Episode Transcript
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Speaker 1 (00:01):
Good morning. What you the Capital District Money and Investment Program.
You're listening to the Fagan Financial Report. I'm Dennis Fagan.
Aaron is off this He'll be joining us in the
second half hour, so any questions, feel free to give
me a call. I five one to eight talk WGY
or one hundred talk WGY, and I'll take a couple
(00:22):
of calls to that hour if you want so. Feel free.
The second half hour we will not be taking any
calls because it'll broadened up the conversation. But the place
is to say, a lot of news going on tomorrow.
We have the inauguration. We'll see get some more clarification
and the policies of President Trump exactly. You know, hopefully
what's going to transpire a little bit. It's going to
(00:43):
sign some executive orders. Investors are looking at deregulation, They're
looking at selective tariffs, are hoping for selective tariffs. I
think they're looking for some sort of reconciliation with Canada
and CO. But I think more importantly Canada and we'll
(01:05):
go from there. Obviously, some things that affect the economy
in an indirect way, if you want to call it that,
which is you know, well, it's actually pretty direct as immigration.
So hopefully we'll get working on some of those things
and move forward. But so what we'll do also is
take a look at the market the first half, fiul.
(01:26):
Take a look at you know, how the market did
this past week. Some of the economic data that came
out and the big big numbers that came out this
past week was a consumer and producer price index, So
we'll talk about that. But anyways, hope everybody's doing well.
Getting ready for some snow. I think you're talking four
to eight inches. Going to get out and go for
a walk before that right after the show in so
(01:48):
be safe and enjoy the snowfall should be pretty out there.
So for the week, the Dow Jones Industrial Lavish closed
the fifteen hundred points at forty three four eighty seven.
You're still sitting around three or four percent away in
the Dow from its all time high. One of the
things that you'll notice with the Dow is it's the
best performer of the broad indices on a year to
(02:10):
day basis. Now you got the transports, you've got industrials
in there, you do have some technology in there, so
it's more of a broader index or more a cyclical index.
I might say, compared to the other two indices, that
there are three indices that are that are the broader ones,
that S and P fIF on a NASDAK and Dow
Jones Jewish total market index. But the Dow, like I said,
(02:30):
of fifteen hundred points, up three point sixty nine percent
for the week, far out pacing the S and P
five point of which closed up two point nine one
percent for the week one hundred and seventy points. I
thay what triggered the rally in the market was pain
inflation at the producer price index and then on Tuesday
(02:50):
and then followed up with with good numbers again on
retail inflation. Prices at the wholesale level as measured by
the Producer Price Index up two ten percent in December,
and this is after entering up four ten percent November
year over year. The producer present this is up three
point three percent, little little hotter than the three percent
(03:11):
year over yere there was up November, but down from
the peak of about eleven point seven percent. Sort of
inflation at the whole sevil peaked in March twenty twenty
three forty percent or cell of inflation at the at
the wholesale level was impacted by energy. Energy costs jumped
(03:33):
three and a half percent during the month of December,
and I think that's why I had the PPI up
a bit. Even if you look at the consumer percing next,
which is inflation at the retail level, energy prices up
two point six percent. That was forty percent of the CPI,
as I mentioned, So you have inflation coming down, and
I think you know quite often on the radio show,
(03:54):
and I think we'll talk about in the second half
hour bit we talk about the FEDS target of at
two percent. And I think one of the things that
you have to realize is that embedded inflation to a
certain extent, and most people think of inflation, they think
of something bad, and indeed it can be. It can
(04:15):
rob individuals and corporations of their spending power or their wealth.
But a little bit of inflation is good as it
creates demand for goods and services to a certain extent,
if you think that prices are going to be going
up in a year over your basis for housing and
the like and automobiles, that it does create demand. I
(04:37):
think deflation is something that we saw that culminated over
you that destroyed really Japan over a thirty year period
that came to an end five three or four years ago.
And now they have a bit of inflation, which is
allowing their economy to grow again. But you don't want
rampant inflation. I like in it terrain. Rain is good.
(05:00):
You don't have a garden without some rain. You don't
have really increasing demand without obviously a good economy and
a strong labor marketing like, but a little bit of
inflation is good. But the Dead wants to get it
down to two percent. That is half of their mandate.
His inflation at two percent in GDP growth nominal GDPRE
growth at four percent or two percent GDP growth after inflation,
(05:27):
so stable labor market they're looking to achieve. And I
don't know that. I think that last mile of inflation
is going to be somewhat difficult to get inflation back
down to. They had a very difficult time getting inflation
up to two percent from two thousand and eight to
twenty twenty, and now I think they're going to have
a bit of a difficult time getting it back down.
You know, if you look at the dock order strike,
(05:48):
you'll get the strike at Boeing. You look at just
the the increasing I guess I wouldn't call it power,
but increasing balance of really power. I guess said that
word shifted a bit from management to labor. And you know,
and Aaron would say that if he was.
Speaker 2 (06:06):
Here, he'll be in while that that's good.
Speaker 1 (06:10):
And I do believe it's good. If you look at
the middle class in America, it's been eroded over the
past thirty or forty years. A little bit of shift
from management to labor, I think is good. It's good
for the economy. May restrict corporate profits a little bit.
That's perhaps AI is certainly a reason, but perhaps some
of the other reasons that some of the technology leaders,
(06:34):
you know, from from a Tim Cook to an Elon Musk,
Mark Zuckerberger coming up to the President Trump and we'll
be at as inauguration tomorrow, in addition to a couple others.
But I think they see that maybe that balance turning
a little bit. I think they see challenges in AI
(06:55):
and they and they want to get a little closer
to the president. But just circle them back to inflation.
Good numbers. Last week, market rallies shot sharply in the
second half of the week. I think it was up
about three hundred points if it is represented by the
down on Thursday, another couple hundred or so on Friday,
and part of it due to tame inflation at the
(07:15):
whole set level or also tame inflation at the retail level.
Consumer press send us up four ten percent in December.
Like I said, forty percent of that was energy prices.
So if you overlook that or you exclude food and energy,
the course, CPI I have two tens of a percent,
which was below expectations, and you know, ease the fear.
Someone eased the fears that inflation was reaccelerating. We start
(07:36):
our our snapshot that we send out every Sunday to
all of our clients, and those of you who wanted
who want our clients, feel free to email us at
taganasset dot com that let's not get too excited, you know.
So we sent out by four or five page missive
every Sunday for those of you that don't get it.
(07:56):
And the first page or page and a half or
so is this descript of the economy what happened in
the past week, and then some newsworthy items put out
in bullets and One of the news worthy items that
we put out this week that we thought was newsworthy
worthy was the bond market rallied. As I mentioned, i'm
better than expected readings on inflation as a yield on
(08:17):
the Tenure Treasure NO, which had gotten up close to
five percent, I think it peaked at four point eight
something percent, and many thought that if the yield on
the tenure Treasury NO pierced five percent, that that was
going to create a significant headwind for the stock market.
And I kind of agree with that, and I think
that's something as investors you have to look at closely,
(08:43):
the yield on the tenuere because as that climbs, investors
look at that as a risk free rate of returns. Certainly,
if they buy a tenure treasure of five percent and
interistrates go to seven and they need to cash it
in prior to that, it's not it's not risk free.
You'll get less than you paid for it because of
(09:03):
the interest rates go up the value of bonds go down.
But it also has risk, purchasing power risk or the risk,
you know, the opportunity cost that you could have bought
a a bond that's seven percent and you bought it
a five, but most investors don't see that. Most most
investors in fixed income retail investors equate risk with, Hey,
(09:26):
I put in one hundred thousand dollars and we're going
to get out less than that at the end. So
if you hold a tenure no to maturity at this
point in time, you're going to get four point sixty
one percent, and that's that's okay. But if that rate
continues to move up, if the long term average rate
of return of those sock markers nine or ten percent,
(09:48):
Now as that rate moves closer, that risk free rate
of return in the eyes of most investors move moves
closer to five percent, then five and a quarter percent,
five and a half and round numbers make news. And
then NAS that closed over nineteen thousand, and then the
Dow closed at an all time high of forty three thousand, whatever,
(10:10):
when stock market makes When the Dow closed about forty
thousand for the first time, the s and P five
hundred six thousand for the first time, that type of
information makes news, and so on the same basis the
same level. When the tenure gets to five percent, that'll
make news, and that'll catch the attention of investors, And
(10:32):
as I mentioned, I do think that is aheadwin. I
think we are going to get that. I really do.
And we use a quote of marks when the rumors
of my demise are greatly exaggerated. Perhaps we can apply
that same line to inflation, as in our opinion, inflation
will hang around this two and a half percent mark,
a bit above the FEDS target, but most likely palatable
(10:54):
to now for the FED as they ready for the
Trump administration and also as they measure the glide path,
if you want to call that of the economy. They
want to slow the economy down, but they won't want
theyn't want to slow it down if they look at
it as a big plane that's perhaps coming for and
for landing. They don't want to tip that nose down
too far because I obviously closes problems for a plane,
(11:17):
and we also cause substantial problems for the economy as well.
So that's what the Fed's dealing with right now. That's
what the market's dealing with right now. You have the election,
and said it every week. I think since since the
election ed that President Trump's the range of potential outcomes
as much broader with President Trump than it is with
(11:37):
the traditional politician, all right, love them or hate him,
and certainly hoping for the best. And we'll get more
clarification to think. And I think over the next week
two three, the market returns will depend to a certain
extent on what President Trump has to say. We're in
the heart of earning season. We've got earnings coming up
(11:58):
three am, Netflix, out of the Airlines, Johnson and Johnson
this week. But I think that takes that shares the stage,
or even takes a back seat, you know, to this
first two or three weeks when President Trump gets into office.
You know, since the election, the Dow's up three percent,
the S and p FI punters up three point seven percent,
(12:19):
the nastacts up six percent, so that that's positive. But
if you think about the Dow of three point sixty
nine percent this week and of three percent since the
election going into this week, you know, the Dow is
down since the election. So so we'll we'll see, we'll
see how it plays out. As if you're listening to
the show, you are concerned about your your financial future.
(12:41):
So I think it will pay to listen to that,
listen watch the inauguration, and we'll certainly be doing that.
