The Fagan Financial Report

December 22nd, 2024

Episode Transcript

Speaker 1 (00:00):
Good morning, and welcome to the Capitol District's Money and
Investment Program.

Speaker 2 (00:03):
You're listening to the Fague and financial.

Speaker 1 (00:04):
Report three days before the Christmas holiday, and uh, I
kind of feel like we've entered this, uh type of
trading that's very on a number of fronts, very unpredictable.

Speaker 3 (00:16):
You know, yeah, you know, probably volumes lower. People are
spending time with their family as they should.

Speaker 1 (00:23):
And at the end of the year, you got the
Trump presidency, the pending presidency. We saw some you know,
fireworks this week with Elon Musk and and and President
Trump kind of like, uh, kind of trying to give
guidance to Congress as to whether the pass the spending bill.
And so there's a lot a lot of things going
on that that makes the and then we had the

(00:44):
Fed meet this week, and uh.

Speaker 2 (00:45):
But first, how are you doing good?

Speaker 4 (00:47):
Good?

Speaker 1 (00:47):
Yeah, yeah, I'm doing well. I'm doing well. I can't complain.
Got a little you've got a little bit a little
accident this past week.

Speaker 3 (00:53):
Yeah, you know, I got someone right through a red
light and hit me. You're both okay, Yeah, So but yeah,
it was surprising, frightening experience. It was. It was so
I think my car is totaled. So, yeah, you came
to the rescue. You.

Speaker 4 (01:13):
I was talking to Lauren.

Speaker 3 (01:14):
It's funny, like you know that something like that happens,
like the guy went through the red light and just
like literally hit Lawrence side like dead on and like
Laurence fine, Like you know, it's funny that like that
that happens.

Speaker 4 (01:24):
You get home and Jude, like your kids are just like, hey,
what's going on.

Speaker 2 (01:27):
I have no idea, Like I've got a good one.
It's just that that's a good way though, you think,
you know what I mean, that's good. That's good. So
I don't know where do you want to start? You
want to start with the FED?

Speaker 3 (01:38):
Yeah, you know, I think the FED is the major
news of the week after after they came out with
the news on Friday. I think the SMP dipped almost Wednesday. Wednesday,
I mean the S and P dipped almost three percent,
same with the NASDAC down almost three and a half percent.
I think it was the worst day in the stock
market in a long time, a few years, really, you know. Yeah,

(02:01):
the nasdack town three point five six percent, s and
P down two point nine to five percent.

Speaker 4 (02:05):
And you know, I'm not too worried about it.

Speaker 3 (02:09):
In the grand scheme of things, you know, I think
pullbacks happened once in a while. And the reason rates
are going to be highest because the economy is good.
I think we have we can't forget that, really, So
I think a good economy puts a floor on the market.
But yeah, it looks like the you know, FED brought
down rates to the you know, four and a quarter
to four and a half percent, and but indicating that

(02:31):
there will be two reductions and rates next year, as
opposed to the belief that there will be four just
in September for next year. So I think it's uh,
you know, yeah that uh, you know, persistent inflation. That
that is what have has people worried.

Speaker 1 (02:45):
Yeah, you know, I think is some things that you said,
you know, I think that No, I think I think
you're right. I think that the FED a good economy
puts somewhat of a floor under the market. A good economy,
I run, might put a ceiling above the market in
as much as interest rates stay where they are now,

(03:06):
uh you know. And I think that now we're running
the kind of the parameters of an economy that is
growing faster than most would have anticipated at this point,
including the FED, UH kind of does not favor small
cap stocks because of the borrowing that they need to do,

(03:28):
so favors of larger companies with you know, Christine balance
sheets and the like. On the flip side, you know,
a growing economy with with the higher interest rates is
also going to make the cost of borrowing higher for everybody.
And it's also going and it's going to make options
to the market market available treasuries and the like. So

(03:48):
we'll talk a little bit about that. The FED action, UH,
the comments from Chair Powell UH in the press conference,
the post press conference. But I think now going forward,
I think kind of looking at a FED in future meetings,
Whereas going into this meeting and in prior meetings over
the past year or so, UH, investors were expecting a

(04:11):
cut in rates. Now I think when you go in,
when the FED goes into meeting, I think you're I
think investors are expecting a hold in rates and then
for the FED unless the data would dictate otherwise. And
I think that's the big difference coming out of the
meeting before before Wednesday, Fed's gonna cut, Fed's gonna cut,
Fed's gonna cut. You you mentioned four times through September
of next year. Now it's two times for all of

(04:33):
next year. And the FEDS were going into meetings thinking, Okay,
the Fed's gonna hold unless something were to suggest otherwise.

Speaker 2 (04:39):
And if the FED cuts.

Speaker 1 (04:41):
Then maybe what we're seeing is going to be economic
malaise rather than a cut a reduction in inflation. So
I think it just adds a little bit of uncertainty
to the market. And we've been saying that since the election.
I think the election of President of Trump, former President Trump,
president elect Trump will also create from time to time

(05:02):
swings and sentiment as as investors kind of try to
determine what what the ultimate policies are going to.

Speaker 3 (05:10):
Be, you know, and it's going to be obviously tough.
I mean, you know, just Friday midday at eleven twenty,
you're seeing the you know, triple ques up one point
three percent. You're seeing the S and P up one
point three percent, so you are seeing a rebound. Personal
the PCE index came in a little weaker than expected, so.

Speaker 2 (05:29):
You know, you have weakers, good because that's weak.

Speaker 3 (05:32):
Good because you know it is personal income rows point
three percent short of estimates, So you know, I think,
you know, you're kind of seeing you know, both sides
really and uh, you know, but at the same time,
I just don't think that the FED is, yeah, as
they said, is going to be in a hurry to
cut as as long as that you know, pp I
and CPI numbers are are you know, in the two

(05:54):
point five to three percent range.

