Episode Transcript
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Speaker 1 (00:00):
Good morning, and welcome to the Capital District's Money and
Investment program. You're listening to the Fagan Finance Report. I'm
Dennis Fagan. Aaron is off today. Feel free to gimme
call five point eight w G y one and hit
eight two five five nine four nine. We haven't been
on the air as far as live and quite a
bit of time. So this is life. So if you
want to talk to me, feel free to gimme call
(00:21):
on the air and express your concerns about the market,
your bullishness, parishness, questions you have in a particular security
or a ETF for mutual fund, retirement planning, whatever you
want to talk about that retains the financial markets or
your finances. Let me know. Stocks push higher this week
with the SMP closing at six thousand, just over six thousand,
(00:42):
at six thousand point three six that's twenty percent, I think,
just about twenty percent above their April eighth closing low
forty nine eighty two, so two months ago. Over a
two month period, the market has risen twenty percent off
that forty nine eighty two zero point seven to seven
closing low on that date. Was that time that President
(01:04):
Trump shifted his perspective or attitudes towards the tariffs bec
became a little more malleable, and the market has since
bounced off and we've received pretty good economic date over
that period of time as well, and that's led to
a market that is, you know, within shouting distance really
of its all time high, and we'll talk a little
(01:24):
bit about that as the first half goes on. The
NASDA composite US total marketing next to Russell two thousand
have all risen between twenty and thirty percent over that
same timeframe, So it's been a good run for the
market as investors turned their focus away really from tariffs,
or not completely away, but they know they're taking other
(01:48):
things in the consideration the economy, the labor market remains
relatively strong. We had non farm payrolls come out this
past week for the month of May, and non farm
payrolls grew by about one hundred and thirty nine thousand
him it's above the consensus estimate was for one twenty
or one twenty five and around there that set. Payil
numbers for the prior two months were revised downward by
(02:09):
a total of ninety five thousand for the months of
March and April three month rolling average fell a little bit,
but with the three month average still at one hundred
and thirty five thousand jobs being created, just despite public
sector of the federal government shared twenty two thousand jobs
during the month of May, and the public sector as
(02:30):
a federal government is down fifty nine thousand jobs year
to date. That's we're still we're still hanging in there
as far as as far as the labor market goes,
not really aggressive hiring, but also not really a lot
of firing either. We saw that break through the labor
report strength and health and human services. We had strength
(02:55):
in travel and tourism still look pretty strong leaders hospitality,
forty eight thousand jobs created. So the market is set
really on relatively firm footing. As we come toward the
end of the second quarter of the Fed meets on
June eighteenth, President Trump's calling for one percent rate cup
(03:15):
we'll talk a little bit about that. But again, the
stock market has, in addition to tariffs, which which I
think will remain a concern for quite some time, the
market is also focused on the fact that the economy
is doing pretty well, and that change in the stance
of President Trump on the morning of April ninth has
(03:36):
really changed the tenor of the market. The investors are
and President Trump, I think, is focusing on the tax
package getting that through the budget. Prior to this or
prior to April ninth, the only thing that the President
seemed to be focused on was the tariffs. In fact,
the market had sold off from and we talked about that,
I believe on April sixth or fifth and around there.
(04:00):
We were very concerned about the market on April, so
we were then April fourth, the sixth, excuse me that show.
On the sixth, we were very concerned about the market.
President pivoted on the ninth. The morning of the ninth,
and the market has taken off, and that's good for
investors and certainly good for the country. To put it bluntly,
(04:21):
the labor market with one hundred and thirty nine thousand
jobs created to break evens anywhere from from fifty to
one hundred thousand and around there, so we're hanging in there.
Labor force participation rate went down a little bit. I
think that might have to do with immigration or the
lack of immigration. So we saw that and so we
have we have solid fundamentals pushing the market higher. If
(04:43):
you look at where we stand for during the course
of this week, the Dow up four hundred and ninety
two points to close at forty two thousand and seven
sixty two. The Dow is around twenty two hundred and
forty points away, twenty two hundred and fifty points away
from mid all time high. That's five percent exactly. The
Dow is five percent away off of it's all time high.
(05:05):
The S and P five hundred up two percent for
the year. The Dow, excuse me, is up point five
percent for the year, so we really had a waterfall market.
The culminated in an April eighth, and subsequently the market
is climbed back in most of the major indices and
the positive The S and P five hundred at six
thousand point three six as I mentioned earlier, they're all
(05:26):
that all time high is sixty one thirty four, So
the S and P is about two percent off of
it's all time having NASA composite about three point three percent,
three percent away if midst all time high. Up four
to points for the week, up two percent for the week,
NAS like up one percent for the year. US total
Market index up almost one thousand points in US Total
Market Index, which is which is really the most fair
(05:47):
benchmark to compare your portfolio to. That's up one point
sixty six percent for the week and one point sixty
five percent for the year. So I think we noted
that on our snapshat that comes out every Sunday. If
you want to get that and you're not even feel
free to email us at Dennis dot Fagan at Fagan
Associates dot com or www dot Faganasset dot com. Either way,
(06:10):
we'll get that weekly snapshot to you. And we also
have a chart talk that either myself or Aaron A
Doug puts together that goes out every Wednesday, just describes
the market and or various economic indicators of the company's
information in a chart and then explains a little bit
about the chart. So both interesting pieces, both relatively short
(06:32):
reads and good reads. So if you want to want
a copy of it, just feel free to email us
at Fagan Asset dot com. The Russell two thousand, second
third thousand largest American stocks up sixty six points to
close the twenty one thirty two That was up three
percent for the week, down four percent for the year.
I think that merits watching. I think it merits a
(06:54):
look because the smaller companies tend to tend to have
get most of the revenue from inside the United States,
so they're with the United States economy hanging in there
and not being subject obviously domestically produced could not being
(07:16):
subject to tariffs. I think it makes a lot of sense.
And we'll take over at that but still down four
percent for the year, so there's room to move there.
With the Russell two thousand a good ETF. If you
want to jump on board the Russell two thousand would
be M d Y that's a spider S and P
(07:38):
MidCap four hundred ETF. I think you can also use IWM,
which is the I shares Russell two thousand ETF. You
can also use s c HM, which is Schwabz etf
a schwab Us MidCap ETF. Either of those, any of
those three IWM, md Y or s e HM are
(07:58):
all good proxies for the Russell two thousand carry very
low expense ratios, you know, and merit to look in
my in our opinion. You know, right now our largest
holding UH with the with e tfs and when we
UH for correlation to the market UH is the S
and P dividend Aristocrat fund the symbols N O, B,
(08:21):
L UH and UH. You know, we would we balance
that then we use an energy sector E t F,
the US broad market, the JP Morgan, US tech leaders
j T, e K, and Schwab divid in Equity s
e HD. So that's some domestic ETFs that you might
want to consider. That's that's all on our website if
they and asset dot com if you're interested in taking
(08:42):
a look at that. But so the market's rebound and
the market's rebound. Here we are sitting UH on June eighth, again,
almost halfway through the year, with you know, pretty much
an unchanged market. You tell the average is up five percent,
transportation average down six percent. Transportation average would be down
because perhaps you know, less tariff with the shipping and
(09:03):
the like, or less goods being imported because of the tariffs.
We'll see, but not not a bad week for the market.
I think. One of the things that I think if
you're looking at the other side of the financial another
asset class rather than rather than equities, it would be
fixed income. We had to tick up in bond yields
(09:26):
on Friday, given a surprisingly strong number coming from the
labor market, coming from the non farm payrolls US ten
year back over four point five percent. It's up ten
basis points or zero point one percent over the past week.
It sits about you knowero point six percent above. It's closing.
(09:50):
Excuse me, it's no, it's it's just in line with it.
It's closed as of last year. And I think you know,
we we ladder some bonds. I would recommend that you
do the same ladder some treasuries between one and seven
years or so. You'll pick up a little over four
percent right across the yield curve. And that would make
some sense as well. So we have it, we have
(10:11):
a market. That's all. All economic data would suggest that
things are growing modestly. And I know the GDP came
out and then pulled back point three percent in the
first quarter of the first revision. But you know that's
that's somewhat.
Speaker 2 (10:25):
Could be.
Speaker 1 (10:28):
Import related. I think it was inventory related a little
bit as well. But both the Institute for Supply Managements
Composite Index of Manufacturing and the non Manufacturing Service Sector
Index both up at the add or near numbers that
are shown. Really an economy that is not firing on
(10:48):
all cylinders, but the company economy that is, you know,
growing modestly, and that bodes well for the stock market.
