases to combat inflation, which meant that your long
term debt would be fine. Well, the opposite was true.
Long term debt as far as its price to par plummeted,
and many banks, you know, either went out of business
(07:41):
or needed emergency capital to be prevented from going out
of business. So they were wrong. Then they were wrong
when Ben Bernaki cut rates too soon and then inflation
came back worse. Now, what we haven't talked about yet
is government spending. They're already slip flopping on CRS continuing
(08:04):
resolutions there they're literally I mean, how as an American
political leader, I don't care if you're a Republican or
Democrat you don't support that. You need to have proof
of citizenship to vote. You need proof of citizenship and
(08:26):
id to go to school. You need proof of citizenship
and id uh on a plane to get a driver's license,
to go to other countries, to you know, to go
in to the military, and on and on and on.
But yet you don't need proof of citizenship to vote
(08:48):
for the president of the United States.
Speaker 3 (08:50):
I need proof to go into a bar.
Speaker 2 (08:53):
And so here we are with this whole You know,
oh God, who's going to be responsible for the government
shutting down? Because attached to these continuing resolutions is the
Save America Act, which is yes, we have no America.
And again this isn't a political aisle issue, it's an
(09:14):
American issue. You don't have a country if you can
just open up the country to to to U nigo
not nigos NGOs, non governmental organizations you know around the world,
that can affect your sure political you're governing bodies. It's absurd.
(09:36):
So right now, this to Save Act is attached to
these continuing resolutions, which by the way, are to borrow
and print and borrow more money, so.
Speaker 3 (09:49):
Which has created the problem with inflation in the first
time to begin with, but too much spending, too much stimulus.
Speaker 2 (09:54):
So the cut was for a short term to try
to figure out how to refinance our debt coming doe,
and then you're going to see inflation rear its ugly head,
worse than it already is. By the way, inflation cooling
is not prices going down. It's the rate of increases
(10:15):
of prices going down. Prices have gone up and gone
through the roof and they have not gone back to
any level that makes things affordable, like housing, like mortgages,
like borrowing costs, so on and so forth, which we'll
talk about. You know what strategies you should be employing
(10:36):
and what strategies we're employing. Stay tuned, you're listening to
the wise money guys, John Scambrady de Sepivskane and we
are certified portfolio managers, which means we are investment experts,
we are market strategists. We are certified portfolio managers, as
I said, creating winning strategies, winning portfolios to help our
clients accomplish their custom goals and objectives, not somebody else's,
(11:00):
not ours, yours. And so if you like what we're
talking about and want to get on our calendar for
an absolutely no obligation consultation, call us at nine one
six ninety six seven thirty five hundred. So here's what
a lot of people don't understand by the way they think,
there's this fifty basis point rate cut to FED funds
(11:21):
and it's a one for one relationship that automatically why
didn't rates go down at least fifty basis points? And
the reality is that, yes, banks borrowing the Fed at
the FED at the FED funds rate you know, obviously
can then pass along that discounted that that that fifty
(11:42):
basis point rate cut onto you know, things that they
that they have for loan products and services. So mortgages
in fact, had already come down in anticipation of a
rate cut, because the mortgage market is created in the
secondary market. It's supply and demand. It's not that the
(12:06):
FED cut Fed funds. The anticipation of the FED creating
more liquidity making it easier to borrow by lowering rates
on what banks get when they borrow from taxpayers essentially
helps the overall market reduce its rates, and so.
Speaker 3 (12:26):
There is a more direct correlation to their shorter tram,
which is going to be the money market. You'll see
them impact the CDs and then obviously the savings rates.
Speaker 2 (12:34):
So the direct bank product, all.
Speaker 3 (12:36):
The five plus percent rates that you've had for you know,
high fours. As far as savings, yeah, yields, annual annualized
yields for any promos, for CDs, savings rates, savings accounts,
money market accounts, they're all going to be adjusted downwards.
Just yesterday we chacked with Schwab, which is one of
our custodians and platforms that we use, which they were paying.
(12:59):
They were from five point one four to five point
one seven has dipped down four point nine nine. So
there's a direct correlation when Feds pull the lever and
and move the rates.
Speaker 2 (13:08):
Down, it really does start with the bank products and
all the short term money, right. And then but here's
what's interesting. We actually saw you know, corporate bonds, treasuries,
you know, actually go up in yields. So here people
are going, hey, you know, all's clear, it's saved the
day the FED has come through, And actually some rates
(13:31):
went up, and that's because they already priced in a
rate cut. And so when the anticipation of that rate
cut actually has has already happened, then nothing happens when
the actual rate cut takes place. Well, let's go.
Speaker 3 (13:50):
Let's let's talk about you know, because because what's on
people's mind and what I've seen on like social media
and some some on the internet is okay, Feds are
cut cutting rates. Now what can we expect of the
market and the economy? Is this a good thing? Is
this a bad thing? And every cycle is different, every
recession is different, so one is not like the other.
(14:13):
But what I did is I looked back in history
and time and I went back basically forty years and said, okay,
and previous rate hike cycles were Then the Fed pivoted
and started to cut rates, but they cut them with
initially at least a half a percent cut from the
get go, instead of what we most people anticipated yesterday,
(14:35):
which was a quarter percent. What took place six months
after as far as the stock market twelve months after
and did we go into recession or not? So the
four time periods going back forty years was nineteen eighty four,
nineteen ninety, two thousand and one, and two thousand and seven.
So nineteen eighty four, six months after stock market went
(14:58):
they cut a half percent, stock market went up ten percent.
Twelve months later up fourteen percent. We did not go
into recession. Nineteen ninety market went down five percent. Twelve
months later it was down three percent, so not bad,
but it did. But we did result into recession. I
think it was nineteen ninety one, two thousand and one.
That was a tech bubble burst, so we all know
(15:19):
what happened. It was down. It was up five percent initially,
so short term typically it's up, the market's up. Twelve
months later, market was down thirteen percent. We were in recession.
Obviously in two thousand and seven, we all can remember
unless we're you know, really young. But initially six months
after the market was up ten percent after the first rika,
but then twelve months later the market was down forty percent. Obviously,
(15:41):
we were in a recession at that point in time.
Speaker 2 (15:43):
Right, There's another variable in caveat to that study, and
in fact, another variable which which I put in and
read about and and you know it really ultimately changes
the study is where is unemployment? You know four no,
where is unemployment in relationship to other times where rates
(16:06):
were cut and whether or not the market ended up
or down. So obviously, you know, in timeframes where we
were in a recession, unemployment was also high, and those
rate cuts even though rates kept going down, the market
kept going down, and that's because unemployment was high. So
the variable that changes all of this and what we
(16:27):
need to look for and what you should be looking for,
especially if you're managing your own money, which I don't
get at all, you know, is does unemployment? The key
indicator for me and most of the studies that that
that I've ran and looked at are where is unemployment?
(16:48):
And that is when you typically see things break. Things
break financially as long as unemployment remains in the low
fours even mid four, or does unemployment go down? I
saw late last week, I believe it was on a
Thursday that the jobs market was was better than what
(17:15):
was expected on a current report. And so again.
Speaker 3 (17:21):
That's it's revised down. The other which is the other
variable that a huge I mean, come on, you can't
that's any of this data. And so that's one of
the things that's in my head when they cut a
half percent and surprise most people because I was betting
on a quarter percent?
Speaker 2 (17:37):
Is me too?
Speaker 3 (17:38):
Are they looking at data and all these downward revisions?
Is there going to be more to come? And maybe
that's what they're looking at. Something underlying their economy.
Speaker 2 (17:46):
Come back to politics, what's the true motivation behind coming
out with these numbers and then having to revise them
just a month later, or a year later or a
quarter later. You know, that's not advantageous. Most of the
revisions are just the opposite of what the Fed and
what politically, you know, the candidates and representatives who control
(18:12):
the purse want. And so here's the key. We only
take out of this data and this information, you know,
as much as we can, which is maybe slightly more
than a grain of salt. We again, because of our
long term track record and experience of helping people financially
(18:37):
with their money. I mean, Giuseppe and I combined have
almost been in this business, you know, a combined fifty years.
