The Fagan Financial Report

Episode Transcript

Speaker 1 (00:00):
Good morning, and welcome to the Capitol District's Money and
Investment program. You're listening to the Fagan Financial Reportum Dennis
Fagan sitting here with my son every Sunday morning right
here in News Talk eight ten and one O three one.

Speaker 2 (00:09):
W g Y. This is recorded.

Speaker 1 (00:11):
We were usually record the show on Friday morning, and
that's exactly what we're doing now.

Speaker 2 (00:16):
So as I look out the windows.

Speaker 1 (00:19):
Sunny day, I think it's rising, you know, if we
were pretending it was Sunday.

Speaker 2 (00:24):
I think it's rained.

Speaker 1 (00:25):
Yesterday, supposed to rain yesterday, well till the dry week.
Got some good rain, I think coming up tomorrow for
the garden. I don't want rain. I don't care about
the garden. We'd have every ring We've had every bit
of We've had rain every weekend since November.

Speaker 2 (00:40):
Correct, right, correct, you don't care about the garden.

Speaker 1 (00:42):
I gotshido peppers left in the trunk of your car, yes,
for a week, but they look good.

Speaker 2 (00:49):
Maybe they're better off.

Speaker 3 (00:50):
Well, you gave me the sashido peppers at like six
am at work, Like, here's just ishido pepper plants that
we got.

Speaker 2 (00:57):
Yeah, gods, and I got four of them.

Speaker 3 (01:00):
So what was that like last week down at your
house hanging out with mom and his Mom's like, so, how.

Speaker 4 (01:05):
Does shield pappers do it? They're still in my trunk.

Speaker 3 (01:08):
I forgot so, but I you know, I rushed home
and I got him in the ground and I watered
him and they actually look great.

Speaker 2 (01:14):
They do look good. Yeah, I got squirrels.

Speaker 1 (01:17):
I got a groundhog stalking or staking out our area,
stalking us. Yeah, he got him outside the fence, which
is good. Still, I put I put a trap out
there with melon in there, but he has not bitten.

Speaker 4 (01:30):
On the yet.

Speaker 1 (01:31):
I don't know that he's going to I don't think that.
I don't think the door comes down like it should.
I think it's a little rusty.

Speaker 4 (01:37):
So she came there to see if he's even going
in it.

Speaker 1 (01:40):
There's that issue, you're right, And I think I'll try
to fix it over.

Speaker 2 (01:44):
I'll get mom to fix it over the weekend. Yeah.

Speaker 1 (01:47):
And uh, and what else is going on with that?
So we got some stuff going on there. Something else
happened in the garden this week, and I forget what
it was in your garden. In my garden, Oh, it's
the squirrels are digging. They dig anyone have any ideas,
email me Dennis dot fag and a Fagan associate stock.
I think it's like cayenne, pepper and water.

Speaker 3 (02:07):
There's also a theme lately between me and you Waharo's
working on our garden worker is the basil's not looking
great here. So if anyone has any ideas of why
the basil isn't looking good but everything else is, please.

Speaker 2 (02:23):
That's pretty good. Yeah, yeah, I'm we're in pretty good shape.

Speaker 1 (02:25):
And no, I got cucumbers, I've got a squash, I've
got butternut squash. I'm using cattle panels to make trellises,
which is nice. This is all on the weekend, you know,
a couple of beers and cattle panels. What else is
there to do? Yeah, that's about it.

Speaker 3 (02:39):
They do invent these things called trellises, but you're really
into creating a cat.

Speaker 1 (02:44):
Take two of them, zip tie them together like just
to the top you and create a little tent. It's
perfect and they're only I think they're only twenty bucks apiece.
So that's my suggestion to you. But anyways, let's get
right at it. After three minutes.

Speaker 4 (02:56):
Usually, you know, try to get three minutes.

Speaker 2 (02:58):
Three minutes of a little bit of who works with.

Speaker 3 (03:00):
Us says, you know, you guys need to talk about
what's going on, what's going on your life?

Speaker 4 (03:05):
More people want to hear that.

Speaker 1 (03:06):
We don't used three minutes, three minutes, three minutes of
the garden, you know what I mean?

Speaker 2 (03:11):
The next play today, right, the next.

Speaker 4 (03:13):
The next player last night, Saturday place. I don't know
when they play, uh.

Speaker 1 (03:17):
Friday morning. So the next I think the knicks are
set up down three to two?

Speaker 4 (03:22):
Do they play?

Speaker 3 (03:23):
They play, you know, and it's exhausting, you know, put
a fork in me. They played tomorrow, so they play. Yeah,
so they played last night hopefully while we're speaking now,
there's still a game going on, mostly just nervous. You know.

Speaker 1 (03:37):
It's kind of well, it's kind of like the tariffs,
this recording it on Friday and yet airing it on Sunday.
You know, sometimes we get caught in this whole the
tariffs thing. It's like a tariff go round.

Speaker 3 (03:48):
And who knows by the time Sunday hits what what
is going to be the news and tariffs? But you know,
you printed out all these documents, you know, you over
you've fund to doc with documents and we have, you know,
just from this week five that have to do with
the tariffs. And you know, it's getting exhausting.

Speaker 4 (04:06):
So if you you're.

Speaker 1 (04:07):
Exhausted by the Knicks, you're exhausted by the garden, you're
exhausted by.

Speaker 3 (04:10):
The you graduated from, you know, his three year old program,
two three year old program.

Speaker 4 (04:16):
So that's exhausting.

Speaker 2 (04:17):
That was that was mentally exhausted, but you were emotional
about that.

Speaker 1 (04:20):
It was you know, he's a good Lauren was more really, yeah, well,
don't tell anybody.

Speaker 2 (04:26):
So yeah.

