Episode Transcript
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Speaker 1 (00:00):
Good morning, and welcome to the Capitol District's Money and
Investment Program. You're listening to the Fagan financial Report in
Dennis Fagan sitting here with my son Aaron, as we
do every Sunday right here in news tol K ten
one O three one w g Y.
Speaker 2 (00:12):
Let me ask you a question. How you doing? How's
how's your bracket last? Your bracket is busted?
Speaker 3 (00:16):
I don't know, I haven't checked it. You know, it
is Friday morning, so you know he had one day
Friday morning taping this Friday mornings. We had one day games.
You know, it was fun. It's always nice to uh,
you know. My car broke down on Thursday though, so
that really put a hiccup in like the usual office
March madness. Watch, yes, get a pizza sometimes, yes, but no,
(00:43):
not this not this year. Watched some games last night.
But yeah, it's fun. How you doing?
Speaker 2 (00:48):
Look good? I'm doing well. I can't go playing. You know,
I didn't have one great I don't have a bracket,
you know, I don't know.
Speaker 1 (00:55):
Just the week got away, you know, got away from
it saying, you know, I was going to start the
show a little it by talking about the eventful week
on Wall Street. But if all weeks are eventful, does
that mean that they're now it's uneventful? That's true, you
know what I'm saying. Yeah, if someone says, oh, they're
in rare form, if they're in that same form all
the time, is.
Speaker 4 (01:12):
It rare No?
Speaker 2 (01:14):
Probably not.
Speaker 1 (01:15):
Yeah, So I and I think I think, you know,
and I will continue to continue to you know, despite
my uh, poor joke.
Speaker 2 (01:25):
These are eventful times.
Speaker 3 (01:28):
You know, they're unpredictable times, you know. Really, I think
we talk about it on the show a lot, you know,
uncertain the uncertainty that this this administration brings, uh, I
think heightens the risk in the market. That's just something
that I think we're gonna have to get used to.
Speaker 2 (01:48):
And the potential reward, yeah, you know, and.
Speaker 4 (01:51):
The potential reward.
Speaker 3 (01:52):
But yeah, it's it is a I've been calling it
an experiment with with what's going on, and it's hard
to back test a lot of the policies that Trump
is putting in place other than you know, the small
smooth Holly tariffs of nineteen twenty nine and that didn't
work out well. But you know, other than that, there's
really not many parallels to draw from any other time
(02:14):
in history when you know, when something like this was
going on, especially for the United States. So you know,
I think I think at the end of the day,
the market could go up here, you know, it could
go down here. But you know, I think I think.
Speaker 2 (02:26):
You uh, those are the direction you know.
Speaker 3 (02:28):
I think I think with the I think there's risk
to the market and uncertainty, and that warrants I think
de risking your portfolio a little bit, especially if you're
in retirement or near retirement.
Speaker 1 (02:39):
And we've done that, We've rebalanced as of the last
about three or four weeks ago. We mentioned that in
our Sunday Morning snapshot where appropriate, and I think that
where appropriate is also important to note given your other
sources of income in retirement is a broad statement. I mean,
what are your sources of income? Do you have a pension?
Do you have a soul security? Yeah, came somebody came
(03:02):
in yesterday. Were just retiring. There are two solid securities
and there in a relatively small pension. Uh certainly took
care of their income needs. Now, their income needs were
were less obviously less than their sources of income monthly income.
That sounds simple and and it really is. But a
lot of time it comes down to lifestyle. And you
(03:23):
know this, these individuals had, you know, uh, relatively I
won't call a simple lifestyle, but they had a peaceful lifestyle,
and they didn't have any debt, and uh, they were
in good shape. Now, if your income needs, if your
standard of living is predicated upon the stock market continuing
to go up at the pace it did over the
(03:44):
past eight years, then yeah, you do risk your portfolio.
Speaker 2 (03:47):
I do think we're we we were at a.
Speaker 1 (03:49):
Time or at least for the time being, you know,
and that that dividends and interest are important to a portfolio.
That that you're right, Eric, I think, you know, having
a a level of risk that's commensurate with your objectives.
Speaker 2 (04:05):
Should outweigh any greed that you that you feel.
Speaker 1 (04:08):
There's probably not a lot that people feel right now,
but I guess at some point in time, it's a
it's a clear day, it's a straight road, and maybe
go a little too fast. Now is not really the
time to do that. I think now you just got to,
you know, make sure that you know your t'ser crust
and your eyes are dotted, yeah, because then we'll talk
about it later in this half out and FedEx and
Nike both come out and we hold both of them said, hey,
(04:30):
you know, we're concerned about the tariffs, We're concerned about
the future. FedEx mentioned slow down in the industrial base.
So a lot of things going on. You know, I
did want to, you know, in the FED met this week,
the FED mentions uncertainty and their statement after their Open
Market Committee meeting, the committee that determines the direction of
monetary policy. So those are some things we'll talk about
(04:51):
in the first half. The second half will broaden it out.
