How to Protect Yourself in a Bad Market

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Transcript

00;00;00;02 – 00;00;16;27

Mike

Right? Sure. So I thought, you know, maybe I could give you for free a simple little test that anyone can use to identify. Hey, should you be a little more aggressive in the markets or a little less aggressive?

 

00;00;21;17 – 00;00;40;23

Jonathan

Welcome to retirement today. I’m Jonathan Berglund. And with me, as always, is Michael Reese, certified financial planning professional for over 25 years, helping those of you out there in radio land get to in through retirement successfully. Today Mike we’re talking about market volatility and that’s that’s just the fun topic of the day, right? I mean.

 

00;00;40;23 – 00;00;41;24

Mike

Yep, that’s right.

 

00;00;42;07 – 00;00;42;29

Jonathan

Get away from it.

 

00;00;43;09 – 00;00;58;00

Mike

Markets go up and down. They do it all the time. They do. It turns out I was having a great conversation with one of my clients. You know, they’ve been with me for many, many years. And they said to me, they said we were having a conversation when the markets were down and they said, Mike, wait a minute.

 

00;00;58;28 – 00;01;19;16

Mike

And he was joking, of course, he said, Didn’t you promise me that as long as I work with you, that the stock market will never go down? I said, let’s call him Joe. That’s not his real name. But you know, Joe, I think I remember telling you that I can promise you that markets go both up and down.

 

00;01;19;16 – 00;01;34;04

Mike

Indeed, yes. They go in both directions. And and he was joking about it. He’s like, oh, yeah, I guess I guess you did say that. But yeah, you know, the stock market goes up, it goes down. Nobody seems to get excited about it when it’s going up.

 

00;01;34;25 – 00;01;38;07

Jonathan

Right. It’s just it’s expected. Right. Just take it for granted.

 

00;01;38;07 – 00;01;59;17

Mike

Yeah, but but when it goes down, boy, it gets real exciting because, you know, it does tend to go up slowly, but it goes down quickly. Indeed. And, you know, one of the things that I think we forget is if you look at history, the stock market tends to have a bad year like a double digit down year, like a big bad year.

 

00;02;00;09 – 00;02;32;23

Mike

Usually about once every five years. And once we hit once we got through 2000, 2001, 2000, two. Right. So the 20 years after that, we’ve kind of experienced really only one bad market environment right now. So 2008. Mm hmm. So what’s happening? You know, in in recent past or recent history is, you know, markets are in 2022. They have start, you know, halfway through the year, they’re down.

 

00;02;32;25 – 00;02;43;09

Mike

You know, the the large cap companies are down 20%. The Nasdaq is down over 30%. Yeah, markets are getting crushed.

 

00;02;43;14 – 00;02;43;24

Jonathan

Into.

 

00;02;43;24 – 00;03;06;21

Mike

Here. And you know, that that creates a lot of uncertainty. It creates a lot of discomfort. A lot of people are really worried. And Jonathan, I hate to be the bearer of bad news, but a lot of people should be worried because many of you listening, your portfolios, if we’re real honest about things, are not set up the way they should be.

 

00;03;06;21 – 00;03;23;10

Mike

Many, many of you are taking on far more risk than you ever thought you should be. You might be just sitting there like, Oh, no, what do I do? Do I ride it out? Do I do something? And I think that’s going to be a good topic today of, you know, when markets are down. What should you do?

 

00;03;23;11 – 00;03;49;07

Mike

Should you ride it out? Should you do something about it? Right. And I think that today’s going to be a great a great time to talk about why the concept of buy and hold is when you are younger, a great idea. It works out fine. But when you’re north of age, oh, I don’t know, 55 probably. You’re north of age 55.

 

00;03;49;07 – 00;03;55;17

Mike

Buy and hold might be one of the dumber things you could possibly do. And so I think we should talk about that today as well.

 

00;03;55;18 – 00;03;56;10

Jonathan

I like it. I like.

 

00;03;56;10 – 00;04;00;16

Mike

It. Right. So and I’ve just probably gone and offended half of our listening audience. Yes.

 

00;04;00;29 – 00;04;02;02

Jonathan

Don’t take it to heart. Right.

 

00;04;02;10 – 00;04;09;07

Mike

Yeah. So I just keep an open mind with me today. Dan, this one, you know, this reminds me, I wrote for Kiplinger now.

 

00;04;09;18 – 00;04;09;27

Jonathan

Okay.

 

00;04;10;17 – 00;04;41;17

Mike

And it seems like every time I write an article for Kiplinger, they call me or the email me say, Mike, you’re blowing up our website because I like to be a little I like to put in some titles and topics that maybe fly in the face of conventional thinking a little bit. Okay. So an example of that was I remember one of the articles I wrote was, you know, how your 401k once you retire is quite possibly the worst possible account you can hold?

 

00;04;42;22 – 00;04;44;17

Jonathan

Well, not wrong.

 

00;04;44;18 – 00;05;09;26

Mike

If you are a regular reader of Kiplinger, you have been brainwashed over the years to believe that you’re for when K represents the most awesome source investment of all time, it’s like the most awesome account you could possibly hold ever, period. It’s a no brainer, of course, for when kids are wonderful. Right. And the the part the article, though, did not say for when kids are bad.

 

00;05;09;26 – 00;05;35;21

Mike

It said once you retire your it may be the worst account you can possibly own, specifically from a tax perspective. Right. Right. Now, that is a true statement indeed. But, you know, all the bobbleheads at Kiplinger, they saw 41k bad idea at any point in life and they freaked out and basically exploded the website with comments about how I was evil, I was Satan.

 

00;05;36;24 – 00;05;44;02

Mike

I was just a overall bad and stupid person. And how could Kiplinger ever, ever publish something like that?

 

00;05;44;02 – 00;05;46;07

Jonathan

So they didn’t read the article, is what you’re saying. Yeah.

 

00;05;46;07 – 00;05;48;08

Mike

They they, you know, shocker. Right?

 

00;05;48;13 – 00;05;49;09

Jonathan

Right. But anyway.

