Kersten Wealth Management Group - Money Sense 5-03-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money Central, listening to the advisors
of Kirsten Wealth Manageer Group, Kevin Kirsten and Brad Kirsten.
Happy to be with you today. Brad, what a whirlwin
month for the market. For the month of April, we
saw the high to low, well, I know, the high
to low from the peak which was on February nineteenth,
almost got to twenty percent on the S and P

(00:20):
five hundred to eclipse twenty percent on the Nasdaq and
the Russell two thousand small cap Index. Maybe not all
of that occurred in the month of April, but then
the corresponding turnaround was fairly historic, and it's interesting on
the political side of things. It was interesting to see
the Treasury Secretary of Scott Bessett out there talking about

(00:42):
the media's role that they played in the cell off.
And they did play a role. I mean, the media
to some extent always plays a role. The media loves
bad news. Bad news sells, so they love that. But
also the media is extremely left leaning, and so there's
that component of it too. And Scott Bessett was on
one of the weekends shows and he said, I noticed

(01:05):
you guys did a lot of reporting, a lot of
reporting about the downturn and no reporting about the corresponding recovery.
Now we haven't recovered all the way back, but it
has been an historic rally. But the month of April
downturn was a V shaped down for two weeks, up
for two weeks. And if you look at the end
of March to the end of April, you had the

(01:27):
dow down a little bit, the other two basically flat.
And then when you ask, I think was slightly higher, yeah,
NASAK was slightly higher. I think the SMP was down
to half a percent, yeah, and the NASTAK was down
a half or up a half or maybe won't even
one percent. But then you follow on the next few
days a positive as well, so you fully erased the
April second, April third big downturn and almost zero talk

(01:50):
of it. All we're talking about is what everyone thinks
is going to happen. We're making headlines with what economist
thinks are going to happen and how much prices are
gonna go for tariffs that haven't gone into place yet,
And all of the talk leading in was all of
everyone's opinion about what they thought was gonna happen, but
not what's actually happening. So in this in today's first

(02:13):
couple segments, I think we have to talk about what's
actually happening versus what everyone thinks is gonna happen. And
look no further than the earnings. We go into the
year with an estimate of I think ten percent for
the first quarter, and it went all the way down
to everyone thought it was going to be flat, and
then a week later, which is two weeks ago, they're

(02:35):
up to S and P five hundred earnings they think
will be eight percent. And then a week ago it
was ten point one percent was the estimate for first
quarter earnings. And now we're not even done with all
the first quarter earnings, and the actual earnings for the
first quarter are up to twelve point eight percent. Big
one to on on Thursday when Microsoft reported huge earnings beat.

(02:56):
So the actual earnings, not everyone's estimate, not everyone's guess,
but the actual earnings for the first quarter up twelve
point eight percent at this point, and we haven't had
a single mark that has been lower than the prior ones,
so it might even be higher when we get to
the end of all the earning season and that's the
broad picture. When you look at individual news stories, everyone's

(03:18):
speculation about what's going to happen. It's even more egregious
that we are moving around on everyone's guests or the
economists estimate or the estimates for what they think GDP
will be. We also had a GDP number this week,
and that's that's another one where it was everyone's guests
as to what's going to happen and how big the
slowdown is going to be. Now, the GDP number one,

(03:39):
it was reported at one point GDP now had it
as a negative four percent. When it was actually reported
for the first quarter, it was real GDP headline number
down point three. Now let's look under the hood. There's
really about five components here. The full number was negative
point three. The two spending numbers are consumption spending one

(04:03):
point two percent positive, fixed investment one point three percent positive.
And here are the negatives, government spending down point two
five percent, good trade imbalance negative four point eight percentage points. Okay,
so you can take the trade imbalance out because all
it is is everyone importing before the tariffs start, and

(04:24):
now we're gonna have nothing. So guess what's gonna happen.

Speaker 2 (04:26):
This big surprise in the second quarter that we have
less goods coming right back. It's going to come right back.
What really matters with GDP is are we consuming and
spending more? And is the anticipation, especially for companies, that
their capac spending is going to go up or go down.
And that's the other thing with all of the earnings reports,
it's every company saying, not only are we going to

(04:48):
reiterate what we're spending this year, we're gonna have to
go higher. Every tech companies is saying we're either the
same or higher, and so all of that is what
really matters to the economy. That's what really drives the
economy forward. As long is the government spending isn't falling
off a cliff but steadily declining or in government terms,
increasing by less, then it won't be a big mover

(05:09):
for GDP or for spending in the economy. But both
figures that really matter were one point two and one
point three positive on GDP, and the trade and balance
took four point eight percentage points off of first quarter GDP.

Speaker 3 (05:22):
It is a back.

Speaker 2 (05:23):
And forth figure it always is with with trade, imports
and exports, and next month will be a big export,
and next quarter, next quarter will be a big export,
and it again that'll be one that doesn't make any headlines.

Speaker 1 (05:36):
Well, the three big numbers that the Fed should be
using because they have a mandate of controlling inflation and
is it economically related or what's actually in the wording
is it or is it employment? I know it's stable employment,
so the other mandate is stable employment. And those numbers
weren't great recently too, so hey.

