Episode Transcript
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Speaker 1 (00:01):
Good morning, and welcome to the Capitol District's Money and
Investment Program. You're listening to the Fagan financial Report on
Dennis Fagan. Sitting here with my son Aaron, as we
do every Sunday morning, even on this cold Sunday morning,
I was out.
Speaker 2 (00:11):
I was out, uh at around midnight now two am.
Meteor showers. Big Oh yeah, I didn't see anything.
Speaker 1 (00:18):
Really, drones, aliens, no drones, No drones. I think the
FBI is saying, don't worry, it's just people, right, I mean.
Speaker 3 (00:25):
I mean that's sketchy. I mean, okay, I guess. And
why would.
Speaker 1 (00:30):
Aliens have drones? Then that's what I would say. They
have something that would not be with something we're familiar with.
Speaker 4 (00:34):
I would think, you know, unless it's like people. I
don't know, I don't know who knows.
Speaker 2 (00:40):
What do you think it is?
Speaker 4 (00:41):
I don't know what it is? But I keep on
going down rabbit holes at night and Lauren. Lauren will
be looking over at me, maybe like eleven o'clock, and
I'm just going down these rabbit holes of space, but
also what it could possibly be.
Speaker 3 (00:52):
And you know, it's, uh, it's weird. You don't think
it's weird.
Speaker 2 (00:57):
I haven't really paid that close attention.
Speaker 4 (00:58):
It can almost be like a self filling prophecy, though,
like a couple people see, like, you know, maybe the
army testing out something. Now everyone sees a drone, right,
Like a meteor is a drone, a plane is a drone.
Speaker 3 (01:10):
A helicopter is a drone. So who knows.
Speaker 2 (01:13):
Yeah, I'm entertained that, Yeah you are. Yeah, I was.
Speaker 1 (01:19):
Yeah, I saw so Jupiter, so Uranus. I saw Mars
last night, March. It was so clear out last night.
Speaker 2 (01:26):
The moon was huge.
Speaker 1 (01:26):
You could see Mars like the red star over to
the from my perspective, over to the left of the moon.
Speaker 2 (01:31):
Probably from everyone's perspective.
Speaker 3 (01:33):
You're dipping your toe in astronomy, right.
Speaker 2 (01:36):
I don't even know if it's that much. It's that's scary. Yeah,
you know, the whole universe is scary.
Speaker 3 (01:42):
It's scary.
Speaker 1 (01:42):
I'm a snow globist in the snow globe, and then
somebody's kind of watching over us. They shake us up
every now and then. But anyways, we got a lot
to talk about that's pertaining to the real and now.
Speaker 2 (01:55):
No no drones, no snow globes.
Speaker 1 (01:58):
Right, you know, we're talking in flame and I think
for quite some time and the second half of broad
now that we've got a mail bag of we accumulated
some questions that we see from our clients, either verbally
or via email, and we will talk a little bit
about that rebounds in your portfolio, Tariff's talking about giving
money to kids, that that type of thing, especially at
the end of year.
Speaker 2 (02:17):
Bonds, how do they work?
Speaker 1 (02:18):
And we'll talk about bonds in the first half on
a more current basis, though, But I think as we
sit here, yeah, I think the two big news items
for the week, you know, A was the NASDA crossing
over twenty thousand and then coming back down off of
that to close at nineteen nine twenty six, so just barely.
The NAASAC was the only index that was up for
the week. The Dow down one point eight two percent,
(02:41):
Russell two thousand, which, you know, people have been claiming
that small caps are going to lead the way they're
the second and third thousand largest American stocks. I don't
think that they are. I think the mid caps will
be winners at some point next year.
Speaker 4 (02:54):
So you're not, So what do you mean by that?
Did you just say they're not leading the way, or
they're not gonna lead the way.
Speaker 2 (02:59):
Both.
Speaker 3 (03:00):
You don't think they're going to lead the way, not.
Speaker 1 (03:01):
Small caps, not small caps, I think might not because
I think I think there's too there's too many of
those companies aren't making any money.
Speaker 3 (03:12):
I agree with that.
Speaker 4 (03:13):
You know, I think that we keep on waiting for
small and mid caps to you know, have their moment
in the sun, like we do with international once in
a while.
Speaker 3 (03:23):
But you know, and I think.
Speaker 4 (03:25):
A lot of people, a lot of times people just
equate it to an interest rate environment. Interest rates are
going to go down. It's going to be better for
small and mid cap. But I think I think sometimes
we forget the power and the resources that larger cap
companies have to continue to increase their margins and not
needing a low interest rate environment to succeed. I think
we saw that although you know, larger companies didn't do
(03:46):
great during twenty twenty two, they still grew their revenue.
They still increase their margins from then until now so and.
Speaker 1 (03:55):
And and more and in a better, more conducive environment
on a regulatory basis for mergers and acquisitions. You know,
where are the larger companies gonna go They're not gonna
skip over the midcaps and go to small because they're
not gonna get they're not going to get the bump
from that really from revenue or income standpoint. I think
they'll go from from from the large megacaps to to
(04:16):
to to large caps in the mid caps, and I
think that's where the real values are. That you know,
a lot of the mid caps are financials, a lot
of mid caps are industrial. So I think you'll get
a and a lot of the midcaps are profitable. You know,
you're talking about when I took midcaps, I talk the
S and P five hundred x the largest one hundred,
so the S and P you know, one hundred through
five hundred and that that's where that's where I would
(04:37):
look at. But you know, so as you as you
look at and this is not one week is not
an indication. But yeah, so the Russell two thousand down
two point five eight percent, the utility average down three
percent this past week. The utility average is around seven
and a half percent away from its all time high.
And I think that's something that you have to keep
track of. And it's also think it's something that is
reflective of interest rates. And I think as we sit here,
(05:00):
you looked at the tenure was sitting at four nineteen
at the beginning of the month.
Speaker 2 (05:03):
Now it's four forty.
Speaker 1 (05:05):
So if you think of if you think of this
whole thing as like a the intermediate and longer term
bonds are really an indication of the current interst rate
environment plus inflation expectations. And what you see really is
if you look at the current interest rates environment, what
do we see in one year, Treasury went from four
thirty to four to twenty four from the beginning of
(05:26):
the month to close the business on Friday, so down,
so current interest rate environment. People are saying, okay, interest
rates are going to come down a little bit. The
six month went from four to forty three to four
thirty two, the three months from four to fifty one
to four to thirty four, lower again, the woman from
four to seventy five to four forty three.
Speaker 2 (05:42):
But then when you get out a little bit from
two years up every specific.
Speaker 1 (05:46):
Timeframe, the two, the three, the five that seven to
ten to twenty, and the thirty, interest rates have all
gone up since the beginning of the of the of
the month. On the two year, four to seventeen to
four to twenty five up eight basis points. Basis points
is one hundredth of a percent on the three or
four eleven to four to twenty one ten basis points,
on the five year four to eight to four to
twenty five seventeen basis points, on the seven year four
(06:09):
thirteen to four to thirty three twenty basis points, and
the ten yere four nineteen to four to forty twenty
one basis points, on the twenty or four forty six
to four sixty nine to twenty three basis points, and
on the thirty year four thirty six to four sixty
one twenty five basis points. So every timeframe from the
two year on interest rates of A going up and
B going up incrementally incrementally relative to the prior time
(06:33):
frame that I mentioned. So that tells me that there
is some concern over and again you know it's maybe
there won't be a concern to you know, Friday when
the PC is released as part of personally come and spending.
But you know, as I think what we've been saying,
there is comes somewhat sticky inflation.
Speaker 2 (06:52):
Yeah, you know, someone.
Speaker 4 (06:54):
Sticky sticky inflation as well as sticky inflation expectations not sticky,
but inflation expectations could lead to inflation hovering around three
percent for the foreseeable future, which I mean, you know,
let's say six months to a year. It's really going
to be hard to get inflation down so drastically when
(07:16):
the consumer is in good shape. Even shelter costs rows
point three percent during November four point seven percent year
over year after rising point four percent in October. And
you know, those are things that I don't like want
to use the word worries soon, because I think the
stock market and the economy can still do good in
an interest rate environment where the consumer is doing good.
Speaker 3 (07:39):
But I think you'll still see the.
Speaker 4 (07:42):
You know, price gouging in quotations from from businesses, landlords
and the like, as long as the consumer is doing well.
You know, It's kind of like the same thing about groceries.
You know, Trump said over the weekend or last we like, hey,
you know, I said, I said, you know, we can
bring grocery prices down, but now, like you know, it's
going to be really hard to bring grocery prices down.
I think it's good, just like I think housing and
(08:05):
groceries are the same.
Speaker 3 (08:06):
You're not going to see a decline in.
Speaker 4 (08:08):
Prices until companies are like, all right, we need to
we need to lower prices because unemployment has gone up
or or the consumer's not doing as well. So I
think all those things kind of lead to inflation sticking
around here for the time being.
Speaker 1 (08:25):
And I think if you think about what's going to
impact all right, so what will impact inflation? And I
think inflation is going to be steady in through here.
Let's say two and a half percent, and we'll get
into more of the details. But producer pricing next, which
is inflation at the wholesale level PPI is up three.
Speaker 2 (08:46):
Percent year over year.
Speaker 1 (08:48):
Now, if they don't pass that on to the consumer,
they then margin shrink a little bit, or they could
get cost efficiencies out of technology whatever. Okay, but generally speaking,
the overall numbers three percent. Retail and flation is measured
by the consumer pricing next is up two point seven
percent year over year. So let's say inflation still comes
down a little bit and is sitting at two and
a half, Well, then the ten years should be sitting
(09:09):
at around four and a half percent. It's sitting at
four forty because usually there's a two percent bump between
inflation and the nominal interest rate on the tenure so
or excuse me, corridor. So I think we're kind of
in through here. We're going to stay in through here.
Speaker 3 (09:25):
Now.
Speaker 1 (09:25):
If you say you'll and right now, I would say
the foreseeable future. What is unforeseen? Okay, it's unforeseen what
President Electrump does with the tariffs, but that will come
before the impact the offsetting impact potentially of the Department
of Government efficiency, the DOGE department DOGE Department of Government efficiency,
(09:46):
which will be which will come after that because of
all the work it will take to kind of wrench
out the government efficiency from that. So I think inflation
stays around here for twenty two twenty five, I think,
and I think the second half inflation could go up
a little bit, depending upon how President like Trump levies tariffs.
(10:08):
Does he use them.
Speaker 2 (10:08):
Really as as like as rhetoric.
Speaker 1 (10:11):
You know, Mom and I went to Quebec City, Quebec,
Quebec whatever on Wednesday. I took a couple of days
off and I watched the news, and you know, they're
concerned about it, and they're also thinking, Okay, what can
we do about it and not necessarily goes caving to
President Trump, but what can we do about it? And
they're also talking about immigration coming from the north down here. Yeah,
(10:32):
there are people who come into Canada then come to
the United States that illegally, but according to the Canadian government,
they're relatively relatively few to be dealt with, really in
the hundreds and tens rather than in the thousand. So
I think, you know, nobody knows how that's going to
play out.
Speaker 3 (10:48):
Yeah, even.
Speaker 4 (10:51):
Even with people you know, ordering things this year for
next year before Trump's gets into office, could level out
inflation here for a little bit. And then when when
when these companies that over ordered at the end of
this year is have to start ordering again next year?
You know what does that mean to inflation? Could you
see a spike up in inflation in the second half
of next year? So you know, again, you know, I
(11:12):
think we've been talking about this since Trump was elected. Uh,
the range of outcomes are just so much greater and
there's a lot more unknowns out there. So I think,
you know, it's a good time right now to you know,
to have a diversified portfolio and not not make any
large I don't know, haven't bets in anyone area. Yeah,
(11:33):
large bets in anyone area.
Speaker 2 (11:34):
Still, yeah, I would say stay diversified, so you have that.
Speaker 1 (11:37):
So that's that's something that I think, you know, kind
of came out of this week that I think bears watching.
