Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Good morning, and welcome to the Capital 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 New stock Ga ten
and one oh three to one. WGY halted a little
bit because it's funny. You know, you'll hear in the
second half that we mentioned that the second half was
recorded on Thursday. Okay, right now, it's Friday morning at
(00:22):
ten twenty s and P five hundred down Nasdaq Total
Market indext on Russell two thousand closed it all time
highs yesterday, first time for the Russell two thousand since
twenty twenty one. We'll talk about that. But I mentioned
we usually record the show on Fridays in its entirety,
but we had some stuff going on today and each time,
(00:44):
you know, they take a lot of prep work and
then they take about a half hour to record. But
you'll notice the difference in Aaron because the second half
was recorded Thursday. Overnight, Aaron got sick, and now you
got to tell people that it's a subdued Aaron, A
quiet Michael Jordan game, a horse blue game, that's right.
(01:06):
The flu game. Who was he? Who was it against?
It wasn't the next ones that I hope jazz? Was
it against the Jazz?
Speaker 2 (01:11):
No?
Speaker 1 (01:11):
No, no, he lit it up too, right.
Speaker 2 (01:13):
Yeah, Willis Reid broken leg, so they forget though. Willis
Reed didn't play.
Speaker 1 (01:18):
That broken leg. Sprained ankle, but a long time ago
before I was born. But right, so broke go with
the broken leg.
Speaker 2 (01:26):
Man. But he didn't play that well that game, Willis Reed.
Speaker 1 (01:30):
He didn't play that much. I don't think either. He
came out and he hit a long I don't think
even there weren't three pointers back then. It was in
nineteen I believe it was in nineteen seventy three that
it was, I think seventy three when he came out.
He hobbled out against the Lakers. I remember. I remember
those games. For those of us that are sixty three
or older, you remember the quote unquote good old.
Speaker 2 (01:51):
Days, nineteen seventy NBA Final.
Speaker 1 (01:53):
Seventy okay, and they were in seventy.
Speaker 2 (01:55):
Four points and three rebounds. It's funny that but he
had that long.
Speaker 1 (01:58):
Well, it was just that he gave the next one,
didn't they do?
Speaker 2 (02:01):
One?
Speaker 1 (02:01):
By a couple was it game six or they won
by a couple game seven against the Lakers. I don't
know anyways, So you know, there there was, it was
sure it was on TV. But I can remember.
Speaker 2 (02:19):
TRANSI radios the Lakers, you remember it.
Speaker 1 (02:22):
I remember the players for the Lakers, Gail Goodrich, pat Riley.
I think that I'm talking about the Lakers. I can
name eight players on the Knicks, Bill Bradley, Kazzie Russell, Stalwarth,
Reid Barnett, Walt Frasier, Dave.
Speaker 3 (02:38):
De Buscher, Dave de Busher's autograph you do on a
basketball basketball anyways, So how are you feeling beat up?
Speaker 2 (02:45):
Okay, yeah, just a little beat up. We got kids,
they go back to school, you know kids. What the heck?
Speaker 1 (02:52):
The source of wall?
Speaker 2 (02:53):
Okay though?
Speaker 1 (02:54):
Yeah? Good, yeah, Well let's get to it.
Speaker 2 (02:56):
Then.
Speaker 1 (02:56):
Uh, market's rallying, market's rallying. So Wednesday, the FED cuts
by a quarter of a point, and I think quite
often the market will pull back initially after a FED meeting,
and quite often it does reverse itself. And that's what
(03:17):
we definitely saw on Thursday, or excuse me, on Wednesday,
when the market did pull back, you know, kind of
traded around the flat line. You know, it's a but
there was nothing that would have indicated or projected or
forecast what we saw on Thursday, which was a big rally,
especially in the surprise.
Speaker 2 (03:37):
To be honest, are you really yeah? You know, I
thought that it might be priced in. You know, it's
usually buying the rumors selling the news, so you know,
I was a little surprised on the rally on Thursday
and going into Friday morning. You know, it's only ten
twenty two right now, but yeah, you know, I thought
it'd be more of a buy on the rumor selling
the news. You know, maybe people were a little bit
scared of a fifty basis point rate cut because I think,
(04:01):
you know, maybe that was holding the market back a
little bit, right like, so maybe people thought that, hey,
if the if the there's ten to fifteen percent chance
at the marcut's fifty basis points, it'll be a signaling
of oh no, you know, maybe the countie's a little
bit weaker than we thought. So maybe it's rallying on
the twenty five basis but basis point cut in that Okay,
(04:21):
you know, economy is still doing pretty well, stocks are
still doing pretty well.
Speaker 1 (04:27):
Yeah, you know, I think rallies be get rallies, you know.
And here we are sitting on September the nineteenth, and
there's also a FOMO rally. You know, you get both
retail and professional investors who are like, man, I'm missing
out on this on the professional side, you know, in
(04:48):
our institutional side, you know, you miss out on something
for the entire year because you were too bearish on tariffs,
you were too bearish on what was going on with
the economy, and you'll lose lots of clients. So there's
that's perhaps that scrambled to catch up.
Speaker 2 (05:03):
The end of the year scramble, right, FOMO end of
the year scramble too. There's yeah, there's momentum. Stocks are
doing well too. I mean, the companies are doing are
doing well at look at the you know, look at
the cash paths of the biggest companies in the world.
You know, they're very fundamentally sound from a you know,
financial statement aspect. So I think has a little bit
to do with that as well.
Speaker 1 (05:24):
You know, and I think what President Trump is doing,
you know, reinvigorating the American American industry, you know, putting
pressure on the FED. You know works you know, how
long it works, you know, that's anybody's guests, but it
certainly is working to the in the timeframe that the
(05:46):
market is focusing on right now, you know, near shoring
and on shoring, UH, the tariffs making uh, making our country,
our companies when we're seventy we're seventy percent contained economy
more competitive domestically, and those that compete internationally are you know,
behemoths really in in in industries that the rest of
(06:07):
the world needs. So the stock market is liking what
it's seeing from President Trump, both domestically and abroad, you know,
from you know, from a from a financial perspective, which
is what the show is all about. I also think
that most of the economic indicators that we have out there,
(06:28):
you know, are indicating an economy that is that is
hanging in there, you know, and and doing okay for
the halves. You know, a lot of people would call
this like a K economy, and we'll get back to
the FED in a little while, but call it like
you know, the O kay. You know, if you look
at a K that that leg that goes up off
of the stem, you know, I think is what's fueling
(06:49):
the market. The people with jobs and unemployments still at
four point three percent, very low historically. Initial claims from
employment benefits spiked up last week, came down this for
the for the weekending September thirteenth, they failed thirty three thousand.
So we're getting good news for the people, for the
(07:10):
individuals that are controlling the direction of the market. You
know where the economy is weak and where is where
people with lower income are struggling, And I think you
see that in areas like housing starts, but in the
US Index of Leading Economic Indicators. On the flip side,
(07:33):
retail sales are up six tens of a percent dur
in August five percent year over year, excluding motor vehicle
parts and motor vehicles up seven tens of percent five
percent year over year. Sales, gasoline stations up five percent
point five percent, Food service and drinking play sales kind
of like an indication of what's going on. Are people
still going out? Up seven tents of a percent during August,
(07:55):
up six point five percent year over year. Business inventory
is up point two percent and business sales up one percent.
The inventory to sales ratio, which kind of measures you know,
what's what's on the shelves down to one point three
seven months. The lower that goes, the more it means
that businesses have to you know, manufacture to restock. The
manufacturing in inventory to sales ratio went down a little
(08:17):
bit as well. The prices seemed relatively checked although we think,
you know, from PPI wholesale retail level and also from
an import export prices, they seem to be bottoming out
into the two to three percent range. US expoort prices
a three point four percent year over year, a point
three percent during August, import prices up three tens percent
as well flat year over year. Industrial production, you know,
(08:42):
up a little bit for the month of August, up
a little bit year over year in capacity uses all
the measures that we see if you look under the
hood of the economy, as this economic data is disseminated,
it really is showing you a pretty good economy other
them a weakening labor market. And we'll see, you know,
(09:03):
there's still still out there as to what's causing is
it a weak labor market? Is it just the lack
of people to laborers, you know, And what we're looking
at there trying to carry the carry the water today
are because.
Speaker 2 (09:17):
I know you're doing a great job.
Speaker 1 (09:18):
Thank you.
Speaker 2 (09:19):
I'm I'm I'm a little bit dazed over here you
are dating.
Speaker 1 (09:22):
But then and then one of there's.
Speaker 2 (09:23):
A lot of optimism in the economy. I went to uh,
you know, Winster County Chamber dinner on Thursday, and I
was talking to you know, one of the really nice
man who heads the workforce development for the Capital Region
of New York State in Albany, and he was saying, how,
you know, it is a pretty strong economy, surprisingly in
(09:45):
my opinion, How how strong the economy really is, And
he said that, you know, the job market is pretty
strong still. So I think there's a lot of optimism
around the economy right now. I think lower rates will
help people. And you know, I you know, companies are
doing well, you know.
Speaker 1 (10:02):
And the thing I think that's what that's what the
FED chair pal really, I think, is concerned about that
there was a lull in the activity, a lull in
the and I think the chair CEO of United Airlines
or one of the airlines, I think it was United,
said he did see a lull early in the year,
but he's seeing that pick up. And I think one
of the things that the FED chair is concerned about
(10:23):
is that lull over over tariffs? And I think we
all kind of felt a little bit what's gonna happen here? Yeah?
Speaker 2 (10:28):
And then I think you I mean Kashkari, Neil Kashkari,
who's the one of the one of the Minneapolis was
saying on on the show, you know, yeah, how how
strong really the economy is right now? So yeah, you know, I.
Speaker 1 (10:46):
So the Fed's dual mandate about you know, stable economic
growth and stable unemployment and stable inflation.
Speaker 2 (10:53):
Stable and I'm sorry he said, you know, the the
tariffs are looking more and more likely to maybe be transitory,
right and in terms of the right the impact on inflation.
So you know, I think there's a lot of positive
news in the economy right now.
Speaker 1 (11:09):
Well, you know, offset by the valuation and the fact
that you know, prices have come up thirteen or fourteen
percent this year as far as pricing pricing of the indexes,
and I think, you know, so we had this pullback
after the FED cut. I look at some of the commentary.
First of all, the Fed cut, the range on the
(11:30):
FED funds rate was four and a quarter to four
and a half. The Fed cut by a quarter of
a percent, So the new ranges four to four and
a quarter. This dot plot, which kind of gauges all
of the voting individuals where they see interest rates going
for this year and next, and I think I believe
in twenty twenty seven indicate that two more rate cuts
(11:51):
this year and one in twenty twenty six, which would
then be bring the Fed funds rate down to three
and three and a quarter to three and a half
half uh and and and so so we have that
we also have a change changed in the verbiage of
the what the Fed had to say about interest rates.