Speaker 2 (05:56):
For first tick really was these last couple of weeks
on some unemployment UH and ADP employment number a little
week and the unemployment figure people getting on unemployment was
slightly higher. The first one that beat missed in a while,
still not extraordinarily high thin it was two hundred and
twenty six thousand. They were expecting two twenty but it
was the first one that wasn't on or below expectations,

(06:19):
so the Fed could lean on that as it changes
language on May seventh. They're not going to cut on
May seventh, but they could change language and set up
for a June cut. And the interest rate environment, especially
on the short end, is telling the Fed that the
market is planning on a cut and it better do
it soon, because we're really out of balance here. The
Fed funds rate is at four and a quarter to

(06:40):
four and a half, and the two year was at
three point eight to start the week, and today we're
taping the show, it's at three point five. So it's
off by call it zero point eight percent from where
the market thinks the Fed fund should be. And then
the other thing that they would use the Fed would
use to lower rates would be their preferred measure of
it inflation, which is the personal income and spending release

(07:03):
that decelerated to two point twenty nine from a year ago.
Core inflation decelerated to two point sixty four, Core services
inflation x housing decelerated to two eight six. All of
these are the slowest since early twenty twenty one in
terms of inflation. And this is to early twenty twenty one,
when was when they were extremely low and going up.

(07:24):
This is us extremely high and going down and almost
I don't know how.

Speaker 3 (07:28):
They have any more excuses anymore.

Speaker 2 (07:30):
It is just a stead steady decline down into the
ones that are definitely coming in the next two months.
CPI is going to be two point three in two weeks,
and it's likely to be a one point something. By
the time we get to the June release, it's going
to be a negative monthly number, just depends how negative
it's going to be. And if we that that's before

(07:53):
the June FED meeting. If we have a one point
nine number on CPI and you have another monthly figure
for unemployment that looks weak or strong for the unemployment
weak for the employment numbers, the Fed has no excuses.
By that point, we'll have had some trade deals done.
The rumor now is well not really rumor. They're talking

(08:13):
about it.

Speaker 3 (08:13):
The India deal is.

Speaker 2 (08:14):
Done and they're waiting for their parliament to vote on it.
This week also had a deal done on the Ukraine
mineral deal. I mean that is one step closer to
peace there, because if we're investing money jointly with Ukrainian
companies to take minerals out of the ground and have
them be more profitable and be able to rebuild, there's

(08:35):
no way that we're going to put up with anything
with Russia. That's the first start to what needs to
happen in the Ukraine and Russia to end that war.

Speaker 1 (08:43):
So the S and P five hundred BRAD is still
down four point ninety two percent on the year. It
was down seven tenths on the month. But we talked
about the wild swings in the month, and you look
when you get to the end of the month. Here
the firstified portfolios had a great month. Diversified portfolios had
a great month. You had on a one month basis,

(09:06):
you actually had growth up one point eight percent, large
cap growth, MidCap growth up three point four percent. On
a one month basis, you saw tech up one point
six in the large cap space, large cap foreign which
is up twelve percent year to date. And I had
a couple of people say, how can that happen? Why

(09:28):
is that happening? Well, two things are happening, okay for starters,
and I try to get people to visualize this in
their heads because it's the same with emerging markets as
it is large cap foreign In two thousand and seven,
the S and P five hundred was at one thousand,
five hundred, a little over but one thousand, five hundred.
Recently it got to six thousand, one hundred, came down
to five thousand, and is now at five thousand.

Speaker 3 (09:49):
Six hundred. Whatever.

Speaker 1 (09:50):
It is, okay, but it is more than triple where
it was in two thousand and seven, both the International
Index and the Emerging Market Index are still at the
same place. If you invested in them in two thousand
and seven, you have the exact same amount of money
that you did eighteen years ago. So cycles go very

(10:12):
very long. Sometimes is one of the longest in US International,
which makes international on a relative basis much cheaper. So
that's part of it. The second part of it is
the dollar's weaker. And so if you make your earnings,
say in Europe, in euros, and the euro is stronger
against the dollar, that's your hedge. People think the hedge
is gold, Okay, fine, Gold's done nicely. But if the

(10:36):
dollar's weaker against other currencies, then any earnings that are
achieved in those currencies are more valuable. Everything in your portfolio,
everything in all of our client's portfolios. What do you
see when you log in dollars dollars. However much money
you have, it's dollars. So if you have companies in
your portfolio that earn that earn profits in non dollars

(11:00):
denominated currencies, it makes it more valuable. Those are the
two big reasons for that happened.

Speaker 2 (11:05):
I'll give you a third one they're on a different
stimulus package than we currently are. They just got done
with their seventh rate cut. China's cut rates and doing
stimulus across the board, including the buying their own stock market.
All of the countries except for US are in a
stimulus mode with their interest rates and with all of
what their central banks are doing. Ours is being very political,

(11:29):
and it's not going to do anything to help the
economy because that would help Trump. And I never thought
they were as political as they were until this last year.

Speaker 3 (11:37):
There's no other.

Speaker 1 (11:38):
Excuse because unemployment is ticking up and inflation is down.
There's no what other excuse could there be besides Jerome
Powell as a fad being political? Right, it doesn't make
any sense because you think that tariffs might cause inflation,
which they're not. General Motors just came out today and
say we're not touching prices. Ford has said we're not

(11:59):
touching So what's this anticipation of higher prices?

Speaker 3 (12:04):
Drom Powell?

Speaker 1 (12:05):
Because I thought you were data driven and the data
apparently the data that they're looking at is what a
random economist at a company is speculating will happen with
a company, instead of what the actual company, And by
the way, that speculation is what caused them to make
one of the most massive FED mistakes of all time
in refusing to raise rates in twenty twenty one and

(12:26):
twenty twenty two. They were speculating that it was transitory,
and now they're speculating again. That's all they they say
they're data driven, That's all they do is speculate.

