Episode Transcript
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Speaker 1 (00:00):
Hello, and welcome the Money Centra're listening to the advisors
of Kirsten Wealth Manager Group, Kevin Kirsten and Brad Kurston.
Happy to be with you today as we continue to
see the market rally off those lows over eighteen percent
from the April eighth lows. You know, Brad, it's interesting
to see a little bit of skepticism, which is good.
You know, you certainly like to see some skepticism as
(00:22):
the market rallies. That's that's an encouraging sign that shows
you there's still more buyers out there. But at the
same time, you know, you talk about those skeptics, and
you were saying that a lot of these things have
been put on the back burner with tariffs. You had
the meeting with the Treasury Secretary, met with some Chinese
(00:42):
delegates about tariffs. But I'll say, and you know, you're
probably I think you're following a little bit closer than
even I am. But I think to the lay person
out there, it's a little bit of all the whip
saw back and forth, and if you're really looking at
the tear negotiations and the tariff deals, it's hard to
(01:03):
know where we are compared with where we start we are. Yeah,
that is very true. But I do think there's going
to be a couple of things happen. We're going to
get nine to ten deals, and Trump's going to have
all this fanfare of what the deal is, and some
will have specific some won't. But we're going to be
six months down the road and nobody's going to care anymore.
(01:24):
We don't need two hundred deals to be announced before
everyone is going to get exhausted with me. I was
thinking that as I was driving into work this morning.
I was thinking about that too. It's just kind of interesting,
and some of it might be planned, but it's interesting
how the narrative in the last month it was just
not stop tariff, and now it's a little bit more.
(01:46):
I mean, the tariff is still on, I think, a
little bit more on the back burner. Well, And I
think maybe that's what Trump thought from the beginning. I
think when all the market volatility happened, I think he
was maybe in his mind going back to two thousand
and eighteen seventeen eighteen, where everybody kind of just got
exhausted with the news of it, and he didn't think
I mean, he probably miscalculated a little bit how much
(02:08):
the market would react. But now here we are six
eight weeks later, uh, six weeks later from the liberation.
I hate that. I hate. By the way, we're not
calling it liberation on April second. We'll call it April second,
whatever it was. I don't like that Trump call it liberation.
Don't like anybody else called it liberation day. I think
part of the reason that the media is saying that's it,
(02:30):
that's all you got when we when we have some
of these deals, is because Trump is building it up
like it's the greatest deal of all time. I'm not
going to do a Trump voice, but if there's anything
that he can boast about, it is what just happened
in the last three days in the Middle East. I mean,
these these business deals they're making are the largest of
their kind. Even if we had only done it with
(02:52):
one country and they stacked on three countries that any
one of them would have been the largest deals of
their kind. This they can talk talk about as huge. Well,
But the tariffs. The thing is, you have countries that
have had tariffs since they started as a country with US,
and now it's going away. So for the media to say, oh,
(03:12):
that's it. You know, they had twenty percent tariffs and
now they're zero. Big deal. It is a big deal
because could you have gotten it if Trump just picked
up the phone and said take the tariffs to zero
or we're gonna we're gonna do something. Maybe, but he
got everyone's attention, and now they're all coming begging to
do zero. And what we're getting is we're ten your zero.
(03:33):
Now we're more competitive for companies to stay here or
for foreign companies to come here and do all of
their business here so they don't have any tariff, and
so it does bring more jobs here. So to downplay
what is currently happening and going to happen because most
of these countries are gonna have zero tariffs and we're
gonna have ten is totally missing what this is going
(03:55):
to look like five years down the road. And it's
the same thing with these deals they're making in the
Middle East. These these are these are not just deals
where they're promising to buy ten ten Boeing jets. This
is ten year, one point two and one point four
trillion dollar deals with UAE and with Cutter and it
is it's hard to even add up all of what
(04:17):
happened in Saudi Arabia, but it's basically a promise for
another trillion. It's three trillion dollars that was not done
and will just be a boost to not just one
or two companies, but probably twenty companies over the course
of the next ten years. It's it's directly to their
bottom line. You have to kind of rewrite everything with
(04:37):
a company like Boeing with what their earnings are going
to be now going for well, you reh have to
be right. Also the time he goes and has a
meeting with the country, they come out and they sell
another dozen Boeing planes. Yeah, it's not a recommendation to
buy or sell Boeing, but we did make an adjustment
to portfolios. Trumps Trump's out there on on Wednesday because
if you like industrials and that's aerospace and defence, is
(05:02):
you really have to like just specifically the aerospace and
defense because of these deals, it rewrites everything with their
earnings and almost immediately, so there was momentum, there was
the best it was the best sub sector starting Wednesday
for the rest of this week and rightfully so you
have every one of these countries. It's a promise to
(05:24):
have defense spending. Now think about this, Are we cutting
defense spending or just flatlining it? Maybe, But you have
all of these countries tripling and quadrupling their defense spending,
and where are they buying it from? Their promising to
buy it from ten US companies or really it's big,
the big two or three companies plus all of these
other subcontractors. So it's it's forty billion here, one hundred
(05:48):
billion there with all these defense contractors, and the same
thing with all the aerospace. It's it's across the board.