Look at stock market to pass twelve twelve months. I
think it will. It's just it's justifies what I just said.
Speaker 2 (11:01):
S and P.
Speaker 1 (11:01):
Five hundred of the past twelve months is up around
twelve percent. Corporate profits have risen about twelve and a
half percent. You know, So what you have is if
you look at a price to earnings ratio as a
metric for value in stocks, and that pretty much stayed
the same over the past twelve months. You had stocks
up twelve percent, earnings of twelve percent, so stocks did
not become more expensive on a relative basis. I think
(11:24):
that's kind of what we're seeing here. And no, they're
not the only game in town. You have fixed income
becoming a bigger and bigger percentage of one portfolio that
should as investors lock and guaranteed returns. But I think
if you if you came into the past two or
three years with seventy percent or seventy five percent in
the stock market and twenty five percent in the buying
(11:46):
market for a growth and income portfolio can ratchet that
down a little bit to maybe sixty five thirty five
and take a little bit less risk, but you know,
get decent returns that will help you, uh maintain your
standard of living in retirement. Individual specific news that came
out this week and the spat call it, we call
(12:07):
it in our snapshot the spat hurt around the world.
I think that that's and there's a comment really on
on the market and the resilience of the market when
you see something like that. And who would have who
was surprised really of the the battle between you know,
President Trump and Elon Musk and their relationship coming to
(12:30):
an abrupt end, uh this past Thursday, you know, and
Willy will they will they kind of de escalate the feud?
Will they? You know, will they you know, will they
both get over it and and do business again? Obviously
they got to do business. President Trump needs Elon Musk's
money with the upcome with the mid terms coming up
(12:53):
next year, and Elon Musk needs the government contracts for
SpaceX for one of his myriad of companies that he
that he that he's in charge of. So, but I
think what was the most interesting that came out of
that from from our perspective, is the market kind of
looked past it. Obviously it didn't for Tesla, and you
(13:14):
know we we don't. We don't own Tesla for any
clients other than those that they want to buy it
just because of Musk. Musk's personality has leads to a
lot of volatility in the stock. And you know, if
we're looking at a potential growth in stocks in a security,
(13:39):
I think you have to take that into consideration. How
much volatility does an individual want in their portfolio and
can you get the growth that Tesla might offer somewhere else?
And I think the answer the answer is yes. I
think if you want to take you know, you look
at a stock that pulled back about four or five
percent on great earnings. Broadcom would be one. In Nvidia
(14:01):
is you know adder here it's all time high. We
own Palanteer p L t R as an aggressive growth company.
So those is those are the ones that you know
we would recommend rather than And although else Karp is
somewhat of a character himself CEO of Poundeer, he's generally speaking,
(14:23):
he's out of the limelight. So we would not recommend
Tesla at this time. And it's not not due to
a political statement. It's more a statement of the bombastic
personality of Elon Musk and also think, you know, do
you really want to get on the bad side of
President Trump. But we'll see, We'll see how this plays out.
But I don't think it has wide stock market market repercussions.
(14:46):
I may have repercussions for Tesla that remains to be seen,
and that's why we don't we don't own any But
for the market, I think in the same with the text,
I think that the market is just looking past these things,
and I think that that's a big plush. But the
other there the other kind of I guess the two
big pieces of news that came out this past week,
if you were made news that dominated the news. I'm
(15:09):
not so sure that this, the spat between President Trump
and e La Musk is is newsworthy from a from
a longer term financial perspective. But what is newsworthy is
the ECB, the European Central Bank in India's Central Bank
UH cut there their key lending rates UH the ECB
(15:30):
by point twenty five percent and the India Central Bank,
the Royal Bank of India by point five percent. President
Trump's after that and after a call for a full
one percent rate cup by the FED and true social
Trump posted, go for a full point rocket fuel. You know,
the FED isn't a pickle. You know, they're damned if
(15:50):
they do, and damned that they don't. Inflation has eased, however,
we were just talking about the labor market remains resilient
in the US, the U, US companies, consumers, we've yet
to really been able to quantify and the FED be
able to quantify the full impact of the tariff. So,
you know, I think the FED could cut rates. You know,
(16:12):
will they at their June eighteenth meeting, the conclusion of
their meeting at the conclusion of the meeting on June eighteenth,
I don't know. I I think I think they may
cut by a quarter point. If I had a BED,
I would say no, they won't cut. But it would
(16:33):
not surprise me if the FED cut by a quarter point,
because the difference between the ten year and inflation is
about two and a half percent, and generally speaking, the
FED once that that gap at about two percent, so
the FED has room to move. No, they're not going
to cut by a full point. There's zero percent likelihood
in my opinion, but there's there's a remote chance that
(16:53):
the FED will cut at its upcoming meeting. Again, our
baseline is no, uh, but but we'll see. So that's
one one piece of news that came out this week.
The ECB in the Royal Bank of India another news
worthy items. I think that does have longer term repercussion.
It really shows the the integration and and the the
(17:16):
I guess, the need for for energy. Meta, you know
company formally nomos Facebook's and a twenty year agreement with
Constellation Energy to purchase one point one gigawatts of energy
necessary to power their their AI infrastructure. And and that
that that the move by Meta follows deals by Alphabet
(17:36):
and Microsoft. They're purchase of energy either late last year
or early this year. And the parallel management we have
something that kind of corresponds with them just saying they
attributed one percentage point of growth and GDP to data
center construction. So that need for energy is not is
(17:59):
not going and any anytime soon as AI becomes more
integral or integrated in business and both on in business
and also for the consumer, uh, for the average American,
I think the more that becomes integrated in our life.
I think you're going to see more and more the
(18:21):
need for energy is just going to continue to continue
to to to grow. And I think that bodes well
for bodes well for Broadcom, you know, for chips ai
A m D and video. On the energy front, you know,
I think it bodes well for you know, like a
Constellation Energy. I think it bodes well for I don't know,
(18:47):
the Evistra, the the V S T is the symbol there.
I think I think it bodes well for Nexteras n EE,
which we own for some of our clients. And I
also think by and large bodes well for energy for
the traditional energy companies which you can use like an
XL Energy Select Sector spider. We own some of that.
(19:08):
We also own Chevron and these and these stocks are down.
Chevron's down from one seventy or so in April to
about one forty now, so you're talking thirty points over
one seventy. You're talking about sixteen or seventeen percent decline.
Carries a good dividend. I think Excellon Mobile is the same.
I think that that that merits are looking here excellent.
And then both both have if you're concerned about the
(19:29):
valuations of the market. You know, I think both of
those you know that carry a good dividend are worth
the look you just just when we this is not
pertaining the energy anymore. But if you look at Bank
of America JP Morgan, I think banks, banks are in
good shape here, and we be buying them on substantial weakness.
So I think you look at technology, I look at
(19:51):
and the market still looks decent into here. We're carrying
probably nine or ten percent cash overall in our portfolios
and we'll be purchasing UH. Security is on weakness. We
are concerned about, you know, the tariffs. We're concerned that
of the focus of the administration has to be on
the economy and on UH and the tax package, the budget,
(20:15):
budget package. I think, you know, there's there's news that
the president will be meeting with maybe not the president,
representatives of the president gonna be meeting with UH, their
counter their Chinese counterparts this coming week. So so we'll
see how that goes well. Also, I think that, but
I do think also the volatility as we approach that
ninety UH that that July ninth deadline, that the ninety
(20:37):
days and ends in July ninth. I think that, you know,
probably volatile is gonna volatility is going to pick up.
So right now we're getting through the doldrums, getting through
the dog days of summer. I would also say that,
you know, I don't see the market taking off from here.
I think we're just going to be You buy on weakness,
You buy good companies on weakness, you hold them for
(20:57):
the long term. You know, our average holding periods about
five years, and you you look past the noise every week,
and I think this was a good example. This past
week was a good example. Despite the noise coming from
President Trump and in Elon Musk, I think the market
held its own, you know. And with again with the
(21:18):
dow up, you know a little, with all major innoties
up a little over one percent, utility average dropped a
little bit. Utility average generally speaking, responds inversely. The interest
rates and his interest rates ticked up a little bit.
It's not surprising to see the utility average come down.
