Episode Transcript
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Speaker 1 (00:06):
Tonight, we've got a lot going on, a big week
for interest rates, a major Apple announcement that could impact you,
and Warren Buffett, by the way, made a major announcement
we'll talk about that. You're listening to simply Wheney, presented
by all Worth Financial Imami Wagner along with Bob Sponseller.
If you are keeping up, then I understand it's not
so easy to keep up.
Speaker 2 (00:27):
For the first time, since President Trump said he.
Speaker 1 (00:29):
Wanted to then fire Fedchair Jerome Powell then kind of
went back on his words and say he didn't want to,
we are now going to hear from the FED Chair
Jerome Powell as they meet this week to discuss what
they're going to do with interest rates for the very
first time.
Speaker 2 (00:44):
I think it might be interesting.
Speaker 1 (00:46):
Joining us is all Worst Chief Investment Officer Andy Stald,
of course following this saga like the rest of us,
maybe more closely than the rest of us. It's a
little bit like a soap opera, except that has to
do with our money, except not not so entertaining.
Speaker 3 (01:01):
I guess, well, I guess it depends on your perspective
if you find it entertaining or not. The media certainly.
Speaker 4 (01:07):
Finds it entertaining.
Speaker 2 (01:08):
Yeah, something to talk about and drives the ratings there.
Speaker 3 (01:11):
I mean, nothing says more excitement than you know, the
Federal Reserve, right, so when I'm thinking.
Speaker 2 (01:16):
About it, and Trump has made it interesting though he.
Speaker 3 (01:19):
Has, he has, so just you know, from the Fed's perspective,
when they meet this week, they're not going to do anything.
They're going to keep rates where they are. There there's
a two percent chance they actually do anything, So it's
it's just not going to happen. But what will be
interesting when the FED meets is how Chair Pale responds
(01:39):
to Trump's criticism and the ongoing inflationary environment that we're in.
I don't think he's going to do anything or say
anything about Trump, because they will try. He'll be asked,
but they do a pretty good job of avoiding any
sort of political discussions. But you know, what will certainly
be very very interesting is how they respond and position
(02:02):
the markets to keep rates where they are, because if
you look at what the market's pricing in, market's pricing
in about three to four quarter point rate cuts this year,
and unless we fall into recession, you know, I'm a
little skeptical that will happen. I think the FED might
be even slower than that.
Speaker 4 (02:22):
Well, when we listen to chair Pal talk, he always
talks about we're looking at the data. We're looking at
the data, and understandably the data is hard to decipher
based on uncertain trade policy. But we did get some
data out last week. Andy, we got a GDP report,
and we got a jobs report. What is the data
telling us as of Friday of last week.
Speaker 3 (02:43):
Yeah, so I just set a second ago. They'll keep
rates where they are or close to it unless we
fall into recession. So we had a negative zero point
three percent GDP print, which think about it, then you might,
you know, think, well, what is a recession? And a
lot of people define a recession as two consecutive quarters
of negative GDP. So in theory, if we were to
(03:06):
get another negative print here in the second quarter, some
people would say we're in a recession. That's actually not
the definition of recession. Here in the United States, without
going into the weeds, we have an official recession dating arbitr,
if you will, called the National Bureau of Economic Research,
and they don't even explicitly mention GDP. As some of
(03:28):
the things are looking at they're looking at retail sales,
personal spending, personal income, employment payrolls, industrial production, so they're
looking at a broad swath of data. Nonetheless, when you
look at it, you know, we did see a negative
as zero point three percent GDP print, and that is
something that we need to be mindful of. And I
(03:49):
think we all knew low print was coming, and that
was because of businesses front running the tariffs, pulling forward
demand and essentially causing the trade part of the GDP
calculation to pull almost five percentage points away from the economy.
Speaker 1 (04:07):
Let's put that in simply money terms, right, So essentially,
these businesses are like, well, the things that we're going
to need to buy are likely going to go up
in the future, so we're going to spend a lot
of money now, and then you've got a lot more
flowing into the US than out of the US.
Speaker 2 (04:22):
Correct, Absolutely correct?
Speaker 4 (04:24):
Okay, all right, Well, help me understand then, because if
they front run tear if businesses front run tariffs and
they bring in a lot of imported goods ahead of
tariffs coming, how does that impact gross domestic product, which
I thought was just a measurement of all the goods
and services produced in the United states explain how that
(04:46):
takes five percentages for five percentage points off of GDP.
Speaker 3 (04:51):
So what GDP measures as our total output of the country.
You can think of it as our total economy and
growth you will, And it's really comprised of a few
main areas. One is personal spending, another is business spending.
Then we have government spending, and we have net exports.
And when you think about it, just from those high
(05:14):
level aggregate measures, the net exports which is imports or
exports minus imports, that's where you see the pulldown. Because
if you look at a probably a better way to
gauge you underlying economic trend is what I like to
look at is essentially private sector output, which is really
(05:35):
consumer spending plus business spending excluding inventories. And that grew
three percent in the first quarter, and that is basically
what the average has been for that over the past
four years.
Speaker 4 (05:49):
So what really skewed that GDP number then was that
big swing in net exports caused by companies bringing in
a lot of important goods.
Speaker 3 (05:57):
Yeah, and now the question is will that reverse going forward?
What does that mean for GDP in the future. And
there's some argument that we could actually see some revisions
higher to this number because of just we're Inventori's word.
We don't need to get into the leads there. But
what we're seeing is that with companies pulling back or
pulling forward, demand that could help that traded number next quarter.
(06:22):
And what I think we'll need to do is kind
of look through the noise like where you're having to
this time, and focus on that private sector demand, that
consumer spending, that business spending excluding inventories. That's going to
be the real measure of the underlying economic momentum, and
right now it still points to there being some of
that momentum.
Speaker 1 (06:41):
You're listening to simply money presented by all Worth Financial,
I Memi Wagner along with Bob Sponseller, and we are
joined by our chief investment officer and these doubts. It
will be an interesting week, right We've got the Federal Reserve,
our nation Central Bank meeting this week really for the
first time since President Trump put them in the hot seats,
and then City is going to fire the FED chair
(07:01):
and then kind.
Speaker 2 (07:02):
Of walked that back.
Speaker 1 (07:03):
What the what the Federal Reserve is looking at is
not what's happening in the headlines. They have the dual
mandate to try to keep inflation under control and try
to keep the labor market full right, people working. And
we did get labor numbers out recently as well as
the GDP numbers before you kind of looked under the
hood showed a weakening economy.
Speaker 2 (07:25):
What did the labor report show.
Speaker 1 (07:27):
I'm not saying it did show a week, but the
kind of headline number on GDP looked that way.
Speaker 2 (07:32):
What does the labor numbers tell you?
Speaker 3 (07:35):
The jobs report came in better than what economists were
thinking it would. They were thinking we'd probably see around
one hundred and one hundred and thirty eight thousand, to
be exact, new jobs added by employers, and what employers
added was one hundred and seventy seven thousand new jobs,
so easily outpaced those expectations. Now, I will note though
(07:56):
the prior months were revised lower. But when you look
at where we're at right now, and specifically at some
of the industries that you know might have shown some
weakness in front of the tariffs, where the trade and
transportation sector and that basically came in pretty good. Overall,
they added roughly thirty two thousand jobs. And then I
(08:16):
was also watching pretty closely leisure in hospitality, because that
would be a good measure of underlying consumer discretionary spending
because if people start to get worried, they're going to
pull back on spending out restaurants and other types of
leisure activities that travel. So you know there was some
strength there as well. So when you look at all
of that together, it was a decent report. And then
(08:37):
we also saw the unemployment rate as part of that
Jaws report remained study at four point two percent, and
that was impressive for the main reason that about five
hundred thousand people entered the labor force, so there was
a big influx there and yet employers were stopping them up.
And you saw the unemployment rate remained as is.
Speaker 4 (08:59):
What would have caused half a million people to enter
the labor force in the last quarter.
Speaker 3 (09:05):
Well, it was just the last month that we saw. Now,
admittedly these numbers can move pretty quickly from month to month,
just how it's set up with these Basically, it's the
government calling or reaching out to individuals asking about their
job status, and it's a survey and it's representative, and
it jumped there. Now it could be that people are
worried about what the future might hold. I mean, if
(09:27):
you look at the overall consumer sentiment out there and confidence,
it's certain, it's you know, it's waivered, there's no question
about that. That is that's in the data. So if
people are getting more worried, maybe some of them, people
are starting to look for jobs a little bit more.
And when you think about just the overall employment picture
and that lower consumer confidence, the question is whether or
(09:48):
not that consumer confidence will translate into future and continued spending.
Because if it doesn't, what you're going to see as
employers not higher as quickly as.
Speaker 4 (09:57):
They have been.
Speaker 1 (09:59):
Lots of data in but I think one of the
major things as long term investors that you have to
keep your eye on is earnings. Right, how these big
companies are doing in what they're projecting for the future.
Obviously an interesting time for them as they are trying
to figure out what's going to happen with that with
the tariffs and how that would impact them.