And you know, you know we often say when we
sit here today, when we sit here in that today,
we'd said it today earlier though, not that we're that
worried about it. Yeah, we're worried about everything. That's kind
of your job to be worried about everything. It's like
a pilot. Your pilot's worried about everything because you know,
if he or she doesn't, then in the plane, something
(11:59):
happens to the plane, and then you gotta worry about everything.
So yeah, we're we're concerned that. That's that's that's a
potential issue. The second issue I think is like the
FED will meet this week.
Speaker 2 (12:11):
I know, I think what.
Speaker 1 (12:12):
I would call like a hawkish cut where the FED
says we're cutting because they can't not cut now because
they haven't prepped Wall Street for not cutting. You know,
they haven't come out, no one, none of the governors
have come out and said, hey, we might not cut,
we might not cut or be careful, you know, in
a in a implied fashion. So I think they're gonna
cut by a quarter, but don't be surprised if that's
(12:33):
the last one for a while. I think they're truly
going to be data dependent, truly going to be watching
President Trump's then President Trump's action or I think the
next FRED meeting is on or about the inauguration day,
which is like January twentieth or whatever, and so we'll see,
we'll see how that plays out. What and then the
NAS that crushing What do you think about the NAS
that crossing over twenty thousand for the first time Wednesday,
(12:55):
in conjunction with their the fact that the more stocks
have been down in the S and P five hundred
than up for ten consecutive days, the longest stretch of
consecutive days such since following September eleventh of oh one.
So breath b R A d th h has been bad.
So yeah, the nazeg moving up and the S and
(13:15):
P breadth being bad over the past two trading weeks,
do you make.
Speaker 2 (13:20):
Anything of that? What do you see?
Speaker 1 (13:22):
And you know, what do you see with the mag seven?
Is it stretching out any any kind of what comes
to your mind.
Speaker 3 (13:29):
Yeah, yes and no.
Speaker 4 (13:32):
On one hand, I think that it's again it pays
to be diversified here. On another, if you look at
you know, the mag seven companies in general, they're all
amazing companies. They're all extremely financially sound, so they all
have their foot in the door. And these emerging technologies,
whether it be cloud, whether it be cloud storage, whether
(13:53):
it be data centers, where, whether it be you know,
even chips they're just starting to make their own chips now,
advertising artificial intelligence. So it's I don't know, it's hard
to bet against these stocks until they give us a
reason other than overvaluate.
Speaker 3 (14:11):
What's the biggest risk to them overvaluation? Right now? What
do you think regulation?
Speaker 1 (14:16):
Maybe I think I was gonna say regulation, but I
was gonna go with the over But.
Speaker 4 (14:20):
Now you're seeing you know, open Ay, Meta, Amazon all
throwing a million bucks at Trump's inauguration kind of kissing
his pinky ring. Now it's like, okay, so we'll see
what happens there and.
Speaker 2 (14:32):
What comes of that. Really, you know what I mean,
what comes of that? Is there anything that comes of that?
You know?
Speaker 1 (14:39):
So yeah, so so so bad breadth, but I think
relatively fairly bad. Look, you know, excluding Tesla, I think
you know, Apple, Microsoft, you know the others.
Speaker 4 (14:51):
It's hard to see Tesla really doing that poorly with
Elon Musk kind of being the you know, kick JD.
Vans out the door and being his number one guy. Now,
so I think Tesla could still do well. You see
some let's say Trump does take away some of those
EV credits Tesla's Tesla already has that first mover advantage,
(15:12):
has already such a head start on all the competition
that I think it could just be ultimately good for Tesla,
maybe decrease their margins, but decrease other other EV maker
EV makers revenue even more than that. So I think
over evaluation is the is the mag is the mag
Seven's biggest threat here. But you know, they're all still
(15:35):
great companies, growing very well. So I think you just
kind of have to see your position in them, and
if you're extremely overweight, maybe it's time to trim We
trimmed some of them a couple of weeks ago. Fifteen
percent of people's holdings, So if someone had ten percent,
we brought it down by one and a half percent.
Speaker 1 (15:52):
To eat so and those are I think most of
those were for qualified accounts too, so the non qualified accounts,
especially with Trump being elected. You know, we see no
change in the capital gains tax rate for next year,
so trying to put it off in the next year.
Although I will say that fifteen percent rate on long
term gains goes up to five hundred thousand dollars or
so when it adjusted gross income, So you got a
(16:12):
wide swath of fifteen percent that you know, you know
we'll be using some next year.
Speaker 4 (16:17):
Yeah, and you know, I think I think we've been
talking about it a lot, and I've been talking about
it's just been like a theme in my head. And
you know, you never like to lose a client ever.
But if you lose a client for de risking someone's
portfolio after these fifteen years, who's seventy years old because
they didn't have S and P returns because they didn't
have enough mag seven, I'm okay with that. I think
the risk reward here isn't there as as it was
(16:41):
five ten years ago. I think now is the time
to be diverse. I think a lot of great companies
can use artificial intelligence, and sectors like industrials like energy,
every single sector and use that to their advantage. So,
you know, I do think it is a time to
maybe de risk your portfolio a little bit. If you
are sixty five seventy seventy five years old and you
(17:02):
are on a fixed income and need distributions from your portfolio,
I think sometimes now is a good time to say,
you know, it's been a really good ride. It can
still be you know, market weight or a little bit
underweight in these securities, but we still own them. But
thank you stock market for getting me to where I
needed to go.
Speaker 1 (17:20):
Plus a ten year note get you from sixty five
years old to seventy five years old, which is two
thirds of your active retirement life. If you think of
retirement as and we've talked about it all the time
here in the fig and Financial Report, active versus passive retirement,
passive retirement kicking it around seventy eight seventy nine, think
about you know, and your friends and just our parents,
(17:41):
your grandparents, my parents and in laws. I mean to
have both parties make it till seventy eight or seventy nine,
you know, is not that common, you know, so I
think you and then after that period, and even if
the one is healthy. What I have found I've been
in this business since nineteen eighty three is a surviving
(18:02):
spouse has much less uh. And I'm like going to
say then, and this is just anecdotal, but options to
do things that he or she wants to do because
they've lost their traveling companion or their dinner companion or yes,
or that you know.
Speaker 2 (18:17):
So if I die, take care of mom? Will you
take with us? Take her on trips? Yes?
Speaker 1 (18:22):
So anyways, so that so that's that's that, you know,
the other couple of the things that Baird Baird was
And to get your two cents on two things. One is,
you know, on the cover of Barons Outlook twenty twenty five,
White Equities could have another big year, but also President
Trump ringing the bell at the New York Stock Exchange.
(18:44):
So I'm thinking about two things, you know, offset what
I just said about Barons and President Trump with the
whole Sports Illustrated theory that the person on the cover
of Sports Illustrated ends up having a crummy year a
crummy uh uh, you know, whatever time frame going forward.
It's like the kiss of death to be on the
cover of Sports Illustrated.
Speaker 2 (19:05):
Sometimes so the Maden.
Speaker 4 (19:06):
That's the thing. That's the thing, the Madden usually Madden.
It's like a Madden curse if you're on the cover
of Madden.
Speaker 2 (19:12):
Right.
Speaker 1 (19:12):
So, so we'll see, right, So, I don't see.
Speaker 2 (19:17):
I don't see equities having another big year. I don't.
Speaker 1 (19:20):
We don't see a lot of downside risk, especially in
the first half of the year. But as those as
those tariffs kick in, we'll we'll see what goes on.
Speaker 4 (19:28):
I know, it's kind of our job to talk about
the market. You know, it's the fake and financial port
and you know, but you know, you could see a
melt up at the beginning of next year.
Speaker 3 (19:36):
You could see a melt up towards the end of
the you know, and this year in weeks.
Speaker 4 (19:39):
But yeah, but we're good, We're I think we're good
where we are.
Speaker 1 (19:45):
I think, you know, we'll be rebalancing over the next
three to four weeks as at the end of the year,
you know, s and p you know, twenty five twenty
six percent this year. I think it just pays and
makes sense to rebounds as we get into next year.
One of the things too, though, and I know we
got in a few minutes left and I don't know
if there's if there's anything you want to touch on
prior to me touching on something.
Speaker 3 (20:03):
No, nothing.
Speaker 2 (20:05):
Article in New York Times. No, what is this? I
don't think it's the New York Times.
Speaker 1 (20:09):
Well, I'm gonna say it's an Yeah, Wall Street Journal
by Catherine Hamilton. Young men are making risky bets on
crypto and politics and raking it in right now, Eco parts, bitcoin,
golden game stop and draftking stocks, you know, up something
like sixty percent, whereas sixty percent stocks and forty percent
(20:31):
bonds of fifteen or twenty percent. Is that something to
be concerned about? Some forty two percent of men ages
eighteen and nineteen invested in the use crypto versus seventeen
percent of women, eleven percent of men ages twenty five
to thirty four both gold and civil silver, compared to
six point five percent of the US population.
Speaker 2 (20:51):
You know, And I'm hitting you with this out of
the blue.
Speaker 4 (20:55):
But what I mean in up years, people that take
on risk can do really well. I mean, I don't know,
I don't think this is surprising. What the Triple q's
is up thirty percent this year. Yeah, people that are
taking more risk, are are are doing better in the market.
I don't think that's uh, I don't know. I mean,
you saw a lot of it. You saw a lot
of this in two thousand and one as well. But
(21:18):
I don't know what's the point of the article though,
well the is uh is that going? Is that a
sign the point of the article? I don't know what
the point of the articles I've read. I read pieces
of it. Uh.
Speaker 2 (21:33):
Is it a sign of really a bubble? You know?
Is it a sign of a huge change?
Speaker 1 (21:40):
And you know, is it a sign that they're gonna
get their their hats handed to them over time?
Speaker 3 (21:47):
I don't know.
Speaker 2 (21:49):
Is it? Is it gambling?
Speaker 4 (21:51):
Yeah, it's a form of gambling, you know. I think
you could equate any type of investing to gambling at
some point, sports gambling, let's say. But I think that
is even any type of investing to gambling.
Speaker 2 (22:04):
That's not you don't have an.
Speaker 4 (22:05):
Approach, if you don't have a philosophy, if you don't
have a strategy. You know, I guess good sports gamblers
have actual strategies, you know. I think if you're just
you know, throwing darts at a dartboard and hoping for
the best.
Speaker 3 (22:18):
Yeah, that's not really a strategy.
Speaker 4 (22:20):
You don't have an exit plan, you don't have an entrance,
but you you don't have you know, a reason to
invest in things. But I think that's going to be
you know that that whole gamification of the stock market.
You know you can get on a Schwab app or
a Robin Hood app or you know you have Wall
Street bets that has millions of followers on Reddit. You know,
I don't think this is ever going to end. I
think it's kind of like the ever the evolution of
(22:44):
of you know, the stock market kind of.
Speaker 1 (22:47):
But I know the last time that this happened, it's
spelled doom for that type of investing. And I can't
help but think that, you know, this article is a
contrarian indicator.
Speaker 3 (22:58):
Yeah, I agree with that.
Speaker 1 (22:59):
I think, well, you know, yeah, so I think where
where do you look? Where do you look for opportunity here?
Then in the in the next one, we'll give you
thirty seconds, where do you look for opportunity here?
Speaker 2 (23:09):
Would you say?
Speaker 3 (23:10):
Diversification?
Speaker 4 (23:11):
You know, I think the more unknowns that there are
out there, the more diverse you should be. Like any
so I think right now is you know you have
a diverse portfolio. I don't think you you know, go
all the value, all the growth, all the all the
makeap all the AI. I think it right now, it
pays to be diverse. I think you kind of have
to have your you know, hand in a little bit
of everything right.
Speaker 2 (23:31):
Now, and that sets you up for disappointment.
Speaker 3 (23:33):
Yeah, but you.
Speaker 4 (23:34):
Know, I'd be happy if the market was up ten
percent next year and my account was up six, right
because there's so many.
Speaker 3 (23:41):
Unknowns right now.
Speaker 4 (23:42):
I agree, you know, I think right now it pays
to be diverse, you know, especially in your retirement accounts.
You know, I don't think you should ever gamble or
anything like that with money you need fifty I agree.