Speaker 1 (04:27):
So on Wednesday, the Federal Court, I think it's the
international US Court of International Trade blocked President Trump's reciprocal
tariffs because they were unilaterally imposed by President Trump without
any congressional approval, and as we all know, Congress holds

(04:47):
the purse string. So uh, International Court of Trade basically
said that uh and and I quote, the Worldwide and
Retaliatory terraffords exceeded any authority granted by the Press President
by I E e p A to regulate importation by
means of tariffs.

Speaker 2 (05:05):
And this is what the judges wrote.

Speaker 1 (05:07):
And that's the international The i E I e e
p A is International Emergency Economic Powers actor. Remember President
Trump declared these tariffs saying they were an economic emergency.
And this the judge said, this panel of judges the
US Court of International Trade, they said, hey, you know,
you exceeded your authority by doing this, because it really

(05:28):
isn't an emergency. And then uh and then Thursday, this
was on Wednesday, Thursday, a Federal Appeal of Appeals Court,
you know President Trump.

Speaker 2 (05:40):
Uh.

Speaker 1 (05:41):
And this was I think it was Wednesday morning early
about one or two o'clock that this happened with the
international Court of the US Court of International Trade. President
Trump appealed it within hours, and on Thursday evening or
Thursday late afternoon, a Federal Appeals Appeals Court granted President
of Trump had been strautions requested temporarily pause this court's ruling.

(06:05):
Thistle Quarter Court of Appeals is above the US Court
of International Trade and basically said that just to temporary
pause the ruling that struck down President Trump's tariffs.

Speaker 2 (06:18):
Uh.

Speaker 1 (06:19):
And now you know he's got he's got some time
to decide, you know, what he wants to do as
far as action that he wants to take, and with
any thoughts that you have on what action he might
want to take.

Speaker 3 (06:31):
Or I think he'll try to take any action that
he can, you know, to to get this. So then
you had, you know, the FED Fed Chair Power meet
with Trump, you know, at the White House Thursday and
told him the rates decisions shouldn't be political. So you know,
you got tariffs, you got rates, you have you know
they are intertwined a little bit because you know, the
tariffs do effect in my opinion, and they will affect

(06:54):
you know, the inflation as well as you know what
the Fed does next. So you know they're going to
see Trump really try to do all he can to,
you know, over overturn this ruling.

Speaker 1 (07:09):
There's a there's a you know, I'm not a trade expert,
but there was a section I was reading, Section one
twenty two of the Trade Act of nineteen seventy four.

Speaker 2 (07:17):
One of the one of the.

Speaker 1 (07:21):
I guess moves that President Trump and the Trump adm
administration could make is initially invoke this Act does not
require a formal investigation, and you and you could you
could have across the board tariffs up to one hundred
and fifty excuse me, up to fifteen percent, and it
only lasts for one hundred and fifty days after that

(07:43):
it does require congressional action, which would give President Trump
time to line up those stuffs.

Speaker 3 (07:49):
Don't we want you know, I guess a balance of
power in Congress and the president to make the right decisions.

Speaker 2 (07:55):
Who's wait, who's meaning me?

Speaker 1 (07:58):
And you you know what I mean. I think a
lot of people would say no, that they do want
Trump to have more power. Uh, personally, No, I don't.
I mean, this has worked well for twenty fifty years
or whatever the case may be.

Speaker 2 (08:09):
You know, let's stick with it. What do you think?

Speaker 3 (08:11):
Yeah, you know, I think that I think that these
tariffs can have some you know, we've been talking a
little bit about that. As you know, the tariffs are
one thing. Having five documents talking about the tariff in
one week is another thing that, in my opinion, will
you just that will will hinder the market a little bit.
US Bank came out with a study and it's not

(08:33):
just a study, it's a couple of graphs that you know,
you know, healthy CABEC spending has supported economic growth. You know,
you had it S and p I T sector up
fifty six percent twenty twenty three, thirty five, twenty twenty four,
you know, and that's led by artificial intelligence and basically
that they see the next two years of stagnant to

(08:54):
low single digits CAPEX growth in CAPEC spending. In that,
I think that has to do a little bit with
you know, how much we've spent in the past three
or four years in CAPEX spending and artificial intelligence, and
you know, maybe when we get data centers and you know,
all the projects done that that then will you know,
pull the reins in a little bit of CAPEC spending.

(09:15):
But I think it also has a lot to do
with the uncertainty in the economic environment that we're in
right now, and you know, who's going to UH, who's
going to forego or who's going to go with UH
and and and start some you know, billions of tens
of billions of dollars cap x X project when they
do not have any idea what the what the you know,

(09:37):
economy will look like in two months, let alone two
or three years. So, you know, I'm nervous that a
lot of this rhetoric, a lot of this back and
forth will lead to slowing cap back spending, which will
in turn lead to you know, layoffs and in turn
will lead to you know, not as much economic growth.
So I think that's my I guess biggest fear when

(09:58):
it comes to these tariffs is you know, slow to
slow to moderate economic growth due to terriffs, you know,
in addition to.

Speaker 4 (10:08):
Maybe some inflation because of that those tariffs.

Speaker 3 (10:10):
So that is the that is the formula for stagflation,
which is you know, never good for an economy.

Speaker 1 (10:16):
You know, which you don't which I was, you know, yeah,
I was listening to Tom Lee and he was talking
about the range of potential outcomes is narrowing as we
move through the year, and I do agree with that.
I think I think, you know, at one, when this
was firstly when this tariff was lobbed by President Trump

(10:40):
or initiated, when tariffs were initiated by President Trump back
on April second, I believe, you know, the range of
potential outcomes was broad. You know, we didn't know how
President Trump, what his what his stance was. Generally speaking,
we didn't know country's response, what their their responses would be,
and and to a certain extent we do don't know

(11:01):
though we don't have those answers now. However, it's beginning
to narrow down. No, there's not going to be one
hundred and forty five percent tariffs on on China. There's
going to be something much less. How damage isn't going
to be you know, who really knows. But I do
think that the range of potential outcomes is narrowing as
opposed to two or three months ago, and that probably

(11:22):
provides support for the market. On the flip side, you know,
companies are now companies and countries are still weighing their
options as to you know, where do you build manufacturing
plants Apple? Do you do you pay the twenty five
percent tariffs? Or do you do you do you continue
to build elsewhere and continue to build elsewhere, or to

(11:46):
bring that production home and then have to charge somewhat more.
There's been lots of different numbers as to what that
case may be. So I you know, the market has
been in a trading range since April second. It's probably
down five or six percent. It's all time highs was
down about fifteen or twenty percent, so we've recoup some
of that. As as I mentioned, the potential range of

(12:06):
outcomes of narrowed. But as you say, and I agree
with that, capex has got to be hurt going forward
because the market doesn't like uncertainty. Capital expenditures. Don't like uncertainty.
Think about yourself.