Speaker 2 (10:18):
What are you seeing there, Andy, Well.
Speaker 3 (10:20):
We're almost three quarters of the way through earning season.
When you look at just the S and P five
hundred and so far, it's been pretty good. I mean,
if you look at past numbers. So specifically, we've seen
earnings about twelve and a half percent higher compared to
the first quarter of last year, so that twelve months changed.
What economists or Wall Street I guess was looking for
(10:43):
was a six point six percent growth rate, so almost
double that. Pretty good from that perspective. But what's not
so good is the revisions lower. We've seen roughly thirty
six percent of companies reduce their full year earnings guidance,
and that's higher than normal. So that is one thing
(11:03):
to watch. But here's the other thing to keep in
mind is that when companies lower guidance, that also allows
them to beat those estimates in the future. It's kind
of a game they play, and you see it almost
every quarter where uh, the company's lower estimates and then
you beat them. Mean that's why basically, on average, you
see seventy five to eighty percent of companies beating earnings estimates.
I mean, if it was truly if they weren't gaming
(11:25):
the system, it'd be closer to fifty to fifty. But
you know they're gaming the system. It's what they do.
Speaker 4 (11:31):
So Andy boiling all this down for us looking at earnings,
the labor report, the GDP Report. What's your message to
investors here on a Monday as we continue to navigate
the second quarter of twenty twenty five.
Speaker 3 (11:44):
So, I mean, there's so many ways I could take
that question. There, Bob, and I see a little That's.
Speaker 4 (11:49):
Why I asked it.
Speaker 3 (11:52):
I see a little smirk on your face there. You know,
one thing I'll also point out before answering that is
that you know, we have seen pretty strong recovery in
the equity markets. I mean, people were running for the hills.
I know there was lots of worried investors, probably some
going to cash. But you know, if you stay disciplined,
you were in pretty good You're in a pretty good
(12:13):
spot because we recovered a lot of those losses. Now,
I think the thing to keep in mind is that
even with stocks, because stocks have recovered much of those losses,
it's a good reminder of the market's resiliency. Obviously there's
a lot of uncertainty around, you know, international trade and inflation,
but you know, it's it's a good reminder that not
(12:35):
reacting to these headlines, and remember these headlines that you read,
they're designed to get you to react, and there's probably
only a handful of things that can charge people more
than politics, you know, as we know. But even with that,
you know, those politically charged headlines. Essentially, the most effective
way to navigate the market is, you know, focusing on
(12:56):
your financial plan, making sure you have a right investment
mix to whether the storm. Because remember your investment mix
and financial plan should really be built to weather the headlines,
not trying to anticipate the headlines.
Speaker 1 (13:06):
Yeah, built for you also and your individual needs is
a long term investor, great point there, Andy, Coming up next.
Apple just made a one hundred and ten billion dollar move, So.
Speaker 2 (13:16):
If you own the stock, is it good news or
bad news? We'll get to that next.
Speaker 1 (13:20):
You're listening to Simply Money, presented by all Worth Financial
here on fifty.
Speaker 2 (13:23):
Five KRC, the talk station.
Speaker 1 (13:29):
You're listening to Simply Money. You're presented by all Worth Financial.
I mean, wag you're, along with Bob sponseller Warren Buffett
sitting on more cash than ever before.
Speaker 2 (13:38):
Is that a sign? Should we all be worried?
Speaker 1 (13:41):
We're going to talk about Warren Buffet and what you
need to be understanding in our Factor fiction segment that's
coming up at six forty three. In the headlines recently,
one of the darlings of the tech industry, Apple, announcing
another one hundred and ten billion dollars in stock buybacks. Obviously,
when companies do this, Bob, they get a ton of headlines,
(14:03):
whether it's a buyback or a stock split. But I
think it's important for investors to know. Okay, if I
own Apple, most of us own some portion of Apple,
maybe in our four to one k if it's well diversified,
what does it really mean.
Speaker 4 (14:16):
It can mean a lot of different things, and maybe
mean different things simultaneously. So here's what I mean by that.
You know, if you think of a pizza, You've got
eight slices of pizza. They're all a finite size. So
if the size of the pizza doesn't change, you know,
thinking of a share of Apple stock, if the company
buys back shares.
Speaker 2 (14:37):
There's less shares out there.
Speaker 4 (14:38):
There's less shares out there, and so on a dollar
of earnings basis, if there's fewer shares or fewer slices
of pizza, each slice of pizza hypothetically is worth more money.
That's what gets advertised, so to speak. But a lot
of times people will criticize companies like hey, if all
(14:59):
your doing is buying backstock. That means you don't have
any real new, innovative product announcements. You're not growing, you're
not innovating, you're not creating through new things, and the
suspicion comes in that maybe the growth of future earnings
is going to be lower, and that can cause investors
(15:20):
to back off. You know. In terms of Apple, it's
been interesting to watch that company kind of evolve over
the years from a super high growth company to more
of a value play and now even a dividend stock.
Speaker 1 (15:33):
Yeah.
Speaker 2 (15:34):
I think it's a great point.
Speaker 3 (15:35):
You know.
Speaker 1 (15:35):
You think about Apple and the fact that most of
us carry around a computer in our pockets because of Apple.
Speaker 2 (15:41):
So it used to be where every year.
Speaker 1 (15:44):
When they were announcing new products, everyone was like on
the edge of our seats because it was like, what
is the next thing that's going to revolutionize not only
this company and their growth, but the rest of the world.
I mean, that's how cutting edge Apple was for the
law longest time. And I remember, you know, I've been
doing the show for a long long time. We were
always talking about the fact that research and development, right,
(16:06):
I mean, Apple was shoving any money that was coming
into the company into developing the next big thing.
Speaker 2 (16:11):
So it does make you wonder.
Speaker 1 (16:14):
When they are shifting where their money is going away
from maybe some of that research and development into stock buybox.
Speaker 2 (16:22):
Does that signal that maybe.
Speaker 1 (16:24):
Apple's age of revolutionizing the world is I mean, and
who knows? Yeah, but I think as an investor, it
kind of is what it is, and maybe you own
a slightly larger piece of the pie.
Speaker 2 (16:37):
Is the pie?
Speaker 1 (16:38):
Does it taste as good? Is it as valuable as
it once was? I think that remains to be seen.
Speaker 4 (16:44):
Yeah, I can remember to your point, Amy, I can
remember those media events. I remember like at for a
Ken events, and I mean the whole financial world shut down.
Every analyst on Wall Street was there. It was this
hyped up product unveiling of the next new grat thing,
and oftentimes it really was. I mean, these were revolutionary products.
(17:05):
People were lining up outside of Apple stores, you know,
with baited breath, ready to pounce on the latest new thing.
We have not seen that type of excitement out of
Apple in recent months and years. Doesn't mean it's a
bad company. So I think everybody evaluates companies like this
based on what they need or wanted to do. In
their portfolio, and you know, whether it's a dividend payer.
(17:28):
You know, Apple gets criticized and praised simultaneously depending on
what kind of investor you are, for how much cash
you're holding right now, and the thinking as well, they're
holding back, They're waiting to acquire something that's of higher
growth that hasn't really happened in recent history. It's just
fun to watch that company evolve over the years.
Speaker 1 (17:49):
And I think, you know, it's what's the takeaway as
an investor, right, why should you care? I think they
can tell you something important about what Apple's management is thinking. Right,
what's going in the wardrooms. You can't read between the lines.
We really don't know. But I think to your point, Bob,
we've been seeing this gradual shift away from this astronomical
(18:10):
growth into Okay, maybe maybe our largest innovations maybe behind us,
but we.
Speaker 2 (18:17):
Could still be a solid, solid company. I can still tell.
Speaker 1 (18:21):
I mean, we've got six people in my family and
all six of us still have iPhones, and when our
iPhones were out, we will get more iPhones, you know.
I mean, I don't know, maybe, but I don't know
that things are necessarily going to change in that realm.
Speaker 4 (18:35):
Well, and they still are sitting over one hundred and
fifty billion dollars in cash. Amy so they if they
find something that they really think is attractive and can
buy that will juice that earnings growth and help them
innovate something new and exciting in the future. They can
do that. So the jury's still out on Apple.
Speaker 2 (18:55):
Yeah.
Speaker 1 (18:55):
And you know, also just remember when these headlines come
that buybacks, aren't you garanteed?
Speaker 2 (19:00):
Right in recession, they're the first thing off the table.
Speaker 4 (19:02):
There's worse things you can do with cash than buy
back your stock. Yeah, I mean you could waste money, yes, absolutely,
So this is not a bad thing.
Speaker 1 (19:11):
Yeah, interesting play by Apple. It doesn't necessarily move the
needle greatly in one direction or another for investors, but
important to understand what's really going on here.
Speaker 2 (19:21):
Here's the all Worth advice.
