Kersten Wealth Management Group - Money Sense 6-07-25

Episode Transcript

Speaker 1 (00:00):
Good morning and welcome to Money cent. You're listening to
the advisors of Kristen Wealth Manager Group, Kevin Kirsten and
Brad Kirstin. Happy to be with you today. I always
fall back into the good morning. I forget that we
were we're on the show, but we have the podcast too,
So yes, the show's on the radio in the morning.
But if the podcasters are thinking, good morning, what's that?
But Brad, you look at the overall market over the

(00:22):
last couple of weeks, specifically in the last week finding
its footing. The initial rally off the April lows was tremendous,
and then you certainly had a little bit of consolidation
in the last couple of weeks, but never really retracing
much of that selloff. And certainly, looking at the chart

(00:42):
when we talked about it a couple of weeks ago,
you lay this chart over top of either the twenty
eighteen twenty percent sell off which recovered in four months,
or the COVID selloff which was thirty five percent and
recovered in five and a half months, you really see
a lot of similar So you just have to change
the scale a little bit with the cod one, but
it is it's probably most similar to that, and well

(01:04):
from the from a scale standpoint, though most similar to
the end of twenty eight team doesn't matter either way
away the market recovered all of its losses in four
to six months. Yeah, and and not until you got
all the way back did you start to see more
like a week long sell off or give up any
kind of ground. Because what you get is just this this.

(01:24):
People aren't buying, don't buy the dip, and so they
wait for you know, give me, give me a five
percent dip and I'll buy in, give me a give
me a week long sell off and I'll buy in.
And then eventually they they just say, you know, give
me a down day and I'll buy. And what we're
seeing the last couple of weeks is just give me
some negative news in the morning and I'll buy. And
so that that's that's what you're getting on some of
these week reports, like last Thursday, we got the GDP

(01:47):
report and not as negative as everybody wanted. So you're
a little weak in the morning, and then you rally,
you rally throughout the rest of the day. So just
people buying the dips, even if they're they're intra date
dips and not uncommon. I mean, we see that that
pattern repeatedly. When you don't get that retest that all
the air quote experts are predicting and uh any, there's

(02:11):
a lot of positives out there, and it seems like
a lot of people are ignoring the positives. And I
want to look back. We didn't talk much, and I
hate to say, Brad, but the market has spoken, you know,
and the market is the ultimate you know, who do
we go to? Should we go to the fast money gang?
Should we go to Jim Kramer? Who do we go

(02:32):
to to tell us what's going on underneath the hood?
Who do who do we go to to tell us
if the economy is okay? Who do we go to
to tell us if we should be nervous? Which expert? Yeah, well,
this whole week it was, but who ald not? You know?
The ultimate expert is the market. Yeah, the market is
telling you that it's not all that. All that stuff

(02:53):
is noised at the moment. And this whole week is
another week of let's bring a billionaire hedge fund out
and ask him what he thinks and ask him why
he's so bearish, And they're going to talk about the debt.
I saw two different billionaire hedge funds talking about how
this is it. We're Argentina, the debt is, we can't

(03:14):
do anything about it, and this is the end of
our civilization. Well again, talking your book, I mean, when
you're a billionaire, yeah, you just you batten down the hatches.
You get four percent in a money market and you
call it a day. Most people aren't billionaires. And so
this whole narrative of it's the end of the world
is something that you heard in the eighties, nineties, two thousands,

(03:36):
and now you're hearing it again this week. And I
blame the cnbcs for bringing those people out because they're
not the everyday investor. And yet you're right, the market says,
we're not worried about that. We're not worried about all
this fear of GDP. If you remember a month, you
know what, honestly, CNBC would be better off doing, you know,

(03:58):
when the election comes around, because the market is made
up of regular people, it's not billionaires. Yes, okay, when
the election comes around, they do a focus group, right
Fox News we'll do it and they'll put ten Republicans
and ten Democrats or whatever it might be CNBC would
be better off rather than have Ray Dallyo on TV, right,

(04:19):
because who cares what he says? Right, Bring in ten
regular four oh one k IRA type investors and see
what they do. US market is unusual in that we
have every two weeks everybody putting money in. So you're right,
go stand outside the GEP plant and ask people when
they come off their shift, Hey, what'd you do with
your four to one k today in the middle of

(04:40):
the day. And most people are gonna say, I didn't
even think about it. It's stayed invested. And next week
my contribution goes in and I'm not doing anything with it.
And that's the steady anti gravity of the market, this
steady flow in, and that's why you have this. I
get sentiment. If you're gonna get sentiment, you can't get
sentiment from a billionaire and they're constantly doing this. You know,

(05:03):
when you're a billionaire, you can put all of your
money in a one month T bill and you'll be
just fine. Yeah, regular investors cannot do that. Okay. They
need to have inflation protection, they need to have some growth,
they need to have income and dividends. So when you
have the stratospheric type money. There's no relatability there. I

(05:25):
don't understand why they put somebody on who is just
completely unrelatable to people. Yeah, okay, yeah, it'd be like
it'd be like from a fitness standpoint, Brad. You know,
from a fitness standpoint, put a regular guy on there.
You put David Goggins on there, and he tells you
what he's doing. Well, I wake up at four o'clock
in the morning and I run twenty miles and then

(05:46):
I do this and I do that. Yeah, how about
put a regular guy on there, who looks who looks good,
who has a job, whose job isn't fitness. You know,
it's the same thing with finance. They put people out
there that that number one. These billionaires haven't been in
the finance world. They manage their own money and that's
the only thing they do. If you ever heard the

(06:07):
term family office, that means they're managing their own money
and nothing else. And so it's completely skewed, you know.
Back to the market a little bit, Brad. We closed
out the month of May with a five point seven
percent gain. We've only had since nineteen fifty, we've only
had seven five percent gains in the month of May,

(06:29):
and people talk about selling May and go away, right,
selling May and go away, You want to get out
in May because it's the worst six months. It's true,
it is true, but it's also still a positive return.
But when May is this positive, it's been a pretty
good harbinger for the next twelve months. So if we
look at the last time we had a five percent
gain in the month of May was two thousand and nine.