And then tech is the other big winner. So cutter
is is two hundred and forty five billion of tech
spend one point two trillion over a ten year period
total a billion spend with kind of a tiny offshoot
(06:13):
of Honeywell that for quantum computing, you have a couple
of privately held companies, but they were spinoffs of companies
like Raytheon was another big beneficiary of a billion dollar
deal for this year for drone defense spending Saudi Arabia
one hundred and forty five separate deals with basically one
hundred and forty five different companies, most of it Tech
(06:37):
and Starlink actually had a big deal starlucks privately. Let
me be a little bit of a skeptic on all
of this though, just like what China does with a
lot of the climate change things, where they show up
and they say, oh, yeah, we'll do that. Yeah, especially
when it's over a ten year period. Right, Yeah, where's
the where's the ink on the deal? Not even the
I mean they actually did sign deals. Yeah, but where
(06:59):
is the if they don't do this? What happened right? Right? Well,
it's with this and you get the same thing with energy.
It's it's the agreement that we are partners. You're going
to buy from US if you can, or our companies
are going to partner with your companies so that we
come there that one of the things with I think
(07:20):
it was UAE was infrastructure spending and you're gonna partner
with US companies to do it, and then it's a
US company that's benefiting from all that. So those are
a little bit more of a solid deal where you
know it's going to continue to happen, and that all
of that region, all three of those those countries want
to be thought of the same as the US technology
technologically advanced, uh modern, I mean you look at I
(07:43):
don't know if they're just putting on a show, but
every every street looked immaculate, Every building looked enormous, every
every it looked like in indoor stadiums when they were
doing some of these announcements and and having some of
these rallies. It's pretty impressive over there. Yeah, I mean
North Korea does that too. But the skepticism for me
(08:09):
would be, yeah, I mean they're putting on a great show,
but is this really what it's like? And and you're right,
I mean the skylines would be hard to fake. I
mean North Korea's could put up a green screen or
a Hollywood like street. It's all great, and if the
actual investments happen, it obviously will be a boost to
(08:30):
the US economy because that's where the money's going, right
into two US corporations. I mean, Boeing is an interesting
one to me because it's like Trump is out there,
It's like he works for Boeing. I mean it's not
a recommendation to buy or sell Boeing, but it is
one of the better performers from a month ago. I
mean I know that they are pretty much our only
uh manufacturer. I mean, this is where it was kind
(08:51):
of interesting. But the E Aerospace is also a separately
traded company and they had they had big contracts as well,
so well, all they're to make the engines, Yeah, all
they're doing is the parts for the bone. So I
mean it's all well interconnected. Yeah so, but I mean
you look at it, and this is not a recommendation
to buy hersell but one hundred and thirty six dollars
a share to two oh six in a month. Yeah,
Trump's out there selling planes for them. I mean it
(09:13):
is a little bit with Boeing that they I don't
know if you want to say, too big to fail
or too important to fail with all the stuff that
came down with a lot of bad things that happened
with Boeing, whether it was the crashes or the door
blowing out and all the quality control that really wasn't
as good as it was in the eighties and nineties.
(09:34):
At the end, you can't lose them as a company.
They're too important. I mean there's only air Bus. I mean,
obviously you have the other smaller regional jets that are
made by what of those what's the name of those,
uh drawn a blank. Talking about the Bombardier, Yeah, Bombardier
(09:54):
publicly traded. Yeah, oh yeah, yeah, yeah, it is Bombardier.
And then there's there's another one. Okay, I forget what
the name is, but they're they're making a niche plane.
They're not making they're not making the big you know
planes that are going overseas and all those other things.
So so that that's to me, it's good. I mean,
I don't care if it's Boeing or any other company.
(10:15):
I think it's good overall. But I just found it
interesting that it really seemed like no matter where he
would be like, you're gonna do all this stuff and
you're gonna buy a dozen Boeing planes. It's like, but
there's other investments too. They're investing in tech and things
like that. You're still finding just because it's political for
most of the media that whether it's terrorists, and you're like, well,
I know they're agreeing to lower it to zero, but
(10:37):
that doesn't seem very good. You know, they were only
ten percent, now they're zero. Oh, they were twenty percent.
Now they're going to ten to match us, and that's
not that great. And here you know what you're hearing. Yeah,
I guess you made three trillion dollars worth of deal.
But you took a you took a gift of a
of a seven forty seven from Cutter. That's you shouldn't
have done that. Who cares. I don't think Trump should
(10:58):
have done it either. It just looks bad. You have
all this great news, why do you have to do
that or do it? At the end, I think it's
a little bit of trolling for Trump. He's literally he
gets a kick out of making the left it all
worked up. But then, I mean, that's all the news.
The thing is so dumb about the plane is this
is not a plane that's coming over, and Trump's just
(11:20):
gonna hop right on it, right, good lord. I mean
they would have to. I think, honestly, the reason he
took the gift, I mean, you realize Boeing is like
ten years behind on the newest Air Force one. The
current Airs Force one is from the way over budget too. Yeah, yeah,
way over budget. I think he accepted the gift as
sort of a jab at Boeing to say, hurry yet going,
(11:43):
or I'm gonna fly this thing around? Correct? Yeah, correct?
And it is a seven forty seven. I mean he's
still a Boeing plane. But I mean there's there's all
kinds of like you think. The first thing that comes
to mind is like Trojan Horse right, totally right in
terms of the gift that came over. But I think
it's two things. He loves it when the left gets
all worked up. And the second thing is I think
(12:04):
it's a jab at Boeing to say hurry up and
finish Air Force one. So so I don't have to
do hard to say no to a four hundred million
dollar gift. And if you don't think when Trump's done
in three and a half years, He's he's gonna You
think he's gonna park that thing at the Presidential lie rate, No,
he's he'll park it there and then he'll fly it
all all around the country. It's gonna say Trump on it.