 

00;05;49;09 – 00;06;16;07

Mike

Today, I want to talk more about on the risk side. So historically speaking, if you look at a lot of research over time, this concept of buy and hold has been how do we say it? It’s been promoted. Right. And it’s been promoted by the financial industry. Mm hmm. They say, hey, research says you should just invest your money and hold on now, by the way, before we go any further, who benefits there?

 

00;06;16;07 – 00;06;21;21

Mike

If the market goes up or the market goes down, who benefits? Either way, with that concept.

 

00;06;21;26 – 00;06;26;12

Jonathan

You hinted it’s not you, right? It’s the financial services company. Yeah, right.

 

00;06;26;13 – 00;06;39;29

Mike

I mean, think about it. Fidelity, let’s say you’re invested in fidelity. Mutual funds market goes up, you’re happy. And Fidelity is happy because fidelity is getting paid their fees. What if the market goes down? Are you still happy?

 

00;06;40;12 – 00;06;41;04

Jonathan

Definitely not.

 

00;06;41;05 – 00;06;46;06

Mike

Not so much. But as long as you don’t do anything, who’s still getting paid their fees?

 

00;06;46;15 – 00;06;47;01

Jonathan

Fidelity?

 

00;06;47;01 – 00;06;48;21

Mike

Yes. So who’s still happy?

 

00;06;48;27 – 00;06;49;16

Jonathan

Yeah, exactly.

 

00;06;49;16 – 00;07;16;27

Mike

Fidelity. So in whose best interest is it already for you to just buy and hold? We know that a good times are bad times. Who wins either way? Well, the industry does. Yeah, the mutual fund families benefit, right? Fidelity benefits. Vanguard benefits. You know, everybody. Everybody in the financial industry benefits. But guess who doesn’t? Maybe benefit? Maybe you.

 

00;07;17;28 – 00;07;53;22

Mike

So buying and holding this is what I compare it to. Right. In fact, I’m going to do this in the next segment. Okay. In the next segment to talk about what I compare it to. But but I want you to think about this. If you are 28, 29, 30 years old, your late twenties early hack, if you’re even in your early forties, I have no problem with buying into the stock market and holding on because the reality is at that point in your life, you have a magic four letter word working in your favor.

 

00;07;54;12 – 00;07;56;11

Mike

Any idea what that word is, Jonathan?

 

00;07;56;12 – 00;07;58;04

Jonathan

I guess. Time. Yes.

 

00;07;58;05 – 00;08;20;11

Mike

The magic four letter word of time. Yo, you’re 42 years old and the market’s down. Who cares? In fact, you should be all excited about it. You should be saying, this is awesome. I get to buy this. I’m putting money on my 401k, which when you’re working is a good account I’m putting my name out for when I’m buying shares cheap.

 

00;08;20;14 – 00;08;39;24

Mike

Yeah. I’m not going to need the money for 20 years. Right. If you’re 42 years old, you probably won’t need the money for 20 years. And guess what? 20 years from now, I can I can’t guarantee the market’s going to be higher. But, boy, I think there’s. I’ll bet the house on it.

 

00;08;39;24 – 00;08;40;24

Jonathan

Yeah. Pretty good chance.

 

00;08;40;26 – 00;09;06;26

Mike

Yeah. There’s an overwhelming probability that the market will be higher in 20 years than it is today. Right. So if you’re 42, this is awesome. What if you are 57 years old and you want to retire in five years? Will the market be higher five years from today or not? Hmm.

 

00;09;07;05 – 00;09;08;04

Jonathan

That’s a coin toss.

 

00;09;08;09 – 00;09;35;08

Mike

The answer is, I don’t know. Yeah, I hope so, but I don’t know. Right. I hope so, but I don’t know. And so for a 42 year old to buy and hold, at least at that stage of life, that works out great. But if you’re 57, not so great. Yeah, not so great. You got to be smarter. You’ve got to be smarter when you start getting into your late fifties and early sixties.

 

00;09;35;17 – 00;09;58;15

Mike

So that’s what we want to really talk about tonight, is, you know, what do you want to do? How do you how do you do that? How do you you know, how do you make smart decisions when it comes to your investing once you’ve gotten north of, say, 55? Mm hmm. My daughter, Sarah, in our office, she decided she somehow made a deal with Coca-Cola so that we could be an official partner of Coca-Cola.

 

00;09;58;15 – 00;09;59;20

Jonathan

Oh, yeah. Official.

 

00;09;59;23 – 00;10;07;12

Mike

Yes. Now, by the way, I couldn’t give a hoot between I don’t know that you could put Pepsi or Coke in front of me. I don’t know the difference.

 

00;10;07;18 – 00;10;08;13

Jonathan

Oh, come on, Mike.

 

00;10;08;13 – 00;10;09;00

Mike

I hardly go.

 

00;10;09;00 – 00;10;11;27

Jonathan

Oh, you just like you just made a lot of people mad with.

 

00;10;11;27 – 00;10;13;16

Mike

They don’t really know the difference. I mean.

 

00;10;13;16 – 00;10;14;10

Jonathan

I don’t like.

 

00;10;14;19 – 00;10;35;21

Mike

You blind taste. You get blind taste. Test me. I wouldn’t know. But I will tell you that the benefit of this Coca-Cola partnership is that we get these cool old fashioned bottles in the office. Now they’re putting the. Yeah, and one of those bottles is filled with the Fanta Orange, which I am a huge fan of, and I’m drinking while we’re doing the radio show today.

 

00;10;35;21 – 00;10;40;20

Mike

So everyone listening, you get to listen to me drink Fanta, Fanta Orange on the show.

 

00;10;40;22 – 00;10;42;08

Jonathan

So it’s that much of a better mood, right?

 

00;10;42;09 – 00;11;04;08

Mike

Puts me gives me a little pep stuff. So here you go. This is everything you need to know about investing. And this is appropriate, particularly if you’re over the age of 55. So here you go. I was in Georgetown and up in our Georgetown office. And Becky, my wife, calls me, she says, hey, we’ve got some friends coming in the airport tonight.