(06:50):
The best best gain in the month of May was
nineteen ninety at nine point two percent. The twelve month
gains following a five five percent gain in the month
of May thirty and a half in nineteen eighty five,
seventeen point three, seven point nine, twenty eight point six,
sixteen point three, and eighteen point five, for an average

(07:12):
gain of twenty percent in all seven and through all
seven instances, with not one instant having a negative twenty
average one hundred percent average double the market all years
since nineteen fifty. So it's a probability situation. When does

(07:33):
it matter? It matters when the probability is better than
the average. So all years since nineteen fifty, seventy three
percent of the time the market's up years where May
is up five percent or more one hundred percent of
the time the market's up all years since nineteen fifty
average return twelve months later nine point two years where

(07:56):
the SMP goes up five percent or more twenty. So
that's pretty significant. You're going from seventy three percent and
nine point two to one hundred percent and an average
of twenty and with the worst instance being seven point
nine percent twelve months later in nineteen ninety. So May
is a great predictor for the next twelve months. And

(08:16):
we're we keep ticking off these these sort of you know,
we're looking to get to these milestones as the market
hits its bottom. Another one I saw was hitting a
sixty five day high. Now that sounds sort of random,
but it's a lot of it's it's something that a

(08:37):
lot of financial analysts follow as a trigger to say, Okay,
if the market goes down, it's one thing, everyone's looking
for a retest. But if it recovers and stays higher,
and does it start rolling over and hits a sixty
five day high, there's a certain amount of time that
goes by where investors start getting in and we're going
to talk about an article in the Wall Street Journal

(08:57):
later on in the show, where investors will start throwing
in the towel and say, I have to get back in.
I'm gonna I keep hearing retest, retest the low, Retest
the low, retest the low. You get to a certain
amount of time that's gone on Brad where you don't
really have a precedent for retesting that low. And right
now we're working on two full months since the low

(09:19):
that goes to that sixty five day high. I'm talking
about two full months since the low point. You get
to a certain point where we don't have much precedent
where the market would go and retest. Part of the
problem is that this twenty four hour news cycle is
constantly giving you a reason not to stay in and
not to buy the dip. There's no one on TV

(09:43):
telling you that buy the dip. We always say that
the bell at the bottom and the bell at the
top does ring, you just don't know what it sounds like.
And at the bottom it's maximum pessimism. No one telling
you to buy is the bell at the bottom. Everybody's negative.
But even the major stories with with some of the
reports are leading into it. They're telling you the reason

(10:03):
that you don't want to buy coming out of it.
If it's good, they don't want to talk about it. Well,
and the only reason many of these so called experts
are talking about market going back down, retest or whatever
it might be, is the fact that the market corrected
in March and April. If you closed your eyes and
look at this sheet that I'm holding up here, Brad, Yeah,
and if you didn't know what happened earlier in this year, okay,

(10:26):
you'd say it's an average year. And I said, the
SMP's up two large forms up seventeen and a half.
By the way, you might talk about that later in
the show. That's still something that's been tremendous. SMP's up two.
Tech Index is up zero point seven. Would you be
talking about market's gone too far? The market's over valued?

(10:48):
If you looked at this on people are still saying Texas.
If I went back in time and showed you this
on January first, would you you'd be like, Oh, it's
kind of a actually kind of a blow average year. Well,
all this talk of TEX over valued, We had a
twenty percent correction and TEX sold off thirty What do
you want I mean, if texover value you get a
thirty percent sell off, is it before the sell off,

(11:10):
what would you have told me you wanted. You would
have told me you wanted a twenty percent sell off,
You got a thirty in tech, and yet we're still
saying it's overvalued. You need to kind of map out
the plan and one of those getting exactly what you wanted,
and you still are looking back even if I hear
some of a major economists saying the same thing, But
what do those investors want? Do they want it to

(11:31):
have a thirty percent sell off and stay there? That's
the only way they would see quote unquote value. Yeah,
I don't know, Like how long do you think it
stays down there? We talked about that during COVID. Once
you're down below twenty, you only get so many days
the average. I mean, what's the expectation for value as
an investor when it goes down thirty percent? You just

(11:52):
it's just gonna stay there, right, Well, then then it's
not a good investment. Right If it goes down to
the valuation that many of these people are calling for
and stays at that valuation, it's a bad investment. Right.
The whole point of the valuation is it only goes
there for a minute or a day or a week,
and you get a great deal and then you move on.
Right now, some of the negative news here from the

(12:12):
last three months. We remember we had never talked about
GDP now the FEDS predictor of what GDP would be
until it got extremely negative. When GDP now showed the
Atlanta Fed was showing a negative four percent GDP and
then we're talking about it for two months. Well, just
like the month of April in stocks that we talked
about worst month ever, but no headline in the Wall

(12:36):
Street Journey into the about best recovery ever. Well, that
headline was on April thirteenth that said, on pace for
the worst April since Great Depression. We get to the
end of April and it's just a mild sell off
and we don't talk about it at all. Right, So
GDP thing with this GDP now had this huge predictor
of negative The actual second first quarter GDP came in.