The oil oil moved up a little bit. Gold is
(21:40):
at thirty three forty six, And like I said, the
interest rates spectrum went right across the board, So there's room,
there's room for the market. I wouldn't consider it a
lot of room for the market too. I think we
just buy our time through the summer months and worked
through these tariffs and then go from there. It's that
going a half hour. We're going to talk a little
(22:02):
bit about some of the concerns that you know, our
clients have expressed over the past three or four months
with the stock market, and you know how we're responding
to those concerns, and go from there. But right now,
it's ten thirty on this beautiful Sunday morning on the
station depend upon for news, weather and information, News Talk
(22:24):
A ten and one O three one WGY. Good morning,
Welcome back to the second half hour of the Capitol
District's Money and Investment program. You're listening to the Fagan
Financial Report. I'm Dennis Fagan, sitting here with my son Aaron,
as we do every Sunday right here in News Talk
A ten one O three one WGY. You can't you
can't control everything that happens to you. You can only
control the way you responds.
Speaker 2 (22:46):
Kind again, that is me. That is me. Actually I
said that a long time ago.
Speaker 1 (22:50):
I'm sure it's paraphrasing somebody else, because you know, everything
else has taken it. But I wrote that in our
journal on October thirtieth of twenty and seventeen. You know,
during the first Trump administration, before the pandemic, before the
Biden administration, and before this second Trump administration the market's higher.
We read that again, you can't control everything that happens,
(23:12):
so you can only control the way you respond. And
I think that has a lot to do really with
the psychology of of the market and the psychology of investing.
And so the second half hour we're going to talk
about investor psychology and then also talk about the things
according to Shelby Fishman, an article published within the past
month or so, the number one money concern according to
(23:36):
financial pros that their clients are facing right now, and
we'll talk about that was written April twenty fifth. The
market bottom down April the eighth or ninth, So we'll
touch on that. And in these investor psychologists from with
Master Class or.
Speaker 3 (23:50):
Yeah, Master Investment, Master Investment or something like.
Speaker 1 (23:54):
That, it's meant as food for thought, and I think
that's you know, that you know kind of investor knows myself.
I don't know if you said that or somebody else
said that, but Uh, why don't.
Speaker 2 (24:03):
You start off?
Speaker 1 (24:04):
So we both I xed out about ten or twelve
of them and you exed out about ten or twelve
of them.
Speaker 3 (24:08):
But you know, I think I think it's interest in
what you did say to start in that. You know,
investing is hard because you really have to be disciplined
and stick to your disciplines. Right, So you know, as
you said, you know you're you can only one more time,
one more time.
Speaker 1 (24:24):
You can't control everything that happens to you. You can
only control the way you respond.
Speaker 3 (24:29):
Yeah, and you know in investing, you know you're wrong
a lot. With a with a diversified portfolio, you're gonna
have things that don't work out. But even if you
have things that you think are gonna work out, they
don't always work out. So you know, you try to
you try to learn from your past mistakes and see
where you rent wrong, but you always have you also
(24:50):
always try to build off those past mistakes, so you know,
it's kind of like a culmination of being wrong and
being wrong and being wrong to to learn from that
but also actually implementing what you learn from it is
hard to.
Speaker 1 (25:11):
In my opinion, well, because if you look at the
you know, if you look at the nature of investing,
there's the fundamental components to investing, whether you're in a
mutual funded TF for a company, there are the technical components,
fundamental meaning you know how you know, let's say you're
investing in an ETF what what what's the sector? What
are the companies involved? What are the ratios? You know,
(25:32):
what's the price learnings ratio, price to runnings ratio, overgrowth?
You know, what's uh? You know, what are these companies
growing by in the average? Then perhaps you're investing in
individual companies. You have all those questions to answer. Also, yeah,
the technical aspects of the market, which is that how
is the market trading? You know, is it overbought, is
it oversold? Is the company over bought or over sold?
(25:54):
Is it runway up? Is sentiment very bullish on it
or bearish? And then you have political components to it,
both domestic and abroad, that are influencing your your choice.
You know, I will say though you know of all that,
you know that stocks can be priced almost anywhere at
(26:15):
any given moment, or the market at almost anywhere to
any given moment, Because I think that's a random type
of a scenario. But over the longer haul, you know,
the market conforms to the overall strength of the underlying
companies that that that comprise that index, as as Warren
(26:39):
Buffett once said that that that is the case.
Speaker 2 (26:42):
You know, it's that the weighing machine.
Speaker 1 (26:46):
The market's a weighing machine as opposed to a it's
a voting machine, then Graham Road. In the short when
the stock market is a voting machine, but in the
long run it's a weighing machine. And sentiment can change
the market over the short term very quickly, but over
the long term, you know, you pretty much get true
performance from the work that you do. And I think
(27:08):
the other thing too areas that only did Drona. But
you know, you get so much cross currents today in
the markets, some which are true, some mhich aren't. Yeah,
you know, you battles between President Trump now Jamie Diamond
said a couple of things that Scott Besson didn't like.
Elon Musk is involved in it. You've got the Democrats
snipe and at the Republicans and vice versa. And it's
difficult to determine what actually what actually means anything and
(27:29):
what doesn't. I think even the tariffs you know, where
do we land. I don't think anybody really knows where
we land. I think what people do know is we're
not going to land in as bad of a place
as over the short term as as investors thought during
the first week or two of April.
Speaker 3 (27:44):
And I think a lot of times people in investing
there's that like what anchoring bias, where people rely on
one piece of information, you know, to make an investment decision,
whether it be in an ETF.
Speaker 2 (27:55):
Or an individual stock.
Speaker 3 (27:56):
But there's a lot of random things really that that
go into the price of a stock, you know, psychology, economics, politics,
and in human psychology. So I think it's it's easy
to make bad decisions when investing, especially with how much
(28:18):
access you have to your portfolio, into to your accounts,
and the volatility of the market, especially in recent years
that you know you really have to it's it's a
constant struggle day to day when the market's open to
really stick to your you know, investment approach.
Speaker 1 (28:36):
And you said earlier in the second half that and
it is important to maintain a consistent approach, but evaluate
that all the time, and I think it make you
make little changes to your approach and you know, we're
big sports fans, and I think, you know, you look
at the year peed Alonzo's having a very big year
for the Mets so far. Each changes swing a little bit.
(28:59):
It doesn't chase that pitches. Sure, the underlying nature of
his swing is the same, but the choices that he's
making regarding the pitches are different. What he's going after
is different, and you know, his his approach is just
a little bit different. So I think, you know, you
have to you have to with with technology, communication services
(29:20):
and consumer discretionary being more than forty percent of the market.
I think you have to evolve with the market. But
the underlying what would you call the underlying investment process
that we have at Fagan Associates.
Speaker 3 (29:32):
You know, I think we were you know, I think
correlation to the underlying indices is important. But we were
talking about this earlier today and I think it fits
in perfectly. And we had a you know, a client.
Speaker 2 (29:43):
Who's we were going over.
Speaker 3 (29:44):
Their portfolio was an incoming growth portfolio, so you know,
about forty percent in the stock market and sixty percent
in bond markets, and we were talking about the stocks
and you know, in the in the stock equity portion
of their portfolio and how they've done really well, and
they're like, oh, you know, it's a little bit skewed
towards it's technology.
Speaker 2 (30:03):
But how what.
Speaker 3 (30:04):
We try to do is really when we meet with
every single client, really try to customize their portfolio not
only for you know, for returns or distributions, but you know,
what they're comfortable with too. So like, so let's say
someone has a fifty percent if someone should be in
a you know, let's say for distribution purposes, you should
(30:25):
be in a fifty fifty stock DEVIOND portfolio. I think
at times you try to and if they're really risk averse,
you try to come to you know, a consensus really
that okay, you know, even they're fifty percent in the market,
that stocks, you know, what stocks will they be comfortable with?
You know, what would happen if they had a poor
(30:46):
sequence of returns or an extremely volatile market where the
market is down twenty percent? How would they react to that? So,
you know, we try to do is build portfolios with
you know, with what we think people will not get
scared out of as well with what their risk tolerance is.
Speaker 2 (31:03):
It's a component to it. Yeah, I think you try
to you try to really.
Speaker 3 (31:09):
Build a portfolio that people people are comfortable, you know,
a mix of what people are comfortable with and what
they should be doing.
Speaker 2 (31:15):
You've got to make You've got to be able to
make it.
Speaker 1 (31:17):
If you're sixty two or sixty three year old years
old and bear markets have been once every three or
four years, you've got to be able to make it
to the other side of probably five or six bear
markets to eventually be successful. If you get stopped out
of your your trades, if you get stopped out of
your account or sell out your account at the bottom
once that that's that's what could change the longer term
(31:39):
direction of your account and the viability of it.
Speaker 2 (31:42):
So I think, I think you're right.
Speaker 1 (31:43):
I think, and you know, I know what you're saying
is kind of like, you know, it's implied that we
have to take people's tolerance to risk into account, and
we do, you know, but we also make sure that
they make use of our expertise inasmuch that we can
begin to quantify the risk that they're taking. You know,
(32:05):
I met with somebody this morning, and you know, he said, look,
I'd be happy with a four percent return.
