Kersten Wealth Management Group - Money Sense 11-01-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money Cent. You're listening to the
advisors of Kristen Wealth Management Group, Kevin Kirsten and Brad Kirsten.
Happy to be with you today, Brad. As the market
continues to move higher, I feel like I say that
every week, and we're in the month of October, which
historically gives you some pretty big volatile days. We'll see
what happens here. It's October twenty ninth. Let's see the

(00:21):
market closes out at the end of the week then,
and we only have three days left as we're recording
this show. We certainly have a FED meeting today. Who
knows Jerome Pale always has the capability of saying something
that could put the market into some little bit of
a tailspin. He's been known to do that before in
his Q and A, and the market is obviously very

(00:43):
aware of even one slight change in his wording. Well,
I don't know if you saw in the last one,
there's a couple of people videoing the live stream of
his speech and the market and the second he says good,
good afternoon, the market, the market dropped like a half
a percent because the market is just anticipating that that

(01:03):
there's no way he goes the whole speech without hedging
on something he's already said, and it spooks the market,
and all the algoes are waiting for that. So it's
almost to be expected. Whatever the initial reaction is of
his speech, you'd just retrace that, and it's just this
back and forth. But there's a lot of reasons the
market's up. It's not just up. You know, everybody's making
all these nineteen ninety nine comparisons that that was the

(01:27):
market moving up in spite of companies not having any earnings.
Here we have one hundred and fifty companies that have
already reported as of the start of this week, and
the eighty two percent revenue beat is the highest since
two thousand and one. So it is moving up because
of earnings. It is moving up because of growth in
the economy. It is not moving up in a vacuum

(01:50):
of not good news. So there is a reason. There
is a reason that we're up as much as we
are since April. All of the fear from April went
away and none of it came true. That was supposed
to cause a recession, right, That was supposed to cause
companies to not spend as much and consumers to back
down on what they're spending. And none of that happened,

(02:11):
and it's showing up in earnings, and it is accelerated
every quarter. But we have gone a long time without
even a pause in the weekly and monthly progress of
the market. But this seasonal period is one that gives
people a lot of optimism. And I'll be a little
bit of Devil's advocate. Their markets don't hit their peaks

(02:32):
on bad news. They hit their peaks on good news.
So the market will hit its peak when earnings are
at their absolute best. The market will hit its peak
when the news is as good as it possibly can be.
And whenever that peak, we just don't know if it's
gonna get even better. Yeah, we just don't know. But
as we've talked about in previous shows, every day, every
week that goes by, your probability of double digit returns

(02:57):
in the next twelve months goes down. It just does.
You had an eighteen percent gain on the S and
P five hundred this year. You had a similar I
believe gain last year. I don't have it off the
top of my head. You had twenty twenty three, which
was in the twenties, all of these things. It's great,
we all want to participate, but I do always have
to be a little bit of devil's advocate. We have

(03:18):
done that a little bit on this show. And you
do have to pay attention to what could possibly spook
the markets and set up that next correction. Everyone's got
a short term memory, and up markets they do. I mean,
I'll bet most people don't even remember the market went
down last March, and that's only six months ago. This March,

(03:41):
you know, yes, the most recent March, let alone, going
back to twenty twenty two and asking an investor if
they remembered that loss. No way, no, no. We're in
this market where people are saying, why wouldn't I just
do this with the simplest of things, and they forget
that everyone was panic in March in April and to say,

(04:02):
why wouldn't I just buy the Nasdaq one hundred and
call it a day and retire in ten years because
you won't and and six months ago prove that people
bailing on the market is the reason the market went down.
So the Nasdaq, not the Nasdaq one hundred, but the
Nasdaq itself from nineteen ninety five to nineteen ninety nine
went from roughly one thousand to five thousand. I don't

(04:24):
have it perfect here, but that's not the point of
this discussion. Okay. After it went in a five year
period from one thousand to five thousand, it proceeded to
drop almost back to one thousand. It's amazing it almost
erased five years. It dropped seventy eight percent in five years. Okay.

(04:44):
Then if you look at the round trip to get
back to five thousand. By the way, you're want to
talk about a crazy number, which I just looked up,
the NASDAC peaked at five thousand and eighty two, Okay,
in the year two thousand. At the COVID low it
was at six thy five hundred. So at the COVID
low it was only up roughly thirty percent in twenty years. Okay,

(05:12):
So this is kind of interesting to look at that.
But if you go back to the year two thousand,
it was a fourteen year sideways period before the NASDAK
recovered its losses. So and I've had people say, well,
it doesn't matter, you know, just buy it, which is great.
If you have the money to buy it, it doesn't matter.
It always recovers eventually, which I agree with one hundred
percent agree with the question is where are you in

(05:34):
your life do you have enough time for that for
that recovery to happen. I mean, if you're eighty years
old and you're in the Nasdaq, you're gonna if that
happens again, it's a big If it happens again, you're
gonna have to wait till you're ninety four to recover. Yeah,
is that the kind of loss you want to see
and recovery you want to wait for, So just be careful.
I'm not saying that we're like two thousand by any

(05:54):
stretch of the imagination. But when you look at the
last five years, and I mentioned the COVID low, oh,
which was right around sixty five hundred worth twenty four
thousand on the Nasdaq five years, so it went from
one thousand to five thousand, so it's times five. Okay,
we don't have to get it to the number we
were at. Sixty five hundred times five would be a