 

00;11;04;08 – 00;11;13;16

Mike

Do you mind driving down to pick them up? And I’m thinking to myself, this is awesome because I’m in Georgetown. What’s the fastest way to get to the airport?

 

00;11;14;06 – 00;11;15;07

Jonathan

Right down the tollway.

 

00;11;15;10 – 00;11;17;06

Mike

Yeah. Go down I. 130, right.

 

00;11;17;11 – 00;11;18;26

Jonathan

80 miles an hour speed limit.

 

00;11;18;27 – 00;11;27;07

Mike

Oh yes. This is where I. And as a guy. Oh, my God, this is awesome. I get to drive on. I think the speed limit is I don’t know what 80.

 

00;11;27;07 – 00;11;29;14

Jonathan

Yeah, yes, yes. Speed limits. 80. Yeah, it’s.

 

00;11;29;14 – 00;11;50;23

Mike

Up there and I’m all excited right out there, I think maybe 85, whatever. So and it’s a beautiful sunny day. It’s the summertime, it’s like 90 degrees. I’ve got the sunroof open, a couple of windows open, just loving it. So I’m saying, all right, super. I’m going to do it. So I leave the office in Georgetown, I get on to I go to merge on 2i1 30.

 

00;11;50;23 – 00;11;51;02

Jonathan

Yeah.

 

00;11;51;12 – 00;11;57;04

Mike

And I’m speeding up, I’m hitting the accelerator, I’m getting up there like 85 miles an hour. So I enter the highway at speed.

 

00;11;57;04 – 00;11;58;14

Jonathan

Mm hmm. Good for you, by the way.

 

00;11;58;14 – 00;12;10;25

Mike

And I’m feeling very, you know, I’m just so happy. Big smile plastered on my face. And then I notice something right away. I notice that while I was driving 85, guess what I was doing?

 

00;12;11;11 – 00;12;11;27

Jonathan

What’s that?

 

00;12;12;00 – 00;12;18;01

Mike

I was blocking traffic. Your blood is going way faster. It was like cruising down the road.

 

00;12;18;01 – 00;12;19;01

Jonathan

I’m out of the way. Am I?

 

00;12;19;02 – 00;12;36;17

Mike

It’s a beautiful day. The sun is out. There’s not a cloud in the sky. You can see the road straight. You see for miles in front of you. And so everybody’s got the pedal to the metal. I’m holding up traffic by driving 85, so I have to push the pedal down a little more and catch up to traffic.

 

00;12;36;17 – 00;12;58;25

Mike

So I’m not a, you know, not a nuisance. I don’t want to be a nuisance. So now I’m driving 90 something, right? We’re off cruise. I mean, the semi trucks are doing 90. We’re just cruising down the road. Everybody’s great and everything’s great. And then about maybe two thirds of the way to maybe halfway, two thirds of way somewhere on there to the airport.

 

00;12;59;21 – 00;13;11;02

Mike

I noticed in the distance there, we saw like a line of clouds in the distance because it looked like, holy cow, there’s a line of clouds.

 

00;13;11;05 – 00;13;11;19

Jonathan

Ominous.

 

00;13;11;29 – 00;13;15;21

Mike

Ominous line of clouds in it that those clouds look like rain.

 

00;13;16;03 – 00;13;16;12

Jonathan

Oh.

 

00;13;16;26 – 00;13;30;12

Mike

It looks like those clouds might be coming our way. And those clouds look like rain. What do you think magically happened? As soon as everybody started seeing those clouds coming our way, what did they all do?

 

00;13;30;21 – 00;13;31;26

Jonathan

Tap on the brakes just a little bit.

 

00;13;31;27 – 00;14;00;15

Mike

They start slowing down. Yeah, yeah, they start slowing down. Yeah. You could still see for miles on the road. The road was still dry. It was straight, mostly sunny. The why would we start slowing down? Well, because it might rain soon. And then what happened? Then the clouds got closer, closer, closer. Next thing you know, we got one of those, like, downpours, and it wasn’t a sprinkle.

 

00;14;00;19 – 00;14;22;23

Mike

Yeah, right. It was just crushed. Like to the degree that literally we’re driving like 25, 30 miles an hour because you can barely see, wow. Right. It was one of those. Yeah. Yeah. And it didn’t last long. You know, it just probably lasted five or 10 minutes. I mean, hardly any time at all. And the line of clouds went through.

 

00;14;23;10 – 00;14;47;11

Mike

Sun comes back out again, the road starts drying and everybody starts speeding up again. So how does that story relate to investing? Well, here’s the thing. When you’re driving down the road, if everything looks good in the sky is clear and the wind is low and the road is straight, hey, go ahead, fire. You’re put the pedal to the metal.

 

00;14;47;11 – 00;15;10;15

Mike

Fire your way down the road, right in. If the market’s good and the economy’s good and, you know, everything looks beautiful, fire away. Go stocks. Put all your money in stocks and fire your way down the road. Everything works. But when clouds start coming in and when it starts raining, we know when we’re driving, we’re smart enough to know.

 

00;15;10;15 – 00;15;22;26

Mike

Hey, we probably should slow down. Mm hmm. Can you imagine when it’s raining so hard that you can’t see we’re all driving, like, 25, 30 miles an hour? What are some idiots cruising down the road at 90 miles an hour? So because they’re by and holding.

 

00;15;24;05 – 00;15;25;24

Jonathan

Okay, I’m right. And that’s good.

 

00;15;26;11 – 00;15;34;07

Mike

They’re buying, holding their way to 90 miles an hour in the when it’s raining so hard, a bounce is going 2530. What do you think’s going to happen to that idiot?

 

00;15;35;04 – 00;15;37;14

Jonathan

Yeah, not. Not good things crash and burn, right?

 

00;15;37;14 – 00;15;56;10

Mike

You know, they’re going to be, you know, just please let me crash and burn. My point is, we know when we’re driving, if the conditions change, we need to change how we drive. Just like if we’re going down a straight road and we suddenly hit curves.