Speaker 2 (12:18):
Think about it.

Speaker 1 (12:19):
If your job was in jeopardy or your pay your
next pay raise was questionable, would you put on that addition?
Would you put in that pool? You know, you might
not do that. And I think businesses operate the same way.
You know, are they going to have to build here
or not? Do they want to build here or not?
What are the tariffs going to be against other countries?
So it is which which may in the long term

(12:41):
if you if you come down on that side of
equation in the long term may be good for the US.
It doesn't mean over the intermediate term it's going to
be good for the market.

Speaker 2 (12:50):
You know.

Speaker 1 (12:50):
President Trump lam bested, I think Walmart told them basically
to eat eat the price increases. Now, as an American,
you know, I do think Walmart has you know, and
their profit margins are thin. But you know, you could
you could see the rationale behind behind that. Hey get us.
By the way, they do produce most of the revenue

(13:10):
does come, especially on the grocery side, from from the US,
North America and.

Speaker 2 (13:14):
Specifically the US.

Speaker 1 (13:15):
But they they they they You also could say, yeah,
to these companies give up a little bit now for
the long term. So you can see the rationale behind
what President Trump said. But that's not good for the
market because if a company can't raise prices to coincide
with the tariff costs, when that's going to hurt their
profit margins, which is going to hurt their stock price.

Speaker 2 (13:36):
So you know, you got you got to balance that.

Speaker 4 (13:38):
So and you know how much government intervention do we really.

Speaker 2 (13:41):
Work on price controls?

Speaker 3 (13:42):
You know, what are price controls? You know, do we
really want the government telling companies what to do? That
is kind of the opposite of what capitalism is. So,
you know, it's it's it's just something I you know,
disagree with just from a you know, economic and stock
market standpoint.

Speaker 1 (13:56):
You know, we did have some economic data. You want
to want to move to economic data? Yeah, all right,
so we did have some economic data that came out
this week. But you know, so moderating capital expenditures. We
feel we've hit that hard enough.

Speaker 4 (14:10):
Yeah, you know, we have you know, do you do
you have?

Speaker 3 (14:15):
We had consumer confidence come out this uh for May,
which is much much stronger than expected. The Confidence Boards
Consumer Confidence index leaps ninety eight twelve point increase from
April and much better than the Dow Jones estimated for
for eighty eighty six. Much of the positive sentiment, according
to the Board officials, came from developments in the US

(14:36):
trying to trade in pass in past, most notably President
Trump's halting of the most severe tariffs on May twelfth.
You know, so, you know, I think that consumer confidence
goes along with how the market's doing. Market's been doing
pretty well lately. Consumers are, you know, pretty confident.

Speaker 1 (14:57):
Yeah, I mean you had that rebound. So which you
have is like a divergence really between the present Situation index,
which is pretty strong, it's only down three and a
half percent year over year, versus the expectations index, which
is despite that, you know that the huge jump from
a reading a fifty five point four to seventy two

(15:17):
point eight. And the numbers are irrelevant, you know, as
far as the listeners go. It's more the change the
month over month change in the year over year change,
which gives you directionally what the what's going on. The
expectations component up thirty one percent, So what you had
and what you just said, Hey, you know, the rebound
comes from a cooling of the impasse between the US

(15:41):
and China, as the expectations component and the present Situation
index I think comes from some of the same issues,
but also from a you know, a rebound in the
stock market. Overall, the index was up pretty strong, still
down job you know interview, Those served saying that jobs
are hard to get rose a little bit during the

(16:02):
month of May, and those saying that jobs.

Speaker 2 (16:04):
Are plentiful also rose a little bit. So I think
you probably have a little bit of.

Speaker 1 (16:07):
A back and forth going with with uh, you know,
political parties maybe.

Speaker 3 (16:14):
Or even you know, as we speak, Trump on so
truth social you know, talked about you know, two weeks ago,
China was in grave economic danger. The very high tariffs
I set made it virtually impossible for China to trade
into the United States marketplace, which is by far.

Speaker 4 (16:30):
Number one in the world.

Speaker 3 (16:31):
We went in effect cold Turkey with China was devastating
for them. Many factories closed, and there was and there was,
to put it, mildly civil unrest. So basically then he
goes on to say, the bad news is that China,
perhaps not surprisingly to some as totally violated it's agreement
with the with the US.

Speaker 4 (16:47):
So much for being a nice guy.

Speaker 3 (16:49):
So, you know, I think it's just these back and
forth back and forth that will eventually start to weigh
on the market.

Speaker 4 (16:56):
And you could see some fatigue.

Speaker 2 (16:57):
You could see some fatigue.

