The Fagan Financial Report

October 22nd, 2023

Episode Transcript

(00:00):
Good morning, and welcome to theCapital District's Money and Investment program. You're
listening to the Fagan Financial Report.I'm Dennis Fagan, sitting here with my
son Aaron, as we do everySunday from ten to eleven right here on
News Talk eight ten and one Othree to one WGY. Got quite the
show planned for you today, firsthalf hour. The Federal Reserve Reform Act
of nineteen seventy seven. Everyone's hearda lot of listeners have heard about the

(00:21):
dual mandate of maximum employment and stableprices. However, there was a third
component to that dual or triple mandateactually, and that is moderate long term
interest rates. We'll see what's goingon in the treasury market right now.
Four percent is now four point sevenpercent studied done by Bill Bengen in nineteen

(00:42):
ninety four, talked about a fourpercent distribution rate. It's been revised to
about a four point seven percent disdistribution rate from your investments and gold Pops
mortgages hit eight percent. Good thoughtsand good morning air. How are you.
I'm doing good? How are yougood? Flannel Fest today, sixth
annual six touch on that a littlebit if you don't mind two to five,

(01:03):
Ryan's Wake, Ryan's four oh threeRiver Street, bring a toy for
Toys for tots and that's in abook, right book book. Yeah,
you get a free softer hard drink. Aaron. I'll be there as well
as everyone else who works for us. It's our sixth annual one. We
contribute a lot of things to thatas well. Yet nice, it's just
a good event. Yeah. Yeah, we have nice clients. You have,

(01:26):
you know, a lots show upand yeah, it's just it's been
a good event. We have generousclients. Generally, we really do nice
clients, generous clients, and sowe'll be there. It starts, it
starts at two, ends at five. You know Samantha, Mary, Aaron,
Ryan, and also Karen. She'sbeen doing this. She can't help
herself. She can't help herself.Had Lauren made a basket to this year.

(01:49):
It's Christmas basket she was at Target. Yes, right, so we
got giveaways, we got raffles,we got fifty to fifties music. It's
it's always good. It's always anice event. We usually get a couple
hundred people there and hopefully we'll havemore there this year, more there this
year. In the second half,I will talk about MFS pushes down beyond
the news every week and talk aboutisn't the topic that we're going to spend

(02:10):
a lot of time on is abull market? Bowling quotes is this a
new bull market or not? Andalso knows it, know it all's pay
more for investments. So we'll talkabout that. But let's get right into
the week. Are the Dow Jonesindustrial lavage fell five and forty three points
to close a fifty thirty four twentyeight? Why do I bring that up
right away? Because you're to date, that pushes the Dow Jones industrial leverage

(02:34):
into negative territory. People don't reallyrealize that, you know, even I
look at it and I'm a littlebit surprised, but it just makes sense
when you have that. You know, S and P s, you know,
the S and P four ninety threedoing so poorly, and I know
we kind of keep on talking aboutit on the show, and you know,
at the beginning of the year youhear a lot and even last year,
and I think it worked a littlebit last year's you know, diversify

(02:57):
get outside of the you know,large cap tech holdings, but you know,
they've proven once again. RSP equalweight s and P five hundred ETF
is down one point six percent uhthis year, you know, and you
see the SMP up you know,ten percent this year. So you know,
I think we've been saying this fora while. Large cap tech needs

(03:17):
to, I guess, prove usthat they're not the best investment out there
from the on the equity side goingforward. If if you take overvaluation out
of the equation, and I know, you know it's hard to like,
well, overvaluation is part of youknow, the main part. Someone would
say, yeah, but you know, I don't know. I think that

(03:38):
these companies will go become undervalued overvaluedover time. But you know, I
think that that's just going to happen, and I think they'll we'll need other
reasons to sell those companies other thanovervaluation from time to time. Yeah,
you know, I agree. Andif you look at the NAS that composite
this past week down three point onesix percent. So certainly when you have

(04:00):
interest rates move in to the extentthat they did, especially on the intermediate
to longer end, you're going toget more volatility in the navs that composite.
But that does not necessarily mean you'regoing to get you're going to take
on more intermediate and long term risk. You know, from time to time,
the market, uh you know,moves in a in a aggressive fashion

(04:25):
for lack of a better word.And then so the assets that are counter
to that do take it on thechin more than others. And that's why
you saw when intermediate long term interestrates go up, you have longer dated
instruments. Secular growth investments specifically don'tdo as well as others. That's why

(04:45):
you had to Dow down one pointsix percent, the S and P five
hunder down two point three nine percent, and more diversified index. Then you
get to the NAS that composite whichis even more heavily dominated by technology,
and that's down three point one sixpercent. And I will say that and
this is just for this is justfor comparison. It's not I'm not stating
that this is a long term issueor not. But you know, our

(05:09):
common stock portfolio or managed stock portfolio, you know, which doesn't include ETFs,
it doesn't include bonds, just theindividual stocks that we watch, and
there's about fifty or fifty five andwas down one point eight three percent this
week the SMP down two thirty nineand NAZDEK down three sixteen. So and
when we're having a good year relativeto those relative to the s and P,
relative to the Dow, for sure, and I'm happy with that,

(05:30):
very happy with that, because wehave worked at barbelling our individual stock holdings
between growth components and the value ifyou want to call it, thank you
know, And yeah, I thinkit's we We've we've used energy as our
value play this year, and Ithink that's what worked in the past week.
You know, entered xcelly energy sectorspider ETF was up point zero eight