 

00;15;56;23 – 00;15;57;19

Jonathan

Yeah, we should.

 

00;15;57;19 – 00;16;22;01

Mike

Probably slow down. Well, the same is true with investing. Look at the sky is clear and everything looks good. The economy looks good, the markets are good. Every you know, all the news is good. Fine. Pedal to the metal. Drive like crazy. But if the economy starts doing not so good, if a recession looks like it’s coming, if the market’s not doing so good, that’s like clouds.

 

00;16;22;11 – 00;16;31;08

Mike

Maybe slow down. Maybe it’s time to take some stocks off the table. Maybe dial down the risk a little bit, maybe move more to cash.

 

00;16;31;12 – 00;16;31;20

Jonathan

Yeah.

 

00;16;32;01 – 00;17;00;21

Mike

Right. So a good example of that is like in a lot of our portfolios this year, you know, in 2022 when we started the year, things were looking pretty decent. We had about 70% of the money sitting in the stock market. By the time we rolled into June, you know, it was less than 30% Y because the markets, you know, clouds, clouds came in, it started raining, its start, you know, winds started whipping up in the markets.

 

00;17;00;21 – 00;17;22;13

Mike

It was time to start slowing down. And as a result, a lot of our clients, what happened, did they were they still down? You know, halfway through the year? Yeah, a little bit, but not to the degree that the market was. Right, right, right. In the secret in investing. It’s not making money in the good years. The secret to investing is don’t get killed at the bad years.

 

00;17;22;13 – 00;17;23;03

Jonathan

Right? Right.

 

00;17;23;09 – 00;17;39;20

Mike

Like you want to make money in the markets. Don’t get killed in the bad years. That’s the key. And you just need to have some type of, you know, some type of system in place. You know, if you do your own investing, you need to have a system in place that tells you, here’s when you dial down the risk.

 

00;17;39;20 – 00;17;49;13

Mike

Here’s when you dial up the risk. And if you’re working with an advisor who all they do is they put you in a portfolio and say, all right, here’s your allocation. Now, just hang on and your good luck.

 

00;17;49;13 – 00;17;49;20

Jonathan

Yeah.

 

00;17;50;00 – 00;18;13;09

Mike

That’s like saying I’m going to drive 85 miles an hour down. I want 30, whether it’s sunny or rainy, whether it’s windy or calm, whether it’s, I don’t know, snowing or sleeting. You just going 85 no matter what. Right. Which is known as dumb with a capital D. There you go. You got to be smarter than that. It’s time for my favorite segment.

 

00;18;14;04 – 00;18;25;16

Mike

And this segment is what kind of laws would I put in place if I were king for a day? I don’t know about you, Jonathan. I just have fun saying that.

 

00;18;25;17 – 00;18;32;27

Jonathan

I know you do. And I love I love like watching you said the expression on your face, we have a good time. It’s obviously a good time. If you can’t tell, we’re all laughs and smiles here.

 

00;18;33;04 – 00;18;58;14

Mike

All right. So here we go. So every week, if you haven’t been listening, I have this segment where I say, you know, if I were king for a day, what are a couple of laws that I would enact? Right, right. Where a couple of laws or rules. And and one of those are going to be financially related. And then the other one would be just, I don’t know, something that either annoys me or that I just think would be really cool.

 

00;18;59;00 – 00;18;59;16

Mike

How about that?

 

00;18;59;22 – 00;19;00;09

Jonathan

Fair enough.

 

00;19;00;24 – 00;19;06;07

Mike

So while we start with the financial this the financial show, we’re supposed to talk about financial topics.

 

00;19;06;07 – 00;19;06;28

Jonathan

We do our best.

 

00;19;07;05 – 00;19;19;13

Mike

Yeah. So here is here’s something that I think I would want to do, you know, a law that I want to put in place if I were a king when it comes to a financial related topic.

 

00;19;19;17 – 00;19;20;24

Jonathan

Okay.

 

00;19;20;24 – 00;19;23;16

Mike

So the other day.

 

00;19;24;19 – 00;19;26;05

Jonathan

Here was a story I love.

 

00;19;26;05 – 00;19;36;28

Mike

It always starts with something, right? And the other day I was talking to one of my kids who shall go shall remain unnamed because I don’t want to embarrass them. Okay.

 

00;19;36;29 – 00;19;37;09

Jonathan

All right.

 

00;19;37;15 – 00;19;38;15

Mike

But I have five children.

 

00;19;38;15 – 00;19;39;15

Jonathan

So pick one.

 

00;19;39;18 – 00;19;51;21

Mike

Four of them have graduated high school. Three of them have graduated college. And one of them’s about to graduate college. I still have a 16 year old at home, so she’s still a high school to go?

 

00;19;51;23 – 00;19;52;02

Jonathan

Yep.

 

00;19;53;14 – 00;20;22;00

Mike

Anyway, we were going over a budget with one of my kids and this child. We’re going over the numbers that this child did not. This was a new experience, right? For them. And then I said, well, pull out your bank account. Let’s see what’s going on there. They had never balanced their bank account. They didn’t know what I meant.

 

00;20;22;08 – 00;20;24;11

Jonathan

Yeah, that’s a foreign concept, right? Yeah.

 

00;20;24;25 – 00;20;32;10

Mike

They this same child, they had no idea how investments work. They just said, Dad, just. I put the money in there. Just tell me how to set it up.

 

00;20;32;17 – 00;20;32;26

Jonathan

Right.

 

00;20;33;07 – 00;21;02;07

Mike

Right. In other words, basic financial concepts like investing. What’s a stock, what’s a bond? Yeah. And what’s the difference, right? This child knew nothing about that at all. Basic things like budgeting never, never did that. This is all brand new to this, you know, this child, by the way, who’s partially my fault, because I just I mean, I’m glad I helped them out, but I never talked to them about it.

 

00;21;02;07 – 00;21;09;07

Mike

So that’s part of me, too, right. And just all these things like balancing checkbooks.