(06:17):
little over thirty thousand. So there are some similarities there
to that period of time. Oh, but this is different
because we have AI great and Oh that was different
because we had the internet all great new technologies that
will change our lives, make us more productive, make everyone
more money. I agree with all of that. Now, all
this stuff that's saying AI will produce more millionaires blah

(06:40):
blah blah, and well, part of that is that a
million isn't what it used to be. And by the way,
because we talked about it last week, especially with the
devaluing dollar, in the five years after the dot com
bubble burst, the Emerging Markets Index went up four hundred percent.
You know what the recovery was on the Nasdaq in
that five years, because it did recover in the same
five years one hundred percent, one hundred and fifty percent,

(07:03):
one hundred and fifty percent. So there's opportunities out there.
So I'm not gonna sit here and hide our head
in the sand. There's gonna be opportunities out there to
be had. I just what a caution against the euphoria
and make sure people are positioned the right way. Well,
because let me tell you, whatever loss it might be
when the next correction happens, when you've you have to

(07:25):
always ask yourself. I had this conversation with somebody yesterday. Okay,
and let's pick a round number in terms of the assets.
Let's say the person had a million five and you say,
what what is if you look at the difference here
and we talked about a twenty percent loss if it happened,
is one to five going to one two more painful

(07:49):
than one five going to one eight is enjoyable? And
I'm telling you, I'm asking this question to clients, Brad
and to a person they're saying, yes, the pain one
five to one eight nice. I'm the same. I'm the
I have enough now and have enough then yeah, okay, Well,
and you could pick another two million, three million, doesn't

(08:10):
matter what the person has. But ten up or ten
down or twenty up or twenty down that happened in March. Yeah,
So the question is is that twenty down more painful
than the twenty up is enjoyable? And the second that happens, yeah,
it's it's time to reassess. But I think the reason
for this whole discussion. If someone's been listening, they'll say,
what you guys haven't even backed off risked yourselves, right?

(08:32):
The reason is as we get further along and to
do one move in July, but that was just to
come back down to the same allocation that we had
four months before because tech had run up so much.
So it's just to rebalance a little bit. But if
you've listened and or you're a client, and you know
that we still have this tech overweight and we're more

(08:53):
aggressive than we started the year. The point is the psychology,
the further away you get from a down turn for
individual investors is why wouldn't I just have everything there?
Why wouldn't I just why would everybody just says that
all you need to do is this? Why wouldn't I
do that with everything? And the tendency is to get

(09:14):
more aggressive at the exact wrong time. Not to get
more aggressive when the market has a downturn, but to
get more aggressive when it looks like the sky is clear.
And when it looks like you get the all clear,
it usually means that everyone has already bought, the market
is already up. You don't get the all clear from
anyone you're listening to when the market has gone down

(09:34):
by twenty percent. So the caution that we're doing on
this show is don't get overextended. Now you've if you
missed out, wait for the next one. Okay, if you participated, great,
prepare to start to de risk at some point here
in the near future, because this is what normal market
cycles look like. They'll run up and then you give

(09:56):
up a little bit, and then another run up and
you give up a little And by the way, talking
about the downside that is the only responsible thing to do,
because the upside takes care of itself. Okay, there's no
point in talking about the upside. That's great, everyone, you're
all happy. We're happy. Everyone's happy. You always have to
be looking out for the risk and looking at that
downside potential and by and let me just also reiterate

(10:17):
something here when we're discussing downside risks, okay, because I've
heard many shows like ours, and when those advisors are
talking about downside risk, or maybe they're not even advisors,
they're just talking heads. They're then positioning and saying short
the market, meaning invest so that you benefit when it

(10:38):
goes down by put all your money in gold. Short
the market. You know, all these crazy things were all
out and all out position right, no stocks whatsoever. Right,
That is not what we're talking about. Okay, We're talking
about making sure you have the seat belt on. Let's

(10:59):
not cover the car and bubble wrap. We don't need that,
So let's drive the speed limit, yes, instead of ten
over or what most people do, which is you've been
driving ten over and it looks like it's working. So
let's hit the turbo button and drive as fast as
we possibly can after we've already driven ten over for
a while. That's all we're saying. Yeah, drive the speed limit,

(11:21):
wear your seat belt. That's what's going to benefit you
in twenty twenty six and beyond. And by the way,
if the market keeps going up, you'll participate. Okay, you'll participate.
You'll be fine. I was looking at some of our
fixed income portfolios. Brad, Oh, it's it's unbelievable. I mean
you're talking about the aggregate bond on bond funds. Yes,

(11:42):
the aggregate bond index is up seven point six year
to date and the Feds cutting rates. Yeah, and we'll
continue to cut rates next year. Yeah, they're not talking
I mean like they were, which was a one and
done from two years ago. This is not a put
it under the mattress trade when you sell a little
bit of stocks like it used to be. So we
always have to look out of what could be the thing,
what could be the next thing. Because it's easy to

(12:04):
sound the all clear. We have good earnings, we have
a FED rate cut, we have an extension of Trump's
tax cut, which is stimulative of the overall economy. It's
easy to sound the all clear. Our market commentary this week,
which can be found on our website kirstenwealth dot com,
we look at what could spook the markets? Don't we
already know the good news? Good news is out there, yep.

