Record Cash on the Sidelines, is this an Opportunity?

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Episode Transcript

(00:00):
All topics and securities mentioned on straightTalk from the House or for informational purposes
only, and should not be usedas investment advice. T Anton Investment House
does not offer tax or legal advice. Investments or investment strategies covered are not
a recommendation or solicitation to buy orsell the securities. Past performance is not
a guarantee of future performance. Thisis straight talk from the House right here.

(00:22):
I'm thirteen ten Wida with certified financialplanner Tracyanton. Tracy of course comes
to us from Tanton Investment House.The website Tanton Investmenthouse dot com. That's
t A N t o N investmentHouse dot com. Great website to get
to know Tracy and the team.Also listen back to this in previous shows
podcasts. Also great opportunity there toschedule an appointment at a time and a

(00:44):
date that's convenient to you in thewebsite Tanton Investment House dot com. That's
t A N t O N investmentHouse dot com. Of course, t
Anton Investment House a fee only fordouciary with offices right in Middleton. Speaking
of the office in Middleton, telephonenumber six SO eight five zero one fifteen
forty nine. That's six so eightfive zero one fifteen forty nine. And
speaking of sortified financial planner, TracyAnton, Tracy, how you doing this

(01:07):
beautiful day. I'm doing great,Sean. How about you? I'm doing
well. It's exciting to get achance to hang out and talk with you
this morning. And we've got abig topic. What are we what are
we discussing this week? Well,this week we're talking about the Federal Reserve,
where they're at in the rising ratecycle, and whether or not this
is a buying opportunity for the stockand bond markets. And of course we

(01:30):
don't we always talk well, youknow, we don't like to time the
market, and we say, ifyour money is long term, you should
keep it long term and keep itinvested in stock and bonds. But currently,
Sean, there is record number ofdollars that are in money market and
high yield cash accounts to the twoand of five point six trillion dollars here

(01:51):
in the US and worldwide, it'slike ten trillion dollars in cash. So
today what we're going to do isexplore is it time to re allocate those
funds due to the changing economy andinterest rates And I've got a quote here
from the Capitol Group Mike Gitlin,and he's the head of the fixed income
security and I listened to a webcastthat he was on as well as like

(02:14):
several other analysts, and he saidhere he says, some of the most
uncertain times like FED hikes, inflation, disappointing earnings have been inflection points,
and in hindsight, these events wereopportune times to reallocate your cash in client
portfolios and even in money markets andalign them to what their long term objective

(02:38):
is. Oh. Interesting, Sothis is going to be an exciting conversation,
Tracy. Now, when we talkabout cash, we talk about cash
on the sidelines and in different accounts. I always thought that we think cash,
we think emergencies and savings and thosetype of things. Yeah, I
mean cash can be used for unexpectingemergencies like job loss obviously, or unplayed

(03:00):
and expenses. But what we're talkingabout is like extra cash, like more
than normal, or you have morecash than you typically have had in the
last five to ten years. That'swhat we're talking about, because that's what
I'm seeing, and that's what everyone'sdoing, is having lots of money that's
like, well, I'm not sureabout the stock market, but hey,

(03:20):
I can get some pretty good rateshere at the bank. So what we're
talking about is like that extra money. You know, there's it's always important
to have a healthy amount of emergencycash reserves, and of course that always
varies for people. Some people sayto me, well, how much should
I have? And it really dependson how much you prefer. You know,
you don't want to have too manydollars that you're missing out on the

(03:43):
difference between cash and money market versusthe stock and bond markets, right,
so there's can be a huge differencein performance over like decades, so you
don't want to miss out. Soat the same time, you want to
have enough cash. So we're goingto talk a little bit about that later,
like kind of how much really shouldyou have? That is fascinating stuff