 

00;21;09;24 – 00;21;10;15

Jonathan

Writing a check.

 

00;21;10;27 – 00;21;12;19

Mike

They all they don’t do that. Everything.

 

00;21;12;25 – 00;21;13;26

Jonathan

Yeah, right.

 

00;21;13;27 – 00;21;29;15

Mike

Online, everything. Credit card and debit card. Yeah. Yeah. How do credit card work. That was the other thing. Oh yeah. I had to show him. Look at all the interest you’re paying since you’re it’s like they’ve got money in the bank to pay their credit card bill, but they don’t pay the full credit card. They say no. They say, I only have to pay this much.

 

00;21;29;20 – 00;21;30;04

Jonathan

Yeah. Yeah.

 

00;21;30;07 – 00;21;59;17

Mike

They didn’t understand that the interest they were paying because they weren’t paying off the credit card every month. Right. Basic stuff. And then I saw in the news how there are a couple of different states out there. I think Florida is one of them. I think Michigan might be one of them where if you want to graduate high school, you must pass a class that talks about these basic financial concepts.

 

00;21;59;23 – 00;22;00;18

Jonathan

Yeah, yeah.

 

00;22;01;01 – 00;22;12;04

Mike

And I thought to myself and of course I saw that that news report right after I tried to help my one of my children who will go remain on nameless, something like that. Something remain nameless.

 

00;22;12;04 – 00;22;13;01

Jonathan

There you go. There you go.

 

00;22;13;23 – 00;22;31;06

Mike

I thought to myself, what a great idea. I mean, in school, you know, they teach you how to read and write. They teach you basic math. How I mean, this same kid took classes in, like calculus, right? That they’ll never use in their entire life.

 

00;22;31;06 – 00;22;32;03

Jonathan

Definitely not. Yeah.

 

00;22;32;20 – 00;22;36;25

Mike

But they never got a class on basic financial management.

 

00;22;36;27 – 00;22;48;16

Jonathan

Yeah. Yeah, we had one of those when I was in high school but and I took it, by the way, just because that’s, you know, my, my brain, my nature. But it’s, it was an elective and there was like, you know, five other kids in there with me. Yeah. Not required. Yeah, not a big yet.

 

00;22;48;23 – 00;23;03;03

Mike

All of us have to be able to handle, you know, budgeting, you know, dealing with how to taxes were dealing with credit cards, maybe investing. We all have to deal with that. Yeah. Why isn’t there a requirement?

 

00;23;03;03 – 00;23;03;23

Jonathan

It should be.

 

00;23;03;23 – 00;23;12;03

Mike

In every state in the country that if you graduate high school you have this is part of the required class material.

 

00;23;12;06 – 00;23;12;28

Jonathan

Yeah.

 

00;23;12;28 – 00;23;29;21

Mike

So I think as king for a day that one of my rules, one of my laws will be that in all, every high school in the country, if you want to graduate, you must pass a class on finance. Basic financial concepts. Yeah. How do you feel about that?

 

00;23;29;21 – 00;23;32;13

Jonathan

I love that one. That would be fantastic help. So many people, too.

 

00;23;32;13 – 00;23;47;22

Mike

Right, right. There we go. So there we go. Now I can go ahead and say announce it that it is now the law. There we go. Got new law. Okay, now we’ll go to my fun one.

 

00;23;48;09 – 00;23;48;27

Jonathan

A fun one.

 

00;23;48;27 – 00;23;57;21

Mike

Got to have a fun one. Sometimes the fun one is about me being annoyed about people who drive. Yeah, but this is going to be different. This one’s different.

 

00;23;57;21 – 00;23;58;00

Jonathan

Okay.

 

00;23;58;17 – 00;24;07;25

Mike

So if you’re listening the show, you know that I’m excited. I’m drinking some Fanta orange soda here. This is Bring me back to my childhood.

 

00;24;08;00 – 00;24;08;14

Jonathan

In the back.

 

00;24;08;14 – 00;24;15;06

Mike

Yeah, yeah. Taking me back to the good old days. I remember when I was a kid, Jonathan, I had a paper route, a newspaper.

 

00;24;15;07 – 00;24;15;08

Jonathan

Out.

 

00;24;15;27 – 00;24;19;03

Mike

Back when I was a kid. We still had newspapers. Not so much today.

 

00;24;19;03 – 00;24;19;26

Jonathan

Not so much.

 

00;24;20;06 – 00;24;31;01

Mike

Everything’s online. But back then we had newspapers. I had a paper route and I remember, you know, I would go and if it’s called collect, you know, collect the dues for the paper, whatever.

 

00;24;31;01 – 00;24;31;10

Jonathan

Options.

 

00;24;31;17 – 00;24;47;10

Mike

Subscription. Yeah. Anyway, I would make money and on those days I would go to our local IGA store very small store and you know, like a little not a convenience store bigger than a convenience store, smaller than a bookies.

 

00;24;48;27 – 00;24;50;16

Jonathan

You, you know, just.

 

00;24;51;04 – 00;24;58;24

Mike

Anyway, I’d go to the store and I would buy candy and soda and by the way, orange Fanta that was on my list.

 

00;24;58;24 – 00;24;59;19

Jonathan

It was on the list.

 

00;24;59;19 – 00;25;09;12

Mike

Every time I had some words fan, I think back to my paper boy days. But there was a candy bar that I loved. Loved?

 

00;25;09;25 – 00;25;10;02

Jonathan

Yeah.

 

00;25;10;10 – 00;25;13;08

Mike

It was called a marathon bar.

 

00;25;13;13 – 00;25;14;02

Jonathan

Marathon.

 

00;25;14;03 – 00;25;15;29

Mike

Do you have any idea what that is?

 

00;25;15;29 – 00;25;18;26

Jonathan

I’m racking my brain here trying to think about. No, I.

 

00;25;18;26 – 00;25;22;00

Mike

I doubt it because I think they stopped making them before.

 

00;25;22;07 – 00;25;22;12

Jonathan

You know.