Speaker 1 (16:59):
But you know, I think that the the issue, I
think some of the issue is is that it's fatigue.
But it's also like personally, like I was, I was
emotionally invested in this or in vested in this, and
I still am. I still I much have our emotional
attachment to this whole tariff stuff as it pertains to

(17:21):
the market. Yeah, I think constitutional in this and that
I'm still uh, you know, concerned, But I do think
that uh I think you know, if I think if
it's constant back and forth and back and forth, I
just want to see, hey, let's see how this plays out.
I also think that you know, the old the taco trade,
which stands for Trump always chickens out. I think people
are getting used to President Trump, you know, coming out

(17:42):
with a strong statement and and then kind of backing
off a bit from there. And I think that's what
just that's what you have going on as well, that
that a lot of a lot of investors are saying Okay,
you know, let's let's see how this plays out. Let's
not just kind of you know, let's just let's just
not assume that whatever President Trump says is going to

(18:04):
end up. Now Again, people may those listeners may say, well,
you know, it's negotiating and he's going to get what
he wants, so it's good. Others may say, you know,
he just flip flops back and forth, like we're not
coming down on that. But I think the market is
kind of getting used to the whole what's going on
with President Trump. So you know, I think I don't know,
it's probably still cautious on the market to a certain extent.

Speaker 2 (18:27):
I think it's run a long way, you know.

Speaker 1 (18:29):
I think we've got that Cappex thing, you know, as
a headwind. First quarter GDP was initially reported at a
zero point three percent decline, revised upward. First quarter GDP
was down only zero point two percent. Final sales up
at a rated two percent revised down from two point
three percent. Government spending fell by point seven percent during

(18:52):
the first quarter. Was that's the first revision. Initially recorded
down one point five percent. Yeah, the GDP price index
up unrevised that three point seven percent, excluding food and
energy up at three point four percent. So I think
you have an economy that's kind of probably you know,
contracting or maybe you know, plus or minus one percent

(19:13):
on either side. I think that data center information thereon
that you.

Speaker 4 (19:16):
Get and you know, it was very I also think
it's interesting to see if there was maybe a pull forward.

Speaker 3 (19:27):
Right with you know, with overordering in the first couple
of months of this year. So now we're kind of
getting into maybe you know, maybe some some slower economic growth.
But you know, Tourist and Slock came out this week
and talked about which you know, makes me a little
bit nervous in that I have to find it in
that data center accounts for one percent of GDP growth
in the economy.

Speaker 1 (19:47):
So basically one third to one quarter GDP comes from
data centers.

Speaker 3 (19:51):
From data centers and data the building of data centers,
so even the country construction, artificial intelligence hips everything that
goes into it. And you know what makes you nervous
with that if there is a slowdown in CAPEC spending
in the next in the second half of this year
and into next year in the year after, you know,
what impact does that have on our GDP growth in
the economy, So you know, I think that's something to

(20:11):
look at.

Speaker 4 (20:11):
You know, it's great.

Speaker 3 (20:12):
I think that, you know, we need to keep spending
from a technological standpoint, innovation standpoint. You know, we are
a country of innovators. The past thirty forty years, we've
really innovated like no other country. And you know what,
what we don't want, in my opinion, is to have
all this uncertainty while China has what what did you say,

(20:32):
What was this that you said about engineers? They have
global engineers, their engineers in China. And you know, if
if you see a you know, a flea of you know,
some of the smartest uh, you know, engineers in the
world to you know, different countries, then you could see,
you know, other countries in other areas of the world
really step up in terms of innovation. And you know,

(20:54):
I think that's what we don't want obviously, because you know,
what are we five percent of We're only five percent
of the population with twenty percent of the world of
twenty five percent of the world of economy twenty five
twenty percent of the world economy. So you know, we're
small but mighty, and I think it's like mom right
from I think we need to continue to be that,

(21:15):
to be you know, the country that to get where
we This is kind of how we got here, and.

Speaker 1 (21:21):
We are the country of technological innovation. I forget who
said it, but it was somebody a while back, and
I know you remember that they said Europe is turning
into a geographical area of museums and wineries and you.

Speaker 4 (21:34):
Know, and it's a great place to visit.

Speaker 1 (21:36):
Right there's no innovation going there. In the US has innovation,
and I think that's the thing that I know in Vidia,
Jensen Wan came out and said that, you know, to
not deal with China, we run the risk of getting.

Speaker 2 (21:48):
Off the edge of the global AI ingenuity trade.

Speaker 1 (21:56):
Yeah, and we'll talk a little bit in the second
half about about their earnings. Well, we got we got
a couple of minutes. We can touch on them right now.
If you want what you got, you got them in
front of you or no video. Yeah, once you hit
them and we'll go because it's one of our largest
holdings and it's been you know, someone in the spotlight
for a while.

Speaker 2 (22:13):
Uh.

Speaker 3 (22:16):
You know, they beat on earnings and revenue as data
center sales jumped seventy three percent. You know, so again
data seter revenue, uh, you know, is such a huge
part of their business. Earnings per shared ninety six cents
suggusted verse ninety three, expected revenue forty four point six
billion verse forty three point three one. You know, the
stock did jump about six to seven percent pre trading on.

Speaker 4 (22:40):
Wednesday, it was on Wednesdays, you know.

Speaker 3 (22:44):
Then it did give up a good chunk of that
throughout the day and the next day in Vidio sat
it expects forty five billion in sales in the current
quarter versus estimates of forty five point nine During the
cover the court of the US government, formulive Video that
a previously approved Aged twenty processor for China to require
an export license, and Video set inchord four point five

(23:04):
billion dollars in charge related to access inventory for the
chip and would have recorded two point five billion dollars
and extra sales if the chip hadn't been restricted. Video
said gross margins of sixty one percent for the quarter
would have been seventy one percent if not for the
China related charge. So, you know, you are seeing some
effects of you know, the geopolitical tensions already, and you

(23:28):
know it does say that, you know, there's a fifty
billion dollar market cap in China for AI chips, and
you know it's effectively closed in the US industry.

Speaker 1 (23:38):
And this is without really like AI chips being passed
on from the corporate sector to you know, governments. The
governments have not really implemented AI.

Speaker 4 (23:49):
And we can talk about that a little bit.

Speaker 1 (23:50):
But right now, it's ten thirty on the station depend
upon for newsweather and information news talk A ten and
one O three one w g Y. Good morning, and
welcome back to the second half hour of the Capitol
District's Money and Investment program. You're listening to the Fagan
Financial Report. Aaron and Dennis Fagan sitting here. It is
a Friday morning, so this is recorded. I hope you're
enjoying your Sunday. We are basically is it one or

(24:13):
two weeks removed from Father's Day?

