Kersten Wealth Management Group - Money Sense 9-16-23

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Episode Transcript

(00:00):
Good morning, and welcome to money. Since you're listening to the advisors of
Kursten Wealth Management Group, Kevin Kurstonand Brad Kurston. Happy to be with
you this morning, Brad, aswe work our way through September, and
as we've talked about in previous shows, the toughest month of the year for
stocks overall, and that's looking tobe true, although it hasn't been a
huge sell off from the end ofAugust, only about one percent from the

(00:25):
end of August level, so Iwould certainly put it more in the consolidation
camp as opposed to any sort ofgiant market correction. A little bit bigger
of a market correction happened in themonth of August, just shy of five
percent, so still consolidating off thosegains that went really went from January,
first of the year all the waythrough the end of July, and to
me, you know, a healthydevelopment which typically sets you up for a

(00:48):
fourth quarter rally in stocks overall.So so here we are haven't recovered all
of the losses on the SMP fivehundred from twenty twenty two, and really
even if it took through the endof the year, which would still be
a pretty substantial gain in the fourthquarter. You'd still be looking at a
market that went nowhere or went completelysideways for two years. It's a very
normal market recovery. I mean,a little bit more off the bottom would

(01:11):
have been expected. But if we'relooking at what a typical third year of
the presidential cycle would be, ora typical year after a negative year would
be, it would be this.You would call this textbook even so much
and to say when are we goingto how many pullbacks are we going to
get? Two? Okay, wegot it. We got it in March
when the bank failures happened, andwe got it here in this typical seasonal

(01:32):
week period of time the start ofAugust through about now through the middle of
September, not even the end ofSeptember would be typical. And that's that's
the consolidation that you're talking about.When you're talking about consolidation, what you
mean is we have a little selloff, have a little recovery. You
bounce back and forth in this range, and right now we're in the middle
of this range where you had ahigh to low sell off of six and

(01:53):
we're sitting at at down three fromthe high point from the end of July
and just kind of back and forthfor a while and eventually then you break
out. But like what you're saying, if we then break out past that
high from the end of July andcontinue to move on back to an all
time high, it is a prettybig move from here to the end of

(02:14):
the year, but one that shouldalmost be expected because it would be it
would be a continuation of this verynormal market cycle post a negative year.
Yeah, and when you're looking atthe back and forth not only we've had
in the last four or five years, Brad, but also in the more
short term, I think there's beenquite a bit of back and forth year
in August of September. You lookday to day today being a little bit

(02:37):
more of a value day, right, and a little bit more of a
small And when it's a value day, that's probably the wrong term because you
call it a value day. Ilook at the split between SMP five value,
SMP five hundred growth, the splitbetween the tech stocks and the consumer
discretionary stocks that would be growth andfinancials, energy healthcare that be more value.

(03:00):
You also see the outperformance of smallcaps and midcaps on those days as
well, so it's interesting to see. But when you look at the market,
seesaw not only in the last threeor four years. Let's look at
it twenty twenty, coming out ofCOVID all growth twenty one, all growth,
technology, consumer, discretionary, andconcentrated. Right, big names moving

(03:23):
more than than small company names.And so you get this this headline of
seven stocks are moving the market.Okay, the biggest stocks always moved the
market the scene. The opposite ishappening on the periods of time in between
there where they kind of languish fora little bit and everything else catches up.
Well. In twenty twenty two wasall about value, but not only

(03:45):
just it was big value. Soit would be your big energy names that
we're really outperforming and your big healthcarenames that we're outperforming in twenty twenty two,
and that seesaw has shifted us backto growth in twenty twenty three.
Richard Bernstein has an op ed pieceout where he talks about this year,
we're right back to the big growthnames leading the way. The seven largest

(04:08):
stocks growth stocks in the SMP fivehundred. We don't have to list them
off. I mean, they're thebig names that everybody knows Apple, Amazon,
Google, Tesla, Microsoft, Nvidia. Not a recommendation to buy or
sell any of these, but thosestocks are up ninety five percent this year
through August thirty. First, theseven companies contributed seventy one percent of the

(04:30):
return of the SMP five hundred.Going back to it looked up before,
they were probably seventy one percent ofa negative performance last year for sure.
For sure they were down much morethan the market hide to low. For
those seven, we're probably fifty fourpercent. So when we looked since nineteen
ninety, when we have this,the leadership narrows. Profits cycles are decelerating

(04:50):
or expected to decelerate, which wasmore so this year. Not so much
deceleration, but as expected to decelerate. What do people do? They gravitate
towards the big blue chip names thatthey're comfortable with. But when markets broadened
out and profits cycles accelerate again,the lower quality and more cyclical companies,
smaller cap companies have greater operating andfinancial leverage. According to that framework,

(05:14):
the Big seven, I won't callthem the Magnificent sevens a cheesy name.
I won't call it that because that'swhat's in there. So during twenty twenty
three implicitly incorporates an extraordinarily dire forecastof corporate profits. So when people go
to these big names, and itused to be more the consumer staples I
think of the world brad used tobe more utilities companies, but now it's

(05:35):
actually the growth companies that get thedefensive money. In a lot of cases,
many of these big blue chip technames pay a dividend now, have
consistent reoccurring revenue, so they don'thave drop offs and earnings like everything else.
And that's what investors were looking forwardthirty years ago when they were buying
the consumer staples. What did youwant? You wanted a companies that had