(04:05):
for sure. As we talked thismorning with sort of five financial planner Tracy
Aton right here in thirteen ten wuiBA. Of course, Tracy comes to
us from Tanton Investment House. Imentioned the website. You need to check
it out this morning, Tanton InvestmentHouse dot com. That's t A N
T O N Investment House dot com. You can get to know Tracy in
the team right on the website.Also a fantastic feature if you're looking for

(04:28):
money management portfolio management tracing. Theteam would love to get to know you,
they'd love to work with you.Get actually schedule appoyment right at Tanton
Investment House dot com. Tellphone oversix oh eight five zero one, fifteen
forty nine. That's six oh eightfive zero one, fifteen forty nine.
So, Tracy, why would investorsbe leery of reallocating their cash to stocks
and bonds? Well, I thinkpeople at least one reason would be leary

(04:53):
of it is as they're thinking tothemselves, well, why would I reallocate
my assets when I'm earning five percentin a saving account. And again,
you know, even though history isnot we shouldn't predict it use it to
predict the future. If we dolook at history, what we see is
that when we have declining interest rates, you know, once the Fed does

(05:15):
kind of like the last change overthe last four rate rate hype cycles.
Right, US three month T billrates were an average of two point five
percent lower eighteen months after the lastFed hike. So that means that the
relatively attractive money market yields that we'recurrently seeing on you know right now at

(05:38):
you know five or so percent,you know, may drop really sharply once
the Fed change is course. Andwhat I want to say here is that
don't expect, you know, bellsto go off. That's just not what
happens. You don't hear about itgo off, and then you know,
Pavlov's dog and now we should invest. That's not what happens. You shouldn't
wait until you think, well,the Fed now said that it's done raising

(06:00):
rates and now I'm going to turnaround and I'm going to invest in the
stock and bond markets. No,that's not what happens. You know,
it happens before that, right becausepeople predict, people, you know,
anticipate. So the market is afuturistic vehicle. So what you want to
do is look now, in thenext six to nine to twelve months,

(06:24):
where do you think rates are goingand how is that going to affect the
money that's sitting in the money market. Now, again, cash emergency cash,
that's not what we're talking about.We're talking about additional dollars, more
cash than you would typically have,and if you have it in there,
because of fear of what markets willdo, you should look at possibly going

(06:46):
up the risk level to like bondmarkets. Bond markets have really gotten hit
last year, right because we hadwhat we had, rising rates, decreasing
bond prices. But what if theFED turns round and changes that and says,
okay, done raising rates. Guesswhat things inflation's under control, We're

(07:06):
going to now reduce rates. Whatare bond price is likely to do?
Go up? That's what they do. They go up when fed when the
Fed reduces rates. So you havepotential here not only in the stock market,
but the bond market as well.And the yields and the bonds are
quite high too. Oh, thatis fantastic. Talk about being proactive with

(07:28):
your planning. As we talked thismorning with certified financial planner Tracy Anton here
on thirteen ten WIBA. The tallemphilnumber for the office right in Middleton six
oh eight five zero one fifteen fortynine. That's six soh eight five zero
one fifteen forty nine. Even bettermake an appointment. All you got to
do is head on over to thewebsite Tanton Investmenthouse dot com. That's t
A N T O N investment Housedot com. In your conversation with Tracy,

(07:51):
will talk a little bit more aboutthat cash that's sitting on the sidelines
and the ways to make it workand get it get it doing something.
We'll get some details from Praise onthat next as Straight Talk from the House
continues right here on thirteen ten.Double u i ba. This is straight
Talk from the House with certified financialplanner Tracy Aton right here on thirteen ten

(08:13):
doub UiB A talking this week withTracy about the record cash that's on the
sidelines, very timely as we're infootball season as well. I was familiar
with the sidelines any time I playedfootball, more time there than analogies.
We'll have to save that till foranother day, that's for sure. In
the meantime, mentioned before the break, Tanton Investment House dot com what an