The markets closed and out of doctor Martin Luther King
justifiably so, so we'll all have time to pay coaches
close attention to the inauguration and then see if we
can get any nuggets of insight into what that means
(13:06):
for the for the stock market. But so, I uh,
I just I'm not negative on inflation. I'm not thinking, Hey,
the world's coming to an end because or things are
great with that, Inflation is not going to be a
problem anymore. I do think it will remain a little
(13:28):
bit hotter, and I don't think I'm choosing my words
really well. But I don't think inflation. I think Defend's
gonna have a difficult time get inflation down to two percent.
I think we are this is a normal interest rate environment.
I don't think that. I think get used to interest
rates in and around here. Maybe they'll be a little
bit higher from time to time and a little lower
(13:50):
from time to time. I said a little while ago.
I do think that we will see the ten year
peak its nose above back above five percent at some
point in time this year. I just feel that that
as investors realize that inflation is somewhat of an issue,
(14:15):
or the defense is going to have somewhat of a
difficult time getting inflation back down. I uh, you know,
I think that's that's investors are going to like bid
up interest rates. How do you do it? What do you?
What do you do?
Speaker 3 (14:26):
You know?
Speaker 1 (14:27):
I think there's lots of different ways to invest in
stixed income. You know, you can buy treasuries directly, you know,
I'm looking at we buy uh the I shares bond
December twenty twenty seven, Treasury twenty nine, Treasury thirty twenty
thirty one, Treasury two thousand and thirty three, Treasury ETFs,
And what happens is you invest in those if you
(14:50):
buy treasuries like the ib th H, which buys treasuries
that can do in twenty twenty seven, IBTJ buys treasuries
that come do in twenty twenty nine, I b t
L and thirty one, IBT O and thirty three. There
are other similar ones that similar ETFs that do that,
and also similar or ETFs within I shares that by
(15:13):
longer data ones. But those are the ones we're buying
now eight years and inn ib t O in two
thousand and thirty three, ib t H in twenty and
twenty seven and will ladder those for our clients. We
also buy the BIL which is a Bloomberg. Bloomberg went
a three month Treasury bill. He pays interest, paying about
four and a half percent interest right now. So that's
(15:38):
that's kind of how we're looking at the interest rate environment.
So the big news out for the week market was
worried about the producer worried about inflation coming into the
week that you've got good news at the wholesale level
with the with the producer price index and even better
with the consumer price index wimer a bit out of
inflation before you definitely change the station across of shelter,
(16:00):
which is one third of the CPI of three tens
of a percent during the month of December year over
your four point six percent cost of shelters coming down.
That cost the shelter has been the bugabooth and really
the if you can't get the cost of shelter under control,
it's going to be difficult to get the CPI under
control because the cost of shelter is one third of
the CPI, you know, So it was good news at
(16:24):
the cost of shelter rose three tens of percent year over,
has four point six as I mentioned, it's the smallest
year over your increase since January of twenty twenty two,
so nearly three years. Because we are measuring the CPI
for the month of December. Retail sales of four tens
of percent December, so you still have economy humming along
x motor vehicles of four tenths of a percent, spending
(16:45):
on motor vehicles and parts zero point seven percent though
pretty good right along those levels. And finally, housing starts,
housing starts of fifteen pointy eight percent. Mortgage rates went
back over seven percent as measured by you know, Freddie Mack,
the thirty year seven point oh four to fifteen year
mortgage six point two seven percent. Get used to it.
(17:07):
Just get used to it. That's all I have to say.
If you have to borrow money, get used to these rates.
If you're a saver, good news, get used to getting yields.
If you're not getting returns on your on your bank
account or whatever, and you have a sizeable amount of there,
you should look for alternatives. Show Up has money markets
that pay four and a half percent or so. We
have some money there. We have some money and instantaneous
(17:28):
money funds that an't paying app But for those investors
that we keep money or for tactical purposes, well we'll
put money in one of their money market funds. Them
usually use the one that's backed by shorter termulus treasury,
so you don't have the risk there. So the rumors
of my demiers are greatly exaggerated. We'll totally We'll obviously
(17:50):
credit diet to Mark Twain, but use that for what
we how we feel about the bond market. Good, what
sectors that are doing well this year? Kind of flip
the script. Energy oils up twelve bucks a barrow. Since
the n of last year, Energy materials and industrials have
been at the top of the chart this year. We'll
see how that plays out. All right, Energy, uh, this
(18:14):
prior week up six point three percent, the xl E
the XLF, which is financials up six point one five percent,
also very very very strong numbers. When you think that
the mark is up you know, three percent or so.
The materials at the XLB, as I mentioned, up six percent,
(18:37):
So three sectors up six percent this past Weekive industrials
up four pointy nine, real estate up four pointy five.
Why you're probably listening and say, well, what what about
communications services, which is meta, What about consumer discretionary which
is Amazon. What about technology, which is tons of companies,
but you know from the from the apples and the
(18:58):
and whatever in videos of the world. They were in
the bottom this past week. If you look at the
eleven sectors, number seven was consumer discretionary, number eight, technology,
number nine, Communication services. Year to date consumer discretion area six,
Technology ninth, Communication service is tenth. You know, let's not
(19:23):
you know, worry a lot, and I'm not that worried
about that, but it's just kind of we'll see, we'll
see if it continues to play out like a normalized
yield curve. Just you know, sometimes sometimes you know, the
fixed income market drives the stock market and the economic data.
Inflation drove the fixed income market. The fixed income market
(19:44):
drove the stock market this past week, the latter part
of the week, in conjunction with the inflation data and
what I would say about that, and that's kind of
why financials did well. If you look at a normalized
yield curve, which is one where long term rates are
higher than short term rates, which we really haven't had
for for several years now, I think two or two
and a half years continuously. I think it normalized yield
(20:10):
Kirk benefits the banks. Earnings from JP Morgan were very solid.
City Group, Bank of America and Wells Fargo. If you
look at just JP Morgan, which is which is our
largest bank in the US returns over the past week.
JP Morgan's stock was up six percent. You know, City
(20:30):
Group the stock was up bunch it up here nine
point nine two percent. I think Wells Fargo was the
big winner of the week nine point two nine percent.
How you can play you can play with the XLF
that's the sector Selex Spider ETF money center banks. You
(20:51):
can play with the KRE which is a regional bank
ETF that was up four and a half percent. You know,
we like to use individual secures in that sector. We
do have some XLF. We also have like master Card
and Visa, And you know, I think another area, another
stock that would go very well if you're looking for
to add some money at this time. And a lot
(21:11):
of a lot of investors are concerned right now for
a lot of reasons. But Schwab, I think Schwab's a
good way to play. A normalized yields care will help
them a stable interest rate environment, which I think they
have we have will also help them to good earnings.
Mortgage rates up over seven percent. I think will probably
come down this week because, as I mentioned earlier, the
(21:34):
yield in the tenure came down from four point eight
to four point six. Big news out this week is
definitely going to be the inauguration. What are the surprises
coming from there? A couple of things. I think as
we close out the first half our shares of Apple
we're down this past week and disappointing iPhone sales data
coming from China. I think disappointing really for and Apple
(21:58):
is down one point nine percent the trailing week. I think,
what it's one of our biggest holdings. I think it's
their second or third largest individual stockholding. Yes, it's down
from a high of let's see, you had gotten up
to maybe two forty five or two fifty past year
(22:23):
or so, now it's down to two twenty nine. Are
we watching that? Yes, but has gotten to two sixteen
and it's down to two thirty. So you have a
stock go off about twelve down about eleven percent or so.
Are we worried about it? We are not. We are
watching it closely. We think they are typically not the
(22:45):
first mover in big technology changes, other than obviously their iPhone.
They adding AI to their iPhone is going to take
some time. I think their iPhone seventeen is due out
later this year. I think the shares will be supported
by that the services component side of the company and
also as from the anticipation of the release of the
(23:08):
iPhone seventeen do out later this year. So those are
some big numbers.
Speaker 3 (23:13):
Right now.
Speaker 1 (23:14):
It's ten thirty on the station dependingpon for news, weather
and information News Talok E ten and one O three
one WGY.
Speaker 3 (23:24):
Good morning, Welcome back to the second half hour of
the Capitol District's Money and Investment program. You're listening to
the Fagan Financial Report Aaron Fagan and Dennis Fagan sitting
here every Sunday from ten to eleven right here on
News Talk K ten and one O three one w G.
I was daydreaming and forgot to pull the microphone over.
That's where there was a little bit of dead air.
But you know, you did say something right before we
got on the air, and we sit here every Sunday
(23:48):
and every once in a while we talk about it,
and you said the first thing we want to talk
about in the second half hour. As we mentioned during
the first half hour, is you know, percent of the
S and P five pointed by market capp where they're
going to talk about, you know, flipping your sixty forty portfolio,
perhaps a forty sixty portfolio.
Speaker 2 (24:03):
Little anof was a a tweet or a post.
Speaker 3 (24:07):
Facebook post by Josh Brown from Mitholts Capital Management, was
that Twitter? Yeah, ex whatever, And then forty one percent
of companies worldwide plan to reduce workforces by twenty thirty
to the AI. But you said, pertaining to the first topic,
which the top ten stocks, and we sent out our
chart talk earlier in the week, and you said, we
got a diversified, diverse five diversifying Its almost like but
(24:30):
it reminds me of so much, so many things that
just takes you know, like practicing shots, free throws, you know,
one hundred free throws on I did one hundred yesterday,
you know, when you're a kid, you know, And.
Speaker 4 (24:43):
I think that's that's the theme. And I think that's
kind of the theme that we've been talking about, but
specifically me lately, when when when talking about you know,
investing and in the correct acid allocation, and how should
you be how should you invest? And you know the
gist is and what you come to the conclusion is
(25:04):
the diversification is obviously very important, the especially the older
you get diversification. Diversification reduces the volatility in your portfolio,
helps you not do the wrong thing at the wrong time.
Speaker 5 (25:18):
And you know what we talk about in the article.
Speaker 4 (25:20):
A little bit is you know, you sacrifice some performance
for maybe better sleep at night. And I think that's
the goal of your portfolio when you get in retirement
is you know, you work forty years, fifty years, and then.
Speaker 5 (25:34):
You know, you quit cold turkey.
Speaker 4 (25:35):
And I think it's a little unsettling for a lot
of people to not have an income stream, and you
try and create a portfolio that you know allows them
to have an income stream through their investments. But you know,
it's unsettling, it's tough. And the article goes on to say,
how you know the S and P five hundred now
is over fifty percent in sectors that are considered sensitive
(25:58):
that would be communication services, energy, industrials, and technology. And
of that, you know, thirty three point two percent of
the S and P five hundred is technology now, so
you know it's although the SMP has gone up twenty
percent two straight years, and it could go up twenty
percent more the older you get.