(05:57):
consistent, reoccurring revenue that wasn't subto market in economic cycles as much recession
proofs, right, And that's wereally have to reevaluate what is recession proof
in this current day and age.So, but at the same time,
what there's three thousand, seven hundredstocks in the United in the well,
there's probably more than that if youconclude all the microcap stocks, but for

(06:20):
the most part, three thousand,seven hundred stocks in the US market,
Okay, twelve thousand stocks in theworld is it really only that there's only
seven stories and this has been goingon for a long time. So,
but the real thing that you haveto pay attention to is when you allocate
to small caps, midcaps in international, you have to realize that the United

(06:43):
States is has a growth tilt,has a growth tilt because of these big
names. And so if you don'twant to be completely out of whack with
your portfolio, if you're if you'reinterested in allocating to midcaps and small caps
international, which we do, youhave to add additional growth waitings or growth
sectors to your portfolio to balance thatbe the same as the overall market,

(07:06):
right otherwise you're going to be underweight. Your sector waitings won't be the same.
And so if you're just striving toget market like returns, which are
good over the long term, that'swhat you should strive for. But you're
going to add some things in thereare going to give you some diversification to
smooth the road out. You haveto be mindful of what your sector makeup
is, or you might have theseyears where the market performs well but you

(07:28):
don't. You won't and you won'tknow why until you look at the actual
makeup of your sectors. Yeah,and so I think that longer term,
I agree with Bernstein's assessment here isit can't just be seven stocks. And
if it is that, yes,it can be a growth tilt like you
say, but it cannot just beseven. There can't just be seven stocks

(07:49):
in the whole world. There hasto be more to it. There has
to be more new and exciting namesthat we haven't even thought of yet,
right, whether it's small caps becomingcaps or startups that aren't even publicly traded
yet. It certainly can't be thatit's just those seven stocks. And we
have an historic gap between small capsand especially the megacaps. That gap in

(08:15):
performance has gone on for almost adecade. Yeah, almost a decade,
but I think one year out ofthe last ten. But think about this
change in the in the investment worldand why this exaggeration of large caps versus
small caps, or even US versusinternational might exaggerate for a few more years.
What's happening with how people invest.There's less flows into actively managed mutual

(08:37):
funds, more flows into passive indexesor even actively manage ETFs that are going
to overweight to these big seven companies. Or just large caps in general.
At more dollars are getting invested intofour one case and what are the choices
in those four one case passively managedindex most of them market cap weighted,
So where are the flows going?Blindly, No one's making a choice any

(09:00):
more, unware to investor just investingin the SMP five hundred which has these
seven as the largest holdings. Sodaily and every paycheck, everyone is contributing
to this exaggeration of performance. Andit's only getting worse because the the the
attention that low cost investing is gettingis only is only getting greater, and

(09:22):
how cheap it is to invest thatway is only getting greater. We're doing
the same thing, maybe not withvery passively passively managed indexes. I think
we can do you can do alittle bit better, but still low cost
is the is the driver of allthe four one k dollars moving to just
passively managed indexes that are going toget these this large cap waiting. Anyway,

(09:46):
even if you have small cap options, what does everybody put there?
Five percent, ten percent, theother fifty sixty seventy percent, even if
it's a an allocation fund, isgoing to go to this any the large
caps anyway. So it's not likeif the trend is over, it's going
to be over for very long.There is a floor and there is a

(10:07):
constant flow into the largest of thelarge cap and I don't think it's anywhere
near over. It may never beover. Well. I think another thing,
Brad, that that is sort ofout there and from an investing standpoint,
is just getting bigger and bigger isthe number of portfolios out there that
people can use to hedge the market. You know, you talk about technology

(10:28):
and how I often mentioned on theshow, technology is the only sector that
touches every sector. It touches finance, right, it touches banking, touches
investing, it touches healthcare, toucheshotels and airline, it touches everything.
You can't say that that about almostany other sector. Okay, But one
of the things that technology has done, and alternative AI and all the coding

(10:52):
that people can do to create portfoliosjust basically with the with a keystroke is
a lot of the hedging algorithms thatare out there for people to invest in
various portfolios that get created and doit cheaply, and do it cheaply.
But the irony of those portfolios isthey're designed to protect against this certain downside.

(11:16):
But what a lot of investors missis the more money that goes to
protect the downside, the less likelythe downside is to happen, right,
because many of these portfolios to say, oh, I'm gonna go in this
and this has x per set protectionon the downside through options, that's what's
being done, okay, or anotherlayer of protection on the downside. Then
they go back and they say,well, in nineteen sixty, nineteen seventy,

(11:39):
nineteen eighty, nineteen ninety, ifyou had done this during y Z
crash, then you would have onlylost this much or you would have lost
nothing at all. But the problemis that investment portfolio did not exist back
then, so you can't say so. I think that's the other part I
think. I think indexing and theamount of money flowing into so like you

(12:01):
said, just not that's not abad Sometimes like it's flowing in blindly.
That doesn't mean it's a bad thing. But the other part of the market
that exists today is that hedged partof the market. And I'm not saying
that it's a bad thing. WhatI think is so great about it is
I that part where people are hedgingso dramatically, and the more people do

(12:26):
it, I believe long term reducesvolatility in the market as a whole,
up and down, up and down. It's true, you're not trying to
have your wild up swings because we'rehedging off the top. And you're not
gonna have your wild down swings becauseeverybody's put a floor at the same spot.
Who who hedged in nineteen eighty Yeah, hedge funds, that was it.