(08:35):
amazing resource. It is great opportunityto get to know Tracy and the team.
The best thing there those if you'relooking for money management or portfolio management,
all you gotta do this that onover to Tanton Investment House dot com.
You can schedule appointment at a timeand a date that's convenient to you,
or pick up phone, give mecall six oh eight five zero one
fifteen forty nine. That's six oeight five zero one fifteen forty nine.
So, Tracy, what are someof the some ways to kind of help

(08:56):
people when it comes to reallocating cash? What should they be thinking about?
Well, what we do is wedo a financial plan along with reviewing their
investment allocation as well as performance.And so when you do that, you
identify what the cash is on theside lines, is it earmarked for something
and how much is it? So, what we like to do there is

(09:18):
if it's truly for emergency, sayit's twenty to thirty thousand, you would
subtract that from the total cash thatyou have. If you have money that's
earmarked for remodeling, or auto purchases, or world cruise or something big right
like family vacation, subtract that amountas well. So if you have more
money that's left over after subtracting thesethings, then you ask yourself, is

(09:43):
this really long term retirement money oris this money that I'm likely not to
touch for at least five to sevenyears, perhaps longer. So if it's
that's the dollars we're looking at,and those are the dollars. We're looking
to say should we be reallocating Isthis an opportunity time because of the shifting
landscape that we have with the federalReserve. So the next question is that

(10:07):
money important to you to have incash? That's the next question. Okay,
So in order for some people toactually have dollars invested in the stock
and bond markets, you know,say they have a million dollars in their
four to one k or iras well, maybe that makes someone a little bit
nervous. Maybe they're eighty percent stocks, twenty percent bonds and still they're you

(10:28):
know, they're they're content with it, but they have one hundred grand sitting
in cash, and that's what theyneed in order to kind of keep their
eighty twenty, you know, withoutfrinting, you know, because they think,
well, whatever comes up, I'mprepared. And I think that's fine.
You know. I think for somefolks they need a higher cash balance
just to feel like, hey,I can leave my other investments as is

(10:50):
and I don't have to worry toomuch about that. So I think you
have to find that right balance foryou. And I think the main start
there to me would just be findout what the details are on the cash
balances that you have. It's surprisingto me when I talk to people.
Some people don't even know that ratesare that high and that that's what they

(11:11):
could get money markets or CDs.Now they they think, well, you
know those dollars, I know,it's not really earning anything. So we
ask, well what is the rateand they're like, well, it's really
like less than one. Okay,Now let's figure that out. How many
dollars do you need there? Andshould those dollars even earning five percent?

(11:31):
Should we get those better invested?So again, I think, you know
the answer of how much money sittingin sidelines really has a lot to do
with long term What is your purposefor those dollars? If it's emergency,
leave it. Leave it where it'ssupposed to be, right in emergency cash
reserves, right earning something. Though, it's good to have it in money

(11:54):
markets that are earning high rates rightnow. But we might be at this
turning point where it's a good timeto look at investing in securities that provide
long term rates on dollars that youtypically wouldn't have in cash. You have
it there because markets have been youknow, volatile and nervous, and people
are thinking, well, they haven'tbeen doing much well, obviously they've come

(12:16):
back a lot this year, right, But in addition, people are still
talking about the R word, they'restill talking about recession, so they just
feel more comfortable. Well, that'swhat we're talking about today. How do
we kind of get over that feeling. How do we look at your portfolio
in a way that's different because bondshave opportunities as well as stocks, I

(12:41):
believe, and again it's my opinion, but others agree with me as well.
It's pretty amazing we talk about andlook at some of these opportunities that
may be out there for you andTracy, I know, one of the
great things about working with you isyou get to know people and you talk
with people, and that's really,you know, one of those areas that
is important to us. Understand theirtheir priorities and understanding what their goals are.