I think it's forty eight plus years and counting. It's
that combined experience of helping our clients through just about
any type of investment environment that the country, the economy,
(19:01):
and the world has thrown at us that makes us
the best choice for helping people reach their goals and objectives.
You know, with what's going on now, we strongly urge
you to come and see how we do things by
attending our workshop on October second from six to seven
(19:23):
thirty pm at the Old Spaghetti Factory in Roseville. Call
nine one six ninety six seven thirty five hundred. Leave
a message for Kathy. It is the weekend. She won't
get it till Monday. Get your name and phone number
on there. She'll call you back to confirm if it's
just you, Are you bringing up a spouse or a
(19:45):
significant other, so on and so forth. Are you retired
or about to retire? Just the very very limited basic
stuff to get you on and registered for attending the
October Sober second Retiree free dinner, great information workshop. Now,
(20:08):
if you can't make that date, come in for a
new obligation consultation. There is absolutely no pressure to get
advice from us on what you're currently doing and how
we would potentially do things differently. Maybe some of it's
the same, but more importantly, how we would help you
(20:28):
quantify your goals, quantify and redo and revise your plan
to make sure you have the best possible chance of
combating inflation and not running out of money. I mean,
think about that, Joseeppe. When we were doing plans for
our clients over the last decade, the assumed inflation rate
(20:53):
was like one percent.
Speaker 3 (20:54):
Yeah, or two right, announce it's increased. And even if
you think like, oh, what about you know, two to
two and a half, that's not that big of a deal.
Speaker 2 (21:00):
Right.
Speaker 3 (21:01):
We've ran we've ran scenarios where we've bumped up a
half a percent inflation rate and see what it's done
to the long term effects of retirement and how long
your money lasts and actually has a pretty big impact.
Speaker 2 (21:15):
Yeah, some of those numbers where gosh, somebody with a
million dollars not only still had the million dollars when
the inflation rate was low, they passed on a great
amount of wealth to you know, their next generation or
charity or whoever their legacy was designed to benefit. Or
as you said, you pumped it up a half of
(21:37):
percent to one percent, which inflation is increasing at still three,
four or five percent, meaning the prices of goods and
services aren't going down. They're still going up, they're just
not going up as quickly as they went up.
Speaker 3 (21:54):
Well course, CPI the latest reading was three point two
percent year over year.
Speaker 2 (21:58):
Yeah, but what was so interesting is if you plugged
in a two and a half or three percent number
versus a one and a half or two percent number
and they ran out enough money like when they were
still in a viable you know, yeah, if you're on
the cost per clear retirement age.
Speaker 3 (22:13):
Yeah, if you're on the cost per close as far
as probability success, and you didn't have a lot of
wiggle room. And it made all the world of the difference.
Speaker 2 (22:22):
And this is where it gets so challenging. You cannot
you cannot earn one, two three percent on your money
and not run out of money potentially. Now if you have,
you know, if you're one of the fortunate people that
have millions and millions of dollars, you know, then it's
not as consequential. Then it's about protecting your your investment
(22:45):
and making sure it's there for whatever you want it
to do when you're no longer here. But if you're
like the average you know, affluent person, person who's worked hard,
saved their whole lives, paid off their debts, doesn't have
you know, excess millions of dollars, well, then these sorts
(23:06):
of things are crucial. Knowing that minimum return to objective,
Knowing that you have a great plan to keep up
with inflation and more importantly, exceed inflation is crucial. Because
it seems like there's a little bit of relief in
the mortgage market. Yes, you know, and again a half
(23:26):
a percent, a one percent certainly if you if you
bought a property at the peak, which was around eight percent,
Boy did I love? I got a couple of clients
some eight percent agency bonds, which is great. Do I
look like a hero because those definitely don't exist. They're
(23:47):
still pretty close to six percent fixed bonds out there,
but they are drying up quickly. In fact, we had
that bed over coffee and where you renig on buying
me coffee, the cogh the quot over six You said
six percent and the yield was five point nine and
(24:07):
I did. You're right, I did say five point nine
to nine. It was close though, yeah, yeah, yeah. But
here's a good point is we have two platforms that
we work on and we have two custodians. So we
have Schwab and we have Interactive Brokers, and we have
a more of our clients on the Schwap platform, and
so we do a lot of bond trading, and I
do a lot of bond trading on Schwab. But the
(24:28):
but there are clients that we have on Interactive brokers.
We also do bonds on that platform too, and they
have different offerings, sometimes totally different bondings. And so that's
the nice thing is John pays a lot of attention
to interactive brokers in their bond platform. I pay a
lot of attention to Schwab and then we trade ideas.
And so I hadn't looked at interactive brokers in a
(24:48):
little while, So I wasn't too sure of what was
available out there. So when he'd said six percent, I'm thinking,
no way, it's probably five and a half at best.
So he was able to pull up a couple of bonds.
It wasn't six percent, but it's pretty darn close at
five point nine percent. Yeah. And the other one was
at five point eighty six.
Speaker 3 (25:04):
Yeah. And so the nice thing and what makes it
different from the run of the mill, you know, advisor,
nothing to take away from them because we were there,
We worked for big institutions.
Speaker 2 (25:17):
It's been a long time.
Speaker 3 (25:18):
Been a long time, right, Well it's been a longer
time for you than than for me. But we're not
attached to one firm or another. We we don't have any.
Speaker 2 (25:30):
Where it's proprietary right where we'd have no choice but
to use what we can get through them.
Speaker 3 (25:34):
Nor do we have a layer of management, tiered management
that that pressures you of, Hey, you need to make
sure that you're pushing our brand, you know, at least
this much because you've been pushing all the other brands
or or what have.
Speaker 2 (25:48):
Their executives get paid. That's how their shareholders get paid.
When you're an advisor at the big you know, national firms,
of course they have to meet reve new goals. You know,
they have to meet, you know, shareholder goals, so on
and so forth. The executive officers of the company get
(26:09):
paid in equity, and so in order to get their
stock price up, they have to get their profitability up.
They have to get their earnings the bottom line up,
and in order to do that, you have to sell
your products and services, and the advisors are pressured to
do so.
Speaker 3 (26:27):
And we don't have that completely independent. We've chose to
align with Schwab and work off their institutional sided platform.
Speaker 2 (26:37):
And that means we're not we're not employees of Schwab,
as Juseppi said, We're on the institutional side, which means
we get to offer what you need, not what Schwab
thinks you need what we decide sitting down with you,
learning about you and your plans and your goals and
(26:58):
getting you what matches the those things. So nobody, nobody
has any other interest at heart but yours when you
work with us.
Speaker 3 (27:08):
And that's part of the other reason of why we
have a couple of different platforms and not just one
soul platform.
Speaker 2 (27:14):
Excellent point. But going back to all right, I'll buy
you coffee again to a.
Speaker 3 (27:20):
Real good But but getting back to rates, and how's
that helping people?
Speaker 2 (27:25):
Right now?
Speaker 3 (27:26):
So we have half a point off the table, right
off the cuff, out the gates, after no after no
rate cuts after four years, right, because we were in
this rate height cycle for quite a while, and then
we're on pause for over two years. So mortgage rates
have gone down to six point nine percent. And if
you bought at the peak and it was closer to
(27:46):
eight percent, now's.
Speaker 2 (27:48):
The time you remember what your first mortgage rate was
four point seventy five. Okay, so you bought one.
Speaker 3 (27:54):
Two thousand and two thousand and three.
Speaker 2 (27:56):
Yeah, my first mortgage rate was seven point seventy five,
and of course the price of the house was substantially different.
It was one hundred and forty nine thousand dollars in
mine was to thirty. But again, this this absurdity that
the norm is the two three or four percent is ridiculous.
That was a ten year period in our history, right,
(28:19):
that's it. But people been borrowing more money, you know,
for mortgages for one hundred years or more. So this
this this notion that you know, it's got to be
two three or four percent in order for it to
make sense, just isn't the norm.