(05:56):
percent this week. So I thinkthat's where we're finding value on the value
side is in the energy sector,and I think we saw that this week.
I don't want to say luck isinvolved, but especially when something like
happened what happened in the Middle East, but I think what happened in the
Middle East stabilized oil prices a littlebit to the upside. Yeah, yeah,

(06:20):
we had you know, we haduber Vertex, you know, so
we didn't just go specifically with theXLV. Netflix has done well this year.
That's a technology I was just talkedabout it last week. What the
hell? This up a little soso last week's it's it's a good chance
to look at your portfolio, seehow you did. Yeah, and uh
but I will thank you if youwere three four percent. You know,

(06:42):
maybe your portfolio does skew a littlebit more towards towards the technology side than
it should. But the Dow downyear to date point zero six percent,
the Russell two thousand down four pointfive seven percent year to date, and
also down three point five three percentyear over year. Utility averages interest it's
go up. Utilities historically pay ahigher rate of return, so utilities,

(07:05):
you know, to use an oldWall Street adage or for widows and orphans.
And the utility average is now downsixteen percent year to date, down
six point six percent over the trailingtwelve months, and about thirty three excuse
me, about twenty five percent awayfrom its all time high. We are
way underweighted in utilities. We havebeen for quite some time. It's because

(07:27):
we because we did believe that asinterest rates went up, utilities would suffer,
and indeed they have. You know, here's here's not to shift gears,
but to kind of take a stepout of that specific you know,
you know, I'm thinking with witha ten year at five percent. You
know, you look at the sevenyear treasury sitting right now at four point

(07:49):
nine three percent to five year atfour point eight six percent. You look
at that and you look at likea next Terra Energy era, you know,
one of the one of the mostone of the soundish utilities. Uh,
you know, and and I thinkthey begin to I think you got
to put them on your radar screen. Yeah, I agree, you know,

(08:09):
you know, down five percent thisthis past five is down thirty six
percent year to date. Next,Yeah, you know, I agree.
I think you have to start puttingsome of these companies on your watch list.
But you know, I haven't donetoo much research. National have that,
uh you know, much of anopinion on it, right National Grid.

(08:31):
Also, you know a stock that'staken this year, any Ease dividend
now is three point six percent.I think it was in the ones at
one point, right, So,yeah, you know, I think it's
a good company. It's fundamentals arelook pretty strong. Just looked on looking
at some of their you know,key metrics. But I haven't done too
much looking into this really, right, So so I and then and then

(08:54):
I guess what we would say is, you know, it's it's a tough
it's a tough call. It's,first of all, it's arrogant to think
to know that, you know,you say, okay, I know,
I'm gonna be right, but it'sa tough cup. But we're getting to
the point that, you know,some of these interest rate plays look tempting
in through here, especially if interestrates start to level off or even go

(09:18):
down in the future. These allshould do very well. They should do
well, so you know, Iwould probably buy them down here, but
you could get bored out of themin the next three to six months.
Let's say if they go nowhere butshows social technology, if interest rates,
if interestrates are peeking in through hereand head down. We just talked about
technology taking on gin early this weekthis week, excuse me. Then then
then there I think overall, theystill up thirty two percent year to date

(09:41):
though, so you know, thoseare from elevated levels as opposed to let's
say a utility or next stair that'syou know, gotten beat up pretty significantly.
XOK is down thirteen percent from itshighs though. Yeah, so let's
take on that a little bit soyou know the first paragraph in our snapshot
that we send to all of ourcustom clients and clients people who aren't our

(10:03):
clients but want it's just email usat Faganasset dot com. Stocks fellows as
the yield on the ten year UStreasury that rose above five percent in the
war between Israel and Hamas intensified.As we noted this past week in our
opinion, at this point, stockprices will be supported by better than expected
earnings, and it was this pastweek to a certain extent. The banks
came out with decent earnings this week. We have Meta, we have Amazon,

(10:24):
we have Google or alphabd as wellas a lot of other companies be
supported by better expected earnings along withpositive seasonality, but held back by the
fears that the war between Israel andHamas will spread along with valuation. We
are most likely in the trading rangewith the bias to the upside. Despite
the gains us for this year.We counsel patients. There's no need to
be a hero. You know.That's pretty much us in a nutshell right

(10:46):
here, you know, Yeah,pick your spots. Yeah, you know,
I had an appointment this morning.That's kind of what it is whoa,
whoa, whoa Sunday morning. Yeah, you're great, but they you
know, and they said, whatdo you think about the market here?
It's like, you know, I'mnot too optimistic about the market, but
I'm not too pessimistic either. Yeah, so you know, I think we'll
be in this trading range. Andyou know, if you, if we
are a client in an income havesome income in your accounts. That I

(11:09):
was saying to them, you know, it's not the worst thing being able
to pick up four or five percenton you know, the bond side,
fixed income side of your portfolio rightnow. Yeah, and you think about
that, think about good news withinthe yeahs there is. And think about
if you're sixty two and your activeretirement life goes to seventy five and you
can get five percent on a tenyear treasury note. That means now at

(11:33):
seventy you've got five percent distribution guaranteedto seventy two. Now you take inflation
and and you you you have ifyou take up four percent of your distribution,
they've got six years where even inan inflation adjusted rate is above four
percent if you start out at five. So you know, the seven year
treasure I think I said four ninetythree or so, so you've got to