(13:03):
And when you talk with people aboutthe current markets and economies kind of
how do you have that conversation decidinghow best to invest well the market and
the economy. Shan are just onearea we discuss when looking to maximize the
returns but also reduce the risk andagain no guarantee. You know, markets
don't always they don't always act asif they what they did in the present

(13:26):
or the future. You know,it's it's not always predictive, right what's
happened in the past. But marketevents tend to run in cycles, and
we've seen similar conditions where investors havehigh amounts in cash due to fears over
the economy. And so we lookat historical context not to say this is

(13:46):
exactly what's going to happen, becausewe never know that, we never know
the timeline, but we try tohelp investors process today's markets as well as
you know, like the risk isthat too risky right now? Are those
growth stocks too risky? Those toexpense of relative to earnings, things like
that. But it's really important toremember, you know, we've seen some

(14:07):
of these situations before, and sowe did. We have seen run up
in cash during the global financial crisisand even more recently during the COVID pandemic.
So if you look sean in termsof investing in the SMP five pounded
five hundred, it rebounded strongly afterboth of those cases. After the global

(14:28):
financial crisis and after COVID pandemic,and so investors who waited too long in
cash they missed a fifty five percentrebound in the first six months after the
SMP trough ending in March of twothousand and nine, and forty six percent
in the first six months after theS and P five hundred trough in twenty
twenty. So in other words,you hear nothing else. The opportunity costs

(14:52):
were significant by being out of themarket, and so again no bell goes
off when it says this is agood opportunity to be investing your long term
dollars. And that's what we're talkingabout today. If that didn't get your
attention, I don't know what willthis morning as we talk. Certified financial
planner Tracy Anton right here on thirteenten wib A, Today's today looking for

(15:16):
money management or portfolio management? Today'sday. To make that appointment, I'll
get to do is het on overto Tanton investment House dot com. That's
t A N T O N investmentHouse dot com. Schedule appointment right from
the website at a time in aday that's convenient to you, or pick
up phone, give a call sixoh eight five zero one fifteen forty nine.
That's six so eight five zero onefifteen forty nine. Tracy, why
is it important to understand each kindof investment from money markets to stocks and

(15:41):
bonds? Why do people need toreally understand that? Well, it's important
to understand the change in the marketand that not every investment will work for
a long period of time. Right, So you know, one of the
analysts again at my American funds,he says, investor emotions are real past
losses sting for a long time,and we all know that. And today's

(16:04):
seemingly attractive rates on CDs and moneymarkets feel good, he says, But
as investors, we know that marketsdon't idle for long, so you could
become stuck in cash, he says, if you wait too long to get
back into the market as better potentialopportunities emerge. And again it's just we've

(16:26):
been here before. We've seen highamounts in cash, we've seen these rates,
but we've also seen that the Fedcan change their mind. So we're
at after we're right now in acycle where we're getting close to the peak
of rising rates. So what's goingto happen next? Right, So here's
the opportunity. Hey, we talkedabout that. You mentioned that there's not

(16:48):
going to be a bell that's goingto ring a ring for you. Today
is the day to take notice ofwhat's going on. Start that conversation.
I've been looking for money management,portfolio management. Today is a great day
to start that conversation with Tracy theteam. All I got to just pick
up phone, get a call sixoh eight five zero one, fifteen forty
nine. That's six oh eight fivezero one fifteen forty nine, or even
easier, head on over to thewebsite Tanton Investment House dot com. That's

(17:11):
t A N t O N investmentHouse dot com. From there you can
schedule apployment at a time and adate that's convenient to you. Again,
the website Tanton Investmenthouse dot com.We'll talk with Tracy about the next steps.
We will do that next as StraightTalk from the House continues right here
on thirteen ten dollible u ib A. This is straight Talk from the House

(17:33):
with certified financial plan at Tracy Antonhere on thirteen ten double U I b
A. Talking this week about therecord cash that's sitting on the sidelines.
As we talked with Tracy this morning, some great things great information we've been
we've been getting from Tracy, andyou want to start a conversation and continue
the conversation. If you look formoney management, portfolio management, I gotta
do this. Head on over tothe website. You can schedule appointment right