Speaker 3 (28:38):
But what also isn't the norm? And what changed the
environment was during the mid two thousands when the housing
when that when they made everything very lax and lenient
as far as the lending, it blew it blew up
the real estate market the value artificially yeaheah upwards and
(28:58):
then downwards, right, because two thousand and eight wiped out
like forty fifty percent values across the nation. But people
after that, all of a sudden, the ones who had
money said, huh, I missed out last time. Maybe I
want to be a real estate investor in a landlord.
The other thing that we have now is we have
big institutional firms that are stopping up property, tons of properties.
(29:22):
So you have that mentality.
Speaker 2 (29:23):
Rants are very high, right right.
Speaker 3 (29:25):
And I mean you've I'm sure you've come across a
lot of clients that said, oh yeah, I have X
amount of money, but I'm waiting for the real estate
market to come down a little bit. I want to buy.
I want to buy. Have you ever owned before? Have
you ever been to a landlord? Have you ever been
to and no? No, But I want to be one
because in two thousand and eight it worked well for
a lot of the people.
Speaker 2 (29:43):
Let's talk about why. Let's digress a teeny bit because
this is this is a very important topic. Most people
want to own property because it's not volatile, meaning.
Speaker 3 (29:55):
Well, you can touch it and feel it.
Speaker 2 (29:56):
You can touch it and feel it. And more importantly,
you're not watching on a television with the value or
on your computer screen or your phone what the value
of that property is. Will we like cash flowing investments
that are similar in the fact that we like high
quality big company, been around for a long time, pay
(30:20):
a consistent dividend, have track records of increasing those dividends
year and year out, that have low volatility, just like
a house does. And in fact, we showed a portfolio
a mix of investments within an allocation within a portfolio
that had a cash flow of seven percent, that doesn't
(30:45):
mean the total return that you make. That means the
cash flow that you make.
Speaker 3 (30:50):
It's like a rental income you'd be collecting.
Speaker 2 (30:52):
And that's what when you were talking about that, That's
why it reminded me of that. So imagine if you
had a million bucks or five hundred thousand bus bucks
and your cash flow was seven or eight percent. That's
why people like rental property. They believe they're going to
pay a good price for the property. But it's not
so much of how much that property goes up or
(31:14):
could it potentially go down. It's how much rent It's
how much cash flow do they get from that property,
you know, each month, each year. And investing in other
investments like stocks and bonds is also about the price
you pay and more importantly, what does it pay you
while you own it. And that is where we are
(31:37):
building portfolios that are designed to cash flow more than
the current rate of inflation, so that way you don't
run out of money and that your buying power keeps
up with the prices that are increasing of the things
you gotta have. And so that's a crucial difference and
a crucial you know, plan to have in place when
(32:01):
things are going on like they're going on right now.
And so just getting back to the people that you know,
maybe bought at seven plus now it's at six plus.
But even if you were saving a half of one
percent or one percent mean on a typical four or
five hundred thousand dollars loan over the life of the loan,
(32:21):
it's hundreds of thousands of dollars, right Well.
Speaker 3 (32:23):
I looked at I looked at what's the median just
for Plaster County, since that's where our home base is.
At seven hundred and fifty thousands a median price of
a home, if you put the typical twenty percent down,
then your loan amount is going to be six hundred grand.
So six hundred grand, and I just put a different
you know, what is one percent save you essentially, So
(32:44):
if it was a seven percent interest rate versus a
six percent interest rate, just for you know, hypothetical purposes,
the monthly payment on a you know, per month that
you save is four hundred bucks, So one percent difference
four hundred dollars a month savings over the life of
the loan, it's one hundred and forty thousand dollars in interest.
Speaker 2 (33:02):
Yeah, I'm a typical thirty year right.
Speaker 3 (33:03):
So if you got it at seven and a half
percent and then you refinance and you get and you
saved it three times, it's even it's even well close
to it.
Speaker 2 (33:12):
If you went from seven and a half to six.
Speaker 3 (33:14):
Yeah, well you're not saving three times. You're saving probably
like five hundred bucks a month instead of four hundred.
Speaker 2 (33:19):
From seven and a half to six. Yeah.
Speaker 3 (33:22):
Okay, yeah, I didn't calculate it, but I canul you
twelve hundred bucks versus four hundred.
Speaker 2 (33:28):
I mean, that'd be awesome, well on on on four
hundred thousand, one percent.
Speaker 3 (33:31):
But the larger the more, the larger larger the loan,
the bigger impact obviously as far as dollars.
Speaker 2 (33:36):
And so we have clients all over the Bay Area,
in Nevada, in Arizona, in multiple states, and obviously it's
different in every market. But still, what's the average price
of a house in our market these days?
Speaker 3 (33:48):
So Sack County median is five hundred and forty, Plaster
County at seven hundred and fifty, So I mean two
hundred thousand dollars difference to.
Speaker 2 (33:55):
Then you take that to the Bay Area and you
know the cost Costa County, you're Alameda town, it's your
San Francisco county seven figures, you know what I mean.
And then so a half a one percent or a
one percent decrease, I mean, you're you're you're rushing to refinance.
Speaker 3 (34:11):
Right, So if inflation has impacted you and you're trying
to find some ways the cut rates, it's anticipator they're
going to cut rates again before the end of the year.
Could be could be good to look at, Hey, I
got into maybe a car loan really high interest rate,
or I got into my mortgage, and what does it
take to refinance? And that's where you can find some savings.
Speaker 2 (34:30):
And can compare and contrast that to the gift of
high interest rates. And we've been saying this for gosh,
probably close to a couple of years now, that the
reality is if you don't have debts while interest rates
are high and they are coming down, obviously there's some
urgency there because you know, you could lock in some
(34:50):
pretty good rates that we were arguing over early as
far as bonds as individual bonds, individual bonds don't get
suckered into bond funds right now. There's a actually a
couple that we like. But the reality is individual bonds,
the interest that you get is guaranteed by the issuer, Okay,
whereas bond funds don't have a guaranteed interest rate, you know,
(35:15):
in an individual bond, which a lot of advisors don't have,
you know, a whole lot of skills with the fixed
income side of investing, whereas we do because we focus
on income and what you get paid from an investment
while you own it, and then growth. Second, we want
you to pay a good price, and we want to
(35:37):
be an investments that we believe are going to go
up in price, but we will also want them to
cash flow as part of your total return to help
you accomplish your goals and objectives.
Speaker 3 (35:47):
The other difference is one has an expense ratio and
one doesn't. Another good and that can impact your overall portfolio,
which we can talk more about when we come back.
Speaker 2 (35:55):
Okay, when we come back, we'll talk about some specific
investments and some other ideas. You're listening to the Wise
Money Guys, we'll be right back. Welcome back to the
Wise Money Guys radio show. I'm your co host John
Scambran here with my partner Giuseppe Fisconti, and we are
super excited about this segment where we talk about some
(36:15):
specific investments that you can get through us, or you
may be able to get through your person or get
yourselves be a lot easier to get them through us.
If you like this show, I'm probably only going to
say this one more time, and you want to learn
more about the things we've been talking about and how
we can help you, call us at nine one six
(36:37):
nine six seven thirty five hundred, get on our calendar,
or come into our workshop. If you're retired and concerned
about all the stuff going on and your plan might
be outdated, you know, you might be worried about how
much the cost of everything has gone up, and really,
all of a sudden, a million bucks, five hundred thousand,
couple hundred thousand doesn't look the same anymore, when when
(37:00):
the price of things have doubled and tripled in some cases. Anyway,
that workshop for retirees includes dinner. It's from six to
seven thirty pm at the old Spaghetti Factory on Sunrise
in Roseville called nine one six nine six seven thirty
five hundred. So we always love talking about some actual
(37:21):
investments that our clients might own, we might own personally,
or both. In this case, last week we talked about
Frontline Plc the oil tanker. Still a good time to
buy it. It's definitely up from where we talked about it.
It was in the low twenty two range. I think
it's in the mid twenty three range. But remember that
(37:43):
target price is thirty four, the fifty two week high
is twenty nine, and the dividends still you know, projected
at that price, the forward dividend around eight plus percent,
So don't let that one get away. That one is
definitely in our client PORTFOLI and our own TLT the
twenty year Treasury ETF. That one actually went down a
(38:08):
little bit under the price.