(12:13):
Excuse me on their release and let me find that
basically there there their previous policy statements that are those
swings in that experts continue to affect. The data changed
that to recent indicators suggests that growth of economic activity
moderated in the first half of the year. The job
gains have slowed, and the unaplumb rate has edged up
(12:34):
but remains low. Inflation has moved up and remains somewhat elevated.
In support of its goals, and in light of the
shift and the bounce of risk, the committee decided to
lower the target range for the Federal friends rate, as
I mentioned early, by a quarter percentage points the four
four to four and a quarter Now. Of interest also
is the two individuals that voting individuals on the FED
(12:58):
that are considered really that are reportedly considered to be
up for UH the new Fitch air no the one
one one one held one held the ground, and that
was Christopher Waller. Christopher Waller voted for a quarter percent.
The only dissenter was Stephen Marin, who was just appointed
(13:19):
as h as a member of the Fed, and he
voted to reduce rates by half a point. And in reality,
I think maybe that's why the the market sold off
a little bit on Wednesday, because I think the concern
for my my concern is really is that the FED
becomes too dubbish under a under a Trump controlled board
(13:40):
reduces rates too fast. Inflation kind of uh percolates lingers
and then.
Speaker 2 (13:47):
What you know, what's the plan? If inflation stays UH
is persistent and we start cutting rates, cutting rates, cutting rates,
the dent you know that then you don't really have
any tools to help ugglying economy. Like what I mean,
we've already we already cut taxes, We're going to cut rates,
so yeah, you know, then what you know? So I'm
happy that the stock market's doing well. I'm happy that
(14:08):
the economy is doing well. I'm nervous that we see
a melt up and then if something happens, whether economically
or stock market wise, then what right, So, you know,
even the firing of the Bureau label Statistics chief, you know,
six month reporting, which you know I agree with, But
you know, the more we I am for for some deregulation.
(14:32):
I think we overregate regulated coming out of the Great
Financial Crisis. But if we deregulate, deregulate, deregulate too much,
then that could lead to a bigger problem.
Speaker 1 (14:45):
It sets yourself up. Yeah, and and President Trump, who's
called for you know, substantial rate cuts, you know, you know,
and I think we talk about this in the second.
I think these these individuals on the FED have they
have a reputation to uphold, you know that.
Speaker 2 (15:01):
On the FED now though, right, But they're like, so, whoever,
you know, whoever Trump continues to to hire, I think
is just going to do what he tells him to do, right.
Speaker 1 (15:10):
If their political appointments, quite possibly, but I'm hoping that
that's not going to be the case. You know. Stevenmer
again recommended half a point he would he would, Uh,
I'm sure, and has a founded that decision upon you know,
economic his impression of the economy and what the economy
(15:33):
needs at this point. But you know, the Fed, but
the Fed has to be careful not to cut rates
too fast. And but we we we I know, we
came out of the past two or three weeks thinking
the Fed would cut. And I'm happy that they cut.
I'm happy that they cut. It gives it gives the
economy and consumers an indication that they aren't asleep at
the wheel. So if it was a debate as to
whether they should have cut or not, and the general
(15:54):
public was thinking that they should cut, I think it
was a good move to cut.
Speaker 2 (15:58):
And I think surprisingly after the Fed did cut on Wednesday,
we saw mortgage rates go up abouzero point one five percent,
so fifteen basis points. So I don't know what that
is an indication of. But you know, I don't think
it's an indication of faith in the economy, really do you.
Speaker 1 (16:15):
I know, I think it's an indication and the concern
that the that the Stephen Maren's will prevail. If like
you were saying just a few minutes ago that President
Trump appoints people that are going to do his bidding
rather than people who are are more you know, that
are more just objective at the whole thing. And I
think so I think that's the that's the fear, so
the and then what happens is if you have a
(16:37):
rekindling of inflation, you know, we talk about this in
a second, I have, it builds in inflation expectations. I
think that's why you saw and not only did mortgage
rates back up a little bit, but so did the tenure.
The tenure got down to I think just about four
percent or maybe a little under four percent, and as
we speak are about four to ten or four eleven.
So they backed up lit bit. Nothing really to you know,
(16:58):
kind of like get your knickers in a bunch about.
But I think that that uh that uh, you know,
just something that you just pay attention to. And and
and you know, we we we we think this is
just you know, a normal interest rate environment and we're
going to be in around here.
Speaker 2 (17:13):
Yeah.
Speaker 1 (17:14):
That cuts the short term. The short end goes down
inter me long end, which is affected by a lot
different things, and you know, and inflation expectations, you know,
go up. The other thing too, a couple other things. Uh.
And I think we we talked about it in a
in a in a more definitive or direct way. But
David Tepper, uh, you know, one of the big hedge
(17:36):
fund gurus, basically said if they go to go too
much more in interest rates, depending on what happens with
the economy, it gets into the danger territory. This is
what David Tepper uh stated Thursday. You've got to be
careful not to be making things too hot, I think
with with the stock market, and we can bridge that,
bridge that over into the stock market there. With the
stock market at record highs. You know, the stock market
(17:59):
as we speak as up this morning, but you're also
the Dow at a record high, the S and P
five hundred at a record high, the NASDA composite at
a record high, the US Total Market Index at a
record high, and the Russell two thousand, which is the
second third thousand largest American stocks at a record high.
The mid and small cap stocks will do better as
(18:19):
interest rates go down because historically speaking, they take on
more debt to grow their business. The more domestically oriented
as far as percentage of their revenue as opposed international
they're large, multi billion dollar companies still, but also they
tend to fund their debt on the shorter end a lot.
Speaker 2 (18:39):
Of SCCHM schwaps. Mid cap is twenty percent industrials, you know,
thirty nine percent cyclic calls. You know, that includes sixteen
percent of financial services, thirteen point five percent consumer cyclicals.
So it's a little bit more diverse. It should do
well as we cut rates, but I'm still we do
(19:03):
own some small cap through various CTF. J va is
JPMorgan Active Value Co. OWZ is that's a large club
pretty much a w Z.
Speaker 1 (19:13):
Yeah, yeah, yeah, it's a large cab.
Speaker 2 (19:15):
I'm not sure about that, but zo w Z Yeah,
I'll look that up. But that's fifty four percent madcap
large cap, fifty four percent mid cap.
Speaker 1 (19:28):
So you know, we do want a little make What
about a r R.
Speaker 2 (19:30):
AI R is the First Trust American Renaissance Industrial ETF.
You know, it's having a great year, it's up twenty
four percent year to date. We do own some of
that in portfolios, and that is a seventy one percent
small cap in nineteen percent mid cap. So that has
a huge eight microcap. So no, no, no giant, and
no large cap so you know, we do try to
(19:52):
play or not play. We do try to invest mid
cap through ets mostly. You know, we don't own many
mid cap companies, so we use we use ETFs to
you know, invest in MidCap to pair with most of
our large cap individual stockholdings.
Speaker 1 (20:10):
I'm just kind of looking at some of the things.
Speaker 3 (20:12):
Yeah, Intel Intel rallied almost what twenty on Thursday with
you know, a deal between in Vidia and Intel to
you know, work together, right.
Speaker 1 (20:26):
The cash infusion of five billion dollars from in Vidia
into Intel.
Speaker 2 (20:32):
Let's keep propping up this failing business that Intel is.
Speaker 1 (20:36):
Well, you know, I think that if you look at
just that that money that came into Intel, uh, you know,
looking at code developing data center co developing PC chips,
dropping a bucket really for in video, you.
Speaker 2 (20:52):
Know, I did, I did say that. It's a little
bit in jest, but I do. I do agree that
semiconductors and chip manufacturing is of national security as well,
So I don't I do like the idea of bringing
chip making back to the United States. I am all
for that. It's just Intel, It's just continued to really
(21:13):
struggle in a world that in an economy that has
uh six in a business sector. I guess that's really
succeeded in the chip manufacturing. So yeah, I was I
was kind of half kidding there, but you know, I
think it's important that we do have manufacturers in the
(21:33):
United States too.
Speaker 1 (21:35):
You know, you know, cynical about things. You know, the
US government had taken a ten percent stake in Intel
and the under the Biden administration. I think they'd given
Intel and the numbers aren't as important as the what
happened give them the ten billion dollars and not demanded
(21:56):
anything in return. So President Trump comes in, he says, look,
we're gonna give you money, but we want a ten
percent non voting stake. We won't be on the board
of directors and and and you know there's some there's
some issues with that. We don't have a lot of
time to get into those issues, both positive and negative.
But then the President also said they want fifteen percent
of all and VIDIA chair sales to China, will give
(22:17):
them the green light to sell into China. They still
got to get the green light from in China, obviously,
but then now then you know, and then you don't know,
but then behind the scenes or whatever, the Nvidia decides
to invest in Intel, is that it payment back for
getting into China that the Trump administration allowed them or whatever.
And then also the government's going to reap the benefits
(22:39):
from Intel, because I think they invested in Intel around
twenty two and Intel's sitting right now that are thirty
two or so thirty three, So there's the benefit there.
So I think it just clouds the issue as to
you know, the the the really the independence of American.
Speaker 2 (22:53):
Ages and what type of I guess government we're in
a little bit right now.
Speaker 1 (22:57):
But but you also would say someone would say, and
I agree with them, President Biden did the same thing,
and he didn't get it. He didn't get anything. At
least we're getting money back for for what we wanted,
you know. So I think that's the debate moving forward then,
and I've read a ton on it, and I know
you have to. It's we're more of a mercantile, mercantilistic
type of a government now than we were then we've
(23:18):
been in the past, and we're moving that direction. What
does that mean? What does that mean for our economy?
What does that mean for our relations? Time will tell.
Speaker 2 (23:25):
I think we're seeing that in the in the longer
lower duration is the unknown variables that that we're going
through right now and what that will mean for the
economy ten, fifteen, twenty years from now.
Speaker 1 (23:35):
Right so it is changing the nature of the economy.
But for right now, the stock market is saying, we
don't care about that down the road. That's too far
down the road to really worry about. That'll just about
do it for the first half. Right now, it's ten
thirty on the station depend upon for News, weather and Information,
News Talk A ten and one oh three to one WGY.
Good morning, and welcome to the second half hour of
(23:57):
the Capitol District's Money and Investment program. You're listening to
the Fagan Financial Report of Dennis Fagan. Joined for the
second half as always by Aaron Fagan. You know, thirty
five years of the Fagan Financial Report on News ten
one o three one w g Y. It's a wow.
It's a long time. It's a long time. It is
a long time. Every once in a while it hits me.
(24:19):
Hits me when someone comes in and I call them
mister so and so, and I look at their day
of birth and they're younger than I am.