Speaker 1 (05:57):
And the personal consumption is Expenditures index, one of the
FEDS favored on a year over your basis is a
two point four percent, which is you know, kind of
what the Feds, the Fed's looking for, you know. And
you also have data coming out this past week from Lenaro,
maybe talk a little bit about that. It's the housing
market is relatively weak, you know, housing data that came

(06:18):
out this week this year, this week, relatively week. On
the flip side, the Index of Leading Economic Indicators was
up for the first time in a couple of years
during the month of November. So you've got some conflicting data.
But right now, in our opinion, you have an economy
that's growing and third quarter.

Speaker 2 (06:34):
GDP was just revised for the This is a third
look at.

Speaker 1 (06:40):
Third quarter GDP and an annualized rate of three point
one percent, So you've got an economy doing well in
pockets and doing overall doing well, but doing very well
in pockets, and this poorly in some pockets. Like I said,
the housing market, which is critical to the economy, is
not doing well because you know, interest rates are stand up.
You have the tenure right now sitting around four forty five,

(07:03):
four fifty, you know, maybe sixty or seventy six point
six or point seven percent, sixty or seventy basis points.
That is above where i FED first began the cut rates.
So so there are some conflicting issues. But let's take
a look at some of the comments there from from
you know, in the post Wednesday open market commedian Prescott.

Speaker 4 (07:25):
You know what I think.

Speaker 3 (07:26):
I think this one is. You know, we understand very
well that prices went up by a great deal and
people really feel that. And it's prices of food and
transportation and heating your home and things like that. So
there's tremendous pain in that burst of inflation that was
very global, and I think that's you know, a good
reason why you know Trump won the election is that,
you know, twenty twenty three percent increases in prices over

(07:49):
the past four years has you know, really been hurting people.
But I think at the same time, you know, if
if prices went down, it would mean that the economy
you know, was struggling. So he then goes to say that,
you know that the best solution for the FED is
to continue working to get inflation back down to that

(08:10):
two percent mandate, so and then have you know, so
wages can catch up, you know, ultimately restoring consumers good
feeling about the economy. So you know, you get inflation
down to the two percent three percent mark, you still
have growth in the economy, so you still have spending,
so you still have wages going up.

Speaker 4 (08:30):
So that's kind of the.

Speaker 3 (08:31):
Goal is to basically grow out of this right, you know,
and get that two percent inflation target, you know, get
us back to that. Uh So, I think that's what
we're going to see going forward. But you know what
we what we're not going to see, hopefully, is prices
go down, because if prices go down, it would mean
that there would be many more issues with the economy.

Speaker 1 (08:53):
Now, you want GDP growing faster than inflation, yeah, is
what you have any relatively stable inflation. You don't want
deflation where prices are going down. You want for a
period of time, which we've had over the past year
or two, disinflation, which is inflation growing at a slower
month over month and year over your pace. And now
at some point in time, you want to inflation inflation

(09:15):
to level off at about two percent because some price
increases in price increase, price inflation spurs demand if you
think something's going to cost a little more next year, which.

Speaker 2 (09:27):
You don't want. I think that's and that that's some
of the some of the angst.

Speaker 1 (09:31):
I think that in the public is feeling right now
and it's easing a bit. Is we could set up
by consumer sentiment, consumer sentiments the highest it's been in
several months, that that twenty twenty two percent that we've
seen over the past four years or so is still there.

Speaker 2 (09:49):
You know, it's still there.

Speaker 1 (09:50):
So prices are twenty or twenty two percent higher than
they were four years ago.

Speaker 2 (09:55):
And I think that's the issue.

Speaker 1 (09:56):
Now of a lot of people would like to see
prices go down to where they were four years ago.
And like you were just saying, generally, historically speaking, that's
not healthy for a period of deflation. Japan through the
nineties two thousand and two thousands and well into the
twenty tens experienced that and you had to decline in
prices but also home prices, goods and services salaries. It

(10:21):
also led to uh, you know, recession because it also
quelled any demand that there was for goods and services,
especially some of your arts ticket items. If if consumers,
Japanese consumers thought they were going to be cheaper a
year down the road. So you did have this comment
from from share Powell. What else did he say going
through there?

Speaker 4 (10:42):
You know a lot of the same things.

Speaker 3 (10:44):
You know, they do think the label market is cooling
by many measures, but you know, not cooling at at
a rate that they would they would see to be
concerning as of yet.

Speaker 2 (10:55):
Or do you want that?

Speaker 3 (10:56):
Really?

Speaker 1 (10:56):
You don't want you want you don't want to labor
markets school to fest. You know, you saw the initial
claims employment benefits get up to around two forty you're
back down this past week. I think the two twenty
five or so too, thirty two hundred and fifty thousand.
It's kind of the market the same way where you
start to get concerned about the labor market. So the
labor market remains relatively strong. On deployment is still four

(11:16):
point two percent.

Speaker 3 (11:17):
You know what, I guess it is a little concerning
about this. You know, goal and objective is to grow
your way out of this. Is you know, although the
labor market's not cooling out a substantial rate, it is cooling,
so you know, to to grow out of this by wages,
that's obviously not the best sign. So you know, I
guess that's a little bit concerning going forward, is you know,

(11:39):
how does this happen? What policies does Trump put in
place to grow GDP? To yeah, to I guess, grow
your way out of this. So I think a lot
of people are just waiting for next year to say, hey,
you know, yeah, what what what does Trump prioritize.

Speaker 4 (11:53):
To grow our GDP?

Speaker 3 (11:56):
And you know, essentially the country's margins, right, you have
to do, you know, decreasing you know, you try to
decrease expenses and increase revenue. So you know how that
works out, you know, as as you know, a business
is a business, and you know, everyone, you know, everyone says,
you know, you want it's going to be great to
have a businessman, you know, run our country.

Speaker 4 (12:17):
You become more efficient.