Speaker 1 (19:22):
Next time you see a company announce a multi billion
dollar buy back, ask yourself why and ask whether that's
helping you as a long term investor or maybe just
dressing up their balance sheet. Coming up next, some solutions
for those of you who are maybe interested in getting
into private equity or private debt. Does it make sense
to you for you you're listening to Simply Money presented
(19:44):
by all Worth Financial here on fifty five krs the
talk station. You're listening to Simply Money presented by all
Worth Financially Meni.
Speaker 2 (19:56):
Wagner along with clobspond Seller.
Speaker 1 (19:58):
If you are an investor, a long term investor, you
have more options now than you ever have before. I
think the question is do they make sense for you
joining us tonight as our chief investment officer and the
stout kind of opening the world of investments that maybe
wasn't open to the average investor anymore before. Recently we're
(20:20):
talking about things like private equity and private debt, and Andy,
just to get us started, can you explain exactly what
we're talking about here.
Speaker 3 (20:28):
Yeah, So when we normally talked about equity and debt,
we're talking about the stock market, and we're talking about
the bond market, which anybody you know, with the money
can essentially go out and buy stocks, which is an
ownership of a company, or by debt, which is a
loan that you're making to a company. Now that's available
to anyone who wants to do it now on the
(20:51):
private side, I mean, that's what it means. It's on
the private it's not the public markets. So on the
private side, you know this is going to be loan
and investments in companies that aren't available to the general public.
Now with this, though, it comes a little bit more risk. However,
it does provide some more upside.
Speaker 4 (21:11):
So Andy, we're seeing more of a preponderance of discussion
of private equity and private debt in the financial media,
painting with a broadbrush, and I know every client is different,
their situation is different. Why would one want to incorporate
these asset classes in their overall financial plan and investment mix.
Speaker 3 (21:29):
Well, there's a few key benefits a high level. You
got diversification, so when you look at how these assets
move with other assets, they don't move in a straight line,
so you're getting someone's called diversification benefits, and that can
smooth out your overall returns. Also, they can be less volatile. Now, admittedly,
(21:50):
part of that is because they're not priced every day
like stocks are, So when you get your private equity investment,
you might only get updated prices or value every month,
So it's going to essentially smooth out those returns. But nonetheless,
you get that perception and it might make you feel
a little bit better. But you know in general that
(22:11):
that does result in a little bit less volatility. Now
in terms of you know why you would do that, though,
you also get the upside potential because you're sacrificing liquidity,
meaning you're not going to be able to exit out
of these positions, you know, in a month or a year.
I mean you might have a multi year lock up.
You might have you might only be able to redeem
(22:32):
x percent of whatever your investment is. So when you
put that all together, you have less liquidity. And because
you do have that less liquidity, Bob, you have more
upside because you can't trade that away without getting something
in return. So the extra the benefit you get in
return is extra return.
Speaker 4 (22:52):
Talk about fees, we read pros and cons about that
or how much higher are the fees in these kind
of instruments versus the traditional you know ETFs, publicly traded
stuff that we use for a majority of our portfolios.
Speaker 3 (23:06):
Yeah, so fees and what we just talked about, the
lack of liquidity, those are the two main i'll call
it drawbacks and a lot of investors' eyes. And I mean,
no one wants to pay more money than you have
to totally get that. Uh, some people would argue that,
you know, you get what you pay for at the
same time, and so whenever you're looking at a potential
private investment, whether it be private credit or private equity,
(23:29):
you want to make sure you're looking at the if
they have any sort of historical returns, the historical returns
net of fees, so you can at least see how
they've done in the past. Obviously that's no guarantee for
the future, and we all do that financial disclosure, you know,
past performance blah blah blah. But you know, with that said,
fees are higher on the private equity side. I mean
you've probably heard the term for hedge funds two and twenty,
(23:52):
which is two percent management fee and twenty percent of
performance above and beyond some level. Now that's kind of
pulled back a bit, and you know what, I'm seeing
a lot more now you can get some negotiated rates
depending on you know, your your investment, but one in
a quarter is a little bit more realistic, with maybe
a twelve and a half percent performance fee somewhere around there,
(24:15):
or one and a half in ten. So, I mean
there's lots of different variations out there.
Speaker 1 (24:20):
What kind of investor, Andy, do you think would be
a good fit for this kind of investment? Right, private
equity and private debt. You know, we see people all
over the place coming into the doors here at all Worth.
We see, you know, someone who has five hundred, seven
hundred and fifty thousand dollars in therefore one k. We
(24:40):
see someone who has several several million dollars. Maybe they
have owned a business or recently sold a business, you know,
in that spectrum of investors who should maybe be looking
into this.
Speaker 3 (24:54):
So the first thing I would say is you need
to have the liquidity for if you need that money
in the near you're not the right investor for it.
I mean, you have to be able to have this
money locked up for a period of time in order
to hopefully get those higher returns. So first thing is
someone who doesn't need the money right away. The second
(25:14):
thing is many of these private investments require you to
be what's called an accredited investor, meaning that you have
to meet one of the following. Either your net worth
excluding your home has to be at least one million
dollars and also or excuse me, your income over the
past two years and expected to be for the current
(25:35):
year is expected to be two hundred thousand or higher
for an individual file, or three hundred thousand or higher
for a joint filer.
Speaker 4 (25:44):
So do you like these these asset classes in and
I know you and your team are now managing over
twenty seven billion dollars now for all of our clients
across the country here at all Worth, So I had
know do you like these asset classes more for their
diversification benefits or the potential increase return benefits or both?
Speaker 3 (26:05):
I would say both. I mean you just listed two
benefits of them, so I mean I'm guessing you wanted
me to say both.
Speaker 4 (26:12):
No, I'm the context of the question. Are you actually
seeing the benefits of both versus just how they're advertised.
Are you actually seeing evidence that they're they are delivering
both benefits as you've started to use them in client portfolios?
Speaker 3 (26:27):
Yeah, you do see the benefits there. And I think
what you really need to be careful of is not
just going in and it's like, oh, here's a private
equity fund, just go by. I mean you got to
do your research, you got to do your due diligence.
I mean there's a lot of I mean potentially. I
don't want to say shady offerings out there, but you
know people have been scammed before. I mean sticking with
(26:50):
maybe some more well known companies that are out there
could be beneficial, but really doing the due diligence and
understanding what you're getting invested in. And just because you
see a pitch book showing you of some crazy awesome
investment doesn't mean it's a good investment. You have to
actually understand how to look through that. You know what,
if you have a pitch book, you could always upload
(27:11):
it to AI and have it analyze it for you
and ask you for hey, does this look like a scam?
Is there enough information in here to make a decision?
I mean they could give you a really quick answer.
I mean that's a benefit you know of AI out there.
But I'll also say I mean AI fall short in
many areas. I mean, it's not a bad idea to
probably talk to a financial professional before putting your hard
earned savings.
Speaker 4 (27:31):
Andy, I don't I don't want you to be replaced
by a robot. I want to make that real cock.
Speaker 2 (27:35):
Andy is a eieplace exactly. There is no way that
we can both making the same point.
Speaker 1 (27:40):
We can never replace that computer of a brain of
yours with AI. But I think you started to make
a really good point here, which is we've got a
lot of di wires who listened to the show, right
And for someone who has been doing it themselves for
a long time, maybe picked a couple of individual companies
and you know, a few concentrated positions and have done
pretty well, I think it's easy.
Speaker 2 (28:01):
To feel like, well, I could easily do this as well.
Is this a do it.
Speaker 1 (28:06):
Yourself proposition or is it time to maybe at least
run something by a fiduciary.
Speaker 3 (28:12):
I'm always a fan of someone actually trying to look
out in your best interests and not getting scammed, So
obviously I would go down that route. And then when
you just think about it from a DYI or perspective,
you have to have access to these things. It's not
like you can just walk into some random business and
make hey, I want to invest in your equity. I
want to be a private equity. You have to have access.
(28:35):
So it's still like a hang around.
Speaker 2 (28:37):
It's like lying around on Robin Hood right now.
Speaker 4 (28:39):
Yeah, I know.
Speaker 3 (28:39):
Even though Warren Buffett has said he's going to be
retiring that doesn't mean you can go get the same
access to the private investments that he has. So I mean,
let's just be real about it.
Speaker 4 (28:49):
So it helps to know Andy or warm or Warren Buffett.
Speaker 1 (28:53):
Either way, great thoughts I think on private equity and
private debt. And you know you're to be reading more
and more headlines about this. Does it make sense to
you or for you? Thank you so much and Andy Stout,
our chief investment officer. You're listening to Simply Money presented
by all Worth Financial here on fifty five KRC, the
talk station. You're listening to Simply Money presented by all
(29:17):
Worth Financial. I mean he Wagoner along with Bob Sponsor or.
Do you have a financial question you need a little
help just figuring out what's best for you. There's a
red button you can click on while you're listening to
the show. It's right there on the iHeart app. Record
your question. It's coming straight to us and straight ahead.