Speaker 3 (12:36):
Uh.

Speaker 1 (12:36):
The other thing that did well this month is bonds
brad at us Agrea Bond index up point four percent
on the month, up three point two percent on the year.
If you're a sixty to forty investor, you're pretty and
you have some international in your stock part of your portfolio,
you're basically flat on the year. And I've seen a
lot of that in client portfolios as well, So you know,

(12:58):
seeing that scare on those scary headlines. In fact, somebody
just posted here recently on X and they showed the
Wall Street Journal from like a week ago, and it
was Dow Jones to to have its worst April since
the Great Depression. Yeah, yeah, was this Scott best at
the post of that?

Speaker 3 (13:18):
Yeah?

Speaker 1 (13:19):
I mean, how irresponsible is that it wasn't the worst
April even at the bottom it wasn't even closed.

Speaker 2 (13:24):
Well it was it was. It was worst worst April
since Great Depression. And now we've had the best two
week recovery in April since.

Speaker 3 (13:34):
The Great Depression? Are we are? We?

Speaker 2 (13:37):
Are we posting that? Yeah, it didn't end up being
the worst April since the Great Depression? So do they
retract that? No, it's out there.

Speaker 1 (13:44):
So just to close out, you know, this segment wrapping
up the markets for the month of April. There's a
lot of encouraging signs out there, Brad. One of the
things I look off a market bottom for is kind
of think of the market when it's trending higher versus
when it's trending lower. You know, if you visualize it
in your head, it looks like a set of stairs
going up or a set of stairs going down. And

(14:06):
when the market's going down, it's making a series of
lower lows and lower highs. And we saw a low
on April ninth, and then we saw one high that
occurred like two days later. Then we had the market
dropped back down on April twenty first, and then has

(14:26):
since gone above that. So right now the market.

Speaker 2 (14:29):
Has made a higher high currently above that big Trump
You know announcement day where we went up ten percent,
we got above that and have stayed above it now
for this entire week. And we have a higher low,
we have a higher lower, the actual low, and then
one higher low. So that is very encouraging for the

(14:50):
overall market. And then I'll just close with this. Ryan
Dietrich had a couple things out what you're looking at
on these big days. Is it concentrated in a couple
of names, or is at the broad market across all
different sectors rallying. If you look at a market that
has had ninety percent of stocks up, ninety percent of

(15:11):
stocks up, and ninety percent of volume in stocks up
in a ten day period, going back to nineteen eighty
this signal has only happened four times. Five times, excuse me,
five times. It happened in nineteen nineteen eighty five, it
happened at the bottom market in two thousand and nine,
it happened at the bottom of the market in twenty eleven,

(15:33):
it happened during COVID, and it happened recently in a
ten day period, two different days with ninety percent up.
If you look at that at those different periods of time,
it's nineteen eighty six, two thousand and nine, twenty eleven,
and COVID twenty twenty four different times it happened. Six
months later, the average return is twenty four point seven.

(15:55):
Twelve months later, the average return is thirty one point twos.
We're looking at we're saying, are we in for a
little more pain? Or would history tell you that that
probably the pain is already behind us? And this is
what amazes me when you turn on the TV, that
until we are twenty five percent off of the bottom,
you'll have everyone saying, I don't know, I don't know
just yet. I think it's gonna get worse. I think

(16:16):
it's gonna get worse. Even when all signs point to go,
you won't have anybody come out and I guess stick
their neck out. They're not following history the way that
we're always talking about.

Speaker 1 (16:29):
It's got to be able to tell you something. We
also just recently had an eight day winning streak. Since
nineteen fifty there's been approximately ten eight day winning streaks
as all, and in this eight day winning streak, the
S and P five hundred is up nine point two percent.
If we look at the previous eight day winning streaks.
There was only one of them that was negative twelve

(16:49):
months later, and that was November of nineteen eighty. So
out of the previous ten eight day winning streaks, only
one of them was negative twelve months later, with the
average return being thirteen point four percent. Going back to
nineteen the nineteen eighty one that did not work. So
starting with nineteen eighty since then, when we've had eight
day winning streaks, every single time, the market was hire

(17:12):
twelve months later. So you have the big volume, big
push higher, all stocks rallying. We have an eight day
winning streak, so we're starting to tick off multiple boxes,
Brad that we can feel a little bit better that
we were very close to a bottom on April ninth.
Let's say our first pause, we come back.

Speaker 2 (17:30):
I want to talk about headlines versus the actual news,
and what was speculative news versus the actual news when
it comes in or this is one example of that.
But let's talk about a few other things that we've
been hearing and seeing over the last couple of weeks.
You're listening to advisors at Kirston Wealth Management Group. We'll
be right back and welcome back. You're listening to the
advisors of Kristen Wealth Management Group, Rad and Kevin here

(17:51):
this morning. Kevin, I'm always complaining about headlines that are
based in zero reality, and I saw one this week. Actually,
I saw I want a week ago that I pulled
out because I knew that that all the auto earnings
were coming up and I was really curious on what
their guidance was going to be. So the headline is
General Motors is facing higher costs and lower demand that

(18:11):
may eat into US auto giants profits under this is
all one headline. By the way, under the tariff program
imposed by Donald Trump go into the story, and all
of that is based on what a UBS analyst thinks.
So our estimates are that are reduced to consider the

(18:32):
impact of tariffs and the cost structor as well as
the impact of auto demand. Says analyst Joseph Spack.

Speaker 1 (18:41):
You know what aid into auto profits in the last
five years more than any tariff would ever do. Loading
up on electric vehicles that no one wants.