Speaker 2 (24:24):
You know, you know, It hit me a couple of
weeks ago when you told me that I'm just as
close to Jude going to college as i am from
graduating college.
Speaker 1 (24:34):
Yeah, you know from from you graduating right, yeah, yeah.
Speaker 2 (24:38):
From and Jude going to college once in a while,
like you just kind of just talking to Aaron Ryan
does our operations, just how time goes back when when
Aaron Ryan first started here, her youngest who's turning eight, eight,
Jimmy was younger than Jude is now. Really, yeah, so
(24:59):
he was he was turning two in September, when three
in September when and she started in January of that year.
Speaker 1 (25:08):
So she just Aaron started in January of twenty twenty, right, yeah,
right before the pandemic. I wonder if she was kind
of the reason for it, the cause.
Speaker 2 (25:16):
Of the pandemic, or she came here and then she
came there and then the pandemic came up. To look
into that what it could be some correlation.
Speaker 1 (25:23):
There could be some correlation is not causation.
Speaker 2 (25:26):
There could be some cause issues.
Speaker 1 (25:28):
I'm sure she'd be happy to hear this. She's been great.
Speaker 2 (25:31):
Yeah, every what is.
Speaker 1 (25:33):
Beautiful day out, beautiful, beautiful fall, And I'm getting tired
of it. To be honest with you, we need frost.
We need frost to ruin the garden. I don't want
to pull things. And also all my stuff is dry,
the lawn is dry. Everything is just so dry.
Speaker 2 (25:48):
Yeah, I've noticed that I had beautiful my friendship, My
ferns have thrived.
Speaker 1 (25:53):
Well, you actually watered though. I know, quite a quite
a novel.
Speaker 2 (25:56):
Like I'm going to try and bring him inside. But
you know, I'm used said that I should probably try
to kill the bugs before.
Speaker 1 (26:02):
Well they're outside. You know.
Speaker 2 (26:04):
Nimo just hit a three one run Homer. It's one
o'clock on Thursday, when that's two thirteen on Thursday.
Speaker 1 (26:11):
Good.
Speaker 2 (26:12):
So the Mets are playing the Padres now they're up
five to one.
Speaker 1 (26:14):
Nice, Yeah, which is good. Let's get right to it. Then,
bond Bear turns five. This is a we received the
email from Calamos Investments. I want to talk a little
bit about bonds and how to invest in bonds, because
I think not a lot is understood about bonds. And
we want to pick off three or four things from
(26:35):
Ben Carlson's article ten Things I've learned, he says about
wealth management. In ten years, he's been with Ridthols. Talk
a little bit about some of those things, and you know,
we've learned of ourselves. We've been in business for forty
years or thirty six years. Talk a little bit about that.
And also seven seven trillion dollars the wall of worry.
What is those seven trillion dollar wall of worry? That's
(26:55):
cash on the sidelines. Yeah, yeah, and I think that's
going to be looking for a place. We kind of like,
let's let's use that part to bond within the second bond,
the bonds and the seven trillion dollars, because that's got
to find the spot to rest. Now, now you are
an investor, Okay, you've got three components to your portfolio.
(27:15):
You have we'll say you have three components, and people
have gold, and that's kind of like it's obviously a commodity,
but people use gold miners, they use gold ETFs, and uh,
they're an uncorrelated asset really or an uncorrelated investments lots
of times when compared to traditional equity ETF they have cryptocurrency,
and that's someone uncorrelated. Let's let's for for the intense
(27:37):
of this conversation, let's say there's three classes of accests stocks, bonds,
and cash. The market has a market. Stock market has
a market capitalization of let's say, uh, forty trillion dollars.
So one sixth of or one seventh between the stock
market and cash is in is in cash? One seventh
(27:58):
of the market valuation in cash. That doesn't include the
bond market, which is bigger than the stock market. But
I just want to illustrated point. There's a lot of
money sitting in cash right now, a lot of.
Speaker 2 (28:08):
Money sitting in cash. And the Fed fun the Fed,
the Fed just you know, as we spoke about the
beginning of the show, cut right by a quarter percent.
So I think a lot of people, as you know
you were saying, are going to be looking for a
spot where they can Where is.
Speaker 1 (28:22):
That going to?
Speaker 2 (28:23):
Where is it going to go?
Speaker 1 (28:24):
That's my that's my question for you. Are where? So
if there's seven dollars, I think people I just got allocated.
So are people going to allocate it according appropriately, according
to their objectives? Are they going to get caught in
the up and the hype of the market because I'm
sitting out of near all time highs. This is going
to stay in cash?
Speaker 2 (28:44):
I think it has to be a little bit of everything.
Speaker 1 (28:46):
Right, allocated according to people's objective.
Speaker 2 (28:48):
I would I would think that if people are still
in cash now after you know, being up thirteen fourteen
percent this year, having a great year last year, I'm
in twenty twenty four. You know, in my opinion, a
lot of this is going to go into bond and
bond funds. What do you think?
Speaker 1 (29:06):
I don't. I don't think so. Why because people are greedy?
Speaker 2 (29:10):
Yeah, but I feel like the people who are greedy
would have been greedy by now.
Speaker 1 (29:14):
But the consumer, the investor optimism as told by the
American Association of Individual Investors, kind of has optimism not
that high. There is that wall of worry. The market
climbs of Waller warrion is an all datage. I think
I think it's going to be a tailwind to stocks.
I think you're right, people is going to put money
(29:35):
into bonds personally, you know, managing over nine hundred million dollars,
we will, we will do what's in the client's you know,
objective for sure, because as we will talk about later,
Ben Carlson mentioned to process in everything is key. You
can't let emotions rule, and that process dictates money should
(29:56):
go according to the client's objectives.
Speaker 2 (29:58):
Obviously, Yes, so a lot of that money on the
sidelines will have to go to bonds. Let's say I
have a you know, let's say you work with an
advisor with a sixty forty portfolio and you're you know,
pushing up against that sixty percent limit, and you got
ten percent in a money market fund that has to
go to Grez.
Speaker 1 (30:12):
Right, how about the retail investor.
Speaker 2 (30:16):
I feel like the retail investor, if they have money
in money markets now, they'll just continue to have money
markets and ride those down or allocate those towards bonds.
What do you think?
Speaker 1 (30:29):
I think, Yeah, I think it's a little bit of both.
I think the retail investor is going to put money
into the stock market because they're going to chase here.
I think that the retail investors is going to say,
maybe I'll stay in the money market because interest rates
were four and a half and five and now they're
four three, three and a half or whatever. So I
think it's going to be a mixed back. But I
think that seven train is going to come. Some of
(30:50):
it's going to come off the shelf and is going
to be invested, which is going to be a plus
more for the stock market than the bond market from
an investment perspective, I'm not so sure. Look, Stephen Myron
is the new person on the on the Federal Reserve Board,
(31:10):
and this is digressing a little bit, but it really
isn't It may appear as such. He he was the
loan dissenter in cutting rates. He wanted to cut rates.
There's twelve voted votes and then there's chair Pile. Yeah,
and he dissented. He wanted to cut rates by half
a point. Everyone else, you know, grew with Pole at
a quarter point. What does what did that tell the
(31:32):
bond market? Interest wates you know went up more. Mortgages
we just heard today went up thirty basis points or
point three percent over the past couple of days. I
think I think the market is concerned to some extent
that the Stephen Myrns will will rule, will control the
FED by the time Jerome Powell with his replacement is named,
(31:54):
and even before his replacement is name, it's quite possible
that the shadow Fed. I'm not saying, no excuse me,
let me take a step back, even before the replacement
takes his or her seat as FED Chief FED Chair
he or she will be named, and he or she
will let their their intense be known. As far as
(32:16):
cutting rates, and that shadow FED is going to kind
of dictate the short end. And I think it's also
going to spell some trouble for the lunch. I think
it's pushed the long end up.
Speaker 2 (32:27):
You could push the long end up. You know, it's
supplying demand and its faith in you know, a lot
of the longer let's say, you know ten twenty thirty
years is way more based on you know, the optimism
or the faith that Americans in other countries, Japan, especially Russia,
drying all these other countries that buy our debt, the
(32:49):
the faith that they have in the US dollar, in
the US economy. So it could if we if we
see more, as you said, like shadow managing of the
FED and our interest rates, you know, that could push
confidence down in the US dollar and in the US
in general and its investability. Right, so you know, the
(33:10):
United States, the bond market and the stock market. You know,
I people pay a premium for its transparency, right, and
that premium might go away the less transparent we are,
or as.
Speaker 1 (33:22):
A country, come jaded.
Speaker 2 (33:23):
No.
Speaker 1 (33:23):
The other thing too, is is I agree with that,
the other thing is if rates are cut too fast.
You know our chart talk that came out today actually
it's Thursday, as we as we record this basically said
that the mortgage rates are not as impacted by the
FED as are short term rates because mortgages are intended
(33:45):
to last twenty to thirty years. The rates are. That's
why the banks and mortgage ors put in a cushion,
and also for obviously the faults, but they generally speaking
they last or historically they last five to seven years,
and people move. But what's built into that that rate
also our inflation expectations. And if it's thought that the
(34:07):
Fed's gonna cut too fast, then you'll have interest rates
come come way down. We'll have let's say mortgage rates
go back. Let's say they go then they won't. But
let's say, and I'm gonna talk about motgage rates, let's
say rates go go way down. The FED pushes short
term rates down, then you have loan let's say loan
rates go down. Then you have the same position we
(34:30):
were in in twenty twenty one or twenty two, where
you have too much money slashing around, you know, buying
things that people don't really need the just doing it
because they're getting short term they're getting low interest rates.
So I think that's that's the issue with the Fed's
got to be careful. Now, I will say, uh, Steven
Mere and then Kevin, I think it's Kevin Waller, and
(34:51):
I hope I've got that we got the right Waller
tight end. Yeah.
Speaker 2 (34:58):
For Chris Christopher Waller.
Speaker 1 (35:00):
Christopher Weller, I'm sorry he voted for a quarter point.
I think these individuals that are on the FED now
and I don't know about the future appointments, but on
the FED now have built the life a lot of
them working for the FED for decades. They're not going
to go off the reservation. They'll ruin their reputation. And
I think, but if we get political appointees in there,
(35:22):
then you have an issue. So we'll wait and see.
But the bond bear market, let's say, so our outlook
for interest rates is more of the same. I think
the FED is going to push down short term rates.
They won't have a lot of impact on the intermediate
long term mates because there's other things involved like liquidity, inflation,
(35:46):
the dollar, inflation expectations and like. So I would call
this the new normal, the new pre two thousand and
eight Great Recession normal where interest rates are on CDs
will stay around four mortgages will stay around five and
a half for six six and a half unless they're
artificially lowered or unless the Fed cuts rates by two
(36:07):
percentage points, and then you know, with the economy staying sound,
and then that'll push interest ratescope because people will fear inflation.