If you could use a little extra money around your house,
we would say some good and not so great ideas,
(29:39):
but some people are doing them, so maybe maybe it'll
make sense to you. We'll get into that in just
a few minutes. If you've listened to the show for
any amount of time. You know that when it comes
to fan clubs, I might be president of the Warren
Buffett fan club. Guy is the smartest, in my mind,
one of the smartest investors that has ever lived, and
he picked actually the final moment. The shareholder meeting for
(30:01):
Berkshire Hathaway is an event, right, It is an event
for shareholders, and it becomes more and more so every year.
Warren Buffett speaks at that he waited till the final
minute to announce that this is the last year he
will be attending, and also that he's stepping down as
a CEO, which interestingly, his successor was standing right there
(30:22):
in the wings and had no idea the announcement was
even coming, you know.
Speaker 4 (30:26):
And I don't know.
Speaker 1 (30:27):
I just think he's such an interesting man. But I
also think there's a lot that we can continue to
learn from him and also to apply to our own
way that we think about investing.
Speaker 4 (30:40):
Yeah, quite a career for mister Buffett. I mean he
has amassed a one point trillion dollar behemoth of a
company and just doing it the old fashion way, finding
value investing for the long term, being patient. It's quite
an amazing career. This gentleman has built an affirm and
(31:01):
think of the you know, millions of investors that he
has benefited over the years through his just patient, disciplined
approach to long term investing. What a tremendous lesson for
all of us. Amy. You know.
Speaker 1 (31:13):
One of the other things too, that he has always
been such a big proponent of is understanding what you
are investing in. I was just reading an article about him,
and it talked about him like walking around his home
with the you know, these page is long financial statements
on companies, so that he fully understands and I mean
he is getting down to the minute details of these
(31:36):
running into furniture, because his face is in these statements
day in and day out that most people have never
even cracked the first page on, you know.
Speaker 2 (31:46):
And so he's always said.
Speaker 1 (31:47):
Listen, don't invest in something that you don't understand. I
quoted that a lot when crypto first kind of made
its first kind of big boom, you know, for investors
of like, if you can explain it to me and
you fully understand it, okay, and it might make sense
for you, But if you don't understand it. Going back
to Warren Buffett. He has always invested in things that
make sense to him. One of the interesting things about
(32:08):
Buffett right now, his company, Berkshire Hathaway now sitting on
close to two hundred billion dollars in cash, which is
a record high for them. You know, we like to
do these factor fiction segments because I think there's a
lot to be learned from them as investors. You know, Bob,
factor fiction, Is that a sign of something bad coming
(32:29):
for the stock market? We know he's a smart investor.
Is he seeing something coming that maybe the rest of
us is not seeing?
Speaker 4 (32:36):
Possibly? I don't think his cash stockpile is, you know,
a sign that the market's overvalued, or we're due for
a huge decline or anything like that. I think mister
Buffett would tell you if he's sitting right here, he
looks to buy things on sale. Yeah, and he really
doesn't pay a whole lot of attention to what the
broad market is doing. If he doesn't think anything's on sale,
(32:58):
he's going to sit in wait. And one of one
of the most interesting investments I ever watched him do
was back during the housing crisis in two thousand and
eight and two thousand and nine, when all these companies
were looking for tart money and no one had any
money to lend. You know, money banks didn't have any money.
(33:19):
And I'll never I'll never forget the investment he made
in good old General Electric. General Electric needed cash. You
know this is this isn't some obscure bitcoin company that
nobody understood. But to your point, Amy, he'd been done
doing his homework on GE for years and years and years.
Lo and behold, he says, hey, I'll write you guys
(33:40):
a big check, but I want I think it was
like ten and a half percent preferred stock and he
was the guy holding the check when no one else
would write the check. He made a tremendous investment in GE,
and as we all know, the rest is history.
Speaker 2 (33:56):
Yeah, yeah, I think you know.
Speaker 1 (33:57):
Money sitting in cash right now is morris sign of
nothing's float in my boat right now, no major opportunities.
Not everyone should go to cash right now because doom
and gloom in the bottom is about to fall out.
Speaker 2 (34:12):
Factor fiction s.
Speaker 1 (34:12):
And P five hundred is more concentrated in the top
ten companies now than it was in two thousand.
Speaker 4 (34:18):
Well, this is still a fact. And we talk about
the impact of the magnificent seven stocks. Over the last
few years, those stocks have come down in value. We've
talked about how other stocks have filled the gap this
year and are actually up. So yeah, it's a fact.
We still have concentration in the S and P five hundred,
which means you need to diversify elsewhere in your portfolio
(34:42):
to truly have a well built diversified portfolio.
Speaker 2 (34:45):
Yep factor fiction.
Speaker 1 (34:46):
We're talking about the FED right FED meeting this week,
with a FED signaling the end of rate hikes, it's
time to shift aggressively back into long term bonds.
Speaker 4 (34:56):
I think the operative word here is aggressively. We talk
about all the time. It is very difficult to predict
the movement of interest rates in the short term, so
this is fiction. I think now's the time to do
exactly what we've been doing, and that's build a responsible,
laddered portfolio of bonds because you never know what's coming
down the pike next. Don't put all your eggs in
(35:19):
one basket, don't load up the truck and buy any
too much of any one thing based over what we
think is going to happen in the short term.
Speaker 1 (35:28):
You know, when it comes to thinking about kind of
long term assets in your long term financial plan. I
have seen times through the years where maybe someone loses
their job or early or cash becomes tight, and the
question is should I then dig into those reserves. We
have some alternatives for you next, ways to maybe make
money in the near term. Some of them great ideas,
(35:49):
some of them I'm scratching my head, but I don't know.
Maybe you'll like you're listening to Simply Money, presented by
all Worth Financial here on fifty five krs the talk station.
You're listening to Simply Money and presented by all Worth
Financial and Memi Wagner along with Bob Sponseller. Years ago,
(36:09):
I remember we had a client who was on track
right to retire and retire well, and then he felt
like the bottom was cut out from under him an
unexpected layoff, and he was a few years away.
Speaker 2 (36:19):
From that goal, and his financial plan.
Speaker 1 (36:22):
Looked a lot differently if you started pulling from those
long term investments. And so we kind of said to him, hey,
just just find something else in the near term. He
ended up being an usher a great American ballpark, and
he loved baseball, So it.
Speaker 4 (36:34):
Was my dream job.
Speaker 2 (36:34):
It was like a win win, right.
Speaker 1 (36:36):
He wasn't making anywhere close to what he had been
making before, but it was enough that he didn't have
to touch those assets. Maybe you're in a similar situation,
or have been, or maybe money is just a little
bit tight right now for whatever reason. And I think
for those who are especially in or near retirement, it's
like what do I do. One of the things that
I have seen work time and time again is if
(36:58):
you've been working for decades in a certain industry, you've
built up expertise. There's someone out there that can benefit
from your expertise. Maybe you don't want to go back
to work full time for that company that you had been,
you know, working your butt off for for years and
years and years, but maybe a consulting gig isn't a
bad one.
Speaker 4 (37:15):
I see a lot of retired clients go into consulting,
and not only most of them don't have any income need,
it's because they still want to work, They still want
to do something, They still want to contribute to society.
They shots exactly, Yeah, yeah, you're working ten fifteen hours
a week and having fun doing it, versus being chained
(37:36):
to your desk and cubicle for fifty hours a week.
Having someone tell you what you have to do all
day long.
Speaker 1 (37:42):
Yeah, or you know it's a choiceyeah, of course yes,
or you know, if you own property right rentals. I
see actually lots of clients that I work with who
have that rental income going into retirement as well, and
they don't even need to pull on their assets when
they retire because it's essentially replacing their paychecks.
Speaker 2 (37:58):
Also a good option.
Speaker 1 (38:00):
There are others, and this one's interesting to me too,
monetize a YouTube channel. I don't know how tech savvy
some of my clients are, but I will say lots
of them have really interesting hobbies that I'm like, explain
more to me about that, and there's probably other people
who would be interested in hearing about that too. Take
(38:21):
it to YouTube, right, I mean, everyone's got a camera.
Speaker 2 (38:23):
On their phone.
Speaker 4 (38:24):
It's a legitimate income source. It takes time to get
something like that ramped up. But I'm always shocked at
how many people are actually making that work. They're having
fun and they're making a little money. Here's a last one, Amy,
renting out your clothes. Is this something you would ever do,
either rent your clothes out or rent someone else's clothes. No,
but it's a thing, right, it is a thing.
Speaker 1 (38:46):
Yeah, actually have friends who have done like rent the runway.
I wouldn't be opposed to renting something that I was
going to wear one time, but I don't know that
anyone would be interested enough in anything that's in my
closet to pay to rent out something that I have
worn before.
Speaker 2 (38:59):
You can rent your technology. You can also even rent.
Speaker 1 (39:02):
Your car on websites like turo where if someone's coming
in from out of town, rather than renting a car,
there's options if you're interested.
Speaker 2 (39:10):
Thanks for listening. Tune in tomorrow.
Speaker 1 (39:12):
We're talking about just how much money you're missing out
on if you don't take advantage of catch up contributions.