Speaker 2 (18:50):
Yeah, and then you got to subsidize the whole department
with electric vehicles that are sitting there, or subsidize lower
prices of electric vehicles and go up in prices.

Speaker 1 (18:59):
The other still aren't there the hybrids. The hybrids are
still selling great, but the electric vehicles are sitting on
these lots and just languishing.

Speaker 2 (19:08):
Rad So they estimated and by the way, this is
not GM estimating it, this is not Ford estimating it.
The estimate was by this and other analysts that the
prices of cars are gonna go by forty three hundred,
and that was that was all autos, but gms, we're
gonna go up sixty two fifty, and so I'm gonna

(19:28):
I'm done with that. But all of this was just
what the analysts think. Okay, this is two weeks ago.
GM's earnings come out and and they're not increasing at all.
They're not gonna increase price for the entire year. In
the last week, Trump's done a little bit with the
auto tariffs and doing like A is, doing a three
year rebate basically on the tariff, where it decreases a

(19:51):
little bit every year, and by the end of the
third year you're gonna have the full amount of what
currently is the tariff, but even that'll get negotiated. And
the more that you make here, the more that you're
gonna get rebated. And you could have but if everything
is made here, you get nothing. Obviously, they're also doing
something where they're not gonna stack tariff on top of tariff.
So if you had a ten percent tariff for steel,

(20:13):
you get a credit for that off of other imported
parts or for the car if it's assembled here, and
so in a lot of cases there's no different tariff
than you had before, or very little of it. And
if you're increasing the amount of production, which is what
GM announced they're gonna make, they're going to try to
make all of their trucks here and they're increasing their
fort Wayne truck assembly plant production so that by the

(20:39):
end of this year they're going to be making more
and more here and probably making more and more overseas
so that they don't have to ship overseas and worry
about import tariffs over there. But the point being, we're
doing all of this based on what they think the
price is going to be. And it wasn't a little increased,
right it's five to six thousand of ina, And when

(21:01):
it actually comes out, GM says we're not increasing at all,
it's gonna have a negligible effect. And one of their
statements was if everything stayed exactly the same for the
whole year. We might be five billion of write down,
but it's not gonna be Their estimate is right now,
just based on what Trump did with a little bit
of the tariff relief and the production that they're moving,
it might be one billion of a tariff hit, but

(21:23):
they're gonna do other things throughout the year, so it
won't even be that. So why increase prices? Why reduce
your demand? So what's gonna end up happening is probably
gonna be just like cash for clunkers. We have a
month or two of increase and that's everything.

Speaker 3 (21:36):
This month.

Speaker 2 (21:38):
Record sales this month because everybody's worried, so consumers are
going out and buying cars. What you're gonna end up
with is probably thirteen months worth of sales because the
month of March is gonna end up being the same
as two months, and the other months will all be
the same. Maybe April be a little down because you
front end loaded a little bit, but you're probably gonna
have a record year for autos because ahead of the tariffs,

(21:59):
we had this booming March month and the rest of
the year is going to be exactly the same, and
prices aren't gonna go up at all, and if they do,
it's just the normal increase for inflation and everything else.
But enough of this speculating what you think is gonna happen.
And this is what I fault the FED for. We
think this, well you thought this with autos. That's part
of inflation inflationary figures. So there's all this speculation and

(22:22):
it hasn't come yet in the inflationary figures. And guess what,
based on what Ford's saying and GM saying, it's not
gonna come. They're not gonna increase prices, and therefore all
your speculation of what would happen is just that speculation,
not based in actual fact. And the same thing with
earnings this quarter. We think it's gonna go down, and
when it doesn't, they say, well it'll go down next month.

Speaker 1 (22:43):
Well, and the tech companies that came in, which over
the years they become a larger and larger percentage of
the earnings in the S and P. Five hundred, not
a recommendation to buy or sell any of these names
GM that you mentioned, Facebook, Microsoft, all blew the numbers
out and also their earnings kind of you look at
two sides of their earnings. These companies make a lot

(23:05):
of money, but they also spend a lot of money,
so they're a big input into the into other companies.
And they both reiterated how much they were going to
spend zero change, zero change based on what they had
estimated last quarter. And that was the big fear is
all these tech companies are going to pull back and
not invested as much. Didn't happen. So not only did

(23:29):
these these tech firms that reported here recently post grade numbers,
but they plan to continue to invest billions and billions
of dollars.

Speaker 3 (23:39):
And that's what.

Speaker 2 (23:39):
Spills over into other companies and other tech companies. And
that's that's the biggest thing. With the autos. We are
so shortsighted with the jobs and the the production in general.
That's here versus overseas. Forward in their earnings call, said
that if everyone is doing what they're doing with on

(24:00):
shoring and what they're planning on doing, the estimate that
they would give is the US would have four million
more cars made in the US this year. And so
based on what all companies are doing to quickly increase
the production at plants that are not full capacity, that's
all we're doing. You're not building a new plant, You're
just taking a plant that is at half capacity at

(24:23):
increasing it and rehiring people, or hiring people or taking
your full your workforce and making them as productive as
they can be and want to be.

Speaker 1 (24:33):
I mean, all Trump is really asking for is for
our country to do similar things to what other countries
do to us. And what I mean by that is,
you want to sell us cars in China or anywhere
in Europe, they require you to manufacture those cars in
that country and hire those workers. I don't even care

(24:56):
if China wants to sell a car over here, if
they build a plan and hire American workers.

Speaker 3 (25:01):
How would we care? Why do we care? Right?