(12:48):
Yeah, So there was a bigadvantage to that if you were if
you were a traditional mom and popinvestor in nineteen eighty and you said,
I want to hedge the market,you want treasuries. That's all you could
do, right, You weren't Youweren't actually hedging the market. Okay,
now everybody can do it. Sothe billions and trillions of dollars that are
flowing that way I inherently reduce volatilityin the overall markets. Well, that

(13:13):
last year was volatile. I don'tknow that last year was that volatile?
Was it was it? I mean? Was it wasn't historic? Not historically
volatile, But you know, forthe full calendar year it did rank as
the fifth worst negative year for theSMP five hundred of all time. But
it was pretty orderly sure, okay, and so well, I mean that

(13:35):
you know, we'll see, Imean the market has really changed. I
mean, this is the problem.I love looking at history when it comes
to markets, but the problem withlooking at history is it doesn't factor in
all the changes that that have happened. Uh. It does help. I
think investors stay the course to beto be long term oriented. But I
do think that some of the newinvestments, including exchange traded indexes that that

(13:58):
you talk about, have changed theway the inner workings of the market work.
And so it'll be interesting to seeas time goes all see our first
break. And then let's just defineit a little bit so that if people
are doing it on their own orthey were curious what we're doing, especially
in non retirement portfolios, what theadvantage is of using an exchange traded fund

(14:20):
versus a mutual fund, and taxadvantages, why the world is going that
way, why it's cheaper, andwhat you should be looking out for if
you have mutual funds in a nonretirement portfolio, and how there might be
a little bit of an exaggeration onthe taxes it costs you because you're the
last one standing, and so acouple of things to look for there,
and just let's just talk about someof these things that terms that we throw

(14:43):
out there, that we can definea little bit better for people. You're
listening to money since the abodes acurse to Wealth Management Group, we'll be
right back and welcome back to theshow. You're listening to the advisors of
Kurston Wealth Management Group. Kevin Kurstonand Brad Kurston, happy to be with
you this morning. As a reminder, we are professional financial advisors. In
our office are in Perrysburg. Youwant to give us call throughout the week
to set up a consultation four onenine eight seven two zero zero six seven

(15:05):
or check us out online at Kirstenwealthdot com. Brad, I think some
of the stuff we kind of takefor granted, and we were talking about
in the beginning of the show,index investing, exchange traded funds, how
that's really changed the marketplace, andwhile possibly helping these large megacaps and the

(15:26):
top five or the top ten ofthe SMP five hundred, how that's become
exaggerated over the last ten years.But let's go backwards a little bit and
talk about the difference between a mutualfund and an exchange trading fund and what
they are. Because many people,if you're sixty or seventy years old or
fifty years old, you may havespent your whole career investing in mutual funds

(15:46):
and maybe just now in the lastten years or so, have seen exchange
traded funds. You might not evenknow you might own them, and you
didn't didn't know it. I mean, technically, the Vanguard SMP five hundred
is a mutual fund, but theyalso have an ETF, but it has
a lot of similarities to the ETFtwo. So we'll talk about that pros

(16:08):
and cons of each and just kindof go into that a little bit.
So, Okay, so we sayETF. It stands for exchange trade of
fund. We also sometimes just sayindex, and what we really mean is
ETF because you can't invest directly inthe Dow Jones or the SMP five hundred.
You have to be if you're goingto invest in the SP five hundred.
You might think you own the SMPfive hundred index. What you really

(16:32):
own is you own it tracking stockyou own it. Et that's impossible exchange
trade of fund that tracks the SMPfive hundred. Now, the largest ones
should be the cheapest ones, andthey are, and there's been a race
to almost zero for these. Thereare there is, there's one of them
that I disagree. The largest onesare the cheapest ones. The well,

(16:52):
the State the State Street not arecogdation. Buyers sell any of the names
that we use. The State Street. SMP five hundred is not the largest
dreds. It is, but theyhave an right. You're right, okay,
okay, Well this is important though, somebody's gonna go out and do
it on their own right. Thespy is the largest. Now, it's
the largest ETF in the world.That is not the lowest cost. The
lowest cost is this exact same onefrom State Street with a different ticker symbol

(17:18):
that tracks the s and P fivehundred the exact same way, but it
only charges two basis points point zerotwo percent to one hundreds of a percent
is what they charge. But theold spy they charge ten just under ten,
just under ten, okay, sothey charge ten to why most of
it has a lot of embedded gainsand they know that they can just keep
it that way because nobody can sellit because they'd have to pay tax.

(17:40):
And if they want to sell it, they'll just move over to the other
one. That's fine, But whywhy would State Street have to cut the
revenue by divided by five if theydon't have to, So they don't.
There's four hundred and twelve billion dollarsin that in that portfolio, in that
exchange traded portfolio, and you're you'reright. I mean what they do is
they create a new one. Sobecause did you mention that I was reading

(18:02):
on the phone, okay about theunrealized gains. Yeah, so they know
a lot of people can't leave anyway, and they don't see that as a
big cost anyway. But if you'reout there looking for the cheapest one,
State Street has one for two basispoints. I think NAD is like fIF
fifth biggest, yeah QQQ. Andit's not the cheapest, it's not the
cheapest, it's not even the cheapestof the NASDAC one hundred tracking indexes.