You've been listening to Simply Money, presented by all Worth
Financial here on fifty five KRC, the Talk station
Tonight, we've got a lot going on, a big week
for interest rates, a major Apple announcement that could impact you,
and Warren Buffett, by the way, made a major announcement
we'll talk about that. You're listening to simply Wheney, presented
by all Worth Financial Imami Wagner along with Bob Sponseller.
If you are keeping up, then I understand it's not
so easy to keep up.
Speaker 2 (00:27):
For the first time, since President Trump said he.
Speaker 1 (00:29):
Wanted to then fire Fedchair Jerome Powell then kind of
went back on his words and say he didn't want to,
we are now going to hear from the FED Chair
Jerome Powell as they meet this week to discuss what
they're going to do with interest rates for the very
first time.
Speaker 2 (00:44):
I think it might be interesting.
Speaker 1 (00:46):
Joining us is all Worst Chief Investment Officer Andy Stald,
of course following this saga like the rest of us,
maybe more closely than the rest of us. It's a
little bit like a soap opera, except that has to
do with our money, except not not so entertaining.
Speaker 3 (01:01):
I guess, well, I guess it depends on your perspective
if you find it entertaining or not. The media certainly.
Speaker 4 (01:07):
Finds it entertaining.
Speaker 2 (01:08):
Yeah, something to talk about and drives the ratings there.
Speaker 3 (01:11):
I mean, nothing says more excitement than you know, the
Federal Reserve, right, so when I'm thinking.
Speaker 2 (01:16):
About it, and Trump has made it interesting though he.
Speaker 3 (01:19):
Has, he has, so just you know, from the Fed's perspective,
when they meet this week, they're not going to do anything.
They're going to keep rates where they are. There there's
a two percent chance they actually do anything, So it's
it's just not going to happen. But what will be
interesting when the FED meets is how Chair Pale responds
(01:39):
to Trump's criticism and the ongoing inflationary environment that we're in.
I don't think he's going to do anything or say
anything about Trump, because they will try. He'll be asked,
but they do a pretty good job of avoiding any
sort of political discussions. But you know, what will certainly
be very very interesting is how they respond and position
(02:02):
the markets to keep rates where they are, because if
you look at what the market's pricing in, market's pricing
in about three to four quarter point rate cuts this year,
and unless we fall into recession, you know, I'm a
little skeptical that will happen. I think the FED might
be even slower than that.
Speaker 4 (02:22):
Well, when we listen to chair Pal talk, he always
talks about we're looking at the data. We're looking at
the data, and understandably the data is hard to decipher
based on uncertain trade policy. But we did get some
data out last week. Andy, we got a GDP report,
and we got a jobs report. What is the data
telling us as of Friday of last week.
Speaker 3 (02:43):
Yeah, so I just set a second ago. They'll keep
rates where they are or close to it unless we
fall into recession. So we had a negative zero point
three percent GDP print, which think about it, then you might,
you know, think, well, what is a recession? And a
lot of people define a recession as two consecutive quarters
of negative GDP. So in theory, if we were to
(03:06):
get another negative print here in the second quarter, some
people would say we're in a recession. That's actually not
the definition of recession. Here in the United States, without
going into the weeds, we have an official recession dating arbitr,
if you will, called the National Bureau of Economic Research,
and they don't even explicitly mention GDP. As some of
(03:28):
the things are looking at they're looking at retail sales,
personal spending, personal income, employment payrolls, industrial production, so they're
looking at a broad swath of data. Nonetheless, when you
look at it, you know, we did see a negative
as zero point three percent GDP print, and that is
something that we need to be mindful of. And I
(03:49):
think we all knew low print was coming, and that
was because of businesses front running the tariffs, pulling forward
demand and essentially causing the trade part of the GDP
calculation to pull almost five percentage points away from the economy.
Speaker 1 (04:07):
Let's put that in simply money terms, right, So essentially,
these businesses are like, well, the things that we're going
to need to buy are likely going to go up
in the future, so we're going to spend a lot
of money now, and then you've got a lot more
flowing into the US than out of the US.
Speaker 2 (04:22):
Correct, Absolutely correct?
Speaker 4 (04:24):
Okay, all right, Well, help me understand then, because if
they front run tear if businesses front run tariffs and
they bring in a lot of imported goods ahead of
tariffs coming, how does that impact gross domestic product, which
I thought was just a measurement of all the goods
and services produced in the United states explain how that
(04:46):
takes five percentages for five percentage points off of GDP.
Speaker 3 (04:51):
So what GDP measures as our total output of the country.
You can think of it as our total economy and
growth you will, And it's really comprised of a few
main areas. One is personal spending, another is business spending.
Then we have government spending, and we have net exports.
And when you think about it, just from those high
(05:14):
level aggregate measures, the net exports which is imports or
exports minus imports, that's where you see the pulldown. Because
if you look at a probably a better way to
gauge you underlying economic trend is what I like to
look at is essentially private sector output, which is really
(05:35):
consumer spending plus business spending excluding inventories. And that grew
three percent in the first quarter, and that is basically
what the average has been for that over the past
four years.
Speaker 4 (05:49):
So what really skewed that GDP number then was that
big swing in net exports caused by companies bringing in
a lot of important goods.
Speaker 3 (05:57):
Yeah, and now the question is will that reverse going forward?
What does that mean for GDP in the future. And
there's some argument that we could actually see some revisions
higher to this number because of just we're Inventori's word.
We don't need to get into the leads there. But
what we're seeing is that with companies pulling back or
pulling forward, demand that could help that traded number next quarter.
(06:22):
And what I think we'll need to do is kind
of look through the noise like where you're having to
this time, and focus on that private sector demand, that
consumer spending, that business spending excluding inventories. That's going to
be the real measure of the underlying economic momentum, and
right now it still points to there being some of
that momentum.
Speaker 1 (06:41):
You're listening to simply money presented by all Worth Financial,
I Memi Wagner along with Bob Sponseller, and we are
joined by our chief investment officer and these doubts. It
will be an interesting week, right We've got the Federal Reserve,
our nation Central Bank meeting this week really for the
first time since President Trump put them in the hot seats,
and then City is going to fire the FED chair
(07:01):
and then kind.
Speaker 2 (07:02):
Of walked that back.
Speaker 1 (07:03):
What the what the Federal Reserve is looking at is
not what's happening in the headlines. They have the dual
mandate to try to keep inflation under control and try
to keep the labor market full right, people working. And
we did get labor numbers out recently as well as
the GDP numbers before you kind of looked under the
hood showed a weakening economy.
Speaker 2 (07:25):
What did the labor report show.
Speaker 1 (07:27):
I'm not saying it did show a week, but the
kind of headline number on GDP looked that way.
Speaker 2 (07:32):
What does the labor numbers tell you?
Speaker 3 (07:35):
The jobs report came in better than what economists were
thinking it would. They were thinking we'd probably see around
one hundred and one hundred and thirty eight thousand, to
be exact, new jobs added by employers, and what employers
added was one hundred and seventy seven thousand new jobs,
so easily outpaced those expectations. Now, I will note though
(07:56):
the prior months were revised lower. But when you look
at where we're at right now, and specifically at some
of the industries that you know might have shown some
weakness in front of the tariffs, where the trade and
transportation sector and that basically came in pretty good. Overall,
they added roughly thirty two thousand jobs. And then I
(08:16):
was also watching pretty closely leisure in hospitality, because that
would be a good measure of underlying consumer discretionary spending
because if people start to get worried, they're going to
pull back on spending out restaurants and other types of
leisure activities that travel. So you know there was some
strength there as well. So when you look at all
of that together, it was a decent report. And then
(08:37):
we also saw the unemployment rate as part of that
Jaws report remained study at four point two percent, and
that was impressive for the main reason that about five
hundred thousand people entered the labor force, so there was
a big influx there and yet employers were stopping them up.
And you saw the unemployment rate remained as is.
Speaker 4 (08:59):
What would have caused half a million people to enter
the labor force in the last quarter.
Speaker 3 (09:05):
Well, it was just the last month that we saw. Now,
admittedly these numbers can move pretty quickly from month to month,
just how it's set up with these Basically, it's the
government calling or reaching out to individuals asking about their
job status, and it's a survey and it's representative, and
it jumped there. Now it could be that people are
worried about what the future might hold. I mean, if
(09:27):
you look at the overall consumer sentiment out there and confidence,
it's certain, it's you know, it's waivered, there's no question
about that. That is that's in the data. So if
people are getting more worried, maybe some of them, people
are starting to look for jobs a little bit more.
And when you think about just the overall employment picture
and that lower consumer confidence, the question is whether or
(09:48):
not that consumer confidence will translate into future and continued spending.
Because if it doesn't, what you're going to see as
employers not higher as quickly as.
Speaker 4 (09:57):
They have been.
Speaker 1 (09:59):
Lots of data in but I think one of the
major things as long term investors that you have to
keep your eye on is earnings. Right, how these big
companies are doing in what they're projecting for the future.
Obviously an interesting time for them as they are trying
to figure out what's going to happen with that with
the tariffs and how that would impact them.