Speaker 2 (24:16):
Too? Biggest day of the year.

Speaker 4 (24:17):
It is the biggest day of the year. What are
you doing? What are we doing?

Speaker 1 (24:21):
I don't know nothing. Whatever we want, whatever we want.
You know, I don't have any kids that are relying
on me now, so I can do whatever I want.

Speaker 2 (24:29):
You not really I appreciate it. That. I appreciate it.

Speaker 1 (24:32):
But you've got a You've got you who's probably looking
forward to Is he looking forward to Father's Day already?

Speaker 4 (24:37):
I don't think so.

Speaker 1 (24:38):
No, he's not looking forward, looking forward to some booberries, Yeah,
something like that. So talk to the first half about
the tariffs. The tariff go round as as we call it,
a little bit of economic data consumer confidence. And then
we started off on Nvidia and they still have a
you know, you know, I don't know, you know, it's
one of our largest holdings. I think our average cost

(24:58):
is probably one six of where their prices now. We
have trimmed it from time to time. I'll probably continue
to trim it if it goes up. I think, you know,
probably a lot of the good news is priced in.
They do have other areas that they can really address.

Speaker 2 (25:12):
You know.

Speaker 1 (25:12):
One is that when President Trump was in the Middle
East a while back, UH, he helped in Nvidia, you know,
kind of set up agreements with the UAE Saudi Arabia.
So I think the move to have sovereigns kind of
join in the AI, UH already build up their own
AI makes a lot of sense. And also China, I think,
you know, some of invidious products are barred from China

(25:34):
just for security purposes. If they can, you know, use
a workaround, uh either either a security checklist there or
you know, kind of a dumb down type of a server.

Speaker 2 (25:45):
I think they you know, that also is an.

Speaker 1 (25:48):
Area for them, so and who knows how it's going
to play out, but uh, you know, I don't think
I'd be other than trimming for portfolio management purposes, you know,
I don't think i'd be selling a lot of our
our Nvidia down here. You also mentioned there and it
kind of you kind of blew over it somewhat quickly.
Is that you know, data center construction accounts for one

(26:09):
percentage point of GDP growth.

Speaker 2 (26:11):
That's a lot. I mean that that is a lot.

Speaker 1 (26:14):
And if you look back, you know, it's anywhere from
you know, point two five about so you're you know,
data centers to handle AI is accounting for probably one
quarter of of of all GDP growth.

Speaker 3 (26:26):
And I think I was reading that, you know, twenty
six percent of energy energy in the entire state of
Virginia is going into data centers as well, So you know,
you're seeing data centers, you know, carry a lot of
the you know, economic load throughout the country. And if
you you know, yeah again, you know, we talk about
that a lot. You see a slow down the economy,

(26:47):
you see a slow down in CAPEC spending, you see
a slow down in data revenue spending, then you're going
to see a slow down in GDP.

Speaker 4 (26:53):
So yeah, that's a possibility.

Speaker 2 (26:57):
Yes.

Speaker 1 (26:58):
One more, we'll broaden this out the second half to
the four percent rule distribution rule for retirees.

Speaker 2 (27:04):
We want to talk a little bit about that.

Speaker 1 (27:05):
You know, that's been updated and we've always we've kind
of updated ourselves when we talk to clients to maybe
four and a half or five percent. We'll talk a
little bit about that, and then touch on, you know,
a little bit about housing. Ben Carlson had a good article.
We'll talk a little bit about that. And then the
market just gave investors a gift. Here's how not to
blow it from Eric Rosenbaum.

Speaker 2 (27:26):
And and that's about it for the second half.

Speaker 1 (27:28):
But I did want to mention one thing, Eric, because
before we broaden this out as far as news for
the week, you know, I musk pretty much leaving Doge
and going back to you know, Tesla, going back to
his other businesses, starlink SpaceX and basically becoming a super

(27:51):
focused on he needs to be super focused.

Speaker 2 (27:56):
On what his current and his other businesses, you know.
And I think, well, that's that was a positive.

Speaker 1 (28:02):
That was positive really for for Tesla as it's as
it rose during the course of the weekend, has actually
bounced off for recent low and uh, maybe that'll help
his image in some some corners. The four percent rule
there and and Bill bengen Back I believe in the
early nineties did a study and the study suggested how

(28:23):
much a retiree could safely withdraw withdraw from his or
her investments or their investments, and then with the likelihood
that that will last for more than thirty years.

Speaker 3 (28:35):
You know. Yeah, you know, the original number was four
point one that was that was rounded down to four.
The last book he wrote in twenty twenty six, nineteen years.

Speaker 1 (28:48):
Ago, basically talked about you know, he basically talked about
his new book updating that to what four point seven percent? Yep,
you know, he he did though, and he'd began to
clarify this in as much that he talked about it
was safe withdrawal rate assuming that sequence of returns started

(29:10):
started huge, Yeah, started badly for you right out whether
rep so go ahead and explain with the sequence of
returns as well.

Speaker 3 (29:16):
Now, and we we send out a chart of the
week every every week, and uh, you know, basically it
talks about, you know, this week talks about how the
sequence of returns matters. And you know basically that you know,
if you have a poor sequence of returns, Let's say
you started to invest, you know, the day before you
know the market crash in nineteen eighty seven, or you

(29:37):
know in late two thousand, late summer of two thousand
and eight, that you know, returns would be much different
than they would be if you know, you had a
few few up years.

Speaker 4 (29:44):
You know, it is obvious, but.

Speaker 3 (29:48):
You know, we sent out something that said, you know,
all three, you know, three different scenarios, three retires with
a million dollars. Each one earned an average five percent
rate to return, but one had a poor sequence of return.
So so basically, you know, what it turns out is
that if you had you know, a great start in
a in a bad end, you'd have one point five

(30:08):
million dollars. If you had a bad start and a
great end, you'd have zero dollars eight years earlier. So
in year about twenty three as opposed to and you're
thirty with a great start, you'd.