Oh yeah, it'll be the next it'll be the the
(12:25):
retired president Trump plane for sure. I mean it's not
really a plane you can do anything with. It's a
seven forty seven, which nobody uses, right, Okay, No, he's
not flying that into the West Palm Airport. He can't
sell it to anybody. He can't sell it to Delta
because they don't use it. Yeah, so there's it's is
it worth four hundred million? You know, any investment is
only worth what somebody would pay you for it. Yeah,
(12:46):
so who's paying Who would buy that? No one would
buy it, So it's really worth nothing. Yeah, because but
I mean the left got so worked up both it's
all they were talking about, you have. All that was
the day that they had the deals with Saudi Arabia,
which is the first of this of this trip, and
nobody was talking about what these deals were. They were
only talking about the plane. And I think everyone's missing it.
(13:08):
And when the market moves up four straight days after that,
and you have people coming on TV and say, there's
no reason for this, all this optimism, Well, the only
optimism is the fact that stock prices are up. Because
when you turn on the TV, no one's optimistic. You
have everyone convinced that the same narrative of constant recession
talk is still here, and it's not. Everything has changed
(13:30):
in the last month. Now, at some point, when the
market's sold off and the VIC spikes above fifty, you
just you know that it's going to be a good
buying opportunity. You don't know what the catalyst is. It's
pretty obvious what the catalyst was going to be trade
deals getting done. But on top of that, we had
that start, and then you we had the deal with UK,
(13:51):
and then you have these talks with China and you
have other countries saying we're going to zero, we just
have to vote on it. All of that we knew
was happening. The tax cuts you knew were going to happen.
So this one's a little more obvious. Where you knew
that the news was gonna get better. Maybe the market
just didn't anticipate that it was gonna get this good
this quick. And I think most people are missing it
and people need to just stop trying to figure it out.
(14:14):
Because the market did what it did. It went down,
it went up, you know, and we we didn't know.
We were telling people you don't sell in an environment
like this. It's hard to figure out what's going on,
why it's happening. But what we do know is you
don't panic and you don't sell in an environment either,
buy that dip a little bit, and anyone that wasn't
fully invested got that, and even some of our main
(14:35):
models got that adjustment. Once the market was down or
the very least if you're not dialing up risk, you
don't dial down risk when the when the market gives
you this kind of an opportunity. And so now to
try to figure out we don't understand what's happening. These
deals aren't that great, and the market matter has spoken
it doesn't matter. It does not matter, And that doesn't
mean it's gonna go straight up. But I tell you
(14:56):
what we're gonna get back from the break. We're we
talk about a couple of things. First of all, talk
a little bit more about the China potential deal, and
then also the market itself in some of the similarities
some other periods of time. You're listening to Money Sense,
Kevin and Brad. Kirsten will be right back and welcome back.
You're listening to the advisors of Kristen Wealth Management Group.
Brad and Kevin here with you. Kevin, we are a
(15:19):
little past the month point of the of the low
point of the market for this year, back on April eighth.
But I want to look back at maybe that sentiment
a little bit more. When we were in that period,
you heard something that was very similar. You and I
did a show where we had a segment where we
said there's all this unprecedented talk, and we were saying
(15:40):
how much precedent there is. There is history of the
market and history of these things. And I think what
people miss is five and ten percent sell offs can
happen for any reason. It could You sometimes can't even
pinpoint why you have a five percent sell off, and
ten percent could just be the market just getting exhausted.
And by the way, no matter what the sell off is,
you don't need know you don't need to know the why.
(16:01):
You don't need to know the why. But I think
this is the point. When you get a twenty percent
sell off, which is what we got, it has to
come with something that is a little bit. This time
it's different. It has to be otherwise the market would
have prepared for it, or everyone would have bought the
five or ten percent dip. So when you look at
Tariff's the first time around at the end of eighteen,
(16:22):
or COVID or this current sell off, the talk of
this time it's different and it's going to turn into
two thousand and eight is so silly because it has
to be different or we wouldn't be here. And the
doomsday talk and the certainty that everyone has when we're
at those bottoms. That it's going to continue to go
(16:43):
down is almost laughable when you look at it. In hindsight,
Wall Street Journal April twentieth. April twenty first had a
headline that said the Dow headed for it's worst April
since nineteen thirty two. That's the Great Depression, as investors
signaled no confidence. Sign Now we ended the month barely down,
and yet that was and the headline was worse since
(17:06):
the Great Depression. Number one inflow in the month of
April was the T bill ETF. So that's investors looking
at the news saying, this time it's different. I better
head for the hills. I saw another article here before
we get into the charts we want to look at,
which was pointing out a Howard Marx article from the
(17:26):
middle of last year that talked about the fallacy of certainty,
everyone thinking that they know for certain things that they
can't possibly know, and we saw it's so interesting thing
you point that out, because we've talked about this show
that one of our biggest pet peeves is people who
are certain investors who are certain about things that it's
(17:47):
impossible to be certain about exactly. And that's what Howard
Marx was pointing out that people are certain about politics
and how it affect the economy or the market. People
are certain about what's going to go on with companies
and what the reaction will be, or even things like
what Trump is doing overseas, and they're certain that they
that they think it's either good or certain that they
(18:07):
think it's bad. And what we saw in April was
the certainty around calling the recession and the certainty around
the market's reaction to that recession, and discounting the fact
that we know certain things. We do know certain things.