(12:25):
Let's talk about what could spook the markets. So when
you look at record high territory, we're thirty five, almost
forty percent off the April lows we have. We haven't
been that scared lately. But what could spook the markets?
Number one, it is a late cycle economy. Even though
we don't have you any data on the labor market
lately because of the government shutdown, labor market is stalling

(12:47):
out a little bit. We're seeing the numbers. I just
saw Amazon is laying off thirty thousand employees. In fact,
my own wife asked me about the Amazon layoffs. I'm like, boy,
when it's getting to her right, it must be ajient,
But I said, also take the with a grain of salt.
How many employees. Does Amazon half millions? Yeah, and they're
not they're still hiring too. Right, we're gonna we're gonna
cut this division, but we're gonna hire in this division.

(13:08):
Facebook was the same way they were cutting. It was
less than a thousand, but it was just to eliminated
division that it is not profitable to beef up other divisions.
So it is that's the grain of sault with some
of these major companies. Yeah, when you have millions of
employees or hundreds of thousand, at thirty thousand sounds like
a lot. But yes, if it was thirty thousand at
your local Amazon warehouse, if it was all one right, yeah,

(13:30):
then But a lot of times these companies do the
headline because they know it's good for the stock, because
it's a we're trimming the fat sort of news. And
most companies, big companies go up when they say they're cutting.
The reason jobs are so important, Brad is we're a
seventy percent seventy percent of our GDP is consumer spending.
So you have a job, you're gonna spend money. If

(13:50):
you don't have a job, obviously you're gonna cut your spending.
So businesses could potentially curb hiring, household income growth stalls,
confidence will erode. This takes time, obviously, but it does
create a feedback loop that can deepen recession weakness. Certainly,
past episodes oh one, after the Twin Towers fell down,
consumer spending pulled back dramatically. That was obviously a little

(14:12):
bit more of a one off event. Two thousand and eight,
UH certainly had consumer spending pulled back dramatically as well,
but that certainly had a lot to do with over leverage.
I think we mentioned last week started the nineteen twenty
nine book by Andrew Ross Sorkin, and it's fascinating to
hear the similarities to the two thousand and eight crisis
with debt, margin and leverage, and so yes, it's that's

(14:33):
And I would really love someone to do a deep
dive and probably have to reach out to LBL Research
on this. Give me some give me some charts in
comparisons to eight. I want to see it, and I
don't want to see dollars. Like you always say, the
dollars of debt will always go high. And we have
one in this piece, and they're doing dollars. Our research
departments putting this together and they're doing dollars instead of
a percentage, and it's just it is not a chart

(14:55):
that is meaningful because the S and P five hundreds
market cap is different than was five years ago. Everyone's
income is different than five years ago. So you really
do have to do it. But the thing with that book,
or the thing with other margin debt that we're seeing
today in crypto especially and some of the exchanges that
are allowing a little bit too much free money, is

(15:16):
the percent that you're allowed back in nineteen twenty nine
when they first started doing margin debt, allowing someone to
be ninety percent levered to have a million dollar position
or in this case, I think they were ten thousand
dollars positions but only have one thousand in the account.
You know that ten to one leverage is not something
you're even allowed to do now. But in the crypto markets,

(15:37):
when we had this blow up two weeks ago, it
was we find out that they were thirty, forty fifty
times levered. Well, then only a ten percent move takes
you takes you out, or a twenty percent move takes
you out. So I'd love to see some more comparisons
on the leverage, especially when you talk about two thousand
and eight, because without leveraging the system in two thousand
and eight, the market probably has a year like twenty

(15:59):
twenty two, down twenty five or thirty percent. Yeah, leverage
can really take it down, can take it down like
it did Noway, So one more comment here on the
on the jobs numbers. ADP was a beat this week,
but kind of a small number, right. I mean, when
we're looking at the shrinking number for weekly jobs numbers,
it has been a shrinking number. I think job availability
staying above seven million is a key level and growth

(16:21):
not not a zero on some of these weekly job numbers,
is what we need to see. So the FED is
coming in and going to cut because they're more concerned
about jobs now than they are about inflation. That is
a good thing and it will be stimulative. Hopefully they
do two of them this year. Let's take our first pause.
We come back going to continue on the weekly market
commentary and the interesting charts we put together for you

(16:42):
listening to the advisors of Kurston Wealth Management Group. We'll
be right back. Welcome back to the show. You're listening
to the advisors of Kirsten Wealth Management Group. Kevin Kirsten
and Brad. Kirsten Brad. We were discussing our weekly market
commentary can be found on our website Kirstenwealth dot com
and the headline is things that could spook the markets.
We talked about number one jobs. You know, I agree

(17:05):
and I disagree because when I think market's getting spooked,
I think of something very quick. The jobs thing it
You're there's no question that when we have a slow
down in the economy, and when we have a market
slowed down like oh one, oh two and eight, the

(17:26):
job's numbers will reflect that. But it's a it's it's
a trend. Yeah, you have to look at a long
term so slow, it's so slow to move and the
reason is you get a you get a one week
number that is crazy, the next week will make up
for it. And the same thing on the monthlies. If
you get an outlandish month even upside monthly number, the
market knows that it's a pull forward and next nuts
numbers is probably going to disappoint. One thing we discussed

(17:48):
many many years ago was the concept of when do
you want to own stocks and when you do not
want to own stocks, And we discussed it on this
show that One of the things you look at is
the trade off between stocks and bonds. Of course, what
can you get on your fixed income. The level that
we looked at was five percent on the tenure treasury.