Speaker 1 (23:52):
It's ten thirty on the station depend upon for news,
weather and information, News Talk A ten and one o
three one w g Y. Good morning, and welcome back
to the second half hour of the Capital District's Money
and Investment program. You're listening to the Fagan Financial Reportum
Dennis Fagan sitting here with my son Aaron, as we
do every Sunday right here in new Talk ten and
one oh three to one w g Y. Talking in
(24:13):
the first half hour about the consumer Price Index. The
producer price index the market add are near record highs.
Going to broaden that out a little bit. We got
some questions that we've kind of accumulated over the past
two or three weeks from our clients, and we thought
it would be a good idea to uh, as we're
getting towards the end of the year, as these are
kind of kind of broad questions, portfolio management questions, gifting questions, Uh,
(24:34):
you know what percentage of my couch you I have inequities,
that type of thing. We thought, you know, it would
be a good thing for the listener as they drive
along out to drinking their coffee, out holiday shopping, or
going to going to church or whatever, mask synagogue to
address right there, right, all right, you want to take
one of these? Do you want me to start off with?
Speaker 3 (24:56):
You can start off.
Speaker 1 (24:57):
I will start off. Okay, I will start off. We've
got a let I have been questions.
Speaker 4 (25:00):
You know, they're kind of compiled from emails, questions we've
had from clients, telephone calls, telephone calls, questions, and appointments. So,
you know, I think it's a good list of It
says ten questions, but I see eleven here.
Speaker 2 (25:12):
Eleven. Yeah, So it's a bonus one, the bonus one.
So andy, so let's start off.
Speaker 1 (25:17):
I'm not going to start off with number one, but yeah,
why don't we start with how often should I rebalance
my portfolio?
Speaker 2 (25:24):
And I think the question.
Speaker 1 (25:25):
That that that the optimal word there, the keyword there
is often, and it shouldn't be on a calendar basis.
Speaker 2 (25:33):
It shouldn't be on You.
Speaker 1 (25:35):
Should set yourself up on a regular basis to look
at your portfolio to see if it needs rebalancing. And
usually we do that at the end well not usually
we do that at the end of every quarter. We'll
look at portfolios to see if they need rebalancing. That said,
you know, I offer the quarter quarterly and of every
quarter on a rebalancing basis comes up on Wealth Box.
Speaker 4 (25:56):
Yeah, and we have, I guess, different rules and regulations
that you know, we have to follow as financial advisors.
You know, we have people in different portfolios. And let's
say you're a growth and income portfolio. It's a you know,
seventy five to one hundred percent in the seventy fifty
I'm sorry, fifty to seventy five percent the market. So
you know, we go through them quarterly to rebounds to
put people back into asset allocation. I'm correct, asset allocation.
(26:18):
You know, when the stocks do better, they maybe drift
to seventy seven, seventy eight, seventy nine percent. So you know,
in our system we have it quarterly to look at
all accounts that are out of balance. But you know,
when I look at this that question, I think of
it more from like a four to one K standpoint
in what respect, Like you know, if I had a
four to one K, how often you know if a
(26:39):
client has a four to one K that we don't manage,
but we do help them with, you know, how often
like that this question? When I read it, I thought
more of that, like how often you know when a
when a client asked me how often should I rebounce
my portfolio?
Speaker 3 (26:52):
Would say yearly? What do you think?
Speaker 2 (26:56):
Yeah?
Speaker 1 (26:56):
Yeah, so you know I think that Yes, I mean,
I think you should set yourself up on a regular
basis to manage your port to rebalance your portfolio least
often on an annual basis. But if you were to
take a look at let's give you an example. If
you start out with seventy thirty that you want in
(27:17):
the stock market, you have one hundred thousand dollars, or
that means you have seventy thousand dollars in the stock
market and thirty thousand dollars let's cause call it in bonds. Well,
after a year like this, you know that seventy thousand,
if the market's up twenty five percent, that is seventeen thousand,
five hundred dollars, So that's worth eighty seven thousand, five
hundred dollars. Your thirty thousand might be worth thirty one five.
(27:39):
Let's say bonds are up five percent, So your total
portfolio value is going from one hundred thousand to about
one hundred and nineteen thousand, of which that eighty seven thousand,
five hundred. Don't have a calculated right in front of me,
but eighty seven to five Divide it by nineteen thousand
is eighty seven five let me see, eighty seven five
(27:59):
divis it by one nineteen is seventy three percent of
your portfolio, So you're really haven't that's that's like what
you would call like an acid allocation drift, but it's not.
Speaker 2 (28:10):
It's not that much.
Speaker 1 (28:11):
But indeed you should ratchet it back to uh to
it's its original balance, original, your your original intent. Now
that said, so annual, annual, even with the market that
went up like this, Uh, you know you still there's
still a lot, a lot of you haven't drifted away
(28:33):
a lot. I don't don't know if that's that's right.
Let me actually look at my calendar. So seven eighty
seven point five, divide it by one nineteen. It's seventy
three point five percent. So you started out at seventy percent.
Now you're at seventy three point five percent. So you
could rebalance back. So I would say annually at the
(28:53):
least often quarterly. We have it pegged in our system
to look at things quarterly. But then and I often say,
it's like water in your garden. But then, should there
be a volatile market, let's say like the pandemic when
the SMP was down thirty three percent in a month,
then you kind of look at it between the quarter.
You also have to think about if you have individual securities,
(29:18):
how do you rebalance those? If indeed that's an issue.
You know, if you have a stock that jumps on
good earnings or plunges on bad earnings, if you still
like it, you might might want to nibble at it
if it rises on good earnings. So so from a
portfolio basis, uh, and I think.
Speaker 2 (29:35):
You're you're proven right there.
Speaker 1 (29:36):
Actually, on an annual basis, I think that's what's optimal
for the retail investor.
Speaker 2 (29:42):
We just take a look at it a little.
Speaker 3 (29:43):
More broad based ETFs.
Speaker 4 (29:45):
If you had you know, if you have a four
to one K or four three B at you know
at your job, Yeah, you know, you only have X
amount of choices, right, So but if you have individual stocks,
let's say a palent here or something that just or
an Nvidia that just kind of went parabolic, I think
that you know, it was a case by case scenario.
Speaker 3 (30:03):
So let's say you.
Speaker 4 (30:04):
Buy you know, three percent of your portfolio and Palanteer
at the beginning of the year, and now it's probably
ten percent, right over ten percent, So you know, I
think it's always prudent to pair that back. You know,
you could, you know, cut your holding in half and
still you know, double your profit and still have twice
as many, twice as many shares as you know, from
a from a from a cash standpoint as you had
(30:25):
when you bought the stock. So I think, you know,
we look at that on a stock by stock situation,
but you know. Yeah, if you have your four one K,
I would say yearly you should look at it, you know,
and decide, you know, if it's prudent to rebalance. But
at the same time, you know, it's hard because I
got you know, a on a financial life landscape, one
(30:48):
year isn't a long time, you know. But if you're
if you're transitioning, like okay, now your kids are out
of college, or now this or I'm gonna you know,
there's just different phases that, you know. I think although
you should, you should look at your portfolio, you know,
at least you know quarterly, right, you know, But I
don't think rebalancing is something.
Speaker 3 (31:06):
You need to do. I think personally on a yearly basis.
Speaker 1 (31:09):
Would you agree with this, there's more danger looking at
your portfolio too often, yeah, than not often enough.
Speaker 2 (31:15):
Yeah.
Speaker 3 (31:15):
And I think that's you know, I think that's the.
Speaker 4 (31:20):
Hey, you know, big question people that look at their
We always say that if you look at your portfolio
every day, fifty three percent of the days it's the
market's up, so half the time, essentially you're gonna it's
gonna be down.
Speaker 3 (31:30):
You're gonna want you to do something, you know, the
wrong thing.
Speaker 4 (31:33):
But at the same time, it's like, you know, seventy
five percent of people I think Fidelity said that when
they open an account like a four to one K,
they never change their asset allocations. Like, on one hand,
you don't want to look at it too much because
you don't want to do the wrong thing. On the
other hand, you don't want to, you know, look at
it too little. And let's say, like, you know, it was,
you know, February or April of twenty twenty and we're
(31:56):
in the middle of COVID. You're like, you know what,
I'm going to start this new job and I'm gonna
put it all in cash or twenty twenty two when
the market's down, you know. So what you don't want
to do is, you know, do the wrong thing at
the wrong time, try to time them up. You know.
Speaker 1 (32:09):
In fact that Fidelity you mentioned that, and the I
guess the gist of the story is more important than
the details of this story they're about to tell. But
they in some manner they determined which account holders were deceased,
and I think they might have, you know, not used
(32:31):
the word deceased. Maybe they hadn't touched their account for
five years.
Speaker 2 (32:36):
Something like that.
Speaker 1 (32:36):
Well, but they determined And the gist of the story
is people who were dead had better returns than people
who were alive managing their portfolio because they didn't really
mess with it.
Speaker 2 (32:46):
Yeah, I think we even.
Speaker 1 (32:47):
See that here with with our clients, is that you know,
if our clients let us do our things, generally speaking,
it works out better than if they're meddling all the time.
Because even though we're getting go ahead them.
Speaker 4 (32:58):
Saying you know, I was just gonna say, you know
that you don't see like co CEOs and co managers,
right because it's just a level of friction that's unneeded,
you know. That said, it's nice to have like a
team of investment professionals that all give their you know,
two cents on different investments because I do believe, you know,
we kind of have different investing philosophies, right, So I
(33:19):
think that people I think it's nice to have a
team to have invested different investment philosophies because it.
Speaker 3 (33:25):
Does build a diverse portfolio.
Speaker 4 (33:27):
But you know, if you have someone calling you, you know,
you do see it sometimes, you know, you see the
phone ring a lot of times. If I see a
specific name, I know exactly the stock they're going to
talk about because it was just on Cnbcity, right.
Speaker 1 (33:39):
But on the other hand, though, I will say that,
you know, I think that there are just like I
often say, there's there's people who pilot planes in our
professional pilots, there's people who you know, work on their
own car that are that are don't do with mechanics
for a living. And I think the same thing is
I think that the smarter and smarter that investors get.
I will that I do believe that a lot of
(34:02):
our clients add value to the overall management of the
account by by having a relationship where they kind of
they know what's going on. You want your client to
know what's going on and have and have be familiar
with the market because then they know the risk involved
in the potential award. They have an understanding of why
(34:22):
we might make changes to a portfolio and periodically, which
is great. We'll get calls of for somebody who who
has a question as to hey, or a suggestion I
saw this come out or that come out, and those
are really invaluable that input from our clients. But you're
right on the flip side, we are right now we're
getting a lot of questions about cryptocurrency, and it's going
(34:44):
from ten thousand to one hundred thousand.
Speaker 2 (34:46):
And I saw an add on or not.
Speaker 1 (34:48):
An add interview on CNBC the other day someone I'd
recommend one or two percent. And for a chunk of
our clients, we have one or two percent of their
account in crypto. We probably have, you know, overall of
our entire portfolio, probably zero point five percent in crypto.
But the average drawdown every year on that is about
seventy percent. So crypto could go from a bitcoin could
(35:09):
go from you know, ninety eight or ninety nine thousand
where it is now down to you know, thirty forty
fifty thousand and still be quote unquoted in an uptrend.
So circling back, we bounce your portfolio if your retail
at least once a year, more frequently if you're more
active in your portfolio or on an as you need
basis kind of like water in your garden. You look
at it and if you think it needs it water,
(35:29):
don't be too active in it. And you know, like
I said, I will say that again that you know
that input from our clients, you know, helps out a lot.
And we send out quarterly reports to them, so the
sill they know what's going on and they get detailed
accounts from Schwab as well. Let's move on to number two.
And here we are twelve minutes in and we've just
gone to number two. We're a different number er. What
(35:50):
do you think anything in there that strikes your fans
can tear us work?
Speaker 2 (35:54):
You wrote, I didn't think you'd hit that one.
Speaker 1 (35:57):
What I didn't think you would hit that one just
because of the you know, just because it's it's could
be a lightning rod.
Speaker 2 (36:03):
You I mean to answer that. Do you want to
touch on that?