(11:54):
begin to look at these The problemright now, I think is is that
these these funds ETFs have gotten hammeredon a year to date basis, and
also you know even in the extentthat uh, those returns out of it.
If you look at the v cI T, which is the Vanguard
Intermediate Term Corporate Bond ETF, ona one point six per year to date

(12:18):
year to date, so that's notthat bad on a what what's it like
on on a three and a fiveyear basis? There? Yeah, three
years it's sound fifteen percent, soan average of five five years it's up
five point three seven, so it'sgoing up an average of one percent a
year. And I think I thinkthat's what happens to investors, is they
they tend to move away from thingsthat they feel the pain from and move

(12:39):
towards the things that are thing that'sgiving them return or gratification. And at
some point in time that's just theopposite of really what you want to do,
i e. Buy low and sellhigh. So I think there that's
where that's where we are now.I think we're in some sort of where
the where the tide has already comein, and now has it come in
all the way? Hasn't it comeall the way? When is start to

(13:00):
go back out? And we're inthat position I think right now with interest
rates to a certain extent, wherethe interest rates have come up far enough,
we're waiting for the economic data tocatch up with interest rates to show
that the economy is slowing, andthen we'll go from there with the economy
has certainly been resilient. What doyou think about mortgage rates? The Mortgage

(13:22):
News Daily reported that the average rateon the thirty or mortgage top eight percent
for the first time since two thousand. Average monthly payments up by one thousand
dollars as compared to two years ago. You know, I don't think much
different than when it was seven percent. You know, I think they're high.
I think people know that they're high, and I think we have to

(13:43):
get farther and farther away from theabnormally low rates that we once had.
That said, I think it putsthe FED in a little bit of a
tough bind in that so many peoplehave mortgage rates below five percent that it
will just take time for the higherrates to actually start to have an impact

(14:05):
on the economy. We need almosta new buying cycle, of of a
buying cycle that includes taking on debt. I think I saw and I think
it was a Touriston Slock from ApolloCapital Management. The average US mortgage rate
on a dollar weighted basis, Ithink is three three point six percent,
you know, and I think so. And if you take that into consideration

(14:31):
or in conjunction with the average personmoves every seven years. Now maybe because
of the pandemic and people working fromhome, the average person isn't gonna move
every seven years because they don't haveto go into work. They can work
from home. AI also you know, kind of helps with that, helps
with that. And then you takea look at with interest rates at three
point six you know, if theaverage if the average mortgage is one thousand

(14:56):
dollars a month more, then you'regonna have to really hate your home to
move, now, I think,what or hate your job. Like Let's
say let's say you're making seventy grandand someone says I'm gonna pay you seventy
five to move to tim Buck two. You're gonna say, well, if
I got to buy a new home, I'm gonna pay a thousand dollars more
a month for this mortgage. I'mgonna lose relative you know, relative money.

(15:16):
Yeah, but eventually that's gonna cometo come to fruition. You know,
if you look at supply and demandwith homes, you think about anything,
think about chips, think about whatever. If there's a great demand for
things, eventually the supply is gonnacome up to meet demand. Because people
think they can make money by buildinghomes, I would think, you know,
yeah, so eventually that's gonna thosetwo are gonna come together. And

(15:39):
but I think that results in lowerhome prices hopefully. You know, if
supply comes up to meet demand,or if if demand comes down to meat
supply one way or another, it'sgot to result, I would think in
a drop in home prices. Youknow. And look, if your home
price, let's say the price onyour home went up, you know,
let's say not your home specificly.Let's say I went up from three hundred

(16:00):
to four hundred thousand dollars in thepast three years. You'd be, oh,
my god, this is great.If they went from three hundred,
four hundred to three fifty, wouldyou be saying, oh my gosh,
it's I gotta sell this, oroh my gosh, it's still it still
was only where it still was worththree hundred three years ago. Well how
would you how would you feel like? As you know, I don't know,
I don't. I don't think muchabout housing being a part of your

(16:23):
net worth, you know, Ieven downstairs. You know, you talk
to people about how much debt theyhave, and you know, they always
bring up their mortgage and their cars. And although you know, you take
that into calculations for financial planning,those are almost like necessities that you need
anyway. So I don't take that, you know. It's it's almost like
the cost to live. It's likea cost of living, you know,

(16:45):
a mortgage. So you know,if if my house, which probably has
happened, has gone down in value, that I wouldn't think about it right
now, to be honest, Iwould I never think of pulling money out
of my house to make more money, if that makes sense. I'm not
a commercial real estate company where youknow, I can borrow from my home
to buy a new home to buyto buy more properties, So you know,

(17:08):
I don't really think about it likethat, to be honest. Yeah,
because refinances have dried up for obviousreasons. The other thing I would
say, though, is it's aninteresting point that you made because you're thirty
thirty four. Thirty thirty four,right, So yeah, you're thirty four.
I'm sixty two. The only timeI would ever see our house,

(17:29):
mom, is my house as asan asset. I mean, for maybe
for networth a nursing home, maybenetworth for taking it from me, right,
maybe networth for estate planning, butnot for certainly not for cash flow
unless I intended to downsize. Yeah, if you intend to downsize, that
you take that into an account.But at thirty five, I don't thirty
four, I don't think you woulduse your home as an asset. And

(17:52):
you know, I don't think youshould ever buy a home either, thinking
that it's going to go up invalue. You know, I don't think
you ever should get into real estate, your primary real estate, with the
assumption that you need it to goup in value. That's what happened in
two thousand and eight, you know, that's the second and third homes.
Yeah, so I don't know.I don't really take homes into account.