(18:25):
So these tracking indexes ETFs are generallycheaper than the mutual fund counterpart that might
be doing the same thing. Soif you're invest in a mutual fund that's
tracking the SMB five hundred versus anETF that's tracking the SMB five hundred,
the ETF is going to be cheaper, and there's certain tax advantages even if
it's a passively managed index like theSMPT five hundred to owning the the ETF

(18:48):
instead of the mutual fund. TheETF does kind of tax free exchanges inside
where they're buys and cells. Evenif it's an actively managed ETF, there
buys and cells are more like exchangesthan they are rate buys and straight cells
that would generate capital gains tax forthe investor. So an ETF could pay
a capital gain, but in mostcases ninety eight percent of the time,

(19:10):
all actively managed even ETFs are ableto mask those capital gains, either by
picking and choosing their taxlots or bydoing them as exchanges of one share to
another share, and so you endup being able to have a lot more
unrealized gains than the ETF than themutual fund, where in a non retirement
portfolio, every year you're going tosee these end of the year capital gains

(19:30):
distributions, so it's not as taxefficient. Now, why would you have
done it in the first place,because it probably was your only option when
you started investing. In nineteen ninetyseven, they were only eighteen ETFs in
the world eighteen. That grew tenyears later to over five hundred. In
twenty fifteen it was twelve hundred,and today we're coming up on three thousand

(19:53):
different ETFs. Now, I wouldsay, just by judging how many are
started every year, about a thousandof that three thousand are just ones that
are tracking something and are not activelymanaged, just passively tracking a sector market
cap weighted in most cases, passivelytracking the SMP five hundred or the NASTACK

(20:14):
or the Dow Jones. But theother ones are more actively managed, either
with filters or they're just taking amanager's ideas and putting it on an ETF
platform and having it be more taxefficient and cheaper. Those options are what
you should be using, and everytime we're making an adjustment to a portfolio,
we're typically looking, is there alower cost ETF option on a non

(20:36):
retirement account, especially that we canbe using to save taxes and save underlying
costs to get the same performance.So those sorts of things you should be
doing the dollars every year are flowingout of actively managed mutual funds and into
ets. I think there'll be atime where where it'll be a ninety percent
of investing will be done with theETS and probably ten percent with a mutual

(20:57):
fund platform. Billion we're in ETFsin nineteen ninety seven. It's six and
a half trillion at the start ofthis year. So it is. It
is one is a ballooning industry,and every even actively managed portfolio or manager
is creating an ETF that that theycan manage for people so they don't lose
assets, and they're just doing itin a much more efficient manner. A

(21:19):
lot of broker dealers, though,because they're taking a little bit more off
the top from every investor, aren'tallowing ETFs on their platforms. They're only
allowing mutual funds because they can trima little off the top that that's not
what LPL does where there isn't anETF out there that we couldn't use.
But I know there are mutual fundUh, there are ETFs that are not

(21:41):
allowed on a lot of broker dealerplatforms, and that's just because they're publicly
traded companies and they need to notcut their own profits and uh. And
that's one problem was that some advisorsrun into or some broker dealers won't allow
it because there's a revenue sharing agreement, yeah, that they have with the
fund. So a couple of thingsto look out for though on ets Number

(22:02):
one, size, be careful onsize a little bit, and where would
you see this. There's something calledthe bid ass spread. Bid you know,
the bidass spread is the difference betweenwhat you buy it and what you
sell it for. Stock has thesame thing, and these ets are training
during the day like a stock does, and a mutual funds just training at
the end of the day, andit doesn't have this bid ass spread,

(22:22):
right, So that spread you youlose that money, right, that spread,
you lose that money because if youbuy something for one hundred dollars and
ten cents and immediately if you triedto sell it it was one hundred dollars,
you're gonna lose that ten cents andyou're always gonna lose that ten cents.
The stock could go up to onehundred and fifty, or excuse me,

(22:42):
the ETF could go to one hundredand fifty and when you sold it,
you're still gonna lose that ten cents, Okay, So you have to
be mindful of that because the largerthe exchange traded fund, the tighter the
gap is, the tighter spread.But could be could be a penny,
It could be, it could be. And the other thing to look at
it is if you're looking at twoand you're saying, which one's better for

(23:03):
me, one thing to be lookingat would be there, we're tracking the
exact same index. One has alower internal costs than the other. However,
one the spread is ten cents onten dollars and the other is ten
cents on one hundred and fifty dollars. Well, guess what, if you're
not going to hold it for thatlong, you should definitely buy the ten
cents spread one hundred and fifty dollars, even if the internal costs is slightly

(23:26):
higher if you're going to hold itfor a year or less, because when
you buy, when you sell,you're not gonna get so much lopped off
the top. You're gonna actually savemoney. So something for everybody. So
you did have to pay attention withmutual funds when you're looking at size as
well. You still have to payattention to size for a couple, but
for different reasons, right, didn'treally The bond market is so much bigger