Speaker 4 (36:05):
You know, I think we can both touch on We'll
touch on it first. I think they can work. I
think it's possible for them to work. I don't, but
I also don't think what President Trump or President elect Trump,
you know kind of campaign down will completely come to fruition.
Speaker 3 (36:24):
So do I.
Speaker 4 (36:25):
I do think that smaller tariffs on countries can work.
You know, blanket tariffs I don't think are great. I mean,
we saw what happened in nineteen thirty when President Hoover
signed into UH into law, you know, blanket tariffs on
you know, all countries. So you know, I don't think
that can work, but I do think strategic tariffs can work.
(36:49):
That said, you know, when during Trump's last presidency, when
he did raise tariffs on steel and the like, you
never you did not see a rise in production in
domestic exteel. I don't know why, but that did not work.
So I think they can work. But I hope and
I think that Trump will use them more as a
(37:10):
bargaining chip than actual Uh, you know, a lot of tariffs,
I guess on on many different countries. I think they
can work in that I don't think he will have
blanket tariffs on all countries.
Speaker 1 (37:30):
And he was saying the other day he you know,
I think he uses tariffs. He will use tariffs as
a leveraged in other areas, you know, perhaps foreign policy.
Uh you know, he he had mentioned, you know, wars
or I think maybe he didn't mention it. Maybe so
somewhere else that you know, you want to leverage the
economics of the United States for other areas other.
Speaker 2 (37:52):
Than just economics, you know.
Speaker 1 (37:53):
I will say, though, I think you know, when we've
said it off en, you know, President elect Trump, there's
a wider race of potential outcomes with a traditional politician. Uh,
those that, you know, those that voted for President Trump
think that that range is skewed to the upside. Those
that didn't think it's skewed to the downside. You know,
we do think that there's a wider potential range of outcomes,
(38:15):
like I just said, and we'll see how that works,
because I do think that that you never know how
things end up. I liken it to a bar fight,
you know, where the first punch is thrown and then
all hell breaks loose and how'd you end up out
on the street. And though I have never been in
a bar fight, or you look at that that where
(38:35):
you dropped the wall was a TV show where someone
dropped the ball down and it went down, hit barriers
over and over again, it got to the bottom, and
you never know how it turns out. So President Trumps
has a lot of experience in this, so you certainly
give him the benefit of the doubt and we'll just
see how that plays out. See, the tariffs can work
Aron just mentioned, and I agree limited tariffs and tariffs
(38:57):
with a dual or multiple purposes.
Speaker 2 (39:02):
We'll we'll see how it plays out.
Speaker 1 (39:04):
But that you know, things can work out and still
have have bumps along the road. And that's that's the
other as we as as we look into next year
for our clients and we manage money for our clients,
as you know, eight hundred million dollars, we have to
decide what are the potential events in next year that
(39:25):
could derail the market. Certainly there's valuation, there's earnings, their economy,
but one of them is the tariffs are going to
work out, but not till twenty twenty six and a
half for twenty.
Speaker 2 (39:35):
Seven, you know, and mean, what does that mean? Exactly?
Speaker 1 (39:40):
So those are the things that you know that that
we have to think about and that might come up
along the way. And then and look, I mean, if
you if you voted for President Trump, your price and oh,
of course they're gonna work. If you voted for President Biden,
you say, of course they're not gonna work. You know,
we're saying, certainly they could work. And it's our job,
whether we voted for President Trump or not, to consider
(40:00):
the fact that they might not work, just like we
do with any president. President Biden included that, hey, what
if this doesn't work, what happens to our clients?
Speaker 2 (40:09):
Anyways? Third, one hour, as we moved through this exciting
half hour of the Fagan Financial.
Speaker 4 (40:15):
What is an appropriate measure for my performance?
Speaker 2 (40:19):
We talk about that.
Speaker 3 (40:19):
All that is your probably you know, decade long battles battle.
Speaker 2 (40:26):
It's like my nemesis.
Speaker 4 (40:29):
With yourself, I personally, you know, And I've won all
those by the way, you know.
Speaker 2 (40:35):
But I've lost them too.
Speaker 4 (40:36):
I've lost, you know, and you've changed your mind.
Speaker 2 (40:39):
Those battles with myself, I win and I lose all
the time.
Speaker 4 (40:42):
And you know, this is what I kind of come
to the conclusion. I think the Vanguard Total Stock Market
Index is the best thing for people in retirement to
compare their stock portfolio against the stock portion of their
stock portfolio, of their stock portion of them. So that
would be VT Vanguard Total stock Market Index, and that
(41:03):
would include oh, I don't have it up in front
of me, the allocation because I can't sign into my
y charts right now.
Speaker 3 (41:10):
But it's it's more diverse.
Speaker 4 (41:14):
So the VT, uh looking at portfolio composition, I can't
see right now, are you and y charts?
Speaker 2 (41:21):
No?
Speaker 3 (41:22):
Okay, so you know.
Speaker 4 (41:24):
It's uh, it includes you know, ten percent emerging markets,
fourteen percent Europe, ten percent Pacific, and sixty six percent
North America.
Speaker 1 (41:33):
I think it's not the vanguard. Total stock market indexes
total world world.
Speaker 4 (41:37):
Right, yeah, right, So I think that is the best measure, yeah,
index to compare yourself against, because it's the most diverse
and you want diversity and retirement. As we always say
that the SNP is thirty five percent, three percent tech,
almost ten percent consumer services, which is you know, meta,
(41:58):
Netflix and the likes. So you know, I think in
retirement you want to you know, be more diverse. So
I think the Total Market Index is the best thing
to comparison.
Speaker 2 (42:06):
Of nineteen percent year today.
Speaker 4 (42:08):
I saw that, Yeah, yeah, nineteen which is up nineteen
percent year today. You know what I do think is
interesting in you know, is that sense since twenty nineteen,
the SMP Since twenty fifteen, the s and P is
(42:29):
up two hundred and forty one percent. In billion hares
are up one hundred and twenty one percent or half.
And I don't like to in this might sound kind
of like a ridiculous comparison, but you know, when you're
in retirement.
Speaker 2 (42:44):
I thought it was a good analogy.
Speaker 4 (42:48):
But you know, people in retirement are more, in my opinion,
are more inclined to invest, like a billionaire, or a
hedge fund or a pension fund. You know, Ray Dalyo
is famous for Bridgewater Capital. Our Bridgewater brought Bridgewater Bridgewaters
returns astronomical, no, but on a risk adjusted basis, they're phenomenal.
(43:09):
So when you're investing for a pension that needs seven
percent per year, it's much different than investing for someone
that you know is thirty years old in the accumulation
stages of their life. So when you're in retirement, like
you know, you know, you should invest more like a
billionaire who is more inclined to preserve that wealth as
(43:31):
opposed to accumulate more wealth. That's kind of how and
that's why I think the Total World Index is a
better thing to compare yourself against, because you know, when
you're in retirement. I think most of our listeners probably
are in retirement or nearing retirement. You know, it's about
getting to retirement or maintaining retirement as it is about Oh,
you know, the S and P's up thirty percent this year.
(43:52):
I should be up thirty percent this year. You know,
you should be within range of the S and P.
But I don't think that it's a great compare because
you know, I don't think you want that volatility of having,
you know, such a tech heavy portfolio.
Speaker 1 (44:05):
So so my two cents there would be you said
a couple words, what is risk adjusted? So if you're retired,
you know you have to look at your risk adjusted
returns when you're comparing your portfolio. You should only you know,
if if let's say we use the VT the Vanguard
World stock Market Index as a comparison, only the stock
side of your portfolio should be compared to that, because
(44:25):
you might have thirty forty percent of your account out
of the stock market. That portion that's in out of
the stock market, the Bloomberg US stock or us A
bond market index is a good measure there. The last
thing I'll say on that is when I'm sixty three,
I meet with we meet with people you know, usually
fifty and up. At some point in time, your wealth
(44:47):
accumulation phase is over. You know, you talk about billionaires
and what do they have in common with the retiree. Generally,
generally speaking, the wealth accumulation phases over.
Speaker 2 (44:57):
That's why you're retired. You got to move to spending.
Speaker 1 (45:00):
I know a lot of people have difficulty with you've
saved all your life and now you know, someone like
myself or Aaron's asking you to spend.
Speaker 2 (45:06):
Yeah, you have to spend.
Speaker 1 (45:07):
You want to continue to maintain your standarding and do
the things that you've worked your whole life to do.
You know that said, it's hard to stop chasing that,
you know, chasing that wealth. It's hard to get off
that horse because now right now people have fomo on it.
You know, if they if they de risked a little bit,
now they have fomo.
Speaker 4 (45:25):
You know, even like you know, it's a it's winter time,
people are inside, you're retired. You probably have maybe CNBC
or the news on more. And you know, your portfolio
which was once okay, you know, I'm working forty hours
a week dollar cost average into my four oh one
k uh.
Speaker 3 (45:41):
Then you know, you roll it into an ira.
Speaker 4 (45:42):
You have your own choices, you're watching the news all day,
and your portfolio becomes your hobby. And we've seen that
happen quite often, and sometimes that happens to you. It
can be a great thing, or it can be a
bad thing. You know, or it could be you know
and neither. It could be it could just be a hobby.
But what you what you don't want to do is
you know, you know, get too involved, over confident, get
(46:05):
fomo and do the wrong thing at the wrong time.
Speaker 1 (46:07):
Well, I met with somebody the other day and I
made that example of you know, the aulat the wealth
accumulation phase of our lives. He's about my age is over,
and I said, the Rea, the way that it's not
over is if this is what you enjoy to do,
enjoy doing. And he has a good he and his
wife have a good chunk of money with us, and
(46:29):
he manages some money on his own. And he was saying,
I do enjoy it, and that's great. It's like gardening
or anything else. It's a it's you know, it is
more important than guardening because it's your life. And we
often say that the you know, the kind of the
four legs to your stool are you know, your health,
your family, your spiritual nature, and basically your your finances.
(46:50):
So it's one of those four important things. But if
you've enjoyed doing your whole life and you're proficient at it,
you know, have at it.
Speaker 2 (46:57):
But suffice it to say that.
Speaker 1 (46:59):
That's more of a you should be doing it more
for uh, that type of you know, like like anything
else like reading or whatever, rather than hey, I want
to accumulate wealth because you know you want to, you
also want to make sure that the wealth that you've accumulate,
you if you pass through that door to financial independence,
you just don't want to go back out the other side.
Speaker 4 (47:20):
Yeah, you know, and the risk is just way too high.
Speaker 3 (47:23):
You know, do you want to have to go back
to work?
Speaker 2 (47:26):
Sure?
Speaker 3 (47:26):
You know that. It's just uh, you only get you know,
one life.
Speaker 1 (47:29):
And so we got we got three of the eleven done,
you know, so we'll we'll probably you know, if we
get some more questions, we'll add them and maybe you know.
Speaker 4 (47:36):
The last thing, Yeah, can I gift money to my children?
Speaker 3 (47:39):
If so? How much? This year?
Speaker 4 (47:40):
You can gift up to eighteen thousand dollars to your
kids or anybody without having to file that gift as
a gift ext return. So that's always important. It's about
thirteen million dollars per individual now thirteen point something. But
you know, yearly, if you if you go up to eighteen,
you are you're in good scheap.
Speaker 1 (47:58):
Yeah, and if you find if you let's say you
give a little more, you basically just draw down that
thirteen and a half million dollars.
Speaker 2 (48:04):
You have to file gift tax return. I's think it's
nine oh something, maybe nine oh five. I think maybe
I'm not I'm not an accountant. So but that you
have to file a gift tax return.
Speaker 1 (48:14):
But you can give eighteen thousand, So you could you
could give eighteen thousand the listener, the gift listeners spouse
or parder could give eighteen thousand. Anyone person, So anyone person,
you know, Uh, you can give eighteen thousand. Right, that'll
just about do it. Thanks for listening to the show.
Give us a call during the week five one, eight, two, seven, nine,
ten forty four. Uh, check us out on the web
(48:34):
at Faganasset dot com, Like us on Facebook, and uh,
you know, have a great day.
