The Fagan Financial Report

November 26th, 2023

Episode Transcript

(00:00):
Good morning and welcome to the FaganFinancial Report. This is Aaron Fagan sitting
here by myself for the first halfand then my father Dennis will join me
for the second half. I'm givinghim. You know, we we actually
recorded the second half, so youknow, since COVID, you know,
we have we have the ability nowto you know record one half bolts halves
you know, uh, maybe justthe second half, so you know,

(00:20):
we have him coming in on thesecond half, you know, talking more
global thing. So in the secondhalf we talked about, you know,
what a presidential election means and whatit means for the stock market in general.
Christine le Guard from the EU said, the segmentation of the global economy
is underway and we're already starting tosee signs of you know, maybe fragmentation.
You know, we we we gotto where we are today from an

(00:42):
econ, from an economical standpoint.I'm through global through globalization, you know,
using labor in the East, innovationin the West, and in or
the opposite, impairing those together toyou know, get to where we are
today, especially technologically, and nowwe're kind of kind we're starting to see
some fragmentation East versus West. Youknow, the East is really trying to

(01:03):
build up their middle class and indoing so, they're kind of trying to
isolate themselves. But you know,I think it's going to be a good
amount of time before they get theconsumer in the East that they need to
become become I guess, standalone economies. And we also talk about the four
percent rule. The four percent ruleis back. According to the Wall Street

(01:23):
Journal, last year was about youknow, three point three percent. But
with the with the rise and interestrates, you know, they're saying that
the four percent rule is back.So we talk about all of those things
in the second half. On thefirst half though, you know, although
it was a holiday week, ashort week for for many. You know,
we had a half day on Wednesday, recorded the second half on Friday.

(01:44):
I'm head Thursday obviously off for Thanksgiving, but you know, it was
a little bit more of a busierweek than we thought. So we talked
about Nvidia's earnings, which were greatexponentially here over year. The Dow is
the lagger this year, only upnine point one four per not not not
this year, but the Dow isthe laggard in quotation sense. The market

(02:05):
bottomed in the pullback in October onlyup nine point one four percent. All
the other made major indices up overten percent, triple QS NAZAK one hundred
forty six percent year to date,but down thirty three percent in twenty twenty
two. So, you know,although we're we're really we're talking a lot
about, you know, overvaluation inthe market. You know, yeah,
maybe on a one year basis,but you know, if you just stretch

(02:28):
your time horizon a little bit,you know, you're still down two point
one percent since the start of twentytwenty two, sixty five percent chance of
a rate hike in May, andwhat that really means for the stock market.
I have some numbers for you onafter the FED is done raising rates,
what's what that means for bonds ingeneral? And we have who was

(02:51):
it the CEO of president CEO ofStu Leonard, the supermarket chain based out
of Connecticut, the approximately three hundredand forty one million dollars annual revenue,
says, the one thing I don'tthink we're going to get away from is
the increase in labor costs. Youknow, we've been talking a lot about
that and I think it kind ofgoes well with this deglobalization in that you

(03:13):
know, there will be increase inlabor costs if we want to do if
we want to produce more goods athome, and that might be inflationary,
but you know, we've been talkingabout that a lot on the show.
Although it may be inflationary, wethink it's extremely good for the United States
in general, both socially, politicallyand economically. So, you know,
if we can bring jobs back home, although it'll increase labor costing can be

(03:35):
maybe a little bit inflationary in theshort term, we think it can be
in deflationary in the long term.And I think it's really what we need
in America to build up the middleclass. And I think that's really one
of the most important topics we're goingto see in the next five to ten
years, is you know, thestrengthening of the middle class in America,
because we really believe that, youknow, with technological innovation, you know,
we don't have the pensions that wedo anymore. I think we had

(03:57):
about thirty two percent, thirty threepercent of people had pension twenty thirty years
ago and that's down to about twentypercent now. So you know, the
middle class is so important to America, you know, from a consumer standpoint,
but also from a social standpoint.I think that should really be one
of the things that we can beat least bipartisan about here, is that

(04:17):
the building up of the middle classand how it can be extremely good for
the entire entire country. But youknow, first we start off this week
saying stocks continue to rally off ofthe October twenty seventh closing low up until
now the second second conservative consecutive yearduring which the major averages have bottom during
October, a move that has takenthe NASAK composite US Total Market Index SMP

(04:41):
five hundred and Russel two thousand upat least ten percent. As I was
saying that now is the laggard inquotations of just nine point one seven percent
since those October twenty seventh lows.The move higher inequities has also been likely
fooled by seasonality as well as thecorresponding move lower on the yield of US
Treasury obligations. For example, theyear on the tenure has declined by seven
point six four percent from four pointeight four to four point four to seven

(05:03):
percent. On the belief that perhapsthe FED is done raising rates. So
you know, obviously the FED raisingrates is extremely important. And with this
sixty five percent of a rate cutin May, stocks should do well around
here. But you know, we'vebeen saying for a long time. You
know, rates around three four percentare what are normal historically, what we've

(05:28):
seen in the last let's say fifteenyears with rates around one percent, that's
the abnormality. And I think asa country and as consumers, we need
to get used to this three fourpercent uh interest rate because that is what's
normal. And you know, theera of free money in quotations is is
kind of over, and now we'regoing to have to see companies not only

(05:48):
do well because of the free money, but do well because they're responsible.
They're they're making every decision that theymake, every money, every dollar that
they that that they borrow, needsto be used widely. As you know,
the hurdle rate is now three fourfive percent. You know, the