So I think we're in the zone of normalcy here,
and that tells me that, you know, I think if
you can clip your coupon on your bond fund, I
think that's what you're going to see going forward. So
the bond bear market that calum most turns about being
(36:30):
five years old, then it is five years old because
I printed out the total return on the Vanguard Total
Bond Market Index, which carries an expense ratio of point
oh three percent. Five year trail an average loss of
point seven percent a year, but a three year trail
has a gain of three point oh eight, a one
year trail a gain of three oh eight, and a
(36:52):
year to date return of four ninety seven. Because interest
rates have flattened out, So don't look at your bond
fund and say, my gosh, I've lost zero point seven
percent over the past year. Let me abandon bonds and
go into the stock side. If you do that, you're
substantially increasing your risk, and you're selling after you've already
took it on the chin. So I think going forward,
(37:13):
I think investors can expect a rate of return in
and around their coupons in and around four percent. Did
I explain everything that you want to add anything to
that air? You know, I think that's how we're investing money,
you know, intermediate to short term.
Speaker 2 (37:28):
I think I have to stay intermediate to short term.
Speaker 1 (37:30):
You know.
Speaker 2 (37:31):
I don't think I go out to the longer end
of the intermediate term or long term just yet. As
you know, I do think there's still a lot of
unknownst in the United States economy, and I guess the
investibility especially, you know, if you're talking about you know,
and when you think of ten year, twenty years, thirty
(37:51):
year bonds, that means you're investing for ten twenty thirty
years just you know, the chances of something happening are
far greater. So, you know, I think, uh, with where
we are economically and politically, you know, I think that
that you could see I don't see the long term
rates going down. I don't precipitously anytime.
Speaker 1 (38:12):
I don't either.
Speaker 2 (38:13):
I think we're going to be range bound in the
mid forest, maybe maybe hit five percent on the longer
range CHEF for the foreseeable future.
Speaker 1 (38:20):
The ten years probably around four thirteen, four to fourteen,
it got down right to around four of the FED
cut rates and it did not impact. And again we've
said it over and over again. There's a lot of
different components to intermediate and longer term rates and not
just what the FED does. It's funny, I'm looking through
this notebook that I've kept for the first entry into
(38:43):
this notebook is nineteen, well thirty years ago. Wow, Yeah,
it's crazy it is. And one that three and this,
you know, I don't know. It's a little keys to
we've learned to invest in in some of it's not
been investing. But from Anne of Green Gables, a book
I read and a lot of people.
Speaker 2 (39:04):
We've I just read that. Yeah, probably the past two years.
Speaker 1 (39:06):
Yeah, next to trying and winning, the best thing is
trying and failing. The key there is trying and another.
I will give my life here my best, and I
believe it will give its best to me in return
and then Warren Buffett the ABC's of business decay, which
are arrogance, bureaucracy, and complacency. Yeah, so good.
Speaker 2 (39:31):
You know, I do agree with the uh, you know,
the anti Green Gables thing. Especially in investing. It's like,
you know, you always talk about, you know, baseball and
investing in how a three hundred percent hitter is still
in the Hall of fame, And you know, I think
in investing it's something that you know, with the diversified portfolio,
you know you're you're gonna get things wrong, and you're
gonna get things wrong a lot. It's about not making
(39:53):
the big mistake that affects your life forever.
Speaker 1 (39:58):
Right, it's what are some of those big mistakes? What
do you think there's some big mistakes that investors make.
Speaker 2 (40:02):
With their dollar cost averaging into the market when they're young,
over allocation to a specific stock or a specific sector,
on correlation to the S and P five hundred. I
do think that you know, if you are an investor,
you want to be correlated to the S and P
five hundred because you do know historically that it goes
up over over time. You know, the better companies do
(40:24):
better because it's a market cap weighted index. I'm thinking
that you're smarter than you know, the average person, or
think thinking that you're you know, a better investor than
you really are, just because you're in a boat market.
So those are the things you know. But I do
think it's it's the over allocation in the fomo trade
that really can you know, mess your life up financially
(40:46):
if you if you make the wrong move in.
Speaker 1 (40:50):
On both ends. Really it's a fear of fear of
missing out, but it's also when the market goes down,
fear of you know, it's different time the market's going
to zero.
Speaker 2 (40:57):
You know, I can't tell you how many clients come
over with you know, seventy eighty ninety percent in fixed
incomeing cash and have been there since two thousand and
nine because it was just too hard for them, you know,
two thousand and nine was just too hard for them,
and they don't want to do it again. I think
a good part of the hard part about being a
good investor is you know, investing at lows and knowing
(41:20):
that you know you're going to go through times like
these and getting out the other side. But when you're
going through it, it's so much harder than it actually
saying it.
Speaker 1 (41:29):
Well, because you're going to a couple of reasons. One,
what is you're going to get? I mean what what
the media likes? Nothing better than disaster? Yeah, man, because
that gives them news that people can in fear is
a greater motivator than greed, So the news. So what
the media does with the stock market, and then they
(41:50):
do it every day is they take something very predictable
and they reduce it to a period of time that's
not predictable, which then, in turn learn makes you want
to watch who wants who who? If you know the
Weather report gave the climate all the time, no one
would watch because it's so slow, But they'll give the
(42:11):
day to day weather. Right. Ten things I've learned about
wealth management in ten years. Want to take one of those?
And then you want me to start off for how
do you start off? Right? So yeah, why don't you
start off with one? If anyone sticks, you know, come
comes right to mind. Alpha is overrated and overrated.
Speaker 2 (42:27):
You know, I think I do think that is true.
Alpha is overrated. So our performance was the only thing
people cared about in the institutional investment world. I understand
why intelligent people have a desire to outperform the market,
but an obsession with alpha can be detrimental to your
investment plan. And you know, if if if anyone doesn't
know what alpha is, it's basically, you know, it's your
(42:51):
performance against your benchmark risk adjusted for risk. Yeah, so
you know, basically, And I I kind of disagree with this,
you know, I think I think that I think that
alpha is very important in especially when you're trying to
distribute assets. I do think you do want the best
(43:13):
return for the least amount of risk possible. So I
don't necessarily agree with that, but he does say at
the end, the only benchmark that truly matters is this,
are you in track to reach your goals? And I
do agree with that, you know, I do agree with
(43:36):
I do agree with the fact that when you are
nearing or at retirement and you can see the finish line,
there's no reason to take an excess level of risk
when you know that you can not work ever again,
at sixty two, at fifty five, at whatever age that
you get.
Speaker 1 (43:55):
Yeah. I often say you cross over that threshold into
financial independence. You just don't want to go back out. Yeah,
And if you're gonna leave some money on the table. Fine,
Now there's people that can can deal with the the
emotional side of investing and compartmentalize it and say, you know,
I know, I'm not going back out there regardless of
what happens to the market. I know that the market
(44:15):
does good the best over a full economic cycle. So
I'm gonna stick with it. I can, I can understand that,
but I think by and large, the vast majority of
investors out there tend to be shaken out at the
wrong time. And also you don't want that to happen
when you're nearing retirement or in retirement. You know, we
(44:36):
often get, you know, questions as to what's the appropriate
asset allocation model? You know, and there is, and it
is and maybe this is a it's it's addressed somewhere else,
and what's to say here? Well, I'm like communication or
(44:57):
trust is important. No, Well, it talks about it talks
about mostly about that processes the key to everything. So
you want to you know, I'm going down the wrong way. No,
it basically talked about your dealings with your clients are
(45:18):
all individualized, and so I think you have to know
your client and make sure that they are within to
a certain extent, you want to make sure. What do
you think about this? I do I care that somebody's
in their comfort zone. No, unless it's gonna unless it
unless they are the type of individual and very rarely
(45:41):
can we know this up front that will make the
wrong We'll call us and say I want out.
Speaker 2 (45:46):
Yeah, you know, I think that's I think when you
said that with palsy, that's what came to my mind.
Is you know, I want people to be in their
comfort zone for the main reason that I don't want
them to do the wrong thing at the wrong time, right.
You know, So if someone steps outside their comfort zone
and is a little bit more allocate to stocks and
you get a bad sequence of returns, I don't want
(46:07):
that to cloud their judgment for the rest of their relationship.
Speaker 1 (46:11):
You know, what is the comfort zone ever led to anything?
Speaker 2 (46:14):
Yeah, that's true.
Speaker 1 (46:15):
You think about it. You know what I mean? The
comforts will never let you get it. You know you
ran a half marathon last year. Were you out of
your comfort zone from time to time? Yeah, it's hard work.
You know, the market down, it's hard to stay with it.
You know, you're you're getting pecked at from a lot
of different sources. It's different this time. I hate Trump,
I love Trump, I hate Biden, I love Biden. Uh,
we got this, we got the war, we got you know,
and and then that pushes. If that's going to push
(46:37):
you over the edge, then you got to incrementally pull
back your equity exposure. But the biggest mistake, and we
mentioned it earlier in a roundabout way, it's not all
or none.
Speaker 2 (46:46):
Man.
Speaker 1 (46:46):
If you pull your equity exposure back to zero, and
it's an inappropriate move for you unless your objectives have
changed or this, or that you're going to buy a
house next year and you need that money, that's the
biggest mistake you're going to make. But if the market
goes down and you pull your exposure back, that will
last forever. Oh yeah, here's what I was saying. Philosophy
(47:06):
has to be universal. Strategy is personal, so everyone needs
to be grown in the same direction, and you have
systems in place. Processes the key to everything. But the
individual strategy that we set out for each client has
to be personalized if it's going to work, and that
client has to know that that is the case. You
(47:28):
don't want to lump them in with everybody and then
not know them, not know their goals, not know their objectives.
And that's you know, one of the reasons why we've
asked Doug Keenholtz to reach out and he's been with
us just about a year, to reach out to our
clients that are in and about the age of retirement
to kind of firm up a good retirement plan for them.
(47:49):
So if we haven't reached out to you yet, please,
you know, reach out to us.
Speaker 2 (47:55):
Or maybe we will. And I you know, I yah, yeah,
I forget what I was going to say, but you know,
I think that's what we do with the investing here.
We meet with the clients, so you know, we really
kind of we really know what equities, what bonds fit
for for each specific client, you know, whatever they call.
Speaker 1 (48:10):
So yeah, and obviously the securities. But right now we're
attur here all time highs. The market is doing well.
It's a good time. It's surprising because it is September.
It's a good time to look at your portfolio. Make
sure that we'll be sending our quarterly reports out at
the end of this quarter. Take a look at them.
You know, are you comfortable with your asset allocation model.
(48:31):
Do you want to pull back, have hast things change
and let's let us know that'll just about do it.