We know that when the vis gets over fifty, it
has never had a one year, ever had a negative
one year, so we know that for certain. But the
(18:29):
things that they're certain about, but even that that's I
would be a little bit hesitant on that because that
doesn't mean it it is certain. No, it doesn't mean
it is certain, but it just means what does it mean? Right?
It means it's probabilities. It's it's all probabilities. But people
are basing their investment decisions around things they can't possibly know. Okay,
(18:53):
I mean I look at anything, any of these metrics
that we look at when the market's going down, and
obviously it always improves your one, three, and five year
return numbers. But you can't be certain. But you can't
be certain. But what I would say is when I
look at something where over a one year period the
market averages averages better than the long term average. Yeah,
(19:14):
so if it's nine, and but after a twenty percent
sell off it's thirteen or fourteen, that has increased your odds.
If if the market is up on a given any
given seventy two percent up in any one year, but
and now we've done something where it's ninety, that's better.
That's all you really need to know. It's better or worse.
(19:34):
That's all it is. It's not certain. It's never certain.
Even even on something that historically gives you a one
hundred percent, at some point there's gonna be one that doesn't.
And my point is there's always at some point there's
going to be a tip. There will be where even
with the Vicks, yes, because here here's what will happen
is a year out will have some event that happens
(19:55):
right around the time we're at the one year point,
and it'll take us down again. So it'll take two
sell us. But it's going to happen. But the other
thing that people miss on the recessions is if the
market is already priced in a recession, that's all you
need to know. Whether we get one or not doesn't matter.
The market already priced it in when it sold off
twenty percent. It already priced it in. Whether we get
(20:18):
one or not is irrelevant. You already priced it in.
Let's take a look at how similar periods of time
are though you take it. I think the ones that
matter right now are the last time we had a
tear off sell off, which is twenty eighteen, we sold
off twenty percent in about a three month period COVID.
Because we have a very similar V shape recovery to
(20:38):
the COVID period and the current one that we're in.
There's a lot of precedent here for these V shape recoveries.
But everyone is now talking that this is just a
bear market rally and we're going to retest. Of course
they're going to talk about retesting. We were talking about
retesting at the end of twenty at the twenty two
low for probably nine months before everyone gave up on
(21:00):
talking about a retest. And you're gonna hear this you're
gonna hear this all the way until we get maybe
a five percent correction at some point this year and
it doesn't retest. That's how long we're gonna hear about
a retest. Well, and it's always possible. And there's examples
where the market has had tremendous rallies, especially from like
(21:20):
in recent memory, and this is still a long time
ago at this point now, but late nineties, nineteen ninety
eight there was a full five week rally and they
went right back down. So that's an example of a retest.
In two thousand to two thousand and two, there were
multiple ten to fifteen percent rallies that failed, failed, that
(21:41):
failed in the market. I mean that as bad as
two thousand and eight was, at least it only took
a year. Yeah, I mean two thousand to two thousand
and two of people. Remember that's a three year grind
where every single time you got a ten percent rally,
you breathe a sigh of relief and say, oh this
is over. It goes and it goes away, and you
I mean, we lived through that well. In recent times though,
(22:01):
there was a little bit of a retest in twenty two,
but twenty two was not the same as what we
have right now. Twenty two. You bottomed out in the summer,
you rallied big, the thing that went down the most,
tech rallied the most, and then you sold off and
finally hit a new low in October. So that I
would call that a little bit of a retest too.
But here we have a market that has rallied twenty
(22:22):
percent off the bottom, and the thing that sold off
the most, what you call it the naszaq qqqs, is
twenty five percent off the bottom. This is not just
a ten percent rally off the bottom. Well, the striking
similarities to both twenty eighteen and COVID. COVID was a
much greater degree of downside. Thirty five percent this was
nineteen twenty eighteen is a very similar level of downside,
(22:45):
almost exactly the same. This was nineteen two on the
on the close. That was nineteen point nine on the clothes, right.
And if you look at that particular sell off, it's
interesting that in the first week there's this huge up
upturn in the market, which we had in April, and
then what was that sell off in early April? It
was five six percent, was it not? Oh yeah, yeah, yeah, definitely,
(23:07):
is it right around the time that this article came
out that said we're gonna have the worst April since
the Great Depression, And that exact same thing happened in
early January twenty nineteen, after that twenty percent sell off.
But when you lay these two charts and throw the
COVID one in there as well, Brad, when you lay
these three charts over one another, it's unbelievable how close
they are. Yeah, unbelievable. It's not nothing's ever perfect. But
(23:29):
when you look at these two charts, I just don't
know how people can look at COVID and twenty eighteen
and a bunch of other time periods quite frankly and say, oh, yeah,
but you know, we're just a bear market rally. Well,
there wasn't a bear market rally during the COVID period.
The market just kept going up. And there wasn't a
bear market rally during twenty eighteen. The market just kept
(23:51):
going up. Now, eventually, I mean, I guess you wait
long enough, you can find it. In twenty eighteen the
market found its bottom. You could say, well eventually it
went back down again during COVID, Well, okay, fine, And
then in during COVID in COVID. But I think people
think when when the market went down in COVID it
was at the same spot as eighteen, it wasn't even close.