 

00;25;22;13 – 00;25;22;27

Mike

Your dad.

 

00;25;22;28 – 00;25;23;21

Jonathan

Seen one? Yeah.

 

00;25;24;02 – 00;25;26;03

Mike

But I do encourage you to Google it.

 

00;25;26;05 – 00;25;27;22

Jonathan

Okay. Okay. Well, do you.

 

00;25;27;27 – 00;25;37;01

Mike

There are these things called marathon bars. And they were like for a quarter in those days or something, but they were like it was like a big long bout like maybe a foot long and like, wow.

 

00;25;37;01 – 00;25;37;12

Jonathan

Really hot.

 

00;25;37;15 – 00;25;42;07

Mike

And flat. And it was like, you know, kind of a, oh, I don’t know.

 

00;25;42;07 – 00;25;44;06

Jonathan

Leave caramel or not.

 

00;25;44;07 – 00;25;49;09

Mike

Here it was. It was a kind of like hard caramel surrounded by milk chocolate.

 

00;25;49;10 – 00;25;50;00

Jonathan

Okay. Okay.

 

00;25;51;01 – 00;26;05;26

Mike

It was awesome. I love those things. So but I think that a, they, they just stop making them. Yeah. Which I find to be just criminal. How do you stop making a marathon?

 

00;26;06;04 – 00;26;06;22

Jonathan

The joy.

 

00;26;06;28 – 00;26;25;28

Mike

Well, I almost feel like I think that there’s a huge there’s a huge potential business here by buying the rights to marathon bars and then just making them again. Yeah, right. That be cool. But anyway, so here’s my law. This is what I’m thinking, okay? I’m thinking it should be lost. Somebody makes that stuff.

 

00;26;26;03 – 00;26;27;03

Jonathan

It’ll bring it back. You can’t.

 

00;26;27;04 – 00;26;50;29

Mike

Can’t let that bring it back. I think it should be law. Here’s what I think it should be. Law. I think it should be law that that that we have our government who does a whole lot of useless stuff. What if we made a law that the government had to create some type of marathon bar making machine that a person could purchase for, I don’t know, 100 bucks.

 

00;26;52;05 – 00;26;56;28

Mike

And then they can make marathon bars to their hearts, delight in their own home.

 

00;26;56;28 – 00;26;59;19

Jonathan

Just set it up there on the kitchen counter and have it go to work for you.

 

00;26;59;19 – 00;27;27;24

Mike

Press out some marathon bars. I know. I saw this YouTube thing about, you know, refurbishing a candy making machine back in the 1800s is cool. And that made me think about this. So I’m thinking, wouldn’t it be cool if our government put some scientist on it, say, here, create a device that makes marathon bars and they’ll sell it for less than $100, like $129, something like that, that if I wanted to, I could buy it and I could make all the marathon bars.

 

00;27;27;24 – 00;27;28;21

Mike

I want it for myself.

 

00;27;28;29 – 00;27;32;16

Jonathan

I like it. It packages it and everything too for you. Right. Got to do the whole thing.

 

00;27;32;16 – 00;27;33;22

Mike

Yeah. Because you got to be able to.

 

00;27;34;14 – 00;27;38;14

Jonathan

Look like it, right? Yeah. Yeah. Like it’s there on the shelf and you have a stack of them.

 

00;27;38;14 – 00;27;42;19

Mike

They’re like my own little manufacturing facility, a personal marathon, bars.

 

00;27;43;13 – 00;27;50;01

Jonathan

That’s cool. I’m sure everybody has their favorite candy bar. Right. And perhaps years has been discontinued, so maybe they can do it for other candy bars as well.

 

00;27;50;02 – 00;27;50;29

Mike

No, just marathon bar.

 

00;27;51;01 – 00;27;51;19

Jonathan

Yes. Okay.

 

00;27;51;20 – 00;27;54;10

Mike

Because I’m the king. Now, if you working for.

 

00;27;54;10 – 00;27;55;19

Jonathan

Use me working.

 

00;27;55;19 – 00;28;16;08

Mike

For a day, you could pick your own darn candy any time. I do like that. That’s actually a good twist. Maybe that’ll be next week’s thing. But yeah, the twist of the government has to have their scientists create a machine that makes multiple types of candy bars that just spits them out, and you can buy that equipment and just make your own at home.

 

00;28;16;08 – 00;28;18;24

Mike

But I’m going to stick with marathon bars because they were my favorite.

 

00;28;18;25 – 00;28;21;04

Jonathan

Enough, right? I would try one. I’m sure it’d be great.

 

00;28;21;04 – 00;28;29;26

Mike

So they’re just basically chocolate covered caramel. That’s all it really was. But what was really cool is you could then put it in like the refrigerator or the freezer.

 

00;28;29;26 – 00;28;30;20

Jonathan

Yeah, there you go.

 

00;28;30;20 – 00;28;33;27

Mike

And then. Oh, my gosh, any like.

 

00;28;34;25 – 00;28;35;23

Jonathan

Even heightens it, right?

 

00;28;35;24 – 00;28;47;26

Mike

Even today you give me dark chocolate like caramel that is covered with dark chocolate and with sea salt. Yeah, I put those things in the freezer. Oh, my gosh. Oh.

 

00;28;48;05 – 00;28;51;10

Jonathan

That changes it. Something about the coldness.

 

00;28;51;10 – 00;29;17;04

Mike

Heaven on earth. That’s what that is. So here we go. I’m going to have to enact this law. So this is my law. My law is that the government has to hire scientists to create a machine. Right, a that we can all buy. That’s not overpriced. Like for like 150 bucks or less. They got to create a machine that we can buy, and at home, we can make our own marathon pass.

 

00;29;17;18 – 00;29;18;04

Mike

That’s my.

 

00;29;18;04 – 00;29;19;06

Jonathan

Law. Let’s do it. Are we.

 

00;29;19;06 – 00;29;23;27

Mike

Good? Yes. All right, folks, it is the law.