Speaker 3 (12:18):
But you know what you don't want to do is
you know, run this country like a private equity firm
and just got everything. That's hard because you know then
it will be more and more difficult to you know,
spend and grow your way out of this.

Speaker 2 (12:30):
So well, so let's seehere it goes. So that's so yeah.

Speaker 3 (12:34):
Yeah.

Speaker 1 (12:34):
I also had Chair Pale mentioned mentioned h President Trump,
you know, his policies to a certain extent, and some
took umbrage at that because, uh, he had never brought
up the inflationary impact of President Biden's Inflation Reduction Act.
You know, that was really an oxymoron. Uh, Some people policies.

(12:54):
Some people did take a very preliminary step and start
to incorporate highly conditioned estimates. Some people, meeting people on
the the Committee and their their staff highly condition lessons
of economic effects of policies into their forecasts at this meeting,
and zaid so at the meeting, some people said that
they didn't do so, and some people didn't say whether
they did or not. Then they're making some approaches to that,
you know, wondering, you know, how things are going to

(13:17):
work out a little bit with with the tariffs and
with as you mentioned, the Department of Government efficiency.

Speaker 2 (13:23):
I think the government efficiencies.

Speaker 1 (13:25):
Also said today was a Wednesday's cut by quart a
point was a closer call, but we decided it was
the right call because we thought it was the best
decision the forster achievement of both of our goals maximum
ployment and price development.

Speaker 2 (13:40):
In the future, it's even going to be more cautious.

Speaker 3 (13:43):
I don't, you know, as people will always say, you know,
history doesn't repeat, but it rhymes. And I do think
though that, you know, although we did see a drastic
pullback on Wednesday, you know, I don't think it's anything
to really be worried about.

Speaker 4 (13:56):
What what have you been saying to clients the market? The
market up like.

Speaker 2 (14:00):
A like an look an escalator, and down like an elevator.

Speaker 3 (14:03):
And you know, usually that's a sign of a healthy market,
a healthy pullback. And you know, I do agree with that,
and I do think that, you know, what the last
three or four years have showed us, is that the
United States economy is extremely resilient, especially in a higher
interest rate environment. I think companies did way better than
than the public and investors thought, you know, being in

(14:23):
a three four five percent as we've seen in the
past year or two. Really, you know, not not a
six seven percent you know, eight nine percent inflationary environment.

Speaker 4 (14:32):
But you know, if we stay in this two to
three percent.

Speaker 3 (14:34):
Inflationary environment while while we have you know, you know,
four ish four or five percent on the tenure, I
think companies can continue to do well here and and
make a profit and an increased revenue. I still think
you will see some of the you know, downside pressure
on costs with artificial intelligence over the next two or

(14:55):
three years, which which could you know again put you know,
increased margins on a lot of these s and P
five hundred companies. And it's not just technology, it's you know,
it's it's all companies throughout all different sectors.

Speaker 1 (15:06):
Yeah, yeah, so yeah, I would you know, I would say,
don't worry about the pullback on Wednesday. Markets steady on Thursday,
rebounded a bit on Friday. And I think it's you know,
part and parcel with holiday volume, late volume trading, part
and parcel with year end. I know, I said this

(15:26):
last week on the show in subsequent weeks or prior weeks,
that everybody wants to stay in the game. They want
to stay like the musical chairs. They want to keep
moving around the table, move around the table or the
chair actually, and then when the music stops, they sit,
and who knows when the music's going to stop. And
I'm not talking about the long intermediate, longer term. I'm
talking about people want to get the most they can

(15:47):
out of this year, this calendar year. The S and
P's up twenty some percent. Nobody, especially professional managers, want
to get off that. Off that band wagon, off that
wagon if the market keeps going up, because they're going
to lag even more.

Speaker 2 (16:00):
So what do they do? They stay there, They stay there,
They stay there.

Speaker 1 (16:03):
Then all of a sudden, the market turns around and
begins to pull back, and they're like, oh my gosh,
now I don't want to give up the gains. And
I think that's what we saw on Wednesday. I'm surprised,
and why are we going into this because I think
we did get some calls from from clients. One thousand,
eleven hundred point down, doubt down day on the Dow
two point five percent as that, as you mentioned earlier,

(16:24):
down three and.

Speaker 2 (16:24):
A half percent.

Speaker 1 (16:25):
We diget calls and you know, and we gave the
escalator up, elevator down, and also some of the some
of the numbers would suggest really, uh, the Dow down
ten days and Dow ten days, and oh my gosh,
this is the beginning of the end. I pulled out
something from Bespoke Investments, and you know it talks about, okay,

(16:46):
the Dow Dow ETF performance after eight consecutive opens to
close the clients. This goes back to the year two thousand.
So out of out of the eight that we've had,
excuse me, out of the one, two, three, four, five, six, seven, eight, nine, ten,
eleven that we've had declines of eight consecutive days or more.

(17:08):
And remember the Dow went down for ten consecutive days.
That's the that's the most in fifty years after a
six month period. The market has only been lower twice
in five you know five and this is since since
two thousand, since the year twenty so twenty five years,
it was down you know five point seven five point
five seven percent and then point three three percent. That's

(17:30):
the d IA, the Dow ETF over one year period,
it's only been down once and that was in twenty
twenty one. Even over a three month period, the Dow
was down one or the da was down one point
two to three percent. So generally speaking, long declines. These
are eight consecutive days in a row. Doesn't pretend the
beginning of the end for the market. So I think

(17:53):
that's something that you have to really keep track of.

Speaker 3 (17:56):
Uh.

Speaker 2 (17:57):
And like I said, I think it's just.

Speaker 1 (17:58):
A matter of the market kind of finding its way
around here, kind of coming up with the new language.
And like I said, I'm very surprised that investors responded
the way they did on Wednesday. What did you really
think was going to happen? Did you think the Fed
was going to continue to cut cut, cut forever and
and and ignore the numbers, just like they did when

(18:19):
we were having an inflationary period where they were going
to raise raise rais excuse me where they where? They
said inflation was transitory and and and did not raise
quick enough. So you know, I think this is expected.