(18:15):
But as you said, you know, you know, it's crazy though.
I you know, I had someone, a friend of mine's parents sold their
house and a nice beautiful house upin Brunswick and they're selling their house for
the same price as a town hometo three acre home in Brunswick. They're
moving to a town home and gettingthe same amount of money. Well,

(18:37):
it's dollar for dollar transact. WellI think you were talking about, Well,
it's crazy the baby boom generation.I think you say, there's ten
thousand people turning age sixty five everyday. Yeah, so I think that
may have something to do with Andalso I think you know, it's what
you want to so like is itcrazy, yes, but like do they
really care? No, right,you know, And I think that's a
lot of people are in that situation. But yeah, townhomes are crazy,

(19:00):
Yeah, four seventy five to likefive twenty five in this area. So
you know that that's tough for people, especially first time home buyers. And
I think less than two percent ofhomes are now less than two hundred thousand
dollars. So yeah, it's it'shard to be a first time home buyer.
The impact of higher interest rates islike an albatrosse hanging around the neck

(19:21):
of the housing market. I think, did you make that up? Yeah?
I like it, but I don'tthink I don't think that. I
don't think it like I don't thinkindustrate's got to go back to three percent,
but I think they've got to firststabilize, and then if mortgage rates
move back to six percent or sofrom eight, I think the housing market
would be fine. I think we'vegot to get some stabilization in there,

(19:44):
which brings me to my next topic. That third mandate from the Federal Reserve
Act of nineteen seventy seven. Mostsay the FED has the dual mandate,
you know, maximum employment and stableprices would just come gone. No.
No, it's like you know,and I like that you brought that up,
and you've brought it up probably fifteentimes this week, and it's given
me a lot of time to thinkabout. And I think what I like

(20:04):
the most about what we read itagain, I don't have it a Federal
reserve. Despite the fact that thelist the Act list three mandates, most
refer to the FED is having onlya dual mandate, the dual mandate of
maximum employment, and that's about afour percent unemployment rate. Right now,
we're about three point eight percent stableprices which exists two percent inflation. If

(20:26):
you have you know, four percentGDP growth, you want moderate interest rates
because you want responsible spending, youknow what I mean. So I think
you don't want too high interest ratesbecause you don't want the economy to shut
down. And you really don't wanttoo low interest rates because you don't want
free money, because people start toact irresponsibly. As my mom always said,

(20:48):
something someone else, just something forfree, take it and then decide
what to do with anything, youknow, And I still don't think we've
felt the brunt of that really incorporations. So you know, I do
think that that interest rate of youknow, four is percent is a healthy
interest rate to like induce responsible spending. I think some of the larger cities

(21:12):
are have yet to deal with commercialreal estate issues because of long term leases
are just beginning to expire. Ithink you take a city like Troy,
which you have a lot of residentialhousing really that has been built. I
think that's fine, but I thinkwhen because I think the need for residential

(21:33):
housing will be there for a longperiod of time. Apartments, although it
would be interesting to see and it'sit's probably a good business opportunity for many
would be to move to the condominiummarket from apartments selling condos selling. Knowing
Troy there's no one building down inTroy that sells them. But yeah,
I don't think it's really that'd beinteresting, I guess, so the last

(21:56):
topic that But anyways, so thefeds dual mandate, We've got a couple
minutes ago, so let's stick onthis topic. The Fed's dual mandate is
actually a three pronged serpents so tospeak, to maintain moderate long term interest
rates. And the Fed has animpact on long term interest rates, but
long term interest rates a good chunkof what where long term interest rates stand

(22:22):
are also dictated by economic activity andalso inflation expectations, and I think what
the Fed's got to do is becareful that inflation expectations don't get embedded into
the economy, because then investors willwill expect higher long term rates for as
you know, you know, tocommand some of their money. And I
think that's one of the areas thatthe Fed's being very careful on. You

(22:45):
know. Fed Pole came out thisweekend and made a couple of comments saying
inflation is still too high, andlower economic growth is likely needed to bring
it down. And yet you knowit's a tough struggle right now. So
in essence, I think we remain, you know, somewhat in a tree
range seasonality. Year ends usually aswell. But you know, I'll finish
up here. You may go fromchasing returns if you're behind the eight ball

(23:07):
relative to the S ANDP, toprotecting your profits if you're ahead of it.
Yeah, so we'll see once again. Yeah, two to five,
Ryan's Wake flannel Fest River Street andTroy redik or a toy toy right at
the right at the Troy side ofthe Green Island Bridge. Yeah, and
it'll be anyway. So that'll justabout do it for the first half.

(23:27):
It's ten thirty on the station youdepend upon for news, weather and information,
also the Fagan Financial Report, NewsTalk K ten and one O three
one w g Y, Good morning, Welcome back to the second half our
of the Capitol District's Money and Investmentprogram. You're listening to the Fagan Financial
Report. Tennis and Aaron Fagan sittinghere today as we do every Sunday from
ten to eleven right here at NewsTalk K ten and one O three to

(23:49):
one w G y second half hour. A going to divide it into two
twelve minute slots or so, andhopefully we'll get to it because we kind
of like tend to drone on it'sa good drug. It's a good drone.
It is a good drone. Butfirst, first segment, Beyond the
News, your weekly digest of usnews as it pertains pretty much to the

(24:11):
financial market, has delivered to ourinbox from MFS. You know, we
get a lot of good content fromdifferent companies that we not work with,
but you know, maybe we usetheir funds, maybe we've worked out of
them in the past, or thatwe got into their you know, you
know inbox folder where they can sendus things every week. And this is
one of my favorite ones. It'sbeyond the News. They used to have

(24:33):
beyond the Numbers, which I liketoo, which was just you know a
little bit of a you know,yeah, statistics that they'd push out,
but they don't do that anymore.So this is a good one though.
You know, every week some differentthings come out and this week is good
that so I think that's why wedecided to go with it. And you
know, interestingly, you know,it was a really rough Day Friday,
really rough day Thursday as well,and you know we have a bull market.