(17:56):
online at Tanton Investment House dot comor pick a phone call the office right
in Middleton. Six oh eight fivezero one, fifteen forty nine. That's
six oh eight five zero one fifteenforty nine. A little bit of a
cliffhanger at that last segment, Tracius, we were kind of working through through
some of this stuff, and Iguess the question a lot of folks have
is, so, what's the nextstep to invest if you got that extra
cash? What's kind of the nextstep there? Well, typically people kind

(18:21):
of go up the risk ladder andthey'll say, okay, well, you
know, maybe I just want toinvest in some bonds instead of something that's
totally secure, like something back byFDICE. Right, So they might look
at some conservative bonds, maybe governmentor corporate bonds or kind of a combination,
and then there's some more high yieldingbonds. But typically bonds have historically

(18:45):
benefit. As the FED ended itshiking cycle. So again with the best
returns coming in the months leading upto them ending their rate cycle, and
so and actually immediately following that lastFED hike. So again no bells go
off, But the bond market reallylooks promising right now, and you know,

(19:07):
obviously short term bonds, but evensome intermediate urn bonds. But some
people say, well, the Fed, you know, they could do another
rate hike, and that's true too, So nobody really knows that, and
that's why people kind of nervous still. But that's why if you take a
little bit of risk with those extradollars that you have on the sidelines,
that might give just a huge opportunity, because you know, you're not just

(19:30):
looking for the bonds to give yougood yield, and they are yielding good
five to eight percent. I thinkI'm pretty sure five to eight on those,
and even like higher yielding would becloser to eight. But those you're
getting to yield. But you're alsogetting price appreciation if interests when they do
interest reduce interest rates, so youget a bump too, and the appreciation

(19:52):
of bonds. And we know thatbecause last year we saw the opposite,
right, we saw bonds come downin value, so I would suggest looking
into the bonds. I also wouldsuggest if you're wanting to be a little
bit the next level up would bea balanced fund that stocks and bonds.
And there's all kinds of balance fundsout there show and there's stuff that's,

(20:12):
you know, eighty percent stocks andtwenty percent bonds. There's stuff that's seventy
thirty that's more of a typical bondfund. Are a balance fund seventy percent
stocks, thirty percent bonds, Andthen there's stuff that's even more conservative sixty
forty. And then there's even sixtyyou know, sixty percent bonds and forty
percent stacks. So there's everything inbetween. But the balance funds, again,

(20:36):
what's really nice about them is mostof them concentrate on dividend paying stocks
and high quality bonds. And again, if you're earning higher rates or return
on the bond markets anywhere five toeight percent yield, and then you're also
being pretty conservative there and also investingin the stocks that paid dividends. You've
got dividends coming in and also areyielding you part of the return. And

(21:00):
then you have price appreciation both inthe bond and the stock markets. So
again, don't forget, declining interestrates does tend to lead to bond values
increasing. But what's interesting is whenthey were I was on this webinar,
they looked back at different scenarios.Again no guarantee, no guarantee obviously,

(21:21):
but that the stocks actually did welltoo when declining interest rates happened. Right,
So, just great opportunity for appreciationpotential, but also incredible yields as
well. And again I would justsay why do I like value stocks.
It's just because forty percent of thereturn typically comes from dividends. In the

(21:44):
last decade, it was like inthe teens. So again another great opportunity.
If you could get forty percent ofyour return coming from a dividend that's
been consistent, that's been paying fordecades, that's a nice way to earn,
you know, feeling pretty good aboutthe return that you're getting. And
then in addition, appreciation potential tooon those stocks. That is really fascinating