Speaker 2 (32:11):
I said, that's fine.
Speaker 1 (32:12):
But if you take thirty percent of your account and
put it in the stock market, and the stock markets
down thirty percent. You know, let's say on one hundred
thousand dollars, you're gonna lose nine thousand dollars. There, the
other seven makes four, seventy thousand makes four, you're gonna
make twenty eight hundred dollars. So you're gonna lose sixty
two hundred dollars or six point two percent. He says, Oh,
I can live with that. So if you begin to
(32:33):
quantify the risks, everyone's afraid of something. If the unknown outcome,
if there's an unknown outcome, Oh my gosh, a bear market.
Speaker 2 (32:42):
I can't I can't lose any money.
Speaker 1 (32:43):
Yeah, the what ifs, And if you can't quantify those
what ifs, there's a problem. So if you can begin
to quantify those, then the client can take an appropriate
level of risk for his or her needs. But that said,
I think you're right. You know, when you take the average,
you want to make sure that they're going to come
out the other side of bear markets because of the
(33:04):
number of them that they are going to have in
their lifetimes.
Speaker 2 (33:08):
We also have to make sure that we are are uh.
Speaker 1 (33:13):
Investing and fiduciarily so that you know, and we we
tend to be longer term secular growth investors, and that's
what I would classify. So one of the first things
you said, when I said how would you classify as
you was? You said kind of like you know somebody
that and I'm paraphrasing what you said, but you know,
kind of like, you know, portfolios that are particular to
(33:36):
that individual and securities that take into consideration what we
think and we what we think and have spoken with
them about their their tolerance to risk, you know, you know,
which is Yeah. So anyways, so what do you think
this investor psychology? Great Benjamin Graham and David Dodd, who
(33:59):
are longer term you know, they wrote probably one of
the most infamous books on Wall Street about investing.
Speaker 3 (34:08):
In in security analysis.
Speaker 2 (34:09):
Security Analysis.
Speaker 1 (34:12):
One of the quotes within there evidently the process by
which the securities market arrives at its appraisals. I mean,
like valuations are frequently illogical and erroneous. Erroneous, these processes
are not automatic or mechanical, but psychological. And you'll hear
this word a lot during the remainder of this half
psychological for they go in for they go on in
(34:33):
the minds of people who buy and sell. So you
have the psychological component of investing, the emotional component of
investing that's going to cause you to become perhaps.
Speaker 3 (34:45):
Yeah, And I think there's two different psychological components to investing.
It's the psychology of the market and all the people
in investing in the market, and the psychology of yourself too,
So you kind of have to play. You have to
take both of those into consideration. Really when you are investing,
you know, what am I comfortable with? And if if this,
(35:06):
if you know this psychology, I guess of the overall
market where they are at now? I guess in terms
of you know, where we are at economically, where we are,
where we're at in the stock market. And you know,
it's two factors that you know, I guess are really
kind of hard to master and you're never going to
(35:27):
be completely right.
Speaker 1 (35:28):
And you're being pushed around psychologically now more than ever.
I mean, between social media and the politics, the political
environment that we live in. Statistics show that you know,
if you're a Republican now you're much more positive about
the economy than your if you're a Democrat, a year ago,
if you were a Democrat, you were much more positive
(35:49):
than about the economy of the stock market than you
were Republican. And I think and also, you're pushed around
in a lot of different ways.
Speaker 2 (35:57):
Like I said, politically, you're pushed.
Speaker 1 (35:59):
Around by social media through their algorithms that in the
news that they delivered to you, and that manifests itself
in sentiment that perhaps drives you psychologically to make moves
that are not in your best interest because of the
fact that you know, over the short term, according to
(36:20):
Graham and Dodd, and this is you know, common knowledge
that the valuation of securities over the short term are frequent,
illogical and erroneous, but over the long term neither illogical
or erroneous. And you know, so that's kind of what
we were talking about the second half. You mentioned something also,
(36:41):
before you begin studying companies for investments, study yourself. That's
a quote, go go explain that a little bit. No,
we already we already did, all right.
Speaker 2 (36:52):
Can't you know?
Speaker 3 (36:52):
And I think that's kind of what we were talking
about a little bit before you know, And I think
it's a it's a trial and error, trial and error
with yourself is you know, you have to know what
type of investing you're comfortable with. You know, some people
are uncomfortable are comfortable with having six to eight stocks
in their entire portfolio, and some people need twenty or
thirty because it, you know, the the volatility over your
(37:18):
portfolio goes down drastically with the more securities you have.
So you know, you really have to know yourself and
what you're comfortable with and what type of swings you're
comfortable with and investing and you know, invest accordingly.
Speaker 2 (37:28):
True, all right, so let's go.
Speaker 1 (37:30):
Let's go to what is bothering a lot of a
lot of our clients are potentially right now, and we
can I can we can agree or disagree with this.
And this is that article by Shelby Fishman. Fourteen financial
pros reveal the number one money concern their clients are
facing right now. And this is about three weeks after
the bottom of the market. And you want to touch
on the first you want me to.
Speaker 3 (37:48):
I think the first one is do we do we
need to work a few more years before retiring? And
you know, I think that's you know, pretty cut and dry.
When you you know, you can take some information down
into a financial plan for someone and how much money
they need in retirement and how much distributions they can
have from their portfolio. But I think what you always
(38:11):
say is smart is you know lap twenty percent of
office you are lop twenty percent off. You know the assets,
the investible assets you have now, and would you be
would you still be able to take distributions from your
account and retire because you know, as you were saying,
bear market happens every three to six years. So if
you if you're in retirement for twenty years, you know
(38:32):
you're going to go through three to five bear markets.
So I think you have to start getting comfortable with
being uncomfortable.
Speaker 1 (38:41):
And I would still take that distribution rate too. So
let's say you have a million dollars. Well, pretend you
have eight hundred thousand dollars and strike a four percent
distribution rate on that. So now you're starting at thirty
two thousand dollars a year, Okay, yeah, right, rather than
forty and see how your retirement goes, and then then
you'll get a clear pity as to whether or not
you need to work a few more years before you're tiring.
(39:03):
That's also as there also has a lot to do
with your sources of income. If you have if your pension,
if you have a pension be it a municipal or
private sector, and your social security, and if you're married,
your partner or you have a partner, then you have
to determine the component the percentage of those components relative
(39:26):
to your overall income needs. And then that so if
your pensions and solid security are ninety percent of your
income and you're only filling the other ten with like
a one or two percent distribution from your investments, then no,
you probably don't need to work a few more years.
And I also would say too, you know the issue
of does a twenty If a twenty percent pull back
in the market makes you work a few more years
(39:48):
before retiring like we saw earlier this year, then you
probably shouldn't. Then you probably should work at least a
couple more years anyways, because they're going to come along.
Speaker 2 (39:56):
You know.
Speaker 3 (39:56):
The next one I think it is important is do
you have a flick liquidity to write out a downturn?
And I think that's another important factor, and we take
that into you know, how much people should have in
fixed income, you know, specifically money markets. Now that they're
paying four percent or you know, short term short term treasuries,
and I think the average bear market is thirteen months
(40:19):
in the average time to recover it. You know, a
new all time has about twenty seven months. So you know,
I do think it's important to have you know, about
two to three years of liquidity on the fixed income side,
so you can take continuously take money out of you know,
the short term, short term fixed income to to get
(40:41):
you through a bear market.
Speaker 2 (40:42):
I agree with that, you know, I think it.
Speaker 1 (40:44):
And there's a there's there's a few things in here
that would address that, you know, not address that, but
uh that clients a couple of things that clients are
concerned about that when ness, they really some fixed income
components of their portfolio, and usually you mentioned short short
and I would say intermediate term ties and then money
market a money market account. And let's say the three
(41:05):
of those together are thirty percent of your portfolio. How
you wait them, you know, money market short term treasures
or intermediate term bonds depends upon your job security, your
liquidity needs, depends upon how your your tolerance to risk
and the like, and that would kind of determine how
(41:26):
you wait.
Speaker 2 (41:27):
But I think you're right. I think you're right, you know.
Speaker 1 (41:29):
And we talked about an article from Susie Orman, probably
four or five weeks ago that she suggests five years,
you know, and you know, I don't have a problem
with that. Three, four or five years in around then,
depending upon your situation. But there's a lot of different
reasons that, you know, people need fixed income in their portfolio.