(24:11):
I know, I know, that's exactly what when you look
at a one year chart, people say, oh, yeah, but
but that that is your you go further back and
it's going to be higher. It wasn't. But looking at
these markets and I'm actually shocked. I mean, this how
similar it is well in this market's even shocking me.
I mean, we're we're approaching six thousand on the SMP
right now. We were at five thousand a month ago.
(24:35):
But looking at the what it took to get to
a new high in the twenty eighteen sell off, which
was very similar in severity, down almost twenty percent, just
shy of twenty percent. A new high was reached by
May one, and the low was December twenty fourth. So
for four months in a week, four months in a week,
(24:57):
COVID was the was let's see here, March twenty third, Yeah,
March twenty third, and new highs were reached in on
basically September first, Yeah, okay, and you got made up
a lot of ground until about June first, and then
looking back, that's five months in a week. So we
have five week five for COVID, it was five weeks down,
(25:20):
five months up. Yeah, five months in a week twenty
eighteen four months in a week, okay, well, four months
in a week for this current market would take from
the low on April eighth, right, April eighth was low.
That takes you sometime in the end of August. Five
months in a week. Sometime is the end of September.
(25:41):
That certainly makes a lot of sense. Now, both of
these markets during COVID and also in twenty eighteen ran
into another smaller corrective phase after they reached the all
time high. So the all time high on September first
was reached at post cod and then the market went
(26:02):
from thirty six hundred down to thirty two fifty, and
so that had a little bit of a mini bear
market at that point in time, a little more than
ten percent after reaching the all time high. Is that
the beginning of junior talking, No, that was way back.
It was another one, but it wasn't at an all
time high. The one of the beginning of June was
only a two day selloff, but it was significant, and
(26:22):
then we continued to rouse. Well, this one on September first,
This is twenty twenty we're talking about, went from September
first all the way to the middle part of November,
so that's all off lasted a little bit longer as well,
and that was sort of right above the all time
highs in twenty eighteen. The market hit the skids in
May and then also hit the skids again in late July,
(26:45):
but still when it went back down, it was nowhere
near the severity of the initial selloff. So in COVID
you thirty five percent down and then you had a
couple of ten percent sell offs later on in the year.
During the twenty eighteen sell off, you went twenty percent down,
and then you had a couple of seven percent sell
(27:06):
offs five to seven months later. That is that's what
the technical guys would call the Fibonacci. Well and right,
you go up, say you go up thirty, are gonna
come back down ten and then you're gonna take off.
We often talk about it in more simpler terms with clients.
You take three steps forward, take one step back, yep,
And that is exactly what happens in a market. If
(27:26):
this market holds in at this level for another month,
it's gonna make a new all time high. It will, yeah,
I mean it will. It's not that far away. You're
up on the year, you're up about one percent on
the year, but you're only call it three and a
half percent away from the all time high. I hate
handicapping markets because it's a big waste of time. But
everybody else does it, so why shouldn't we If I
(27:48):
had a handicap this market, I think we make an
all time high sometime between July and August barely, and
then we have a two to three month period of
consolidation where you in that period of consolidation, you could
see five to ten percent down. So the S and
P five hundred s peak is sixty one forty four,
(28:08):
Maybe you get to sixty two hundred or something like that.
You have a two to three month period of consolidation
that includes the market going back down to fifty six
fifty seven hundred, and then you have a good rally
to end the year, and so everybody else gets to
put an SMP target brand. I think a sixty five
hundred target for year end is a decent number. Yeah,
(28:31):
I mean, think about you're talking about the market getting
past the all time high and peeking out, Think about
what would happen to get us there, get you to
get a tax cut deal done, You get past the
ninety days without a lot of fanfare and a lot
of countries making deals with us, and then they probably
extend another ninety days with everybody else so they could
have time to get them done. You have a lot
of things we know we're going to happen, and you
(28:53):
probably have a FED cut during that time. You're talking
about July and early August. The FED will probably cut
in July. The market will like to see that. You
already know you're gonna have the win at You're back
with a lot of these things that has to be
started the year at fifty eight eighty one. Fifty eight
eighty one sixty five hundred puts US at at what
for the year. Then at fifty eight eighty one points,
(29:16):
it's a eleven percent rally or a year. And I
know we hate the eight to ten. Yeah, I know
we hate the eighth The only reason I hesitate, But
I'm looking at these charts. I'm looking at these charts,
and I'm looking at these last two periods which are
strikingly similar. And I mean, don't you think if you
had to handicap the year, you look at getting you
an all time high at some point in the next
three months, consolidating a little bit, and then rallying through
(29:37):
the end of the year. Yeah. And I also wouldn't
put it past the starting point of the year that
fifty eight eighty one being your new floor. You know
that that troves to be a ceiling and now it
becomes your floor when you're nine months out. True that
that's a really good point because many times that line
in the sand between a positive and negative year is
(29:58):
a lot of support. You think about all the people
that either sold in April or sold at the end
of the year might be saying, all right, it just
gets back to where flat on the ear, flat on
the ear, I'm gonna get it. And that's where them
that's where the psychology comes in. That also moves markets.