Give us a called five one. Check us on the
webitfig and asad dot com. Like us on Facebook. Take
care
Good morning, and welcome to the Capital 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 New stock Ga ten
and one oh three to one. WGY halted a little
bit because it's funny. You know, you'll hear in the
second half that we mentioned that the second half was
recorded on Thursday. Okay, right now, it's Friday morning at
(00:22):
ten twenty s and P five hundred down Nasdaq Total
Market indext on Russell two thousand closed it all time
highs yesterday, first time for the Russell two thousand since
twenty twenty one. We'll talk about that. But I mentioned
we usually record the show on Fridays in its entirety,
but we had some stuff going on today and each time,
(00:44):
you know, they take a lot of prep work and
then they take about a half hour to record. But
you'll notice the difference in Aaron because the second half
was recorded Thursday. Overnight, Aaron got sick, and now you
got to tell people that it's a subdued Aaron, A
quiet Michael Jordan game, a horse blue game, that's right.
(01:06):
The flu game. Who was he? Who was it against?
It wasn't the next ones that I hope jazz? Was
it against the Jazz?
Speaker 2 (01:11):
No?
Speaker 1 (01:11):
No, no, he lit it up too, right.
Speaker 2 (01:13):
Yeah, Willis Reid broken leg, so they forget though. Willis
Reed didn't play.
Speaker 1 (01:18):
That broken leg. Sprained ankle, but a long time ago
before I was born. But right, so broke go with
the broken leg.
Speaker 2 (01:26):
Man. But he didn't play that well that game, Willis Reed.
Speaker 1 (01:30):
He didn't play that much. I don't think either. He
came out and he hit a long I don't think
even there weren't three pointers back then. It was in
nineteen I believe it was in nineteen seventy three that
it was, I think seventy three when he came out.
He hobbled out against the Lakers. I remember. I remember
those games. For those of us that are sixty three
or older, you remember the quote unquote good old.
Speaker 2 (01:51):
Days, nineteen seventy NBA Final.
Speaker 1 (01:53):
Seventy okay, and they were in seventy.
Speaker 2 (01:55):
Four points and three rebounds. It's funny that but he
had that long.
Speaker 1 (01:58):
Well, it was just that he gave the next one,
didn't they do?
Speaker 2 (02:01):
One?
Speaker 1 (02:01):
By a couple was it game six or they won
by a couple game seven against the Lakers. I don't
know anyways, So you know, there there was, it was
sure it was on TV. But I can remember.
Speaker 2 (02:19):
TRANSI radios the Lakers, you remember it.
Speaker 1 (02:22):
I remember the players for the Lakers, Gail Goodrich, pat Riley.
I think that I'm talking about the Lakers. I can
name eight players on the Knicks, Bill Bradley, Kazzie Russell, Stalwarth,
Reid Barnett, Walt Frasier, Dave.
Speaker 3 (02:38):
De Buscher, Dave de Busher's autograph you do on a
basketball basketball anyways, So how are you feeling beat up?
Speaker 2 (02:45):
Okay, yeah, just a little beat up. We got kids,
they go back to school, you know kids. What the heck?
Speaker 1 (02:52):
The source of wall?
Speaker 2 (02:53):
Okay though?
Speaker 1 (02:54):
Yeah? Good, yeah, Well let's get to it.
Speaker 2 (02:56):
Then.
Speaker 1 (02:56):
Uh, market's rallying, market's rallying. So Wednesday, the FED cuts
by a quarter of a point, and I think quite
often the market will pull back initially after a FED meeting,
and quite often it does reverse itself. And that's what
(03:17):
we definitely saw on Thursday, or excuse me, on Wednesday,
when the market did pull back, you know, kind of
traded around the flat line. You know, it's a but
there was nothing that would have indicated or projected or
forecast what we saw on Thursday, which was a big rally,
especially in the surprise.
Speaker 2 (03:37):
To be honest, are you really yeah? You know, I
thought that it might be priced in. You know, it's
usually buying the rumors selling the news, so you know,
I was a little surprised on the rally on Thursday
and going into Friday morning. You know, it's only ten
twenty two right now, but yeah, you know, I thought
it'd be more of a buy on the rumor selling
the news. You know, maybe people were a little bit
scared of a fifty basis point rate cut because I think,
(04:01):
you know, maybe that was holding the market back a
little bit, right like, so maybe people thought that, hey,
if the if the there's ten to fifteen percent chance
at the marcut's fifty basis points, it'll be a signaling
of oh no, you know, maybe the countie's a little
bit weaker than we thought. So maybe it's rallying on
the twenty five basis but basis point cut in that Okay,
(04:21):
you know, economy is still doing pretty well, stocks are
still doing pretty well.
Speaker 1 (04:27):
Yeah, you know, I think rallies be get rallies, you know.
And here we are sitting on September the nineteenth, and
there's also a FOMO rally. You know, you get both
retail and professional investors who are like, man, I'm missing
out on this on the professional side, you know, in
(04:48):
our institutional side, you know, you miss out on something
for the entire year because you were too bearish on tariffs,
you were too bearish on what was going on with
the economy, and you'll lose lots of clients. So there's
that's perhaps that scrambled to catch up.
Speaker 2 (05:03):
The end of the year scramble, right, FOMO end of
the year scramble too. There's yeah, there's momentum. Stocks are
doing well too. I mean, the companies are doing are
doing well at look at the you know, look at
the cash paths of the biggest companies in the world.
You know, they're very fundamentally sound from a you know,
financial statement aspect. So I think has a little bit
to do with that as well.
Speaker 1 (05:24):
You know, and I think what President Trump is doing,
you know, reinvigorating the American American industry, you know, putting
pressure on the FED. You know works you know, how
long it works, you know, that's anybody's guests, but it
certainly is working to the in the timeframe that the
(05:46):
market is focusing on right now, you know, near shoring
and on shoring, UH, the tariffs making uh, making our country,
our companies when we're seventy we're seventy percent contained economy
more competitive domestically, and those that compete internationally are you know,
behemoths really in in in industries that the rest of
(06:07):
the world needs. So the stock market is liking what
it's seeing from President Trump, both domestically and abroad, you know,
from you know, from a from a financial perspective, which
is what the show is all about. I also think
that most of the economic indicators that we have out there,
(06:28):
you know, are indicating an economy that is that is
hanging in there, you know, and and doing okay for
the halves. You know, a lot of people would call
this like a K economy, and we'll get back to
the FED in a little while, but call it like
you know, the O kay. You know, if you look
at a K that that leg that goes up off
of the stem, you know, I think is what's fueling
(06:49):
the market. The people with jobs and unemployments still at
four point three percent, very low historically. Initial claims from
employment benefits spiked up last week, came down this for
the for the weekending September thirteenth, they failed thirty three thousand.
So we're getting good news for the people, for the
(07:10):
individuals that are controlling the direction of the market. You
know where the economy is weak and where is where
people with lower income are struggling, And I think you
see that in areas like housing starts, but in the
US Index of Leading Economic Indicators. On the flip side,
(07:33):
retail sales are up six tens of a percent dur
in August five percent year over year, excluding motor vehicle
parts and motor vehicles up seven tens of percent five
percent year over year. Sales, gasoline stations up five percent
point five percent, Food service and drinking play sales kind
of like an indication of what's going on. Are people
still going out? Up seven tents of a percent during August,
(07:55):
up six point five percent year over year. Business inventory
is up point two percent and business sales up one percent.
The inventory to sales ratio, which kind of measures you know,
what's what's on the shelves down to one point three
seven months. The lower that goes, the more it means
that businesses have to you know, manufacture to restock. The
manufacturing in inventory to sales ratio went down a little
(08:17):
bit as well. The prices seemed relatively checked although we think,
you know, from PPI wholesale retail level and also from
an import export prices, they seem to be bottoming out
into the two to three percent range. US expoort prices
a three point four percent year over year, a point
three percent during August, import prices up three tens percent
as well flat year over year. Industrial production, you know,
(08:42):
up a little bit for the month of August, up
a little bit year over year in capacity uses all
the measures that we see if you look under the
hood of the economy, as this economic data is disseminated,
it really is showing you a pretty good economy other
them a weakening labor market. And we'll see, you know,
(09:03):
there's still still out there as to what's causing is
it a weak labor market? Is it just the lack
of people to laborers, you know, And what we're looking
at there trying to carry the carry the water today
are because.
Speaker 2 (09:17):
I know you're doing a great job.
Speaker 1 (09:18):
Thank you.
Speaker 2 (09:19):
I'm I'm I'm a little bit dazed over here you
are dating.
Speaker 1 (09:22):
But then and then one of there's.
Speaker 2 (09:23):
A lot of optimism in the economy. I went to uh,
you know, Winster County Chamber dinner on Thursday, and I
was talking to you know, one of the really nice
man who heads the workforce development for the Capital Region
of New York State in Albany, and he was saying, how,
you know, it is a pretty strong economy, surprisingly in
(09:45):
my opinion, How how strong the economy really is, And
he said that, you know, the job market is pretty
strong still. So I think there's a lot of optimism
around the economy right now. I think lower rates will
help people. And you know, I you know, companies are
doing well, you know.
Speaker 1 (10:02):
And the thing I think that's what that's what the
FED chair pal really, I think, is concerned about that
there was a lull in the activity, a lull in
the and I think the chair CEO of United Airlines
or one of the airlines, I think it was United,
said he did see a lull early in the year,
but he's seeing that pick up. And I think one
of the things that the FED chair is concerned about
(10:23):
is that lull over over tariffs? And I think we
all kind of felt a little bit what's gonna happen here? Yeah?
Speaker 2 (10:28):
And then I think you I mean Kashkari, Neil Kashkari,
who's the one of the one of the Minneapolis was
saying on on the show, you know, yeah, how how
strong really the economy is right now? So yeah, you know, I.
Speaker 1 (10:46):
So the Fed's dual mandate about you know, stable economic
growth and stable unemployment and stable inflation.
Speaker 2 (10:53):
Stable and I'm sorry he said, you know, the the
tariffs are looking more and more likely to maybe be transitory,
right and in terms of the right the impact on inflation.
So you know, I think there's a lot of positive
news in the economy right now.
Speaker 1 (11:09):
Well, you know, offset by the valuation and the fact
that you know, prices have come up thirteen or fourteen
percent this year as far as pricing pricing of the indexes,
and I think, you know, so we had this pullback
after the FED cut. I look at some of the commentary.
First of all, the Fed cut, the range on the
(11:30):
FED funds rate was four and a quarter to four
and a half. The Fed cut by a quarter of
a percent, So the new ranges four to four and
a quarter. This dot plot, which kind of gauges all
of the voting individuals where they see interest rates going
for this year and next, and I think I believe
in twenty twenty seven indicate that two more rate cuts
(11:51):
this year and one in twenty twenty six, which would
then be bring the Fed funds rate down to three
and three and a quarter to three and a half
half uh and and and so so we have that
we also have a change changed in the verbiage of
the what the Fed had to say about interest rates.