(06:09):
mortgage rates are over nine percent ina lot of places. So you know,
I think although higher rates aren't greatfor the economy, we do think
they are plateauing, which should begood for the stock market. But I
also think it should be good forcompanies that you want to invest in.
You know, you want to investin companies that have that have really strong
balance sheets, really strong financial statements. So I think we're going to see

(06:30):
over the next one two, threeyears, the companies that are going to
do well are the companies that areresponsible fiscally, and I think that's really
important for you know, a workingeconomy. That's not to say the last
fifteen years didn't work, but youknow, with interest rates near one percent,
it was hard for it not towork. So now I think we're
going to see, you know,maybe a less volatile economy, a less

(06:53):
volatile stock market. We're going tosee that sixty forty portfolio gain some traction
again, and it's going to makethat four percent distribution rate that we talk
about all the time on the showmuch easier for clients and listeners to obtain,
as you know that the forty percentof your portfolio fixed income now can
yield about four or five percent,which I think is extremely obviously important for

(07:15):
the economy. Before we get intothe market numbers, you know, I
want to talk a little bit aboutin VideA. In Vidia's revenue tripled year
over year as AI chips boom.The AI chip boom continues. In Vidia
shares moved down one percent though andextended trading. You know, that's amazing.
In Vidia's revenue tripled on a trilliondollar company. So we're really seeing

(07:36):
the influence that artificial intelligence supercomputing willhave on the economy but also also stocks.
So you always think it's going tobe something AI is gonna is going
to be something that you know,takes place in the future, but we're
already seeing the implications of of ofwhat that means now. As in Video
earned about four earned four thousand andtwo cents, eating estimates of three dollars

(08:01):
and thirty seven cents. So youknow, in Video's numbers grew big,
they grew fast, and you know, I think Jensen Wong said a few
years ago that this is what theyenvisioned when they when they went public thirty
years ago or so is this timeand I guess history technologically where where uh
supercomputing? Where chips are basically thefoundation of of of everything, especially technology,

(08:26):
And we talked about it a loton the show, going back to
what I said earlier, building upthat middle class. We really think that
chip manufacturing bringing chip manufacturing home isone of the most important things in in
in in in the stock market,in the economy. Right now, one

(08:48):
other thing I would like to talkabout in regards to in video. And
you know, before I talk aboutthis, I have Norris Pearson coming on
at ten twenty. He's the presidentof the Renstler County Chamber of Commerce.
And we have the Victorian Stroll comingup on December third, so we'll be
able to talk about that. Youknow, the Victorian Stroll in general,
what what it means locally, butalso you know what the Renster County Chamber

(09:09):
does, which what what eCOM,what commerce chambers do for for the for
the region, for for business locally. You know, yesterday was shops small.
We went downtown, me and me, Lauren, my wife, and
Jude, my son. We stoppedin Market, Black Books, a couple
other places. And you know,the Chamber does a great job with representing

(09:30):
all businesses in your area. Andand and we we we think it's really
important for for for economic growth.But you know, back to Nvidia and
you know what we saw and Ithink they all kind of meld together.
And sorry if it's a little confusinghere. You know, on one On
one hand, I talked about,you know, the one thing I don't
think we're gonna get away from isis increased labor costs. And you know,

(09:50):
I think that's because of what we'reseeing is uh, you know,
employees being extremely important obviously, butalso vocal and influence. You know,
we saw Sam Altman fired. Hewas the CEO of open AI, the
chat GPT that we've heard a lotabout this year, and you know,
we think that chat GPT and AIhas obviously been you know, one of

(10:11):
the reasons that you know, theTriple cues, especially like the magnificent seven
Google, uh, Meta, Amazon, Microsoft, while they've done so well
this year, was because of thisintroduction to art to artificial in intelligence,
and we think that you know,chat GPT was kind of the first step
into that. But you know,Sam Alman was fired set but then seven

(10:35):
hundred out of I think the sevenhundred and seventies or so employees you know,
said that, hey, I'm gonnaquit unless you bring him back,
and they actually did. So youknow, we're seeing the strength of the
of the employee now and I thinkwe're going to continue to see that.
I think labor costs will will remainhigh. As you know, there's a
there's a three or so million morejobs in America than people looking for jobs.

(10:56):
So that's still lends the that's stillthe employing people looking for jobs in
a very high position. But beforewe get norse, come on, let
me go over the weekly numbers.All major industries were up this week.
J Dow Jones Industrial Average is upfour to forty two to close that thirty
three thirty five thousand, three ninetyup one point twenty seven percent, up

(11:16):
six point seven percent year to date. SMP up forty five thirty two to
close that four thousand and five pointfifty nine, up one percent, exactly,
up eighteen point seventy five percent forthe week. And now as that
composite up one twenty five thirty sevento close at fourteen thousand, two fifty
up point eight nine percent for theweek, up thirty six point one percent
for the year. Total market upfour to forty eight to close that This

(11:39):
is what I just said, fortyfive thousand, two seventy seven, Russell
two thousand, up nine to seventythree to close at one thousand, eight
hundred and seven, up point fivefour percent for the week, up two
point sixty three percent for the year, Utilities up two point four eight to
close at eight sixty five up pointnine two nine percent for the week,
still down ten point four eight percentfor the year. I think we could
see utilities start to do a littlebit well as interest rates plateau and start