Speaker 4 (30:22):
Have one point five million dollars.

Speaker 3 (30:23):
So you know, sequence of return matters obviously, and you know,
when we managed portfolios for people, you know, we do
try to manage for a bad sequence of returns because
the effect of a bad sequence of returns is so
great that you know, we really try to protect clients

(30:45):
against that. And you know, maybe that will come with
a little bit more muted returns, but I think that
is okay because you know, you always, in my opinion,
you want to have you know, worst case scenario in
the back of your mind as an investor because as
it can just completely jeopardize your you know, your happiness
in retirement. Really, he can't d offer me your portfolio

(31:08):
however much you want.

Speaker 1 (31:09):
To, and I you know, then however much you want to. Typically, yeah,
historically has been pegged at about four percent, you know,
And and that sequence of returns starts out with with
a negative return really in the first year, and that's
what Bill Bengam was trying to prove. Now he did,

(31:30):
and I think and we've been talking about five percent
recently as interest rates have come up is and that
five percent number answers the question if I have a
million dollars, how much can I withdraw every year and
still end up with that million dollars thirty years down
the road, And and and also just that for inflation,

(31:51):
and the answers you know, for Bill Bengen from his research,
the answer is four point seven percent.

Speaker 2 (31:56):
Round that up to five.

Speaker 1 (31:57):
So if you start out with a million dollars, maybe
you die with eight hundred thousand dollars or whatever the
case may.

Speaker 2 (32:01):
Be, if you, if you if you go a little
bit above that.

Speaker 1 (32:03):
But his his his study, and he's kind of like
the ax on this, so to speak. You know, it
says four point seven percent, so roughly four thousand bucks
a month, and then you index that for inflation at
two or two and a half percent, And and it's
broken out too with a with a fifty five forty
five ratio between stocks and bonds.

Speaker 3 (32:23):
Fifty out, Okay, fifty five that's what he use. Is
that what he used in the beginning too.

Speaker 4 (32:28):
I thought it. I thought he used sixty forty to.

Speaker 1 (32:30):
See he might have, yes, But he divides it eleven
percent large cap stocks, eleven percent mid cap eleven percent,
small cap eleven percent, microsaft cap eleven percent. International stat's
a total of fifty five forty percent intimate term US
comment bonds. And I will say that for the vast
majority of people out there, including US, intermediate term bonds

(32:52):
are the place to be. You don't get crushed if
inter strates go up, and you got some protection if
f inure strates go down. Yeah, And then he says
five percent in cash is represented by US Treasury bills,
and I think.

Speaker 2 (33:02):
I think that makes a lot of sense.

Speaker 1 (33:03):
I think a five percent four and a half five
percent distribution rate on on whatever money is that you have.

Speaker 4 (33:12):
Yeah, you know, good.

Speaker 1 (33:13):
And he also pegs us for inflation, and he pegs
it for inflation at three percent.

Speaker 3 (33:17):
And you know, intermediate term bonds are bonds that mature
between four and ten years.

Speaker 4 (33:22):
So I would say, you know, probably the lower.

Speaker 3 (33:24):
End of intermediate term bonds is the way to go
with all the uncertainty in the in the economic environment
right now.

Speaker 1 (33:29):
Now, with that though, with that sequence of returns, you
also had printed something out and we discussed it earlier
in the week off the show about you know the
odds of so the odds of experience a bear market,
you know.

Speaker 4 (33:43):
And we love this stuff.

Speaker 3 (33:44):
This is by is it rit Holts Animal Spirits writ
Holt's Wealth Management, and you know it talks about where
you got it in front of you.

Speaker 1 (33:57):
The odds of experience a bear market increased by whole
holding period.

Speaker 4 (34:01):
Right, Yeah, I know I have it here, so.

Speaker 3 (34:09):
Yeah, so you know if the ods of experience a
bear market increase by holding periods, So you know, the
odds of experience in a bear market in one year
is thirty two percent, and two years is forty seven percent,
in three years it's fifty nine percent. So more than
half the time you have more than a fifty percent
chance to experience a bear market. If if you're invested

(34:29):
in three years, four years sixty nine percent, five years
seventy seven, ten years ninety five, and fifteen years one
hundred percent.

Speaker 4 (34:36):
So if you retire at.

Speaker 3 (34:38):
Sixty five and you live to eighty, you will experience
a bear market. And that said, you'll probably experience more
than one bear market. I don't have those exact figures.
Markus come once every three or four years, so you know,
it's kind of that behavior aspect of investing that you
know when you're in retirement, you get comfortable with being
uncomfortable because there will be periods of time I'm throughout

(35:01):
your retirement that you know, it is uncomfortable, you know,
to be invested, especially when you don't have an income
coming in.

Speaker 4 (35:08):
You rely on you rely on distributions to fund your
your life. It's tough. You know, it's tough when you
don't have that paycheck coming.

Speaker 3 (35:18):
So I have that paycheck coming, I'll continue to dollar
cost average into the market. But when you don't have
that paycheck coming in, in the ease of looking at
your account nowadays it at shop Alliance, you can log
on any time and see in real time how much
money you have. That you know, it just increases the
likelihood of making the wrong decision at the wrong time. So,
you know, that's what we try to tell our clients,
you know, through through conversations, through emails, through you know,

(35:42):
we put out the chart of the week, we put
out something on Saturday, so you know, just to keep
people more informed and you know the history of the
stock market and the fact that it usually it works
out in the end. The longer you do hold into
you do hold on to stocks, and then you know

(36:02):
right above this chart. Also it helps wealth management. It's
the historically odds of gains increase with holding period as well.

Speaker 4 (36:09):
You know, so.

Speaker 3 (36:12):
Day one fifty one percent, week one fifty seven, one month,
sixty two, three months, sixty six, six months, seventy so
you know you're already seeing you know that, what about
five years, five years eighty three percent?