(23:48):
than the stock market, so alarge bond portfolio didn't really matter as much.
Okay, But on a stock portfolio, law of large numbers kicks in.
If it's a two hundred billion dollarsfund, they run out of especially
if they're not in the large capspace, they run out of individual stocks
that they can buy without moving thestock price. Yes, say you're a
small cap manager and you want tobe a concentrated a small cap manager and

(24:11):
you get too big. You can'tperform the same as you used to because
you're so big and your flows aretoo big to actually you have to expand
into mid caps or you have tohold more holdings. Your past performance is
not gonna be the same as yourfuture. And that's an example of something
that would not happen in exchange tradedfun. The other thing on a fun
brad that you have to worry about. You mentioned capital gains. Well,

(24:33):
if a portfolio is hemorrhaging flows,whether people are just getting out of the
fund for under performance or they're gettingout of the fund because they're switching to
ETFs, that can cause a lotof capital gains. Think about it.
If you're in the fun and you'renot selling, but everyone else is that
manager is constantly selling stocks up here, down here, doesn't matter because the

(24:55):
money's flowing out the door. Wellif they if the fund's been around for
a while, chances are those stockare at a gain and they're realizing gains
which they will then distribute to youat the end of the year. So
somebody is getting out of the fund, they have to sell stocks at a
gain. Even if even if lastyear was a negative year, they probably
bought some of those stocks five yearsago, So what they're selling is at
a gain. The investor who gotout is just paying their own gain.

(25:17):
But the fund itself is sitting onthese capital gains that will distribute at the
end of the year. And whowill it distribute it to? The remaining
shareholders left in the fund. Soif it's a fund that is growing has
assets that are higher than they wereat the end of the year, those
gains are distributed to a smaller portion. But say say the fund had bad
performance and flows are going straight outthe door. If you're you're one of

(25:40):
the ones left in, you anyou have a realized gain that is unreasonable.
It's not it's not what it shouldbe because you're one of the last
few left in the fund. Now, that would resolve itself when you finally
sold. You could get out beforethat capital gains and then you're not gonna
worry about not ever going to gainor lose more than you actually did.
But there could be a year ifyou had sold that you would pay capital

(26:02):
gains in, like a year likelast year where the portfolio might be down
but you paid capital gains right now. That, like I said, it
would resolve itself once you moved on. But that's something to pay attention to
in terms of fun size and notmore importantly, the direction of the fun
size is the fund growing or shrinking. That would be an issue on the

(26:23):
on the mutual fund side. Onthe exchange traded fund side, you put
in ten thousand dollars, you're almostnever gonna have a capital gains. You
can't say never on exchange traded funds, but you're almost never gonna have a
capital gain. So much more taxefficient in non retirement assets because you put
in ten thousand dollars, it's notgoing to distribute every year Those gains you

(26:44):
could, you can essentially defer thosegains for as long as you would like.
So really, Brad, the bottomline is we've gone from what forty
We now have forty percent of moneygoing to ETFs, where ten years ago
it was less than ten They're cheaper, they're more efficient, they're more tax
efficient, they're more efficient from atrading stamp. But they're also much more

(27:07):
tax efficient for non retirement assets.But even in retirement assets, you can
build a very active portfolio of exchangetraded funds. So this doesn't mean well,
I don't want to just sit onmy hands and let the market come
to me, which is you cando that too. But if you have
an advisor like us, which we'redoing, we are active, but we're

(27:29):
active by using these exchange traded portfolios, and certainly we're using more and more
every single year. It saves alot of money, which goes right to
your bottom line and performance. It'smuch more tax efficient in non retirement accounts,
and it really gets you that pureexposure you want to get because you
can really pinpoint with exchange traded portfolios. I want exposure to MidCap growth,

(27:55):
and you get it. You don'thave to worry about goes searching for a
fund what it says, it's MidCapgrowth, but the manager had to drift
because he got so it's more mcapblend. No, you get that pure
exposure that you need to maybe filla gap in your in your portfolio.
It's something that's missing, and itcould be a sector gap, it could
be an asset class gap. Soit really efficient from that standpoint as well.

(28:19):
And just go back to the costsavings is so big over time.
Exchange traded portfolios, even in anactive account with an advisor, could be
a half a percent to one percentcheaper than an active account with exclusive exclusively
the mutual funds. Yeah, soyeah, build across the whole portfolio.

(28:40):
Maybe you're saving half a percent evena quarter percent every single gear for the
exact same exposure that you would havehad years ago with a mutual fund portfolio.
Is meaningful over time when you startto compound that, it's it's it
goes directly to the bottom line ofyour portfolio and your portfolios performance. So
there's really no reason to not touse it, especially on the stock side.