(24:57):
The S and P five hundred twentytwo point four percent gain in the
year since last October ranks. October'slow ranks is the third week is in
the first year of a post WorldWar two bull market. Since nineteen forty
five, the S and P fivehundred's average gain in the first year of
a bull market has been thirty ninepoint one percent, and only the eighteen

(25:18):
point nine percent gain in the firstyear of May nineteen forty seven bowl market
and the twenty and the twenty onepoint four percent rally in the first year
of the December nineteen eighty seven bowlmarket were weaker. You know, what
do you take into account there?Well, well, first of all,
I think, you know, isit a new If you use the same
statistics to determine a bull and abear market all the time, then it

(25:41):
is a new bull market. Thewith the mfs beyond the news, they
have bolt in quotations mark suggesting thatthey do not consider this a new bull
market. Now by definition, it'smore because we just got over the twenty
percent mark, right, yeah,I guess so, or that we didn't
have the capitulation or yeah right,or barely over twenty two twenty percent.

(26:03):
Excuse me, I in the strictestof terms, it's a new bull market.
You know, I would not consideryou know, I don't know.
I think I would consider it anew bull market, but one that AM
not surprised that the gains the twentytwo point four percent from the October twelfth,

(26:26):
twenty twenty two closing low pales incomparison to the average bull market a
because generally speaking, historically speaking,bear markets go deeper than the twenty two
point four on both both absolute terms, but also evaluations go down, where
the price startings ratios go down quitea bit more than the fifteen or so
that we got to it the OctoberOctober twenty October twenty two closing lows.

(26:52):
And the other thing too, Ithink we had such frothy evaluations going into
that correction that started I think JanuaryJanuary third of two thousand twenty two.
You know, I think those andI think that's where you know, and
I think that's what you're kind ofstruggling with, and maybe I'm not positive,
but like you know, when youwhen you say bulling quotation marks.
You know, I would say we'rein a bull market because the only other

(27:14):
option is being in a bear market. So like it's hard to say bullmarket.
But like at the end of theday, if we're either in a
bull market or a bear market,I would I would skew towards bull market,
still, right, So what Ibut look when you when you talk
about it like this isn't semantics confidentthis thing for the listeners, This starts
as semantics bowler Bear. I don'tcare, you know, for the for

(27:34):
the listeners out there, but Ithink it's more than semantics, because I
think if you take a look atwhy it may not feel like a bull
market is precisely what we've been talkingabout over the past several months. As
you know, the seven or eightstocks that have led the market, which
is forty percent of the S andP five hundred. Without those in your
portfolio, it doesn't feel like abull market, no yees. So you

(27:57):
know, if you have let's sayyou're nearing retirement, and you know,
you go to your financial advisor andyou know, sometimes not only like you
should be sixty sixty percent this,let's say you should be fifty percent in
the stock market, fifty percent inthe bond market. You know a lot
of times that what financial advisors door just asset managers is, you know,
just because you're in retirement, youskew away from you know, technology

(28:21):
stocks, and that would include Apple, Microsoft, you know, Amazon,
Meta and all the in all thosecompanies. And then if you look at
like you know s c h Dwhich is Schwab dividend payer, that e
T if you're the date it's downfour point eight, what about your what
about the trailing ar Now it's trailingone year, since it's up four point
seven nine, can you can youask makes a couple of punching v D

(28:42):
I g X the Vanguard Dividend growthv d I G I don't think that's
v l v v d I gX And what what is that doing in
your year? You know, yearover year that is up six point seven
four? Then how about I gottwo more? How about the spy spy

(29:06):
I have it right here, whatyear you're seventeen point seven? And then
one more? The SHV I knewyou're going to say that last that year
one year to date is down twopoint three seven years up six point three
two percent and you know, yeahit's largest holding. His Berkshire SCCHV is
doing a little bit better, butit's still only seven point I thought it
would have more energy, but it'sstill seven point eighty five percent energy.

(29:30):
So if you don't have large captech like you know, where the XLK
I think is up, like XLKis up about thirty percent your and I
think that's why we're going to bein a trading range. Right, So
we have the the you know,X seven largest stocks are are flat for
the year. You know, thatdoesn't really give you a bull market feeling.
And then let's say going forward,you have you know, Torst and

(29:52):
Slock from a Pilo on October eighteensays, you know, the pe for
the S and P four ninety threehas fluctuated around ninety for twenty twenty three
because the market hasn't moved much forthe S and P seven. So the
set set there's seven companies has increasedfrom twenty nine to forty five. So
not only do we have you know, the RSP not doing much, which
doesn't give you much confidence in thosesectors you have, now we also have

(30:17):
a pretty expensive S in the sevenlargest companies. So you know, I
think that's why it really doesn't feellike a bullmarket, because you know,
fourtune ninety three companies aren't doing goodessentially, and the seven that are are
now extended. How about this onetoo, though, is that what do
you have up there right now?Nothing? Can you tell me? Tell

(30:37):
me what the sh D did intwenty two two? Right? That'll that
might take a little bit longer,not a little bit longer, but yeah,
I'll just have to put it right, so I would what what my
point is is that if you hadeven if you have the sn you have
the S and P five hundred,this year, you're up seventeen percent.