Speaker 3 (18:31):
Yeah, and just you know, I know, the stock market's
not the economy, but you know, I kind of you know,
piggybacking out on what you said. You know, if the
market's already relatively expensive on a historical basis, you know,
you start cutting rates right now and you have a
you know, another sharp, sharp parabolic move in the stock market.
Isn't as good for the market over time, as you know,

(18:52):
I guess just being responsible with with with these raid
cuts and you know, seeing that, hey, you know, the
economy is doing pretty good. I'm consumer are doing pretty good.
It's unnecessary to cut now, especially in such a time
of you know, I guess there's a lot of variables
that go on with with with what happens next year.
You know, I do understand how people might be a
little bit frustrated that Powell never you know, brought up

(19:14):
that chip sack.

Speaker 4 (19:15):
But you know, again I do.

Speaker 3 (19:16):
I just think that there's so many variables and unknowns
in the next month or two that you know, what
policies get put in place, and how does that affect
the you know, inflationary environment that you know, it's pretty
imp impossible to ignore it is.

Speaker 1 (19:31):
It is so so that that that kind of encapsulates
our opinion of the FED. Again, we expect them to
be very much data dependent going forward. We think that
they are should be data dependent going forward. We think
that they should be a little cautious going forward and
be a little bit more conservative on rake cuts going
forward because of a the economy is still doing pretty well.

(19:55):
B We've said it often that weeks now, weeks and
weeks you know, certainly since the election, that the election
of President Trump will present a broader potential range of
outcomes for the economy and the stock market than a
traditional politician. Yeah, those that are voted for President Trump,

(20:16):
and a lot of us, you know, voted for President Trump.

Speaker 2 (20:20):
Obviously a lot of us didn't.

Speaker 1 (20:22):
All wish that those those that potential range of outcomes
are going to be positive. And certainly tariffs can work
if applied applied appropriately, pairing back government expenses where they're
unnecessary can work. I think the market is going to
the Fed is going to take awake, wait and see
attitude because they can also be inflationary. And I think

(20:46):
that's what you'll see going forward because President Trump is
not a traditional politician. And that's and and that and
that merits. I guess even a recalibration of how the
FED calculates, you know, the numbers that they see coming
in because they're less all the data that we have
coming in that's come in over the past decades with

(21:08):
traditional politicians may be turned on its head. And yeah,
we're all hoping that's good. But I think you know,
when you go out of the norm. I think you're
just going to take take a little bit of a
wait and see attitude. And the Fed's doing that. Another
thing too, I think when you look at the FED,
I think I think there were investors that thought the Fed,

(21:32):
you know, I saw somebody say goodbye, punch bowl. You
know that the FED is not going to be there
really to to to help investors, and I disagree with that.
I think, I don't think you want the FED propping
up the market. I think you want the FED to
be a good steward of the economy to make sure
inflation doesn't come back. And that's what we would hope
that the Fed you know, is going to is going

(21:55):
to do going forward. A couple of other things, Uh,
the dollars strong, I think interest rates keep the dollar up.
That's you know, got to keep an eye on that
because that that will hurt exporters a little bit. A
stronger dollar, and I think that's something that uh, you know,
may may may end up weakening the economy as we

(22:18):
move through next year. And then their their dot plot
has moved from four or five cuts to to two
cuts through the balance of next year.

Speaker 4 (22:25):
Yeah, and I think, you know, as you said, you know,
goodbye punch bowl. It's the same thing.

Speaker 3 (22:29):
I don't know who said it looks like Lisa Khalihan,
but it's a logical time to pause.

Speaker 4 (22:34):
And I think that makes a lot of sense.

Speaker 3 (22:36):
You know, it is a logical time to pause here
as long as inflation continues to remain it has been
stubborn over the past few months in that two and
a half plus percent range, that it would be illogical
to continue to cut rates with the possibility of that
two point sext two point six turn to three and
then three and a half, then four. So you know,
I think that hopefully that the Fed, I'm through interest rates,

(22:59):
which you know aren't really historically that high or historically
numbers then stay around here, and yeah, we see what
President Trump puts in place to increase hopefully increase GDP
and not have inflation, you know, get to out of hand.

Speaker 1 (23:15):
Yeah, abnormality in interest rates was really from eight to twenty.
I'm trying to look for and I'll have it right
in front of me in a minute.

Speaker 2 (23:22):
Where's it? Where's it was?

Speaker 1 (23:24):
Thirty seconds last the statement from Lenar and basically the
interest rates have gone back up. The thirty year treasuries,
not treasury thirty year mortgages back above seven percent, and
the CEO of Lenard that came out with you know,
disappointing earnings a bit did note interest rate. So the
housing market still remains kind of in a little bit

(23:46):
of adultrums. Anyways, we'll broaden out the conversation is something
that's more interesting in the second half hour. But right
now 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 Capitol District's Money
and Investment program. You're listening to the Fagan Financial Reportum,
Dennis Fagan sitting here with my son every Sunday morning

(24:09):
from ten to eleven. We if we still have listeners,
I'm not sure that we do. I mean to talk
that we have fower about the FED. Well that's your problem,
you know. Now, I'm like, well, there's so much to
talk about the Fed. Really, there's so much to talk about.
The Fed is almost like going into one of those
house those house of doors or house of mirrors for

(24:30):
every every door you go through. I don't know there
is a house of doors, but every door you go
through you got to choose another one, and you go
this way, you go that way. And dealing with interest rates,
Fed policy, you know, I've been doing this forty years
and it's a gray area and human behavior is impossible
to quantify. So when the Fed, you know, cut rates
by a quarter, which I thought was was very responsible

(24:56):
of them, they waxed cautiously. It was a hawkish cut.
We said that would happen in our in our staff
shot that we released every Sunday morning around eight o'clock.
So if you're not a not a subscriber, please do
a Faganasset dot com sam We'll get a get you
on the list. So I'm not a hawkish cut. I mean,

(25:17):
what do you expect. Economy is doing pretty good, Inflation
is running a little hot. They don't want to give
up the ghost President Trump's programs. Let's say they'll be
turned out great, but they might be inflationary a little bit.
They might they might hurt the economy for a while
before they held It might turn out to be the
best thing in the world, but we might have to
get over some bumps because of teriffs or because of
you know, cutting government jobs whatever. So I'm not saying

(25:38):
any negative or positive, just saying creates some uncertainty.