(12:57):
It was actually negative point two. But we had consumer
spending higher than expected, investment higher than expected, exports higher
than expected. What do we have? We had imports as
the as the biggest contributed to negative and government spending
also a negative. So the two things were front loading
tariffs and government spending getting cut that led to it.

(13:18):
Everything else that's consumer spending and driven to company earnings
were all higher than expected. Did we talk about it? No? Now,
what do we have now that exports are higher than
imports and we had a trade surplus today? And what
does GDP now show? They're showing four point three percent
for the second quarter. Are we talking about it? Did
you hear about it from anyone? No, we'll just ignore

(13:40):
it now what it was negative for talk about it
for a week straight when it's positive for which it
probably won't be. Also, it's all getting skewed by imports
and exports. We're not talking about it at all. I
have heard no one talk about it. And I was
surprised when I went to GDP now to see the spike,
because you would think a spike like that would make
some headlines, and it does. Well. This is the equivalent

(14:01):
of the weatherman calling for twelve inches of snow and
we get two and no, there's no there's no come up.
And it's afterwards to say, oh, well, I thought you
said twelve inches of snow was coming and everyone should
go out and go to the grocery store and get
all their can goods. This was the reason that for
for two months, most people were watching every day had
to have this fear of recession, and I had clients

(14:23):
ask me, hey, i'm here, we're going to go into
a recession. Well, recession by definition would be one of
the definitions would be two negative quarters of GDP. Well,
here we had point two negative for the first quarter
and next quarters predicting a huge spike, so we're not
talking about recession anymore. But that would have been the
reason a lot of people stayed out. There's all these
reasons to stay out, but they'll never give you a

(14:44):
reason to be in or stay in. And one of
those for two months was, Oh, this GDP negative is
going to cause a recession. Look at this predictor. It's
gonna be a huge negative and how's that going to
turn around? Well it did already turn around, and no
one's talking about so they're not on TV telling you
we were wrong. You should have stayed in, and if
you got out, you better get back in because now

(15:06):
we see a big, huge surge because the tariff stuff
isn't as bad as we thought. Looks like we're going
to make some deals. Maybe we're not going to have
one hundred percent tear us for the rest of our lives.
I mean, did they think we were going to Apparently
they did well. And there's two different articles that I
that I'm going to talk about here later on in

(15:28):
the show from the Wall Street Journal, and one of
them talks about that sort of fear missing out or
fear of getting in, But the other one talks about
concentration in stocks. And I think this is where what
you're saying comes into play, and maybe there's a disconnect
between what the people on TV are talking about, which
is a lot of individual stocks, and the average investor

(15:49):
who is in the market as a whole making calls
like we do you know, a little bit more tech,
a little bit more financials and healthcare, a little bit
less wherever it might be, and looking at it from
an individual stock standpoint, because I think from an individual
stock standpoint, you can lose eighty ninety percent of your money.

(16:09):
You can lose all your money if you're overly concentrated,
and in those scenarios you might make have to make
decisions to be out to be in because when all
of your money is at risk, like it is when
you have single stock risk, then you do have to
be a little bit nervous. But when you are diversified

(16:29):
and you own the market as a whole, there is
one layer of I don't have to worry that is gone,
and that is that this particular investment could go to zero.
A single stock can go to zero. A diversified portfolio,
the S and P five hundred, the Russell three thousand,
whatever it might be, or a diversified portfolio that's an

(16:51):
active manager, it can't go to zero. So you can
take that off your worry list. Now it could be volatile,
it can drop, but you could take that off your
worry list. So maybe give a little bit of grace here. Yeah,
and people miss this because I see it. They're not
talking about the overall market. They're talking about single stocks.
Most of those shows are and if you're looking at

(17:12):
individual stocks, you would have seen in COVID or even
in twenty twenty two, we had tech stocks major ones.
Maybe not look at just MAG seven, but MAG fifteen,
the fifteen largest tech stocks. There were probably somewhere around
twelve of those that had fifty plus percent sell offs
twice in COVID, and in twenty twenty two, several of

(17:34):
the very large ones sold off seventy percent in both
of those stocks that today are up two hundred and
three hundred percent off that bottom, but sold off seventy
percent twice. So that's what they're talking about. It's not
how you're investing. So don't worry about them saying, oh,
we need a little bit more of a sell off
because they're waiting for a fifty percent sell off. You

(17:56):
can't wait for that. The overall market doesn't give you that, right.
So let's stay on that topic a little bit and
look at these two articles from the Wall Street Journal,
but and and talk about number one, the overall market
and where investors are in terms of money on the
sidelines and fear of missing out and fear of also
getting in after the increase we've seen off of the

(18:18):
April lows. But then also I want to touch on
this single stock risk, which I think is something that
some people make the mistake of some don't. But also,
like we said, the CNBC crowd is more of the
single stock crowd. That's what they're talking about as opposed
to well diversified investors. You're listening to Money Sense Kevin
and Brad Kurston will be right back. Welcome back to