And so I think that a lot of these technicians
who are calling for the double dip down to those
lows point, yeah, if it goes another month and there's
(30:21):
no signs of it, it's not gonna happen, right, And
that that would be sort of my I'm not breathing
the sigh of relief yet because I definitely think that
that could happen. But we're consistently making higher highs, we're
making higher lows. That's always a good sign. We've talked
about that on this show. But I definitely think that
there's a there's an element of time involved that if
(30:42):
you go long enough without rolling over. I mean, I
mentioned all those bear market rallies in two thousand to
two thousand and two. They lasted a month and then
the market went right back down. They didn't last six months,
and then the market went right back down. So that's
what you're looking for, is there's a certain element of
time that allows you to breathe along. I think there'd
(31:03):
be some investors that would say, oh, the market is,
it's got exhaustion, there's no more buyers. You also get
to the point where the people who are on the
sidelines give up on finding a ten percent sell off
and just say give me a five and I'll buy.
And then when that doesn't happen, they'll say give me
a two and I'll buy. And then they say just
give me one down day and I'll buy. And that's
what ends up happening the longer you go sideways, especially
(31:24):
if in six months those tea bills, because if the
FED is going to do what they say they're going
to do, which is cut twice before the fall, those
tea bills are going to yield into the mid to
low threes, and that's going to make it even more
painful to own those types of investments. Let's take our
next pause. You're listening to money sts Kevin and Brad Kurston.
We'll be right back. Welcome back to the show. You're
listening to the advisors of Kirsten Wealth Management Group, Kevin
(31:45):
Kirsten and Brad Kirsten. As a reminder, we are professional
financial advisors and our offices are in Perrysburg. Give us
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up a consultation to review your financial plan. Whether you're
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zero zero six seven or check us out online at
(32:06):
Kirstenwealth dot com. Brad, we've had a slew of inflation
numbers in the last couple of weeks. We had the
CPI week, we had the PCE is coming right, it's
next next Friday, that's the one the FED likes to use.
And then we had the producer prices. But there was
a couple of interesting things to talk about with the
(32:28):
producer prices. The producer prices would be more at the
business level yep, and so it's a little bit more
of a leading indicator because is what businesses are paying,
and then the question of if businesses are paying more,
then consumers will eventually have to pay more because because
businesses will, we'll pass it on to the consumer. So
this is the one after CPI was unexpectedly low for
(32:50):
the last two consumer prices. The consumer price index was
unexpectedly low for the last two months because they said, oh,
this is where we're going to see Trump's inflation in it,
and it wasn't there. And then the next month we say, well,
now we're going to see it, and it wasn't there.
Now go this whole week, everyone's been saying, this is
the one for producer price index that is going to
(33:10):
be unexpectedly higher because of Trump's tariffs and what happens
on Thursday morning. They're ready for it to be just
to blow out to the upside. And if you weren't
watching live in inflationary you mean inflationary, Yeah, if you
weren't watching live, you wouldn't have seen this, because it
happened pretty quickly. These numbers always come out at eight thirty,
and to me, it's that CNBC was so ready for
(33:33):
it to be an upside inflationary beat that they put
the number out wrong. So every time they put these
numbers out, Rick Santelly's the one that reads them all off,
and he does a great job with it. They put
the chiron up as the monthly number is plus point five.
Then he starts reading it and the number is minus
point five, and they keep the plus point five up there,
(33:54):
and I think, did he get it wrong or did
they get it wrong? And then eventually, after about thirty
seconds they take it off. You can see the future
and the dow of course sells off when they put
it up wrong. But he starts reading it off and
what he's reading off is the lowest number monthly number
we've had in five years. And then you take out
food and energy, which is more volatile, and it's negative
(34:16):
negative point four. What were they expecting on one of
them they're expecting plus point four and the other one
they're expecting plus point three, and it's negative point five
and negative point three, meaning prices are going down. So
then they have to come back and say, now, was
that plus point five or at minus point five? And
(34:37):
Rick Santelli says, did I say it wrong? It was minus?
It was half a percent, half a percent negative from
the prior month, the first negative in a long time,
but the lowest negative that we've seen in five years.
And then of course you have to bring the people
that don't like Trump out to comb through the numbers
and say, well, comb through these numbers, and while it
(34:57):
is negative, it looks like it's negative because marg what
businesses are willing to eat is going down. But what
they're missing is if companies are eating the import number,
they wouldn't take it negative. These are actually negative month
over month. What would they do? They'd keep it the
same and just eat it. Well, there was this narrative
that no matter what they're going to pass it on
(35:21):
to to again the policy of certainty, they were positive
that if you put tariffsicle corporate Even in the Senate hearings,
are you telling me Scott Bassett that that the consumer
doesn't pay the the the import tariff, and he would
say no, and here we have it. They aren't paying it.
Businesses are saying they're not going to pass it on
(35:41):
at the end. These evil corporations that the senators talk about,
they don't want to lose a customer, right, They want
to keep their customer, right, and if that means they
have to make a little bit less, but it's anybody else,
by the way, it's actually negative. But it's not only
that margin shrunk. The prices actually went down. Yeah, the price.
If charges were gonna shrink, they would have kept it
(36:01):
the same. Yeah, prices actually came down. And part of
that's because of the uncertainty and tariffs and wanting to
incentivize and even on automobiles for example, incentivized to people
to keep buying and keeping those customers. But and that
eventually obviously can can hurt profits, which then hurts stocks potentially.