(12:03):
to go down. But we'll seetransports up one sixty one ninety to close
that fifteen th ninety four to twentyup one point eight eight percent for the
week, up twelve point seven onepercent for the year, trailing twelve month
up four point five to one percent. Uh. You know, since election
day closed, daw is up twentyeight point seven eight percent, SMP up
thirty five point three three percent,and as that composite up twenty seven point

(12:26):
six to nine percent. US totalmarket up thirty point eight two percent,
Russell two thousand up eleven point ninepercent, Utilities up down two point six
seven percent, transports up thirty pointfive seven percent. So you know,
utilities are down as we're seeing arisein interest rates. They are alternatives to
the to the high dividend paying stock. So now, although it was a

(12:48):
short week on the market, marketstill moved every major indocy was was up,
and I think, you know,that's kind of on the back of
that that came out this week andthat we're seeing maybe a sixty five percent
chance of a rate hike come May. So, you know, although we
think the stock marketings still do wellin a higher interest rate environment, we

(13:09):
still believe that interest rates are obviouslyextremely important to the stock market. And
as interest rates plateau and maybe moveddown, that'll obviously be beneficial for the
stock market. But before we getinto that conversation, I think, you
know, obviously it's important to talkabout bonds, and I think now with

(13:31):
interest rates maybe plateauing, we couldsee some maybe capital gains in bonds.
And according to First Trust, isimportant to note that bonds have exhibited positive
total returns one hundred percent of thetime over this of the six month,
one year, three year, andfive year time periods following each of the
last seven FED tightening cycles. Sothe average turns of those time periods were
nine percent, fifteen thirteen eleven percent, respectfully. So although we have seen

(13:56):
a major move in the ten yearas it has declined about seven point six
four percent since October twenty seventh,I think we can if you start locking
in maybe not ten year, butyou know, we're we're we're locking in
more intermediate term intermediate intermediate term bondsand I think you could also you can
get that four or five percent,but you can also you can also maybe

(14:18):
obviously not obviously, but you couldget some capital gains in that as well.
But right now we have Norris Peer, president of the Renser County Chamber
on hold, Norris, can youhear me? Yep? I can?
I can? Great? Great,So you know I talked a little bit.
Yep, I can hear. Ican hear you? Good? Gotcha?

(14:39):
So you know again, you knowI told listeners that, you know,
we were having a president of theRenser County Chamber of Commerce, and
you know, obviously you guys doso much for the community. But you
know, I think what you guysare known for most and it is the
Victorian Stroll as it's not just theTroy thing. It's being located in Troy,
but it's really a capital district thing. It is it is, and

(15:00):
I appreciate you getting out of thegate with that. It really is.
You know, sometimes folks think we'rejust Rinser County. We are a Rinser
Regional Renster County Regional, so weare very much part of the entire region.
And I also appreciate the fact thatthis is definitely, probably this is
the largest event we do, andI often refer to it as one of

(15:20):
our signature events of the year.So I appreciate your acknowledging that. Yeah,
and you know, I grew upin Showy. It it is such
a core memory for me, youknow, just growing up. And I
know a lot of my friends family, you know, we go down every
year. I know people that todo a Victorian stumble at you know,
at all the bars, so theyreally love it. I mean this year
is a little unique. I thinkit is the two hundred anniversary of it

(15:46):
is it is it's actually even thankyou for saying that. So this year
marks the two hundredth anniversary of Twicethe Night Before Christmas, which was originally
published by Clement Clark Moore and theThe Troy Newspaper. So we're combining that
effort with a lot of folks whoare coming from well outside the region to

(16:07):
help us do an additional celebration.There's also outside of the stroll itself,
you know, we're partnering with TWASto recognize the Twitter at the anniversary,
but we have some additional things aregoing on to sort of celebrate that as
well. November twenty ninth at Willer'sgot fifteen pieces of art called Santy Classics.

(16:29):
December seventh, we're doing at TWASdinner celebrating at the Franklin Plaza and
we're recognizing Laura Amos, former Chambermember and City of Troy employee. We're
also recognizing Eastcort Jones one hundred andtwenty fifth anniversary and for what Eastear Jones
and Laura Amos has done for theStroll over the years. So we have
a lot going on. I gottabe honest with you. It's got aware

(16:52):
of the stumble. That's not oneof our events. But I'm glad people
find ways to diversify the activities tothe day if you will. Yeah,
yeah, absolutely. And you knowthere's tons to do down there. It's
not just you know, people downthere going to bars. It's not just
people down there dressed up. Butthere's a tons to do. So what
do your families expect from from beingdown there with any any businesses, food,

(17:17):
music, entertainment, absolutely, it'sa great question. There is a
I you know what's funny is I'mPresident of the Chamber, but I've been
going down to this about every singleyear and one of the things that came
up with the other day is Isaid, uh, you know, and
I'll talk about the activities, butwhen we're about to all sort of burrow
away and hide away in our ownfor these let's be honest with the Northeast

(17:41):
winters can be can be a littleharsh, but it's a great chance to
be outside on a Sunday afternoon andsee, uh, we have street vendors.
We have a lot a ton ofextra street vendors this year. Activities
it's for the young and the old. My church which is Saint John's Episcopal
Church, it's a stained glass tourand place the Menealy chimes, which are