Speaker 2 (25:41):
So it creates a cautious FED.

Speaker 1 (25:42):
A cautious FED equals you know, cautious tones, hawkish tones.

Speaker 2 (25:46):
And I think that's what you got from the FED.

Speaker 1 (25:48):
And people who are The market was evidently surprised, and
it was down eleven hundred points, but we thought, you know,
you know, we think, we do think there's gonna be
chopping iss but we think they'll be buying. These are
buying opportunities, not at opportunities to sell. And don't let
your uh, don't let your if you don't like President Trump,
don't let that get in the way of making money.

(26:09):
Because there were people didn't like President Biden. The market
died fourteen percent a year under President Biden. Uh, and
it could very well do well under President Trump, right
for those same reasons. Yeah, so you're you're you're had
to try it on this and this John Hussman, you're
not to try to try to make.

Speaker 4 (26:25):
John Hustman came out with an article.

Speaker 3 (26:26):
He's, you know, a pretty famous economist PhD Stanford, pH
d who ran a hedge fund in a mutual fund,
you know, and it's peak it had about six point
seven billion dollars under management. You know, the guy's essentially
a genius. And you know he called the dot com bubble,
so he calls it dot com bubble, and he calls
two thousand and.

Speaker 4 (26:46):
Eight, so, you know, the Financial Times.

Speaker 3 (26:48):
Gives him a platform to write an article called new
eras new same bubbles, the forgotten lessons of history, where
he really tries to, you know, say, hey, private margins
having an increase only increased with you know, the reduction
and interest rates. He goes on to say that, you know,
this is just the same old bubble that we're in now,
and markets are you know, very very you know, scary metrics,

(27:13):
you know, and what I'm I didn't you know, and
say say what you want about him and what he
believes in. You know, he might be right this time,
but you know he was right in two separate times. Right,
so since his Strategic market Sunfund market Cycle Fund was
founded on December nineteenth of two thousands, so that includes

(27:34):
the dot com bubble and includes two thousand and nine,
both of which he was right in.

Speaker 4 (27:40):
Since then, what I mean, what do you mean?

Speaker 2 (27:42):
Right?

Speaker 4 (27:42):
He called them.

Speaker 3 (27:43):
So basically he has a he's a perma bear. Yeah,
he's a perma bear essentially. So he calls both of
these pullbacks. It makes it a little bit of money
during both of them. But you know, if you if
you I guess Broughten out his performance to the beginning
of this fund, and he went from you know what
I said, six point seven billion dollars under management to

(28:04):
now he manages this fund two hundred and fifty million essentially.

Speaker 2 (28:08):
So why might that be?

Speaker 3 (28:10):
I know, since so since twelve, twenty nine of two thousand,
of two thousand, his fund is down eight point eight
two percent in the market. The market, you know MSCI
World Index is up three hundred and fifty four percent.
You know, so what I thought was kind of insane
really is you know, the Financial Times giving him in
our bed. Really, you know, even if he's right this time,

(28:33):
you know, at what point do you just kind of
lose credibility? You know, you've been calling for the market pullback,
you know since you know, twenty fifteen, he was sounding
the alarm, and the market's up two hundred percent since then,
one hundred and fifty percent since then. So market pulls
back eighty percent and you're still wrong.

Speaker 2 (28:51):
Well, no, right, I don't know.

Speaker 3 (28:53):
I just think it's you know, it's almost that fear mongering, uh,
you know, trying to get people to jump been and
out of the market. And you know, I just thought
it was kind of odd that the find you know,
at what point do you, I guess, say, hey, man,
you know you're wrong, just kind.

Speaker 2 (29:08):
Of I did a long time ago.

Speaker 3 (29:09):
Do you think he's too yeah, you know, or do
you think he's too too far in the weeds?

Speaker 4 (29:12):
Now?

Speaker 3 (29:12):
That's kind of basically what we always say is, hey,
you know, do you think the market's a little bit
overvalued here? Yeah, that's why you know, a growth an
income that traditionally has seventy five percent in the market
has sixty five, you know, And I think that's how
you you know, achieve success over the over you know,
the life's the you know, your financial life is you know,
not making those wholesale moves and becoming too positive or

(29:35):
too negative. You know, you don't want to get too
greedy and you don't want to get too pessimistic because
you know, you tend to do the wrong thing at
the wrong time.

Speaker 2 (29:42):
Yeah, I stopped paying it.

Speaker 1 (29:44):
I remember him well, no, no, not to you. I've
been paying attention. But you know I've been doing this
forty years. If this is the first time you've run
across John Hussman, it's because he's been irrelevant for the
last since you've been in this business.

Speaker 2 (29:55):
Probably love it.

Speaker 1 (29:56):
You you look, there is a bubble, there is there
is a bub and there you know, but but could
it double?

Speaker 2 (30:03):
Yeah?

Speaker 1 (30:03):
Maybe, well now that there's a bubble in a balloon
that bursts, right, there's a bubble right when you blow
the first breath of.

Speaker 2 (30:09):
Air into it or helium into it.

Speaker 4 (30:11):
You know, you know, I think yeah, but you know
in just you.