Let's say you're buying a house in a year. Let's
(41:51):
say you're you're worried about your job,
Good morning, and welcome to the Capital District's Money and
Investment program. You're listening to the Fagan Finance Report. I'm
Dennis Fagan. Aaron is off today. Feel free to gimme
call five point eight w G y one and hit
eight two five five nine four nine. We haven't been
on the air as far as live and quite a
bit of time. So this is life. So if you
want to talk to me, feel free to gimme call
(00:21):
on the air and express your concerns about the market,
your bullishness, parishness, questions you have in a particular security
or a ETF for mutual fund, retirement planning, whatever you
want to talk about that retains the financial markets or
your finances. Let me know. Stocks push higher this week
with the SMP closing at six thousand, just over six thousand,
(00:42):
at six thousand point three six that's twenty percent, I think,
just about twenty percent above their April eighth closing low
forty nine eighty two, so two months ago. Over a
two month period, the market has risen twenty percent off
that forty nine eighty two zero point seven to seven
closing low on that date. Was that time that President
(01:04):
Trump shifted his perspective or attitudes towards the tariffs bec
became a little more malleable, and the market has since
bounced off and we've received pretty good economic date over
that period of time as well, and that's led to
a market that is, you know, within shouting distance really
of its all time high, and we'll talk a little
(01:24):
bit about that as the first half goes on. The
NASDA composite US total marketing next to Russell two thousand
have all risen between twenty and thirty percent over that
same timeframe, So it's been a good run for the
market as investors turned their focus away really from tariffs,
or not completely away, but they know they're taking other
(01:48):
things in the consideration the economy, the labor market remains
relatively strong. We had non farm payrolls come out this
past week for the month of May, and non farm
payrolls grew by about one hundred and thirty nine thousand
him it's above the consensus estimate was for one twenty
or one twenty five and around there that set. Payil
numbers for the prior two months were revised downward by
(02:09):
a total of ninety five thousand for the months of
March and April three month rolling average fell a little bit,
but with the three month average still at one hundred
and thirty five thousand jobs being created, just despite public
sector of the federal government shared twenty two thousand jobs
during the month of May, and the public sector as
(02:30):
a federal government is down fifty nine thousand jobs year
to date. That's we're still we're still hanging in there
as far as as far as the labor market goes,
not really aggressive hiring, but also not really a lot
of firing either. We saw that break through the labor
report strength and health and human services. We had strength
(02:55):
in travel and tourism still look pretty strong leaders hospitality,
forty eight thousand jobs created. So the market is set
really on relatively firm footing. As we come toward the
end of the second quarter of the Fed meets on
June eighteenth, President Trump's calling for one percent rate cup
(03:15):
we'll talk a little bit about that. But again, the
stock market has, in addition to tariffs, which which I
think will remain a concern for quite some time, the
market is also focused on the fact that the economy
is doing pretty well, and that change in the stance
of President Trump on the morning of April ninth has
(03:36):
really changed the tenor of the market. The investors are
and President Trump, I think, is focusing on the tax
package getting that through the budget. Prior to this or
prior to April ninth, the only thing that the President
seemed to be focused on was the tariffs. In fact,
the market had sold off from and we talked about that,
I believe on April sixth or fifth and around there.
(04:00):
We were very concerned about the market on April, so
we were then April fourth, the sixth, excuse me that show.
On the sixth, we were very concerned about the market.
President pivoted on the ninth. The morning of the ninth,
and the market has taken off, and that's good for
investors and certainly good for the country. To put it bluntly,
(04:21):
the labor market with one hundred and thirty nine thousand
jobs created to break evens anywhere from from fifty to
one hundred thousand and around there, so we're hanging in there.
Labor force participation rate went down a little bit. I
think that might have to do with immigration or the
lack of immigration. So we saw that and so we
have we have solid fundamentals pushing the market higher. If
(04:43):
you look at where we stand for during the course
of this week, the Dow up four hundred and ninety
two points to close at forty two thousand and seven
sixty two. The Dow is around twenty two hundred and
forty points away, twenty two hundred and fifty points away
from mid all time high. That's five percent exactly. The
Dow is five percent away off of it's all time high.
(05:05):
The S and P five hundred up two percent for
the year. The Dow, excuse me, is up point five
percent for the year, so we really had a waterfall market.
The culminated in an April eighth, and subsequently the market
is climbed back in most of the major indices and
the positive The S and P five hundred at six
thousand point three six as I mentioned earlier, they're all
(05:26):
that all time high is sixty one thirty four, So
the S and P is about two percent off of
it's all time having NASA composite about three point three percent,
three percent away if midst all time high. Up four
to points for the week, up two percent for the week,
NAS like up one percent for the year. US total
Market index up almost one thousand points in US Total
Market Index, which is which is really the most fair
(05:47):
benchmark to compare your portfolio to. That's up one point
sixty six percent for the week and one point sixty
five percent for the year. So I think we noted
that on our snapshat that comes out every Sunday. If
you want to get that and you're not even feel
free to email us at Dennis dot Fagan at Fagan
Associates dot com or www dot Faganasset dot com. Either way,
(06:10):
we'll get that weekly snapshot to you. And we also
have a chart talk that either myself or Aaron A
Doug puts together that goes out every Wednesday, just describes
the market and or various economic indicators of the company's
information in a chart and then explains a little bit
about the chart. So both interesting pieces, both relatively short
(06:32):
reads and good reads. So if you want to want
a copy of it, just feel free to email us
at Fagan Asset dot com. The Russell two thousand, second
third thousand largest American stocks up sixty six points to
close the twenty one thirty two That was up three
percent for the week, down four percent for the year.
I think that merits watching. I think it merits a
(06:54):
look because the smaller companies tend to tend to have
get most of the revenue from inside the United States,
so they're with the United States economy hanging in there
and not being subject obviously domestically produced could not being
(07:16):
subject to tariffs. I think it makes a lot of sense.
And we'll take over at that but still down four
percent for the year, so there's room to move there.
With the Russell two thousand a good ETF. If you
want to jump on board the Russell two thousand would
be M d Y that's a spider S and P
(07:38):
MidCap four hundred ETF. I think you can also use IWM,
which is the I shares Russell two thousand ETF. You
can also use s c HM, which is Schwabz etf
a schwab Us MidCap ETF. Either of those, any of
those three IWM, md Y or s e HM are
(07:58):
all good proxies for the Russell two thousand carry very
low expense ratios, you know, and merit to look in
my in our opinion. You know, right now our largest
holding UH with the with e tfs and when we
UH for correlation to the market UH is the S
and P dividend Aristocrat fund the symbols N O, B,
(08:21):
L UH and UH. You know, we would we balance
that then we use an energy sector E t F,
the US broad market, the JP Morgan, US tech leaders
j T, e K, and Schwab divid in Equity s
e HD. So that's some domestic ETFs that you might
want to consider. That's that's all on our website if
they and asset dot com if you're interested in taking
(08:42):
a look at that. But so the market's rebound and
the market's rebound. Here we are sitting UH on June eighth, again,
almost halfway through the year, with you know, pretty much
an unchanged market. You tell the average is up five percent,
transportation average down six percent. Transportation average would be down
because perhaps you know, less tariff with the shipping and
(09:03):
the like, or less goods being imported because of the tariffs.
We'll see, but not not a bad week for the market.
I think. One of the things that I think if
you're looking at the other side of the financial another
asset class rather than rather than equities, it would be
fixed income. We had to tick up in bond yields
(09:26):
on Friday, given a surprisingly strong number coming from the
labor market, coming from the non farm payrolls US ten
year back over four point five percent. It's up ten
basis points or zero point one percent over the past week.
It sits about you knowero point six percent above. It's closing.
(09:50):
Excuse me, it's no, it's it's just in line with it.
It's closed as of last year. And I think you know,
we we ladder some bonds. I would recommend that you
do the same ladder some treasuries between one and seven
years or so. You'll pick up a little over four
percent right across the yield curve. And that would make
some sense as well. So we have it, we have
(10:11):
a market. That's all. All economic data would suggest that
things are growing modestly. And I know the GDP came
out and then pulled back point three percent in the
first quarter of the first revision. But you know that's
that's somewhat.
Speaker 2 (10:25):
Could be.
Speaker 1 (10:28):
Import related. I think it was inventory related a little
bit as well. But both the Institute for Supply Managements
Composite Index of Manufacturing and the non Manufacturing Service Sector
Index both up at the add or near numbers that
are shown. Really an economy that is not firing on
(10:48):
all cylinders, but the company economy that is, you know,
growing modestly, and that bodes well for the stock market.
Look at stock market to pass twelve twelve months. I
think it will. It's just it's justifies what I just said.