 

00;29;24;15 – 00;29;33;06

Jonathan

Back to the topic of the day. Market volatility and buy and hold and all those fun things. Where are we at, Mike? What does it really mean?

 

00;29;33;07 – 00;29;58;02

Mike

Yeah. So here you go. We talked about how if you’re younger, buy and hold is fine, but you get north of age 55 and you just got to be smarter, right? Sure. So I thought, you know, maybe I could give you for free a simple little test that anyone can use to identify. Hey, should you be a little more aggressive in the markets or a little less aggressive?

 

00;29;58;12 – 00;29;59;21

Jonathan

Okay, how about that? Yeah.

 

00;30;00;09 – 00;30;22;24

Mike

So there are these things called simple moving averages, right? A simple moving average is let’s say you looked at the 100 day moving average. All you’re looking at is on a 100 day moving average, you just say, hey, what has the stock market what’s the clothes of the stock market? Ben, for the past hundred days on average, right.

 

00;30;22;24 – 00;30;51;13

Mike

That’s all this super simple on average house market doing. That’s what it does. Well, you can for free and quite easily and say Yahoo finance right go to finance dot yahoo.com. Right. You type in the ticker symbol s, p, y, esp y, that’s the stock market. The S&P 500. That takes you to kind of a little page. And then one the tabs says charts.

 

00;30;51;25 – 00;31;13;27

Mike

So you open up the chart, right? You hit the chart tab. And then what you do is it shows you chart. They give you different time frames you can look at. I would recommend maybe one year, right? Like a one year. And then there’s another little tab that says comparison or indicator. Okay. Right. So you click on the indicator.

 

00;31;13;27 – 00;31;26;00

Mike

There’s two of them. Once is comparison, once is indicator. You click the indicator and the indicator button and then it’s it comes up. You just going to type in moving average here, you’ll see it probably you’ll come right up on a down downdraft, you know, like.

 

00;31;26;07 – 00;31;26;24

Jonathan

The little.

 

00;31;27;06 – 00;31;37;20

Mike

Dropdown menu. Yeah, you’ll see it simple moving average. You click on that and then you click on the box and here’s the number you want. You want 160 days.

 

00;31;37;25 – 00;31;38;19

Jonathan

160.

 

00;31;38;19 – 00;32;06;29

Mike

  1. So on Yahoo! Finance just kind of go through the little press. And by the way, if you can Google this, go to YouTube and say, how do I look at moving averages on Yahoo! Finance? And I guarantee there’s about 14,000 videos that will tell you how to do it. Right. But you want to look at the 160 day moving average on the spy and oh, real important, you want to look at it one day at a time.

 

00;32;07;08 – 00;32;31;26

Mike

It’s not a week at a time. You want one year with each vertical line B representing the daily activity in the market. So you want the 160 day moving average measured a day at a time and all you do is on the first day of each month, you kind of plug that. You go to Yahoo finance, you say, hey, put a chart up the hundred and 60 day moving average.

 

00;32;31;26 – 00;32;39;04

Mike

In comparison to the stock market. And here’s what you do. If the stock market is above that line, guess what?

 

00;32;39;23 – 00;32;41;17

Jonathan

The sun’s out, the sun’s out.

 

00;32;41;28 – 00;32;54;05

Mike

You can feel comfortable being in the market. Things are probably looking good. That means the market’s doing better than it has on average. What if it’s below? What if the market is below that moving average?

 

00;32;54;20 – 00;32;55;18

Jonathan

Seeing some clouds.

 

00;32;55;18 – 00;32;56;08

Mike

Now it’s raining.

 

00;32;56;15 – 00;32;56;24

Jonathan

Yeah.

 

00;32;57;00 – 00;33;26;21

Mike

Thanks. It’s probably pouring. It’s time to say, oh, I don’t like where the market’s going. Maybe I should avoid or scale back the risks that I’m taking. Right? Right. So following this little, simple, little, you know, indicator, you know, you would have been maybe in both May and June of 2022, both tough months. You wouldn’t have been in the market.

 

00;33;27;08 – 00;33;35;22

Mike

You would have said, oh, it’s below the moving average. I better maybe move to cash for a little bit or I better really reduce my risk for a little bit.

 

00;33;35;22 – 00;33;36;00

Jonathan

Right.

 

00;33;36;14 – 00;33;51;03

Mike

And hey, maybe you say instead of holding, you know, maybe you’re used to holding 70% stocks, maybe you cut in half 35, you’d still be down a little bit, but not like everybody else is getting hammered.

 

00;33;51;03 – 00;33;52;11

Jonathan

Yeah, yeah, right. Right.

 

00;33;53;02 – 00;34;19;17

Mike

So simple idea for you. The hundred and 60 day moving average. I’ve heard people in our industry, by the way, Jonathan, they swear up and down on the 200 day moving average or the 100 or the 50 or something else. And it really boggles my mind because in today’s world there are in my in my world, there are all these lovely programs that I have access to, right?

 

00;34;19;26 – 00;34;27;00

Mike

That I can plug in different moving average, you know, different time periods. And it tells you, here’s the optimal number.

 

00;34;27;19 – 00;34;28;04

Jonathan

This is it.

 

00;34;28;08 – 00;34;48;22

Mike

This is the number. This is what you should be looking at. And it keeps coming up 160 if you want, with 165, that would be acceptable as well. But 160, 165, that’s where you want to be. And in the markets, that’s kind of like, you know, what is a half a year, six months or something like that almost.

 

00;34;48;22 – 00;34;49;29

Jonathan

Yeah, close. Getting close.

 

00;34;49;29 – 00;34;53;25

Mike

Close enough because it’s well you don’t have weekends. It’s actually a little longer than that.

 

00;34;54;08 – 00;34;54;25

Jonathan

That’s a good point.

 

00;34;54;25 – 00;35;14;04

Mike

Yeah. But the point I’m just trying to get to is, is this should you do all your make all your investment decisions based upon that one little moving average? Of course you don’t know. That’s a dumb, right? Yeah, it’s not that’s not what I’m trying to share with you. I’m just trying to tell you, especially if you’re doing your own investing, right?