Speaker 3 (30:14):
Know, this type of of of you know, even so
much optimism or so much pessimism, you know it, you know,
and a lot of retirees, let's say, you know, having
the more time on their hands to go down rabbit holes.
You know it could it can become dangerous. You know,
you kind of like equate it to you know, it
might be a stupid equation, but you know, if you're

(30:35):
up late at night and you're going down you're watching
like whatever unsolved mysteries or something about aliens or something.
You know, if you read about something for an hour,
two three hours. You know, you really start to believe it.
You know, you can find enough confirmation biases on the
inner to be like, you.

Speaker 4 (30:49):
Know what this is, this is happening. You know the
same thing happened.

Speaker 3 (30:52):
With the bricks Nations taking over the world. What two
years ago, how many calls we were getting on you know,
this is the end of the dollar. Uh, you know
these bricksations are are are doing this, and they're doing this,
and they're doing this, and they're you know, going to
devalue the currency. Then all of a sudden, you know,
the dollar is going to be worthless. And look at
the dollar now two years later, it's stronger than it's
ever been. Really, So, you know, I just think that,

(31:14):
you know, basically, don't go down these I guess rabbit
holes or or of being too pessimistic or too optimistic,
because you can, you know, you can find I guess
whatever information that supports your theory. And you know, I
think that can be dangerous for people, you know, if
they're investing their own money or yeah, yeah, yeah, I
guess I.

Speaker 2 (31:33):
Just on and and on their website. Yeah, so was.

Speaker 1 (31:40):
You know, performance may significantly deviate from the general market
and the S and P five hundred index.

Speaker 2 (31:46):
You know, that's the that's the hustle, strategic allocation.

Speaker 1 (31:49):
That's just market, I guess, rather than rather than continue
to beat, I think the point is if I said
to you stock market over a five year period goes
up ninety five percent of the time, why.

Speaker 2 (32:01):
Would you ever be a permeable you know, Yeah, you're
you know and a b you know, stressful man.

Speaker 3 (32:09):
I think for him, like he's dedicated the last twenty
years of his life, thirty years of his life to
calling bubbles, and look what it's got him literally negative
ten percent.

Speaker 4 (32:21):
It's it sounds stressful. Yeah, you know, I just don't think.

Speaker 3 (32:26):
I don't know who said it, but I don't know
why you'd ever bet against the United States and the
United States.

Speaker 1 (32:30):
Economy and consumer Yeah, you know, and you're going to
call things right if you call for for doom. Like
eventually the bubble of two thousand, the market was up,
you know, S and P, the NASDAK was up fourfold,
you know, in five or six years leading up. You're

(32:52):
saying he's beenmbarrassed since twenty fifteen. I'm seeing something. John Husman,
the speculative market advanced since two thousand and nine, and
did last week is in June of twenty four. If
I looked at this closely, I could find tons of
articles from a long time ago that were bearish and
and and again it's.

Speaker 2 (33:08):
Not it's it does it's not. It's not just it's not.

Speaker 1 (33:14):
Profitable to be bearished all the time against US markets.
And you were saying earlier, what would you do you
raise some cash right now? You know, we're not barissed,
you know, as you move forward. You know, we think
the markets, we've been saying, fairly valued for quite some time. Again,
depending upon you know, how President Trump's programs work out,
you know, it may be undervalued, you know, so so
we'll we'll just uh wait and see how that plays out. Right,

(33:37):
So anyways, that that anything else about that.

Speaker 3 (33:40):
Not really no, you know, just yeah, I just don't
think it, you know, pays to take any two broad
calls like that because you know, jumping in or out
of cash never works well.

Speaker 1 (33:52):
I think I was talking to Doug Keenholtz, who works
with US, earlier today about about just that that. You know,
if you if you get yourself caught up in the
day to day movements of the market. Then you're bound
to make mistakes because, as you say, the market goes
up fifty percent of the time and down fifty percent
of the time. You know at some point in time

(34:12):
you're going to be paying attention to the wrong person
when you are emotionally prone to toppling that way, lots
of times people are emotionally prone to topping you know,
greed in the market. I think we see that some
we've seen that in pockets of the market now. So
that's why I think this is a healthy reset.

Speaker 3 (34:30):
Yeah, and I think you know what we talk about too,
is you know, you have so much availability to you know, Schwab,
the Schwab after Fidelity, app Robinhood, CNBC that you know,
you see a three and a half percent down day,
That's that's pretty extraordinary. And I think you'll see more
and more of those as the S and P becomes
more and more volatile, as it's more and more technology

(34:50):
and consumer services. But you know, and I think what
makes it dangerous is that you know, just that chart
I think we talked about last week that you know,
time the market just doesn't work right. So the value
of one hundred thousand dollars invested in the SMP from
January twenty twenty three to December twenty twenty two, ten
thousand turn into almost sixty five thousand. You know, if

(35:11):
you missed the ten best days, you'd only have twenty
nine thousand, seven hundred and seven of those ten best
days happened during a bear market. So when you're more
susceptible to probably make the wrong move at the wrong time.

Speaker 2 (35:25):
Stay the course, pulling the reins.

Speaker 1 (35:27):
If you feel like it, go to JP Morgan Premium
Equity Income Fund with some of your money to pick
up some high dividend income.

Speaker 2 (35:35):
Or go to.

Speaker 1 (35:35):
JEPQ that's a Nasdack based option calling fund that deals
with options as well. You know, go those go that route,
pick up some Bristol Myers in your portfolio, Johnson and Johnson,
and you know, enjoy the holiday.

Speaker 3 (35:51):
Build up enough cash and bonds in your portfolio to
you know, withstand those distributions that you need through times
of you know, I guess more uncertain tea and market
pullbacks and bear markets, so you can let the you know,
risk your side of your portfolio.