Speaker 5 (26:18):
The more the more you're nearing retirement or in retirement.
Speaker 4 (26:21):
You know, the S and P five hundred really is
not the best benchmark because it is one third of
technology fund right.
Speaker 3 (26:31):
And you know, I was as you were talking a
little bit, you know, I thought of a couple of things.
One is diversification really is a recipe for disappointment.
Speaker 2 (26:42):
Yeah, you think about it.
Speaker 3 (26:43):
Yeah, but if you think about what diversification is, and
when talking to clients and just in my regular life,
actually I tend to use exaggerations to illustrate a point.
And you know, a good good example is, let's say
you had one hundred, one hundred thousand dollars, but why
don't you put it all in your favorite stocks?
Speaker 2 (27:04):
Well I would never do that.
Speaker 3 (27:05):
So you know, let's say the individual responded with that
with that comment, well, what is the appropriate amount? Then
you know, and you know, we can, you know, certainly
we can guide in we obviously we manage accounts, so
we guide investors along those lines. But I would think,
you know, four or five different industries you know, two
(27:28):
or three companies deep if that's going to be your
your equity side. Another way to look at it is
twelve stocks at five percent of your portfolio, ten stocks
at three percent of your portfolio, maybe five stocks at
two percent of your portfolio based you know. So those
are some things that so you want to diversify across industries,
(27:48):
diversify along market capitalization, did the extent you want to
diversify geographically.
Speaker 2 (27:55):
And then go one or two layers deep.
Speaker 3 (27:57):
You know, we were talking earlier about you know today
you know, not in the show about you know, the
risk of being right on the sector and wrong on
the company. And that's why they're backup of ETFs, you know,
And I think, what, you know, what you know, we'll
give us give you know, you know, and I know
this is putting on the spot a little bit, but
you know, why don't you give me some thoughts on ETFs.
Speaker 2 (28:18):
Now? I know we're we're evolving as a.
Speaker 3 (28:21):
Company in dealing with with ETFs in conjunction with stocks.
Speaker 2 (28:26):
You know, I just think out loud a little bit,
you know.
Speaker 3 (28:29):
Uh, a typical portfolio of fifty or sixty thousand dollars,
should it have all TETF, should it kind of blend
in some stocks, you know.
Speaker 4 (28:39):
Yeah, you know, I think I think that you know,
any approaches is would be you know, really a good approach.
Speaker 5 (28:47):
Yeah.
Speaker 4 (28:48):
We have a lot of portfolios that only have ETFs
in them, and I think some people might get confused,
but hey, you know, I want individual stocks, but you know,
there are there are individual stocks in ETF.
Speaker 5 (28:57):
So you know, with the cost of.
Speaker 4 (29:00):
Creating going down, with a lot of passive ets in
the range of you know, point zero three point zero
four percent, you can find a lot of great ets
out there, whether it be through Schwab, JP, Morgan, Vanguard,
you know, all companies have great ETFs that you can
you know, kind of customize a portfolio for exactly how
you want it to be without including individual stocks. I
(29:22):
do think that, uh, you know, as investors, we do
try to find individual companies that we think could outperform
maybe their their benchmark and invest in those as well
as used as you as well as use individual stocks
to reduce the you know, expense ratio of someone's portfolio.
Speaker 5 (29:41):
So you know, I think I think a mix of
both is good.
Speaker 4 (29:44):
What I do like about ETFs is, uh, you know,
whatever benchmark your bench you marking yourself against to against.
I think it's really important, whether it be uh, we'd
like to have at least fifty percent correlation to whatever
indicy we are benchmarking ourselves against. And although you know
we started off by saying the show by saying maybe
(30:04):
the SMP isn't the great greatest benchmark, you know what
we do like about it is it's American. It's the
most innovative companies in the world. It's market cap weighted,
so the better companies tend to take up more of
the portfolio as time goes on, so you're investing more
in companies that are doing better.
Speaker 5 (30:21):
So I think that's always good.
Speaker 4 (30:23):
And you know, what we have with the S and
P five hundred is some historical context on how it's done,
and I think that's really important as well. You know,
it rewards the more innovative companies. You know, that said
going forward, you know it's tough it being thirty three
percent technology, technology being one of the most volatile sectors
(30:45):
out of the eleven main sectors. In that if you
are investing for someone that you know needs a four
or five percent distribution rate, you know, I do think
it's important to have correlation to the S and P
five hundred, but maybe not as much core relation to
someone who's like in the accumulation phase of their life,
you know, ten plus years out from retirement.
Speaker 3 (31:05):
I think as I've gotten older, I'm sixty three, it's
becoming more and more apparent that not to tie your
your portfolio to somebody else's expectations. Yeah, and not to
tie your portfolio too literally again, unless you're thirty or
(31:27):
forty to the S and P five hundred. You know,
because in part because of the fact that you know,
forty percent of the S and P five hundred is
in the in the ten largest stocks of the S
and P five hundred you mentioned earlier, third of it
is in technology. You know, it's it's it's by all,
by most definitions, it's really not a diversified.
Speaker 2 (31:52):
Index anymore.
Speaker 4 (31:53):
Yeah, you know, there are five hundred companies in it,
but yeah, a third of them are technology.
Speaker 3 (32:00):
So and we like them. We talked last week on
the show about that we like that area. We think
that you know, especially with AI and just the dynamicism
of dynamism of technology, they will continue to be leaders.
Speaker 2 (32:16):
Along the way.
Speaker 3 (32:17):
But you just got to make sure that what you
what the portfolio you have is appropriate for you and
appropriate for your age.
Speaker 2 (32:24):
Now I was.
Speaker 3 (32:24):
Talking to somebody within the I've been using this a
lot later.
Speaker 2 (32:28):
I thank you for it. And this is the theme.
Speaker 3 (32:31):
You came up with, which is, you know, you know,
the wealth the accumulation phase and I think it might
have said it a few minutes ago is over once
you hit sixty sixty sixty five, hopefully that you're able
to retire. And I use the analogy too that once
you pass through that door of financial independence, you don't
want to go back out.
Speaker 4 (32:49):
Yeah, And I think as we talk about this a
lot about this show, how you know there's only about
ten percent of people working now who have pensions, as
opposed to fifty percent nineteen eighty. A lot of the
stress is now on the employee, employee and the retire
So you know, I think one of our main jobs
(33:11):
is to not have people do the wrong thing at
the wrong time, you know. And what what I'm saying
kind of is, I'm just trying to use an example.
Let's say two portfolios are both up thirty percent over
five years.
Speaker 5 (33:25):
Let's say, just to make you know, the numbers easy.
Speaker 4 (33:29):
But one portfolio average is a point two percent hu
you know, up or down swing a day, and then
one average is a one percent up or down swing
a day. You know, although they're in the same spot,
you know you really want to you know yet you
want to reduce the volatility of your portfolio because so
(33:49):
much of this is behavioral and you don't want to
do the wrong thing at the wrong time. So you
know more, you could say, hey, you know both portfolios
did the same, but you know one of the portfolio
and this is you know, something called the sharp ratio
you know, risk of ajusted returns is you know, you
want to decrease the volatility in your portfolio because you
want to decrease your chances of doing the wrong thing
(34:09):
at the wrong time. And that's I think that's the
hardest part, uh with just you know how easy it is.
You know, you have to have a Schwab alliance. Now
when when you sign up for Schwab, which means you
know a lot of people have the app. I said,
I'd say the majority of our clients have you know,
the Schwab app. They can go right in there. You know,
you have CNBC on, you have alerts on your phone.
(34:30):
If the SMP's up two percent, you can go online
and you know, Apple scans your face and you can
check your account right there. You can trade your account
within seconds. So I think the easier access we have
to information, and the more information we have in our
face without even going to look for it, the better
chances you have of doing the wrong thing at the
wrong time. So, and you know the S and P again,
(34:53):
being a you know, thirty three percent, uh, you know,
technology is you're going to see those one two percent
swings way more than you did maybe fifteen, twenty, thirty,
forty years ago and.
Speaker 3 (35:02):
Be able to respond to yeah right away, you know,
you know, see it and respond and quite often that
initial response is going to be solely emotion and not
too can me. So anyways, second topic, if you want
to get you know, go ahead, I'm sorry, no, no,
you can go on.
Speaker 2 (35:21):
Well, I would think that kind of lends itself.
Speaker 3 (35:24):
You know, you could read ten articles and five might
say the classic retirement portfolio is sixty forty and hang
in there. Bonds are looking better and better, especially with
last week's CPI. The PPI was a little high. The
CPI came in good. We market rallied sharply on Wednesday,
or you could say, you know, and this is the
(35:47):
one article I'm looking at. It is consider flipping your
sixty forty portfolio to forty sixty as bonds become more
more attractive than stocks. So one is hey stick with
the classic retirement portfolio of sixty forty. The others say
the markets run a long way up twenty percent a
year over the past couple of years, pulling the reins
should have been rebouncing kind of along the way, but
pulling the reins and move to sixty percent as bonds
(36:10):
become more attractive, So you can kind of, I guess.
Speaker 2 (36:14):
Parlay that.
Speaker 3 (36:15):
So to speak with Josh Brown's article or tweet, I
don't know how you want to handle that for discussion.
Do you want to address the sixty forty forty sixty?
In my opinion, the classic retirement portfolio is anywhere from
depending upon your sources of income, depending upon your sources
of fixed income Social Security defined benefit plan, then.
Speaker 2 (36:37):
Offset by your.
Speaker 3 (36:41):
Expenses, where you should be along that sixty forty up
to seventy five twenty five line. But I've seen an
academic article that suggests bonds are a waste of time.
So it's all along the spectrum of advice from my
opinion in a retiring and I'm working still. Obviously, my
(37:05):
wife Carolyn and I are about seventy thirty stocks to bonds.
I'm sixty three and so is she. So I think
that's kind of the ballpark that for the most of
our clients, you know, in my age, you know, I
kind of would recommend, you.
Speaker 4 (37:19):
Know, seventy thirty, seventy thirty, sixty, anywhere between fifty and
seventy thirty. I would say, it all depends on what
your goals are for the money, you know, how much,
what your you know, what your living expenses are, I
think is important. But you know, I think and obviously
your risk tolerance. So I think, you know, we we
say that a lot on you know, on the radio.