Speaker 2 (48:40):
Take care
Good morning, and welcome to the Capitol District's Money and
Investment Program. You're listening to the Fagan financial Report on
Dennis Fagan. Sitting here with my son Aaron, as we
do every Sunday morning, even on this cold Sunday morning,
I was out.
Speaker 2 (00:11):
I was out, uh at around midnight now two am.
Meteor showers. Big Oh yeah, I didn't see anything.
Speaker 1 (00:18):
Really, drones, aliens, no drones, No drones. I think the
FBI is saying, don't worry, it's just people, right, I mean.
Speaker 3 (00:25):
I mean that's sketchy. I mean, okay, I guess. And
why would.
Speaker 1 (00:30):
Aliens have drones? Then that's what I would say. They
have something that would not be with something we're familiar with.
Speaker 4 (00:34):
I would think, you know, unless it's like people. I
don't know, I don't know who knows.
Speaker 2 (00:40):
What do you think it is?
Speaker 4 (00:41):
I don't know what it is? But I keep on
going down rabbit holes at night and Lauren. Lauren will
be looking over at me, maybe like eleven o'clock, and
I'm just going down these rabbit holes of space, but
also what it could possibly be.
Speaker 3 (00:52):
And you know, it's, uh, it's weird. You don't think
it's weird.
Speaker 2 (00:57):
I haven't really paid that close attention.
Speaker 4 (00:58):
It can almost be like a self filling prophecy, though,
like a couple people see, like, you know, maybe the
army testing out something. Now everyone sees a drone, right,
Like a meteor is a drone, a plane is a drone.
Speaker 3 (01:10):
A helicopter is a drone. So who knows.
Speaker 2 (01:13):
Yeah, I'm entertained that, Yeah you are. Yeah, I was.
Speaker 1 (01:19):
Yeah, I saw so Jupiter, so Uranus. I saw Mars
last night, March. It was so clear out last night.
Speaker 2 (01:26):
The moon was huge.
Speaker 1 (01:26):
You could see Mars like the red star over to
the from my perspective, over to the left of the moon.
Speaker 2 (01:31):
Probably from everyone's perspective.
Speaker 3 (01:33):
You're dipping your toe in astronomy, right.
Speaker 2 (01:36):
I don't even know if it's that much. It's that's scary. Yeah,
you know, the whole universe is scary.
Speaker 3 (01:42):
It's scary.
Speaker 1 (01:42):
I'm a snow globist in the snow globe, and then
somebody's kind of watching over us. They shake us up
every now and then. But anyways, we got a lot
to talk about that's pertaining to the real and now.
Speaker 2 (01:55):
No no drones, no snow globes.
Speaker 1 (01:58):
Right, you know, we're talking in flame and I think
for quite some time and the second half of broad
now that we've got a mail bag of we accumulated
some questions that we see from our clients, either verbally
or via email, and we will talk a little bit
about that rebounds in your portfolio, Tariff's talking about giving
money to kids, that that type of thing, especially at
the end of year.
Speaker 2 (02:17):
Bonds, how do they work?
Speaker 1 (02:18):
And we'll talk about bonds in the first half on
a more current basis, though, But I think as we
sit here, yeah, I think the two big news items
for the week, you know, A was the NASDA crossing
over twenty thousand and then coming back down off of
that to close at nineteen nine twenty six, so just barely.
The NAASAC was the only index that was up for
the week. The Dow down one point eight two percent,
(02:41):
Russell two thousand, which, you know, people have been claiming
that small caps are going to lead the way they're
the second and third thousand largest American stocks. I don't
think that they are. I think the mid caps will
be winners at some point next year.
Speaker 4 (02:54):
So you're not, So what do you mean by that?
Did you just say they're not leading the way, or
they're not gonna lead the way.
Speaker 2 (02:59):
Both.
Speaker 3 (03:00):
You don't think they're going to lead the way, not.
Speaker 1 (03:01):
Small caps, not small caps, I think might not because
I think I think there's too there's too many of
those companies aren't making any money.
Speaker 3 (03:12):
I agree with that.
Speaker 4 (03:13):
You know, I think that we keep on waiting for
small and mid caps to you know, have their moment
in the sun, like we do with international once in
a while.
Speaker 3 (03:23):
But you know, and I think.
Speaker 4 (03:25):
A lot of people, a lot of times people just
equate it to an interest rate environment. Interest rates are
going to go down. It's going to be better for
small and mid cap. But I think I think sometimes
we forget the power and the resources that larger cap
companies have to continue to increase their margins and not
needing a low interest rate environment to succeed. I think
we saw that although you know, larger companies didn't do
(03:46):
great during twenty twenty two, they still grew their revenue.
They still increase their margins from then until now so and.
Speaker 1 (03:55):
And and more and in a better, more conducive environment
on a regulatory basis for mergers and acquisitions. You know,
where are the larger companies gonna go They're not gonna
skip over the midcaps and go to small because they're
not gonna get they're not going to get the bump
from that really from revenue or income standpoint. I think
they'll go from from from the large megacaps to to
(04:16):
to to large caps in the mid caps, and I
think that's where the real values are. That you know,
a lot of the mid caps are financials, a lot
of mid caps are industrial. So I think you'll get
a and a lot of the midcaps are profitable. You know,
you're talking about when I took midcaps, I talk the
S and P five hundred x the largest one hundred,
so the S and P you know, one hundred through
five hundred and that that's where that's where I would
(04:37):
look at. But you know, so as you as you
look at and this is not one week is not
an indication. But yeah, so the Russell two thousand down
two point five eight percent, the utility average down three
percent this past week. The utility average is around seven
and a half percent away from its all time high.
And I think that's something that you have to keep
track of. And it's also think it's something that is
reflective of interest rates. And I think as we sit here,
(05:00):
you looked at the tenure was sitting at four nineteen
at the beginning of the month.
Speaker 2 (05:03):
Now it's four forty.
Speaker 1 (05:05):
So if you think of if you think of this
whole thing as like a the intermediate and longer term
bonds are really an indication of the current interst rate
environment plus inflation expectations. And what you see really is
if you look at the current interest rates environment, what
do we see in one year, Treasury went from four
thirty to four to twenty four from the beginning of
(05:26):
the month to close the business on Friday, so down,
so current interest rate environment. People are saying, okay, interest
rates are going to come down a little bit. The
six month went from four to forty three to four
thirty two, the three months from four to fifty one
to four to thirty four, lower again, the woman from
four to seventy five to four forty three.
Speaker 2 (05:42):
But then when you get out a little bit from
two years up every specific.
Speaker 1 (05:46):
Timeframe, the two, the three, the five that seven to
ten to twenty, and the thirty, interest rates have all
gone up since the beginning of the of the of
the month. On the two year, four to seventeen to
four to twenty five up eight basis points. Basis points
is one hundredth of a percent on the three or
four eleven to four to twenty one ten basis points,
on the five year four to eight to four to
twenty five seventeen basis points, on the seven year four
(06:09):
thirteen to four to thirty three twenty basis points, and
the ten yere four nineteen to four to forty twenty
one basis points, on the twenty or four forty six
to four sixty nine to twenty three basis points, and
on the thirty year four thirty six to four sixty
one twenty five basis points. So every timeframe from the
two year on interest rates of A going up and
B going up incrementally incrementally relative to the prior time
(06:33):
frame that I mentioned. So that tells me that there
is some concern over and again you know it's maybe
there won't be a concern to you know, Friday when
the PC is released as part of personally come and spending.
But you know, as I think what we've been saying,
there is comes somewhat sticky inflation.
Speaker 2 (06:52):
Yeah, you know, someone.
Speaker 4 (06:54):
Sticky sticky inflation as well as sticky inflation expectations not sticky,
but inflation expectations could lead to inflation hovering around three
percent for the foreseeable future, which I mean, you know,
let's say six months to a year. It's really going
to be hard to get inflation down so drastically when
(07:16):
the consumer is in good shape. Even shelter costs rows
point three percent during November four point seven percent year
over year after rising point four percent in October. And
you know, those are things that I don't like want
to use the word worries soon, because I think the
stock market and the economy can still do good in
an interest rate environment where the consumer is doing good.
Speaker 3 (07:39):
But I think you'll still see the.
Speaker 4 (07:42):
You know, price gouging in quotations from from businesses, landlords
and the like, as long as the consumer is doing well.
You know, It's kind of like the same thing about groceries.
You know, Trump said over the weekend or last we like, hey,
you know, I said, I said, you know, we can
bring grocery prices down, but now, like you know, it's
going to be really hard to bring grocery prices down.
I think it's good, just like I think housing and
(08:05):
groceries are the same.
Speaker 3 (08:06):
You're not going to see a decline in.
Speaker 4 (08:08):
Prices until companies are like, all right, we need to
we need to lower prices because unemployment has gone up
or or the consumer's not doing as well. So I
think all those things kind of lead to inflation sticking
around here for the time being.
Speaker 1 (08:25):
And I think if you think about what's going to
impact all right, so what will impact inflation? And I
think inflation is going to be steady in through here.
Let's say two and a half percent, and we'll get
into more of the details. But producer pricing next, which
is inflation at the wholesale level PPI is up three.
Speaker 2 (08:46):
Percent year over year.
Speaker 1 (08:48):
Now, if they don't pass that on to the consumer,
they then margin shrink a little bit, or they could
get cost efficiencies out of technology whatever. Okay, but generally speaking,
the overall numbers three percent. Retail and flation is measured
by the consumer pricing next is up two point seven
percent year over year. So let's say inflation still comes
down a little bit and is sitting at two and
a half, Well, then the ten years should be sitting
(09:09):
at around four and a half percent. It's sitting at
four forty because usually there's a two percent bump between
inflation and the nominal interest rate on the tenure so
or excuse me, corridor. So I think we're kind of
in through here. We're going to stay in through here.
Speaker 3 (09:25):
Now.
Speaker 1 (09:25):
If you say you'll and right now, I would say
the foreseeable future. What is unforeseen? Okay, it's unforeseen what
President Electrump does with the tariffs, but that will come
before the impact the offsetting impact potentially of the Department
of Government efficiency, the DOGE department DOGE Department of Government efficiency,
(09:46):
which will be which will come after that because of
all the work it will take to kind of wrench
out the government efficiency from that. So I think inflation
stays around here for twenty two twenty five, I think,
and I think the second half inflation could go up
a little bit, depending upon how President like Trump levies tariffs.
(10:08):
Does he use them.
Speaker 2 (10:08):
Really as as like as rhetoric.
Speaker 1 (10:11):
You know, Mom and I went to Quebec City, Quebec,
Quebec whatever on Wednesday. I took a couple of days
off and I watched the news, and you know, they're
concerned about it, and they're also thinking, Okay, what can
we do about it and not necessarily goes caving to
President Trump, but what can we do about it? And
they're also talking about immigration coming from the north down here. Yeah,
(10:32):
there are people who come into Canada then come to
the United States that illegally, but according to the Canadian government,
they're relatively relatively few to be dealt with, really in
the hundreds and tens rather than in the thousand. So
I think, you know, nobody knows how that's going to
play out.
Speaker 3 (10:48):
Yeah, even.
Speaker 4 (10:51):
Even with people you know, ordering things this year for
next year before Trump's gets into office, could level out
inflation here for a little bit. And then when when
when these companies that over ordered at the end of
this year is have to start ordering again next year?
You know what does that mean to inflation? Could you
see a spike up in inflation in the second half
of next year? So you know, again, you know, I
(11:12):
think we've been talking about this since Trump was elected. Uh,
the range of outcomes are just so much greater and
there's a lot more unknowns out there. So I think,
you know, it's a good time right now to you know,
to have a diversified portfolio and not not make any
large I don't know, haven't bets in anyone area. Yeah,
(11:33):
large bets in anyone area.
Speaker 2 (11:34):
Still, yeah, I would say stay diversified, so you have that.
Speaker 1 (11:37):
So that's that's something that I think, you know, kind
of came out of this week that I think bears watching.