(12:13):
Excuse me on their release and let me find that
basically there there their previous policy statements that are those
swings in that experts continue to affect. The data changed
that to recent indicators suggests that growth of economic activity
moderated in the first half of the year. The job
gains have slowed, and the unaplumb rate has edged up
(12:34):
but remains low. Inflation has moved up and remains somewhat elevated.
In support of its goals, and in light of the
shift and the bounce of risk, the committee decided to
lower the target range for the Federal friends rate, as
I mentioned early, by a quarter percentage points the four
four to four and a quarter Now. Of interest also
is the two individuals that voting individuals on the FED
(12:58):
that are considered really that are reportedly considered to be
up for UH the new Fitch air no the one
one one one held one held the ground, and that
was Christopher Waller. Christopher Waller voted for a quarter percent.
The only dissenter was Stephen Marin, who was just appointed
(13:19):
as h as a member of the Fed, and he
voted to reduce rates by half a point. And in reality,
I think maybe that's why the the market sold off
a little bit on Wednesday, because I think the concern
for my my concern is really is that the FED
becomes too dubbish under a under a Trump controlled board
(13:40):
reduces rates too fast. Inflation kind of uh percolates lingers
and then.
Speaker 2 (13:47):
What you know, what's the plan? If inflation stays UH
is persistent and we start cutting rates, cutting rates, cutting rates,
the dent you know that then you don't really have
any tools to help ugglying economy. Like what I mean,
we've already we already cut taxes, We're going to cut rates,
so yeah, you know, then what you know? So I'm
happy that the stock market's doing well. I'm happy that
(14:08):
the economy is doing well. I'm nervous that we see
a melt up and then if something happens, whether economically
or stock market wise, then what right, So, you know,
even the firing of the Bureau label Statistics chief, you know,
six month reporting, which you know I agree with, But
you know, the more we I am for for some deregulation.
(14:32):
I think we overregate regulated coming out of the Great
Financial Crisis. But if we deregulate, deregulate, deregulate too much,
then that could lead to a bigger problem.
Speaker 1 (14:45):
It sets yourself up. Yeah, and and President Trump, who's
called for you know, substantial rate cuts, you know, you know,
and I think we talk about this in the second.
I think these these individuals on the FED have they
have a reputation to uphold, you know that.
Speaker 2 (15:01):
On the FED now though, right, But they're like, so, whoever,
you know, whoever Trump continues to to hire, I think
is just going to do what he tells him to do, right.
Speaker 1 (15:10):
If their political appointments, quite possibly, but I'm hoping that
that's not going to be the case. You know. Stevenmer
again recommended half a point he would he would, Uh,
I'm sure, and has a founded that decision upon you know,
economic his impression of the economy and what the economy
(15:33):
needs at this point. But you know, the Fed, but
the Fed has to be careful not to cut rates
too fast. And but we we we I know, we
came out of the past two or three weeks thinking
the Fed would cut. And I'm happy that they cut.
I'm happy that they cut. It gives it gives the
economy and consumers an indication that they aren't asleep at
the wheel. So if it was a debate as to
whether they should have cut or not, and the general
(15:54):
public was thinking that they should cut, I think it
was a good move to cut.
Speaker 2 (15:58):
And I think surprisingly after the Fed did cut on Wednesday,
we saw mortgage rates go up abouzero point one five percent,
so fifteen basis points. So I don't know what that
is an indication of. But you know, I don't think
it's an indication of faith in the economy, really do you.
Speaker 1 (16:15):
I know, I think it's an indication and the concern
that the that the Stephen Maren's will prevail. If like
you were saying just a few minutes ago that President
Trump appoints people that are going to do his bidding
rather than people who are are more you know, that
are more just objective at the whole thing. And I
think so I think that's the that's the fear, so
the and then what happens is if you have a
(16:37):
rekindling of inflation, you know, we talk about this in
a second, I have, it builds in inflation expectations. I
think that's why you saw and not only did mortgage
rates back up a little bit, but so did the tenure.
The tenure got down to I think just about four
percent or maybe a little under four percent, and as
we speak are about four to ten or four eleven.
So they backed up lit bit. Nothing really to you know,
(16:58):
kind of like get your knickers in a bunch about.
But I think that that uh that uh, you know,
just something that you just pay attention to. And and
and you know, we we we we think this is
just you know, a normal interest rate environment and we're
going to be in around here.
Speaker 2 (17:13):
Yeah.
Speaker 1 (17:14):
That cuts the short term. The short end goes down
inter me long end, which is affected by a lot
different things, and you know, and inflation expectations, you know,
go up. The other thing too, a couple other things. Uh.
And I think we we talked about it in a
in a in a more definitive or direct way. But
David Tepper, uh, you know, one of the big hedge
(17:36):
fund gurus, basically said if they go to go too
much more in interest rates, depending on what happens with
the economy, it gets into the danger territory. This is
what David Tepper uh stated Thursday. You've got to be
careful not to be making things too hot, I think
with with the stock market, and we can bridge that,
bridge that over into the stock market there. With the
stock market at record highs. You know, the stock market
(17:59):
as we speak as up this morning, but you're also
the Dow at a record high, the S and P
five hundred at a record high, the NASDA composite at
a record high, the US Total Market Index at a
record high, and the Russell two thousand, which is the
second third thousand largest American stocks at a record high.
The mid and small cap stocks will do better as
(18:19):
interest rates go down because historically speaking, they take on
more debt to grow their business. The more domestically oriented
as far as percentage of their revenue as opposed international
they're large, multi billion dollar companies still, but also they
tend to fund their debt on the shorter end a lot.
Speaker 2 (18:39):
Of SCCHM schwaps. Mid cap is twenty percent industrials, you know,
thirty nine percent cyclic calls. You know, that includes sixteen
percent of financial services, thirteen point five percent consumer cyclicals.
So it's a little bit more diverse. It should do
well as we cut rates, but I'm still we do
(19:03):
own some small cap through various CTF. J va is
JPMorgan Active Value Co. OWZ is that's a large club
pretty much a w Z.
Speaker 1 (19:13):
Yeah, yeah, yeah, it's a large cab.
Speaker 2 (19:15):
I'm not sure about that, but zo w Z Yeah,
I'll look that up. But that's fifty four percent madcap
large cap, fifty four percent mid cap.
Speaker 1 (19:28):
So you know, we do want a little make What
about a r R.
Speaker 2 (19:30):
AI R is the First Trust American Renaissance Industrial ETF.
You know, it's having a great year, it's up twenty
four percent year to date. We do own some of
that in portfolios, and that is a seventy one percent
small cap in nineteen percent mid cap. So that has
a huge eight microcap. So no, no, no giant, and
no large cap so you know, we do try to
(19:52):
play or not play. We do try to invest mid
cap through ets mostly. You know, we don't own many
mid cap companies, so we use we use ETFs to
you know, invest in MidCap to pair with most of
our large cap individual stockholdings.
Speaker 1 (20:10):
I'm just kind of looking at some of the things.
Speaker 3 (20:12):
Yeah, Intel Intel rallied almost what twenty on Thursday with
you know, a deal between in Vidia and Intel to
you know, work together, right.
Speaker 1 (20:26):
The cash infusion of five billion dollars from in Vidia
into Intel.
Speaker 2 (20:32):
Let's keep propping up this failing business that Intel is.
Speaker 1 (20:36):
Well, you know, I think that if you look at
just that that money that came into Intel, uh, you know,
looking at code developing data center co developing PC chips,
dropping a bucket really for in video, you.
Speaker 2 (20:52):
Know, I did, I did say that. It's a little
bit in jest, but I do. I do agree that
semiconductors and chip manufacturing is of national security as well,
So I don't I do like the idea of bringing
chip making back to the United States. I am all
for that. It's just Intel, It's just continued to really
(21:13):
struggle in a world that in an economy that has
uh six in a business sector. I guess that's really
succeeded in the chip manufacturing. So yeah, I was I
was kind of half kidding there, but you know, I
think it's important that we do have manufacturers in the
(21:33):
United States too.
Speaker 1 (21:35):
You know, you know, cynical about things. You know, the
US government had taken a ten percent stake in Intel
and the under the Biden administration. I think they'd given
Intel and the numbers aren't as important as the what
happened give them the ten billion dollars and not demanded
(21:56):
anything in return. So President Trump comes in, he says, look,
we're gonna give you money, but we want a ten
percent non voting stake. We won't be on the board
of directors and and and you know there's some there's
some issues with that. We don't have a lot of
time to get into those issues, both positive and negative.
But then the President also said they want fifteen percent
of all and VIDIA chair sales to China, will give
(22:17):
them the green light to sell into China. They still
got to get the green light from in China, obviously,
but then now then you know, and then you don't know,
but then behind the scenes or whatever, the Nvidia decides
to invest in Intel, is that it payment back for
getting into China that the Trump administration allowed them or whatever.
And then also the government's going to reap the benefits
(22:39):
from Intel, because I think they invested in Intel around
twenty two and Intel's sitting right now that are thirty
two or so thirty three, So there's the benefit there.
So I think it just clouds the issue as to
you know, the the the really the independence of American.
Speaker 2 (22:53):
Ages and what type of I guess government we're in
a little bit right now.
Speaker 1 (22:57):
But but you also would say someone would say, and
I agree with them, President Biden did the same thing,
and he didn't get it. He didn't get anything. At
least we're getting money back for for what we wanted,
you know. So I think that's the debate moving forward then,
and I've read a ton on it, and I know
you have to. It's we're more of a mercantile, mercantilistic
type of a government now than we were then we've
(23:18):
been in the past, and we're moving that direction. What
does that mean? What does that mean for our economy?
What does that mean for our relations? Time will tell.
Speaker 2 (23:25):
I think we're seeing that in the in the longer
lower duration is the unknown variables that that we're going
through right now and what that will mean for the
economy ten, fifteen, twenty years from now.
Speaker 1 (23:35):
Right so it is changing the nature of the economy.
But for right now, the stock market is saying, we
don't care about that down the road. That's too far
down the road to really worry about. That'll just about
do it for the first half. Right now, it's ten
thirty on the station depend upon for News, weather and Information,
News Talk A ten and one oh three to one WGY.
Good morning, and welcome to the second half hour of
(23:57):
the Capitol District's Money and Investment program. You're listening to
the Fagan Financial Report of Dennis Fagan. Joined for the
second half as always by Aaron Fagan. You know, thirty
five years of the Fagan Financial Report on News ten
one o three one w g Y. It's a wow.
It's a long time. It's a long time. It is
a long time. Every once in a while it hits me.
(24:19):
Hits me when someone comes in and I call them
mister so and so, and I look at their day
of birth and they're younger than I am.