(37:40):
Is I think you know something that you can follow
through with is is important as well? You know a
plan that you can actually stick to.
Speaker 3 (37:47):
Well, you were talking about worrying just a little while ago,
and there's a if you look at a fifty to
fifty portfolio versus a seventy thirty portfolio, if your talerance
to risk is low, relatively low, and you just have
to happen to not understanding you opted for a seventy thirty.
There's a good chance or a chance that when the
market's down, you might cancel a vacation, you might take
(38:10):
a shorter vacation. And you know, having been in this
business since nineteen eighty three, so forty two years, Yeah,
you're here thirteen years.
Speaker 4 (38:21):
Even you know, you can even you know, we work
in this business, so it's a little bit different. But
you know, even and I know for me personally, is
when the market's down and it's little rock here, it's
hard to be even present when you're home. So you know,
even so I think the same thing is it happens
for people that I retired and drawing income on their portfolio.
Is you know, the more volatile your portfolio is, the
(38:42):
more distracting it is in life. Right, you know, you
want to you want to decrease the distraction, so you
can you know, be present in the you know, twilight
years of your life.
Speaker 2 (38:52):
Twilight years, I like that twenties. That's is that where I.
Speaker 3 (38:55):
Am no, no, no, everybody else is mom and I aren't.
I like, but so I don't know, I would not
unless for somebody who's very risk adverse. I think the
pressure of the market doing historically speaking, the market doing
well over time is going to be too large to
(39:17):
bear to go forty sixty, so you know, you know,
I would agree with you. You know, anywhere from fifty
to seventy fifty to seventy five percent of your account
in the stock market is appropriate.
Speaker 2 (39:29):
For your long term needs.
Speaker 4 (39:33):
And I.
Speaker 3 (39:37):
We were out with our newsletter, went to publication within
the past few days, a week or so ago, and
within that I don't have in front of me if
I can remember our outlook, and it is I can't
remember because it's our outlook, or I look for bonds
is you know, stick with short intermediate. So seven years
in under and we believe that you're going to get
(39:59):
your coupon or maybe a little less. Meaning what that
implies is that interest rates are going to kind of
stay around where they are for now. That would imply
a coupon, That would imply a total return of which
your coupon is a little less, would imply maybe interest
rates drift upward. I don't see them rocketing skyward from
here for for a number of reasons.
Speaker 4 (40:22):
Unless you saw some major tariffs being implemented and not
just talked about. I think you could see a horizon
you know, longer, longer duration bonds in.
Speaker 3 (40:34):
The president electrump for one more day is kind of
backing away from the broader tariffs from from what I understand,
you know, and pulling in from that.
Speaker 2 (40:44):
So well, so we'll see.
Speaker 3 (40:45):
So I think bond's off for opportunity now the ten
years are for seventy or so, the twenty year close
to five.
Speaker 4 (40:53):
Yeah, I think the Yeah, so you know, I agree.
I think this is a good this is a good
area to pick up bonds. You know, as we say earlier,
Josh Brown, what you said that said, you know, not
financial advice, but me personally, I want every ten year
Treasury bond with a yield over five percent I can have.
I'll take them until I run out of money. The
risk is missing The risk is I miss out unlocking
(41:14):
in six Who cares? I'll be sleeping like a little baby.
Speaker 2 (41:17):
Like a fat, fat little baby.
Speaker 5 (41:19):
Yeah, and you know, I do agree with that.
Speaker 4 (41:21):
You know, I think I think five high four five
percent is a very very great rate for people, especially
people that need distributions. And I think that I think
that we're we're around where world, we will see rates
peak and that five percent, you know, Larry fin comes
on because I could see five and a half percent rates,
but I also because there's three and a half percent
(41:43):
ten years.
Speaker 2 (41:43):
And would you say exactly at that point?
Speaker 5 (41:45):
I forget.
Speaker 2 (41:45):
I think it's that Thanks Larry.
Speaker 3 (41:47):
Right now the ten years at four seventy eight, I
think you get that ten year at four ninety think
about that.
Speaker 4 (41:54):
Yeah, let's don't know, like, what is that? I know
what you're probably thinking of the math right now? What
is that over a year? Well, that's for one hundred grand,
put one hundred grand in a A and a treasure
of five year treasury at five percent ten year treasury.
You know what's the difference between you know, four ninety
eight bucks.
Speaker 3 (42:13):
Right, Yeah, you have forty nine hundred versus five thousand,
if you have put one hundred thousand at five percent
versus four point nine. But the flip side is is
that if you have a distribution rate of four percent,
you know, if that five percent is impacted by inflation
by two percent, right, then the next year it's really
has an effective yield of four point nine percent, you know,
(42:34):
and then it goes down, so you have built in
probably seven you know, seven or eight years maybe even longer,
of locking in an inflation adjusted rate of four percent.
Speaker 2 (42:44):
Yeah, if the ten years at five percent.
Speaker 3 (42:46):
Now, let's say you're sixty three or sixty four years
old when you retire, and you built in an inflation
adjusted rate of four percent, because you start out at
five the yield at five, then that puts you at
seventy three. You're within four five years of you know,
where you move into a slower time of your life.
And I was talking to somebody and really, you know, I,
(43:07):
you know, both of us there, we're both really somewhat
emotional sometimes and not like a crying emotional, but just
like really passionate, I guess, not emotional about the fact
that you know you don't want to be you know,
the chance of both parties, both spouses, getting to be
seventy eight, seventy nine, eighty years old, having the strength,
the physical strength, they're.
Speaker 2 (43:28):
Really the the desire.
Speaker 3 (43:32):
You know, a lot of our clients when they hit
seventy eight seventy nine, they're selling their place in Florida.
They get closer to home, they want to be closer
to their doctors closer to their family. You know, their
kids want them home. Ye, grandkids, right, that's me and Momah.
But so so you know, this is the prime part
of your life. So you want to construct a portfolio
that enables you to do the things you want to
(43:53):
do financially, but also enables you and what did you say,
the peace of mind.
Speaker 2 (43:58):
Or something like that.
Speaker 5 (43:58):
Peace of mind help you sleep, and I help you
sleep at night.
Speaker 3 (44:01):
So so five percent, you know, certainly Jo Josh, bond's
probably forty something years old.
Speaker 2 (44:07):
Forty five or so. But for a sixty year.
Speaker 3 (44:10):
Old, no, I would not put I want to I
would not want every ten year treasury bond with the
yield over five I can have.
Speaker 5 (44:17):
But you know I surely would want.
Speaker 4 (44:19):
To sound rate for forty to sixty percent of my portfolio.
Speaker 2 (44:22):
Yeah, me too, Me too.
Speaker 3 (44:24):
The other thing you can do is you buy bonds
at a premium that are paying maybe six if you
can find them, you start to find them again, and
then they depreciate down to par. So you're actually getting
a better stream of income and you lose a little
principle over time. That's not let's say put let's say
a six percent bond qush one hundred and fifteen thousand dollars.
You might get six percent for ten years and your
(44:45):
hundred fifteen thousand's gonna end up with at one hundred thousand.
But now again you're seventy four and you lock in income.
So there's a lot of things that we can do
to help you while staying you know, away from some
of the some of the more of the fixed income
annuities and that type of thing. What else you got
for said, what's on your plate that you know.
Speaker 4 (45:02):
And you know, not much really, you know, we only
have a few minutes left, but you know, forty one
percent of companies worldwide plan to reduce workforce by twenty
thirty two to AI. You know, I found that interesting,
and I think we're at quite the tipping point as
a country, and you know, technologically at you know, what
happens if a lot of this workforce is out of
(45:22):
work and we're having quite the declining population as well.
So now I think there's a lot of unknowns in
the next ten, fifteen, twenty years.
Speaker 5 (45:29):
Brought on by technology that you know might have to
shift how.
Speaker 4 (45:34):
You know, we invest, but also maybe government policies that
might have to change.
Speaker 2 (45:38):
Is guant guaranteed monthly income.
Speaker 4 (45:41):
Yeah, something you know, if we start to see but
they do say, you know, I read a book called
called called Autonomy. There's a lot of you know, sectors
and businesses that we don't even know will be that
don't even exist yet, that will be, you know, brought
on by by these new technologies. So you know, it
was so it's almost like, you know, one step forward
(46:02):
or two steps forward, one step back here, I think,
and now I could I could see us seeing that
as well.
Speaker 3 (46:07):
I may be wrong here, and I'm going off memory
and we don't have time to really research it before
I say this, But I don't think there's ever been
a period of time where technology hasn't created either more
jobs in that industry or new or ancillary industries. So
there's never been a period of time that have actually meant,
(46:31):
you know.
Speaker 2 (46:31):
A reduction in worldwide workforces. You know.
Speaker 3 (46:36):
But this, so this is kind of a stark statement
or an alarming statement. Forty one percent of companies worldwide
plan to reduce workers by twenty thirty due to AI.
Speaker 2 (46:47):
And that that's something that how much time.
Speaker 3 (46:49):
I got left there, I got to watch stop and
and a half yeah, okay, then you you kind of
lead us into that towards the end because I'm not
sure my watch is off, so so we'll see where
we go from there. But there's a lot of opportunity there,
and that opportunity is all right already begun to kind
of kind of manifest itself. One other thing you want,
(47:11):
uh timing is everything you got you got a few
minutes to talk about that, or a minute and a half
to talk about that.
Speaker 2 (47:16):
You wanted to move away from that.
Speaker 4 (47:18):
Bit about a minute left. Yeah, we can talk about
that next some other time. And I think that's you know,
where you get caught up with the sixty forty portfolios.
Speaker 5 (47:25):
You know, we do a little bit.
Speaker 4 (47:26):
We do see us in this you know, technological revolution
which could continue to the power of the stock market.
It's just now after two years of twenty plus percent
and a five year interest rate, you know, for a
lot of people in retirement.
Speaker 5 (47:38):
That's that's uh, that's good.
Speaker 3 (47:40):
Enough, right, you know, And I think that's that's kind
of what we're taking a look at that we're positive
on the market. If you want our newsletter and you're
not a client, uh, you know, please feel free to
email US.
Speaker 2 (47:49):
At FIG and asset dot com.
Speaker 3 (47:50):
It should be out next week, so yeah, give us
scold during the week.
Speaker 2 (47:56):
Is that it?
Speaker 3 (47:57):
Yeah, all right, that's about it. Thanks Laught for listening
to Fagan Financial Report.