(36:22):
But I think the decision that most businesses made, and
obviously with a lot of these deals that are coming
down the pipeline, Brad, I think it's probably the right decision.
The decision that most of these businesses made was Okay,
we don't think these these extreme levels of tariffs are
going to go on that long, are going to be
that wh I lose a customer just so I can
go up, just to go down, and by the time
(36:44):
I go down, they won't even be around anymore. Right,
So I think that that was the bet that many
companies were making, and that's in that PAP they even
have any impact at all. When you look at the
CPI from last week, here were the negatives. Are the
biggest ones gasoline, airfare, electronics, transferation, hotel rooms, toys, appliance.
Those are all negative numbers. The flat ones were used
(37:05):
cars and new cars, and some of the more significant
ones that were under the annualized CPI were groceries. So
a lot of those don't have anything to do with
I mean, gasoline it's twelve percent negative year over year.
Airfare it's eight percent negative year over year. Well, guess
what is there? Do you have an import tariff when
(37:26):
you buy a Delta ticket? No, you don't have an
import tariff. So a lot of the a lot of
the economy is not impacted by tariffs. Do you know
what was higher than the CPI over year over year
earnings up three point eight percent. Isn't that what we want?
Low inflation and high earnings, high wages. Yeah, even though
(37:47):
wages are a part of the CPI, they're growing at
a higher rate than CPI. That means more people. People
have more money in their pocket. Even exactly what happened
during the first Trump administration is we when the ECONO
t ME starts booming again, you get a little bit
more inflation naturally, but as long as incomes are keeping up,
(38:07):
that's fine. Now the problem is during post COVID and
during the Biden administration, we dug ourselves such a hole
when you look at the affordability of housing and all
these other things, that it would take a few years
to dig out of that hole where income is above CPI.
We need income to be above CPI for three to
five years to dig out of the hole that that
(38:31):
was dug before. I don't know how long they're going
to say this is the number, and then they're going
to do a victory lap when they see one that
is a little bit hotter than expected. But if you
didn't even have tariffs, these inflationary numbers, when we have
twelve of them, were looking at in a year, you
might have six that are in line, and you might
have three that are a little hotter and three that
are are a little cooler, and it and the whole
(38:52):
year is going to be pretty much as expected. But
here we've had four months in a row lower than expected.
The second we have a tenth of a point hotter
than expected. They're going to say, oh, thanks Trump, your
tariffs are causing higher inflation, and that'll be the headline.
Don't buy it. You got to look at the quarterly
and the annualized number that they're all coming down, right,
(39:12):
And the China negotiation on tariff's going to take probably
the longest of any of them. I mean, you look
at what we were able to do with Great Britain
in a relatively short period of time. That's not going
to happen on China. Who knows where we end up
one on China. I mean, the most extreme levels of
tariff have been taken off at the moment based on
the meeting's got best and had over the weekend. So
(39:35):
we'll see, you know. I think with China, I just
think progress is all you need. And I think the
other thing that is good for international across the board,
including China, is as these countries negotiate and get themselves
to spend their own money, whether it's the country itself
or just their own consumers start actually spending money, it'll
(39:56):
be good for their own economy. And that's what's not
happened for the last decade in all of these countries
is they're all just safers. They're all just battening down
the hatches. They're relying on some countries lying on us
for their own defense and relying on us for everything.
As soon as they start becoming a real economy again,
those those stock markets are going to do well well.
And some of what Trump is trying to do to
(40:19):
get rid of the trade deficit tariffs aren't going to
get it done. But what could get it done is
encouraging these countries, including China, including countries in the EU,
to put measures in place like we've done here, like
our FED has done to boost consumption. Now they're already
way ahead of us on cutting rates over in Europe,
(40:41):
which is great. China hasn't done anything. So one of
the things that maybe China could come to the table
and is do a fiscal stimulus package where you're going
to encourage your people to buy more things, which will
inherently See the problem is we're a consumption country and
all those countries are savers, and I think you need
(41:02):
to incentivize them to get off the house what the
international markets are looking at. The international markets here today
are the best way better than us. And part of
the reason is there's a change coming. And the change
is not that we're gonna buy Chinese tech as consumers.
It's that they're going to buy their own Chinese tech
and as consumers and in turn more of ours. Yeah.
(41:24):
And are they gonna in Germany, are they gonna buy
only US products? No, but they're gonna buy more of
theirs and more of ours, right, And so that's what's happened.
I don't think people in the United States of America understand.
We're so used to, maybe to a fault. We want something,
we buy it, we go out, we buy it, we buy.
(41:46):
They don't do any of that. No, especially in China. No, right,
Japan's the same way. It's like a saving savings problem
because their economies all they worry about is can I
buy food? They work, they work themselves to the bone,
they live poor, they live poor and they don't consume. Now,
we've probably taken that too far the other way, but
(42:08):
if you can even get it a little bit off
the mat, it's not only good for the United States,
it's good for the whole world. And as an investor,
you have to know that's coming and if it continues
to if these deals, it looks like the handwriting's on
the roll that the deals are going to spur that
along or they start announcing their stimulus. It's good to
invest internationally, and you can't be afraid to start dabbling
(42:28):
there if you've done none, or add more to it
if you've done a little, because it has been twenty
years of a stagnant international market, and that's one of
the reasons that you see double digit returns in some
of these areas. You look at date large cap four
and fourteen point four year to date merging markets ten
point two compared to the S and P at flat
(42:49):
and the S and p's ten year number is double digits,
and large cap foreign and emerging markets are three to
five percent on a ten year number per year, so
not just three. It could be it could be a
long time too for them to outperform. That's right, we
get back from the break, Let's let's dust off the
tax plan and see where we are on that. Brad
and listening to Money Cents, Kevin and Brad Kirsten. We'll
(43:11):
be right back. Welcome back to the show. You're listening
to the advisors of Kristen Wealth Manager Group. Kevin Kirsten
and Brad Kirsten wrapping up the show talking about the
tax plan. When this first, when Trump first took office,
I mean my assumption is we'd be signing something on
taxes in February or March. Yeah, then I started hearing
(43:31):
middle of May and I heard Memorial Day. Now let's
put it together with the raising the debt ceiling a deadline, right,
and now the war. I mean obviously they go on
some sort of recess in August, they all take their vacation.