Speaker 2 (24:24):
You know, you know, It hit me a couple of
weeks ago when you told me that I'm just as
close to Jude going to college as i am from
graduating college.
Speaker 1 (24:34):
Yeah, you know from from you graduating right, yeah, yeah.
Speaker 2 (24:38):
From and Jude going to college once in a while,
like you just kind of just talking to Aaron Ryan
does our operations, just how time goes back when when
Aaron Ryan first started here, her youngest who's turning eight, eight,
Jimmy was younger than Jude is now. Really, yeah, so
(24:59):
he was he was turning two in September, when three
in September when and she started in January of that year.
Speaker 1 (25:08):
So she just Aaron started in January of twenty twenty, right, yeah,
right before the pandemic. I wonder if she was kind
of the reason for it, the cause.
Speaker 2 (25:16):
Of the pandemic, or she came here and then she
came there and then the pandemic came up. To look
into that what it could be some correlation.
Speaker 1 (25:23):
There could be some correlation is not causation.
Speaker 2 (25:26):
There could be some cause issues.
Speaker 1 (25:28):
I'm sure she'd be happy to hear this. She's been great.
Speaker 2 (25:31):
Yeah, every what is.
Speaker 1 (25:33):
Beautiful day out, beautiful, beautiful fall, And I'm getting tired
of it. To be honest with you, we need frost.
We need frost to ruin the garden. I don't want
to pull things. And also all my stuff is dry,
the lawn is dry. Everything is just so dry.
Speaker 2 (25:48):
Yeah, I've noticed that I had beautiful my friendship, My
ferns have thrived.
Speaker 1 (25:53):
Well, you actually watered though. I know, quite a quite
a novel.
Speaker 2 (25:56):
Like I'm going to try and bring him inside. But
you know, I'm used said that I should probably try
to kill the bugs before.
Speaker 1 (26:02):
Well they're outside. You know.
Speaker 2 (26:04):
Nimo just hit a three one run Homer. It's one
o'clock on Thursday, when that's two thirteen on Thursday.
Speaker 1 (26:11):
Good.
Speaker 2 (26:12):
So the Mets are playing the Padres now they're up
five to one.
Speaker 1 (26:14):
Nice, Yeah, which is good. Let's get right to it. Then,
bond Bear turns five. This is a we received the
email from Calamos Investments. I want to talk a little
bit about bonds and how to invest in bonds, because
I think not a lot is understood about bonds. And
we want to pick off three or four things from
(26:35):
Ben Carlson's article ten Things I've learned, he says about
wealth management. In ten years, he's been with Ridthols. Talk
a little bit about some of those things, and you know,
we've learned of ourselves. We've been in business for forty
years or thirty six years. Talk a little bit about that.
And also seven seven trillion dollars the wall of worry.
What is those seven trillion dollar wall of worry? That's
(26:55):
cash on the sidelines. Yeah, yeah, and I think that's
going to be looking for a place. We kind of like,
let's let's use that part to bond within the second bond,
the bonds and the seven trillion dollars, because that's got
to find the spot to rest. Now, now you are
an investor, Okay, you've got three components to your portfolio.
(27:15):
You have we'll say you have three components, and people
have gold, and that's kind of like it's obviously a commodity,
but people use gold miners, they use gold ETFs, and uh,
they're an uncorrelated asset really or an uncorrelated investments lots
of times when compared to traditional equity ETF they have cryptocurrency,
and that's someone uncorrelated. Let's let's for for the intense
(27:37):
of this conversation, let's say there's three classes of accests stocks, bonds,
and cash. The market has a market. Stock market has
a market capitalization of let's say, uh, forty trillion dollars.
So one sixth of or one seventh between the stock
market and cash is in is in cash? One seventh
(27:58):
of the market valuation in cash. That doesn't include the
bond market, which is bigger than the stock market. But
I just want to illustrated point. There's a lot of
money sitting in cash right now, a lot of.
Speaker 2 (28:08):
Money sitting in cash. And the Fed fun the Fed,
the Fed just you know, as we spoke about the
beginning of the show, cut right by a quarter percent.
So I think a lot of people, as you know
you were saying, are going to be looking for a
spot where they can Where is.
Speaker 1 (28:22):
That going to?
Speaker 2 (28:23):
Where is it going to go?
Speaker 1 (28:24):
That's my that's my question for you. Are where? So
if there's seven dollars, I think people I just got allocated.
So are people going to allocate it according appropriately, according
to their objectives? Are they going to get caught in
the up and the hype of the market because I'm
sitting out of near all time highs. This is going
to stay in cash?
Speaker 2 (28:44):
I think it has to be a little bit of everything.
Speaker 1 (28:46):
Right, allocated according to people's objective.
Speaker 2 (28:48):
I would I would think that if people are still
in cash now after you know, being up thirteen fourteen
percent this year, having a great year last year, I'm
in twenty twenty four. You know, in my opinion, a
lot of this is going to go into bond and
bond funds. What do you think?
Speaker 1 (29:06):
I don't. I don't think so. Why because people are greedy?
Speaker 2 (29:10):
Yeah, but I feel like the people who are greedy
would have been greedy by now.
Speaker 1 (29:14):
But the consumer, the investor optimism as told by the
American Association of Individual Investors, kind of has optimism not
that high. There is that wall of worry. The market
climbs of Waller warrion is an all datage. I think
I think it's going to be a tailwind to stocks.
I think you're right, people is going to put money
(29:35):
into bonds personally, you know, managing over nine hundred million dollars,
we will, we will do what's in the client's you know,
objective for sure, because as we will talk about later,
Ben Carlson mentioned to process in everything is key. You
can't let emotions rule, and that process dictates money should
(29:56):
go according to the client's objectives.
Speaker 2 (29:58):
Obviously, Yes, so a lot of that money on the
sidelines will have to go to bonds. Let's say I
have a you know, let's say you work with an
advisor with a sixty forty portfolio and you're you know,
pushing up against that sixty percent limit, and you got
ten percent in a money market fund that has to
go to Grez.
Speaker 1 (30:12):
Right, how about the retail investor.
Speaker 2 (30:16):
I feel like the retail investor, if they have money
in money markets now, they'll just continue to have money
markets and ride those down or allocate those towards bonds.
What do you think?
Speaker 1 (30:29):
I think, Yeah, I think it's a little bit of both.
I think the retail investor is going to put money
into the stock market because they're going to chase here.
I think that the retail investors is going to say,
maybe I'll stay in the money market because interest rates
were four and a half and five and now they're
four three, three and a half or whatever. So I
think it's going to be a mixed back. But I
think that seven train is going to come. Some of
(30:50):
it's going to come off the shelf and is going
to be invested, which is going to be a plus
more for the stock market than the bond market from
an investment perspective, I'm not so sure. Look, Stephen Myron
is the new person on the on the Federal Reserve Board,
(31:10):
and this is digressing a little bit, but it really
isn't It may appear as such. He he was the
loan dissenter in cutting rates. He wanted to cut rates.
There's twelve voted votes and then there's chair Pile. Yeah,
and he dissented. He wanted to cut rates by half
a point. Everyone else, you know, grew with Pole at
a quarter point. What does what did that tell the
(31:32):
bond market? Interest wates you know went up more. Mortgages
we just heard today went up thirty basis points or
point three percent over the past couple of days. I
think I think the market is concerned to some extent
that the Stephen Myrns will will rule, will control the
FED by the time Jerome Powell with his replacement is named,
(31:54):
and even before his replacement is name, it's quite possible
that the shadow Fed. I'm not saying, no excuse me,
let me take a step back, even before the replacement
takes his or her seat as FED Chief FED Chair
he or she will be named, and he or she
will let their their intense be known. As far as
(32:16):
cutting rates, and that shadow FED is going to kind
of dictate the short end. And I think it's also
going to spell some trouble for the lunch. I think
it's pushed the long end up.
Speaker 2 (32:27):
You could push the long end up. You know, it's
supplying demand and its faith in you know, a lot
of the longer let's say, you know ten twenty thirty
years is way more based on you know, the optimism
or the faith that Americans in other countries, Japan, especially Russia,
drying all these other countries that buy our debt, the
(32:49):
the faith that they have in the US dollar, in
the US economy. So it could if we if we
see more, as you said, like shadow managing of the
FED and our interest rates, you know, that could push
confidence down in the US dollar and in the US
in general and its investability. Right, so you know, the
(33:10):
United States, the bond market and the stock market. You know,
I people pay a premium for its transparency, right, and
that premium might go away the less transparent we are,
or as.
Speaker 1 (33:22):
A country, come jaded.
Speaker 2 (33:23):
No.
Speaker 1 (33:23):
The other thing too, is is I agree with that,
the other thing is if rates are cut too fast.
You know our chart talk that came out today actually
it's Thursday, as we as we record this basically said
that the mortgage rates are not as impacted by the
FED as are short term rates because mortgages are intended
(33:45):
to last twenty to thirty years. The rates are. That's
why the banks and mortgage ors put in a cushion,
and also for obviously the faults, but they generally speaking
they last or historically they last five to seven years,
and people move. But what's built into that that rate
also our inflation expectations. And if it's thought that the
(34:07):
Fed's gonna cut too fast, then you'll have interest rates
come come way down. We'll have let's say mortgage rates
go back. Let's say they go then they won't. But
let's say, and I'm gonna talk about motgage rates, let's
say rates go go way down. The FED pushes short
term rates down, then you have loan let's say loan
rates go down. Then you have the same position we
(34:30):
were in in twenty twenty one or twenty two, where
you have too much money slashing around, you know, buying
things that people don't really need the just doing it
because they're getting short term they're getting low interest rates.
So I think that's that's the issue with the Fed's
got to be careful. Now, I will say, uh, Steven
Mere and then Kevin, I think it's Kevin Waller, and
(34:51):
I hope I've got that we got the right Waller
tight end. Yeah.
Speaker 2 (34:58):
For Chris Christopher Waller.
Speaker 1 (35:00):
Christopher Weller, I'm sorry he voted for a quarter point.
I think these individuals that are on the FED now
and I don't know about the future appointments, but on
the FED now have built the life a lot of
them working for the FED for decades. They're not going
to go off the reservation. They'll ruin their reputation. And
I think, but if we get political appointees in there,
(35:22):
then you have an issue. So we'll wait and see.
But the bond bear market, let's say, so our outlook
for interest rates is more of the same. I think
the FED is going to push down short term rates.
They won't have a lot of impact on the intermediate
long term mates because there's other things involved like liquidity, inflation,
(35:46):
the dollar, inflation expectations and like. So I would call
this the new normal, the new pre two thousand and
eight Great Recession normal where interest rates are on CDs
will stay around four mortgages will stay around five and
a half for six six and a half unless they're
artificially lowered or unless the Fed cuts rates by two
(36:07):
percentage points, and then you know, with the economy staying sound,
and then that'll push interest ratescope because people will fear inflation.