(18:39):
the show. You're listening to the advisors of Kirsten Wealth
Management Group, Kevin Kirsten and Brad Kirsten. Brad just touching
on what we're talking about at the end of the
last segment really quick, but single stocks and single stock risk,
and we think that the CNBC crowd is really mostly
talking about it makes sense they're talking about earnings, not

(18:59):
a recomdation of buyer selling these names. But should I
get in Vidia? Should I get out of Nvidia? Should
I get into Apple? Should I get out of Apple?
Whatever it might be. But for ninety nine percent of people,
you know, they should not have that single stock risk.
And if they're going to buy single stocks, which we
do for people, how to write size it I think
would surprise people. Yeah, okay, so you know, if you

(19:20):
looked at it, some people might say, well, it's now
the number one stock in the world. Should I have
eighty five percent of my portfolio and Nvidia? Should I
own just in Nvidia? On Apple and Bitcoin? If that's
if that, if those three things are ninety percent of
my assets, should I scale back? Well, of course, for
ninety nine percent of people, the answer is yes. And
when you look at it, a great starting point if

(19:40):
you're going to own some individual stocks, because certainly it's
it's a it's a service that we provide to a
lot of people, and we're going to overweight certain areas
of the market, just like we do when we own
indexes or funds, but we're going to do it through
individual stocks. And a lot of times individual stocks, especially
in a non retirement account, can be much more tax
efficient as well. You can end up with market like

(20:01):
performance and tax lost harvest for a number of years,
and it's it's pretty efficient to tax wise while you're
still working, and especially in your later years when you
are maybe at your peak earning years, to be able
to get market like performance and capture some tax losses
throughout the year instead of just buying and holding the

(20:22):
overall market. Now you get the same return, but you're
lowering your tax bill. So that's where individual stocks can
play in. But you say, size it right, the goal
should be let me be weighted the same as the market.
If technology stocks are thirty two percent of the s
and P. Five hundred, and that top ten makes up

(20:42):
you know, twenty percent of the total. That's the way
it should look, not more than that. So let me
give you a hypothetical example of somebody who has a
million dollars in an S and P five hundred like portfolio. Okay,
And the reason I point this out is I think
the percentage if you want to overweight or underweight a

(21:03):
certain stock would surprise a lot of people. And this
is where people get their portfolio concentration completely out of hand.
So if you own the S and P five hundred,
but you did it on an individual stock basis, I'm
trying to get the current because right now in Vidia
is the top holding of the SMP. Right because I
was looking at the fact sheet. Okay, here we go.

(21:25):
I have it. If you have a million dollars, six
point eight percent should be in in Vidia six point
six percent, not sixty percent six percent. I mean it's
still a lot. It's still sixty thousand, yeah, sixty eight
thousand dollars. So if you, as an investor, say I

(21:46):
want to own individual stocks. I like seeing the stocks,
but I want to overweight in Vidia, and you had
a million dollars. An overweight would be seventy or eighty thousand,
not three hundred thousand, which was a lot would be
what a lot of people let it get to, especially
on growth. Microsoft would be sixty seven thousand dollars out

(22:08):
of a million. Apple would be sixty thousand. Amazon would
be thirty eight thousand. Facebook would be thirty thousand, Broadcom
would be twenty four thousand. Google would be nineteen thousand
out of a million dollars. This is just being in
the S and P five hundred. Tesla would be eighteen thousand,
Berkshire Hathaway would be seventeen thousand. So you look at

(22:30):
that diversification. If you were going to overweight or underwaate
any of those areas, you would maybe be what two
or three percent higher at most. At most, that puts
you in a situation where you don't have the single
stock risk. But how many times have you looked at
portfolios where people have single stocks and very rarely do
we take over a portfolio bra where they have single

(22:51):
stock risk where oh I just wanted to mirror the
S and P five hundred. Mostly there's an emotional attachment
they worked somewhere wherever it might I inherited this, inherited
or whatever it might be. Some people get lucky and
inherited something like a Microsoft, but some people inherit something
that they shouldn't hold on to long term. And you

(23:12):
look at it and you end up with a single
stock like locally and Anderson's, which you would never own
if your address wasn't Toledo, Ohio. Or you might own it,
but you're not gonna own as much as you as
you would, and you end up with the single stock
risk that you don't want. So this is I think
maybe what the CNBC crowd is talking about, like, if

(23:34):
you have something, maybe you need to get out of
that because that thing could go to zero and there's
always a risk. The example they gave in the Wall
Street Journal over the ten years ended December of nineteen
for nine to nineteen, the VF Corporation, which I think
is VF is north Face, the north Face and a

(23:56):
bunch of other brands in that category. Is it Decker's
And yeah, it's a clothing brand. It's a clothing brand.
I have to look up. It's a big conglomerate clothing
and footwear. Twenty two percent annualized return from nine to nineteen,
almost doubling up on the SMP five hundred. At that point,
there was an investment portfolio that was a foundation that

(24:18):
they referenced here, that had almost its entire portfolio of
VF shares three point three billion dollars in December of nineteen.
Since December of nineteen, VF Corporation has dropped seventy eight
percent in value. That three point three billion dollar portfolio
had that much money in there, or you look at
other ones. Back in the two thousand, Cisco Systems was

(24:40):
the Nvidia of its era. I mean, there's no question
about it that when you talked about Cisco Systems in
nineteen ninety nine, it was like when you were talking
about in Nvidia. They made routers and other hard work.
The company still exists today. In March of two thousand,
Cisco surpassed Microsoft as the number one most valuable company
in the world at that point and had a market

(25:00):
cap of five hundred and fifty five billion as the stock.
As the stock hit what was then at all time
high of eighty dollars a share. You're a quarter of
a century later and it still hasn't eclipsed that all
time high. Stock remains twenty percent below where it stood. Now,
if you had at that time five percent of your
portfolio Cisco, no big deal, no big deal. But if

(25:24):
you said, like in Nvidia, this is the next big thing,
and you tripled up on that, you could create a
lot of problems for yourself. So you know, that's one
big risk that I think diversified investors can ignore on
CNBC and take off the table. Yeah, and a lot
of this talk of how much of a selloff we
need to be have it be a good buying opportunity
revolves around that they're not talking about the overall market.