Speaker 2 (11:01):
S and P.
Speaker 1 (11:01):
Five hundred of the past twelve months is up around
twelve percent. Corporate profits have risen about twelve and a
half percent. You know, So what you have is if
you look at a price to earnings ratio as a
metric for value in stocks, and that pretty much stayed
the same over the past twelve months. You had stocks
up twelve percent, earnings of twelve percent, so stocks did
not become more expensive on a relative basis. I think
(11:24):
that's kind of what we're seeing here. And no, they're
not the only game in town. You have fixed income
becoming a bigger and bigger percentage of one portfolio that
should as investors lock and guaranteed returns. But I think
if you if you came into the past two or
three years with seventy percent or seventy five percent in
the stock market and twenty five percent in the buying
(11:46):
market for a growth and income portfolio can ratchet that
down a little bit to maybe sixty five thirty five
and take a little bit less risk, but you know,
get decent returns that will help you, uh maintain your
standard of living in retirement. Individual specific news that came
out this week and the spat call it, we call
(12:07):
it in our snapshot the spat hurt around the world.
I think that that's and there's a comment really on
on the market and the resilience of the market when
you see something like that. And who would have who
was surprised really of the the battle between you know,
President Trump and Elon Musk and their relationship coming to
(12:30):
an abrupt end, uh this past Thursday, you know, and
Willy will they will they kind of de escalate the feud?
Will they? You know, will they you know, will they
both get over it and and do business again? Obviously
they got to do business. President Trump needs Elon Musk's
money with the upcome with the mid terms coming up
(12:53):
next year, and Elon Musk needs the government contracts for
SpaceX for one of his myriad of companies that he
that he that he's in charge of. So, but I
think what was the most interesting that came out of
that from from our perspective, is the market kind of
looked past it. Obviously it didn't for Tesla, and you
(13:14):
know we we don't. We don't own Tesla for any
clients other than those that they want to buy it
just because of Musk. Musk's personality has leads to a
lot of volatility in the stock. And you know, if
we're looking at a potential growth in stocks in a security,
(13:39):
I think you have to take that into consideration. How
much volatility does an individual want in their portfolio and
can you get the growth that Tesla might offer somewhere else?
And I think the answer the answer is yes. I
think if you want to take you know, you look
at a stock that pulled back about four or five
percent on great earnings. Broadcom would be one. In Nvidia
(14:01):
is you know adder here it's all time high. We
own Palanteer p L t R as an aggressive growth company.
So those is those are the ones that you know
we would recommend rather than And although else Karp is
somewhat of a character himself CEO of Poundeer, he's generally speaking,
(14:23):
he's out of the limelight. So we would not recommend
Tesla at this time. And it's not not due to
a political statement. It's more a statement of the bombastic
personality of Elon Musk and also think, you know, do
you really want to get on the bad side of
President Trump. But we'll see, We'll see how this plays out.
But I don't think it has wide stock market market repercussions.
(14:46):
I may have repercussions for Tesla that remains to be seen,
and that's why we don't we don't own any But
for the market, I think in the same with the text,
I think that the market is just looking past these things,
and I think that that's a big plush. But the
other there the other kind of I guess the two
big pieces of news that came out this past week,
if you were made news that dominated the news. I'm
(15:09):
not so sure that this, the spat between President Trump
and e La Musk is is newsworthy from a from
a longer term financial perspective. But what is newsworthy is
the ECB, the European Central Bank in India's Central Bank
UH cut there their key lending rates UH the ECB
(15:30):
by point twenty five percent and the India Central Bank,
the Royal Bank of India by point five percent. President
Trump's after that and after a call for a full
one percent rate cup by the FED and true social
Trump posted, go for a full point rocket fuel. You know,
the FED isn't a pickle. You know, they're damned if
(15:50):
they do, and damned that they don't. Inflation has eased, however,
we were just talking about the labor market remains resilient
in the US, the U, US companies, consumers, we've yet
to really been able to quantify and the FED be
able to quantify the full impact of the tariff. So,
you know, I think the FED could cut rates. You know,
(16:12):
will they at their June eighteenth meeting, the conclusion of
their meeting at the conclusion of the meeting on June eighteenth,
I don't know. I I think I think they may
cut by a quarter point. If I had a BED,
I would say no, they won't cut. But it would
(16:33):
not surprise me if the FED cut by a quarter point,
because the difference between the ten year and inflation is
about two and a half percent, and generally speaking, the
FED once that that gap at about two percent, so
the FED has room to move. No, they're not going
to cut by a full point. There's zero percent likelihood
in my opinion, but there's there's a remote chance that
(16:53):
the FED will cut at its upcoming meeting. Again, our
baseline is no, uh, but but we'll see. So that's
one one piece of news that came out this week.
The ECB in the Royal Bank of India another news
worthy items. I think that does have longer term repercussion.
It really shows the the integration and and the the
(17:16):
I guess, the need for for energy. Meta, you know
company formally nomos Facebook's and a twenty year agreement with
Constellation Energy to purchase one point one gigawatts of energy
necessary to power their their AI infrastructure. And and that
that that the move by Meta follows deals by Alphabet
(17:36):
and Microsoft. They're purchase of energy either late last year
or early this year. And the parallel management we have
something that kind of corresponds with them just saying they
attributed one percentage point of growth and GDP to data
center construction. So that need for energy is not is
(17:59):
not going and any anytime soon as AI becomes more
integral or integrated in business and both on in business
and also for the consumer, uh, for the average American,
I think the more that becomes integrated in our life.
I think you're going to see more and more the
(18:21):
need for energy is just going to continue to continue
to to to grow. And I think that bodes well
for bodes well for Broadcom, you know, for chips ai
A m D and video. On the energy front, you know,
I think it bodes well for you know, like a
Constellation Energy. I think it bodes well for I don't know,
(18:47):
the Evistra, the the V S T is the symbol there.
I think I think it bodes well for Nexteras n EE,
which we own for some of our clients. And I
also think by and large bodes well for energy for
the traditional energy companies which you can use like an
XL Energy Select Sector spider. We own some of that.
(19:08):
We also own Chevron and these and these stocks are down.
Chevron's down from one seventy or so in April to
about one forty now, so you're talking thirty points over
one seventy. You're talking about sixteen or seventeen percent decline.
Carries a good dividend. I think Excellon Mobile is the same.
I think that that that merits are looking here excellent.
And then both both have if you're concerned about the
(19:29):
valuations of the market. You know, I think both of
those you know that carry a good dividend are worth
the look you just just when we this is not
pertaining the energy anymore. But if you look at Bank
of America JP Morgan, I think banks, banks are in
good shape here, and we be buying them on substantial weakness.
So I think you look at technology, I look at
(19:51):
and the market still looks decent into here. We're carrying
probably nine or ten percent cash overall in our portfolios
and we'll be purchasing UH. Security is on weakness. We
are concerned about, you know, the tariffs. We're concerned that
of the focus of the administration has to be on
the economy and on UH and the tax package, the budget,
(20:15):
budget package. I think, you know, there's there's news that
the president will be meeting with maybe not the president,
representatives of the president gonna be meeting with UH, their
counter their Chinese counterparts this coming week. So so we'll
see how that goes well. Also, I think that, but
I do think also the volatility as we approach that
ninety UH that that July ninth deadline, that the ninety
(20:37):
days and ends in July ninth. I think that, you know,
probably volatile is gonna volatility is going to pick up.
So right now we're getting through the doldrums, getting through
the dog days of summer. I would also say that,
you know, I don't see the market taking off from here.
I think we're just going to be You buy on weakness,
You buy good companies on weakness, you hold them for
(20:57):
the long term. You know, our average holding periods about
five years, and you you look past the noise every week,
and I think this was a good example. This past
week was a good example. Despite the noise coming from
President Trump and in Elon Musk, I think the market
held its own, you know. And with again with the
(21:18):
dow up, you know a little, with all major innoties
up a little over one percent, utility average dropped a
little bit. Utility average generally speaking, responds inversely. The interest
rates and his interest rates ticked up a little bit.
It's not surprising to see the utility average come down.