Speaker 3 (38:09):
After the announcement. Announcement.
Speaker 2 (38:11):
Yeah, so if you already own it. I bought more
TLT options January options again call us to learn about
options and how our clients benefit from them. And that
one is currently just under ninety nine dollars a share.
(38:32):
At least it was during the week. Bottles of beer
on the wall, ninety nine bottles of beer you take
one day, but no, what is the price currently or
what was the closing price.
Speaker 3 (38:41):
Well, it was over one hundred and then and then
it dipped, dip below and it's it's floating around the
ninety nine range.
Speaker 2 (38:48):
Yeah. So the nice thing is is that one had
a high, an all time high price above one fifty.
Well that's not all time, that was all time. I
thought that was the all time.
Speaker 3 (38:59):
No, that was just us the price. Prior to the FEDS.
Speaker 2 (39:05):
Rates were real low.
Speaker 3 (39:07):
So when they when they just started off for the
rate hike cycle, it was in the one fifty range.
And then it impacted the price because when interest rates
go up, this goes the bonds go down, and so
the reverse can happen. Now they're on a rate cut price.
Speaker 2 (39:22):
And that is why we like this TLT bond etf
because if rates continue to go down, then the price
of this will go up. So but now let's talk
about a couple of those bonds that you can get
through us. You probably could get them at whatever brokerage
firm you're working with, Yes, if you maybe maybe not.
Speaker 3 (39:45):
It's only on one of our platforms down on the other.
Speaker 2 (39:47):
So that's true. These aren't on Schwab. But but again
it's more about working with somebody. If you're managing your
own money, do you have this skill set to scour
and filter the bond on the market, which is trillions
of dollars in size traded you know throughout the year,
trillions in trillions? Does your advisor have the skill set
(40:13):
to find, you know, the best yields out there with
the best maturities at the best price. Currently both high
quality investment grade A A public storage. Now public storage,
you know you also got it sometimes like the stock
or the company that's offering the debt as an investment.
(40:36):
And so in this case, let me tell you a
recession proof type investment. It is storage. When people lose
their homes, they put stuff in storage storage door, or
when they move out of their offices, they put stuff
in storage. So having the underlying company that's borrowing the
(40:59):
money be a company that does well in good economies
and bad economies is a good bond to potentially own.
And so that's public storage. It's got to cupe on
over six and a yield to maturity at over five
point eight. Those literally could be gone tomorrow. Now we
(41:23):
wouldn't put all of your money in any of these things.
We usually use about a five percent rule. So part
of your you know, investments, if you have stocks, bonds, alternatives,
you know, and cash, you know, you're gonna have a
mix of all of those categories to get you to
the cash flow you need to get you to the
(41:44):
goal that you need. And so we're just talking about,
you know, some various investment ideas that may help you
with your financial plans and the cash flow that you need.
So far, both of these investments that we've just talked
about both pay dividends. Frontline pays a good dividend. TLT
(42:07):
pays about three point seventy five, which is, you know,
not a bad interest rate all things considered. And then
these two bonds, both yielding very close to six percent currently,
are also very good with coupons over six. The second one,
so the first one was public storage and then the
(42:28):
second one was.
Speaker 3 (42:29):
A city bank was paying a five point nine percent
yield to worst. The coupon was I think six or
a little over.
Speaker 2 (42:37):
Little over six, yeah.
Speaker 3 (42:38):
Yeah, and that matured I think in twenty twenty six.
Public storage I think matured in twenty.
Speaker 2 (42:42):
Twenty twenty seven. Yeah.
Speaker 3 (42:44):
So and these are individual bonds again, you know, and
if you have questions, and again we we're only giving
giving ideas out there. We don't know who you are.
What's your risk tolerance, is your time horizons? So on
and so forth. So does it fit within your portfolio?
Does it not? Is it appropriate? Is it not? But
to help answer those questions, you can reach out to us,
(43:06):
give us a call, or you can also you know,
email us at question at wisemoneyguys dot com to get
more insight. But that's exactly what we do. We look
at these different components and see how does that work
within your existing portfolio. Or there's seeings and other opportunities
that we can enhance the overall return, whether it's looking
(43:27):
at return or maybe it's enhancing the cash flow of
your existing portfolio, or maybe you just have cash shitting
on the sidelines and you want to put it to work,
all dependent upon your goals, and that's that's what we do.
Along with our clients. We include a financial plan because what.
Speaker 2 (43:43):
Is yes, that's not separate, that's not a separate exactly,
that's included in our annual advisory feed. By the way,
I'm glad you mentioned.
Speaker 3 (43:50):
That, because how do you get from point A to
point B? Without a map, and that's what the financial
plan is. But if you don't have a car to
get you from point A to point B, that's also crucial.
Point two, and that's the portfolio and the construction of
the portfolio. And so we provide both those components to
get you from point A to point B.
Speaker 2 (44:07):
Yeah, great point. Hope you enjoyed this show. Two ways
to come in and see us. If you want to
see us in action live, join us for our retiree
Dinner workshop at the Old Spaghetti Factory on October second,
just a little less than a couple of weeks from now,
by calling nine one six nine six seven thirty five hundred,
(44:29):
or come in for a no obligation consultation by calling
nine one six nine six seven thirty five hundred. Okay,
I hope you enjoyed the Wise Money Guys radio show
you've been listening to John Scambering to Seppi Vescani. Hope
you all have a wonderful weekend and come in and
see us real soon.
Speaker 3 (44:47):
Bye all, talk to you next week.
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):
Welcome to the Wise Money Guys Radio Show. I'm your
co host, John Scambray and I'm here with my partner Justepa, Visconsin.
And we are certified Portfolio Managers, which means we are
investment experts and planning experts that super duper enjoy helping
people who are retired are about to retire manage their money.
If you like our show, please give us a call
(00:37):
at nine one six nine six seven thirty five hundred,
especially if you want to come in, which we highly
suggest come in for a absolutely no obligation consultation.
Speaker 3 (00:49):
Uh.
Speaker 2 (00:50):
Please call Kathy with the K at nine one six
nine six seven thirty five hundred. Get on our calendar.
We'll spend about an hour with you or so or
however long it takes getting an you getting to know us,
and we'll see if what we do is a fit
for you and if it is great. If it's not,
we certainly aren't gonna pressure you to join us if
(01:13):
it doesn't make sense. So more importantly, you can also
call right now because I'm super excited to say that
we still have some space. But we had a lot
of sign ups for our last of the year. At
least at this point it's the last of the year,
but you never know, but probably is because usually we
(01:36):
don't do retiree workshops in November and December, so our
last workshop of the year for people who are retired
or about to retire, especially if you're concerned about all
the stuff going on and how that might affect your
investments and more importantly, your ability to not run out
of money through the rest of your life because of
(01:58):
how much the cost of everything is going on. Up call,
come in, you'll see us live at the old Spaghetti
Factory in Roseville from six to seven thirty pm on Wednesday,
October second. To get on that list and register for
you and your spouse or significant other or guest, called
(02:18):
nine one six ninety six seven thirty five hundred. Again
that number is nine one six ninety six seven thirty
five hundred to register for the October second workshop.
Speaker 3 (02:30):
So and we got to talk about wow the Federal
Reserve and the surprise raatecut.
Speaker 2 (02:36):
I that you I specifically didn't want a rate cut.
I think that it was political. But more importantly, what
I've been saying all along, and I'm not the only
one saying it, is that when you look at the
(02:57):
debt and that over this next year and the following
year you have five trillion and then another five trillion
coming due that the Federal Reserve has to pay off
of the federal debt, so ten trillion dollars over the
(03:17):
next two years they need to be able to refinance
that debt at a much lower cost. And then in
twenty twenty six they have another I believe it's twenty
trillion coming due, and so they had no choice. So
really it was a government internal government political move. Certainly,
(03:40):
the timing around an election to help maybe boost up,
you know, the stock market certainly appears to be kind
of obvious, But really it has to do with refinancing
the debt. That's why I believe, and many a con
miss out there also believe the same thing. I heard.