(31:00):
Last year you were down twenty somepercent. So let's say you skirted last
year and you had SHD was downsix point three percent last year. So
people who people who skewed towards valueair it word, well, no,
it didn't work because if they're stillthere, I think, you know,
I guess my point is that peopleare neither in a bull market or bear
market. Most people either suffered lastyear with the spy and some year and

(31:22):
cover still doesn't feel good, right, you suffered, you suffered less last
year in the SCHD, but you'renot getting any returns this year relative to
the market. Last year you gotbeat up with the Microsofts of the world.
This year you're up twenty five percent. So I think we're neither bull
or bear. We're in a tradingrange for the past two years. I
think the market's been so since thebeginning of twenty twenty two. You know,
we saw the down six and downeighteen for twenty twenty two SDHD and

(31:47):
SMP. But if you extend itfrom the end of twenty twenty one,
so beginning of twenty twenty two tillnow, SMP's down eleven and shd's down
thirteen point eight percent. So youknow, you hear a lot about you
know how people invest now too,And it's like, is is diffidend in
value investing a tactical trade? Now? I know some funds, you know

(32:08):
some funds, do you know ourvalue funds? Fan Value has one ftamore
Asse and that's doing terrible this yearrelative to the market. Yeah, yeah,
And so you know, you canskew towards value, But in my
opinion, if you're a long termtrader, that's hard. Well, if
you're a passive investor, you're justnot if you're a passive investor. Also,

(32:30):
you obviously don't skew towards value,because if it's a market cap weighted
index that you have that skews towardsgrowth. Warren Buffett once said he've never
owned technology. His largest holding isApple. If you don't change with the
times, you're basically left rolling downyour window rather you rather than put it
out with see a lot of these. If you go on morning Star and
you invest in any specific fund,you see a prospectus, you see basically

(32:52):
you know their guidelines of what theyinvest in. And if you have a
company that's a mutual fund that's tenfifteen twenty years old, think of how
much the economy has changed ten fifteenyears and ten to fifteen twenty years ago.
You know, if you're still evaluatingcompanies on the same metrics then as
you are now, that's a problem. I agree, you know, like

(33:12):
and I think you see that alot too. You know, with in
my opinion, with younger people whowant to get into stock market and wanted
to want to get into stock picking, they don't really know what to look
for and everything is kind of basedon you know, the Benjamin Graham you
know whatever, what I can't thinkof his name, his book off the
top of my head, random walkedout Wall Street. Now that's not it.

(33:35):
But he also has his security analysisbook, so they're kind of similar.
They were, which they still havea lot of good points in them,
but the economy has changed so drasticallysince he wrote that in the seventies
that you know, you have tobe open minded, I think when it
comes to investment. But sticking onthat same topic, because I'm getting all
these calls, people are saying,you know, I'm kid listeners to our

(33:57):
show. I would want to beknown. Okay, fine, fine,
you're telling me that if you ifyou kind of skirted the bear market last
year, you've also skirted any gainsthis year. Last year, if you
got beat up by twenty twenty fivepercent, you're up twenty or twenty five
percent this year. You're also tellingme that the S and P five hundred
spout flat over the past two years. Well, okay, fine, what
do I do? What do Ido? And I would say, and

(34:20):
I don't want to leave you hangingon this one, but I think you
barbell on the one side, youbarbell if you look at a barbell,
like a weightlifting barbell, on oneside, you have energy. I think
it's very reasonably valued here. Youknow. Yeah, we be maybe entering
a soft period in economy which maybeing prices down a little bit. But
I do think you know, unfortunatelyor the way business is, you know,
issues in the Middle East can cancan at least cause support for oil.

(34:45):
You also have, you know,a really splitting up of the West
versus the East. So I thinkyou have support for oil on a secular
basis. You have breaks down atyou know, fifteen or twenty percent year
over your lows. So I thinkyou take that. I think it takes
specific healthcare, you know, youknow, maybe can nibble at some of
the more traditional ones, but yougo with the regenerons, you go with

(35:07):
the Vertex in that area. Thefinancials you stick mostly with either JP Morgan.
We have a little bit of Bankof America or the visa master cards
and payment processors and find those Beyonshoring, and then you barble that against
some technology that are the high pees. Yeah, and you know, I
think if you do stick, ifyou do skew towards like growth investing,
you know, I think it's importantto pick out five or six companies that

(35:29):
you know aren't in your wheelhouse,but are great companies, like a like
a UNH, United Health, likea Regeneron. I mean Degeneron could be
considered growth, like a Johnson andJohnson, deer Berkshire, Hathaway. These
are all companies that may be boring, but they'll really help help your portfolio
out if you do have if itis kind of heavily invested in let's say,

(35:53):
even the S and P five hundred, because it's market cap weighted,
so you have, you know,thirty percent almost in the larger cap technology
companies. So I think it's smartto always have some stocks or sectors in
your portfolio that you don't like andyou know they'll bore you to death,
but you just keep them there.It's a good diversified portfolio. And also,