Speaker 1 (25:04):
So, whatever it is, all he's asking for is the
same treat.

Speaker 2 (25:10):
We've let those other countries do that same thing, and
we haven't copied that model, and it is why are
we the just the charity for the world? And so
now it's just leveling the playing field with all of
those things. How is and what's it going to be
bad for shipping companies?

Speaker 3 (25:27):
Okay? How is that the.

Speaker 2 (25:28):
Most efficient way to move product around the world or
for anyone that wants to be more green? How is
it the most. You believe in climate change, and yet
we want to fill these barges with cars and ship
them around the world.

Speaker 3 (25:43):
That can't be the best way to use our resources.

Speaker 1 (25:46):
Think our next pause. You're listening to Money Sense Kevin
and Brad Kirsten. We'll be right back. Welcome back to
the show. You're listening to the advisors of Kirsten Wealth
Management Group, Kevin Kirsten and Brad Kirsten. As a reminder,
we are professional financial advisors and our offices are in Perrysburg.
Give us a call throughout the week if you want
to set up a consultation to review your financial plan.
Whether you're just getting started, well on your way to retirement,

(26:08):
or already in retirement, we'd be happy to sit down
and review things with you four one nine eight seven
two zero zero sixty seven or check us out online
at Kirstenwealth dot com. We have a lot of good
information on our website, including our weekly market commentary. This
week we focus on China and tariffs and the back
and forth. The headline being softer tone on China is encouraging,

(26:30):
but caution still advised ahead on tariffs and the negotiations
with China, but I want to shift gears a little
bit here brad to little behavioral finance talk psychology of
investing type talk. I saw this article in the Wall
Street Journal. The mistake you're making in today's stock market
without even knowing it. The memories you have of what
the market has done before can deceive you in many

(26:52):
dangerous ways. With the turmoil over tariffs jolting the market's
day after day, the most significant question for investors is
what's in your memory bank. If you're young, you know
stocks and bitcoin can lose money at lightning speed if
you look at March twenty twenty or twenty two, but
your experience also tells you they will bounce back even
faster and go on to new highs. That's that's your memory.

Speaker 3 (27:13):
Okay.

Speaker 1 (27:14):
If you're a middle age a bond investor, you've lived
through almost nothing but falling interest rates, okay, and Bonifolt
returns from nineteen eighty one through early twenty twenty two
would be sort.

Speaker 3 (27:26):
Of the polar opposite of that.

Speaker 2 (27:28):
Yeah, if you started investing five years ago, you think
bonds are terrible.

Speaker 3 (27:31):
Yeah.

Speaker 2 (27:31):
If you invested thirty five years ago, you think, yeah,
we had a little blip, but it. They've been consistent
my whole life.

Speaker 1 (27:37):
I can't I can't tell you how many people I've
talked to hearken back to the days of eight nine
percent treasury rates, and that's the memory. And so they
have a really good experience that they had. And so
they have good memories of owning treasuries because not only
did they get the high interest, but they even got
some price appreciation with falling rates. Peter Bernstein, a nancial historian.

(28:00):
Investment strategists like to say investors have memory banks. The
market returns collectively earned by people of similar age experience
sharpen shapes expectations. The problem is, your memory bank can
deceive you in dangerous ways to think. And it's a
little bit of a recency bias. It's a little bit
of a confirmation bias. Sometimes if you're out there searching

(28:22):
for information to confirm that recency bias. Your experience of
the past is a reasonable guide to the future. Only
a future. The future turns out to resemble the portion
of the past that you lived through. Okay, and it
often does it. Given markets wild oscillations amid the uncertainty
over President Trump's trade policy, Let's look at a few

(28:42):
interesting investing beliefs that your memory bank might hold growth
always crushes value. I was talking about this article when
you and I were talking about getting ready for this show,
and I mentioned when I first started working in the
year two thousand, I had heard about the boom of
the dot com area, but didn't experience who's coming out

(29:03):
of college, hadn't invested any money, And from the first
day I invested for the next seven years from two
thousand to two thousand and seven, the only thing that
you wanted to own was value and international and small value.
I mentioned to you, I feel that bias a little
bit in my own brain because that's my first experience

(29:25):
with investing. Well, recent investors might have that similar experience,
but on the other side of it, because value and
international have underperformed up until this year, except for small
little blips of three to six months, they think the
only thing that works when the market's going up is growth,
and international is a dead asset, and value will always underperform.

Speaker 3 (29:48):
So one.

Speaker 1 (29:51):
Value investor, Warren Buffett Berkshire, who owns Berkshire Hathaway or
doesn't own Berkshire Hathway, but he started runs Berkshire Hathaway.
I don't even know if still one hundred percent runs it,
but either way, that's the way people know it.

Speaker 3 (30:03):
Okay.

Speaker 1 (30:04):
He's been the standard bearer for bargain hunting and value
investing for the better part of seventy years. Berkshire Hathaway
is up seventeen point three percent this year, while the
Nasdaq at the time of this article is down ten. Okay,
No matter how much the chaos over trade policy upsets
the global economy, value still does matter. At some point,
value stocks should be less vulnerable to market turmoil than

(30:25):
gross stocks. History shows us that during times of turbulence
in down years, typically you're gonna get that value outperformance.
Most of the past century, cheaper stocks outperform glamorous gross stocks,
but that hasn't happened recently, and so for recent investors,
the memory bank might suggest that growth just always beats value,
and that's not always the case. US is the only

(30:48):
place to invest. We've seen that shift a little bit
this year. For most of the past two decades, international
markets ate up, the US ate the US dust excuse
me going off this article as the dollar strength in
an American technology company's boom that was then this is
now in twenty twenty five, the All World Index, including

(31:09):
the United States is beating the s and P five
hundred by fourteen percentage points. If you're a younger investor,
your memory bank can't tell you that national markets excelled
for much of the past half century. From seventy one
nineteen seventy one through nineteen ninety, the IFA International Developed
International Developed Markets outperformed the SMP by four point two

(31:33):
percent annually over how long a period seventy one through
nineteen ninety, four percent per year better than the SMP
five hundred.