(18:03):
bells that were actually produced in Troy. But it's just we have what would
we be Troy if we didn't haveUncle Sam down there and the always famous
I'm sure you'll recall the Saxo clausewith the refrigerators are going to be playing
a special art exhibit and again recognizingthe tow celebration, we have actors who
are going to be playing out thepoem on the stage down in Monuments Scare

(18:27):
Square, Sorry, Monument Square throughoutthe day, photos with saying at the
YWCA Tons and we want to geteverybody to get into our businesses downtown.
The overall thrust is we want toimprove the economic drive in downtown Troy and
the region. So yeah, thereare a lot of fun activities and things
going on, but this is amajor, major event for a small business

(18:52):
in downtown Troy. So get downthere, enjoy yourself, but please stop
in the shops and look at gettingsome of your holidays shopping done. And
later in the afternoon we've got thetree lighting sponsored by RPI at four point
thirty pm with the Troy High SchoolConcert and they are Imagine and President doctor
Marty Schmidt from RPI will be thereas well. So I could keep going.

(19:15):
I'll pause there to come up forAaron ask you the question, But
it's just a yeah, you know, yeah, you know Troy, but
the capital region in general is youknow, really built on small businesses,
not just Troy, Troy Schenected.You're seeing a lot of going on in
west Stand Lake Clifton Park, wellmaybe not Clifton Park, it's not Mester
time, but you know, you'reseeing a lot go on and you know,

(19:37):
people really you're seeing a lot morebusiness applications in the area, and
you know, kind of people takingtheir employment and I guess their financial life
into their own hands by creating smallbusinesses. And you know, I think
the Victorian Stol is such a greatthing to do. You know, you
have chatterfests, you have you haveChadifest and Saratogy, but I think you
know what the Victorian Stow does isit really does a great job in highlighting

(19:59):
not Troy, but just small businessesin general. And it helps them,
you know, get get some moremaybe get some more customers and some recognition
and some you know pr kind ofabsolutely and you know with the with the
advances with online purchasing and the ease, I mean we're guilty of it too,
you know, if we didn't havea box later of course that we're

(20:19):
clicking submit. But again, Ithink small businesses are not always enabled to
be able to do that. Andmore so, you're getting down there and
actually walking into these shops and we'reclosing down the streets. It's just a
very unique opportunity to have the entirecity and welcome the region. And there
I got, I got to putthis plug out there. We anticipate in

(20:40):
a good way. We thought ifpeople thought the uh Troy Turkey Trot was
did the other day, we're gonnaprobably triple that number. We anticipate,
whether permitting. Of course, youknow, we're gonna have twenty to twenty
five thousand people down in downtown Troy. We're gonna have great parking, plenty
of parking. Downtown streets will beclosed off. And again I've been down

(21:02):
there. You've been down there.It's very walkable. You don't feel like
you're getting jammed in, and you'regetting a chance to kind of see a
lot of the celebrate the diversity thatTroy and this region has. Yeah.
Absolutely, And you know, weonly have a minute or two left.
But you know, if people wantto find out some information about the Stroll
or you know, Reinster County Chamberin general to see you know, maybe

(21:22):
if you're a business owner around here, you know, where can they find
this information? Well, I'll getright under the gate with go to the
www. Victorianstroll dot com. It'sthat easy. Any questions. Certainly my
staff and I were not large staff, but as you know, we're nibble,
We're responsive and open to any andall feedback. But we are a

(21:45):
big week ahead of us preparing forit. And I got to give a
shout out to my crew that's justdoing an amazing job pulling this together for
our inaugural event. So again,I've been a participant. I've not been
on the back end of it,and I will be in full Victorian Garbs,
so come on down and I'll certainlydo photo wops and whatnot, but

(22:08):
we're on the clock also here ifI just give us, you know,
a shout out, and thanks toCity of Troy, they've been nothing short
of amazing help us pull this together. The Troy Redevelopment Foundation, Troy Web
has helped us unbelievably with our websitestuff. RPI, my former employer,
has been great. And again it'sgreat that Stu Jones always steps up every

(22:29):
year, yep. And Pioneer Bank. So yeah, I just wanted to
kind of give our props. Butvictorian'stroll dot com okay, great, and
you know, and again you know, we only have about thirty forty seconds
left, but It is a greatway to start the Christmas season, a
holiday season. The atmosphere there isjust is just very welcoming and warm,
and you know, although it's cold, the atmosphere is warm, and you

(22:52):
know, we look forward to it. So thank you so much for having
me on today and gave you achance to kind of make a big plug
for Troy in the region, ofcourse, and we'll see you next week.
Norris, you best. Thanks Aaron, take care so you know,
to close this off, you knowwe have we have a couple of great
things. We get more global inthe second half talking about the presidential election.