Good morning. What you the Capital District Money and Investment Program.
You're listening to the Fagan Financial Report. I'm Dennis Fagan.
Aaron is off this He'll be joining us in the
second half hour, so any questions, feel free to give
me a call. I five one to eight talk WGY
or one hundred talk WGY, and I'll take a couple
(00:22):
of calls to that hour if you want so. Feel free.
The second half hour we will not be taking any
calls because it'll broadened up the conversation. But the place
is to say, a lot of news going on tomorrow.
We have the inauguration. We'll see get some more clarification
and the policies of President Trump exactly. You know, hopefully
what's going to transpire a little bit. It's going to
(00:43):
sign some executive orders. Investors are looking at deregulation, They're
looking at selective tariffs, are hoping for selective tariffs. I
think they're looking for some sort of reconciliation with Canada
and CO. But I think more importantly Canada and we'll
(01:05):
go from there. Obviously, some things that affect the economy
in an indirect way, if you want to call it that,
which is you know, well, it's actually pretty direct as immigration.
So hopefully we'll get working on some of those things
and move forward. But so what we'll do also is
take a look at the market the first half, fiul.
(01:26):
Take a look at you know, how the market did
this past week. Some of the economic data that came
out and the big big numbers that came out this
past week was a consumer and producer price index, So
we'll talk about that. But anyways, hope everybody's doing well.
Getting ready for some snow. I think you're talking four
to eight inches. Going to get out and go for
a walk before that right after the show in so
(01:48):
be safe and enjoy the snowfall should be pretty out there.
So for the week, the Dow Jones Industrial Lavish closed
the fifteen hundred points at forty three four eighty seven.
You're still sitting around three or four percent away in
the Dow from its all time high. One of the
things that you'll notice with the Dow is it's the
best performer of the broad indices on a year to
(02:10):
day basis. Now you got the transports, you've got industrials
in there, you do have some technology in there, so
it's more of a broader index or more a cyclical index.
I might say, compared to the other two indices, that
there are three indices that are that are the broader ones,
that S and P fIF on a NASDAK and Dow
Jones Jewish total market index. But the Dow, like I said,
(02:30):
of fifteen hundred points, up three point sixty nine percent
for the week, far out pacing the S and P
five point of which closed up two point nine one
percent for the week one hundred and seventy points. I
thay what triggered the rally in the market was pain
inflation at the producer price index and then on Tuesday
(02:50):
and then followed up with with good numbers again on
retail inflation. Prices at the wholesale level as measured by
the Producer Price Index up two ten percent in December,
and this is after entering up four ten percent November
year over year. The producer present this is up three
point three percent, little little hotter than the three percent
(03:11):
year over yere there was up November, but down from
the peak of about eleven point seven percent. Sort of
inflation at the whole sevil peaked in March twenty twenty
three forty percent or cell of inflation at the at
the wholesale level was impacted by energy. Energy costs jumped
(03:33):
three and a half percent during the month of December,
and I think that's why I had the PPI up
a bit. Even if you look at the consumer percing next,
which is inflation at the retail level, energy prices up
two point six percent. That was forty percent of the CPI,
as I mentioned, So you have inflation coming down, and
I think you know quite often on the radio show,
(03:54):
and I think we'll talk about in the second half
hour bit we talk about the FEDS target of at
two percent. And I think one of the things that
you have to realize is that embedded inflation to a
certain extent, and most people think of inflation, they think
of something bad, and indeed it can be. It can
(04:15):
rob individuals and corporations of their spending power or their wealth.
But a little bit of inflation is good as it
creates demand for goods and services to a certain extent,
if you think that prices are going to be going
up in a year over your basis for housing and
the like and automobiles, that it does create demand. I
(04:37):
think deflation is something that we saw that culminated over
you that destroyed really Japan over a thirty year period
that came to an end five three or four years ago.
And now they have a bit of inflation, which is
allowing their economy to grow again. But you don't want
rampant inflation. I like in it terrain. Rain is good.
(05:00):
You don't have a garden without some rain. You don't
have really increasing demand without obviously a good economy and
a strong labor marketing like, but a little bit of
inflation is good. But the Dead wants to get it
down to two percent. That is half of their mandate.
His inflation at two percent in GDP growth nominal GDPRE
growth at four percent or two percent GDP growth after inflation,
(05:27):
so stable labor market they're looking to achieve. And I
don't know that. I think that last mile of inflation
is going to be somewhat difficult to get inflation back
down to. They had a very difficult time getting inflation
up to two percent from two thousand and eight to
twenty twenty, and now I think they're going to have
a bit of a difficult time getting it back down.
You know, if you look at the dock order strike,
(05:48):
you'll get the strike at Boeing. You look at just
the the increasing I guess I wouldn't call it power,
but increasing balance of really power. I guess said that
word shifted a bit from management to labor. And you know,
and Aaron would say that if he was.
Speaker 2 (06:06):
Here, he'll be in while that that's good.
Speaker 1 (06:10):
And I do believe it's good. If you look at
the middle class in America, it's been eroded over the
past thirty or forty years. A little bit of shift
from management to labor, I think is good. It's good
for the economy. May restrict corporate profits a little bit.
That's perhaps AI is certainly a reason, but perhaps some
of the other reasons that some of the technology leaders,
(06:34):
you know, from from a Tim Cook to an Elon Musk,
Mark Zuckerberger coming up to the President Trump and we'll
be at as inauguration tomorrow, in addition to a couple others.
But I think they see that maybe that balance turning
a little bit. I think they see challenges in AI
(06:55):
and they and they want to get a little closer
to the president. But just circle them back to inflation.
Good numbers. Last week, market rallies shot sharply in the
second half of the week. I think it was up
about three hundred points if it is represented by the
down on Thursday, another couple hundred or so on Friday,
and part of it due to tame inflation at the
(07:15):
whole set level or also tame inflation at the retail level.
Consumer press send us up four ten percent in December.
Like I said, forty percent of that was energy prices.
So if you overlook that or you exclude food and energy,
the course, CPI I have two tens of a percent,
which was below expectations, and you know, ease the fear.
Someone eased the fears that inflation was reaccelerating. We start
(07:36):
our our snapshot that we send out every Sunday to
all of our clients, and those of you who wanted
who want our clients, feel free to email us at
taganasset dot com that let's not get too excited, you know.
So we sent out by four or five page missive
every Sunday for those of you that don't get it.
(07:56):
And the first page or page and a half or
so is this descript of the economy what happened in
the past week, and then some newsworthy items put out
in bullets and One of the news worthy items that
we put out this week that we thought was newsworthy
worthy was the bond market rallied. As I mentioned, i'm
better than expected readings on inflation as a yield on
(08:17):
the Tenure Treasure NO, which had gotten up close to
five percent, I think it peaked at four point eight
something percent, and many thought that if the yield on
the tenure Treasury NO pierced five percent, that that was
going to create a significant headwind for the stock market.
And I kind of agree with that, and I think
that's something as investors you have to look at closely,
(08:43):
the yield on the tenuere because as that climbs, investors
look at that as a risk free rate of returns. Certainly,
if they buy a tenure treasure of five percent and
interistrates go to seven and they need to cash it
in prior to that, it's not it's not risk free.
You'll get less than you paid for it because of
(09:03):
the interest rates go up the value of bonds go down.
But it also has risk, purchasing power risk or the risk,
you know, the opportunity cost that you could have bought
a a bond that's seven percent and you bought it
a five, but most investors don't see that. Most most
investors in fixed income retail investors equate risk with, Hey,
(09:26):
I put in one hundred thousand dollars and we're going
to get out less than that at the end. So
if you hold a tenure no to maturity at this
point in time, you're going to get four point sixty
one percent, and that's that's okay. But if that rate
continues to move up, if the long term average rate
of return of those sock markers nine or ten percent,
(09:48):
Now as that rate moves closer, that risk free rate
of return in the eyes of most investors move moves
closer to five percent, then five and a quarter percent,
five and a half and round numbers make news. And
then NAS that closed over nineteen thousand, and then the
Dow closed at an all time high of forty three thousand, whatever,
(10:10):
when stock market makes When the Dow closed about forty
thousand for the first time, the s and P five
hundred six thousand for the first time, that type of
information makes news, and so on the same basis the
same level. When the tenure gets to five percent, that'll
make news, and that'll catch the attention of investors, And
(10:32):
as I mentioned, I do think that is aheadwin. I
think we are going to get that. I really do.
And we use a quote of marks when the rumors
of my demise are greatly exaggerated. Perhaps we can apply
that same line to inflation, as in our opinion, inflation
will hang around this two and a half percent mark,
a bit above the FEDS target, but most likely palatable
(10:54):
to now for the FED as they ready for the
Trump administration and also as they measure the glide path,
if you want to call that of the economy. They
want to slow the economy down, but they won't want
theyn't want to slow it down if they look at
it as a big plane that's perhaps coming for and
for landing. They don't want to tip that nose down
too far because I obviously closes problems for a plane,
(11:17):
and we also cause substantial problems for the economy as well.
So that's what the Fed's dealing with right now. That's
what the market's dealing with right now. You have the election,
and said it every week. I think since since the
election ed that President Trump's the range of potential outcomes
as much broader with President Trump than it is with
(11:37):
the traditional politician, all right, love them or hate him,
and certainly hoping for the best. And we'll get more
clarification to think. And I think over the next week
two three, the market returns will depend to a certain
extent on what President Trump has to say. We're in
the heart of earning season. We've got earnings coming up
(11:58):
three am, Netflix, out of the Airlines, Johnson and Johnson
this week. But I think that takes that shares the stage,
or even takes a back seat, you know, to this
first two or three weeks when President Trump gets into office.
You know, since the election, the Dow's up three percent,
the S and p FI punters up three point seven percent,
(12:19):
the nastacts up six percent, so that that's positive. But
if you think about the Dow of three point sixty
nine percent this week and of three percent since the
election going into this week, you know, the Dow is
down since the election. So so we'll we'll see, we'll
see how it plays out. As if you're listening to
the show, you are concerned about your your financial future.
(12:41):
So I think it will pay to listen to that,
listen watch the inauguration, and we'll certainly be doing that.