Speaker 1 (36:06):
Speaking of which, speaking of which, got article from somebody
and I want to I won't mention them, but actually
it's tourist and slock from Apollo and his issues. The
chart twenty twenty two coming back for the sixty to
forty portfolio. Twenty twenty two is within one of the

(36:28):
worst years ever for the sixty to forty portfolio, which
which led to a lot of investment advisors not us,
saying hey, that that portfolio is dead. Well, you know,
I will say that the reports of my death are premature.
I think who said that, Mark Twain? I might have
said that. I'm not sure. Correct me if I'm wrong,

(36:48):
but I think what you have there is the difference
between now in twenty twenty. So he's basically saying the
strong economy combined with the potential for lower taxes, higher
tariffs and restrictions on him a gration, has increased the
risk that the Fed will have to hike rates in
twenty and twenty five. And we haven't spoken about that
in a while, but we do think it's his restrictions
on immigration that's certainly inflation area because there's less people

(37:12):
doing some of the jobs that are very priced sensitive,
and a lot of those a lot of individuals that
do jobs that are priced sensitive are immigrants because they're
lower cost, so they very priced, wage price sensitive. I
might I might add wage that we see a forty
percent probability that the FED will raise interest rates in

(37:33):
twenty and twenty five for investors that it's starting took
similar to twenty and twenty two. Too high inflation, rising
interest rates, and falling stock prices. I think that's where
the similarities end, given the fact there they remember in
twenty and twenty two, we had interest rates at a
much lower level. On December thirty first of twenty and

(37:54):
twenty one to two year no was one point seven
to three percent. It ended twenty twenty two at four
point four one one the ten and right now the
two years sitting at around four thirty For twenty the
tenure note went from one fifty two at December thirty
first of twenty and twenty one to three point eight
eight percent, so up two and a half fold. Right

(38:15):
now it's sitting here at four point four or five percent,
So the tenure would have to go up for it
to be another twenty twenty one. The tenure would have
to kind of double from here if you look at
it on a on a relative basis, not on a
or even on an absolute basis, the tenure would have
to go from three eighty eight to six ten or
so six six fifty, well in.

Speaker 2 (38:35):
The around six or seven percent right after four thirty
four forty forty.

Speaker 1 (38:38):
Yes, so I don't see it, But you know, what
do you think about What do you think about the
sixty forty portfolio? What do you think about that type
of a scenario? Do you think it's I don't worry
about that.

Speaker 4 (38:50):
I don't know, I don't worry about it as much.

Speaker 3 (38:52):
You know, I think I worry about it more now
than I did two months ago, But I you know,
I don't think you worry about it as much because, yeah,
you know, you see some reports that, you know, the
tenure might hit five. You see some almost more out
out there reports that it could hit six. But even
if it did hit one or the other, we wouldn't
be the same as as as it had been. So

(39:15):
you know, I guess I'm not too nervous about that.
But then again, you know, I do think that, you know,
Trump's policies and in what he's campaigned on, you know,
would lead to to a rising rate scenario. So I think, yeah,
that's the biggest wild card is, you know, and I
do think that his policies are somewhat experimental, and we

(39:36):
haven't seen this.

Speaker 4 (39:37):
Ever happen before as a you know.

Speaker 3 (39:41):
I guess the only time you could see it is
this smooth Holly hacked in the in the nineteen thirties
or late nineteen twenties, and we.

Speaker 4 (39:48):
Saw how that worked out.

Speaker 3 (39:49):
So, you know, we really haven't seen this, I guess
experiment in quotations that you know, Elon Muskin and Trump
are trying to impose. So now it's hard to make
too many you know, I guess prediction with so many
variables really right now, so there's a lot of outcomes
that could happen, both good and on the bad side.

Speaker 2 (40:06):
I think.

Speaker 1 (40:10):
I think that things will smooth down a little bit.
I think things will be volatile immediately after January first,
for maybe the first two or three weeks, just because
I think there are a lot of pent up unrealized
capital gains that investors, including us, want to get rid of.

Speaker 2 (40:23):
I didn't want to do it over the past couple.

Speaker 1 (40:25):
Of months because there was a there was a positive
momentum trend in the market, and also we were closing
out the year, and you didn't want to sell something
and pay taxes this April when you can push it
off till next April. So I would also think that
there is going to be some churning. But but as
President elect Trump's becomes president, as his policies become more

(40:49):
wider known, and you get down into the nitty gritty,
you know, I think, you know, it'll be fine for
the first half, and then as those policies are implemented,
you know, like you said, I think we'll see how
they work out. But I'm looking at at that at
that sixty forty portfolio, and I still see it as
very very u the classic retirement portfolio being still very appropriate,

(41:14):
applicable for some for somebody now and when. And don't
think that, uh, your bond should not be part of
your portfolio. Also think that you know, I think you
can go out five, six, seven years, you know, I was.
What's going to eat into your income is inflation. And
I think if you were saying, if the tenyure drives
up to five percent, it's probably gonna choke off some

(41:34):
economic activity. So it' almost be a self correcting type
of mechanism with inflation, and uh, because of a slowing economy.
So I think that, you know, I think that rising
tenure will choke off inflation to a certain extent because.

Speaker 2 (41:51):
Of just because interest rates are higher, you know. So
we've got got some stuff going on there.

Speaker 1 (41:57):
I've got a couple of things to do left too,
and I don't if you've got anything left, No, if
you want to talk about let me do mine first. Yeah,
Ian Salisbury new retiree should plan to spend less than
four percent a year and why the stock market rally
is to blame, and he says this year new retires
should count and spending just three point seven percent of

(42:18):
their bounces a year. According to a new morning Star report.
Morning Star says the latest figure assumes the retiree invests
twenty to fifty percent of their portfolio stocks and the
rest in bonds and cash twenty to fIF twenty to
fifty right where we're for us, I think the classic
retirement portfolio is sixty forty. So we are more more
allocated to the stock side of the equation the bond side.