Speaker 2 (10:18):
What are you seeing there, Andy, Well.
Speaker 3 (10:20):
We're almost three quarters of the way through earning season.
When you look at just the S and P five
hundred and so far, it's been pretty good. I mean,
if you look at past numbers. So specifically, we've seen
earnings about twelve and a half percent higher compared to
the first quarter of last year, so that twelve months changed.
What economists or Wall Street I guess was looking for
(10:43):
was a six point six percent growth rate, so almost
double that. Pretty good from that perspective. But what's not
so good is the revisions lower. We've seen roughly thirty
six percent of companies reduce their full year earnings guidance,
and that's higher than normal. So that is one thing
(11:03):
to watch. But here's the other thing to keep in
mind is that when companies lower guidance, that also allows
them to beat those estimates in the future. It's kind
of a game they play, and you see it almost
every quarter where uh, the company's lower estimates and then
you beat them. Mean that's why basically, on average, you
see seventy five to eighty percent of companies beating earnings estimates.
I mean, if it was truly if they weren't gaming
(11:25):
the system, it'd be closer to fifty to fifty. But
you know they're gaming the system. It's what they do.
Speaker 4 (11:31):
So Andy boiling all this down for us looking at earnings,
the labor report, the GDP Report. What's your message to
investors here on a Monday as we continue to navigate
the second quarter of twenty twenty five.
Speaker 3 (11:44):
So, I mean, there's so many ways I could take
that question. There, Bob, and I see a little That's.
Speaker 4 (11:49):
Why I asked it.
Speaker 3 (11:52):
I see a little smirk on your face there. You know,
one thing I'll also point out before answering that is
that you know, we have seen pretty strong recovery in
the equity markets. I mean, people were running for the hills.
I know there was lots of worried investors, probably some
going to cash. But you know, if you stay disciplined,
you were in pretty good You're in a pretty good
(12:13):
spot because we recovered a lot of those losses. Now,
I think the thing to keep in mind is that
even with stocks, because stocks have recovered much of those losses,
it's a good reminder of the market's resiliency. Obviously there's
a lot of uncertainty around, you know, international trade and inflation,
but you know, it's it's a good reminder that not
(12:35):
reacting to these headlines, and remember these headlines that you read,
they're designed to get you to react, and there's probably
only a handful of things that can charge people more
than politics, you know, as we know. But even with that,
you know, those politically charged headlines. Essentially, the most effective
way to navigate the market is, you know, focusing on
(12:56):
your financial plan, making sure you have a right investment
mix to whether the storm. Because remember your investment mix
and financial plan should really be built to weather the headlines,
not trying to anticipate the headlines.
Speaker 1 (13:06):
Yeah, built for you also and your individual needs is
a long term investor, great point there, Andy, Coming up next.
Apple just made a one hundred and ten billion dollar move, So.
Speaker 2 (13:16):
If you own the stock, is it good news or
bad news? We'll get to that next.
Speaker 1 (13:20):
You're listening to Simply Money, presented by all Worth Financial
here on fifty.
Speaker 2 (13:23):
Five KRC, the talk station.
Speaker 1 (13:29):
You're listening to Simply Money. You're presented by all Worth Financial.
I mean, wag you're, along with Bob sponseller Warren Buffett
sitting on more cash than ever before.
Speaker 2 (13:38):
Is that a sign? Should we all be worried?
Speaker 1 (13:41):
We're going to talk about Warren Buffet and what you
need to be understanding in our Factor fiction segment that's
coming up at six forty three. In the headlines recently,
one of the darlings of the tech industry, Apple, announcing
another one hundred and ten billion dollars in stock buybacks. Obviously,
when companies do this, Bob, they get a ton of headlines,
(14:03):
whether it's a buyback or a stock split. But I
think it's important for investors to know. Okay, if I
own Apple, most of us own some portion of Apple,
maybe in our four to one k if it's well diversified,
what does it really mean.
Speaker 4 (14:16):
It can mean a lot of different things, and maybe
mean different things simultaneously. So here's what I mean by that.
You know, if you think of a pizza, You've got
eight slices of pizza. They're all a finite size. So
if the size of the pizza doesn't change, you know,
thinking of a share of Apple stock, if the company
buys back shares.
Speaker 2 (14:37):
There's less shares out there.
Speaker 4 (14:38):
There's less shares out there, and so on a dollar
of earnings basis, if there's fewer shares or fewer slices
of pizza, each slice of pizza hypothetically is worth more money.
That's what gets advertised, so to speak. But a lot
of times people will criticize companies like hey, if all
(14:59):
your doing is buying backstock. That means you don't have
any real new, innovative product announcements. You're not growing, you're
not innovating, you're not creating through new things, and the
suspicion comes in that maybe the growth of future earnings
is going to be lower, and that can cause investors
(15:20):
to back off. You know. In terms of Apple, it's
been interesting to watch that company kind of evolve over
the years from a super high growth company to more
of a value play and now even a dividend stock.
Speaker 1 (15:33):
Yeah.
Speaker 2 (15:34):
I think it's a great point.
Speaker 3 (15:35):
You know.
Speaker 1 (15:35):
You think about Apple and the fact that most of
us carry around a computer in our pockets because of Apple.
Speaker 2 (15:41):
So it used to be where every year.
Speaker 1 (15:44):
When they were announcing new products, everyone was like on
the edge of our seats because it was like, what
is the next thing that's going to revolutionize not only
this company and their growth, but the rest of the world.
I mean, that's how cutting edge Apple was for the
law longest time. And I remember, you know, I've been
doing the show for a long long time. We were
always talking about the fact that research and development, right,
(16:06):
I mean, Apple was shoving any money that was coming
into the company into developing the next big thing.
Speaker 2 (16:11):
So it does make you wonder.
Speaker 1 (16:14):
When they are shifting where their money is going away
from maybe some of that research and development into stock buybox.
Speaker 2 (16:22):
Does that signal that maybe.
Speaker 1 (16:24):
Apple's age of revolutionizing the world is I mean, and
who knows? Yeah, but I think as an investor, it
kind of is what it is, and maybe you own
a slightly larger piece of the pie.
Speaker 2 (16:37):
Is the pie?
Speaker 1 (16:38):
Does it taste as good? Is it as valuable as
it once was? I think that remains to be seen.
Speaker 4 (16:44):
Yeah, I can remember to your point, Amy, I can
remember those media events. I remember like at for a
Ken events, and I mean the whole financial world shut down.
Every analyst on Wall Street was there. It was this
hyped up product unveiling of the next new grat thing,
and oftentimes it really was. I mean, these were revolutionary products.
(17:05):
People were lining up outside of Apple stores, you know,
with baited breath, ready to pounce on the latest new thing.
We have not seen that type of excitement out of
Apple in recent months and years. Doesn't mean it's a
bad company. So I think everybody evaluates companies like this
based on what they need or wanted to do. In
their portfolio, and you know, whether it's a dividend payer.
(17:28):
You know, Apple gets criticized and praised simultaneously depending on
what kind of investor you are, for how much cash
you're holding right now, and the thinking as well, they're
holding back, They're waiting to acquire something that's of higher
growth that hasn't really happened in recent history. It's just
fun to watch that company evolve over the years.
Speaker 1 (17:49):
And I think, you know, it's what's the takeaway as
an investor, right, why should you care? I think they
can tell you something important about what Apple's management is thinking. Right,
what's going in the wardrooms. You can't read between the lines.
We really don't know. But I think to your point, Bob,
we've been seeing this gradual shift away from this astronomical
(18:10):
growth into Okay, maybe maybe our largest innovations maybe behind us,
but we.
Speaker 2 (18:17):
Could still be a solid, solid company. I can still tell.
Speaker 1 (18:21):
I mean, we've got six people in my family and
all six of us still have iPhones, and when our
iPhones were out, we will get more iPhones, you know.
I mean, I don't know, maybe, but I don't know
that things are necessarily going to change in that realm.
Speaker 4 (18:35):
Well, and they still are sitting over one hundred and
fifty billion dollars in cash. Amy so they if they
find something that they really think is attractive and can
buy that will juice that earnings growth and help them
innovate something new and exciting in the future. They can
do that. So the jury's still out on Apple.
Speaker 2 (18:55):
Yeah.
Speaker 1 (18:55):
And you know, also just remember when these headlines come
that buybacks, aren't you garanteed?
Speaker 2 (19:00):
Right in recession, they're the first thing off the table.
Speaker 4 (19:02):
There's worse things you can do with cash than buy
back your stock. Yeah, I mean you could waste money, yes, absolutely,
So this is not a bad thing.
Speaker 1 (19:11):
Yeah, interesting play by Apple. It doesn't necessarily move the
needle greatly in one direction or another for investors, but
important to understand what's really going on here.
Speaker 2 (19:21):
Here's the all Worth advice.