(36:14):
I think if you take a lookat secular themes versus cyclical headwinds or
tailwinds, it's tough to determine whatlike if again, if you look at
this tragedy in Israel, and subsequentlyyou know, with the citizens of Gaza,
certainly not Hamas, Okay, thisis a tragedy was somewhat unforeseen for

(36:36):
sure, and so so you maynot get a cyclical play right, But
if you have the secular story rightlike a deer or a caterpillar with with
a quality company with with a fortressbalance sheet, I think you can stay
with it. You mentioned Berkshire,you know, so these are companies that
you can stay with through thick andthin. I think, you know,

(36:57):
for the listeners out there, Ithink we got to touch on some uh
ETFs two that that that that wethat were involved with, you know,
we we certainly have some of themore core ETFs like SPY, SCHWAB Dividends,
SCHWAP, broad Markets s and Pfive hundred funds. But I think
if you, if you, ifyou dig a little deeper than that,
I think I think d g Tis a good one. It's the Spiders,

(37:17):
Global, DOO, the Global DowETF. So about eighty percent of
its assets and security is comprising thenext made up one hundred and fifty companies
from around the world. So itdoes give you as global and a little
bit of you know, more globaland global usually leads to more value esque
companies. Thirty thirty seven percent ofit is in large cat value companies.

(37:40):
You have seven point eighty four percentin energy, thirteen percent in industrial,
is only thirteen percent in technology.So d G. T. Dennis goes,
I don't trailing, Okay, allright, it's like another word for
hiking, you know. Yeah.So you know it has a two point
sixty two percent dividend yield. That'sas you know a lot of times overseas

(38:00):
companies pay a little bit better ofa divident and it has a point five
to one percent expense ratio. Andwhat's set up here to date year to
date's up twenty two percent. It'sone year, so you're still and five
that's the year of year. Butwhat's the points to six percent this year?
The IOO we like that. Yeah, I always a good fund.

(38:21):
You know, it's largest shares globalone hundred ETF, so it's the hundred
largest companies in the world. Thatone is does have you. But because
the largest companies in the world,so you know, the largest holdings in
that are Apple, Microsoft, Amazon, and Video Google. But then it's
Eli, Lilly x On, JP, Morgan, Johnson and Johnson. So
although the largest companies are you know, maybe large cap tech, when you

(38:45):
get down to the to the middle. You have a lot more to companies.
Year to date, it is upfifteen point nine seven percent, so
it's doing well one point seven sevenfour percent dividend yield, So that's that's
obviously a good company. So i'dsay Barbell the IOO with the DGT.
You know. I think the otherthing too is like and this this is

(39:05):
a little bit of a digression.I think you really have to look at
your bond funds and capture losses andnon qualified accounts. And we're working on
that for our clients that are listeningout there to go from bond funday to
bond fundb bond funday. Maybe you'vehad it for eight years. Let's say
you've reinvested dividends for eight years.You've paid tax on those reinvested dividends for

(39:28):
eight years. So if you putfifty thousand dollars in that and reinvested dividends
and pay tax on those dividends orinterest for eight years, and you've had
an increase in interest rates which suppressesthe price of bonds, you might have
a basis now after reinvested dividends offifty five to fifty six thousand and a
value of forty eight thousand, sellit, get the forty eight, you

(39:50):
can write off reinvest that forty eightinto a similar fund. It can't be
exact same type of fund or elseyou couldn't write it off. That would
be a wash sale. And thentake that capital law US an either market
against gains or net net you canclaim three thousand dollarsand losses a year.
So let's say that's your only securitythat you sold for the year, and
you have an eight thousand dollars capitallowe. You can write off three and

(40:12):
carry forward the rest for future.So that's something as we as we as
we get into the last you know, eight to ten twelve weeks of the
year, that's something you want tofocus on moving forward through the balance of
the year. So that pretty muchcovers I think the block one of beyond
the news from MFS the bull marketquote unquote bull market, and I agree

(40:34):
with him. I also, youknow, maybe we're not done with it.
You know, there have been rollingcorrections along the way. So even
if you were to you know,there's been rolling corrections along the way that
I think have hit most sectors atone point or another. You energy got
hit within the past down twelve percentin the first three or six months of
the year, So so I thinkyou got I think I think that's why

(40:59):
investors, how are feeling perhaps abit uneasy. If you're hung in there
last year, you're just hanging inthere this year and not not doing what
the S and P is. Ifyou underperformed the sm P last year,
you're out performing this year. Buteither way, you're kind of feeling ill.
I'm kind of stagnant. But theother thing, too, is that's
what happens, that is investing.Yeah, you know, I had someone

(41:20):
come in and they were my age, a few years younger than me,
and they've done a great job ofsaving and you know, it was funny
hearing him talk because he's my ageand he's a he's an electrician. He
works for National Goods, so he'sa really good job, works a lot
of hours, and he was saying, how you know, if you do
a compounding calculator, I think Idid five percent, he'd have X amount
of dollars and when he retires,and he's like, you know, I

(41:40):
just can't I just can't wrap myhead around that, or honestly, he
can't believe it now and he wassaying, becacause anywhere, because because it
you know, it did so wellin the beginning and it hasn't gone anywhere
in three years. And I wastrying to tell him that, you know,
being thirty years old, that's kindof the best thing he can do.
You just keep piling money away atthese lower prices because if you're you

(42:01):
know, even if you're in amarket cap weighted index, you know,
you just continue to pile money into, you know, some of the best
companies in the world at prices likethis, because you know in twenty years
they'll be higher. And you know, it's really hard to do taking money
from you know, out of yourpocket essentially today for tomorrow. You know,