(29:02):
On the bond side, you couldmake an argument for an actively management
an active manager being able to outperformbecause there aren't too many. They're starting
to be more. But there aren'ttoo many indexes in the past where where
you could recreate the bond manager.But that is also changing. So I
think there will be a time wherethere will be very few manager mutual fund

(29:23):
platform platforms that anyone will be using, especially an advisor building out models like
we are. Last thing I'll sayon exchange traded funds though, which I've
seen at some of the extremes.It was during COVID, during the COVID
crash that bidass spread that we talkedabout, be very careful with something called
a stop loss or just panic sellingin general. Okay, yeah, on

(29:45):
big on big days like we hadduring COVID, where you had extreme volatility,
Putting in a market order for astock is the same. You can
make the same error with putting ina market change on an ETF where you
can get these wild swings, especiallyon thinly traded ETFs. If you're talking
about the talking about a big sevenwith stocks, if you're talking about the

(30:06):
big say three with the ETF world, you're not going to have these wilds.
Well, it did happen though evenspy went from like one penny to
twenty cents on a spread. Ona spread, nothing that's going to be
you know, it's a four hundreddollar a share. But with the smaller
ETF platforms, you saw ten percent, not ten cents, ten percent difference

(30:26):
in a single day that got resolvedby the end of the day. But
if you happen to be one ofthe unlucky ones that there's some new story
that goes across and you get into go sell because you're worried about the
market, you might have been oneof the ones that just sold blindly without
another buyer on the other end,and it has to just go down to
wherever somebody has a has a buyfloor in and that's what's getting filled because
it's the only other buy. Letme just reiterate that that's an example where

(30:49):
the ETF is not trading at theindex level, right, and so you
say, well, wait a minute, and it's supposed to just you just
add up the stocks and it's supposedto trad there no no, no z
s X y Z index was onlydown two percent today and I sold and
I was down ten How did thatit can happen? Again, so you
have to be very careful and youneed to have an advisor that's looking at

(31:12):
that type of thing to say,you know, whether it's making sure you're
not using market orders or whatever itmight be. So that's the other thing
to be careful of on exchange tradedfunds that I don't think a lot of
people pay much attention to that partin particular, and during COVID during the
O eight financial crisis, even certainmarkets, international markets can have a wider

(31:33):
discount premium on the ETF price andit's a little in the weeds, but
there are certain markets that are morethinly traded, and therefore you have to
be a little bit mindful of howyou're buying and how you're selling. That's
right thinking our next pause, you'relistening to Money Sense. Kevin and Brad
Kurston will be right back and welcomeback to the show. You're listening to
the advisors of Kursten Wealth Manager Group, Kevin Kurston and Brad Kurston. Brad

(31:53):
changed change topics a little bit here. But something we often talk about this
on this show is not getting wrappedup in what you either see on TV
or read online and read online.There's a lot of what we call clickbait
out there for people, paid paidadvertisements that look like news stories. And

(32:13):
that's not not even what this iswhat I what I found here on Yahoo,
but things that are out there justto make people scared, mostly mostly
to make people scared. There's nota lot of you know, isn't the
market great? Yeah, isn't themarket great? I mean you might see
that from a Vanguard or somebody likethat. But I saw one that was

(32:34):
sort of clickbait and it said,oh, I don't have the headline here,
but it was expert who called thetwo thousand and two thousand and eight
financial crash says we're in for abig one. Yeah, you see that
all the time, right, Andthis was on Yeah, the expert that
called the last two crashes. Isit got another prediction for you? Right?
Yeah? So this one and Idon't even need to do the name,
but it's the first sentence of thearticle, says asset bubble expert.

(32:58):
WHOA he's an A B. Ididn't know he was an A B business
card right, so Abe Assid Bubbleexpert has Warren investors to buckle up ahead
of a fourth quarter recession. Well, jeez, come on, we have
fifteen days. Have fifteen days,better buckle up fast. Uh. If

(33:20):
the recession was to begin in Qfour, the time to buckle up would
be right now. The notorious marketbear has said, Uh, this person
has long been pessimistic about the USeconomy, And the reason we bring this
up is these are the types ofthings that and to no fault of anyone,
it's you always have to ask,You always have to be skeptical,
and and for people to call usand say, hey, I read this

(33:44):
on it's totally fine, but youalways have to consider the source. Okay,
So he goes on. He goeson to say he's been long been
pessimistic about the US economy and stock'swarning of a deep plunge in equities for
years. A long time stock marketbear who successfully called two thousand and eight
and two thousand crashes. Well,once again, my stopped clocks successfully called

(34:05):
noon and midnight. So that wasthat was right twice a day, has
warned investors may want to buckle upahead of a potential US recession by year
end. If the recession was tobegin in Q four, at the time
to buckle up now, not measurablein real time. The worst equity market
outcomes begin two months prior to recessionuntil four months prior to recovery. Not

(34:25):
a forecast, just an fyi.He stressed, US recession calls are heating
up again as investors feel in acombination of dwindling consumer saving, student loan
repayments, and shrinking money supply couldchoke growth. He recently warned that far
deeper market losses will emerge for stocksas valuations remain high relative to treasury yields.

(34:45):
He also criticized the federal reserves policiesover recent years, saying they've contributed
to economic imbalances that could lead toa financial crisis. In July, he
warned that the SPI index would haveto plunge sixty four percent for the market
to return to balance conditions. Okay, let's go with it. Then let's

(35:06):
go with it, Brad. Thebubble experts downbeat views stand in contrast to
the resilience of the US stock marketeconomy so far this year. Sixty four
percent too. I mean, thatwould be much worse than the two thousand
and eight financial crisis, but we'llgo with it. SMP five hundred and
tech heavy Nasdaq one hundred had ralliesso far this year as inflation as falling
inflation kindles the hope that FED couldsoon and it's interest rate increases amid investor

(35:29):
excitement around the rise of artificial intelligence. So talking about this, saying,
someone might call us up and sayI read this, I read this.
Well, consider the source. Soyou go to this gentleman's portfolio, which
you can find on morning Star,and let's look at the ten year average.