Speaker 2 (36:24):
So that's interesting.

Speaker 4 (36:25):
You've so you've got to seven periods of history too, right, so.

Speaker 1 (36:28):
You've got a seventy seven percent chance of experiencing a
bear market if you hold, if you hold like the
S and P five hundred for five years, and you
have what percentage of chance of making eighty three percent?

Speaker 2 (36:39):
Chance?

Speaker 3 (36:39):
It's about ten experience a bear market. But right, you're
going to make one eighty percent time, you'll make money.
Twenty years, one hundred percent, ten years, ninety three percent.

Speaker 2 (36:49):
Yeah, So that's the point.

Speaker 1 (36:50):
So, so what what's going to happen is is that
you are going to feel like this is different this time. Oh, oh,
it's it's it's the tariffs. Oh oh, it's it's the pandemic.
Oh oh, the Feds raising raids whatever. Oh, it's President Trump,
it's President Biden, it's it's this, it's that it's problems
in the Middle East. But historically speaking, you know, there's

(37:12):
a ninety what percent chance of making money?

Speaker 2 (37:14):
Are you probably moved to something else?

Speaker 1 (37:16):
So ninety four percent chance ten year period and then
ninety three ninety three percent chance of.

Speaker 4 (37:23):
Making ninety percent chance to experience market.

Speaker 3 (37:28):
So I think that, you know, those two charts together
are just you know, a great combination of Okay, you know,
it's it's easy to get scared out of the market.
But you know, we hate sayings stay the course because
it's just kind of we're hit over the head.

Speaker 4 (37:42):
With it in this industry. But it's true, you stay
the course.

Speaker 1 (37:47):
And I think one of the things that you know,
I was sitting with somebody the other day and he
was a warrior and really nice guy, and he had
very limited expenses, no debt, you know, single, not not
any children that rely on him, early seventies, wants to

(38:07):
retire but didn't think he had enough money. And he says,
I worry about it. I told him, look, I can't
tell you to not worry. I can tell you that
you don't have to worry. And there was an article
that by Isaac Taylor that was published within the past
couple of weeks that said, my friends and I are
rethinking or spending because of economic activity, and that may

(38:29):
have repercussions for a gross domestic product and the like.
But I often talk about this to clients and quite
often on the radio show. And if you're sixty five,
you and your spouse, let's say you're a partner, or
if you're a loan whatever the case may be, are
sixty five, you know, what do you have left? Statistically?

(38:49):
Maybe fifteen good years to do what you want to
do if you're lucky. And that's as if you're starting
healthy at sixty five. So people often say, well, I'll
work another five years. What's the difference because I think
they think backward, Well, what's five years I worked from
sixty to sixty five? Five years is not a lot
as a percentage of sixty five, And I think we

(39:10):
have a tendency to think backwards when we think about
our work. But if you look at your active life,
that you have left five years is a third. If
we look at age age eighty as compared to like
a present age of sixty five, that you're going to
spend working rather than you know, kind of turning the

(39:30):
table and enjoying the fruits of that labor probably over
the last forty or forty five years. So it saddens me,
truly saddens me. Some people have legitimate concerns as far
as outco versus income, you know, throughout their entire life regardless,
but it saddens me with people that are creating an
armageddoness situation or potential for an armagedness situation, and that

(39:53):
restricting their ability to do the things that they've worked
hard to do their whole life when they're in retirement.

Speaker 3 (40:00):
Yeah, and you know, usually the people you know, so
if you usually are someone who's a worrier and in
places the armageddon scenario in your head, you know, you're
not the one to run out of money. You know,
we really don't see many people at all run out
of money because they went on too many trips or
had too many experiences in life. Usually, you know, if

(40:22):
people go through their money, it's because of very bad habits,
and that habits usually is in a you know, a
great life experience.

Speaker 4 (40:32):
And then you know it's.

Speaker 3 (40:35):
You hate you know, I think half our job is
to you know, make sure people aren't spending too much.
But you know, also it's to to to let people
know what they can spend safely and not have to
worry in retirement.

Speaker 1 (40:48):
And just check in with and our clients check in
with us with big expenses usually you know, hey, we're
doing this, We're doing that. Is that is what's going
on here? Is this gonna is this gonna impact the
viability of our portfolio? And and and we can do
we can upgrade, we can do an update of financial
projection for people and for all of our clients. If
you're thinking of retiring and you're in retirement, we'll do

(41:12):
a projection of the results of your portfolio, factor and expenses,
factor in inflation, factor in taxes. Client, non client, feel
free to give us called five one eight, two seven four,
and we can help you out with that, you know,
kind of planning for the future. And then if you
have a big expense coming up, be it you know,
something fun like a marriage or a trip, or maybe

(41:35):
a you know, a prepair in your house or expansion
on your house renovation. You know, we we can we
can factor that in as well, or we can factor
some things in along the way, like project your daily
expenses on a normal basis, and then one trip a
year for ten thousand dollars or this or that. So
so we can do all of that for you if
you want.

Speaker 3 (41:55):
Even we can project out if you want to take
a trip a year for the next five or ten
years for ten to fifteen thousand dollars, what that does
to affect you know, the you know, the other month's
cash flow. And hey, you know, maybe if I take
one trip a month for fifteen thousand dollars and I
can only take three thousand dollars out of my portfolio
per month as opposed to five or six, you know,

(42:15):
is it worth it?

Speaker 2 (42:16):
You know? Yeah? Stucking to what else? You got? What
I got? Some other stuff I can move to?

Speaker 1 (42:21):
Yeah, I've got I've got an interesting article from Ben Carlson.
You know, shares of homes and this is totality was
the source of this shares of homes built at less
than fifteen hundred square feet The year I was born
in nineteen sixty was about seventy five. Sixty one was
about seventy five percent, so three quarters of the home.

(42:41):
And I you remember Grammy and Poppy house, that's probably
the size of their home.