 

00;35;14;04 – 00;35;32;26

Mike

You’re doing your own investing. This is a great little indicator that you can use. Give yourself some guidance as to how aggressive you might want to be with your investing. If your if the market is above the moving average, you can be a little more aggressive. If it’s below the moving average, be a little less aggressive, be more conservative.

 

00;35;33;02 – 00;35;33;13

Mike

Right.

 

00;35;33;29 – 00;35;34;16

Jonathan

Make sense.

 

00;35;34;16 – 00;35;49;10

Mike

But here’s the bigger issue. How many financial advisors out there, Jonathan, are trained to say, now here’s what you should do. Ask somebody some questions about the risk, you know, their willingness to take risk.

 

00;35;49;10 – 00;35;49;19

Jonathan

Right.

 

00;35;50;14 – 00;35;54;03

Mike

Put them in a pretty pie shape. Right. Put them in a portfolio that’s.

 

00;35;54;03 – 00;35;54;25

Jonathan

Got to look pretty. Right?

 

00;35;54;25 – 00;36;00;24

Mike

It’s got to look pretty. A lot of colors. Put them in a pie shape, like put them in a portfolio and then tell them just by hold.

 

00;36;01;08 – 00;36;02;05

Jonathan

That’s it. To sit there.

 

00;36;02;05 – 00;36;03;25

Mike

How many advisors are trained to do that?

 

00;36;04;08 – 00;36;05;13

Jonathan

Very, very many.

 

00;36;05;13 – 00;36;06;28

Mike

Almost. Yeah, yeah. Fast.

 

00;36;06;29 – 00;36;08;04

Jonathan

Most, I would say.

 

00;36;08;07 – 00;36;14;29

Mike

Vast majority. Yeah. And why are they trained that way? Who does that benefit?

 

00;36;14;29 – 00;36;16;26

Jonathan

Yeah, the industry they work for.

 

00;36;16;26 – 00;36;41;28

Mike

It benefits the industry because think about it, if you are a financial advisor and you go to work for some big firm, you know, put a name on it that, you know, they’re going to train you how to, you know, they’re training, how to be an advisor. Mm hmm. And think about their biases as they’re training you. They want you to do something.

 

00;36;41;28 – 00;36;45;25

Mike

They want you to be a profitable advisor. For who?

 

00;36;46;21 – 00;36;49;14

Jonathan

For them. For them? Yeah. First and foremost.

 

00;36;49;15 – 00;37;10;06

Mike

You’ve got to be profitable for them. So they’re going to teach you. Here’s how you do things in such a way that we as a company make the biggest profit yet. And at the same time, this is going to hopefully help the clients to some degree. But more than anything, you’ve got to make money as far as they’re concerned.

 

00;37;10;17 – 00;37;37;15

Mike

Right. The whole focus is not how do we do things that provides the highest value to the client. That’s not the focus. The focus is how do we do things to provide the highest value to the name of the company on the door. Yeah, yeah, right. Unfortunately, it shouldn’t be that way, but that’s how it is. That’s just reality.

 

00;37;38;03 – 00;38;02;02

Mike

So one of the nice things that we have and we’re independent, firm. Yeah, right. We are. We’re compensated via fees. We just need to make money for our clients. We make money for the clients. Clients. When we win, clients lose. We lose, right? That’s how it works. Direct, actually, the way we manage money for clients, way we’re compensated, we are directly in in the same on the same side of the table.

 

00;38;02;02 – 00;38;02;23

Jonathan

We’re aligned.

 

00;38;02;24 – 00;38;17;11

Mike

We’re aligned. Thank you. It’s word I’m looking for. So because we’re aligned. Do clients ever wanna lose money? No, no, I don’t want them to not help me. No, help me.

 

00;38;17;11 – 00;38;18;12

Jonathan

At all. No benefit.

 

00;38;18;12 – 00;38;23;16

Mike

You know, no benefit. So I don’t want them to lose money. But I know that they’re not going to make money every single year.

 

00;38;23;21 – 00;38;24;10

Jonathan

So I guess.

 

00;38;24;14 – 00;38;45;03

Mike

That’s how investing works. So what do I want to do when times are good? I want to be able to help them make as much as possible. But when times are bad now we want to lose as little as possible. And the only way you do that is by recognizing and turning the dial of risk. You know, when markets are good, take a little more risk.

 

00;38;45;03 – 00;39;03;24

Mike

When markets are going poorly, reduce the risk and just be smart about it. You don’t have to be a genius. Just be smart about it right. Not that hard. All right. I got to wrap up because we’re running out of time. Yeah. Before we wrap today, if you’re sitting there, you’re saying, Mike, this stuff you’re talking about makes so much sense, but my advisor doesn’t do it.

 

00;39;04;09 – 00;39;24;25

Mike

Or maybe you don’t know how to do it for yourself. You want a little bit of help? Give us a call. We’ll put together a personal to retire. Right report for you. It’s absolutely free, right? Stan is an acronym. It stands for Risk Income Growth, Health Care and Taxes The Five Areas You Must Make Great Decisions On when it comes to your retirement planning.

 

00;39;25;12 – 00;39;46;00

Mike

If you saved at least 200,000 for retirement and you’re on the first ten callers right now, it’s your last chance we’ll put this together for you absolutely free of charge. And we will help show you. Here’s how you can manage money intelligently so you maximize your returns in good years, keep your risk to a minimum bad. So, Jonathan, as we wrap up the show, what’s our number?

 

00;39;46;08 – 00;40;08;28

Jonathan

Give us a call. 5128865850. Again, that’s 5128865850. It is after hours. So we’ll get our answering service will get your name number and set up a time to have a discussion and get you on your way to the retire right report. Again, the number 512886 5850.

 

00;40;09;17 – 00;40;35;24

Mike

This is truly a no brainer. You know, let’s get your planning right so that you can truly enjoy your best. That is yet to come. All right, folks. Hope you enjoy the show. We’ll talk to you again next week.

 

 

 

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