Speaker 2 (31:43):
And even in the period of time from the eighties
and early nineties when the SMP five hundred was doing
fine it had started off one of the longest bowl
markets we have ever seen, Emerging markets doubled that performance
during the first fifteen years of that bowl run.

Speaker 1 (31:59):
Even after the recent run up, international stocks are still
relatively cheap. I mentioned earlier in the show that their
overall levels are the same place they were eighteen years ago.
The international markets are fifteen times earnings over the past
over the previous twelve months, it's backward looking, while US
stocks are twenty four times those rear view mirror earnings

(32:20):
if you think the dollar is going to continue to weaken,
which many people, that's their premise, that's their premise for
owning goal or bitcoin or all these other things. But
you forget We'll wait a minute. Everything every currency is
relative to another currency, so any earnings outside the United
States would become more valuable. That's exactly what happened in
that nineteen seventy one through nineteen ninety period.

Speaker 2 (32:43):
You had currencies moving around and the investments moving along
with it. And yeah, there are people that have that
investment thesis but aren't investing accordingly. Even people who just
think we're in for a recession or we're in for
a downturn. Well, value has outperformed growth in every downturn
that we've had for the last twenty years. So adjustments

(33:07):
are necessary if that's what you think. But most people
are just all in or all out or don't make
an adjustment at all. And I'm not sure if that's
going to change where value has these short cycles, because
the downturns have had short cycles. But at the very least,
an adjustment in your portfolio is warranted if that's what

(33:28):
you think is going to happen.

Speaker 1 (33:30):
Last paragraph of this article. And this is where I
caution people, because this investment has been good recently, and
this goes to your memory bank and your recency bias.
Gold will always glitter. If you've recently invested in gold,
you feel like it shines during times of crisis, your
memory bank might not include gold's historically awful performance. After

(33:54):
rapid peaks in price, gold certainly does not do very well.
Gold didn't surp pay it's January nineteen eighty closing price
until twenty eight years later eight hundred and thirty four
dollars an ounce. It took till two thousand and eight
before it got above eight hundred and thirty four dollars.

Speaker 3 (34:13):
And then ounce the rally that we've.

Speaker 2 (34:15):
Just seen just eclipsed that two thousand and eight price,
or actually I think it went all the way till
twenty ten. And what we just eclipsed was the twenty
ten It was.

Speaker 1 (34:23):
August of eleven. August of eleven, it got to nineteen
hundred an ounce, and we were just at nineteen hundred ounce.
Not that long, but think about what the headline is.
During those periods of time, gold at all time high,
and if you look into it. What it's really saying
is gold finally got above its twenty eleven price. The

(34:43):
headline should say, if you had invested any time around
that period, you haven't made money until twenty twenty five.
Now keep this in mind. Too many people say, well, yeah,
but from eight hundred and thirty four dollars an ounce
to nineteen eighty to thirty three hundred today doesn't sound
too you bad, Well, if you adjust for inflation, it
still hasn't exceeded at that price. If you adjust for inflation.

(35:07):
Now compare that to something like the Dow Jones. I'd
rather use the SMP. But I know off the top
of my head where the Dow Jones was in nineteen eighty,
and that was at one thousand. Today it's over forty thousand.
So not only is it forty times higher, but you
also got a dividend, which gold doesn't pay. So you
got forty times your price plus a dividend that it's

(35:31):
not even close.

Speaker 3 (35:31):
There's no comparison. There's no compares even in the shorter term.
There's no care.

Speaker 1 (35:34):
So think about the way someone who recently bought gold feels.
They pat themselves on the back, and they feel wonderful
about it.

Speaker 3 (35:39):
Never sell it.

Speaker 2 (35:40):
You know, anybody who gets off to a good start
in any investment thinks that this is a this is
a never sell ass.

Speaker 1 (35:45):
This wild never sell. And then conversely, think about the
way the investor from nineteen eighty felt in gold. They
probably didn't live long enough to see it do well
right right, because it was twenty eight years later that
it finally acclied that price, and if you adjust for inflation,
it still hasn't eclipsed that price. So you have to
be careful with these biases. You have to remember when

(36:08):
did I start investing, What big events happen in my
investing life that imprinted on me that left scar tissue,
Or on the other side of it, what big events
on the upside did I feel like, oh, that really worked?
And you keep trying to go back to the well.