So I think we're in the zone of normalcy here,
and that tells me that, you know, I think if
you can clip your coupon on your bond fund, I
think that's what you're going to see going forward. So
the bond bear market that calum most turns about being
(36:30):
five years old, then it is five years old because
I printed out the total return on the Vanguard Total
Bond Market Index, which carries an expense ratio of point
oh three percent. Five year trail an average loss of
point seven percent a year, but a three year trail
has a gain of three point oh eight, a one
year trail a gain of three oh eight, and a
(36:52):
year to date return of four ninety seven. Because interest
rates have flattened out, So don't look at your bond
fund and say, my gosh, I've lost zero point seven
percent over the past year. Let me abandon bonds and
go into the stock side. If you do that, you're
substantially increasing your risk, and you're selling after you've already
took it on the chin. So I think going forward,
(37:13):
I think investors can expect a rate of return in
and around their coupons in and around four percent. Did
I explain everything that you want to add anything to
that air? You know, I think that's how we're investing money,
you know, intermediate to short term.
Speaker 2 (37:28):
I think I have to stay intermediate to short term.
Speaker 1 (37:30):
You know.
Speaker 2 (37:31):
I don't think I go out to the longer end
of the intermediate term or long term just yet. As
you know, I do think there's still a lot of
unknownst in the United States economy, and I guess the
investibility especially, you know, if you're talking about you know,
and when you think of ten year, twenty years, thirty
(37:51):
year bonds, that means you're investing for ten twenty thirty
years just you know, the chances of something happening are
far greater. So, you know, I think, uh, with where
we are economically and politically, you know, I think that
that you could see I don't see the long term
rates going down. I don't precipitously anytime.
Speaker 1 (38:12):
I don't either.
Speaker 2 (38:13):
I think we're going to be range bound in the
mid forest, maybe maybe hit five percent on the longer
range CHEF for the foreseeable future.
Speaker 1 (38:20):
The ten years probably around four thirteen, four to fourteen,
it got down right to around four of the FED
cut rates and it did not impact. And again we've
said it over and over again. There's a lot of
different components to intermediate and longer term rates and not
just what the FED does. It's funny, I'm looking through
this notebook that I've kept for the first entry into
(38:43):
this notebook is nineteen, well thirty years ago. Wow, Yeah,
it's crazy it is. And one that three and this,
you know, I don't know. It's a little keys to
we've learned to invest in in some of it's not
been investing. But from Anne of Green Gables, a book
I read and a lot of people.
Speaker 2 (39:04):
We've I just read that. Yeah, probably the past two years.
Speaker 1 (39:06):
Yeah, next to trying and winning, the best thing is
trying and failing. The key there is trying and another.
I will give my life here my best, and I
believe it will give its best to me in return
and then Warren Buffett the ABC's of business decay, which
are arrogance, bureaucracy, and complacency. Yeah, so good.
Speaker 2 (39:31):
You know, I do agree with the uh, you know,
the anti Green Gables thing. Especially in investing. It's like,
you know, you always talk about, you know, baseball and
investing in how a three hundred percent hitter is still
in the Hall of fame, And you know, I think
in investing it's something that you know, with the diversified portfolio,
you know you're you're gonna get things wrong, and you're
gonna get things wrong a lot. It's about not making
(39:53):
the big mistake that affects your life forever.
Speaker 1 (39:58):
Right, it's what are some of those big mistakes? What
do you think there's some big mistakes that investors make.
Speaker 2 (40:02):
With their dollar cost averaging into the market when they're young,
over allocation to a specific stock or a specific sector,
on correlation to the S and P five hundred. I
do think that you know, if you are an investor,
you want to be correlated to the S and P
five hundred because you do know historically that it goes
up over over time. You know, the better companies do
(40:24):
better because it's a market cap weighted index. I'm thinking
that you're smarter than you know, the average person, or
think thinking that you're you know, a better investor than
you really are, just because you're in a boat market.
So those are the things you know. But I do
think it's it's the over allocation in the fomo trade
that really can you know, mess your life up financially
(40:46):
if you if you make the wrong move in.
Speaker 1 (40:50):
On both ends. Really it's a fear of fear of
missing out, but it's also when the market goes down,
fear of you know, it's different time the market's going
to zero.
Speaker 2 (40:57):
You know, I can't tell you how many clients come
over with you know, seventy eighty ninety percent in fixed
incomeing cash and have been there since two thousand and
nine because it was just too hard for them, you know,
two thousand and nine was just too hard for them,
and they don't want to do it again. I think
a good part of the hard part about being a
good investor is you know, investing at lows and knowing
(41:20):
that you know you're going to go through times like
these and getting out the other side. But when you're
going through it, it's so much harder than it actually
saying it.
Speaker 1 (41:29):
Well, because you're going to a couple of reasons. One,
what is you're going to get? I mean what what
the media likes? Nothing better than disaster? Yeah, man, because
that gives them news that people can in fear is
a greater motivator than greed, So the news. So what
the media does with the stock market, and then they
(41:50):
do it every day is they take something very predictable
and they reduce it to a period of time that's
not predictable, which then, in turn learn makes you want
to watch who wants who who? If you know the
Weather report gave the climate all the time, no one
would watch because it's so slow, But they'll give the
(42:11):
day to day weather. Right. Ten things I've learned about
wealth management in ten years. Want to take one of those?
And then you want me to start off for how
do you start off? Right? So yeah, why don't you
start off with one? If anyone sticks, you know, come
comes right to mind. Alpha is overrated and overrated.
Speaker 2 (42:27):
You know, I think I do think that is true.
Alpha is overrated. So our performance was the only thing
people cared about in the institutional investment world. I understand
why intelligent people have a desire to outperform the market,
but an obsession with alpha can be detrimental to your
investment plan. And you know, if if if anyone doesn't
know what alpha is, it's basically, you know, it's your
(42:51):
performance against your benchmark risk adjusted for risk. Yeah, so
you know, basically, And I I kind of disagree with this,
you know, I think I think that I think that
alpha is very important in especially when you're trying to
distribute assets. I do think you do want the best
(43:13):
return for the least amount of risk possible. So I
don't necessarily agree with that, but he does say at
the end, the only benchmark that truly matters is this,
are you in track to reach your goals? And I
do agree with that, you know, I do agree with
(43:36):
I do agree with the fact that when you are
nearing or at retirement and you can see the finish line,
there's no reason to take an excess level of risk
when you know that you can not work ever again,
at sixty two, at fifty five, at whatever age that
you get.
Speaker 1 (43:55):
Yeah. I often say you cross over that threshold into
financial independence. You just don't want to go back out. Yeah,
And if you're gonna leave some money on the table. Fine,
Now there's people that can can deal with the the
emotional side of investing and compartmentalize it and say, you know,
I know, I'm not going back out there regardless of
what happens to the market. I know that the market
(44:15):
does good the best over a full economic cycle. So
I'm gonna stick with it. I can, I can understand that,
but I think by and large, the vast majority of
investors out there tend to be shaken out at the
wrong time. And also you don't want that to happen
when you're nearing retirement or in retirement. You know, we
(44:36):
often get, you know, questions as to what's the appropriate
asset allocation model? You know, and there is, and it
is and maybe this is a it's it's addressed somewhere else,
and what's to say here? Well, I'm like communication or
(44:57):
trust is important. No, Well, it talks about it talks
about mostly about that processes the key to everything. So
you want to you know, I'm going down the wrong way. No,
it basically talked about your dealings with your clients are
(45:18):
all individualized, and so I think you have to know
your client and make sure that they are within to
a certain extent, you want to make sure. What do
you think about this? I do I care that somebody's
in their comfort zone. No, unless it's gonna unless it
unless they are the type of individual and very rarely
(45:41):
can we know this up front that will make the
wrong We'll call us and say I want out.
Speaker 2 (45:46):
Yeah, you know, I think that's I think when you
said that with palsy, that's what came to my mind.
Is you know, I want people to be in their
comfort zone for the main reason that I don't want
them to do the wrong thing at the wrong time, right.
You know, So if someone steps outside their comfort zone
and is a little bit more allocate to stocks and
you get a bad sequence of returns, I don't want
(46:07):
that to cloud their judgment for the rest of their relationship.
Speaker 1 (46:11):
You know, what is the comfort zone ever led to anything?
Speaker 2 (46:14):
Yeah, that's true.
Speaker 1 (46:15):
You think about it. You know what I mean? The
comforts will never let you get it. You know you
ran a half marathon last year. Were you out of
your comfort zone from time to time? Yeah, it's hard work.
You know, the market down, it's hard to stay with it.
You know, you're you're getting pecked at from a lot
of different sources. It's different this time. I hate Trump,
I love Trump, I hate Biden, I love Biden. Uh,
we got this, we got the war, we got you know,
and and then that pushes. If that's going to push
(46:37):
you over the edge, then you got to incrementally pull
back your equity exposure. But the biggest mistake, and we
mentioned it earlier in a roundabout way, it's not all
or none.
Speaker 2 (46:46):
Man.
Speaker 1 (46:46):
If you pull your equity exposure back to zero, and
it's an inappropriate move for you unless your objectives have
changed or this, or that you're going to buy a
house next year and you need that money, that's the
biggest mistake you're going to make. But if the market
goes down and you pull your exposure back, that will
last forever. Oh yeah, here's what I was saying. Philosophy
(47:06):
has to be universal. Strategy is personal, so everyone needs
to be grown in the same direction, and you have
systems in place. Processes the key to everything. But the
individual strategy that we set out for each client has
to be personalized if it's going to work, and that
client has to know that that is the case. You
(47:28):
don't want to lump them in with everybody and then
not know them, not know their goals, not know their objectives.
And that's you know, one of the reasons why we've
asked Doug Keenholtz to reach out and he's been with
us just about a year, to reach out to our
clients that are in and about the age of retirement
to kind of firm up a good retirement plan for them.
(47:49):
So if we haven't reached out to you yet, please,
you know, reach out to us.
Speaker 2 (47:55):
Or maybe we will. And I you know, I yah, yeah,
I forget what I was going to say, but you know,
I think that's what we do with the investing here.
We meet with the clients, so you know, we really
kind of we really know what equities, what bonds fit
for for each specific client, you know, whatever they call.
Speaker 1 (48:10):
So yeah, and obviously the securities. But right now we're
attur here all time highs. The market is doing well.
It's a good time. It's surprising because it is September.
It's a good time to look at your portfolio. Make
sure that we'll be sending our quarterly reports out at
the end of this quarter. Take a look at them.
You know, are you comfortable with your asset allocation model.
(48:31):
Do you want to pull back, have hast things change
and let's let us know that'll just about do it.
Give us a called five one. Check us on the
webitfig and asad dot com. Like us on Facebook. Take
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