(42:42):
And for no other reason that I look at Johnson
and Johnson pays a nice you know, three and change
percent dividend.

Speaker 2 (42:47):
What's it what's their dividend.

Speaker 3 (42:49):
I think the closer you are to needing that three
point seven four percent, you know, the more conservative you
obviously should be. You know, if you only need a
two percent distributionary, I don't. I don't necessarily I don't
think you should have a more conservative portfolio. I think
you should, you know, increase your risk really because you know,
even if you're depending on who you're saving for as
well and who you're investing for.

Speaker 2 (43:11):
That's a good point.

Speaker 1 (43:11):
He's saying that that three point seven has a lot
to do with the fact that market has done so
well this year. You know, it's it's stripped out some
of the potential of the market, if you figure you're
buying potential selling lack thereof.

Speaker 2 (43:22):
He says, Look, you know, if.

Speaker 3 (43:23):
You're this's always changed though, you know, and so now
I two point seven. The next year, if there's a
twenty percent, corrections will be four point two or you know.

Speaker 1 (43:30):
It's just but I guess I guess what they're saying, right,
I agree with that. But if let's say your portfolio
and just these are for number of purposes, eight hundred
thousand at the close of last year, and you had
a four percent distribution rate. That's thirty two thousand dollars. Well,
if you're if your accounts worth a million dollars now,
and you said, you know what, I'm going to start

(43:50):
taking my investments, and.

Speaker 2 (43:54):
I heard four percent's a good distribution rate.

Speaker 1 (43:56):
And my portfolio is worth a million, that's forty thousand
dollars a year, Well, forty thousand a percentage of million
is obviously four percent. Forty thousand as a percentage of
eight hundred thousands of five percent distribution rate. So just
keep that in mind that the rise in the market
has kind of and that's what this article is saying,
has kind of made that distribution rate go up a

(44:18):
little bit or go down a little bit, you know,
relative to where it was, you know, so that you know,
so I would say lop. You know, we often said
during during the I think during the pandemic in twenty
twenty two, lop twenty percent of your portfolio. Strike a
distribution at that and if you can retire, go from there,
because the market can is certainly correct twenty percent, you know,

(44:39):
sixty forty portfolio wouldn't be likely or historically that likely
for a twenty percent correction, but if you got a
million dollars, go back to eight hundred thousand, strike a
four percent distribution rate and start out, start out your
distributions with thirty two thousand. If you can retire, you know,
then you know, I think you really know you're safe
because that distribution rate is so low.

Speaker 2 (45:01):
A couple of questions we had in our mail bag.
You know you got anything in there? I saw a
couple in there. I don't know if you get that
in front of you or no.

Speaker 4 (45:08):
You know.

Speaker 3 (45:09):
The one question that I have really is, you know,
and we get this question all the time. And I
had someone come in and they basically said that, hey,
you know, I'm nearing retirement. You know, my advisor has
me about twenty five percent international. And I thought that
was interesting because then he goes on to explain how,
you know, his advisors say, hey, you have to get
more you know, you increase your international exposure the closer

(45:32):
you get to retirement, because you know, international companies are
tend to be less volatile, you know. And I understand that,
but you know, I don't know. You know, we have
historically been extremely overweight international compared to let's say, like
a twenty whatever in Next twenty A life Cycle Index
or even the VT the Vanguard Total World indexes, I

(45:53):
think twenty percent Europe. So I don't know, I guess
you give up. I don't think it's an off idea
to increase international exposure in retirement or near retirement. But
I guess you know, international has to, uh, I guess
prove itself as being you know, great companies to invest
in and not just undervalued. I guess, I mean, companies

(46:16):
will go in and out of over and undervalued. But
it's hard for me to invest in international just because
you know it's historically undervalued right now.

Speaker 2 (46:28):
Yeah, it's hard for you to invest there because it's
revenue growth.

Speaker 1 (46:33):
Well, I think they they've got too many social programs
to be competitive with the United States is a problem,
and I think, well, you know, if you if you
look at the rise of President Trump, if you wanted
to say that some of the reason for that has
been that you know, he wants to turn that clock back.
I mean, I think the most of the developed countries
in the world, the developed developed countries have too many
social programs to really uh uh create the uh inventiveness

(46:58):
and the new new products like the US has the
technological that is, the ones that don't have the social programs.
Let's stay China, for instance, don't have the transparency in
their financial system. I think the United States combines the
best of both worlds. I you know, I do worry
that President Trump's tariffs compromise. That our markets are our

(47:19):
international and markets for our products, and I don't know
if it's going to work out. So if you want
to worry for myself going into the next year, that
would be one of them. I hope this works out.
He certainly knows a lot more than I do about business,
So I'm not going to sit here and say that
I know that it's it's going to be good or bad.

(47:39):
I'm hoping that he knows exactly how it's going to
play out, because you know, right now, the US economy
is relatively strong and our markets are still ours for
our companies, so that that would be some of my
concern there. But you know, I think and the other
thing too is I think you've got to sit back
and say, Okay, because of such underperformance in the past

(48:02):
decade decade and a half, I think you have to
be see some you know, not just one month of
outperformance from the international markets. I think you have to
see three six, nine months. I'd rather be late, late
to that beginning of that cycle then early, you know. Anyway,
So I want to wish everybody a very happy holiday.
Enjoy your We're I'll see you on Christmas, right, you

(48:24):
and your lovely family Monday, see you on Monday tomorrow,
and then you know, and then.

Speaker 3 (48:29):
You know, we're going to take the twenty fourth and
twenty fifth off, Yeah, spend time with our family and then.

Speaker 2 (48:34):
Get back at it, get it. Yeah.

Speaker 1 (48:35):
Anyways, all right, give us call during the week five
one four, check us on the web, but faganasset dot
com or like us on Facebook.

Speaker 2 (48:43):
Have a great day, think