(23:15):
But next week Victorian stroll in DowntownTrade starts at ten am. But
right now it's ten thirty on thestation you depend on for news, weather
and information, Radio eight ten WGY. Good morning, Welcome back to the
second half hour of the Capitol District'sMoney and Investment program. You're listening to
the Fagan Financial Report. Aaron andDennis Fagan. You know, here's this
Sunday, as we are every Sunday, this Thanksgiving Sunday and talking a little

(23:38):
bit, you know, as asthe year goes on and we the market
makes you know, the market progresses, the economy progresses, interest rates go
up and down. You know,we have a lot of topics that are
brought up and some kind of getshoved to the background somewhere. Some are

(24:00):
in you know, kind of vettedand kind of expanded upon as much as
we'd like. And and also,you know, you have some things that
I think are just kind of tenetsof our of our business that I think
we think that the listener should kindof like make note of, and that's
what we'll we'll do in the secondhalf hour here. And some of it's

(24:22):
just uh statistics, some of it'sare our philosophy, some of it's are
you know, other people's quotes thatI think make sense and in a timeless
sort of way, and then wego from there. Yeah, you know,
I think a lot of times onthe show it's like a weekly recap,
weekly market recap, So we tryand talk about the stock markets in

(24:42):
general. And you know, mepersonally, and I think a lot of
listeners even like I think I getthis, you know, just from friends
people. I know, you know, people like to talk about stocks,
people like to talk about things likethat. You know, I think a
little bit because you know, Ithink there's many instances, but you know,
I think it's it's just attractive,you know, thinking that you can

(25:03):
you know, maybe get rich orthings like that. But you know,
investment planning is you know, theinvestment in the allocation that the stocks is
definitely a component. But you know, I think sometimes we you know,
have to remember like the financial planningand boring parts of your of the financial
planning are just as important as theas the as the stocks that we tend

(25:26):
to talk about. So you know, it's nice to talk about some more
broader aspects that we can do forpeople and what you can do for yourself
when it comes to your finances.Yeah, I think you know a lot
of people keep an individual portfolio.They might have no. Five hundred thousand
dollars with us and they have fortythousand dollars in a Schwab account on their
own. And it was like,oh, they just like and that's great

(25:47):
because I think when you're doing thingsfor yourself, you're learning along the way
of it, you know what Imean. Yeah, and yet it's not
the bulk of your money that becausethe learning curve can be very very expensive.
Yeah, and so we that's whatI say people. Is a lot
of times people come over, yeah, bring account of Like a client just
came over with a rawth ira,a regular ira and in a brokerage account.

(26:07):
The brokerage accounted like ten grand andhe's like, should I bring this
over? I'm like, I thinksometimes if people are interested in this,
you take five percent of your money, and yeah, do it by yourself,
because what you want to do istake an amount that isn't life changing
for you and if it doesn't dowell, let's say, it won't affect
your financial future. So you know, you take a portion of that if

(26:29):
that's something you're interested in, youknow, five ish percent, and you
do what you want with that,knowing that you know a right now.
If it goes wrong, then there'sa price. There's a price for learning.
Yeah, you know. But anyway, so one of the topics I
guess we wanted to talk about todayis according to First Trust, no,
no, let's let's do Broughther.As we near the eve of the presidential

(26:51):
election, the year of the presidentialelection, investors may be interested to know
that, according to Bloomberg, yearfour, which is twenty twenty four,
coming up of the presidential election cycle, historically a second only to year three,
which is this year. In termsof the SMP returns this year through
yesterday the S and P five hundred, not yesterday Friday, the S and
P five hundreds up about eighteen ornineteen percent, which is which is a

(27:15):
very good year. Now the yearthree is the best year four second best,
and that that is going to benext year. Yours one and two
Historically lag as you know, Idon't know. I mean sometimes when the
president's elected in the past, it'sobviously always been a heat so he has
tried to accomplish things that they maynot be popular with investors, may not

(27:37):
be economically popular. Maybe a taxincrease, whatever, whatever, spending cuts
which is very very rare, spendingcuts, things like that that tend to
keep the market down. So whenyou look at the stock market year one,
this financial the stock market does sixpoint seven percent. That would have

(27:59):
been twenty twenty one year two threepoint three percent. Again, the president's
trying to get things done. Historicallyspeaking, this is not pertaining specifically to
President Biden or President Trump for thatmatter, or any other president. You're
three thirteen point five percent, sowe still have have exceeded that and you're
four to seven point five percent.Now, I think you've got to take
all those numbers with a bit ofa grain of salt, as the direction

(28:23):
of the economy is going also hasa lot to do with the market.
But as we enter twenty twenty four, you know, the average returning if
you look at the market like eightor nine percent plus dividends maybe a couple
percent, so maybe ten to elevenpercent in around there. You know,
the seven and a half percent iskind of in the ballpark. The market
has never really average or rarely average. Yeah, but be happy with that.

(28:47):
Yeah. To tack on another,I think a little bit, a
little bit of gains from this pointon, as we sit within five or
six percent the Dow and the Sand P five hundred of all time highs.
You know, it's been a while, though, since we've had an
all time high. The last alltime high was set in January of twenty
two. So that's the other thing. We're on twenty three months. We're
going next week will be the weekafter will be twenty three months since we

(29:10):
have said in all time. Sothat's been that's that's been a while,
and not much, not much toreally talk about more about that other than
this, say that you know,the year four, it's the presidential election
cycle. Now, what do youthink about next year? Though, Let's
say you had a and I'm nottalking about giving a number, but I
mean, it's going to be apretty contentious primary season. We've got Nikki

(29:32):
Haley kind of gaining a little biton President Trump. We got maybe it's
going to become a little bit morecantankerous, a little bit more you know,
kind of butting heads because President Trumpis leading for the republic nomination as
far as all polls go by abouta two to one ratio, but as
some drop out, and we hadthe senator from South Carolina, Scott was

(29:53):
his last name, and drop out, he goes Tim Scott. You have
you have perhaps some the some ofthe ones that are left over are left
kind of maybe they're going to catchup to President Trump. But right now
it looks like a Biden Trump rerunof twenty and twenty. And you know,
and I look, we never areprognosticators on the market, but you

(30:15):
know, what would you say aboutthat? Like, you know, coming
into next year, you know,I don't think the market will take that
into much account for most of theyear. To be honest, I think
there's other issues that we're going tohave to you know, talk about that
being you know, about thirty percentof our debt becoming renewed. Towards the
you know, end of summer nextyear, we have you know, geopolitics,

(30:37):
which is always I think up inthe air. So, you know,
I don't think we're going to bereally I don't think that'll be fun
and center really till the end ofof of next year. Towards the middle
of that next year. Yeah,well end really, you know, I
really don't think that. I don'tknow, I'm not really playing too much.