The oil oil moved up a little bit. Gold is
(21:40):
at thirty three forty six, And like I said, the
interest rates spectrum went right across the board, So there's room,
there's room for the market. I wouldn't consider it a
lot of room for the market too. I think we
just buy our time through the summer months and worked
through these tariffs and then go from there. It's that
going a half hour. We're going to talk a little
(22:02):
bit about some of the concerns that you know, our
clients have expressed over the past three or four months
with the stock market, and you know how we're responding
to those concerns, and go from there. But right now,
it's ten thirty on this beautiful Sunday morning on the
station depend upon for news, weather and information, News Talk
(22:24):
A ten and one O three one WGY. Good morning,
Welcome back to the second half hour of the Capitol
District's Money and Investment program. You're listening to the Fagan
Financial Report. I'm Dennis Fagan, sitting here with my son Aaron,
as we do every Sunday right here in News Talk
A ten one O three one WGY. You can't you
can't control everything that happens to you. You can only
control the way you responds.
Speaker 2 (22:46):
Kind again, that is me. That is me. Actually I
said that a long time ago.
Speaker 1 (22:50):
I'm sure it's paraphrasing somebody else, because you know, everything
else has taken it. But I wrote that in our
journal on October thirtieth of twenty and seventeen. You know,
during the first Trump administration, before the pandemic, before the
Biden administration, and before this second Trump administration the market's higher.
We read that again, you can't control everything that happens,
(23:12):
so you can only control the way you respond. And
I think that has a lot to do really with
the psychology of of the market and the psychology of investing.
And so the second half hour we're going to talk
about investor psychology and then also talk about the things
according to Shelby Fishman, an article published within the past
month or so, the number one money concern according to
(23:36):
financial pros that their clients are facing right now, and
we'll talk about that was written April twenty fifth. The
market bottom down April the eighth or ninth, So we'll
touch on that. And in these investor psychologists from with
Master Class or.
Speaker 3 (23:50):
Yeah, Master Investment, Master Investment or something like.
Speaker 1 (23:54):
That, it's meant as food for thought, and I think
that's you know, that you know kind of investor knows myself.
I don't know if you said that or somebody else
said that, but Uh, why don't.
Speaker 2 (24:03):
You start off?
Speaker 1 (24:04):
So we both I xed out about ten or twelve
of them and you exed out about ten or twelve
of them.
Speaker 3 (24:08):
But you know, I think I think it's interest in
what you did say to start in that. You know,
investing is hard because you really have to be disciplined
and stick to your disciplines. Right, So you know, as
you said, you know you're you can only one more time,
one more time.
Speaker 1 (24:24):
You can't control everything that happens to you. You can
only control the way you respond.
Speaker 3 (24:29):
Yeah, and you know in investing, you know you're wrong
a lot. With a with a diversified portfolio, you're gonna
have things that don't work out. But even if you
have things that you think are gonna work out, they
don't always work out. So you know, you try to
you try to learn from your past mistakes and see
where you rent wrong, but you always have you also
(24:50):
always try to build off those past mistakes, so you know,
it's kind of like a culmination of being wrong and
being wrong and being wrong to to learn from that
but also actually implementing what you learn from it is
hard to.
Speaker 1 (25:11):
In my opinion, well, because if you look at the
you know, if you look at the nature of investing,
there's the fundamental components to investing, whether you're in a
mutual funded TF for a company, there are the technical components,
fundamental meaning you know how you know, let's say you're
investing in an ETF what what what's the sector? What
are the companies involved? What are the ratios? You know,
(25:32):
what's the price learnings ratio, price to runnings ratio, overgrowth?
You know, what's uh? You know, what are these companies
growing by in the average? Then perhaps you're investing in
individual companies. You have all those questions to answer. Also, yeah,
the technical aspects of the market, which is that how
is the market trading? You know, is it overbought, is
it oversold? Is the company over bought or over sold?
(25:54):
Is it runway up? Is sentiment very bullish on it
or bearish? And then you have political components to it,
both domestic and abroad, that are influencing your your choice.
You know, I will say though you know of all that,
you know that stocks can be priced almost anywhere at
(26:15):
any given moment, or the market at almost anywhere to
any given moment, Because I think that's a random type
of a scenario. But over the longer haul, you know,
the market conforms to the overall strength of the underlying
companies that that that comprise that index, as as Warren
(26:39):
Buffett once said that that that is the case.
Speaker 2 (26:42):
You know, it's that the weighing machine.
Speaker 1 (26:46):
The market's a weighing machine as opposed to a it's
a voting machine, then Graham Road. In the short when
the stock market is a voting machine, but in the
long run it's a weighing machine. And sentiment can change
the market over the short term very quickly, but over
the long term, you know, you pretty much get true
performance from the work that you do. And I think
(27:08):
the other thing too areas that only did Drona. But
you know, you get so much cross currents today in
the markets, some which are true, some mhich aren't. Yeah,
you know, you battles between President Trump now Jamie Diamond
said a couple of things that Scott Besson didn't like.
Elon Musk is involved in it. You've got the Democrats
snipe and at the Republicans and vice versa. And it's
difficult to determine what actually what actually means anything and
(27:29):
what doesn't. I think even the tariffs you know, where
do we land. I don't think anybody really knows where
we land. I think what people do know is we're
not going to land in as bad of a place
as over the short term as as investors thought during
the first week or two of April.
Speaker 3 (27:44):
And I think a lot of times people in investing
there's that like what anchoring bias, where people rely on
one piece of information, you know, to make an investment decision,
whether it be in an ETF.
Speaker 2 (27:55):
Or an individual stock.
Speaker 3 (27:56):
But there's a lot of random things really that that
go into the price of a stock, you know, psychology, economics, politics,
and in human psychology. So I think it's it's easy
to make bad decisions when investing, especially with how much
(28:18):
access you have to your portfolio, into to your accounts,
and the volatility of the market, especially in recent years
that you know you really have to it's it's a
constant struggle day to day when the market's open to
really stick to your you know, investment approach.
Speaker 1 (28:36):
And you said earlier in the second half that and
it is important to maintain a consistent approach, but evaluate
that all the time, and I think it make you
make little changes to your approach and you know, we're
big sports fans, and I think, you know, you look
at the year peed Alonzo's having a very big year
for the Mets so far. Each changes swing a little bit.
(28:59):
It doesn't chase that pitches. Sure, the underlying nature of
his swing is the same, but the choices that he's
making regarding the pitches are different. What he's going after
is different, and you know, his his approach is just
a little bit different. So I think, you know, you
have to you have to with with technology, communication services
(29:20):
and consumer discretionary being more than forty percent of the market.
I think you have to evolve with the market. But
the underlying what would you call the underlying investment process
that we have at Fagan Associates.
Speaker 3 (29:32):
You know, I think we were you know, I think
correlation to the underlying indices is important. But we were
talking about this earlier today and I think it fits
in perfectly. And we had a you know, a client.
Speaker 2 (29:43):
Who's we were going over.
Speaker 3 (29:44):
Their portfolio was an incoming growth portfolio, so you know,
about forty percent in the stock market and sixty percent
in bond markets, and we were talking about the stocks
and you know, in the in the stock equity portion
of their portfolio and how they've done really well, and
they're like, oh, you know, it's a little bit skewed
towards it's technology.
Speaker 2 (30:03):
But how what.
Speaker 3 (30:04):
We try to do is really when we meet with
every single client, really try to customize their portfolio not
only for you know, for returns or distributions, but you know,
what they're comfortable with too. So like, so let's say
someone has a fifty percent if someone should be in
a you know, let's say for distribution purposes, you should
(30:25):
be in a fifty fifty stock DEVIOND portfolio. I think
at times you try to and if they're really risk averse,
you try to come to you know, a consensus really
that okay, you know, even they're fifty percent in the market,
that stocks, you know, what stocks will they be comfortable with?
You know, what would happen if they had a poor
(30:46):
sequence of returns or an extremely volatile market where the
market is down twenty percent? How would they react to that? So,
you know, we try to do is build portfolios with
you know, with what we think people will not get
scared out of as well with what their risk tolerance is.
Speaker 2 (31:03):
It's a component to it. Yeah, I think you try
to you try to really.
Speaker 3 (31:09):
Build a portfolio that people people are comfortable, you know,
a mix of what people are comfortable with and what
they should be doing.
Speaker 2 (31:15):
You've got to make You've got to be able to
make it.
Speaker 1 (31:17):
If you're sixty two or sixty three year old years
old and bear markets have been once every three or
four years, you've got to be able to make it
to the other side of probably five or six bear
markets to eventually be successful. If you get stopped out
of your your trades, if you get stopped out of
your account or sell out your account at the bottom
once that that's that's what could change the longer term
(31:39):
direction of your account and the viability of it.
Speaker 2 (31:42):
So I think, I think you're right.
Speaker 1 (31:43):
I think, and you know, I know what you're saying
is kind of like, you know, it's implied that we
have to take people's tolerance to risk into account, and
we do, you know, but we also make sure that
they make use of our expertise inasmuch that we can
begin to quantify the risk that they're taking. You know,
(32:05):
I met with somebody this morning, and you know, he said, look,
I'd be happy with a four percent return.