And you know, you know we often say when we
sit here today, when we sit here in that today,
we'd said it today earlier though, not that we're that
worried about it. Yeah, we're worried about everything. That's kind
of your job to be worried about everything. It's like
a pilot. Your pilot's worried about everything because you know,
if he or she doesn't, then in the plane, something
(11:59):
happens to the plane, and then you gotta worry about everything.
So yeah, we're we're concerned that. That's that's that's a
potential issue. The second issue I think is like the
FED will meet this week.
Speaker 2 (12:11):
I know, I think what.
Speaker 1 (12:12):
I would call like a hawkish cut where the FED
says we're cutting because they can't not cut now because
they haven't prepped Wall Street for not cutting. You know,
they haven't come out, no one, none of the governors
have come out and said, hey, we might not cut,
we might not cut or be careful, you know, in
a in a implied fashion. So I think they're gonna
cut by a quarter, but don't be surprised if that's
(12:33):
the last one for a while. I think they're truly
going to be data dependent, truly going to be watching
President Trump's then President Trump's action or I think the
next FRED meeting is on or about the inauguration day,
which is like January twentieth or whatever, and so we'll see,
we'll see how that plays out. What and then the
NAS that crushing What do you think about the NAS
that crossing over twenty thousand for the first time Wednesday,
(12:55):
in conjunction with their the fact that the more stocks
have been down in the S and P five hundred
than up for ten consecutive days, the longest stretch of
consecutive days such since following September eleventh of oh one.
So breath b R A d th h has been bad.
So yeah, the nazeg moving up and the S and
(13:15):
P breadth being bad over the past two trading weeks,
do you make.
Speaker 2 (13:20):
Anything of that? What do you see?
Speaker 1 (13:22):
And you know, what do you see with the mag seven?
Is it stretching out any any kind of what comes
to your mind.
Speaker 3 (13:29):
Yeah, yes and no.
Speaker 4 (13:32):
On one hand, I think that it's again it pays
to be diversified here. On another, if you look at
you know, the mag seven companies in general, they're all
amazing companies. They're all extremely financially sound, so they all
have their foot in the door. And these emerging technologies,
whether it be cloud, whether it be cloud storage, whether
(13:53):
it be data centers, where, whether it be you know,
even chips they're just starting to make their own chips now,
advertising artificial intelligence. So it's I don't know, it's hard
to bet against these stocks until they give us a
reason other than overvaluate.
Speaker 3 (14:11):
What's the biggest risk to them overvaluation? Right now? What
do you think regulation?
Speaker 1 (14:16):
Maybe I think I was gonna say regulation, but I
was gonna go with the over But.
Speaker 4 (14:20):
Now you're seeing you know, open Ay, Meta, Amazon all
throwing a million bucks at Trump's inauguration kind of kissing
his pinky ring. Now it's like, okay, so we'll see
what happens there and.
Speaker 2 (14:32):
What comes of that. Really, you know what I mean,
what comes of that? Is there anything that comes of that?
You know?
Speaker 1 (14:39):
So yeah, so so so bad breadth, but I think
relatively fairly bad. Look, you know, excluding Tesla, I think
you know, Apple, Microsoft, you know the others.
Speaker 4 (14:51):
It's hard to see Tesla really doing that poorly with
Elon Musk kind of being the you know, kick JD.
Vans out the door and being his number one guy. Now,
so I think Tesla could still do well. You see
some let's say Trump does take away some of those
EV credits Tesla's Tesla already has that first mover advantage,
(15:12):
has already such a head start on all the competition
that I think it could just be ultimately good for Tesla,
maybe decrease their margins, but decrease other other EV maker
EV makers revenue even more than that. So I think
over evaluation is the is the mag is the mag
Seven's biggest threat here. But you know, they're all still
(15:35):
great companies, growing very well. So I think you just
kind of have to see your position in them, and
if you're extremely overweight, maybe it's time to trim We
trimmed some of them a couple of weeks ago. Fifteen
percent of people's holdings, So if someone had ten percent,
we brought it down by one and a half percent.
Speaker 1 (15:52):
To eat so and those are I think most of
those were for qualified accounts too, so the non qualified accounts,
especially with Trump being elected. You know, we see no
change in the capital gains tax rate for next year,
so trying to put it off in the next year.
Although I will say that fifteen percent rate on long
term gains goes up to five hundred thousand dollars or
so when it adjusted gross income, So you got a
(16:12):
wide swath of fifteen percent that you know, you know
we'll be using some next year.
Speaker 4 (16:17):
Yeah, and you know, I think I think we've been
talking about it a lot, and I've been talking about
it's just been like a theme in my head. And
you know, you never like to lose a client ever.
But if you lose a client for de risking someone's
portfolio after these fifteen years, who's seventy years old because
they didn't have S and P returns because they didn't
have enough mag seven, I'm okay with that. I think
the risk reward here isn't there as as it was
(16:41):
five ten years ago. I think now is the time
to be diverse. I think a lot of great companies
can use artificial intelligence, and sectors like industrials like energy,
every single sector and use that to their advantage. So,
you know, I do think it is a time to
maybe de risk your portfolio a little bit. If you
are sixty five seventy seventy five years old and you
(17:02):
are on a fixed income and need distributions from your portfolio,
I think sometimes now is a good time to say,
you know, it's been a really good ride. It can
still be you know, market weight or a little bit
underweight in these securities, but we still own them. But
thank you stock market for getting me to where I
needed to go.
Speaker 1 (17:20):
Plus a ten year note get you from sixty five
years old to seventy five years old, which is two
thirds of your active retirement life. If you think of
retirement as and we've talked about it all the time
here in the fig and Financial Report, active versus passive retirement,
passive retirement kicking it around seventy eight seventy nine, think
about you know, and your friends and just our parents,
(17:41):
your grandparents, my parents and in laws. I mean to
have both parties make it till seventy eight or seventy nine,
you know, is not that common, you know, so I
think you and then after that period, and even if
the one is healthy. What I have found I've been
in this business since nineteen eighty three is a surviving
(18:02):
spouse has much less uh. And I'm like going to
say then, and this is just anecdotal, but options to
do things that he or she wants to do because
they've lost their traveling companion or their dinner companion or yes,
or that you know.
Speaker 2 (18:17):
So if I die, take care of mom? Will you
take with us? Take her on trips? Yes?
Speaker 1 (18:22):
So anyways, so that so that's that's that, you know,
the other couple of the things that Baird Baird was
And to get your two cents on two things. One is,
you know, on the cover of Barons Outlook twenty twenty five,
White Equities could have another big year, but also President
Trump ringing the bell at the New York Stock Exchange.
(18:44):
So I'm thinking about two things, you know, offset what
I just said about Barons and President Trump with the
whole Sports Illustrated theory that the person on the cover
of Sports Illustrated ends up having a crummy year a
crummy uh uh, you know, whatever time frame going forward.
It's like the kiss of death to be on the
cover of Sports Illustrated.
Speaker 2 (19:05):
Sometimes so the Maden.
Speaker 4 (19:06):
That's the thing. That's the thing, the Madden usually Madden.
It's like a Madden curse if you're on the cover
of Madden.
Speaker 2 (19:12):
Right.
Speaker 1 (19:12):
So, so we'll see, right, So, I don't see.
Speaker 2 (19:17):
I don't see equities having another big year. I don't.
Speaker 1 (19:20):
We don't see a lot of downside risk, especially in
the first half of the year. But as those as
those tariffs kick in, we'll we'll see what goes on.
Speaker 4 (19:28):
I know, it's kind of our job to talk about
the market. You know, it's the fake and financial port
and you know, but you know, you could see a
melt up at the beginning of next year.
Speaker 3 (19:36):
You could see a melt up towards the end of
the you know, and this year in weeks.
Speaker 4 (19:39):
But yeah, but we're good, We're I think we're good
where we are.
Speaker 1 (19:45):
I think, you know, we'll be rebalancing over the next
three to four weeks as at the end of the year,
you know, s and p you know, twenty five twenty
six percent this year. I think it just pays and
makes sense to rebounds as we get into next year.
One of the things too, though, and I know we
got in a few minutes left and I don't know
if there's if there's anything you want to touch on
prior to me touching on something.
Speaker 3 (20:03):
No, nothing.
Speaker 2 (20:05):
Article in New York Times. No, what is this? I
don't think it's the New York Times.
Speaker 1 (20:09):
Well, I'm gonna say it's an Yeah, Wall Street Journal
by Catherine Hamilton. Young men are making risky bets on
crypto and politics and raking it in right now, Eco parts, bitcoin,
golden game stop and draftking stocks, you know, up something
like sixty percent, whereas sixty percent stocks and forty percent
(20:31):
bonds of fifteen or twenty percent. Is that something to
be concerned about? Some forty two percent of men ages
eighteen and nineteen invested in the use crypto versus seventeen
percent of women, eleven percent of men ages twenty five
to thirty four both gold and civil silver, compared to
six point five percent of the US population.
Speaker 2 (20:51):
You know, And I'm hitting you with this out of
the blue.
Speaker 4 (20:55):
But what I mean in up years, people that take
on risk can do really well. I mean, I don't know,
I don't think this is surprising. What the Triple q's
is up thirty percent this year. Yeah, people that are
taking more risk, are are are doing better in the market.
I don't think that's uh, I don't know. I mean,
you saw a lot of it. You saw a lot
of this in two thousand and one as well. But
(21:18):
I don't know what's the point of the article though,
well the is uh is that going? Is that a
sign the point of the article? I don't know what
the point of the articles I've read. I read pieces
of it. Uh.
Speaker 2 (21:33):
Is it a sign of really a bubble? You know?
Is it a sign of a huge change?
Speaker 1 (21:40):
And you know, is it a sign that they're gonna
get their their hats handed to them over time?
Speaker 3 (21:47):
I don't know.
Speaker 2 (21:49):
Is it? Is it gambling?
Speaker 4 (21:51):
Yeah, it's a form of gambling, you know. I think
you could equate any type of investing to gambling at
some point, sports gambling, let's say. But I think that
is even any type of investing to gambling.
Speaker 2 (22:04):
That's not you don't have an.
Speaker 4 (22:05):
Approach, if you don't have a philosophy, if you don't
have a strategy. You know, I guess good sports gamblers
have actual strategies, you know. I think if you're just
you know, throwing darts at a dartboard and hoping for
the best.
Speaker 3 (22:18):
Yeah, that's not really a strategy.
Speaker 4 (22:20):
You don't have an exit plan, you don't have an entrance,
but you you don't have you know, a reason to
invest in things. But I think that's going to be
you know that that whole gamification of the stock market.
You know you can get on a Schwab app or
a Robin Hood app or you know you have Wall
Street bets that has millions of followers on Reddit. You know,
I don't think this is ever going to end. I
think it's kind of like the ever the evolution of
(22:44):
of you know, the stock market kind of.
Speaker 1 (22:47):
But I know the last time that this happened, it's
spelled doom for that type of investing. And I can't
help but think that, you know, this article is a
contrarian indicator.
Speaker 3 (22:58):
Yeah, I agree with that.
Speaker 1 (22:59):
I think, well, you know, yeah, so I think where
where do you look? Where do you look for opportunity here?
Then in the in the next one, we'll give you
thirty seconds, where do you look for opportunity here?
Speaker 2 (23:09):
Would you say?
Speaker 3 (23:10):
Diversification?
Speaker 4 (23:11):
You know, I think the more unknowns that there are
out there, the more diverse you should be. Like any
so I think right now is you know you have
a diverse portfolio. I don't think you you know, go
all the value, all the growth, all the all the
makeap all the AI. I think it right now, it
pays to be diverse. I think you kind of have
to have your you know, hand in a little bit
of everything right.
Speaker 2 (23:31):
Now, and that sets you up for disappointment.
Speaker 3 (23:33):
Yeah, but you.
Speaker 4 (23:34):
Know, I'd be happy if the market was up ten
percent next year and my account was up six, right
because there's so many.
Speaker 3 (23:41):
Unknowns right now.
Speaker 4 (23:42):
I agree, you know, I think right now it pays
to be diverse, you know, especially in your retirement accounts.
You know, I don't think you should ever gamble or
anything like that with money you need fifty I agree.