Speaker 2 (36:25):
I even see this with what people are telling me
about their advisor when they're changing advisors to us, where
the advisor is just a one trick pony. Everybody gets
the same risk level, and it's all because of the
bias of that advisor and their age. Whether it's a
young or old advisor, they're either more aggressive or less aggressive,

(36:45):
lean one way in the market or another, all based
on what they think, and it's their experience too. Financial
advisors can be flawed as well, and if they're a
one trick pony, the same thing for every investor, then
we're letting those biases filter into the I don't care
if somebody wants to be all stock or no stock,
if they want to be more risky than the average

(37:08):
person in their age or way less risky. It's the
portfolio should dictate in their risk tolerance. And you know,
sometimes we'll educate a little bit on risk tolerance based
on time horizon and try to skew it a little
bit that way. But we definitely have people that have
a long time horizon and don't want any risk, or
have a shorter time horizon and still what a lot

(37:30):
of risk. It shouldn't matter to the advisor what each
client wants, and when you started in the business should
not matter either. You have to be aware of it,
and you can't let those big events affect you forever,
whether it's the peak and gold in the nineteen eighties
or the peak and interest rates in the nineteen eighties,
and then you fell in love with treasuries, or the

(37:51):
dot com bubble bursting, and then we're never going to
go back to that, never going to go back to tech,
or the run up of international stocks in Chinese stifle
in two thousand and seven. Then you fall in love
with that, and then you fall out of love with
that particular investment and you never go back, and then
you never go back to it, and now people have
fallen back in love with growth and they hate value.
And then you see a value name like Berkshire Hathaway

(38:14):
up as much as it is this year. So you
need to maintain that balance. You need to understand that
you don't know what you don't know, and you can't
let the headlines in the news. You can't let your
recency bias on what has worked recently affect the way
you put together your overall plan.

Speaker 1 (38:34):
Let's take our next pause. Brad and you're listening to
Money Sense Kevin and Brad Kirsten.

Speaker 3 (38:37):
We'll be right back.

Speaker 1 (38:39):
Welcome back to the show. You're listening to the visor
Kristen Wealth Manager Group. Kevin and Brad here with you
this morning. Got it about ten minutes left here in
the show. Brad and always talking about social security, what
to do when to file. We had this big change
that happened at the end of the year with folks
in Ohio specifically in a couple of other states in
what state's totally in state's total eliminating the windfall elimination provision.

(39:03):
But it is a huge topic of discussion when you're
near retirement or already in retirement, when to take And
I just like with investing, I think a lot of
times emotions drive this decision as opposed to dollars and
cents and.

Speaker 2 (39:17):
And speculation versus the facts. And I think that there's
a lot of people that get caught up in the
emotion and the speculation of what's going to happen with
Social Security and make their decision based on what they
think is going to happen instead of what's actually right
in front of them or what history has told you
in the past. So we're seeing an uptick in people
filing for Social Security this year, and people filing early. Yeah,

(39:41):
and people are.

Speaker 1 (39:41):
Speculating that it's you know, some of the changes and
the claims of fraud have heightened anxieties, leading to fear
based financial decisions. We've seen an increase in website traffic,
field office visits and calls reflect americans unease about Social Security.
Soci Security administration has been shedding staff and changing requirements
for c aiming benefits over the phone. Trump has been

(40:02):
pushing to cut government spending, though he has vowed to
not reduce benefits. In fact, he said that he's going
to go even further and possibly make all soci Security
benefits tax free.

Speaker 2 (40:10):
I think will they're end up on that is, if
you're a lower income, say under one hundred and fifty thousand,
those will be the people that'll have Social Security for free.
And so all the more reason that maybe into retirement
you have some non retirement sources at rowthiray so that
your Social Security could be free.

Speaker 1 (40:25):
There's been an eighteen percent increase in pending Social Security
claims for retirement compared to a year ago, so fear
mongering has driven people to claim benefits earlier. Many effects
of the Trump administrations changes to federal agencies aren't yet apparent,
but with Social Security, they are already changing households financial decisions.
It's leading people to make decisions based on fear. So

(40:47):
they'll give an example of a sixty five year old
who decided to file just because she was afraid and
really didn't wasn't planning on filing until age sixty seven
and just file for the reduced benefit because of the unknown,
And that's really not a great way to go about
your financial planning.

Speaker 2 (41:03):
Yeah, there's all this talk of Social Security fraud, but
that doesn't mean that if you take it early, are
you going to get a few more years out? Yeah,
but it doesn't mean that you at sixty five versus
somebody that waited till sixty seven are going to have
any kind of different change even if they were going
to make an adjustment. The only time in our lifetimes
they've made any adjustment was in the early eighties, and
the oldest person affected was forty five years old. They

(41:25):
had twenty years and two months to prepare for it.

Speaker 1 (41:29):
We recommend people wait longer than most, Brad, and in fact,
a lot of financial advisors are on the same side
of this as we are. You get a seventy six
percent increase from age sixty two to age seventy on
your benefits. The person who postpones benefits until seventy instead
of sixty two would come out ahead if they lived
to at least eighty, So a White House spokespersons cited

(41:50):
other causes for the increase in claims in March, including
aging baby boomers claiming benefits and a new law that
raises benefits for some government retirees, which we mentioned here.
But calls to the agency are definitely up and so.
But looking at some of these examples that they put
in the Wall Street Journal in terms of people who
had filed earlier, it just, I don't know, it doesn't

(42:12):
make a whole lot of sense to me. Here's a
sixty four year old who planned to delay till sixty
seven when he's eligible for his full benefits. He retired
five years ago from teaching, filed in January, but due
to concerns about benefit cuts and chaos. That's they're just
interviewing people and saying.

Speaker 2 (42:28):
Why did you do it? Why did you go early
of benefits? Generalized chaos? Yeah, okay. His wife began her
Social Security last year. The couple printed out their earnings records.
Listen to this.

Speaker 1 (42:39):
They printed out all their earnings records and put them
in a file folder because they were worried that their
data would disappear.

Speaker 3 (42:46):
Again, what are we talking about?

Speaker 2 (42:48):
This is this is the media's fault that that is
somebody's fear and you're worried about your social Security records
going away, and then they won't give it to you.