(25:45):
They're talking about these individual stocks and how if earnings
don't continue at this pace, you could see a larger
selloff than the overall market. Well, that's a whole lot
different than what we're talking about when we're talking about
what are average five, ten, twenty percent sell off, how
long it will stay down that at that point, and
what the market returns are after you get to that point.

(26:06):
And if you're diversified, the more diversified you are, the
more you can rely on those stats that we put
out on this show. Yeah, you can't. You know, we
talk about buy after a twenty percent sell off, and
your twelve month return is better than average whatever it
might be. By after a thirty percent sell off, it's
even better. That's only that's not for everyone, that's for

(26:28):
the whole market. That's for the whole market. And so
the more exposed you are to the whole market, the
more you can rely on those stats. But if you're
thirty percent in video, you can't look at any of
those numbers. Those numbers don't apply to you. So you
have to be very very careful when you're taking that
single stock risk. Let's take our next pause. You're listening
to Money Cents Brad and Kevin. Kirsten will be right

(26:50):
back and welcome back. You're listening to Advices A Kirsten
Wealth Management Group. Brad and Kevin here with you. Kevin,
we talked a couple months ago a lot about about
the mindset of people when the market sells off, and
now that we're a couple months beyond it, I think
that something to point out is that there's a lot

(27:12):
of there's a lot of hindsight bias with what you
thought was going to happen, and especially if you got
out of the market, because I think people people are
stuck in the mud. They if they got out, And
part of the problem with what people did if they
got out is now they're looking at prices that are

(27:34):
higher than what they sold out. So say the market
shoots down, you miss it by a day, and you're like, yeah,
but I think this is going to be a global
catastrophe and Trump is changing things for the forever. Then
the market down ten doesn't bother you. You get out,
market goes down another ten, You feel great. Now it
goes up twenty, and for you to get back in,

(27:55):
you'd have to admit you're wrong and get in at
prices that are higher than when you sold out. And
if you don't get back in, then you don't have
to admit you're wrong. You don't have to emit you're wrong, right,
You just keep telling this This time it's different. It's
still a global catastrophe. The market just doesn't know it. Yeah,
just too early. Yeah, everybody's too positive, even though I
turn on the tea and TV and nobody's positive. It

(28:16):
just hasn't hit yet. Wait till these bad numbers come. Oh,
they didn't come. It'll be next month. Next month. CPI
will be terrible because of tarroosts and it doesn't come.
And when you get out, there's a certain amount of
you don't you don't want to get in because you'll
have you'll have to admit you're wrong. Here's the beauty
of being long term bullish the overall market. The beauty

(28:38):
of being long term bullish the overall market is you
never have to admit you were wrong, right because over time,
over time, it's always going to go up. So there's
always this kind of the new catchphrase of the last
five years of fomo fear of missing out. And so
that FOMO was around uh a lot. We were hearing

(28:59):
it around crypto and around meme stocks, and the FOMO
is the reason that things were up two hundred percent,
and people are still piling into the memestocks, so they
just want to get involved. But we have the opposite
right now with a lot of investors, which is fou
gee fear of getting in, and that fear of getting
in is they is two things. They don't want to

(29:21):
buy in and look stupid. They don't want to buy in,
and then the market immediately goes down. And then all
this time they were waiting for it to go down,
and as soon as they get in, it's gonna go
down and they're gonna say I knew it, and then
what do they do. Their whole thesis from the last
two months was I think that Trump will do this
and the market will go down because of it. And
if I get back in, then I'm gonna have to
do it again, and I'm gonna exacerbate my problem of

(29:45):
I got out. And this is how when we get
the studies that show what individual investors do compared to
the overall market. This is why individual investors average two
point whatever percent while the overall market is near double
digits long term. It's because of this constant getting in
and getting out. And I would even argue because I
will often get the question, you know, I got out.

(30:06):
I got out. No. Nine, I got out during COVID,
I panicked and I got out in this year. People
have made these mistakes over and over and over again.
Can you put together a strategy to get me back
in a lot of times when I sit down with
that person, Brad, I say no, and they say, what

(30:27):
do you mean? I said, you are not cut out
for this, right because three years from now it's going
to happen again and you're gonna tell me you need
to get out. You're going to get the same return
as a T bill with triple the stress. Yeah, why
not just buy the T bill because you will always
only get the two or three percent and there and
there's two things that are that are harming that person

(30:48):
more now than ever. The confirmation bias of what you're
searching on the Internet or what you're searching on the TV.
You're finding things that agree with your gut feel and
your gut doesn't. The market doesn't care about your gut
feel well. And those people, what they don't realize is
they haven't earned. They haven't earned the ability to get

(31:11):
the double digit returns. How do you earn that? You
earn it by going through the tough time, yep, that's
how you earn and not knowing if it's gonna go
down a little further, but knowing that markets these are
that these people want to free lunch, They want to
get out when it goes down, they want to be
in when it goes up, and you won't get that.