(35:52):
Well, let's look at the tenyear today. By the way,
he's down nine percent versus the SMPat eighteen. But this was through I
got nine point nine. Actually,okay, so you must have a more
current But what is the ten yearnumber. Let's just do some easy math.
Ten year three point nine percent negativenegative for ten years average annual of

(36:13):
negative three point nine. Okay,I have the ten You have the tenuere
on the SMP. There I donot, okay. Ten you're on the
SMP through June? Are you throughJune? No, this is the end
of the month. Okay, yeah, okay, so it's not gonna be
that much different, But I knowthe SMP through June was twelve point two
six okay, okay, So prettyeasy to do here, one million dollars.

(36:37):
Okay. If you did the SMPand you owned it for ten years,
you have three million, three hundredeighty six thousand dollars. Okay,
okay. If you bought this thisthis, uh what I say was Asset
Bubble Experts portfolio, the ABE.So what was that three point what three
million, three hundred eighty six thousand, four hundred and forty one dollars on

(36:59):
a million in ten years? Okay? If I bought the ABE Asset Bubble
Experts portfolio with a million dollars,okay, and I averaged what negative three
point eight seven? To be precise, it's ten years? Yeah wow,
okay, I'd end the ten yearsat six hundred and seventy eight thousand,

(37:21):
okay, okay. So but hewas write in two thousand, yeah,
I mean, and he was writingno way. So in two thousand the
SMP five hundred drop forty four percenthigh to low. I mean, you
say he was writing no way andoh eight he was down negative nine,
So I mean the SMP was downmore than that, sure, But in
two thousand and nine he was upfour and the following year he's down negative

(37:44):
three. So being sort of rightin two thousand and eight didn't do him
a whole lot of good because hehad no recovery years the next two and
then following that he was up one, then down twelve, then down ten,
then down eight point four, elevenpoint five, twelve point seven two.
Then in twenty eighteen, when themarket was off one percent, he

(38:05):
was up nine. But then hewas off nineteen the following years. So
there's just repeated bad performance. Becauseit's if you're calling for eight out of
the last two bear markets, you'regonna get a lot of positive years.
Well, and here's the issue,Brad, and people click on these stories
and follow these people and follow themon Twitter, and they these people like

(38:28):
to say, I got it right, and it used to be nineteen eighty
seven, right, got it rightin nineteen eighty seven before that crash,
got it right. There was allthose people. Then they sort of faded
away. I got it right inthe dot com bubble, I got it
right in two thousand and eight.The difference in that performance versus just the
S and P is eighty percent.The market would have to go down by

(38:49):
eighty for you to be the samefor you to be just the same.
Yeah, okay, So even ifhis sixty four percent negative prediction happened after
you were up to three point fourmillion, you'd have one point two million,
So you still have twice as muchBuns, still have twice as much
money if you had just stayed investedthe entire time and rode the sixty the
unprecedented sixty four percent. I findthe sixty four percent negative prediction completely absurd.

(39:13):
However, even if he's right,okay, you are a hundred percent
worse off than if you had justdone nothing. Yeah, okay, So
keep this in mind the next timeyou hear a quote unquote expert on CNBC
or a quote unquote expert that youread on Yahoo Finance or whatever whatever,

(39:36):
especially if they're managing money, youcan go look at their performance. Go
look at their performance. Yeah,and just it's shocking to me. Number
one, I can't believe how muchmoney that the person still manages being this
wrong for this long. But it'sit's shocking to me that you get two
things right your whole career, youget a million things wrong, and yet

(39:57):
people still listen. Yeah, thereis there going to be another crash.
In our lifetime. Sure, isthere going to be another ten percent downturn
in the next three years, Absolutely, But well the in between there is
the market gonna be up more thanten Is it gonna be up more than
the crash? It always has been. In order to get an asset bubble,

(40:17):
you have to create it. Youhave to you've formed one. And
then even then you don't go downto the next love the previous low very
often, and if you do,you don't stay there very long. I
mean, the chart of the marketis a lower left to an upper right,
and the further out you zoom.All those crashes, even in nineteen
eighty seven or a two thousand andeight, seemed relatively minor because of how

(40:39):
large the up swings are for themarket. Do you have to plan for
downturns? Of course? Do youhave to, as we talk about,
turn the dial when the market getsahead of itself a little bit, a
little bit less risk and a littlebit more risk at low. Absolutely.
But the folks that spend all theirdays out there planning for the end of
the world, like I hear thisthe mark, it's gonna crash, It's

(41:00):
never gonna come back. The USstyle The great thing about the end of
the world is you don't have toplan for it because it only happens once,
right, You only have to planfor the stuff that happens a lot.
You could plan for a bear market, you could plan for try to
buffer your loss, buffer it prefairfor your withdrawals for the next year,

(41:21):
and make sure that you're not gonnahave to sell something the world type planning
for investing, don't You don't bothercalling out because I'm not your person,
because it I won't plan for that. I will not. So you know,
keep that in mind when you're clickingon stuff online. And by the
way, remember that these online placesknow you, they know what you like,