(30:57):
I'm not really thinking about that,taking that too much into consideration.
Yeah, I don't agree. Ithink it's going to be more news than
anything else. You know, we'llsee, I think that will, right.
I don't think it's going to impactthe markets a lot. No,
Yeah, that's kind of what I'msaying. You know, I try and
take and you know, people saythat it doesn't really matter who's in the

(31:19):
White House, but I don't knowit obviously does. I just don't.
Yeah, I don't know either,you know, was you know the other
thing too, I would say aboutthat is that what could could impact the
markets positively or negatively would be ifit isn't president by nor Trump that that's
running, what could impact the market, In my opinion, negatively, it

(31:42):
probably comes post election, if there'sthe same type of scenario that we saw
play out post a twenty twenty election, and that that those things could impact
the market. And I think,you know, you know, unfortunately,
I think they're more of a littlepeople, you know, when he has
questions like this, like, oh, do you think the market's going to
do good if Trump's president? Doyou think it's going to do bad?

(32:04):
Do you think it's going to dogood if Biden? Fraim it's going to
be bad. It's like, Idon't really I don't take either into consideration.
The market has done well since Bidenwas elected, right, it didn't.
It did really well under Obama.So I mean, I don't know,
I don't really have an opinion howthe market's going to do if some
person is elected as president. Clintonsaid, it's the economy stupid. Yeah,
you know, a long time ago, in the early nineties. Other

(32:25):
things that I think you got goingon is that we talk about the stock
market a lot. But according toFirst Trust, bonds have exhibited positive total
returns one hundred percent of the timeover the six month, one year,
three year, in five year timeperiods following each of the last seven FED
tightening cycles. So once the FEDis done tightening and a lot of people

(32:49):
think we're there, you know,the bond market does really well, averaging
double digits most of the time,you know, over an extend period,
right right, makes a lot ofsense. You know, we did comes
at the softball. I guess peoplehaven't been really talking about really lately.
Is the the capital gains that youcould have from bond funds going forward if

(33:15):
we're tapping out in this interest ratehiking cycle, if you lengthen out your
bonds, you might have you know. One of the things that I think
is a bit of a concern though, is that if you look at prior
tightening cycles, they didn't come fromzero percent, like you know what I
mean. Inflation when the tightening cycleended in eight inflation was two or three

(33:37):
percent at that point in time,you know. But but now we came
from zero to five five and aquarter or so, so we may not
get that tailwind in lower interest ratesbecause maybe we are in the normal as
we were calling it. You know, I think when interest rates, if
you're assuming to get those types ofreturns over a five year period, First

(33:58):
Trust says it. Yeah, yeah, So you're saying we're not going to
zero to five, five to zero, right right, five to three five,
three and a half. What doyou think about? I think that's
I think that's much more likely improbablestill get some capital gains. I guess
on that. But and I thinkthat I think we want that. I
think that's a normal that that that'sthat's normal for interest rates. So I

(34:22):
think we want to see an economydo well with with interest rates, not
at zero. You know, aneconomy doing well at zero is like,
you know, it has to dowell. It's impossible for it not to
do well. So you know,when you have you know, let's say
three four percent interest rates, youknow, hopefully we'll it will do things

(34:42):
like have corporations act more responsibly withtheir balance sheets and with their with with
their financial statements. So I thinkthat's more important economy doing well with interest
rates at that level. That said, you know, does the government want
to keep interest rates it's kind ofyou know, they're they're damned if they
do, damned if they don't,and that don't they want to get bonds
packed down to you know, wherethey're paying out one to two percent as

(35:07):
opposed to you know, they're gonnahave to renew all this interest that you
know, all these bonds next yearthere's thirty percent at what rate? So
is that does that factor into thedecision on how quickly they want to get
rates back down with the reissuance ofbonds, right, But they they've they've
they're not totally in control that they'veThey've got to the Fed and Treasury,

(35:30):
you know, they the funding ofthe debt's gonna be a major issue.
So when you talk about the presidentialelection, I think the level of debt
we have and how to fund thatdebt at higher interest rates, well,
that's tough. I mean so whatso I guess Trump and Biden could take
that on. But is Nikki Haleyreally going to be like, you know
what we're gonna do. We're gonnacut Social Security, We're gonna we're gonna

(35:52):
do this, We're gonna do that. It's like you're like, maybe,
well, I'm not gonna vote foryou. They call that the third route
that yeah, the third rail.No one's gonna touch it. Yeah,
And like these are things that needto happen or we're screwed. We're screwed
anyway, and America has a reallyshort attention span. Whoever does it needs
to do it. In three months, we're gonna forget about it. Well,
I think, I think what happens. You see people get out of