(31:31):
They don't. Those investors don't deserve it. They deserve a
T B. If you just deserve a T bill, that's
fine by the way some people don't deserve to be
really healthy and fit because they don't want to earn it.
I'm probably one of them, right, I look at look
at him, he looks great. Well, what does he do well?

(31:54):
I don't want to do that. Yeah, Well look at
that person. They average ten percent a year. Yeah, well,
what's the appen to do well? He has to lose
twenty percent every three years. Well, I don't want to
do that. Yeah, it's the same thing. You haven't earned it. Yeah.
They think that you get these above average returns by
moving out and moving back in. And you even in
your own mind, if you were watching the market for

(32:15):
the last five years, in your own mind, if you
didn't do anything, but this time you got out, you're
telling yourself, no, no, no. I knew. I knew when
COVID was hitting that you could have just got out.
And then I knew that the time to buy was
when Trump said fifteen days to slow the spread. I
knew that was the bottom day. Really, that was maximum
pessimism day. No one was saying bye. But you knew,

(32:37):
you knew, you knew that that when he said that,
and we weren't gonna do it for another week and
then fifteen days was going to turn into thirty. You
knew that it was still time to buy when he
announced it. You knew that even though we were gonna
have a vaccine for nine more months and the spread
was gonna get worse and the shutdowns were gonna get
you knew that the bottom of the market was way
before that. That's what they're convincing themselves. You knew that

(32:59):
the FED was gonna go further than everyone expected, but
when they made one more final raise in October of
twenty two, you knew that was over and you knew
to buy. And back to the Fogy trade. The fear
of getting in It goes to what we've talked, what
we talked about in April when we were on this show,
and we said it multiple times. You think it's scary

(33:20):
when when the market's dropping, yep, wait till you're out
it's going up. Yeah, way worse feeling, And so how
does an investor. There's two things I think that investor
needs to think about. If it's too much for you,
then the next time it's up and you're going to
take risk off the table, take more. Okay, the next
time we're going to rebounce the portfolio and it's going

(33:40):
to quit too it right now, yeah, right now, right now.
If if that was too much you and you're stuck
with it, you've recovered, you're only two percent from the highs. Yeah,
you're two percent of the high up on the year.
If you're an international, you're at the highs. Yeah. If
you if you have a twenty or thirty percent international exposure,
your overall portfolio is probably at its high mm hmm. Okay,

(34:03):
so now's the time. Now's the time. So if if
that was too much for you, and you're gonna rebalance
the portfolio by five percent, do ten, do fifteen. If
if not now, at some point we might be even higher,
go further back. Or if you're you can't stand the
market that you're in when it's down, don't do everything.

(34:25):
Take baby steps out and baby steps back in. And
I would say it's the same thing for the fear
of getting in. People just take baby steps back in.
You should have taken baby steps out, but you're leaped
out and now the market's higher, but you don't know
if it's gonna keep going higher, that's fine. Put a
few things in there. Do it again in a month,
Do it again in another month. Do it on the
first down day, do it after we get a down week.

(34:47):
Make a plan. Your gut feel is not going to
be the answer to it, because when the market goes
if the market goes down for a week and a month,
you're gonna say that's it. I knew it here it
comes a big one. Oh shoot, it's not. I think
the problem with a lot of investors is, no matter
how you invest, you always have to accept something bad.

(35:08):
Like every investing strategy involves accepting something bad. I'm one
hundred percent stocks, I have to accept twenty percent losses
every two or three years. Okay, I'm twenty percent stocks
and I'm eighty percent treasuries. I have to accept below

(35:28):
average compared to the market returns. Too many people refuse
to accept anything. I will not accept returns, and I
will not accept what all ten positions in my portfolio
be positive all times. Yes, no matter what your allocation is,
No matter how you invest, I don't care if you're
in a CD or if you're in a single stock,

(35:50):
every strategy involves you accepting something. Well, No, I'm in
a CD, I never lose money. I don't accept anything yes,
you do. You accept that you're basically not going to
beat inflation. Yeah, you accept below average returns. You're always
accepting something. Yeah, you accept that at some point the
market's gonna go out for a couple of years and
every headline is about how much money everyone's making and

(36:11):
you're only making this right. You have to accept that
at some point it's gonna feel bad to earn what
you're happy earning today. Absolutely. Yeah. And so to think
that there's this perfect portfolio that accepts no bad I mean,
even the exact down the middle fifty stock fifty bond
portfolio accepts something. You accept still some downside, and you

(36:35):
accept below the market returns. You're gonna accept something. Stop
thinking that, you know. And this is where we get.
People start going to, oh, what's this annuity provide me? Oh? Yeah, no,
they I can get all the upside none of the
down I know that sounds too good to be true,
but I'll take it anyway. I could participate in the

(36:56):
market and never lose. No, so you would the best
question to ask is what what should what am I
going to accept? Yeah, you're you're not going to get
all the upside of the market, and none of the No.
This is what people convince themselves of when the market's
going down and they decide to just get everything out. Well,
you know what, four to four and a quarter, that's fine.
Why wouldn't I just do that? That's market's down fifteen?