(18:08):
You say, well, if I can get five percent, Now,
there are areas of the fixed income market you can
get five percent, but it's not in treasure. Yeah, but
if you compare it to the valuation of the stock market,
a stock market above twenty on the PE with a
five percent uh interest rate on your on your bonds
makes the bonds pretty compelling. Now we're above that on

(18:30):
the PE. We're not quite there on the bonds, but
we're you're You're at some levels here where the higher
that valuation goes, the prospect of future returns goes down,
But the prospect of future returns in the bonds looks
pretty attractive. And the third level we looked at was
jobs under five percent. But we've been under five percent
for a very long time, and we had a couple
of selloffs. But under five percent, I think, are we

(18:51):
still under four percent? Even? Yeah? I think I think
we are. Yeah, I think we're high threes is where
we are at the moment. Stock valuations we mentioned twenty
times earning was one of those metch we looked at
years ago, and you know, two of those three the
jobs numbers under five percent unemployment and over twenty times earnings. Certainly,
there's been a lot of talk, and we've discussed it
on this show. It's a very different market, so you

(19:13):
have to be a little bit careful. You know, we
tried at one point, I think you tried to do
this where you smoothed out the sector waiting compared to
a nineteen eighty sector waiting. But it doesn't move it
that much. It really doesn't. It's not as dramatic as
you would think. I thought I was gonna have a
Eureka moment and say, look, the real you know, sector

(19:33):
adjusted PE from nineteen eighty is more like seventeen, not
twenty four. It wasn't that, it was only slight. And
I think the difference is that that tech companies today
and a lot of companies today, just the profit margins
are so great. The return on invested dollar is nothing
like we had in the eighties and nineties, so these

(19:54):
companies deserve a higher multiple. Wee the prospects for alternative
intelligence increasing product even further and getting that return on
invested dollar. Even higher is there? But let's just look
at the numbers. Okay, basic valuation approach, try to take
out all the noise. Let's just look at the trailing
price to earnings ratio. Some people look at the forward.

(20:14):
Let's just look at the trailing. Compare apples to apples.
The index currently trays at twenty eight times trailing it's
about twenty two or twenty three times forward earnings. That's
very close to the dot Com peak, which was right
around thirty and well above the respective ten twenty forty
year averages of twenty one point one on the ten
year average twenty years eighteen point four forty years eighteen

(20:38):
point three times trailing earnings. So most concerning thing about
the pe UH looks at when you're at these levels,
what are the next long what are the long term
returns moving out? We looked at this concept a couple
of weeks back. Valuations are terrible for predicting what's going
to happen next year. For example, Oh, we're at a
high earnings level, so that means twenty twenty six is

(20:59):
going to be That is meaningless. It basically is what
are the next ten years bring you. That's all that.
That's all that you can look at, and charts the
show that are are a much better indicator it is,
I mean, because what it could be is it could
be the next five years are great and then the
second five years twenty thirty to twenty thirty five are bad,

(21:21):
and you just don't know. But it does give you
an indication of the next ten years being below the
long term average. The other thing I would point out, Brad,
is even when we look at all these PE charts
on the next ten years, you go from like, all right,
when the PE is low, you get a ten year
return above the average twelve, thirteen, fourteen. The long term

(21:43):
average is ten or eleven, and when the PE is
high you get five or six, seven, whatever it is. Yeah. Yeah,
it's sort of like looking at the presidential cycles. Oh,
when we have the best makeup it's twelve and we
have the worst makeups eight and a half. Oh yeah,
well I thought it was going to be negative. Yep. Yeah,
so you know you have to be careful of that.
But it does predict single digit total returns between now

(22:07):
and twenty thirty five. It does. I mean, if you
look at history, one counter argument is that we're in
a new regime of productivity with AI, as we've mentioned,
that's going to drive structural improvement and corporate profitability. You
talked about it at the beginning Scare number three, Brad
margin balances. We look at the actual level. Okay, it's

(22:27):
up significantly since April when we had the twenty percent
sell off for tariffs, but it certainly exceeds dollar amount levels.
You know, let's just stay on this briefly. As a
percentage of the overall market, it's not very high. Now
when you look at those charts, what's the market sixty
trillion total valuation, I don't even know. Yeah, yeah, But

(22:50):
when you look at it compared to that growing overall
market cap, it's a little blip off the bottom from
the last six months, but not much. And so when
when people are short the market, and there's all these
levered shorts that you can buy as ets now, so
it's so much easier for people to short the market.
They don't have to open up a margin accountant short.

(23:11):
They can just buy those positions in the ETFs. When
you're short, you're buying it on margin, and so those
are those are part of this that probably did not
used to be because there were no ETFs that we're
doing these leverage levered long leverage short. Next scare would
be the bond market. Something happening with the bond market.
Five more Fed rate cuts are priced in or predicted

(23:34):
at the moment, brand and what will happen. What I
think will be interesting is to see is what the
market says interest rates should be versus what the Fed says.
And then when Trump's new person comes in, if they
are more dubbish and want a cut rates even further,
could they be bullied around by the markets in terms

(23:56):
of movements in interest rates not matching what the Fed
is doing. Yeah, all along we've had the market be
lower than the current Fed and maybe even lower than
what the current Fed speak is. What does that look like?
If that changes where the market doesn't move but the
Fed is talking about cutting rates, will we have some

(24:17):
disruptions in the bond market. And I think the stock market,
the bond market, and determining what the Federal Reserve will do,
they're both hand in hand. The FED likes to say
they don't look at the stock market, but I don't
care who the FED chairman is They're gonna look at
the stock market. So you know, the market currently expects
the rates will be below three percent next year. If