(22:06):
and tracy. When we talk aboutinterest rate hikes coming to end, talk
a little bit more about that.I mean that I think that's the one
of those areas where people's ears kindof kind of perk up a bit well,
I just think, you know,last year was really interesting because it
was the first time in forty fiveyears that both stocked and bonds have had
negative returns, you know, andobviously the FED raised interest rates really aggressively

(22:30):
to try to combat you know,high inflation. I mean, they went
from zero percent to you know,five and a quarter, and so those
hikes obviously affected the bonds to drop, also affected the stocks. And so
I think when you're looking at that, what you're seeing again is is this
opportunity that comes about because we're atwe're close to the end, right of

(22:52):
this rising rate environment? And whatand what will what does history show after
that? Fascinating stuff. So,as we've just got a couple of minutes
left here, Tracy, what happensthen to the cash like investments after those
rate hikes end. Well, again, looking at history, even though it's
not predicted of the future, historydid show that that in eighteen months after

(23:15):
the FED ended its rate hike cycle, the last four cycles that this happened,
yields on cash like the money marketshave traditionally decayed rapidly. So you're
getting five percent, Now, whatis it going to be after the Fed
turns you know, and goes theother way, turns the spicket right.

(23:37):
So, according to experts at theCapitol Group, the three month treasure yield,
which is a benchmark for treasury securitieswith a yield similar to cash,
the investments fell on average of twopoint five percent once the Fed stopped raising
rates. So if history were torepeat itself, which of course there's no
guarantee in that money market, yieldscould potentially decline significantly. So you're enjoying

(24:03):
that rate right now, but areyou under risk here that those rates are
going to drop? And you wouldbe better served if it was long term
money in the stock and bond markets. And again, you want to be
inflation for sure in your cash,So in your long term cash, you

(24:25):
want to beat inflation. And ifit's really for retirement dollars, it really
doesn't truly belong in a money market. It really doesn't really important stuff there,
And Tracy, before we wrap upthis week, literally the million dollar
question, which is what's the possibilitythat the Fed could raise interest rates?
Again? Well, let me letme look at my globe here, let

(24:51):
me shake it now. I don'tknow, I mean the Fed could raise
rates. I mean there was acouple of analysts from this webinar from American
funds, and some of said therecould be one more rate in the near
term, but they also felt thatthe FED reserve was clearly close to the
end of their increasing rate cycle.They said, both, you know,

(25:11):
the markets also expect that, andagain, the FED projects the peak is
around the current that it's at thecurrent rate levels, So the rate that
the interest rates are now are atthe peak levels and then they'll decline around
one hundred points. That's what they'repredicting by the end of twenty twenty four,
which is kind of surprising that it'snot that far away really, So

(25:36):
what we're talking about the six ninemonths here, and you want to get
in typically before. So again,if you believe the FED is finished or
close to being finished, history hasproven can't guarantee it. Though it's not
always predictive that cash investments will decay, and that the potential opportunity to stock
in bond markets is kind of pivotalright here, and hopefully, hopefully your

(26:00):
long term money is where it's supposedto be. And if you don't know,
reach out, reach out. Youknow, we're happy to talk with
you. To say, does itmake sense for long term money. That's
important too, as we talk aboutas we've had you know, we talk
each and every week with you,Tracy. An important thing to do is
is to understand and I know planningis a big part and having a strategy
is a big part of what youwhat you talk about in your team at

(26:22):
t Anton Investment Houses is talking aboutas well. That's the important thing.
As we talk with Tracy each andevery week. If you ever have questions,
make an appointment with Tracy and herteam. I'll get you. Just
head on over to Tanton investment Housedot com. If you're looking for money
management or portfolio management, Tracy theteam would love to talk to you.
They'd love to work with you.Again. It all starts with a stop
at Tanton Investment House dot com.That's t A N t O N investment

(26:45):
House dot com and the telephone numbersix oh eight five zero one, fifteen
forty nine. That's six oh eightfive zero one, fifteen forty nine.
Tracy, You enjoy this beautiful day, absolutely, you too, Sean, take care