(36:14):
office and then they talk about andthey come on CNBC they either work for
a lobbying company, either senators orcongressman, and they said, well,
this is what should have happened,and well, you were there. But
the problem is is that someone someone'sgoing to be elected and they're going to
be confronted with the problem because it'sgonna be thrown in their face that you've
got to do this. You knowit's not going to be popular, but

(36:36):
you've got to do it. Youknow, you can't kick the can down
the road anymore. And I thinkyou see that with debt. You know,
you know the Treasury and the Fed, you know, you know it's
Treasury obviously that issues the debt,the bonds to cover the debt. They've
got to get they have to havepeople want to buy it. It's not
like they could say, oh,we want to go down to two percent

(36:57):
inflation could bring bonds down. You'reright, But but this, you know,
the level of debt that's coming tothe market next year and years thereafter,
you know, is going to havethe supply is going to be a
lot. And the more supply youhave, the lower the prices. Right
like anything else, you know,the more supply of houses in the market,
the prices go down a little bit. The more supply of cheese the
price. The more supply bonds inthe market, prices go down. And

(37:21):
unfortunately, uh, interest rates workconversely the price. So if the price
of a bond goes down, theinterest rate goes up a little bit.
So if people are bidding, youknow. So, I think that's what
you have right now. You havethat. That's so we talked about the
the economy, or we talked aboutthe presidential election cycle. I think one
of the biggest things we have overthe next several years is funding the debt.

(37:42):
And and as you mentioned, whatto do with social security. That's
that's really the security and more outlyingprograms. It's not just social Security,
it's it's it's a lot of things, but yeah, you know it's it's
it's all going to be about,in my opinion, uh, the United
States balance sheet and how to makethat point table because you know, we
this just cannot keep happening because it'sgonna at obviously snowballs, and then there's

(38:06):
kind of like the point of noreturn. Well, you don't have to
do that with people with debts sometimeslike five grands fined, ten grands,
fine, Then you get to fiftyand you're like, I'm pervent, I've
got a problem, and it crowdsout other other things you can spend money
on. On a personal basis,you're when you when you're credit card debt
at twenty percent, if your creditcard deb's fifty grand twenty, that's ten
thousand dollars a year you have topay the service that debt. It limits

(38:29):
what you can spend else Seir thefederal governments in a similar situation, either
limits what they can spend elsewhere orthey inflate their way out of it,
and you know, someone's gonna getpissed off. They're i think, really
just trying to figure out who topiss off and who will still vote for
vote for them, you know,but you know, something needs to change

(38:49):
from a spending side, and Ithink that'll just can you know, it's
been a talking point for like probablysix or seven months now, and I
don't see it going away anytime soon. No, And I think what someone
will be elected, in my opinion, whoever's elected and confronts this issue,
that will not be their platform whenhe or she is elected. They're not
gonna They're not gonna They're not gonnasay, oh, we're gonna cut sol

(39:10):
security. They're gonna get in thereand something's going to happen that they have
to make changes to say. AndI think it's becoming more bipartisan, even
from the citizens of the United States, that we're acknowledging that the US has
too much debt and knowing that itcan affect them badly in the future or
your kids or something like that.So I think that kind of has to

(39:30):
happen. Is you know, notjust you know, senators or economists being
nervous about the debt. You know, we need to be nervous about the
debt for the good of like ourcountry. And I think, you know,
it's starting to become more and moreknown how much debt the United States
has and how it can become aproblem going forward. So maybe that'll be

(39:52):
that'll make it a little bit easieron, you know, the constituents to
be okay with maybe getting something takenaway from them, because someone's gonna have
to get something to it's gonna bebipartisan. But I think, you know,
I think what happened is I thinktaking away from them maybe in the
form of increase in the age atwhich you receive full retirement benefits from sixty

(40:12):
seven to sixty nine, making themone hundred percent taxable over certain levels of
income rather than eighty five percent taxablesolid security benefits, maybe limiting sold security
benefits, scaling them back with income. So let's say you have, you
know, very very rich people havefour hundred thousand or five hundred thousand dollars
in income after retirement, limiting thata little bit. So those are some

(40:36):
things taking away more they might beof limiting things like that. Yeah,
you know, But circling back tothat, I think if you look at
the positive returns in bonds, Idon't think they're going to approach what First
Trust says over the past. Whatthey say hewventy seven tightening cycles. The
one to three five year time frames, the average returns were six excuse me,

(40:58):
six month, one year, threeyear, and five years timeframes.
Bonds performed at nine, fifteen,thirteen eleven percent. I'm looking at probably
much less than that, maybe twothirds of that, as interest rates don't
go from five to one again,they go from five to two or three,
and we would consider that normal,you know. So then then you
go into that next part of thewhole bond cycle. So look, if

(41:19):
we can get a four or fivepercent return on our bonds and seven or
eight, six or seven on thestock side, the equity side, I
think that gives our clients what theyneed to meet the vast majority of our
clients what they need to meet theirobligations. And so I then think,
you say to yourself that article inCNBC where this whole strategy of hey,

(41:39):
t bill and chill. You knowit's quoted marco Ian Cheeney, a senior
vice president of Van the Research.He described the virtues of lazy investing.
You know that, and I thinkthat works well on the equity side.
But because he stated that income seekingretail investors takingdvantage of the new high rate
regime. Some are calling it Tbill and chill. You know, I

(42:00):
would not say that. I thinkyou've got to be I think you've got
to extend a little bit. Youdon't want to wake up one day for
being like, oh crap, thesetea bills. Ever doing these T bills
Now, I'm getting two percent ofmy money and I'm you know, taking
a four percent distribution. I'm backwhere I was, you know, before
the pandemic or whatever. So Ithink that's that's somewhat of an issue.
So that T bill and chill shouldbe changed to T note and float.