(24:37):
we have some sort of blow off top in stocks
another ten to twenty percent, are they really gonna cut
into that that? That remains to be seen. Well, I
think Trump's person will initially and then maybe just you know,
try to guide the market that we're gon, we're gonna
wait a little bit, but we're definitely cutting, and it'll
be a different language, I think than what Chair Poal
has been doing, which is is just so cautious and

(24:59):
to say anything to lead the market to think, uh,
maybe a cut would happen if it's not. Yeah, it'll
be interesting to see what Pile does at the tail
end of his FED chairman career. Yeah, I think you're
spot on. I heard you say this earlier. Does he
anticipate does he anticipate the next FED chair being more
dubbish and then therefore not want to do rate cuts?

(25:23):
You know, I think he's kind of backed in a
corner for the rest of this year. Well, that's not
the point that I heard you make earlier. The point
I mean, he's human, right, you want to go out
with a bang. I mean, and if that means that
that you think the market will rally if you do
one more extra cut, and that extra cut might be
definitely cutting now, maybe cutting early part of next year,

(25:47):
even if you don't want to, because you think the
market will rally into that, and then you're going out
on a high note. I think that's just human psychology.
I don't know how you wouldn't do that. Well. I
think there's two different things. If the stock markets at
an all time Jerome Pile gets a tip his cap
and say I went out and the economy was great
and market was at an all time high. If that happens,

(26:09):
and in addition to that, he can not cut, I
think he would prefer that. No, I think so too so.
But if the market is cooperating, I don't think he's
gonna do any cuts at all. Yeah, between January first
and May when the new person takes over. Yeah, but
any disruption and you're gonna have You're gonna have a
don't fight the Fed conversation, because the Fed's gonna come

(26:32):
right back out and say we think the market needs it.
And if, especially if the jobs numbers are weak at all, well,
you know we talked about individual stocks and when they
have their earnings reports, and people will say to me,
why is that stock down today? Why is that stock
down today? The earnings seem good, and then the stock drop. Well,
if the stock runs up ten to fifteen percent before earnings, boy,

(26:55):
these earnings better be better. They have to really be
a beat. Okay. But the same is true with the
Fed chair. Okay, the stock market has run up into
his meeting today, so we did the show before the meeting,
but we'll see. So his commentary is gonna have to
be really good this afternoon for the stock market to
stay hot. So it's just like an earnings report. He

(27:17):
better nail every box the market once. If he even hints,
then okay, we're cut today, we'll cut in December, and
we're done. You've set yourself up for that because of
the rally in stocks. Well, here's the other thing to
keep in mind. We haven't seen the jobs numbers. You
gotta believe he's seen the jobs. I don't see why

(27:39):
it wouldn't have yet. So he knows the jobs number.
If he says we're cutting today, but we're not cutting
in December, he knows the job numbers are strong. You
do have to read between the lines. If they're hinting
at more cuts, you do know that we're gonna when
they finally start reporting these numbers when the government opens up,
we're gonna have some bad numbers. It's the only reason
that he would be laying on a roadmap for more cuts.

(28:03):
So you got to keep that in mind too. So
let's just look at the conclusion here too, Brad, because
the number five is more about the bond market. Two.
But the conclusion here is seasonally we're in the best
historical period. November first to April thirtieth is seasonally the
best six months of the year. It's not perfect, but
it's the best six months of the year, which would

(28:23):
lead you to want to buy any of those dips,
and that those dips would be fairly muted five to
ten percent. Okay, So that would be our bias at
least until the end of the first quarter twenty twenty six.
Midterm election years bring more volatility. If you have a
rally in the first quarter, that might be another time
that you can and should lighten up. Yields are low,

(28:44):
the Feds cutting rates another wind in our back. AI
Capital investment is going gangbusters fueling double digit earnings. Gross
seasonality I mentioned is really good. And the deficit spending
is a concern, but it's certainly we're deficit spending. So
that reduces recession risk in twenty twenty six as well. Well.
Tariff revenues coming in that's a big offset as well,
so that keeps the cost of servicing the debt manageable.

(29:05):
So plus the Trump tax cut extension as well. So
those are the positives. And we talked about the similarities
to the late nineties. You know, where are we that's
the big question? Yeah, are we ninety nine where the
market blew off the first quarter of two thousand, or
are we more ninety five ninety six? And this is

(29:29):
the internet version of this, and this AI boom is
got two or three years left. Yeah. And the reason
that we continue to talk about these same things is
everything you mentioned is what the market is already pricing in.
It's because it's what we already know. Correct. If we're
going to have anything other than a three to five
percent so off, it's going to be something new that

(29:49):
we don't know yet, and you can't know and I
think a lot of people think, well, why didn't you
just go all out and all back in because you
can't know the things that are going to take things
down twenty percent. No, you didn't know COVID was coming.
You didn't know that Trump was gonna was going to
try to spook the market in April with this, with
this really drastic day where he says, we're going to

(30:14):
do all of this and we're never going to back down.
Even though it was a negotiation tactic, it seemed drastic.
Those are the things that take the market more than
ten and we always get them. I would agree with that,
but I would add this, Brad, sometimes you do know
the thing that takes the market down and the market
response surprises you. So I'll use tariffs as an example.