The markets closed and out of doctor Martin Luther King
justifiably so, so we'll all have time to pay coaches
close attention to the inauguration and then see if we
can get any nuggets of insight into what that means
(13:06):
for the for the stock market. But so, I uh,
I just I'm not negative on inflation. I'm not thinking, Hey,
the world's coming to an end because or things are
great with that, Inflation is not going to be a
problem anymore. I do think it will remain a little
(13:28):
bit hotter, and I don't think I'm choosing my words
really well. But I don't think inflation. I think Defend's
gonna have a difficult time get inflation down to two percent.
I think we are this is a normal interest rate environment.
I don't think that. I think get used to interest
rates in and around here. Maybe they'll be a little
bit higher from time to time and a little lower
(13:50):
from time to time. I said a little while ago.
I do think that we will see the ten year
peak its nose above back above five percent at some
point in time this year. I just feel that that
as investors realize that inflation is somewhat of an issue,
(14:15):
or the defense is going to have somewhat of a
difficult time getting inflation back down. I uh, you know,
I think that's that's investors are going to like bid
up interest rates. How do you do it? What do you?
What do you do?
Speaker 3 (14:26):
You know?
Speaker 1 (14:27):
I think there's lots of different ways to invest in
stixed income. You know, you can buy treasuries directly, you know,
I'm looking at we buy uh the I shares bond
December twenty twenty seven, Treasury twenty nine, Treasury thirty twenty
thirty one, Treasury two thousand and thirty three, Treasury ETFs,
And what happens is you invest in those if you
(14:50):
buy treasuries like the ib th H, which buys treasuries
that can do in twenty twenty seven, IBTJ buys treasuries
that come do in twenty twenty nine, I b t
L and thirty one, IBT O and thirty three. There
are other similar ones that similar ETFs that do that,
and also similar or ETFs within I shares that by
(15:13):
longer data ones. But those are the ones we're buying
now eight years and inn ib t O in two
thousand and thirty three, ib t H in twenty and
twenty seven and will ladder those for our clients. We
also buy the BIL which is a Bloomberg. Bloomberg went
a three month Treasury bill. He pays interest, paying about
four and a half percent interest right now. So that's
(15:38):
that's kind of how we're looking at the interest rate environment.
So the big news out for the week market was
worried about the producer worried about inflation coming into the
week that you've got good news at the wholesale level
with the with the producer price index and even better
with the consumer price index wimer a bit out of
inflation before you definitely change the station across of shelter,
(16:00):
which is one third of the CPI of three tens
of a percent during the month of December year over
your four point six percent cost of shelters coming down.
That cost the shelter has been the bugabooth and really
the if you can't get the cost of shelter under control,
it's going to be difficult to get the CPI under
control because the cost of shelter is one third of
the CPI, you know, So it was good news at
(16:24):
the cost of shelter rose three tens of percent year over,
has four point six as I mentioned, it's the smallest
year over your increase since January of twenty twenty two,
so nearly three years. Because we are measuring the CPI
for the month of December. Retail sales of four tens
of percent December, so you still have economy humming along
x motor vehicles of four tenths of a percent, spending
(16:45):
on motor vehicles and parts zero point seven percent though
pretty good right along those levels. And finally, housing starts,
housing starts of fifteen pointy eight percent. Mortgage rates went
back over seven percent as measured by you know, Freddie Mack,
the thirty year seven point oh four to fifteen year
mortgage six point two seven percent. Get used to it.
(17:07):
Just get used to it. That's all I have to say.
If you have to borrow money, get used to these rates.
If you're a saver, good news, get used to getting yields.
If you're not getting returns on your on your bank
account or whatever, and you have a sizeable amount of there,
you should look for alternatives. Show Up has money markets
that pay four and a half percent or so. We
have some money there. We have some money and instantaneous
(17:28):
money funds that an't paying app But for those investors
that we keep money or for tactical purposes, well we'll
put money in one of their money market funds. Them
usually use the one that's backed by shorter termulus treasury,
so you don't have the risk there. So the rumors
of my demiers are greatly exaggerated. We'll totally We'll obviously
(17:50):
credit diet to Mark Twain, but use that for what
we how we feel about the bond market. Good, what
sectors that are doing well this year? Kind of flip
the script. Energy oils up twelve bucks a barrow. Since
the n of last year, Energy materials and industrials have
been at the top of the chart this year. We'll
see how that plays out. All right, Energy, uh, this
(18:14):
prior week up six point three percent, the xl E
the XLF, which is financials up six point one five percent,
also very very very strong numbers. When you think that
the mark is up you know, three percent or so.
The materials at the XLB, as I mentioned, up six percent,
(18:37):
So three sectors up six percent this past Weekive industrials
up four pointy nine, real estate up four pointy five.
Why you're probably listening and say, well, what what about
communications services, which is meta, What about consumer discretionary which
is Amazon. What about technology, which is tons of companies,
but you know from the from the apples and the
(18:58):
and whatever in videos of the world. They were in
the bottom this past week. If you look at the
eleven sectors, number seven was consumer discretionary, number eight, technology,
number nine, Communication services. Year to date consumer discretion area six,
Technology ninth, Communication service is tenth. You know, let's not
(19:23):
you know, worry a lot, and I'm not that worried
about that, but it's just kind of we'll see, we'll
see if it continues to play out like a normalized
yield curve. Just you know, sometimes sometimes you know, the
fixed income market drives the stock market and the economic data.
Inflation drove the fixed income market. The fixed income market
(19:44):
drove the stock market this past week, the latter part
of the week, in conjunction with the inflation data and
what I would say about that, and that's kind of
why financials did well. If you look at a normalized
yield curve, which is one where long term rates are
higher than short term rates, which we really haven't had
for for several years now, I think two or two
and a half years continuously. I think it normalized yield
(20:10):
Kirk benefits the banks. Earnings from JP Morgan were very solid.
City Group, Bank of America and Wells Fargo. If you
look at just JP Morgan, which is which is our
largest bank in the US returns over the past week.
JP Morgan's stock was up six percent. You know, City
(20:30):
Group the stock was up bunch it up here nine
point nine two percent. I think Wells Fargo was the
big winner of the week nine point two nine percent.
How you can play you can play with the XLF
that's the sector Selex Spider ETF money center banks. You
(20:51):
can play with the KRE which is a regional bank
ETF that was up four and a half percent. You know,
we like to use individual secures in that sector. We
do have some XLF. We also have like master Card
and Visa, And you know, I think another area, another
stock that would go very well if you're looking for
to add some money at this time. And a lot
(21:11):
of a lot of investors are concerned right now for
a lot of reasons. But Schwab, I think Schwab's a
good way to play. A normalized yields care will help
them a stable interest rate environment, which I think they
have we have will also help them to good earnings.
Mortgage rates up over seven percent. I think will probably
come down this week because, as I mentioned earlier, the
(21:34):
yield in the tenure came down from four point eight
to four point six. Big news out this week is
definitely going to be the inauguration. What are the surprises
coming from there? A couple of things. I think as
we close out the first half our shares of Apple
we're down this past week and disappointing iPhone sales data
coming from China. I think disappointing really for and Apple
(21:58):
is down one point nine percent the trailing week. I think,
what it's one of our biggest holdings. I think it's
their second or third largest individual stockholding. Yes, it's down
from a high of let's see, you had gotten up
to maybe two forty five or two fifty past year
(22:23):
or so, now it's down to two twenty nine. Are
we watching that? Yes, but has gotten to two sixteen
and it's down to two thirty. So you have a
stock go off about twelve down about eleven percent or so.
Are we worried about it? We are not. We are
watching it closely. We think they are typically not the
(22:45):
first mover in big technology changes, other than obviously their iPhone.
They adding AI to their iPhone is going to take
some time. I think their iPhone seventeen is due out
later this year. I think the shares will be supported
by that the services component side of the company and
also as from the anticipation of the release of the
(23:08):
iPhone seventeen do out later this year. So those are
some big numbers.
Speaker 3 (23:13):
Right now.
Speaker 1 (23:14):
It's ten thirty on the station dependingpon for news, weather
and information News Talok E ten and one O three
one WGY.
Speaker 3 (23:24):
Good morning, Welcome back to the second half hour of
the Capitol District's Money and Investment program. You're listening to
the Fagan Financial Report Aaron Fagan and Dennis Fagan sitting
here every Sunday from ten to eleven right here on
News Talk K ten and one O three one w G.
I was daydreaming and forgot to pull the microphone over.
That's where there was a little bit of dead air.
But you know, you did say something right before we
got on the air, and we sit here every Sunday
(23:48):
and every once in a while we talk about it,
and you said the first thing we want to talk
about in the second half hour. As we mentioned during
the first half hour, is you know, percent of the
S and P five pointed by market capp where they're
going to talk about, you know, flipping your sixty forty portfolio,
perhaps a forty sixty portfolio.
Speaker 2 (24:03):
Little anof was a a tweet or a post.
Speaker 3 (24:07):
Facebook post by Josh Brown from Mitholts Capital Management, was
that Twitter? Yeah, ex whatever, And then forty one percent
of companies worldwide plan to reduce workforces by twenty thirty
to the AI. But you said, pertaining to the first topic,
which the top ten stocks, and we sent out our
chart talk earlier in the week, and you said, we
got a diversified, diverse five diversifying Its almost like but
(24:30):
it reminds me of so much, so many things that
just takes you know, like practicing shots, free throws, you know,
one hundred free throws on I did one hundred yesterday,
you know, when you're a kid, you know, And.
Speaker 4 (24:43):
I think that's that's the theme. And I think that's
kind of the theme that we've been talking about, but
specifically me lately, when when when talking about you know,
investing and in the correct acid allocation, and how should
you be how should you invest? And you know the
gist is and what you come to the conclusion is
(25:04):
the diversification is obviously very important, the especially the older
you get diversification. Diversification reduces the volatility in your portfolio,
helps you not do the wrong thing at the wrong time.
Speaker 5 (25:18):
And you know what we talk about in the article.
Speaker 4 (25:20):
A little bit is you know, you sacrifice some performance
for maybe better sleep at night. And I think that's
the goal of your portfolio when you get in retirement
is you know, you work forty years, fifty years, and then.
Speaker 5 (25:34):
You know, you quit cold turkey.
Speaker 4 (25:35):
And I think it's a little unsettling for a lot
of people to not have an income stream, and you
try and create a portfolio that you know allows them
to have an income stream through their investments. But you know,
it's unsettling, it's tough. And the article goes on to say,
how you know the S and P five hundred now
is over fifty percent in sectors that are considered sensitive
(25:58):
that would be communication services, energy, industrials, and technology. And
of that, you know, thirty three point two percent of
the S and P five hundred is technology now, so
you know it's although the SMP has gone up twenty
percent two straight years, and it could go up twenty
percent more the older you get.