(04:02):
I can't tell you former Fed presidents, former Federal Reserve chairman,
many economists and market strategists like Giuseppe and I all
said they had no choice. They've got to be able
to refinance the debt that's only going to get bigger.
Right now, the cost of our debt is literally more
(04:25):
annually than the cost of our military, and that is
just ridiculous.
Speaker 3 (04:30):
So that, well, I think the other thing is it
could you know. The sad thing is what Jerome Powell
said in a speech. You listen to it, but then
you're trying to look, you know, reading between the lines.
So look for cues and clues because you can't take
what they say directly verbatim and then use that to
(04:53):
help forecast what you should be doing with your investments
moving forward. Reason being is they're in the camp of
this is where we think we should be. Here's where
our forecasts are for the future, and we think inflation
is going to do X and y, and therefore we're
going to act in this manner. They've been wrong on
(05:14):
the forecast many of times, and they were wrong when
they were saying that it was transitory, and so we're
going to believe them with one hundred percent certainty that
they're going to engineer soft landing. Is it possible? Yes,
it is, And they did it in the mid nineties,
but more times than not they've either waited too long
(05:36):
to act and instept what they do is react too
late and they break something in the system. So the
other thing is maybe they did the fifty basis points
or the half point rate cut because they needed to
jump the gun. Maybe after some of the downward revisions
of the job numbers, they decided, you know what, we
should have cut a quarter percent in July, and then
(05:58):
we could have cut a quarter percent now, and now
they're trying to get ahead of the curve. The other is,
if the economy is so strong, like they're saying, then
why cut a half a percent?
Speaker 2 (06:12):
Well, and the real five hundred pound gorilla, And this
is where working with Giuseppe and I comes in. We
are contrarian often to what is being said by the FED.
In fact, we couldn't be more right in the moves
that we've been making and have been making going back
(06:32):
to prior to twenty twenty two. And the reality is,
as Giuseppe said, more times than not, the FED is wrong.
They were wrong in twenty twenty two. They tried to
keep you know, the long term bond market stable mainly
because the reserves that they convinced banks to put their
(06:54):
depositors' money in was long term treasuries. And if they
were wrong on inflation, you saw what happened when they
convinced banks that they had to put their money in
long meaning their client's money, their depositors' money in long
term treasuries with no fear that inflation wasn't going to
(07:17):
be there to stay, and that there would be no
rate increases to combat inflation, which meant that your long
term debt would be fine. Well, the opposite was true.
Long term debt as far as its price to par plummeted,
and many banks, you know, either went out of business
(07:41):
or needed emergency capital to be prevented from going out
of business. So they were wrong. Then they were wrong
when Ben Bernaki cut rates too soon and then inflation
came back worse. Now, what we haven't talked about yet
is government spending. They're already slip flopping on CRS continuing
(08:04):
resolutions there they're literally I mean, how as an American
political leader, I don't care if you're a Republican or
Democrat you don't support that. You need to have proof
of citizenship to vote. You need proof of citizenship and
(08:26):
id to go to school. You need proof of citizenship
and id uh on a plane to get a driver's license,
to go to other countries, to you know, to go
in to the military, and on and on and on.
But yet you don't need proof of citizenship to vote
(08:48):
for the president of the United States.
Speaker 3 (08:50):
I need proof to go into a bar.
Speaker 2 (08:53):
And so here we are with this whole You know,
oh God, who's going to be responsible for the government
shutting down? Because attached to these continuing resolutions is the
Save America Act, which is yes, we have no America.
And again this isn't a political aisle issue, it's an
(09:14):
American issue. You don't have a country if you can
just open up the country to to to U nigo
not nigos NGOs, non governmental organizations you know around the world,
that can affect your sure political you're governing bodies. It's absurd.
(09:36):
So right now, this to Save Act is attached to
these continuing resolutions, which by the way, are to borrow
and print and borrow more money, so.
Speaker 3 (09:49):
Which has created the problem with inflation in the first
time to begin with, but too much spending, too much stimulus.
Speaker 2 (09:54):
So the cut was for a short term to try
to figure out how to refinance our debt coming doe,
and then you're going to see inflation rear its ugly head,
worse than it already is. By the way, inflation cooling
is not prices going down. It's the rate of increases
(10:15):
of prices going down. Prices have gone up and gone
through the roof and they have not gone back to
any level that makes things affordable, like housing, like mortgages,
like borrowing costs, so on and so forth, which we'll
talk about. You know what strategies you should be employing
(10:36):
and what strategies we're employing. Stay tuned, you're listening to
the wise money guys, John Scambrady de Sepivskane and we
are certified portfolio managers, which means we are investment experts,
we are market strategists. We are certified portfolio managers, as
I said, creating winning strategies, winning portfolios to help our
clients accomplish their custom goals and objectives, not somebody else's,
(11:00):
not ours, yours. And so if you like what we're
talking about and want to get on our calendar for
an absolutely no obligation consultation, call us at nine one
six ninety six seven thirty five hundred. So here's what
a lot of people don't understand by the way they think,
there's this fifty basis point rate cut to FED funds
(11:21):
and it's a one for one relationship that automatically why
didn't rates go down at least fifty basis points? And
the reality is that, yes, banks borrowing the Fed at
the FED at the FED funds rate you know, obviously
can then pass along that discounted that that that fifty
(11:42):
basis point rate cut onto you know, things that they
that they have for loan products and services. So mortgages
in fact, had already come down in anticipation of a
rate cut, because the mortgage market is created in the
secondary market. It's supply and demand. It's not that the
(12:06):
FED cut Fed funds. The anticipation of the FED creating
more liquidity making it easier to borrow by lowering rates
on what banks get when they borrow from taxpayers essentially
helps the overall market reduce its rates, and so.
Speaker 3 (12:26):
There is a more direct correlation to their shorter tram,
which is going to be the money market. You'll see
them impact the CDs and then obviously the savings rates.
Speaker 2 (12:34):
So the direct bank product, all.
Speaker 3 (12:36):
The five plus percent rates that you've had for you know,
high fours. As far as savings, yeah, yields, annual annualized
yields for any promos, for CDs, savings rates, savings accounts,
money market accounts, they're all going to be adjusted downwards.
Just yesterday we chacked with Schwab, which is one of
our custodians and platforms that we use, which they were paying.
(12:59):
They were from five point one four to five point
one seven has dipped down four point nine nine. So
there's a direct correlation when Feds pull the lever and
and move the rates.
Speaker 2 (13:08):
Down, it really does start with the bank products and
all the short term money, right. And then but here's
what's interesting. We actually saw you know, corporate bonds, treasuries,
you know, actually go up in yields. So here people
are going, hey, you know, all's clear, it's saved the
day the FED has come through, And actually some rates
(13:31):
went up, and that's because they already priced in a
rate cut. And so when the anticipation of that rate
cut actually has has already happened, then nothing happens when
the actual rate cut takes place. Well, let's go.
Speaker 3 (13:50):
Let's let's talk about you know, because because what's on
people's mind and what I've seen on like social media
and some some on the internet is okay, Feds are
cut cutting rates. Now what can we expect of the
market and the economy? Is this a good thing? Is
this a bad thing? And every cycle is different, every
recession is different, so one is not like the other.
(14:13):
But what I did is I looked back in history
and time and I went back basically forty years and said, okay,
and previous rate hike cycles were Then the Fed pivoted
and started to cut rates, but they cut them with
initially at least a half a percent cut from the
get go, instead of what we most people anticipated yesterday,
(14:35):
which was a quarter percent. What took place six months
after as far as the stock market twelve months after
and did we go into recession or not? So the
four time periods going back forty years was nineteen eighty four,
nineteen ninety, two thousand and one, and two thousand and seven.
So nineteen eighty four, six months after stock market went
(14:58):
they cut a half percent, stock market went up ten percent.
Twelve months later up fourteen percent. We did not go
into recession. Nineteen ninety market went down five percent. Twelve
months later it was down three percent, so not bad,
but it did. But we did result into recession. I
think it was nineteen ninety one, two thousand and one.