(30:35):
Did anyone not expect Trump to increase tariffs right just
because he did it a little bit more aggressive? Yeah,
So I would say, sometimes you know the thing that
takes the market down, and then you look at the
market reaction, which was twenty percent in March in April,
and you say, why didn't you expect this? He said,
tariff is a beautiful word, one of the greatest words
ever I know. But I can't Yeah, I couldn't have

(30:57):
comprehended that tariffs would have all that in a twenty
percent sell off. You know, you go back to the
last few selloffs. COVID certainly was completely unexpected, also self inflicted.
How about the selloff around inflation. Would you have expected
twenty seven percent on the down side because we got
to nine percent inflation? No? Okay, I would not. I mean,

(31:19):
it certainly wasn't surprising we had inflation when we printed
eight trillion dollars and fire hosed it out to the
American people. How about the twenty percent sell off in
twenty eighteen when the FED was a little bit stubborn
in wooden cut rates. Did that surprise you that it
got to twenty That's probably more surprising than even the
twenty twenty two because it wasn't There was nothing really
that drastic happening. And Trump's trade war just went on

(31:43):
a little bit longer than most people I'm saying. I'm
just saying, sometimes, you know the thing that takes the
market down and it and it just goes farther than
you expect. I would even argue two thousand and eight.
I mean, certainly everyone had anecdotal stories in six and
seven where you're you're sitting there thinking, oh, my goodness,
I mean that person, that guy got a five hundred

(32:04):
thousand dollars loan. He makes thirty grand a year, So
we knew the thing. Yeah, But did anyone expect that
that would spill over into regular stocks? Industrial stocks dropping
and healthcare stocks dropping? Right, But obviously financials made sense.
But why did tech drop? Because housing went down? So

(32:26):
it's twofold. But sometimes you don't know the surprise that's
coming that takes the market down. Sometimes you do know,
and the market goes even farther than you expect, and
the same thing on the way up. If in April
I was to have a conversation where I told somebody,
this is going to be a much more muted tearff policy.
We're going to make a lot of deals in the
next six months. The tax plan is gonna not only

(32:47):
get passed, but passed with some business improvements. Would anyone
have predicted that we would have gone one hundred and
seventy days without a three percent sell off, and the
market was just marched higher without any pause from now
until then. The S and P five hundred five thousand
at that time a little bit under since almost seven thousand. Today,
I think you probably was say, okay, okay, yeah, things
will stabilize, Brad. You're right, we'll get back to that March,

(33:10):
that February high of up four percent of the year,
and here we are up eighteen right, right, Yeah, So
in both directions, the market is just a little bit
more exaggerated, and that's why we keep talking about it
and preparing people for that this blowoff top that that
could come, but don't fall for it. It may be

(33:33):
not the the the ultimate high of the boll market,
but it might be a short term one that needs
to give you a little bit of caution in your portfolio.
And that's what we're talking about. Let's take our next pause.
You're listening to Money Sense, Kevin and Brad. Kristen will
be right back and welcome back. You're listening to the
advisors of Kirsten Wealth Management Group. Brad and Kevin here
with you. If you didn't hear any of our ads

(33:53):
and you're listening to the podcast or on iHeart, we
are professional financial advisors in Perrysburg, Ohio, and you can
find a lot of the information we're talking talking about
on today's show and any show on our website Kurstonwealth
dot com. Kevin, one of the classic movies Christmas Vacation,
has a quote that we say in this business a lot,
which is the little lights aren't twinkling. It is when

(34:15):
Clark finally gets all the lights working, he goes down
the line to get this congratulations from the entire family,
and his father in law, with a stern look on
his face, points out to Clark that while all the
lights are on and the power in the entire city
went out because of it, the little lights aren't twinkling.
And I feel like we're in that sort of market
for advisors right now. You could be an advisor who

(34:38):
has everyone positioned correctly and you were fully invested, even
if it wasn't at the very bottom like we bought
a little bit early in that April cell off, but
fully invested as much as we're going to be with
every model and have ridden this entire market out with
a slight rebalance in July, but still fully fully invested.
And yet we will have meetings where we'll point out, hey,

(35:00):
we are overweight tech, and we are underweight these four
sectors that are negative since the market, and the comment
back will be well, why don't we own all tech? Right?
The little lights aren't twinkling right. We'll have people that
will point out, hey, we week dollar policy, we're invested
in emerging markets and they're having their best year in
ten years. And we'll have people say, well, why don't

(35:21):
we own gold and emerging markets while have a much
better batting average than gold? When we have week dollar
and a much better batting average in general, not only average,
but better performance period, better performance period, we will still
have people say why not gold? And I'm not sure
why gold has this. We're gonna talk about this a
little bit too. Why gold just has this sexy investment

(35:46):
mantra to it and it just gets all the headlines.
And yet something like emerging markets that has is an
extreme low valuation and if we are going to be
in a week dollar policy, we'll have much longer legs
than gold. Yet no talk at all. It's it's fascinating.
We talked about this earlier. This week, we'll have meetings
and we'll talk to people, and everybody wants to know

(36:08):
that they have enough AI and tech. Yeah, and people
are asking us about gold, okay, Which the reason I'm
pointing this out is no matter what, whatever's up the most,
people will ask us if we own enough. You remember
twenty thirteen fourteen fifteen, huge boom in oil and energy stocks. Okay,

(36:30):
at that period of time, I was getting asked, do
we have enough oil energy MLP? This is what you
want to own at that time, that's the question. So
even if you had it, though, and I think that's
the point. Now when we look at our individual stock model,
I'll point out to people that the fact that forty
percent of the S and P five hundred is negative,