(42:21):
it can be tough, especially whentimes are tight for people you have
a kid. You know, you'respending goes up a little bit, you
gotta pay for school or something likethat. But you know, I try
to tell them that, you know, it's probably one of the it's probably
a great thing to have. Itwill be a great thing. He just
won't know it for a little bit, right, And that's true. You're
stopping up shares at a lower pricewhen you're young. Time to accumulate chares,

(42:43):
so anything else in that first block. These these are blocks by MFS,
and that that was data delivered tous by MFS. But the sources
bespoke and I got a couple ofyou if you want one, No,
it'll all quote unquote pay more.Researchers and this is from FINRA. Researchers
have found that there is a negativecorrelation between investors with high levels of assessed

(43:07):
investment knowledge and the fees they paymore knowledge lesson fees. However, when
it comes to self assessment investment aptitude, level of knowledge and fees paid are
positively correlated. Those who think theyknow more also pay more. And that's
that's odd a little bit. Youknow, those who know more pay more,
right, So those there's a negativecorrelation between investors with high levels of

(43:31):
assessed investment knowledge and the fees theypay more knowledge lesson fees. However,
when it comes to self assessed investors, more knowledge equals more fees. And
I think one of the things Iwould take from that is that the high
level, if you actually high havea high level of assessed investment knowledge,

(43:52):
you'll pay lesson fees. And ifyou however, when it comes to your
own self assessed investment aptitude, you'llpay more in fees. And I think
that what happened. What they're sayingthere is if you actually have a high
level of investment aptitude aptitude, thenyou know what you're doing, you'll pay
lesson fees. But there's a lotof people out there who think they know
a lot what they're doing, andthey will pay more in fees. And

(44:16):
you know, and sadly we dosee that at the office where and it's
almost you know, everyone has likea self defense mechanism where and some people
have it. It's some people havea period. And we do a lot
of working behavioral side of the investmentequation. For the listeners to the show
who are kind of new because peoplehave been around know that we talk about
this quite lot. You know.You know, I don't want like you

(44:37):
don't want to offend anyone no onthe show either, But you know,
what I find is it's hard towork. People that have high degrees tend
to, Yeah, it seems likethey tend to almost get too involved when
they don't have the time available inthe day to be as well. And

(45:00):
that's not as they should be.That's not it, that's not that's not
it. That's not an insult.You know, the the highly intelligent person
will say something, there's got tobe an answer here, There's got to
be an answer. I want tofind it. Quite often there is the
perfect asset allocation right now. It'sthere, you just have to find it.
Right. You tend to find architectswho or engineers are very dispred and

(45:21):
their risk averse. Sometimes those arethose are jobs that tend to have people
be risk averse. So I thinkwhen you're risk averse, you're always you
know, especially in a market that'sdriven by technology companies, and you know
that kind of skew the line atovervaluation consistently that it you know, it's
it's hard to you know, Ithink it's sometimes it's hard for people to

(45:42):
just to you know, stick inwith with companies, right because remember,
the price per share is predicated uponthe supply and demand of the security for
the security. So if the supplyof the shares is not changing, if
the company is not either buying backshares or issuing new shares, it basically
comes down to the demand for thesecurity, and lots of that demand over

(46:02):
the long term is much more predictablethan over the short term. Think about
the emotion involved with short term demandfor let's say, you know, companies
in and around Europe when when Russianinvaded Ukraine, or or now in the
Middle East, or companies that youknow maybe are chip related pertaining to China.

(46:24):
So over the over the short term, it's an emotional balance between supply
and demand. Over the long term, it's an intellectual balance between supply and
demand. I think sometimes people tendto confuse the two, or or they
confuse volatility with risk. A companycan have volatility over the short term and

(46:45):
not be very risky over the longterm advice versa, and sometimes they do
go hand in hand. So that'sthat's that. That's the one from MFS
that I that I did want totouch and it's funny and I'm just looking
at it's like, you know,I could see it's funny you have I
could see CPA's comments be true aboutengineers asking for too It's about engineers asking
for too much information because that's whatan engineer's job is to do, is

(47:07):
to analyze information. Except that thefinancial world is full of bs and it's
kind of true and read it.But it's about weeding out the bs.
That's hard. What leads you tobe successful, Like think about Poppy.
He was he was, he wasa great guy, and he had your
grandfather, my dad had. Peopledon't realize he had one usable arm.

(47:28):
So his stubbornness and his will tosucceed and provide for his family led to
his success. But it also ledhis stubbornness not to carry his cane around
and he fell in his head afew times. You know. So in
one area you say, okay,that really benefited him, But in the
other area, as he got old, that stubbornness really worked to his disadvantage.
And I think it's the same thing. I'm sure people could say the
same thing about me. I'm avery stubborn person myself, you know.

(47:51):
But you know, what you're goodat is, and I think is what
you're extremely important in the stock marketis self awareness. Knowing your faults and
being self aware on them and youknow, picking them well, mom helps
me with that. Your mom helpsme with dead. So anyway, so
you know, I help you,you know, I hope as we move
through this show, every single week, Aaron and I try to provide you

(48:12):
with something that's informational but also entertainingand also something you can take and take
a look at your own portfolio andsee how you're how you're school give you
some names. Anyways, I'll justabout do it. Thanks for listening.
If you want to get ahold ofus two seven ninety four, check us
out on the webit fag and that'saiddot com, or like the Sun fanal
Fest two to five today, Ryan'sweak. That's it.