Speaker 4 (42:45):
How much fifteen hundred.

Speaker 1 (42:46):
Yeah, yeah, yeah, you know the cellar was unfinished at
the time we finished the cellarer because my mom and
dad had six kids. It was a small cape. The
second floor consisted of two bedrooms, no bathrooms, my three
sisters on one side, my two brothers, and myself on
the other.

Speaker 4 (43:05):
I've slept up there before.

Speaker 1 (43:06):
And no air conditioning. Yeah right, no air conditioning. This
is mean I do. I do reminisce once in a while,
not not that often. But you know, it was a
little transistor radio listening to the mixed mix of the Mets,
and yeah, it was, it was, it was.

Speaker 2 (43:20):
It was a decent life, so I was happy.

Speaker 1 (43:22):
But now that number is less than twenty five percent
of homes built today are less than or less than
fifteen hundred square feet and Ben Carlson kind of blames
it on HGTV. You know, everybody wanting to be bigger
and better, and.

Speaker 4 (43:39):
Yeah, I think things you think you need, but they
really don't make your life better.

Speaker 1 (43:43):
They don't know, and that's one of the bigger problems.
I know, we've talked about it quite often, and we
don't own any housing stocks, but I think it merits
a look before before this problem gets solved. We do
own a lot of Lows. We don't own any home depot.
We've kind of played the housing market through and the
renovation market through Lows and home depot more so than

(44:05):
anywhere else, and that's worked out very well for our clients.
I know, those is one of our top ten holdings or.

Speaker 4 (44:09):
So yeah, pel it for a long time.

Speaker 2 (44:12):
But you tell, you you you talk about the housing
market quite often and.

Speaker 3 (44:17):
How the age of a home buyer is fifty six
now as opposed to first time home buyer thirty eight
or something like that. Home buyer, which I think is
more important. It's fifty six because you know, you have
new home buyers, you know, in or even you know,
people that want to upgrade their their their first home

(44:39):
to the second home, you know, competing with people who
are fifty six, who have who have equity in their homes,
who have way more cash than thirty year old. So
you know, I think again, you know, we say it
all the time that this is going to continue to
be an issue until there's something.

Speaker 2 (44:55):
Major, something's going to break, Something's got to break there.
You know, I would agree.

Speaker 3 (44:58):
Something's got to break or you know, you have ten
thousand and thirteen thousand people turn sixty five every day. Uh,
you know, people are living longer and longer, So that
statistic just started. So eventually these people will have to
move out into other you know, maybe assisted livings or
you know, downsize a little bit. But again, you know,
it's hard to downsize when you don't have a mortgage,

(45:20):
you know, and forty percent of people.

Speaker 1 (45:22):
Don't so right, So what happens is if you don't
have a mortgage, then you're kind of stuck seeing rent yeahs,
and also the housing prices you know, four or five
hundred thousand dollars. You know, you have a bigger house,
but no mortgage, but you have want to buy some
that's four or five hundred grand you stay there or
rents two thousand dollars a month, you know, Yeah, so

(45:43):
I think and.

Speaker 2 (45:45):
The other the other thing too.

Speaker 1 (45:46):
Interest rates continue to you know, kind of you know,
there's somewhat trendless over the past week or so, but
they moved higher that the uh you're seeing the ten
years and four forty three curve, right, the normalized yield
curve is what we have there, So I think you
know that that still signals a growing economy.

Speaker 2 (46:05):
What else can we say in here? Oh?

Speaker 1 (46:07):
Another another little piece that we saw in the in
the news this past weekend. We've been getting some calls
as to when to take your required minimum distribution. We
talk about the market being up seventy two percent of
the time over the course of a year.

Speaker 2 (46:23):
So generally speaking.

Speaker 4 (46:25):
You don't need the money.

Speaker 3 (46:26):
But let's say you know your RMD's twelve grand and
that one thousand dollars a month, will you know, increase
your you know, your happiness then you know, I think,
I think, I think it's not.

Speaker 4 (46:35):
A situation by situation basis.

Speaker 3 (46:37):
But if you don't need the money, about if the
market's up seventy five percent of the time, you know
it's it's beneficial to take that out towards the ladder
half the end of the year.

Speaker 1 (46:47):
And for those of you that are clients, we will
contact you in the fourth quarter if you do not
contact us prior to that. A lot of our clients
use have their day living expenses covered by let's say
pensions and Social Security and take the rm D for
like vacations or specific entertainment or renovations on their home.

Speaker 2 (47:12):
Others. As Aaron just said, factor in their RMD too.

Speaker 1 (47:17):
Let's say you have a job that didn't have a pension,
which is more and more likely now. So there's a
lot of our clients, you know, do take monthly distributions,
and you just got to make sure that that monthly
distribution will satisfy your RMD. But for practical purposes, yeah,
it pays to wait towards the end of the year.
But if you're and you have to begin to take

(47:39):
it the year you turn seventy three, you have to
April first of the filing year, But generally speaking it's
the year you turn seventy three now, because it's only
about three point eight percent of your total of the
prior years ending balance, it really doesn't matter that much
when you take it. If you have one hundred thousand dollars,
got to take up thirty eight hundred dollars. It's a
better way till the end of the year, yes, but
as Aaron said, you don't want to compromise your financial situation.

Speaker 2 (48:01):
A and B.

Speaker 1 (48:02):
It's not that big of a deal when you take it,
and I guess right now is as good a time
as any to take it. You know, numbers during the
week if you want to get a hold of us.
We talk about a lot of things here. We try
to touch on some things that.

Speaker 3 (48:15):
Are financial planning, but also economic stock market economy. So
I try to give people, you know, you know, a
big picture of you know, I guess financial planning.

Speaker 1 (48:28):
And what we do, and then what uh, you know,
what you should be concerned about, you know right now?
UH call numbers during the week five one, two, seventy five,
one two, seven ninety four check us out in the way,
but fagan asset dot com or like us on Facebook,
Aaron into all our listeners have a great ticket