(37:18):
What if it goes down another fifteen? Why don't I
just move off and get my four Why wouldn't I
be happy with that? Well? Why because off the bottom
you just got four five years worth of returns that
you were happy getting when the market was down fifteen
because you were afraid it was going to go down
thirty and it ended up going down twenty and then

(37:39):
recovering twenty five. Yeah. And this is what I often
say to people when they ask me, when am I
just going to be able to get six or seven
percent again in CDs? I remember when I could get
six or seven percent in CDs, And I said, I know,
when when you don't want it? Yeah, when the only
way you can get there is if nobody wants it. Yeah.
If if six or seven percent in CDs sounds good,
it'll never get there. If it sounds bad, it'll get there. Yeah.

(38:00):
I mean that's so. But I would say this fear
of getting in when you have this massive V shaped
recovery to me, and I think that that's out there
right now. I don't want to get in and have
the rug pulled out from under me. This fear of
getting in, to me, Brad is a precursor to the
fear of missing out. Yes, it is. It's the reason
the market keeps climbing the wall of worry. And anyone

(38:23):
that's on TV telling you that the market has fomo
right now, fear of missing out and that's why things
are going up. Is I think it's the only yes
time high. The headline of an all time high, the
Wall Street Journal headline market makes new all time high.
That's when the fear of missing out kicks in. That's
when it kicks in. Yeah, yes, but what will people
be saying. They'll be saying that we're in this sphere

(38:45):
of missing out now we're not. You don't hear anyone
saying that they're fully bullish except for Tom Lee on CNBC.
You don't hear any podcasters maybe except for us saying
that you should be fully invested for a while. You
don't hear any of It amazes me that there's not
more Tom Lee's out there because it's like a cheat code, right,

(39:06):
be bullish. Yeah, if you if you walk into the
casino and over here it says seventy two percent winners,
and over here it says thirty eight percent, twenty eight percent,
what side will be full? And yet when you turn
on the TV, everyone's on the twenty eight side talking
about all the doomsday stuff and talking about all the
reasons to be out and Tom Lee sits alone at
the seventy two percent of the time, Well, and THEE

(39:28):
the seventy two percent winners, which is the one year
average for the S and P five hundred. We're in
that camp, and we sit over here and look at
those people that are like, why are you over there? Right?
The longer you stay there, you're the more like advisors
we talk to you, who will say, aren't you worried

(39:49):
about this? As if it's something new to worry about.
Those fears that most financial advisors have this year, even
if they had it two months ago, are always fears
that the market has. There is this delusion out there
that there are years well, we don't have the same
things to worry about. Aren't you worried about inflation? Aren't
you worried about what the Fed's gonna do? Aren't you
worried about that earnings are too high and they can't

(40:10):
keep growing in this space, as if that is something
new to this market, right right, that's an every year
thing since you were ever invested. You just now are
paying attention. For some people, they're now paying attention a
little more because they're retired and have the time to Plus,
and when you were working, you didn't have time to
look at any of it. It's not new. Plus technology
and social media and the internet puts it all right

(40:32):
in our face. Twenty four to seven. Let's take our
last pause. You're listening to Money since Kevin and Brad
Kristen 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. Last semement, we talked a
lot about people's fogy, fear of getting in and part
of it is just the constant negative news cycle. There's
a new negative news cycle the last couple of weeks

(40:52):
and even today, and it's revolving around the new obsession.
Sometimes we're obsessed with the Fed. We're obsessed with some
trigger points of CPI. Sometimes we're obsessed during COVID of
the new COVID numbers and the COVID death numbers. This
the last couple of weeks, and I don't think it's
it's going to continue, probably until the FED cuts one time.
And it's this obsession with the initial job. Let's claims

(41:14):
it is a weekly figure, and now we're starting to
obsess on it every Thursday morning because it is ticking
up a little bit now. The last couple have been
around what we had one over two hundred and fifty thousand.
That's kind of the line in the sand that a
lot of experts are saying, this is where the market
starts to get worried. Now. We had one that was
two fifty five, and we've had a few that are

(41:36):
below that. The three week or the four week average
is still about just about two forty, call it, and
today's was just a touch above expectations. I think the
expectations were two forty four and it was two forty six.
They're saying that two hundred and fifty thousand is the
line in the sand because we really haven't been above
it very much over the last three years. We were

(41:57):
above it in the middle of twenty three, we got
above it at the end of twenty four, and now
we're starting to after coming back down, we're starting to
creep up on it again. And they are trends, and
so once it starts to move up, maybe you have
a three month trend where you stay up. But maybe
that three month trend corresponds with what the FED is
kind of leaning towards, which is they're a dual mandate

(42:19):
and jobs are one of those. And if if, if
the FED is our backstop and are gonna cut in July,
maybe it's what the FED needs to see in order
to cut. So is it really that bad of a thing?
And the continuing claims has continued to tick down as well,
below two million? Right now, that's a healthy thing. There's
a lot of open jobs out there. I think this
is the worry that if you're it's the thing you're

(42:41):
gonna hear about, if you're looking for one more thing
reason to stay out. If you got out, you're gonna
have plenty of talk of the initial jobless claims and
if you get some unusual spike, oh god, they're gonna
it's gonna be the talk for a whole day and
how much of that Brad. We're seeing the workforce participation
rate go up finally, Yeah, people are re entering the