Speaker 5 (26:18):
The more the more you're nearing retirement or in retirement.
Speaker 4 (26:21):
You know, the S and P five hundred really is
not the best benchmark because it is one third of
technology fund right.
Speaker 3 (26:31):
And you know, I was as you were talking a
little bit, you know, I thought of a couple of things.
One is diversification really is a recipe for disappointment.
Speaker 2 (26:42):
Yeah, you think about it.
Speaker 3 (26:43):
Yeah, but if you think about what diversification is, and
when talking to clients and just in my regular life,
actually I tend to use exaggerations to illustrate a point.
And you know, a good good example is, let's say
you had one hundred, one hundred thousand dollars, but why
don't you put it all in your favorite stocks?
Speaker 2 (27:04):
Well I would never do that.
Speaker 3 (27:05):
So you know, let's say the individual responded with that
with that comment, well, what is the appropriate amount? Then
you know, and you know, we can, you know, certainly
we can guide in we obviously we manage accounts, so
we guide investors along those lines. But I would think,
you know, four or five different industries you know, two
(27:28):
or three companies deep if that's going to be your
your equity side. Another way to look at it is
twelve stocks at five percent of your portfolio, ten stocks
at three percent of your portfolio, maybe five stocks at
two percent of your portfolio based you know. So those
are some things that so you want to diversify across industries,
(27:48):
diversify along market capitalization, did the extent you want to
diversify geographically.
Speaker 2 (27:55):
And then go one or two layers deep.
Speaker 3 (27:57):
You know, we were talking earlier about you know today
you know, not in the show about you know, the
risk of being right on the sector and wrong on
the company. And that's why they're backup of ETFs, you know,
And I think, what, you know, what you know, we'll
give us give you know, you know, and I know
this is putting on the spot a little bit, but
you know, why don't you give me some thoughts on ETFs.
Speaker 2 (28:18):
Now? I know we're we're evolving as a.
Speaker 3 (28:21):
Company in dealing with with ETFs in conjunction with stocks.
Speaker 2 (28:26):
You know, I just think out loud a little bit,
you know.
Speaker 3 (28:29):
Uh, a typical portfolio of fifty or sixty thousand dollars,
should it have all TETF, should it kind of blend
in some stocks, you know.
Speaker 4 (28:39):
Yeah, you know, I think I think that you know,
any approaches is would be you know, really a good approach.
Speaker 5 (28:47):
Yeah.
Speaker 4 (28:48):
We have a lot of portfolios that only have ETFs
in them, and I think some people might get confused,
but hey, you know, I want individual stocks, but you know,
there are there are individual stocks in ETF.
Speaker 5 (28:57):
So you know, with the cost of.
Speaker 4 (29:00):
Creating going down, with a lot of passive ets in
the range of you know, point zero three point zero
four percent, you can find a lot of great ets
out there, whether it be through Schwab, JP, Morgan, Vanguard,
you know, all companies have great ETFs that you can
you know, kind of customize a portfolio for exactly how
you want it to be without including individual stocks. I
(29:22):
do think that, uh, you know, as investors, we do
try to find individual companies that we think could outperform
maybe their their benchmark and invest in those as well
as used as you as well as use individual stocks
to reduce the you know, expense ratio of someone's portfolio.
Speaker 5 (29:41):
So you know, I think I think a mix of
both is good.
Speaker 4 (29:44):
What I do like about ETFs is, uh, you know,
whatever benchmark your bench you marking yourself against to against.
I think it's really important, whether it be uh, we'd
like to have at least fifty percent correlation to whatever
indicy we are benchmarking ourselves against. And although you know
we started off by saying the show by saying maybe
(30:04):
the SMP isn't the great greatest benchmark, you know what
we do like about it is it's American. It's the
most innovative companies in the world. It's market cap weighted,
so the better companies tend to take up more of
the portfolio as time goes on, so you're investing more
in companies that are doing better.
Speaker 5 (30:21):
So I think that's always good.
Speaker 4 (30:23):
And you know, what we have with the S and
P five hundred is some historical context on how it's done,
and I think that's really important as well. You know,
it rewards the more innovative companies. You know, that said
going forward, you know it's tough it being thirty three
percent technology, technology being one of the most volatile sectors
(30:45):
out of the eleven main sectors. In that if you
are investing for someone that you know needs a four
or five percent distribution rate, you know, I do think
it's important to have correlation to the S and P
five hundred, but maybe not as much core relation to
someone who's like in the accumulation phase of their life,
you know, ten plus years out from retirement.
Speaker 3 (31:05):
I think as I've gotten older, I'm sixty three, it's
becoming more and more apparent that not to tie your
your portfolio to somebody else's expectations. Yeah, and not to
tie your portfolio too literally again, unless you're thirty or
(31:27):
forty to the S and P five hundred. You know,
because in part because of the fact that you know,
forty percent of the S and P five hundred is
in the in the ten largest stocks of the S
and P five hundred you mentioned earlier, third of it
is in technology. You know, it's it's it's by all,
by most definitions, it's really not a diversified.
Speaker 2 (31:52):
Index anymore.
Speaker 4 (31:53):
Yeah, you know, there are five hundred companies in it,
but yeah, a third of them are technology.
Speaker 3 (32:00):
So and we like them. We talked last week on
the show about that we like that area. We think
that you know, especially with AI and just the dynamicism
of dynamism of technology, they will continue to be leaders.
Speaker 2 (32:16):
Along the way.
Speaker 3 (32:17):
But you just got to make sure that what you
what the portfolio you have is appropriate for you and
appropriate for your age.
Speaker 2 (32:24):
Now I was.
Speaker 3 (32:24):
Talking to somebody within the I've been using this a
lot later.
Speaker 2 (32:28):
I thank you for it. And this is the theme.
Speaker 3 (32:31):
You came up with, which is, you know, you know,
the wealth the accumulation phase and I think it might
have said it a few minutes ago is over once
you hit sixty sixty sixty five, hopefully that you're able
to retire. And I use the analogy too that once
you pass through that door of financial independence, you don't
want to go back out.
Speaker 4 (32:49):
Yeah, And I think as we talk about this a
lot about this show, how you know there's only about
ten percent of people working now who have pensions, as
opposed to fifty percent nineteen eighty. A lot of the
stress is now on the employee, employee and the retire
So you know, I think one of our main jobs
(33:11):
is to not have people do the wrong thing at
the wrong time, you know. And what what I'm saying
kind of is, I'm just trying to use an example.
Let's say two portfolios are both up thirty percent over
five years.
Speaker 5 (33:25):
Let's say, just to make you know, the numbers easy.
Speaker 4 (33:29):
But one portfolio average is a point two percent hu
you know, up or down swing a day, and then
one average is a one percent up or down swing
a day. You know, although they're in the same spot,
you know you really want to you know yet you
want to reduce the volatility of your portfolio because so
(33:49):
much of this is behavioral and you don't want to
do the wrong thing at the wrong time. So you
know more, you could say, hey, you know both portfolios
did the same, but you know one of the portfolio
and this is you know, something called the sharp ratio
you know, risk of ajusted returns is you know, you
want to decrease the volatility in your portfolio because you
want to decrease your chances of doing the wrong thing
(34:09):
at the wrong time. And that's I think that's the
hardest part, uh with just you know how easy it is.
You know, you have to have a Schwab alliance. Now
when when you sign up for Schwab, which means you
know a lot of people have the app. I said,
I'd say the majority of our clients have you know,
the Schwab app. They can go right in there. You know,
you have CNBC on, you have alerts on your phone.
(34:30):
If the SMP's up two percent, you can go online
and you know, Apple scans your face and you can
check your account right there. You can trade your account
within seconds. So I think the easier access we have
to information, and the more information we have in our
face without even going to look for it, the better
chances you have of doing the wrong thing at the
wrong time. So, and you know the S and P again,
(34:53):
being a you know, thirty three percent, uh, you know,
technology is you're going to see those one two percent
swings way more than you did maybe fifteen, twenty, thirty,
forty years ago and.
Speaker 3 (35:02):
Be able to respond to yeah right away, you know,
you know, see it and respond and quite often that
initial response is going to be solely emotion and not
too can me. So anyways, second topic, if you want
to get you know, go ahead, I'm sorry, no, no,
you can go on.
Speaker 2 (35:21):
Well, I would think that kind of lends itself.
Speaker 3 (35:24):
You know, you could read ten articles and five might
say the classic retirement portfolio is sixty forty and hang
in there. Bonds are looking better and better, especially with
last week's CPI. The PPI was a little high. The
CPI came in good. We market rallied sharply on Wednesday,
or you could say, you know, and this is the
(35:47):
one article I'm looking at. It is consider flipping your
sixty forty portfolio to forty sixty as bonds become more
more attractive than stocks. So one is hey stick with
the classic retirement portfolio of sixty forty. The others say
the markets run a long way up twenty percent a
year over the past couple of years, pulling the reins
should have been rebouncing kind of along the way, but
pulling the reins and move to sixty percent as bonds
(36:10):
become more attractive, So you can kind of, I guess.
Speaker 2 (36:14):
Parlay that.
Speaker 3 (36:15):
So to speak with Josh Brown's article or tweet, I
don't know how you want to handle that for discussion.
Do you want to address the sixty forty forty sixty?
In my opinion, the classic retirement portfolio is anywhere from
depending upon your sources of income, depending upon your sources
of fixed income Social Security defined benefit plan, then.
Speaker 2 (36:37):
Offset by your.
Speaker 3 (36:41):
Expenses, where you should be along that sixty forty up
to seventy five twenty five line. But I've seen an
academic article that suggests bonds are a waste of time.
So it's all along the spectrum of advice from my
opinion in a retiring and I'm working still. Obviously, my
(37:05):
wife Carolyn and I are about seventy thirty stocks to bonds.
I'm sixty three and so is she. So I think
that's kind of the ballpark that for the most of
our clients, you know, in my age, you know, I
kind of would recommend, you.
Speaker 4 (37:19):
Know, seventy thirty, seventy thirty, sixty, anywhere between fifty and
seventy thirty. I would say, it all depends on what
your goals are for the money, you know, how much,
what your you know, what your living expenses are, I
think is important. But you know, I think and obviously
your risk tolerance. So I think, you know, we we
say that a lot on you know, on the radio.