I mean, we got to be done before then. That's
probably the date. Now is get it done before that
recess in August. But one of the sticking points, and
there's a lot of different sticking points, and I let's
(43:54):
not let perfect be the enemy of the good with this.
Let's get it through. I mean the state and local
tax deduction, which was unlimited before so if you had
a fifty million dollar house with a two hundred and
fifty thousand dollars of property taxes, you got to write
all that off before. If you itemize, then it went
(44:14):
down to ten thousand. Well, the first bad thing they
did is they didn't they indexed for inflation. But the
reason they can't is because they have to score all
this stuff ten years out and it has to balance
the budget. For some this is the one time we
have to balance the budget. Okay, you have no idea
how much the economy is going to grow ten years
(44:35):
from now based on what you're doing. And what they
assume is that lowering taxes won't do anything for the economy. Well,
that's a great assumption, and raising taxes also won't won't
be any kind of speed bump for the economy. They
already raised the standard deduction, which eliminated a lot of
people from writing off the state and local taxes anyway,
so it doesn't Already it doesn't affect as many people
(44:57):
as was expected because they have a much high number
of people taking the standard production than they even expect it. Okay,
but if inflation, since they put that in places up
fifty percent, that number would be almost fifteen thousand if
it was just index for inflation. Now they're talking about
thirty thousand, but only for people who make four hundred
(45:17):
thousand or less or two hundred thousand or less. How
do you have thirty thousand of property tax but you
can afford a house on three hundred and seventy five
thousand inco That's not possible, right, Okay, So that's a
that's a silly number to begin with. Why do that
split the difference? Make it twenty thousand and don't put
any income on. That would be better and it would
(45:38):
affect more people, right, And so hopefully they're back to
the drawing board on that because the initial plan with
this thirty with a with a cap on, who's it?
Who gets to take it? Is? It sort of seems unfair.
The other thing that hit a brick wall and I
liked it is they were talking about putting another bracket
in for was it five million and up? Yeah? Five million,
(45:58):
Mary filing jointly two and a half million, single do it?
I've talked about this. It's and the reason that they
take it off is they say it doesn't it doesn't
bring in that many dollars. We know, because there's all
this talk of millionaires and billionaires. So you're making it
difficult for Democrats to vote against it when you put
that in there, and then all my publics the rich,
and you won't let us, and all the Republicans are
(46:19):
in there saying, well, we don't want to be George H. W.
Bush with no new taxes. George H. W. Bush was
raising taxes on the middle class. Okay, this is Lebron James. Yeah,
you think somebody making five million is gonna be up
there screaming at Capitol Hill or in their protesting. You
know why they're not gonna be in their protesting. They're
too busy working. If you have five million of income,
you're probably too busy. You're not going to be storming
(46:40):
the Capitol. These are sports athletes and actors and actresses. Okay, oh,
small business owner, fine, there's I'm sure there are some.
But the point is you're calling the Democrats bluff when
you put that. So that's dead in the water. It's
not gonna happen anyway. They're stuck on the state and
local tax thing. Who knows where they're gonna end up
(47:01):
on it. This whole thing with the scoring, and we
have to do this because of scoring, because of the deficit,
the deficit is blown out regardless. Okay, but when they
say this is gonna raise the deficit by four trillion
over ten years, that you know what they did that
last time around, and you know what it was one
year later lower we brought in more money, and they
(47:22):
were predicting it to go down when we lower taxes.
And if we why because the economy grew and if
the economy doesn't. Whatever the economy does is going to
determine what tax receipts come in. If we have a recession,
it goes down. So you're predicting something that you can't
possibly press. Like we were talking about earlier in the show,
that this certainty they have on on knowing that the
(47:42):
other things you're gonna end up seeing is because they
can't score it. Things like no tax on tip's gonna
last one year. Things like they're gonna do an increase
for anybody over the age of sixty five on the
standard deduction. It's gonna be for one or two years,
three years, batt'll expire it. Well, there wouldn't be some
of this stuff will go ten years, the really juicy stuff,
so he can say he did it. They're gonna do
it one or two years, and that's gonna be it. Yeah,
(48:04):
they'll put the expiration date on it so they don't
have to live with it forever. But it is stimulative
of the economy in the short term, yeah, for sure.
But we'll see what happens. I mean, it's amazing how
long it takes to get everyone to agree. But then again,
you're you're trying to get hundreds of people degree on
one bill, and that's that's a difficult thing to do.
Thanks for listening everyone. We'll talk to you next week.
(48:27):
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(48:48):
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