(43:03):
workforce after that number was unbelievably low. That moves the
unemployment rate up, I know, because it's more people because
you can have these you can do these good jobs number,
you can have these good jobs numbers. But then you
have the unemployment rate tick up, and it's because you
have a point one or a point two tick up
in the number of people actually looking for jobs. Yeah,

(43:24):
so that rate, which is a headline that a lot
of people follow too, even though it's not that useful.
I think that number is going to stay stubbornly high
because more and more people are coming off of COVID,
you know, staying at home. That money is gonna you know,
that stay at home aspect is going to dry up.
I would think that money's already dried up at this point,

(43:45):
and there's more people re entering the workforce. So that'll
be an interesting thing to follow because that's one of
the things the FED has to look at. Look at
the European Central Bank, who just cut again this morning. Yeah,
so the FED is I agree with Trump on this
one that they are way late for what they could
be doing, and all the other central banks are doing it.
One more comment on the initial joblessclims when you look

(44:05):
at a longer term chart and to think that we
have so many more people in our workforce than twenty
and thirty years ago. If you look at a five
year chart, and here it is, the last three years
are a flat line coming off of COVID and it
hasn't moved anywhere. It's been between two hundred thousand and
two hundred and sixty thousand for four straight years. So

(44:26):
it is a nothing and they're trying to make it something.
And if you look at it, the COVID number, I mean,
you're gonna have two. It's like that skews the chart
so much. Did it's still a downward trend, which is
hard to believe. Even if you go back to the eighties.
The eighties and nineties, even when we had good stock markets,
had initial jobless claims on a weekly figure that were
fifty to seventy five percent higher than we are today.

(44:48):
And the workforce is double the size, so it is
an extraordinarily low number compared to historic norms. And no
one talks. I mean, if you're gonna do more recent history,
I'd rather see the twenty eighteen, twenty nine, nineteen numbers
before COVID. Even those numbers were consistently above two hundred
and fifty thousand. A line that everyone is saying is
is worrisome today, It's worrisome, right, Brad, close out the show.

(45:10):
There's a headline in the Wall Street Journal Americans are
finally saving what they should be for retirement. We just
recently reached an all time high for the average savings rate.
This has nothing to do with the balance, the four
oh one K balance, but the average savings rate in
four oh one K is hit a record high fourteen
point three percent. I think that's pretty good. Yeah, it'
hiher and I would have thought it was. Now that

(45:30):
includes the employer portion, sou But if you look at
fourteen point three percent, you know a lot of people
do an arbitrary rule of thumb of fifteen. I think
that's a good starting point for anybody. I'd rather see
you do fifteen percent of your own money and whatever
the employer does kick that in. But it's it's encouraging
to see. I mean, if you if you have one

(45:50):
hundred thousand dollars income and you're saving fourteen thousand, three
hundred per year in your four oh one K, and
you're starting that at an early age. You're gonna get
to some big number. You're gonna get some really nice
numbers by retirement, and of course if the employer matches
something that can certainly help us. Only part of this
is happening for two reasons. There's a little bit of
auto and roll, you know there is. They mentioned that

(46:12):
there is a negative consent that you would have to do.
You'd have to do. It's more work to be out
of it than to auto and roll and be in.
And the other thing is it's very easy. Sometimes it's
a click, sometimes it's an auto on. This is the
auto increase is some It did not used to be
a thing. So even if you started with a five
percent contribution, next year's going to turn into six, the
following year, seven, until you get to the max, and

(46:33):
again you'd have to go in and shut that off.
A lot of times I think that's that's an excellent
thing to do, especially with jobs that have consistent raises.
Your paycheck is still going to go up and your
contribution is going to go up. Five years ago, that
savings rate in four oh one KS was only thirteen
and a half percent. According to Fidelity. The savings rate
includes four point eight percent from employers, which I think
is as an average contribution on the employer side, I

(46:56):
think that's pretty good as well. Seventeen point four the
first quarter, seventeen point four percent of people with four
oh one K accounts increased their savings. This goes to
what we talk about smart money dumb money. I think
the smart money is the individual investors. Seventeen point four
percent of people in the middle of a correction were

(47:18):
increasing their savings rate. Only five percent decreased in less
than one percent stopped altogether in the middle of a
twenty percent sell off. Almost one percent stop thinking their contributions.
You see the most savings at the baby boomer level
at seventeen point two percent. Millennials are fifteen point four
and excuse me, Generation X is fifteen point four and
millennials are thirteen point five. So you know, they talk

(47:41):
smart money dumb money. Yeah, they they can pretty much
stop with that because it's been pretty consistent that the
individual investor has turned out to be the smart ones.
Especially with all of these five, ten and twenty percent
corrections that have bounced back so quickly. Who was buying
in March and April it was the individual investor and
who was increasing their four to one k contributevisual invest
It was the end of vigil Investor, and like I

(48:01):
said at the beginning of the show, maybe CNBC should
start bringing more regular joes on on the screen to
talk about what they're doing in a correction as opposed
to their so called experts. Thanks for listening everyone, We'll
talk to you next week.

Speaker 2 (48:18):
You've been listening to Money since brought to you each
week by Kirsten Wealth Management Group. To contact Dennis Brad
or Kevin professionally, call four one nine eight seven to
two zero zero six 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.

(48:39):
Opinions voiced in this show are for general information only
and are not intended to provide specific advice or recommendations
for any individual. To determine which investments may be appropriate
for you, consult with your financial advisor prior to investing
securities are offered through LPL Financial member FINRA sipc

Speaker 1 (49:01):
S