That was a tech bubble burst, so we all know
(15:19):
what happened. It was down. It was up five percent initially,
so short term typically it's up, the market's up. Twelve
months later, market was down thirteen percent. We were in recession.
Obviously in two thousand and seven, we all can remember
unless we're you know, really young. But initially six months
after the market was up ten percent after the first rika,
but then twelve months later the market was down forty percent. Obviously,
(15:41):
we were in a recession at that point in time.
Speaker 2 (15:43):
Right, There's another variable in caveat to that study, and
in fact, another variable which which I put in and
read about and and you know it really ultimately changes
the study is where is unemployment? You know four no,
where is unemployment in relationship to other times where rates
(16:06):
were cut and whether or not the market ended up
or down. So obviously, you know, in timeframes where we
were in a recession, unemployment was also high, and those
rate cuts even though rates kept going down, the market
kept going down, and that's because unemployment was high. So
the variable that changes all of this and what we
(16:27):
need to look for and what you should be looking for,
especially if you're managing your own money, which I don't
get at all, you know, is does unemployment? The key
indicator for me and most of the studies that that
that I've ran and looked at are where is unemployment?
(16:48):
And that is when you typically see things break. Things
break financially as long as unemployment remains in the low
fours even mid four, or does unemployment go down? I
saw late last week, I believe it was on a
Thursday that the jobs market was was better than what
(17:15):
was expected on a current report. And so again.
Speaker 3 (17:21):
That's it's revised down. The other which is the other
variable that a huge I mean, come on, you can't
that's any of this data. And so that's one of
the things that's in my head when they cut a
half percent and surprise most people because I was betting
on a quarter percent?
Speaker 2 (17:37):
Is me too?
Speaker 3 (17:38):
Are they looking at data and all these downward revisions?
Is there going to be more to come? And maybe
that's what they're looking at. Something underlying their economy.
Speaker 2 (17:46):
Come back to politics, what's the true motivation behind coming
out with these numbers and then having to revise them
just a month later, or a year later or a
quarter later. You know, that's not advantageous. Most of the
revisions are just the opposite of what the Fed and
what politically, you know, the candidates and representatives who control
(18:12):
the purse want. And so here's the key. We only
take out of this data and this information, you know,
as much as we can, which is maybe slightly more
than a grain of salt. We again, because of our
long term track record and experience of helping people financially
(18:37):
with their money. I mean, Giuseppe and I combined have
almost been in this business, you know, a combined fifty years.
I think it's forty eight plus years and counting. It's
that combined experience of helping our clients through just about
any type of investment environment that the country, the economy,
(19:01):
and the world has thrown at us that makes us
the best choice for helping people reach their goals and objectives.
You know, with what's going on now, we strongly urge
you to come and see how we do things by
attending our workshop on October second from six to seven
(19:23):
thirty pm at the Old Spaghetti Factory in Roseville. Call
nine one six ninety six seven thirty five hundred. Leave
a message for Kathy. It is the weekend. She won't
get it till Monday. Get your name and phone number
on there. She'll call you back to confirm if it's
just you, Are you bringing up a spouse or a
(19:45):
significant other, so on and so forth. Are you retired
or about to retire? Just the very very limited basic
stuff to get you on and registered for attending the
October Sober second Retiree free dinner, great information workshop. Now,
(20:08):
if you can't make that date, come in for a
new obligation consultation. There is absolutely no pressure to get
advice from us on what you're currently doing and how
we would potentially do things differently. Maybe some of it's
the same, but more importantly, how we would help you
(20:28):
quantify your goals, quantify and redo and revise your plan
to make sure you have the best possible chance of
combating inflation and not running out of money. I mean,
think about that, Joseeppe. When we were doing plans for
our clients over the last decade, the assumed inflation rate
(20:53):
was like one percent.
Speaker 3 (20:54):
Yeah, or two right, announce it's increased. And even if
you think like, oh, what about you know, two to
two and a half, that's not that big of a deal.
Speaker 2 (21:00):
Right.
Speaker 3 (21:01):
We've ran we've ran scenarios where we've bumped up a
half a percent inflation rate and see what it's done
to the long term effects of retirement and how long
your money lasts and actually has a pretty big impact.
Speaker 2 (21:15):
Yeah, some of those numbers where gosh, somebody with a
million dollars not only still had the million dollars when
the inflation rate was low, they passed on a great
amount of wealth to you know, their next generation or
charity or whoever their legacy was designed to benefit. Or
as you said, you pumped it up a half of
(21:37):
percent to one percent, which inflation is increasing at still three,
four or five percent, meaning the prices of goods and
services aren't going down. They're still going up, they're just
not going up as quickly as they went up.
Speaker 3 (21:54):
Well course, CPI the latest reading was three point two
percent year over year.
Speaker 2 (21:58):
Yeah, but what was so interesting is if you plugged
in a two and a half or three percent number
versus a one and a half or two percent number
and they ran out enough money like when they were
still in a viable you know, yeah, if you're on
the cost per clear retirement age.
Speaker 3 (22:13):
Yeah, if you're on the cost per close as far
as probability success, and you didn't have a lot of
wiggle room. And it made all the world of the difference.
Speaker 2 (22:22):
And this is where it gets so challenging. You cannot
you cannot earn one, two three percent on your money
and not run out of money potentially. Now if you have,
you know, if you're one of the fortunate people that
have millions and millions of dollars, you know, then it's
not as consequential. Then it's about protecting your your investment
(22:45):
and making sure it's there for whatever you want it
to do when you're no longer here. But if you're
like the average you know, affluent person, person who's worked hard,
saved their whole lives, paid off their debts, doesn't have
you know, excess millions of dollars, well, then these sorts
(23:06):
of things are crucial. Knowing that minimum return to objective,
Knowing that you have a great plan to keep up
with inflation and more importantly, exceed inflation is crucial. Because
it seems like there's a little bit of relief in
the mortgage market. Yes, you know, and again a half
(23:26):
a percent, a one percent certainly if you if you
bought a property at the peak, which was around eight percent,
Boy did I love? I got a couple of clients
some eight percent agency bonds, which is great. Do I
look like a hero because those definitely don't exist. They're
(23:47):
still pretty close to six percent fixed bonds out there,
but they are drying up quickly. In fact, we had
that bed over coffee and where you renig on buying
me coffee, the cogh the quot over six You said
six percent and the yield was five point nine and
(24:07):
I did. You're right, I did say five point nine
to nine. It was close though, yeah, yeah, yeah. But
here's a good point is we have two platforms that
we work on and we have two custodians. So we
have Schwab and we have Interactive Brokers, and we have
a more of our clients on the Schwap platform, and
so we do a lot of bond trading, and I
do a lot of bond trading on Schwab. But the
(24:28):
but there are clients that we have on Interactive brokers.
We also do bonds on that platform too, and they
have different offerings, sometimes totally different bondings. And so that's
the nice thing is John pays a lot of attention
to interactive brokers in their bond platform. I pay a
lot of attention to Schwab and then we trade ideas.
And so I hadn't looked at interactive brokers in a
(24:48):
little while, So I wasn't too sure of what was
available out there. So when he'd said six percent, I'm thinking,
no way, it's probably five and a half at best.
So he was able to pull up a couple of bonds.
It wasn't six percent, but it's pretty darn close at
five point nine percent. Yeah. And the other one was
at five point eighty six.
Speaker 3 (25:04):
Yeah. And so the nice thing and what makes it
different from the run of the mill, you know, advisor,
nothing to take away from them because we were there,
We worked for big institutions.
Speaker 2 (25:17):
It's been a long time.
Speaker 3 (25:18):
Been a long time, right, Well it's been a longer
time for you than than for me. But we're not
attached to one firm or another. We we don't have any.
Speaker 2 (25:30):
Where it's proprietary right where we'd have no choice but
to use what we can get through them.
Speaker 3 (25:34):
Nor do we have a layer of management, tiered management
that that pressures you of, Hey, you need to make
sure that you're pushing our brand, you know, at least
this much because you've been pushing all the other brands
or or what have.