Speaker 1 (23:52):
It's ten thirty on the station depend upon for news,
weather and information, News Talk A ten and one o
three one w g Y. Good morning, and welcome back
to the second half hour of the Capital District's Money
and Investment program. You're listening to the Fagan Financial Reportum
Dennis Fagan sitting here with my son Aaron, as we
do every Sunday right here in new Talk ten and
one oh three to one w g Y. Talking in
(24:13):
the first half hour about the consumer Price Index. The
producer price index the market add are near record highs.
Going to broaden that out a little bit. We got
some questions that we've kind of accumulated over the past
two or three weeks from our clients, and we thought
it would be a good idea to uh, as we're
getting towards the end of the year, as these are
kind of kind of broad questions, portfolio management questions, gifting questions, Uh,
(24:34):
you know what percentage of my couch you I have inequities,
that type of thing. We thought, you know, it would
be a good thing for the listener as they drive
along out to drinking their coffee, out holiday shopping, or
going to going to church or whatever, mask synagogue to
address right there, right, all right, you want to take
one of these? Do you want me to start off with?
Speaker 3 (24:56):
You can start off.
Speaker 1 (24:57):
I will start off. Okay, I will start off. We've
got a let I have been questions.
Speaker 4 (25:00):
You know, they're kind of compiled from emails, questions we've
had from clients, telephone calls, telephone calls, questions, and appointments. So,
you know, I think it's a good list of It
says ten questions, but I see eleven here.
Speaker 2 (25:12):
Eleven. Yeah, So it's a bonus one, the bonus one.
So andy, so let's start off.
Speaker 1 (25:17):
I'm not going to start off with number one, but yeah,
why don't we start with how often should I rebalance
my portfolio?
Speaker 2 (25:24):
And I think the question.
Speaker 1 (25:25):
That that that the optimal word there, the keyword there
is often, and it shouldn't be on a calendar basis.
Speaker 2 (25:33):
It shouldn't be on You.
Speaker 1 (25:35):
Should set yourself up on a regular basis to look
at your portfolio to see if it needs rebalancing. And
usually we do that at the end well not usually
we do that at the end of every quarter. We'll
look at portfolios to see if they need rebalancing. That said,
you know, I offer the quarter quarterly and of every
quarter on a rebalancing basis comes up on Wealth Box.
Speaker 4 (25:56):
Yeah, and we have, I guess, different rules and regulations
that you know, we have to follow as financial advisors.
You know, we have people in different portfolios. And let's
say you're a growth and income portfolio. It's a you know,
seventy five to one hundred percent in the seventy fifty
I'm sorry, fifty to seventy five percent the market. So
you know, we go through them quarterly to rebounds to
put people back into asset allocation. I'm correct, asset allocation.
(26:18):
You know, when the stocks do better, they maybe drift
to seventy seven, seventy eight, seventy nine percent. So you know,
in our system we have it quarterly to look at
all accounts that are out of balance. But you know,
when I look at this that question, I think of
it more from like a four to one K standpoint
in what respect, Like you know, if I had a
four to one K, how often you know if a
(26:39):
client has a four to one K that we don't manage,
but we do help them with, you know, how often
like that this question? When I read it, I thought
more of that, like how often you know when a
when a client asked me how often should I rebounce
my portfolio?
Speaker 3 (26:52):
Would say yearly? What do you think?
Speaker 2 (26:56):
Yeah?
Speaker 1 (26:56):
Yeah, so you know I think that Yes, I mean,
I think you should set yourself up on a regular
basis to manage your port to rebalance your portfolio least
often on an annual basis. But if you were to
take a look at let's give you an example. If
you start out with seventy thirty that you want in
(27:17):
the stock market, you have one hundred thousand dollars, or
that means you have seventy thousand dollars in the stock
market and thirty thousand dollars let's cause call it in bonds. Well,
after a year like this, you know that seventy thousand,
if the market's up twenty five percent, that is seventeen thousand,
five hundred dollars, So that's worth eighty seven thousand, five
hundred dollars. Your thirty thousand might be worth thirty one five.
(27:39):
Let's say bonds are up five percent, So your total
portfolio value is going from one hundred thousand to about
one hundred and nineteen thousand, of which that eighty seven thousand,
five hundred. Don't have a calculated right in front of me,
but eighty seven to five Divide it by nineteen thousand
is eighty seven five let me see, eighty seven five
(27:59):
divis it by one nineteen is seventy three percent of
your portfolio, So you're really haven't that's that's like what
you would call like an acid allocation drift, but it's not.
Speaker 2 (28:10):
It's not that much.
Speaker 1 (28:11):
But indeed you should ratchet it back to uh to
it's its original balance, original, your your original intent. Now
that said, so annual, annual, even with the market that
went up like this, Uh, you know you still there's
still a lot, a lot of you haven't drifted away
(28:33):
a lot. I don't don't know if that's that's right.
Let me actually look at my calendar. So seven eighty
seven point five, divide it by one nineteen. It's seventy
three point five percent. So you started out at seventy percent.
Now you're at seventy three point five percent. So you
could rebalance back. So I would say annually at the
(28:53):
least often quarterly. We have it pegged in our system
to look at things quarterly. But then and I often say,
it's like water in your garden. But then, should there
be a volatile market, let's say like the pandemic when
the SMP was down thirty three percent in a month,
then you kind of look at it between the quarter.
You also have to think about if you have individual securities,
(29:18):
how do you rebalance those? If indeed that's an issue.
You know, if you have a stock that jumps on
good earnings or plunges on bad earnings, if you still
like it, you might might want to nibble at it
if it rises on good earnings. So so from a
portfolio basis, uh, and I think.
Speaker 2 (29:35):
You're you're proven right there.
Speaker 1 (29:36):
Actually, on an annual basis, I think that's what's optimal
for the retail investor.
Speaker 2 (29:42):
We just take a look at it a little.
Speaker 3 (29:43):
More broad based ETFs.
Speaker 4 (29:45):
If you had you know, if you have a four
to one K or four three B at you know
at your job, Yeah, you know, you only have X
amount of choices, right, So but if you have individual stocks,
let's say a palent here or something that just or
an Nvidia that just kind of went parabolic, I think
that you know, it was a case by case scenario.
Speaker 3 (30:03):
So let's say you.
Speaker 4 (30:04):
Buy you know, three percent of your portfolio and Palanteer
at the beginning of the year, and now it's probably
ten percent, right over ten percent, So you know, I
think it's always prudent to pair that back. You know,
you could, you know, cut your holding in half and
still you know, double your profit and still have twice
as many, twice as many shares as you know, from
a from a from a cash standpoint as you had
(30:25):
when you bought the stock. So I think, you know,
we look at that on a stock by stock situation,
but you know. Yeah, if you have your four one K,
I would say yearly you should look at it, you know,
and decide, you know, if it's prudent to rebalance. But
at the same time, you know, it's hard because I
got you know, a on a financial life landscape, one
(30:48):
year isn't a long time, you know. But if you're
if you're transitioning, like okay, now your kids are out
of college, or now this or I'm gonna you know,
there's just different phases that, you know. I think although
you should, you should look at your portfolio, you know,
at least you know quarterly, right, you know, But I
don't think rebalancing is something.
Speaker 3 (31:06):
You need to do. I think personally on a yearly basis.
Speaker 1 (31:09):
Would you agree with this, there's more danger looking at
your portfolio too often, yeah, than not often enough.
Speaker 2 (31:15):
Yeah.
Speaker 3 (31:15):
And I think that's you know, I think that's the.
Speaker 4 (31:20):
Hey, you know, big question people that look at their
We always say that if you look at your portfolio
every day, fifty three percent of the days it's the
market's up, so half the time, essentially you're gonna it's
gonna be down.
Speaker 3 (31:30):
You're gonna want you to do something, you know, the
wrong thing.
Speaker 4 (31:33):
But at the same time, it's like, you know, seventy
five percent of people I think Fidelity said that when
they open an account like a four to one K,
they never change their asset allocations. Like, on one hand,
you don't want to look at it too much because
you don't want to do the wrong thing. On the
other hand, you don't want to, you know, look at
it too little. And let's say, like, you know, it was,
you know, February or April of twenty twenty and we're
(31:56):
in the middle of COVID. You're like, you know what,
I'm going to start this new job and I'm gonna
put it all in cash or twenty twenty two when
the market's down, you know. So what you don't want
to do is, you know, do the wrong thing at
the wrong time, try to time them up. You know.
Speaker 1 (32:09):
In fact that Fidelity you mentioned that, and the I
guess the gist of the story is more important than
the details of this story they're about to tell. But
they in some manner they determined which account holders were deceased,
and I think they might have, you know, not used
(32:31):
the word deceased. Maybe they hadn't touched their account for
five years.
Speaker 2 (32:36):
Something like that.
Speaker 1 (32:36):
Well, but they determined And the gist of the story
is people who were dead had better returns than people
who were alive managing their portfolio because they didn't really
mess with it.
Speaker 2 (32:46):
Yeah, I think we even.
Speaker 1 (32:47):
See that here with with our clients, is that you know,
if our clients let us do our things, generally speaking,
it works out better than if they're meddling all the time.
Because even though we're getting go ahead them.
Speaker 4 (32:58):
Saying you know, I was just gonna say, you know
that you don't see like co CEOs and co managers,
right because it's just a level of friction that's unneeded,
you know. That said, it's nice to have like a
team of investment professionals that all give their you know,
two cents on different investments because I do believe, you know,
we kind of have different investing philosophies, right, So I
(33:19):
think that people I think it's nice to have a
team to have invested different investment philosophies because it.
Speaker 3 (33:25):
Does build a diverse portfolio.
Speaker 4 (33:27):
But you know, if you have someone calling you, you know,
you do see it sometimes, you know, you see the
phone ring a lot of times. If I see a
specific name, I know exactly the stock they're going to
talk about because it was just on Cnbcity, right.
Speaker 1 (33:39):
But on the other hand, though, I will say that,
you know, I think that there are just like I
often say, there's there's people who pilot planes in our
professional pilots, there's people who you know, work on their
own car that are that are don't do with mechanics
for a living. And I think the same thing is
I think that the smarter and smarter that investors get.
I will that I do believe that a lot of
(34:02):
our clients add value to the overall management of the
account by by having a relationship where they kind of
they know what's going on. You want your client to
know what's going on and have and have be familiar
with the market because then they know the risk involved
in the potential award. They have an understanding of why
(34:22):
we might make changes to a portfolio and periodically, which
is great. We'll get calls of for somebody who who
has a question as to hey, or a suggestion I
saw this come out or that come out, and those
are really invaluable that input from our clients. But you're
right on the flip side, we are right now we're
getting a lot of questions about cryptocurrency, and it's going
(34:44):
from ten thousand to one hundred thousand.
Speaker 2 (34:46):
And I saw an add on or not.
Speaker 1 (34:48):
An add interview on CNBC the other day someone I'd
recommend one or two percent. And for a chunk of
our clients, we have one or two percent of their
account in crypto. We probably have, you know, overall of
our entire portfolio, probably zero point five percent in crypto.
But the average drawdown every year on that is about
seventy percent. So crypto could go from a bitcoin could
(35:09):
go from you know, ninety eight or ninety nine thousand
where it is now down to you know, thirty forty
fifty thousand and still be quote unquoted in an uptrend.
So circling back, we bounce your portfolio if your retail
at least once a year, more frequently if you're more
active in your portfolio or on an as you need
basis kind of like water in your garden. You look
at it and if you think it needs it water,
(35:29):
don't be too active in it. And you know, like
I said, I will say that again that you know
that input from our clients, you know, helps out a lot.
And we send out quarterly reports to them, so the
sill they know what's going on and they get detailed
accounts from Schwab as well. Let's move on to number two.
And here we are twelve minutes in and we've just
gone to number two. We're a different number er. What
(35:50):
do you think anything in there that strikes your fans
can tear us work?
Speaker 2 (35:54):
You wrote, I didn't think you'd hit that one.
Speaker 1 (35:57):
What I didn't think you would hit that one just
because of the you know, just because it's it's could
be a lightning rod.
Speaker 2 (36:03):
You I mean to answer that. Do you want to
touch on that?