(36:50):
and look how well this individual stock model is doing.
And they'll point to the one thing that is up
the most right now, Robin Hood Pallenteer, I think are
the one and two for the things that are up
the most. And they'll say, well, why don't we own
more Robin Hood. Well, hey, I know, the little lights
aren't twinkling because you only own four percent of that
thing that's up one hundred. But that is proved. That's

(37:12):
the way to be invested. That is proper. And if anything,
we're probably lightening up and rebalancing down on that thing
that is up the most. If six things are working
in the market and you only own five of them.
That is not a failure. You can't own everything. If
you're outperforming the market, that's good. You don't need to

(37:33):
be outperforming the market by twenty percent. But on those
on that front, because the good the things in twenty
twenty five that people are asking about technology stocks, AI
and gold. When's the last time anyone asked you if
they owned enough international in emerging markets? Almost never? Almost never,
And you don't turn on the TV and have anybody
talking about, Wow, when's the last time these things outperform

(37:57):
the market by tenfold? I'll tell you when it will happen. Yea.
And we mentioned this earlier two years in a row. Yep,
that's what it'll take. That's all it'll take. Yeah, oh yeah.
If we get to March and have a ten percent
sell off in the market and emerging markets don't sell
off at all, you're gonna we're gonna get the opposite. Hey,
do we know it enough emerging market? But I think
I think it takes booking that calendar year. Yeah right,

(38:20):
So oh you're saying we need a second full year.
People need to look at that fact sheet and see
the back to back calendar years of performance where it
blows the doors off the S and P. And that's
why when these cycles finally change. And we mentioned this
in a previous show, we've had a lot of one
off years where international and emerging markets is outperformed. Did
we find one that was back to back? There There wasn't.

(38:42):
There wasn't one. Yeah. If you book and people bring
up that fact sheet, I don't care if it's the
index fact sheet and it's beating the S and P
five hundred, people will take notice. That's what. So I
think that it might take till January of twenty seven, Brad,
when those December thirty first fact sheets come out and

(39:02):
people look at Morning Star whatever they look at and
they summarize the year, and they pick up Barons or
the Wall Street Journal and they look at the summary
because they do all these summaries, that at the end
of the year it will take that back to back.
That's for longer term. Let me give you one prediction.
You and I occasionally do these predictions. I'm gonna give
you a prediction that there is this worse to first,

(39:24):
first to worst phenomenon with areas of the market. And
sometimes it's on calendar years, sometimes not. And when it's
when it doesn't happen all at once on January first. Typically,
and here's why, there's a lot of four to one
K investors that are looking at performance not correctly. They're
looking and say, oh, that's doing well, let me have

(39:44):
some of that. And what they're looking at is that
last calendar year. So typically whatever does well in a
year because of flows into four to one k's that
January is usually a follow on and it's pretty good
as well. So I think you're gonna get a a
little bit of that wosh in international investing in the
month of January because of how many investors have the

(40:06):
majority of their investments in for one case, and how
many more are here than were thirty years ago. I
think you get a little follow on the same thing
as I was mentioning before people go to the four
to one case, they look at the performance and they
clicked the one year or the year to date as
they would right now, and what's doing the best. And

(40:27):
so that takes some time, and once again I think
it takes booking that second year. But you're right. I
mean people have referenced in articles and on TV the
gold out performance of the seventies and eighties, and a
lot of people are talking about the similarities to this
period of time when we had the runaway inflation and

(40:48):
then gold did really well and then peaked, by the
way gold peaked in nineteen eighty two or three, okay,
once we got to that week dollar policy. After that
then came the international outperformance. So if you look at
gold today and who knows what the peak will be,
but it has run up if it has peaked. And

(41:10):
by the way, when gold peaked in eighty two and
eighty three at three hundred and fifty, it didn't cross
three hundred and fifty again for twenty five years. And
great today got to four thousand, not even close to
what the Dow Jones did, where the Dow Jones was
at one thousand and is now almost at fifty thousand.
But what I will say is what came next in

(41:33):
from nineteen eighty three to nineteen ninety Yeah, it was
at international trade. So yeah, let's let's let's take our
next pause and maybe spend a little bit of time
on looking at that performance to remind people that this
is another thing gold that has had these one off
years and very rarely does it have two years so
let's look at the performance when we come back from
the break and kind of think about let's not let's

(41:56):
not be an investor that is saying to themselves the
little it's aren't twinkling because I don't own half my
portfolio and the number one asset class this year, because
sometimes these things are short lived. You're listening to the
advisors A Kersonal Wealth Manageer Group. We'll be right back
and welcome back. You're listening to the advisors A Christonal
Wealth Manager Group. Brad and Kevin here with this morning. Kevin,
we're talking about this really good performance for gold and

(42:19):
I said one off years, but it's actually been two years,
twenty twenty four. If we're just looking at the GLD
index as a not a recommendation or buyer sell any
of these stocks we mentioned or or this index. But
last year was up twenty six and I know this year,
I think at its peak it was up sixty. I
think it's given up about ten of that, so probably
somewhere around that fifty percent up. But let's just go back.