Speaker 2 (32:11):
I said, that's fine.
Speaker 1 (32:12):
But if you take thirty percent of your account and
put it in the stock market, and the stock markets
down thirty percent. You know, let's say on one hundred
thousand dollars, you're gonna lose nine thousand dollars. There, the
other seven makes four, seventy thousand makes four, you're gonna
make twenty eight hundred dollars. So you're gonna lose sixty
two hundred dollars or six point two percent. He says, Oh,
I can live with that. So if you begin to
(32:33):
quantify the risks, everyone's afraid of something. If the unknown outcome,
if there's an unknown outcome, Oh my gosh, a bear market.
Speaker 2 (32:42):
I can't I can't lose any money.
Speaker 1 (32:43):
Yeah, the what ifs, And if you can't quantify those
what ifs, there's a problem. So if you can begin
to quantify those, then the client can take an appropriate
level of risk for his or her needs. But that said,
I think you're right. You know, when you take the average,
you want to make sure that they're going to come
out the other side of bear markets because of the
(33:04):
number of them that they are going to have in
their lifetimes.
Speaker 2 (33:08):
We also have to make sure that we are are uh.
Speaker 1 (33:13):
Investing and fiduciarily so that you know, and we we
tend to be longer term secular growth investors, and that's
what I would classify. So one of the first things
you said, when I said how would you classify as
you was? You said kind of like you know somebody
that and I'm paraphrasing what you said, but you know,
kind of like, you know, portfolios that are particular to
(33:36):
that individual and securities that take into consideration what we
think and we what we think and have spoken with
them about their their tolerance to risk, you know, you know,
which is Yeah. So anyways, so what do you think
this investor psychology? Great Benjamin Graham and David Dodd, who
(33:59):
are longer term you know, they wrote probably one of
the most infamous books on Wall Street about investing.
Speaker 3 (34:08):
In in security analysis.
Speaker 2 (34:09):
Security Analysis.
Speaker 1 (34:12):
One of the quotes within there evidently the process by
which the securities market arrives at its appraisals. I mean,
like valuations are frequently illogical and erroneous. Erroneous, these processes
are not automatic or mechanical, but psychological. And you'll hear
this word a lot during the remainder of this half
psychological for they go in for they go on in
(34:33):
the minds of people who buy and sell. So you
have the psychological component of investing, the emotional component of
investing that's going to cause you to become perhaps.
Speaker 3 (34:45):
Yeah, And I think there's two different psychological components to investing.
It's the psychology of the market and all the people
in investing in the market, and the psychology of yourself too,
So you kind of have to play. You have to
take both of those into consideration. Really when you are investing,
you know, what am I comfortable with? And if if this,
(35:06):
if you know this psychology, I guess of the overall
market where they are at now? I guess in terms
of you know, where we are at economically, where we are,
where we're at in the stock market. And you know,
it's two factors that you know, I guess are really
kind of hard to master and you're never going to
(35:27):
be completely right.
Speaker 1 (35:28):
And you're being pushed around psychologically now more than ever.
I mean, between social media and the politics, the political
environment that we live in. Statistics show that you know,
if you're a Republican now you're much more positive about
the economy than your if you're a Democrat, a year ago,
if you were a Democrat, you were much more positive
(35:49):
than about the economy of the stock market than you
were Republican. And I think and also, you're pushed around
in a lot of different ways.
Speaker 2 (35:57):
Like I said, politically, you're pushed.
Speaker 1 (35:59):
Around by social media through their algorithms that in the
news that they delivered to you, and that manifests itself
in sentiment that perhaps drives you psychologically to make moves
that are not in your best interest because of the
fact that you know, over the short term, according to
(36:20):
Graham and Dodd, and this is you know, common knowledge
that the valuation of securities over the short term are frequent,
illogical and erroneous, but over the long term neither illogical
or erroneous. And you know, so that's kind of what
we were talking about the second half. You mentioned something also,
(36:41):
before you begin studying companies for investments, study yourself. That's
a quote, go go explain that a little bit. No,
we already we already did, all right.
Speaker 2 (36:52):
Can't you know?
Speaker 3 (36:52):
And I think that's kind of what we were talking
about a little bit before you know, And I think
it's a it's a trial and error, trial and error
with yourself is you know, you have to know what
type of investing you're comfortable with. You know, some people
are uncomfortable are comfortable with having six to eight stocks
in their entire portfolio, and some people need twenty or
thirty because it, you know, the the volatility over your
(37:18):
portfolio goes down drastically with the more securities you have.
So you know, you really have to know yourself and
what you're comfortable with and what type of swings you're
comfortable with and investing and you know, invest accordingly.
Speaker 2 (37:28):
True, all right, so let's go.
Speaker 1 (37:30):
Let's go to what is bothering a lot of a
lot of our clients are potentially right now, and we
can I can we can agree or disagree with this.
And this is that article by Shelby Fishman. Fourteen financial
pros reveal the number one money concern their clients are
facing right now. And this is about three weeks after
the bottom of the market. And you want to touch
on the first you want me to.
Speaker 3 (37:48):
I think the first one is do we do we
need to work a few more years before retiring? And
you know, I think that's you know, pretty cut and dry.
When you you know, you can take some information down
into a financial plan for someone and how much money
they need in retirement and how much distributions they can
have from their portfolio. But I think what you always
(38:11):
say is smart is you know lap twenty percent of
office you are lop twenty percent off. You know the assets,
the investible assets you have now, and would you be
would you still be able to take distributions from your
account and retire because you know, as you were saying,
bear market happens every three to six years. So if
you if you're in retirement for twenty years, you know
(38:32):
you're going to go through three to five bear markets.
So I think you have to start getting comfortable with
being uncomfortable.
Speaker 1 (38:41):
And I would still take that distribution rate too. So
let's say you have a million dollars. Well, pretend you
have eight hundred thousand dollars and strike a four percent
distribution rate on that. So now you're starting at thirty
two thousand dollars a year, Okay, yeah, right, rather than
forty and see how your retirement goes, and then then
you'll get a clear pity as to whether or not
you need to work a few more years before you're tiring.
(39:03):
That's also as there also has a lot to do
with your sources of income. If you have if your pension,
if you have a pension be it a municipal or
private sector, and your social security, and if you're married,
your partner or you have a partner, then you have
to determine the component the percentage of those components relative
(39:26):
to your overall income needs. And then that so if
your pensions and solid security are ninety percent of your
income and you're only filling the other ten with like
a one or two percent distribution from your investments, then no,
you probably don't need to work a few more years.
And I also would say too, you know the issue
of does a twenty If a twenty percent pull back
in the market makes you work a few more years
(39:48):
before retiring like we saw earlier this year, then you
probably shouldn't. Then you probably should work at least a
couple more years anyways, because they're going to come along.
Speaker 2 (39:56):
You know.
Speaker 3 (39:56):
The next one I think it is important is do
you have a flick liquidity to write out a downturn?
And I think that's another important factor, and we take
that into you know, how much people should have in
fixed income, you know, specifically money markets. Now that they're
paying four percent or you know, short term short term treasuries,
and I think the average bear market is thirteen months
(40:19):
in the average time to recover it. You know, a
new all time has about twenty seven months. So you know,
I do think it's important to have you know, about
two to three years of liquidity on the fixed income side,
so you can take continuously take money out of you know,
the short term, short term fixed income to to get
(40:41):
you through a bear market.
Speaker 2 (40:42):
I agree with that, you know, I think it.
Speaker 1 (40:44):
And there's a there's there's a few things in here
that would address that, you know, not address that, but
uh that clients a couple of things that clients are
concerned about that when ness, they really some fixed income
components of their portfolio, and usually you mentioned short short
and I would say intermediate term ties and then money
market a money market account. And let's say the three
(41:05):
of those together are thirty percent of your portfolio. How
you wait them, you know, money market short term treasures
or intermediate term bonds depends upon your job security, your
liquidity needs, depends upon how your your tolerance to risk
and the like, and that would kind of determine how
(41:26):
you wait.
Speaker 2 (41:27):
But I think you're right. I think you're right, you know.
Speaker 1 (41:29):
And we talked about an article from Susie Orman, probably
four or five weeks ago that she suggests five years,
you know, and you know, I don't have a problem
with that. Three, four or five years in around then,
depending upon your situation. But there's a lot of different
reasons that, you know, people need fixed income in their portfolio.
Let's say you're buying a house in a year. Let's
(41:51):
say you're you're worried about your job,
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