Speaker 1 (19:22):
Next time you see a company announce a multi billion
dollar buy back, ask yourself why and ask whether that's
helping you as a long term investor or maybe just
dressing up their balance sheet. Coming up next, some solutions
for those of you who are maybe interested in getting
into private equity or private debt. Does it make sense
to you for you you're listening to Simply Money presented
(19:44):
by all Worth Financial here on fifty five krs the
talk station. You're listening to Simply Money presented by all
Worth Financially Meni.
Speaker 2 (19:56):
Wagner along with clobspond Seller.
Speaker 1 (19:58):
If you are an investor, a long term investor, you
have more options now than you ever have before. I
think the question is do they make sense for you
joining us tonight as our chief investment officer and the
stout kind of opening the world of investments that maybe
wasn't open to the average investor anymore before. Recently we're
(20:20):
talking about things like private equity and private debt, and Andy,
just to get us started, can you explain exactly what
we're talking about here.
Speaker 3 (20:28):
Yeah, So when we normally talked about equity and debt,
we're talking about the stock market, and we're talking about
the bond market, which anybody you know, with the money
can essentially go out and buy stocks, which is an
ownership of a company, or by debt, which is a
loan that you're making to a company. Now that's available
to anyone who wants to do it now on the
(20:51):
private side, I mean, that's what it means. It's on
the private it's not the public markets. So on the
private side, you know this is going to be loan
and investments in companies that aren't available to the general public.
Now with this, though, it comes a little bit more risk. However,
it does provide some more upside.
Speaker 4 (21:11):
So Andy, we're seeing more of a preponderance of discussion
of private equity and private debt in the financial media,
painting with a broadbrush, and I know every client is different,
their situation is different. Why would one want to incorporate
these asset classes in their overall financial plan and investment mix.
Speaker 3 (21:29):
Well, there's a few key benefits a high level. You
got diversification, so when you look at how these assets
move with other assets, they don't move in a straight line,
so you're getting someone's called diversification benefits, and that can
smooth out your overall returns. Also, they can be less volatile. Now, admittedly,
(21:50):
part of that is because they're not priced every day
like stocks are, So when you get your private equity investment,
you might only get updated prices or value every month,
So it's going to essentially smooth out those returns. But nonetheless,
you get that perception and it might make you feel
a little bit better. But you know in general that
(22:11):
that does result in a little bit less volatility. Now
in terms of you know why you would do that, though,
you also get the upside potential because you're sacrificing liquidity,
meaning you're not going to be able to exit out
of these positions, you know, in a month or a year.
I mean you might have a multi year lock up.
You might have you might only be able to redeem
(22:32):
x percent of whatever your investment is. So when you
put that all together, you have less liquidity. And because
you do have that less liquidity, Bob, you have more
upside because you can't trade that away without getting something
in return. So the extra the benefit you get in
return is extra return.
Speaker 4 (22:52):
Talk about fees, we read pros and cons about that
or how much higher are the fees in these kind
of instruments versus the traditional you know ETFs, publicly traded
stuff that we use for a majority of our portfolios.
Speaker 3 (23:06):
Yeah, so fees and what we just talked about, the
lack of liquidity, those are the two main i'll call
it drawbacks and a lot of investors' eyes. And I mean,
no one wants to pay more money than you have
to totally get that. Uh, some people would argue that,
you know, you get what you pay for at the
same time, and so whenever you're looking at a potential
private investment, whether it be private credit or private equity,
(23:29):
you want to make sure you're looking at the if
they have any sort of historical returns, the historical returns
net of fees, so you can at least see how
they've done in the past. Obviously that's no guarantee for
the future, and we all do that financial disclosure, you know,
past performance blah blah blah. But you know, with that said,
fees are higher on the private equity side. I mean
you've probably heard the term for hedge funds two and twenty,
(23:52):
which is two percent management fee and twenty percent of
performance above and beyond some level. Now that's kind of
pulled back a bit, and you know what, I'm seeing
a lot more now you can get some negotiated rates
depending on you know, your your investment, but one in
a quarter is a little bit more realistic, with maybe
a twelve and a half percent performance fee somewhere around there,
(24:15):
or one and a half in ten. So, I mean
there's lots of different variations out there.
Speaker 1 (24:20):
What kind of investor, Andy, do you think would be
a good fit for this kind of investment? Right, private
equity and private debt. You know, we see people all
over the place coming into the doors here at all Worth.
We see, you know, someone who has five hundred, seven
hundred and fifty thousand dollars in therefore one k. We
(24:40):
see someone who has several several million dollars. Maybe they
have owned a business or recently sold a business, you know,
in that spectrum of investors who should maybe be looking
into this.
Speaker 3 (24:54):
So the first thing I would say is you need
to have the liquidity for if you need that money
in the near you're not the right investor for it.
I mean, you have to be able to have this
money locked up for a period of time in order
to hopefully get those higher returns. So first thing is
someone who doesn't need the money right away. The second
(25:14):
thing is many of these private investments require you to
be what's called an accredited investor, meaning that you have
to meet one of the following. Either your net worth
excluding your home has to be at least one million
dollars and also or excuse me, your income over the
past two years and expected to be for the current
(25:35):
year is expected to be two hundred thousand or higher
for an individual file, or three hundred thousand or higher
for a joint filer.
Speaker 4 (25:44):
So do you like these these asset classes in and
I know you and your team are now managing over
twenty seven billion dollars now for all of our clients
across the country here at all Worth, So I had
know do you like these asset classes more for their
diversification benefits or the potential increase return benefits or both?
Speaker 3 (26:05):
I would say both. I mean you just listed two
benefits of them, so I mean I'm guessing you wanted
me to say both.
Speaker 4 (26:12):
No, I'm the context of the question. Are you actually
seeing the benefits of both versus just how they're advertised.
Are you actually seeing evidence that they're they are delivering
both benefits as you've started to use them in client portfolios?
Speaker 3 (26:27):
Yeah, you do see the benefits there. And I think
what you really need to be careful of is not
just going in and it's like, oh, here's a private
equity fund, just go by. I mean you got to
do your research, you got to do your due diligence.
I mean there's a lot of I mean potentially. I
don't want to say shady offerings out there, but you
know people have been scammed before. I mean sticking with
(26:50):
maybe some more well known companies that are out there
could be beneficial, but really doing the due diligence and
understanding what you're getting invested in. And just because you
see a pitch book showing you of some crazy awesome
investment doesn't mean it's a good investment. You have to
actually understand how to look through that. You know what,
if you have a pitch book, you could always upload
(27:11):
it to AI and have it analyze it for you
and ask you for hey, does this look like a scam?
Is there enough information in here to make a decision?
I mean they could give you a really quick answer.
I mean that's a benefit you know of AI out there.
But I'll also say I mean AI fall short in
many areas. I mean, it's not a bad idea to
probably talk to a financial professional before putting your hard
earned savings.
Speaker 4 (27:31):
Andy, I don't I don't want you to be replaced
by a robot. I want to make that real cock.
Speaker 2 (27:35):
Andy is a eieplace exactly. There is no way that
we can both making the same point.
Speaker 1 (27:40):
We can never replace that computer of a brain of
yours with AI. But I think you started to make
a really good point here, which is we've got a
lot of di wires who listened to the show, right
And for someone who has been doing it themselves for
a long time, maybe picked a couple of individual companies
and you know, a few concentrated positions and have done
pretty well, I think it's easy.
Speaker 2 (28:01):
To feel like, well, I could easily do this as well.
Is this a do it.
Speaker 1 (28:06):
Yourself proposition or is it time to maybe at least
run something by a fiduciary.
Speaker 3 (28:12):
I'm always a fan of someone actually trying to look
out in your best interests and not getting scammed, So
obviously I would go down that route. And then when
you just think about it from a DYI or perspective,
you have to have access to these things. It's not
like you can just walk into some random business and
make hey, I want to invest in your equity. I
want to be a private equity. You have to have access.
(28:35):
So it's still like a hang around.
Speaker 2 (28:37):
It's like lying around on Robin Hood right now.
Speaker 4 (28:39):
Yeah, I know.
Speaker 3 (28:39):
Even though Warren Buffett has said he's going to be
retiring that doesn't mean you can go get the same
access to the private investments that he has. So I mean,
let's just be real about it.
Speaker 4 (28:49):
So it helps to know Andy or warm or Warren Buffett.
Speaker 1 (28:53):
Either way, great thoughts I think on private equity and
private debt. And you know you're to be reading more
and more headlines about this. Does it make sense to
you or for you? Thank you so much and Andy Stout,
our chief investment officer. You're listening to Simply Money presented
by all Worth Financial here on fifty five KRC, the
talk station. You're listening to Simply Money presented by all
(29:17):
Worth Financial. I mean he Wagoner along with Bob Sponsor or.
Do you have a financial question you need a little
help just figuring out what's best for you. There's a
red button you can click on while you're listening to
the show. It's right there on the iHeart app. Record
your question. It's coming straight to us and straight ahead.