Speaker 1 (42:56):
Yep, about a quarter of people filed for benefit. It's
when they turn the minimum age aged sixty two in
twenty twenty three. So you know, to me, if you
put a plan in place and you said, no, I
like these numbers, I'm healthy, I'm married, that's a big,
big reason. If you were single, it maybe goes to
taking it a little bit earlier, and then all of

(43:18):
a sudden, because you don't like who's in office, and
that makes you worried, we're going to scrap the whole
thing and just take it, or we're going to scrap
the whole plan because of that.

Speaker 2 (43:27):
There's a couple reasons to take it early. Your health
and family history would be one for sure. If somebody
were to say, I'm going to take it early because
the market just had a downturn and I want I
don't want to take any money out of my investments, Okay,
I could buy that if if you told me that
you're single and you have cancer and you want to

(43:48):
make sure you get your money out, Okay, I could
buy that if you tell me the only way I
can retire at sixty two is to take those security
and if I do that, I have enough to retire,
So I don't want to wait.

Speaker 3 (44:01):
I could buy that.

Speaker 2 (44:02):
But all of this stuff about what you think is
going to happen, it's based not in reality at all,
or that you're worried that Trump's going to take it
away from you, which is not based in reality at all.
All of that is garbage. And I think there are
a lot of financial advisors. You mentioned the financial advisors
that for the most part, recommend people take it early.
I think they're doing it so that you don't take

(44:23):
you don't take as big a withdrawal out of the
investment accounts that they're managing, so they can manage more money.
I think there's a conflict of interest here. I'd rather
have somebody wait because the math just works just depending
on what their percentage of the assets coming out are,
and then if the market has a downturn, we can
flip the switch.

Speaker 1 (44:43):
One percent of the people I talk to Brad who
waited till seventy are very happy that they did.

Speaker 2 (44:48):
I've never talked to anybody who's mad that they waited,
because the only people that would be mad that they
waited would be they'd be dead. So I don't think
we have to worry about making your dead self happy.
If you wait, you'll always be happy because your social
security be larger.

Speaker 3 (45:04):
And there's one more point here.

Speaker 1 (45:06):
Well, the compounding effect of the interests, the inflation rider.

Speaker 3 (45:10):
If you're gonna.

Speaker 2 (45:11):
Get a double or a double and a half over
your lifetime, depending on how long you live, would you
rather have it be on two thousand dollars or four
thousand dollars? And so if you wait and.

Speaker 1 (45:22):
Your social security based on based on traditional CPI once
every twenty five years, the cost of living doubles, which
means was every twenty five years, your social security would double.
So if you wait till seventy and it goes from
set from four thousand to eight thousand, versus taking it
early by the time you're in your nineties, yeah, versus
taking it early and it goes from two to four.

Speaker 3 (45:43):
Yeah.

Speaker 2 (45:43):
So here you are in your nineties and it's eight
thousand a month or it's four thousand a month. Think
about how much more you're getting out for every incremental
dollar that increases by the same percentage for you because
you waited versus the person that took it early.

Speaker 3 (45:58):
Well, I would.

Speaker 1 (45:59):
I often it like an investment, and you don't call
it social security. Hey, mister and missus smith, I have
this investment for you from sixty two to seventy. You
have a guaranteed income, and that guaranteed income is guaranteed
to increase by over eight percent a year plus inflation.

Speaker 3 (46:21):
Will sign me up. What's that called? It's called social security?

Speaker 1 (46:24):
Oh okay, So if you present it not like it's
social security, yeah, but as an investment, everyone would sign
up for that. Now, you don't get the CPI inflation
increase if you're under sixty two, but once you're sixty
two you get plus plus.

Speaker 2 (46:41):
So the math usually works out for every year you
wait or every month you wait, it's about an eleven
and a half percent break even. So you have to
live eleven and a half years for it to been
the right decision. If you have two living spouses, just
one of you has to live that long to make
the math work. So it's okay in my opinion that
the small of those two social securities takes it early

(47:02):
if you want, and the larger one waits because we
only need one of those spouses to live that eleven
and a half years for that to have been to
the right decision that you're gonna get more out than
the because you waited. If if you don't have two
living spouses, then that that person.

Speaker 3 (47:16):
Needs to live.

Speaker 2 (47:17):
If you both wait, you both need to live that
eleven and a half years to make that be the
right decision. And that's a little harder math to figure out.
So I would say, for the most part, without talking
to somebody about their health and family history or even
their financial situation, I'd be more inclined to say, as
a blanket statement, two living spouses, I'm gonna have one
taket at full retirement age or early and one wait

(47:40):
as long as they can or till seventy.

Speaker 1 (47:42):
Okay, Well, thanks for listening everyone, we'll talk to you
next week.

Speaker 2 (47:50):
You've been listening to Money since brought to you each
week by Kirsten Wealth Management Group.

Speaker 3 (47:54):
To contact Dennis S.

Speaker 2 (47:55):
Brad or Kevin professionally, call four one nine eight seven
to two zero zero seven or eight hundred eight seven
five seventeen eighty six. Their email address is Kirstenwealth at LPL.
Dot com and their website is kirstenwealth dot com. Opinions
voiced in this show are for general information only and
are not intended to provide specific advice or recommendations for

(48:16):
any individual.

Speaker 3 (48:17):
To determine which investments may.

Speaker 2 (48:19):
Be appropriate for you, consult with your financial advisor prior
to investing. Securities are offered through LPL Financial member FINRA
SIPC