Speaker 2 (25:48):
Their executives get paid. That's how their shareholders get paid.
When you're an advisor at the big you know, national firms,
of course they have to meet reve new goals. You know,
they have to meet, you know, shareholder goals, so on
and so forth. The executive officers of the company get
(26:09):
paid in equity, and so in order to get their
stock price up, they have to get their profitability up.
They have to get their earnings the bottom line up,
and in order to do that, you have to sell
your products and services, and the advisors are pressured to
do so.
Speaker 3 (26:27):
And we don't have that completely independent. We've chose to
align with Schwab and work off their institutional sided platform.
Speaker 2 (26:37):
And that means we're not we're not employees of Schwab,
as Juseppi said, We're on the institutional side, which means
we get to offer what you need, not what Schwab
thinks you need what we decide sitting down with you,
learning about you and your plans and your goals and
(26:58):
getting you what matches the those things. So nobody, nobody
has any other interest at heart but yours when you
work with us.
Speaker 3 (27:08):
And that's part of the other reason of why we
have a couple of different platforms and not just one
soul platform.
Speaker 2 (27:14):
Excellent point. But going back to all right, I'll buy
you coffee again to a.
Speaker 3 (27:20):
Real good But but getting back to rates, and how's
that helping people?
Speaker 2 (27:25):
Right now?
Speaker 3 (27:26):
So we have half a point off the table, right
off the cuff, out the gates, after no after no
rate cuts after four years, right, because we were in
this rate height cycle for quite a while, and then
we're on pause for over two years. So mortgage rates
have gone down to six point nine percent. And if
you bought at the peak and it was closer to
(27:46):
eight percent, now's.
Speaker 2 (27:48):
The time you remember what your first mortgage rate was
four point seventy five. Okay, so you bought one.
Speaker 3 (27:54):
Two thousand and two thousand and three.
Speaker 2 (27:56):
Yeah, my first mortgage rate was seven point seventy five,
and of course the price of the house was substantially different.
It was one hundred and forty nine thousand dollars in
mine was to thirty. But again, this this absurdity that
the norm is the two three or four percent is ridiculous.
That was a ten year period in our history, right,
(28:19):
that's it. But people been borrowing more money, you know,
for mortgages for one hundred years or more. So this
this this notion that you know, it's got to be
two three or four percent in order for it to
make sense, just isn't the norm.
Speaker 3 (28:38):
But what also isn't the norm? And what changed the
environment was during the mid two thousands when the housing
when that when they made everything very lax and lenient
as far as the lending, it blew it blew up
the real estate market the value artificially yeaheah upwards and
(28:58):
then downwards, right, because two thousand and eight wiped out
like forty fifty percent values across the nation. But people
after that, all of a sudden, the ones who had
money said, huh, I missed out last time. Maybe I
want to be a real estate investor in a landlord.
The other thing that we have now is we have
big institutional firms that are stopping up property, tons of properties.
(29:22):
So you have that mentality.
Speaker 2 (29:23):
Rants are very high, right right.
Speaker 3 (29:25):
And I mean you've I'm sure you've come across a
lot of clients that said, oh yeah, I have X
amount of money, but I'm waiting for the real estate
market to come down a little bit. I want to buy.
I want to buy. Have you ever owned before? Have
you ever been to a landlord? Have you ever been
to and no? No, But I want to be one
because in two thousand and eight it worked well for
a lot of the people.
Speaker 2 (29:43):
Let's talk about why. Let's digress a teeny bit because
this is this is a very important topic. Most people
want to own property because it's not volatile, meaning.
Speaker 3 (29:55):
Well, you can touch it and feel it.
Speaker 2 (29:56):
You can touch it and feel it. And more importantly,
you're not watching on a television with the value or
on your computer screen or your phone what the value
of that property is. Will we like cash flowing investments
that are similar in the fact that we like high
quality big company, been around for a long time, pay
(30:20):
a consistent dividend, have track records of increasing those dividends
year and year out, that have low volatility, just like
a house does. And in fact, we showed a portfolio
a mix of investments within an allocation within a portfolio
that had a cash flow of seven percent, that doesn't
(30:45):
mean the total return that you make. That means the
cash flow that you make.
Speaker 3 (30:50):
It's like a rental income you'd be collecting.
Speaker 2 (30:52):
And that's what when you were talking about that, That's
why it reminded me of that. So imagine if you
had a million bucks or five hundred thousand bus bucks
and your cash flow was seven or eight percent. That's
why people like rental property. They believe they're going to
pay a good price for the property. But it's not
so much of how much that property goes up or
(31:14):
could it potentially go down. It's how much rent It's
how much cash flow do they get from that property,
you know, each month, each year. And investing in other
investments like stocks and bonds is also about the price
you pay and more importantly, what does it pay you
while you own it. And that is where we are
(31:37):
building portfolios that are designed to cash flow more than
the current rate of inflation, so that way you don't
run out of money and that your buying power keeps
up with the prices that are increasing of the things
you gotta have. And so that's a crucial difference and
a crucial you know, plan to have in place when
(32:01):
things are going on like they're going on right now.
And so just getting back to the people that you know,
maybe bought at seven plus now it's at six plus.
But even if you were saving a half of one
percent or one percent mean on a typical four or
five hundred thousand dollars loan over the life of the loan,
(32:21):
it's hundreds of thousands of dollars, right Well.
Speaker 3 (32:23):
I looked at I looked at what's the median just
for Plaster County, since that's where our home base is.
At seven hundred and fifty thousands a median price of
a home, if you put the typical twenty percent down,
then your loan amount is going to be six hundred grand.
So six hundred grand, and I just put a different
you know, what is one percent save you essentially, So
(32:44):
if it was a seven percent interest rate versus a
six percent interest rate, just for you know, hypothetical purposes,
the monthly payment on a you know, per month that
you save is four hundred bucks, So one percent difference
four hundred dollars a month savings over the life of
the loan, it's one hundred and forty thousand dollars in interest.
Speaker 2 (33:02):
Yeah, I'm a typical thirty year right.
Speaker 3 (33:03):
So if you got it at seven and a half
percent and then you refinance and you get and you
saved it three times, it's even it's even well close
to it.
Speaker 2 (33:12):
If you went from seven and a half to six.
Speaker 3 (33:14):
Yeah, well you're not saving three times. You're saving probably
like five hundred bucks a month instead of four hundred.
Speaker 2 (33:19):
From seven and a half to six. Yeah.
Speaker 3 (33:22):
Okay, yeah, I didn't calculate it, but I canul you
twelve hundred bucks versus four hundred.
Speaker 2 (33:28):
I mean, that'd be awesome, well on on on four
hundred thousand, one percent.
Speaker 3 (33:31):
But the larger the more, the larger larger the loan,
the bigger impact obviously as far as dollars.
Speaker 2 (33:36):
And so we have clients all over the Bay Area,
in Nevada, in Arizona, in multiple states, and obviously it's
different in every market. But still, what's the average price
of a house in our market these days?
Speaker 3 (33:48):
So Sack County median is five hundred and forty, Plaster
County at seven hundred and fifty, So I mean two
hundred thousand dollars difference to.
Speaker 2 (33:55):
Then you take that to the Bay Area and you
know the cost Costa County, you're Alameda town, it's your
San Francisco county seven figures, you know what I mean.
And then so a half a one percent or a
one percent decrease, I mean, you're you're you're rushing to refinance.
Speaker 3 (34:11):
Right, So if inflation has impacted you and you're trying
to find some ways the cut rates, it's anticipator they're
going to cut rates again before the end of the year.
Could be could be good to look at, Hey, I
got into maybe a car loan really high interest rate,
or I got into my mortgage, and what does it
take to refinance? And that's where you can find some savings.