Speaker 4 (36:05):
You know, I think we can both touch on We'll
touch on it first. I think they can work. I
think it's possible for them to work. I don't, but
I also don't think what President Trump or President elect Trump,
you know kind of campaign down will completely come to fruition.
Speaker 3 (36:24):
So do I.
Speaker 4 (36:25):
I do think that smaller tariffs on countries can work.
You know, blanket tariffs I don't think are great. I mean,
we saw what happened in nineteen thirty when President Hoover
signed into UH into law, you know, blanket tariffs on
you know, all countries. So you know, I don't think
that can work, but I do think strategic tariffs can work.
(36:49):
That said, you know, when during Trump's last presidency, when
he did raise tariffs on steel and the like, you
never you did not see a rise in production in
domestic exteel. I don't know why, but that did not work.
So I think they can work. But I hope and
I think that Trump will use them more as a
(37:10):
bargaining chip than actual Uh, you know, a lot of tariffs,
I guess on on many different countries. I think they
can work in that I don't think he will have
blanket tariffs on all countries.
Speaker 1 (37:30):
And he was saying the other day he you know,
I think he uses tariffs. He will use tariffs as
a leveraged in other areas, you know, perhaps foreign policy.
Uh you know, he he had mentioned, you know, wars
or I think maybe he didn't mention it. Maybe so
somewhere else that you know, you want to leverage the
economics of the United States for other areas other.
Speaker 2 (37:52):
Than just economics, you know.
Speaker 1 (37:53):
I will say, though, I think you know, when we've
said it off en, you know, President elect Trump, there's
a wider race of potential outcomes with a traditional politician. Uh,
those that, you know, those that voted for President Trump
think that that range is skewed to the upside. Those
that didn't think it's skewed to the downside. You know,
we do think that there's a wider potential range of outcomes,
(38:15):
like I just said, and we'll see how that works,
because I do think that that you never know how
things end up. I liken it to a bar fight,
you know, where the first punch is thrown and then
all hell breaks loose and how'd you end up out
on the street. And though I have never been in
a bar fight, or you look at that that where
(38:35):
you dropped the wall was a TV show where someone
dropped the ball down and it went down, hit barriers
over and over again, it got to the bottom, and
you never know how it turns out. So President Trumps
has a lot of experience in this, so you certainly
give him the benefit of the doubt and we'll just
see how that plays out. See, the tariffs can work
Aron just mentioned, and I agree limited tariffs and tariffs
(38:57):
with a dual or multiple purposes.
Speaker 2 (39:02):
We'll we'll see how it plays out.
Speaker 1 (39:04):
But that you know, things can work out and still
have have bumps along the road. And that's that's the
other as we as as we look into next year
for our clients and we manage money for our clients,
as you know, eight hundred million dollars, we have to
decide what are the potential events in next year that
(39:25):
could derail the market. Certainly there's valuation, there's earnings, their economy,
but one of them is the tariffs are going to
work out, but not till twenty twenty six and a
half for twenty.
Speaker 2 (39:35):
Seven, you know, and mean, what does that mean? Exactly?
Speaker 1 (39:40):
So those are the things that you know that that
we have to think about and that might come up
along the way. And then and look, I mean, if
you if you voted for President Trump, your price and oh,
of course they're gonna work. If you voted for President Biden,
you say, of course they're not gonna work. You know,
we're saying, certainly they could work. And it's our job,
whether we voted for President Trump or not, to consider
(40:00):
the fact that they might not work, just like we
do with any president. President Biden included that, hey, what
if this doesn't work, what happens to our clients?
Speaker 2 (40:09):
Anyways? Third, one hour, as we moved through this exciting
half hour of the Fagan Financial.
Speaker 4 (40:15):
What is an appropriate measure for my performance?
Speaker 2 (40:19):
We talk about that.
Speaker 3 (40:19):
All that is your probably you know, decade long battles battle.
Speaker 2 (40:26):
It's like my nemesis.
Speaker 4 (40:29):
With yourself, I personally, you know, And I've won all
those by the way, you know.
Speaker 2 (40:35):
But I've lost them too.
Speaker 4 (40:36):
I've lost, you know, and you've changed your mind.
Speaker 2 (40:39):
Those battles with myself, I win and I lose all
the time.
Speaker 4 (40:42):
And you know, this is what I kind of come
to the conclusion. I think the Vanguard Total Stock Market
Index is the best thing for people in retirement to
compare their stock portfolio against the stock portion of their
stock portfolio, of their stock portion of them. So that
would be VT Vanguard Total stock Market Index, and that
(41:03):
would include oh, I don't have it up in front
of me, the allocation because I can't sign into my
y charts right now.
Speaker 3 (41:10):
But it's it's more diverse.
Speaker 4 (41:14):
So the VT, uh looking at portfolio composition, I can't
see right now, are you and y charts?
Speaker 2 (41:21):
No?
Speaker 3 (41:22):
Okay, so you know.
Speaker 4 (41:24):
It's uh, it includes you know, ten percent emerging markets,
fourteen percent Europe, ten percent Pacific, and sixty six percent
North America.
Speaker 1 (41:33):
I think it's not the vanguard. Total stock market indexes
total world world.
Speaker 4 (41:37):
Right, yeah, right, So I think that is the best measure, yeah,
index to compare yourself against, because it's the most diverse
and you want diversity and retirement. As we always say
that the SNP is thirty five percent, three percent tech,
almost ten percent consumer services, which is you know, meta,
(41:58):
Netflix and the likes. So you know, I think in
retirement you want to you know, be more diverse. So
I think the Total Market Index is the best thing
to comparison.
Speaker 2 (42:06):
Of nineteen percent year today.
Speaker 4 (42:08):
I saw that, Yeah, yeah, nineteen which is up nineteen
percent year today. You know what I do think is
interesting in you know, is that sense since twenty nineteen,
the SMP Since twenty fifteen, the s and P is
(42:29):
up two hundred and forty one percent. In billion hares
are up one hundred and twenty one percent or half.
And I don't like to in this might sound kind
of like a ridiculous comparison, but you know, when you're
in retirement.
Speaker 2 (42:44):
I thought it was a good analogy.
Speaker 4 (42:48):
But you know, people in retirement are more, in my opinion,
are more inclined to invest, like a billionaire, or a
hedge fund or a pension fund. You know, Ray Dalyo
is famous for Bridgewater Capital. Our Bridgewater brought Bridgewater Bridgewaters
returns astronomical, no, but on a risk adjusted basis, they're phenomenal.
(43:09):
So when you're investing for a pension that needs seven
percent per year, it's much different than investing for someone
that you know is thirty years old in the accumulation
stages of their life. So when you're in retirement, like
you know, you know, you should invest more like a
billionaire who is more inclined to preserve that wealth as
(43:31):
opposed to accumulate more wealth. That's kind of how and
that's why I think the Total World Index is a
better thing to compare yourself against, because you know, when
you're in retirement. I think most of our listeners probably
are in retirement or nearing retirement. You know, it's about
getting to retirement or maintaining retirement as it is about Oh,
you know, the S and P's up thirty percent this year.
(43:52):
I should be up thirty percent this year. You know,
you should be within range of the S and P.
But I don't think that it's a great compare because
you know, I don't think you want that volatility of having,
you know, such a tech heavy portfolio.
Speaker 1 (44:05):
So so my two cents there would be you said
a couple words, what is risk adjusted? So if you're retired,
you know you have to look at your risk adjusted
returns when you're comparing your portfolio. You should only you know,
if if let's say we use the VT the Vanguard
World stock Market Index as a comparison, only the stock
side of your portfolio should be compared to that, because
(44:25):
you might have thirty forty percent of your account out
of the stock market. That portion that's in out of
the stock market, the Bloomberg US stock or us A
bond market index is a good measure there. The last
thing I'll say on that is when I'm sixty three,
I meet with we meet with people you know, usually
fifty and up. At some point in time, your wealth
(44:47):
accumulation phase is over. You know, you talk about billionaires
and what do they have in common with the retiree. Generally,
generally speaking, the wealth accumulation phases over.
Speaker 2 (44:57):
That's why you're retired. You got to move to spending.
Speaker 1 (45:00):
I know a lot of people have difficulty with you've
saved all your life and now you know, someone like
myself or Aaron's asking you to spend.
Speaker 2 (45:06):
Yeah, you have to spend.
Speaker 1 (45:07):
You want to continue to maintain your standarding and do
the things that you've worked your whole life to do.
You know that said, it's hard to stop chasing that,
you know, chasing that wealth. It's hard to get off
that horse because now right now people have fomo on it.
You know, if they if they de risked a little bit,
now they have fomo.
Speaker 4 (45:25):
You know, even like you know, it's a it's winter time,
people are inside, you're retired. You probably have maybe CNBC
or the news on more. And you know, your portfolio
which was once okay, you know, I'm working forty hours
a week dollar cost average into my four oh one
k uh.
Speaker 3 (45:41):
Then you know, you roll it into an ira.
Speaker 4 (45:42):
You have your own choices, you're watching the news all day,
and your portfolio becomes your hobby. And we've seen that
happen quite often, and sometimes that happens to you. It
can be a great thing, or it can be a
bad thing. You know, or it could be you know
and neither. It could be it could just be a hobby.
But what you what you don't want to do is
you know, you know, get too involved, over confident, get
(46:05):
fomo and do the wrong thing at the wrong time.
Speaker 1 (46:07):
Well, I met with somebody the other day and I
made that example of you know, the aulat the wealth
accumulation phase of our lives. He's about my age is over,
and I said, the Rea, the way that it's not
over is if this is what you enjoy to do,
enjoy doing. And he has a good he and his
wife have a good chunk of money with us, and
(46:29):
he manages some money on his own. And he was saying,
I do enjoy it, and that's great. It's like gardening
or anything else. It's a it's you know, it is
more important than guardening because it's your life. And we
often say that the you know, the kind of the
four legs to your stool are you know, your health,
your family, your spiritual nature, and basically your your finances.
(46:50):
So it's one of those four important things. But if
you've enjoyed doing your whole life and you're proficient at it,
you know, have at it.
Speaker 2 (46:57):
But suffice it to say that.
Speaker 1 (46:59):
That's more of a you should be doing it more
for uh, that type of you know, like like anything
else like reading or whatever, rather than hey, I want
to accumulate wealth because you know you want to, you
also want to make sure that the wealth that you've accumulate,
you if you pass through that door to financial independence,
you just don't want to go back out the other side.
Speaker 4 (47:20):
Yeah, you know, and the risk is just way too high.
Speaker 3 (47:23):
You know, do you want to have to go back
to work?
Speaker 2 (47:26):
Sure?
Speaker 3 (47:26):
You know that. It's just uh, you only get you know,
one life.
Speaker 1 (47:29):
And so we got we got three of the eleven done,
you know, so we'll we'll probably you know, if we
get some more questions, we'll add them and maybe you know.
Speaker 4 (47:36):
The last thing, Yeah, can I gift money to my children?
Speaker 3 (47:39):
If so? How much? This year?
Speaker 4 (47:40):
You can gift up to eighteen thousand dollars to your
kids or anybody without having to file that gift as
a gift ext return. So that's always important. It's about
thirteen million dollars per individual now thirteen point something. But
you know, yearly, if you if you go up to eighteen,
you are you're in good scheap.
Speaker 1 (47:58):
Yeah, and if you find if you let's say you
give a little more, you basically just draw down that
thirteen and a half million dollars.
Speaker 2 (48:04):
You have to file gift tax return. I's think it's
nine oh something, maybe nine oh five. I think maybe
I'm not I'm not an accountant. So but that you
have to file a gift tax return.
Speaker 1 (48:14):
But you can give eighteen thousand, So you could you
could give eighteen thousand the listener, the gift listeners spouse
or parder could give eighteen thousand. Anyone person, So anyone person,
you know, Uh, you can give eighteen thousand. Right, that'll
just about do it. Thanks for listening to the show.
Give us a call during the week five one, eight, two, seven, nine,
ten forty four. Uh, check us out on the web
(48:34):
at Faganasset dot com, Like us on Facebook, and uh,
you know, have a great day.
Speaker 2 (48:40):
Take care
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