(37:40):
Is I think you know something that you can follow
through with is is important as well? You know a
plan that you can actually stick to.
Speaker 3 (37:47):
Well, you were talking about worrying just a little while ago,
and there's a if you look at a fifty to
fifty portfolio versus a seventy thirty portfolio, if your talerance
to risk is low, relatively low, and you just have
to happen to not understanding you opted for a seventy thirty.
There's a good chance or a chance that when the
market's down, you might cancel a vacation, you might take
(38:10):
a shorter vacation. And you know, having been in this
business since nineteen eighty three, so forty two years, Yeah,
you're here thirteen years.
Speaker 4 (38:21):
Even you know, you can even you know, we work
in this business, so it's a little bit different. But
you know, even and I know for me personally, is
when the market's down and it's little rock here, it's
hard to be even present when you're home. So you know,
even so I think the same thing is it happens
for people that I retired and drawing income on their portfolio.
Is you know, the more volatile your portfolio is, the
(38:42):
more distracting it is in life. Right, you know, you
want to you want to decrease the distraction, so you
can you know, be present in the you know, twilight
years of your life.
Speaker 2 (38:52):
Twilight years, I like that twenties. That's is that where I.
Speaker 3 (38:55):
Am no, no, no, everybody else is mom and I aren't.
I like, but so I don't know, I would not
unless for somebody who's very risk adverse. I think the
pressure of the market doing historically speaking, the market doing
well over time is going to be too large to
(39:17):
bear to go forty sixty, so you know, you know,
I would agree with you. You know, anywhere from fifty
to seventy fifty to seventy five percent of your account
in the stock market is appropriate.
Speaker 2 (39:29):
For your long term needs.
Speaker 4 (39:33):
And I.
Speaker 3 (39:37):
We were out with our newsletter, went to publication within
the past few days, a week or so ago, and
within that I don't have in front of me if
I can remember our outlook, and it is I can't
remember because it's our outlook, or I look for bonds
is you know, stick with short intermediate. So seven years
in under and we believe that you're going to get
(39:59):
your coupon or maybe a little less. Meaning what that
implies is that interest rates are going to kind of
stay around where they are for now. That would imply
a coupon, That would imply a total return of which
your coupon is a little less, would imply maybe interest
rates drift upward. I don't see them rocketing skyward from
here for for a number of reasons.
Speaker 4 (40:22):
Unless you saw some major tariffs being implemented and not
just talked about. I think you could see a horizon
you know, longer, longer duration bonds in.
Speaker 3 (40:34):
The president electrump for one more day is kind of
backing away from the broader tariffs from from what I understand,
you know, and pulling in from that.
Speaker 2 (40:44):
So well, so we'll see.
Speaker 3 (40:45):
So I think bond's off for opportunity now the ten
years are for seventy or so, the twenty year close
to five.
Speaker 4 (40:53):
Yeah, I think the Yeah, so you know, I agree.
I think this is a good this is a good
area to pick up bonds. You know, as we say earlier,
Josh Brown, what you said that said, you know, not
financial advice, but me personally, I want every ten year
Treasury bond with a yield over five percent I can have.
I'll take them until I run out of money. The
risk is missing The risk is I miss out unlocking
(41:14):
in six Who cares? I'll be sleeping like a little baby.
Speaker 2 (41:17):
Like a fat, fat little baby.
Speaker 5 (41:19):
Yeah, and you know, I do agree with that.
Speaker 4 (41:21):
You know, I think I think five high four five
percent is a very very great rate for people, especially
people that need distributions. And I think that I think
that we're we're around where world, we will see rates
peak and that five percent, you know, Larry fin comes
on because I could see five and a half percent rates,
but I also because there's three and a half percent
(41:43):
ten years.
Speaker 2 (41:43):
And would you say exactly at that point?
Speaker 5 (41:45):
I forget.
Speaker 2 (41:45):
I think it's that Thanks Larry.
Speaker 3 (41:47):
Right now the ten years at four seventy eight, I
think you get that ten year at four ninety think
about that.
Speaker 4 (41:54):
Yeah, let's don't know, like, what is that? I know
what you're probably thinking of the math right now? What
is that over a year? Well, that's for one hundred grand,
put one hundred grand in a A and a treasure
of five year treasury at five percent ten year treasury.
You know what's the difference between you know, four ninety
eight bucks.
Speaker 3 (42:13):
Right, Yeah, you have forty nine hundred versus five thousand,
if you have put one hundred thousand at five percent
versus four point nine. But the flip side is is
that if you have a distribution rate of four percent,
you know, if that five percent is impacted by inflation
by two percent, right, then the next year it's really
has an effective yield of four point nine percent, you know,
(42:34):
and then it goes down, so you have built in
probably seven you know, seven or eight years maybe even longer,
of locking in an inflation adjusted rate of four percent.
Speaker 2 (42:44):
Yeah, if the ten years at five percent.
Speaker 3 (42:46):
Now, let's say you're sixty three or sixty four years
old when you retire, and you built in an inflation
adjusted rate of four percent, because you start out at
five the yield at five, then that puts you at
seventy three. You're within four five years of you know,
where you move into a slower time of your life.
And I was talking to somebody and really, you know, I,
(43:07):
you know, both of us there, we're both really somewhat
emotional sometimes and not like a crying emotional, but just
like really passionate, I guess, not emotional about the fact
that you know you don't want to be you know,
the chance of both parties, both spouses, getting to be
seventy eight, seventy nine, eighty years old, having the strength,
the physical strength, they're.
Speaker 2 (43:28):
Really the the desire.
Speaker 3 (43:32):
You know, a lot of our clients when they hit
seventy eight seventy nine, they're selling their place in Florida.
They get closer to home, they want to be closer
to their doctors closer to their family. You know, their
kids want them home. Ye, grandkids, right, that's me and Momah.
But so so you know, this is the prime part
of your life. So you want to construct a portfolio
that enables you to do the things you want to
(43:53):
do financially, but also enables you and what did you say,
the peace of mind.
Speaker 2 (43:58):
Or something like that.
Speaker 5 (43:58):
Peace of mind help you sleep, and I help you
sleep at night.
Speaker 3 (44:01):
So so five percent, you know, certainly Jo Josh, bond's
probably forty something years old.
Speaker 2 (44:07):
Forty five or so. But for a sixty year.
Speaker 3 (44:10):
Old, no, I would not put I want to I
would not want every ten year treasury bond with the
yield over five I can have.
Speaker 5 (44:17):
But you know I surely would want.
Speaker 4 (44:19):
To sound rate for forty to sixty percent of my portfolio.
Speaker 2 (44:22):
Yeah, me too, Me too.
Speaker 3 (44:24):
The other thing you can do is you buy bonds
at a premium that are paying maybe six if you
can find them, you start to find them again, and
then they depreciate down to par. So you're actually getting
a better stream of income and you lose a little
principle over time. That's not let's say put let's say
a six percent bond qush one hundred and fifteen thousand dollars.
You might get six percent for ten years and your
(44:45):
hundred fifteen thousand's gonna end up with at one hundred thousand.
But now again you're seventy four and you lock in income.
So there's a lot of things that we can do
to help you while staying you know, away from some
of the some of the more of the fixed income
annuities and that type of thing. What else you got
for said, what's on your plate that you know.
Speaker 4 (45:02):
And you know, not much really, you know, we only
have a few minutes left, but you know, forty one
percent of companies worldwide plan to reduce workforce by twenty
thirty two to AI. You know, I found that interesting,
and I think we're at quite the tipping point as
a country, and you know, technologically at you know, what
happens if a lot of this workforce is out of
(45:22):
work and we're having quite the declining population as well.
So now I think there's a lot of unknowns in
the next ten, fifteen, twenty years.
Speaker 5 (45:29):
Brought on by technology that you know might have to
shift how.
Speaker 4 (45:34):
You know, we invest, but also maybe government policies that
might have to change.
Speaker 2 (45:38):
Is guant guaranteed monthly income.
Speaker 4 (45:41):
Yeah, something you know, if we start to see but
they do say, you know, I read a book called
called called Autonomy. There's a lot of you know, sectors
and businesses that we don't even know will be that
don't even exist yet, that will be, you know, brought
on by by these new technologies. So you know, it
was so it's almost like, you know, one step forward
(46:02):
or two steps forward, one step back here, I think,
and now I could I could see us seeing that
as well.
Speaker 3 (46:07):
I may be wrong here, and I'm going off memory
and we don't have time to really research it before
I say this, But I don't think there's ever been
a period of time where technology hasn't created either more
jobs in that industry or new or ancillary industries. So
there's never been a period of time that have actually meant,
(46:31):
you know.
Speaker 2 (46:31):
A reduction in worldwide workforces. You know.
Speaker 3 (46:36):
But this, so this is kind of a stark statement
or an alarming statement. Forty one percent of companies worldwide
plan to reduce workers by twenty thirty due to AI.
Speaker 2 (46:47):
And that that's something that how much time.
Speaker 3 (46:49):
I got left there, I got to watch stop and
and a half yeah, okay, then you you kind of
lead us into that towards the end because I'm not
sure my watch is off, so so we'll see where
we go from there. But there's a lot of opportunity there,
and that opportunity is all right already begun to kind
of kind of manifest itself. One other thing you want,
(47:11):
uh timing is everything you got you got a few
minutes to talk about that, or a minute and a half
to talk about that.
Speaker 2 (47:16):
You wanted to move away from that.
Speaker 4 (47:18):
Bit about a minute left. Yeah, we can talk about
that next some other time. And I think that's you know,
where you get caught up with the sixty forty portfolios.
Speaker 5 (47:25):
You know, we do a little bit.
Speaker 4 (47:26):
We do see us in this you know, technological revolution
which could continue to the power of the stock market.
It's just now after two years of twenty plus percent
and a five year interest rate, you know, for a
lot of people in retirement.
Speaker 5 (47:38):
That's that's uh, that's good.
Speaker 3 (47:40):
Enough, right, you know, And I think that's that's kind
of what we're taking a look at that we're positive
on the market. If you want our newsletter and you're
not a client, uh, you know, please feel free to
email US.
Speaker 2 (47:49):
At FIG and asset dot com.
Speaker 3 (47:50):
It should be out next week, so yeah, give us
scold during the week.
Speaker 2 (47:56):
Is that it?
Speaker 3 (47:57):
Yeah, all right, that's about it. Thanks Laught for listening
to Fagan Financial Report.
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