(42:23):
It's not bad. That's not bad. T bills comes you just did you
just make that up on the Imade it up, now, I did
make it up. But my pointis good. One T bills come due
within one year. T notes oneto ten years. And I think that
basically says that we think you shouldextend your average maturity. So T note
didn't float, would be as youjust you just sprung that on me right

(42:45):
now too. I haven't heard thatyet. You haven't. I'm sure I'm
gonna hear it fifty more times goingforward the next week. But I like
that actually you know, and thatsaid, I think I'm piggybacking on that.
The four percent rule is back,right, so I think in the
nineties, don't want to take toomuch time up with this. You could
take basically take four percent of yourmoney out adjusted for inflation. So for

(43:06):
the next year, there's three percentinflation, four point three going in that
going forward, and every year,every thirty year period since nineteen twenty six,
even when the economic conditions were attheir worst, you never ran out
of your money, right, Soit went down to about three percent,
three and a half percent, let'ssay three point three I think was last
year, and then now this isthis is also saying for a portfolio with

(43:30):
pretty low exposure to equities, Ithink it's twenty to forty percent actually in
a in a forty percent in stockand sixty percent in bonds. And so
it went down to three point threepercent when interest rates were lower. Now
with interest rates back up, it'sabout four percent. So I don't know
who's saying this. I think itwas in Barrens. But yeah, the

(43:51):
four percent rule is back, they'resaying. But you know what I found
interesting is when it says, youknow, there's there's other ways to go
about it as well. You know, the principle of the bonds the mature
mature each year, plus the incomeof the portfolio is long term tips for
provide inflation adjusting spending about four pointsix percent. So you know, there's
different ways to take distributions out ofyour portfolio. And it's not just four

(44:16):
percent. It's four percent for thatyou know, forty to sixty percent portfolio.
But you know they said one fourstre one strategy to forego inflation adjustments.
And if you forego that, youknow, if it's four percent and
three percent inflation four point three,you can do four point four percent over
over your u you know, thelife of that portfolio. So so anywhere
from four to four point four.So yeah, you know, and that's

(44:37):
saying after thirty years your money willstill be there. It's not saying the
principal will be there. Let's sayyou'll still have money. But you know
that if you're sixty, that bringsyou to ninety, you know, seventy
to one hundred. So you know, when it's more in my opinion of
matter, when you start those distributions, and that's increasing your distribution rate by
the rip pace of inflation each yearthat they assume it is three point three

(45:00):
or three percent, you know,and I think what you have to recognize
too, is during the active phaseof retirement, there is inflation. During
that passive stage of retirement, whichwe Pennant put at about seventy eight years
old, there's no inflation other thanhealthcare really where you have the healthcare healthcare
so and there's actually deflation in otherareas. You go out less, your

(45:21):
kids spend the money, you basicallyyour clothing doesn't change as much, you
drive less, all those types ofthings. So the inflation that you have
is in healthcare. So you needenough money to get you through that last
stage of life, but it's notan inflationary period. And if there is
an inflationary period, if you doneed nursing home care, or you do

(45:44):
need you know, hospitalization that's waybeyond your coverage, then you know you
should have prepared earlier. There's wayto trust things like that. There's way
to ways to prepare for that earlier. So you know, if you do
get hit with those inflation things inthe more passive parts of your retirement,
that you know, hopefully you canget some help through whether it be through

(46:08):
you know, the social systems.So you know, one of the other
things too, I you know,I wanted to kind of bring up is
you know we're talking about next year? Is Christine Laguard And I don't know
that. I think we might havespoken about this last week, but Christine
Leguard before the European Banking Contract Congresssaid that, you know what, there

(46:29):
are increasing signs that the global economyis fragmenting into competing blocks. In our
opinion, should this fragmentation continue atthe pace that we've seen over the past
two or three years, even accelerate, you know, your Russia and China,
Russian, I ran Russian not beingas firm of a back of Israel
if obviously Russian and Ukraine, theNATO block kind of you know, fragmenting

(46:52):
a little bit. Even the UnitedStates and Canada not as close as we
once were, almost like you know, you know, brother or sister kind
of countries. I think that youhave increase in inflation and you also have
the greater possibility of military risks.So I think those you know, when
when you look at over the nexttwo, three, four, five,
ten years, the East versus theWest or democracy versus autocracy. Those are

(47:17):
those are the bigger threats really tothe economy. The economy is on very
sound footing. Our corporations have neverbeen stronger, but you know, the
funding of the debt, dealing withsocial security, and and really the fragmentation
of the global economy. Yes,it may mean things for the United States
positively over the short term. Uh, it may mean a lot to re

(47:39):
kind of establish the middle class.But it also comes with risk of you
know, increased military you know,battles and the like. You know,
I don't know, that'll just aboutdo it. Thanks for listening to the
fakee and financial report. I hopeyour Thanksgiving was a nice Thanksgiving Thanksgiving,

(47:59):
you know, yeah, a nicepeaceful holiday season. Get hold of us
during the week five one, eight, two, seven, nine, ten,
forty four, check us out onthe webit, faganasset dot com,
or like us on Facebook air havea great time too,