(41:43):
and they'll feed you more of it. So yeah, if it looks
like everyone is calling for the endof the world, it's probably because you're
clicking on it and Yahoo or Googlejust keeps feeding you what you want.
If you're if you're pro Trump andyou're clicking on every pro Trump thing,
guess what that's it. It's gonnaknow you like it. If you're clicking
on every bowl market prediction and everyonethat is positive on the market, Eventually

(42:06):
that's all you're going to be seeing. But if you google market's gonna crash
or Market's gonna rise, the numberof search in the results are exactly the
same. We're gonna take our lastpause. You're listening to Money since Kevin
and Brad Kurston will be right backand welcome back to the show. You're
listening to the advisors of Kursten WealthManager Group, Kevin Kurston and Brad Kurston.
Just got a couple of minutes left. So I wanted to do sort

(42:27):
of a funny thing that I sawon Twitter today. Brad, we often
talk about being careful of scams outthere. We always see the scams,
and we talk about the serious ones. These are a little bit more tongue
in cheek on the scam. SoI thought some financial related. So there
was a recent pull on Twitter thatsaid, what's a scam that's so normal

(42:49):
that we don't even talk about itanymore? So you tell me what you
think. First. One I dolike this one getting asked to tip at
a self checkout screen as a wholenew level. You know, if they
have an eye I pad at thecash register, you're going to have to
tip for something that you never tipbefore. Yeah, what do you think
scam or no scam? Do youthink do you think we're gonna get to
a tipping point and that will goaway? I think it's here to stay.

(43:09):
Exactly. Yeah, it's that that'sjust added tacks. Talk about inflation.
That's that's here. I didn't realizethis one printer ink and it's pretty
expensive. Printer ink is equivalent tothe air to chip ratio and a bag
of chips. Didn't realize this printerink is only about seventy five percent full
in the canister when you get it. So that's what I didn't know about.
How about this one? This oneis current for current events. You

(43:31):
forgot to cancel the free trial onwhatever app, and now you're paying twenty
nine nine nine a year. Andthis example of the person said that they
signed up for a plant identifying appand forgot to cancel, and now thirty
dollars for the next year. Andthen you look and how long have I
had that? Yeah, so thatis a scam. You gotta be careful

(43:51):
of those. Check check your Appleand Amazon every now and then. Yeah,
exactly, So it says here,I used to hustle around when I
walk places, but now I slowdown because I'm paying thirty dollars a year,
I might as will identify all theserandom plants. Okay, let's see.
Let's see why don't phones include headphonesanymore? Maybe maybe agree with that

(44:16):
a little one. Yeah, I'mcurrently wearing broken, crooked get glasses and
the wrong prescription because it costs toomuch to to get glasses. I don't
know. I don't know about thatone. So yeah, that one's I
think there's probably a lot of newtechnology where you just get get once from
Amazon or Walmart, and they're thesame as what you would have gotten twenty
years ago. How about this one, Brad, have you fallen for this

(44:37):
one? You buy something online oron Amazon, it's ten dollars plus two
ninety nine of shipping. Oh,I'm not gonna pay that shipping. It's
twelve ninety nine free shipping. Great, great, good deal. I agree
with that one. So let's seehere one more that I thought that you
would say, Oh, paying topark it depends on where you are.

(44:58):
I think some of the airport.This is a big one for me,
Brad. Uh, fifteen dollars burgerand it no longer includes fries. I've
been saying this So when when westart going to restaurants and everything's ala carton
doesn't include sides. Yeah, that'sa scam to me, shrinkflation. Uh,
let's see here. Uh, thisis a Scambus's a personal scam.
You spend three hours making a verywell seasoned meal and it only takes you

(45:22):
ten minutes to devour it. Uh. That's that's frustrating. But what about
everything about flying is a scam?And only I have a thirty seconds lap?
But I disagree with this one.I can't believe how extraordinarily cheap flying
is. They talk about all theup charges for leg room and Wi Fi
and all those, all those differentthings. But if you look at inflation
adjusted, yeah, especially if yougo back to even like the seventies,

(45:44):
it is a you might say it'sdeflationary over these years. Yeah, absolutely
right. I mean that's because wewent sideways for two decades on airline prices.
Does it mean that a rapid increasein the last five years has you
anywhere near a normal inflation rate forfor flying across the country go across the
country for three, four or fivehundred dollars, Yeah, in six in

(46:04):
five hours. Yeah, that's prettyimpressive with a TV right in front of
you. Yeah, I don't.I don't know if I had disagree with
that one being a scam. Sosome interesting, interesting information, interesting thoughts
there, Brad. But just realquick as we close out after next week,
we're gonna have the FED meeting totalk about, so we'll see if
there's any big news that comes outof that. Thanks for listening to everybody.
We'll talk to you next week.You've been listening to Money since,

(46:30):
brought to you each week by KristenWealth Management Group. To contact Dennis Brad
or Kevin professionally called four one nineeight seven two zero zero six seven or
eight hundred eight seven five seventeen eightysix. Their email address is Kristen Wealth
at LPO dot com and their websiteis Kurstenwealth dot com. Opinions voiced in

(46:51):
this show or for general information only, and are not intended to provide specific
advice or recommendations for any individual.To determine which investments may be appropriate for
you, consult with your financial advisorprior to investing. Securities are offered through
LPL Financial, member of finn RepSIPC.