If you could use a little extra money around your house,
we would say some good and not so great ideas,
(29:39):
but some people are doing them, so maybe maybe it'll
make sense to you. We'll get into that in just
a few minutes. If you've listened to the show for
any amount of time. You know that when it comes
to fan clubs, I might be president of the Warren
Buffett fan club. Guy is the smartest, in my mind,
one of the smartest investors that has ever lived, and
he picked actually the final moment. The shareholder meeting for
(30:01):
Berkshire Hathaway is an event, right, It is an event
for shareholders, and it becomes more and more so every year.
Warren Buffett speaks at that he waited till the final
minute to announce that this is the last year he
will be attending, and also that he's stepping down as
a CEO, which interestingly, his successor was standing right there
(30:22):
in the wings and had no idea the announcement was
even coming, you know.
Speaker 4 (30:26):
And I don't know.
Speaker 1 (30:27):
I just think he's such an interesting man. But I
also think there's a lot that we can continue to
learn from him and also to apply to our own
way that we think about investing.
Speaker 4 (30:40):
Yeah, quite a career for mister Buffett. I mean he
has amassed a one point trillion dollar behemoth of a
company and just doing it the old fashion way, finding
value investing for the long term, being patient. It's quite
an amazing career. This gentleman has built an affirm and
(31:01):
think of the you know, millions of investors that he
has benefited over the years through his just patient, disciplined
approach to long term investing. What a tremendous lesson for
all of us. Amy. You know.
Speaker 1 (31:13):
One of the other things too, that he has always
been such a big proponent of is understanding what you
are investing in. I was just reading an article about him,
and it talked about him like walking around his home
with the you know, these page is long financial statements
on companies, so that he fully understands and I mean
he is getting down to the minute details of these
(31:36):
running into furniture, because his face is in these statements
day in and day out that most people have never
even cracked the first page on, you know.
Speaker 2 (31:46):
And so he's always said.
Speaker 1 (31:47):
Listen, don't invest in something that you don't understand. I
quoted that a lot when crypto first kind of made
its first kind of big boom, you know, for investors
of like, if you can explain it to me and
you fully understand it, okay, and it might make sense
for you, But if you don't understand it. Going back
to Warren Buffett. He has always invested in things that
make sense to him. One of the interesting things about
(32:08):
Buffett right now, his company, Berkshire Hathaway now sitting on
close to two hundred billion dollars in cash, which is
a record high for them. You know, we like to
do these factor fiction segments because I think there's a
lot to be learned from them as investors. You know, Bob,
factor fiction, Is that a sign of something bad coming
(32:29):
for the stock market? We know he's a smart investor.
Is he seeing something coming that maybe the rest of
us is not seeing?
Speaker 4 (32:36):
Possibly? I don't think his cash stockpile is, you know,
a sign that the market's overvalued, or we're due for
a huge decline or anything like that. I think mister
Buffett would tell you if he's sitting right here, he
looks to buy things on sale. Yeah, and he really
doesn't pay a whole lot of attention to what the
broad market is doing. If he doesn't think anything's on sale,
(32:58):
he's going to sit in wait. And one of one
of the most interesting investments I ever watched him do
was back during the housing crisis in two thousand and
eight and two thousand and nine, when all these companies
were looking for tart money and no one had any
money to lend. You know, money banks didn't have any money.
(33:19):
And I'll never I'll never forget the investment he made
in good old General Electric. General Electric needed cash. You
know this is this isn't some obscure bitcoin company that
nobody understood. But to your point, Amy, he'd been done
doing his homework on GE for years and years and years.
Lo and behold, he says, hey, I'll write you guys
(33:40):
a big check, but I want I think it was
like ten and a half percent preferred stock and he
was the guy holding the check when no one else
would write the check. He made a tremendous investment in GE,
and as we all know, the rest is history.
Speaker 2 (33:56):
Yeah, yeah, I think you know.
Speaker 1 (33:57):
Money sitting in cash right now is morris sign of
nothing's float in my boat right now, no major opportunities.
Not everyone should go to cash right now because doom
and gloom in the bottom is about to fall out.
Speaker 2 (34:12):
Factor fiction s.
Speaker 1 (34:12):
And P five hundred is more concentrated in the top
ten companies now than it was in two thousand.
Speaker 4 (34:18):
Well, this is still a fact. And we talk about
the impact of the magnificent seven stocks. Over the last
few years, those stocks have come down in value. We've
talked about how other stocks have filled the gap this
year and are actually up. So yeah, it's a fact.
We still have concentration in the S and P five hundred,
which means you need to diversify elsewhere in your portfolio
(34:42):
to truly have a well built diversified portfolio.
Speaker 2 (34:45):
Yep factor fiction.
Speaker 1 (34:46):
We're talking about the FED right FED meeting this week,
with a FED signaling the end of rate hikes, it's
time to shift aggressively back into long term bonds.
Speaker 4 (34:56):
I think the operative word here is aggressively. We talk
about all the time. It is very difficult to predict
the movement of interest rates in the short term, so
this is fiction. I think now's the time to do
exactly what we've been doing, and that's build a responsible,
laddered portfolio of bonds because you never know what's coming
down the pike next. Don't put all your eggs in
(35:19):
one basket, don't load up the truck and buy any
too much of any one thing based over what we
think is going to happen in the short term.
Speaker 1 (35:28):
You know, when it comes to thinking about kind of
long term assets in your long term financial plan. I
have seen times through the years where maybe someone loses
their job or early or cash becomes tight, and the
question is should I then dig into those reserves. We
have some alternatives for you next, ways to maybe make
money in the near term. Some of them great ideas,
(35:49):
some of them I'm scratching my head, but I don't know.
Maybe you'll like you're listening to Simply Money, presented by
all Worth Financial here on fifty five krs the talk station.
You're listening to Simply Money and presented by all Worth
Financial and Memi Wagner along with Bob Sponseller. Years ago,
(36:09):
I remember we had a client who was on track
right to retire and retire well, and then he felt
like the bottom was cut out from under him an
unexpected layoff, and he was a few years away.
Speaker 2 (36:19):
From that goal, and his financial plan.
Speaker 1 (36:22):
Looked a lot differently if you started pulling from those
long term investments. And so we kind of said to him, hey,
just just find something else in the near term. He
ended up being an usher a great American ballpark, and
he loved baseball, So it.
Speaker 4 (36:34):
Was my dream job.
Speaker 2 (36:34):
It was like a win win, right.
Speaker 1 (36:36):
He wasn't making anywhere close to what he had been
making before, but it was enough that he didn't have
to touch those assets. Maybe you're in a similar situation,
or have been, or maybe money is just a little
bit tight right now for whatever reason. And I think
for those who are especially in or near retirement, it's
like what do I do. One of the things that
I have seen work time and time again is if
(36:58):
you've been working for decades in a certain industry, you've
built up expertise. There's someone out there that can benefit
from your expertise. Maybe you don't want to go back
to work full time for that company that you had been,
you know, working your butt off for for years and
years and years, but maybe a consulting gig isn't a
bad one.
Speaker 4 (37:15):
I see a lot of retired clients go into consulting,
and not only most of them don't have any income need,
it's because they still want to work, They still want
to do something, They still want to contribute to society.
They shots exactly, Yeah, yeah, you're working ten fifteen hours
a week and having fun doing it, versus being chained
(37:36):
to your desk and cubicle for fifty hours a week.
Having someone tell you what you have to do all
day long.
Speaker 1 (37:42):
Yeah, or you know it's a choiceyeah, of course yes,
or you know, if you own property right rentals. I
see actually lots of clients that I work with who
have that rental income going into retirement as well, and
they don't even need to pull on their assets when
they retire because it's essentially replacing their paychecks.
Speaker 2 (37:58):
Also a good option.
Speaker 1 (38:00):
There are others, and this one's interesting to me too,
monetize a YouTube channel. I don't know how tech savvy
some of my clients are, but I will say lots
of them have really interesting hobbies that I'm like, explain
more to me about that, and there's probably other people
who would be interested in hearing about that too. Take
(38:21):
it to YouTube, right, I mean, everyone's got a camera.
Speaker 2 (38:23):
On their phone.
Speaker 4 (38:24):
It's a legitimate income source. It takes time to get
something like that ramped up. But I'm always shocked at
how many people are actually making that work. They're having
fun and they're making a little money. Here's a last one, Amy,
renting out your clothes. Is this something you would ever do,
either rent your clothes out or rent someone else's clothes. No,
but it's a thing, right, it is a thing.
Speaker 1 (38:46):
Yeah, actually have friends who have done like rent the runway.
I wouldn't be opposed to renting something that I was
going to wear one time, but I don't know that
anyone would be interested enough in anything that's in my
closet to pay to rent out something that I have
worn before.
Speaker 2 (38:59):
You can rent your technology. You can also even rent.
Speaker 1 (39:02):
Your car on websites like turo where if someone's coming
in from out of town, rather than renting a car,
there's options if you're interested.
Speaker 2 (39:10):
Thanks for listening. Tune in tomorrow.
Speaker 1 (39:12):
We're talking about just how much money you're missing out
on if you don't take advantage of catch up contributions.
You've been listening to Simply Money, presented by all Worth
Financial here on fifty five KRC, the Talk station
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