(42:41):
Let me go back fifteen years and let's look at performance.
And I think a lot of people know in general
what the overall stock market did in these periods of time.
But let's go back to twenty eleven. The GLD index
was up nine and a half. The next year up
six point six, so two really underperforming years from this
from comparing it to stock market. Then in twenty twenty

(43:01):
three it was down twenty eight percent, negative twenty three,
then negative two, then negative eleven. So in a period
of time where the stock market is probably up somewhere
around sixty percent, you're negative. You know, you were up
two years mildly, then you were down three years in
a row. Your recovery year up eight, next year up twelve,

(43:21):
next year negative two. So now we're up to twenty
eighteen and it's negative two versus the market, and it's
the first year here that it beat the market. In eighteen,
still down but not down as much as the market.
Then in nineteen it was up seventeen point eight percent.
That sounds great, right. The stock market was up almost
thirty in that year. Twenty twenty it was up twenty four,

(43:45):
about the same as the market. Twenty twenty one it
was negative, twenty twenty two it was negative. And now
we've had a pretty good run. So talking about the
market being you know, negative markets, negative three out of
every ten years. It's been a little less than that
in recent years. Actually, But if at the market's negative
three of out ur very ten. I just mentioned fifteen years,
we have one, two, three, four, five, six negatives out

(44:06):
of fifteen so is and it's not even zigging when
the markets zagging for the most part, is that what
we went out of our investments. Probably not. I'll take
something that's just a little bit more consistent and can
give us a longer run than these short two year runs,
which is what we've seen for the last fifteen years.
This is the most important thing with any allocation you're
putting in. I don't care if it's something we recommend

(44:27):
or we don't recommend. Keep it reasonable. You want gold,
make it ten percent rank of fifteen percent, yep max.
You want an individual stock, keep it under ten percent.
If you want an individual stock in your portfolio, you
want any asset class, keep it as a reasonable percentage.
And always leave open the possibility that, no matter what

(44:48):
your idea is, you might be wrong or you might
be late. In this case, and I heard it on
CNBC earlier this week, and I'm probably butcher the quote.
But it's the Will Rogers quote, which is it's not
getting things wrong that gets people in trouble. It's the
thing that you're absolutely certain of that that that gets

(45:08):
you in trouble. You're absolutely certain of something that is
not true. Yeah, because you're in trouble, you get overextended,
you start using margin, you start putting your whole portfolio
in it, And those are the mistakes we're trying to
caution people about in this kind of late stage bowl market,
not even in late stage bull market, but just where
we think the market at some point here in the
next six months is going to give us a pause.

(45:29):
Long term bullish, short term cautious is the stance we're
probably going to have through throughout the next nine months.
And but for now we're pretty fully invested, just not
trying to not be over extended and keep yourself kind
of market weighted with a lot of these sectors so
that we don't have any surprises. And I gotta find it,

(45:49):
but I can't. I can't find it that quickly. I
thought it was Will Rogers, but I butchered the quote,
So now I want to perfect it. Now I think
you had it just about right, and the sentiment is there,
which is, you know, we have so many people that
get to have this confirmation bias about something they're very
very sure of is going to happen, and then they

(46:10):
search the internet for the very thing that they think
is going to happen. Of course you're going to find
something that agrees with you, and so then you're even
more sure about investing all of your money in this
one idea and at precisely the wrong time. Yeah. Absolutely.
And it's the question that comes to me that always

(46:32):
is a little frustrating is when it starts with well, obviously, well, no,
nothing's obvious. Well, somebody asked me about crypto the other day. Yeah, well,
obviously this will keep going higher. I guess, like, I
don't know what what can I even look at with
crypto to value it? Right? Well, obviously gold will keep

(46:52):
going higher, Obviously tech will keep going higher. Well, obviously
international is a bad investment. Why are you saying that, Yeah,
there's no obvious, Yeah, it's obvious that you heard that somewhere,
and so that we're trying to play it kind of
down the middle a lot of times where we're trying
to be devil's advocate on this market that we love.

(47:14):
I love this market, but people are starting to love
it a little too much, and this starting to feel
like you need to own everything that's working to perfection.
Is is gonna be the downfall of some investors at
some point in the near future, especially ones that are
trying to get leveraged and people who love crypto got
leveraged and blew up. I think there might be people

(47:34):
that get a little too leveraged and try to use
some of these leverage ETFs are gonna be surprised at
the volatility of those even on a one day or
a two day selloff. Well, I will say this. I'm
there's one I could say, well, obviously, because I've been
watching it every week and people know here that we're
Browns fans, obviously the brown stink and Dylan Gabriel is terrible.
That one I'm on board with. Obviously, he's not the answer,

(47:54):
not the answer, So I can get I can get
on board with that, obviously, But when it comes to investing,
I don't know that there's anything you can say is obvious.
I mean, certainly get it gets much easier, Like in
twenty twenty two, we're on this show saying well, the
market's down twenty or thirty percent, probably should buy it.
But we even then weren't saying, obviously you should buy
it because it could get worse, but your probability was higher.

(48:17):
And when the market goes the other way and goes
through a boom period like we've been in the last
three years, your probability is probably a little bit lower
that you're going to get another twenty thirty percent return
on top of that, So just be careful, folks. Thanks
for listening. We'll talk to you next week. You've been
listening to Money since brought to you each week by

(48:39):
Kristen Wealth Management Group. To contact Dennis brad or Kevin professionally,
call four one nine eight seven to two zero zero
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Their email address is Kristen Wealth at LPO dot com
and their website is Kristenwealth dot com. Opinions voiced in
this show or for general information only, and are not

(49:00):
intended to provide specific advice or recommendations for any individual.
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