Speaker 2 (34:30):
And can compare and contrast that to the gift of
high interest rates. And we've been saying this for gosh,
probably close to a couple of years now, that the
reality is if you don't have debts while interest rates
are high and they are coming down, obviously there's some
urgency there because you know, you could lock in some
(34:50):
pretty good rates that we were arguing over early as
far as bonds as individual bonds, individual bonds don't get
suckered into bond funds right now. There's a actually a
couple that we like. But the reality is individual bonds,
the interest that you get is guaranteed by the issuer, Okay,
whereas bond funds don't have a guaranteed interest rate, you know,
(35:15):
in an individual bond, which a lot of advisors don't have,
you know, a whole lot of skills with the fixed
income side of investing, whereas we do because we focus
on income and what you get paid from an investment
while you own it, and then growth. Second, we want
you to pay a good price, and we want to
(35:37):
be an investments that we believe are going to go
up in price, but we will also want them to
cash flow as part of your total return to help
you accomplish your goals and objectives.
Speaker 3 (35:47):
The other difference is one has an expense ratio and
one doesn't. Another good and that can impact your overall portfolio,
which we can talk more about when we come back.
Speaker 2 (35:55):
Okay, when we come back, we'll talk about some specific
investments and some other ideas. You're listening to the Wise
Money Guys, we'll be right back. Welcome back to the
Wise Money Guys radio show. I'm your co host John
Scambran here with my partner Giuseppe Fisconti, and we are
super excited about this segment where we talk about some
(36:15):
specific investments that you can get through us, or you
may be able to get through your person or get
yourselves be a lot easier to get them through us.
If you like this show, I'm probably only going to
say this one more time, and you want to learn
more about the things we've been talking about and how
we can help you, call us at nine one six
(36:37):
nine six seven thirty five hundred, get on our calendar,
or come into our workshop. If you're retired and concerned
about all the stuff going on and your plan might
be outdated, you know, you might be worried about how
much the cost of everything has gone up, and really,
all of a sudden, a million bucks, five hundred thousand,
couple hundred thousand doesn't look the same anymore, when when
(37:00):
the price of things have doubled and tripled in some cases. Anyway,
that workshop for retirees includes dinner. It's from six to
seven thirty pm at the old Spaghetti Factory on Sunrise
in Roseville called nine one six nine six seven thirty
five hundred. So we always love talking about some actual
(37:21):
investments that our clients might own, we might own personally,
or both. In this case, last week we talked about
Frontline Plc the oil tanker. Still a good time to
buy it. It's definitely up from where we talked about it.
It was in the low twenty two range. I think
it's in the mid twenty three range. But remember that
(37:43):
target price is thirty four, the fifty two week high
is twenty nine, and the dividends still you know, projected
at that price, the forward dividend around eight plus percent,
So don't let that one get away. That one is
definitely in our client PORTFOLI and our own TLT the
twenty year Treasury ETF. That one actually went down a
(38:08):
little bit under the price.
Speaker 3 (38:09):
After the announcement. Announcement.
Speaker 2 (38:11):
Yeah, so if you already own it. I bought more
TLT options January options again call us to learn about
options and how our clients benefit from them. And that
one is currently just under ninety nine dollars a share.
(38:32):
At least it was during the week. Bottles of beer
on the wall, ninety nine bottles of beer you take
one day, but no, what is the price currently or
what was the closing price.
Speaker 3 (38:41):
Well, it was over one hundred and then and then
it dipped, dip below and it's it's floating around the
ninety nine range.
Speaker 2 (38:48):
Yeah. So the nice thing is is that one had
a high, an all time high price above one fifty.
Well that's not all time, that was all time. I
thought that was the all time.
Speaker 3 (38:59):
No, that was just us the price. Prior to the FEDS.
Speaker 2 (39:05):
Rates were real low.
Speaker 3 (39:07):
So when they when they just started off for the
rate hike cycle, it was in the one fifty range.
And then it impacted the price because when interest rates
go up, this goes the bonds go down, and so
the reverse can happen. Now they're on a rate cut price.
Speaker 2 (39:22):
And that is why we like this TLT bond etf
because if rates continue to go down, then the price
of this will go up. So but now let's talk
about a couple of those bonds that you can get
through us. You probably could get them at whatever brokerage
firm you're working with, Yes, if you maybe maybe not.
Speaker 3 (39:45):
It's only on one of our platforms down on the other.
Speaker 2 (39:47):
So that's true. These aren't on Schwab. But but again
it's more about working with somebody. If you're managing your
own money, do you have this skill set to scour
and filter the bond on the market, which is trillions
of dollars in size traded you know throughout the year,
trillions in trillions? Does your advisor have the skill set
(40:13):
to find, you know, the best yields out there with
the best maturities at the best price. Currently both high
quality investment grade A A public storage. Now public storage,
you know you also got it sometimes like the stock
or the company that's offering the debt as an investment.
(40:36):
And so in this case, let me tell you a
recession proof type investment. It is storage. When people lose
their homes, they put stuff in storage storage door, or
when they move out of their offices, they put stuff
in storage. So having the underlying company that's borrowing the
(40:59):
money be a company that does well in good economies
and bad economies is a good bond to potentially own.
And so that's public storage. It's got to cupe on
over six and a yield to maturity at over five
point eight. Those literally could be gone tomorrow. Now we
(41:23):
wouldn't put all of your money in any of these things.
We usually use about a five percent rule. So part
of your you know, investments, if you have stocks, bonds, alternatives,
you know, and cash, you know, you're gonna have a
mix of all of those categories to get you to
the cash flow you need to get you to the
(41:44):
goal that you need. And so we're just talking about,
you know, some various investment ideas that may help you
with your financial plans and the cash flow that you need.
So far, both of these investments that we've just talked
about both pay dividends. Frontline pays a good dividend. TLT
(42:07):
pays about three point seventy five, which is, you know,
not a bad interest rate all things considered. And then
these two bonds, both yielding very close to six percent currently,
are also very good with coupons over six. The second one,
so the first one was public storage and then the
(42:28):
second one was.
Speaker 3 (42:29):
A city bank was paying a five point nine percent
yield to worst. The coupon was I think six or
a little over.
Speaker 2 (42:37):
Little over six, yeah.
Speaker 3 (42:38):
Yeah, and that matured I think in twenty twenty six.
Public storage I think matured in twenty.
Speaker 2 (42:42):
Twenty twenty seven. Yeah.
Speaker 3 (42:44):
So and these are individual bonds again, you know, and
if you have questions, and again we we're only giving
giving ideas out there. We don't know who you are.
What's your risk tolerance, is your time horizons? So on
and so forth. So does it fit within your portfolio?
Does it not? Is it appropriate? Is it not? But
to help answer those questions, you can reach out to us,
(43:06):
give us a call, or you can also you know,
email us at question at wisemoneyguys dot com to get
more insight. But that's exactly what we do. We look
at these different components and see how does that work
within your existing portfolio. Or there's seeings and other opportunities
that we can enhance the overall return, whether it's looking
(43:27):
at return or maybe it's enhancing the cash flow of
your existing portfolio, or maybe you just have cash shitting
on the sidelines and you want to put it to work,
all dependent upon your goals, and that's that's what we do.
Along with our clients. We include a financial plan because what.
Speaker 2 (43:43):
Is yes, that's not separate, that's not a separate exactly,
that's included in our annual advisory feed. By the way,
I'm glad you mentioned.
Speaker 3 (43:50):
That, because how do you get from point A to
point B? Without a map, and that's what the financial
plan is. But if you don't have a car to
get you from point A to point B, that's also crucial.
Point two, and that's the portfolio and the construction of
the portfolio. And so we provide both those components to
get you from point A to point B.
Speaker 2 (44:07):
Yeah, great point. Hope you enjoyed this show. Two ways
to come in and see us. If you want to
see us in action live, join us for our retiree
Dinner workshop at the Old Spaghetti Factory on October second,
just a little less than a couple of weeks from now,
by calling nine one six nine six seven thirty five hundred,
(44:29):
or come in for a no obligation consultation by calling
nine one six nine six seven thirty five hundred. Okay,
I hope you enjoyed the Wise Money Guys radio show
you've been listening to John Scambering to Seppi Vescani. Hope
you all have a wonderful weekend and come in and
see us real soon.
Speaker 3 (44:47):
Bye all, talk to you next week.
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