Two more planning topics as we always do, but let's
start off with this are the the f O. M. C.
Char Powell said, I believe in his statement and that
that that as of now, you know, that hard data
(05:14):
is still seems pretty good. It's the sentiment data, this
consumer sentiment that saw to the soft data that that
is really in question right here. And I think if
we take a look at the the economic data that
came out this past week, it's still pretty good.
Speaker 4 (05:35):
You know, yeah, it's still pretty good.
Speaker 3 (05:38):
You know, I think you know, you are seeing some
you know, tourist and Slock he's the chief economist for
Apollo Asset Management has seen, you know, emergency funds decreasing
the risk of the risk of where is it. I
can't see it right now. Yeah, consumer sentiment is deteriorating,
(06:00):
so data soft data, So you know, I think I
think that, uh and here here's one of we said,
hard data is starting to weaken, you know, so soft
data has weaken. Hard data is starting to weaken a
little bit. But yeah, you know, I I think I
still think the consumer is in good shape.
Speaker 4 (06:17):
But you know, I don't. I don't know how.
Speaker 3 (06:20):
From an economic standpoint, you know, it's hard to think
that in the medium to short term that there's a
lot of positivity out there, you know, like our hate
Donald Trump.
Speaker 2 (06:30):
You know, I think there's got to be something like
or hate like or dislike you. Yeah, you know, it's
like hate is the end of the spectrum, Like is
the you know.
Speaker 4 (06:40):
Yeah.
Speaker 3 (06:42):
Yeah, So I don't know what I was I forget
what I was saying, but basically, you know, his will
bring a lot of you know, short term uncertainty to
the markets, and I.
Speaker 2 (06:51):
Don't I don't.
Speaker 1 (06:51):
I don't mean to hedge around it, but you know,
I think the future is uncertain and I think we're
both in the same camp that if President Trump does
not dial back a little bit the rhetoric, which will
eventually for will you assume it's going to be policy.
Speaker 2 (07:08):
Eventually.
Speaker 1 (07:09):
I don't want to put words of your mouth, but
I think, you know, you're you think and I think
that eventually that's soft data, that the hard data is
going to catch up with the soft data or vice versa. Yeah,
that eventually that data what you said Torsen Slock mentioned
some hard data in there too.
Speaker 2 (07:24):
What did he say hard data is catching up with
the soft data?
Speaker 1 (07:26):
Are?
Speaker 4 (07:27):
Yeah, you know, I don't have it in front of
me right now, but yeah.
Speaker 3 (07:30):
Basically the bottom line is that soft data points to
to weakness coming in the hard data. In addition to this,
past week was a survey week from March employment report,
and with uncertainty elevated the downside. Risks to March non
farm payroll when it's released on Friday, April fourth are significant.
Speaker 2 (07:47):
Yeah.
Speaker 1 (07:47):
So the Fed, if their data dependent, they are going
to be late to the party.
Speaker 3 (07:52):
The cut rates and you know, and I think this
is I think this is He has a chart up
here that's a sharp reversing corp for CAPEC spending comes
in uh, spending plans in recent weeks.
Speaker 4 (08:03):
So you're seeing, you.
Speaker 3 (08:04):
Know, a major decline in large corporations CAPEC spending because
of the uncertainty out there. No one's gonna you know,
build a thirty billion dollar plan, you know, five hundred
million dollar plant if they don't know what the next two, three, four, five,
ten years are.
Speaker 4 (08:20):
Going to look like.
Speaker 3 (08:21):
So, you know, I think I think the entire uh,
you know, corporate world right now is kind of on.
All right, let's let let's take a step back here
and you know, see how this plays out, which will
lead to decreased spending and decreasing GDP growth.
Speaker 4 (08:36):
It'll, you know, it just it'll have to, right, I think.
Speaker 1 (08:38):
I think I think if the plant was necessary to
begin with, I think it will be built, and probably
built in.
Speaker 2 (08:46):
The United States.
Speaker 1 (08:47):
You know, you know, if the plant is like, well,
we really don't need it, you know, we did have
it over here, We're going to bring it back to the
United States. I think that's the big uh, that's the
one that will be in question this by what President
Trump is implying. You know, if you need a plant,
I think there's a good chance it'll be in the
(09:08):
United States. Better chance in the United States than elsewhere
as compared to a year ago. If you don't need
a plan. I think that's what you're saying, is that
capital expenditure is, Hey, you're gonna put it off a
little bit to see how this whole thing plays out.
And that circles back to the rhetoric has got to
die down. If the rhetoric and tariff threats of terror,
(09:31):
the tariffs are policy that will continue for four years,
you know. I think I think that's going to just
create a level of uncertainty that's going to be hard
for the market to make much headway.
Speaker 3 (09:42):
Now.
Speaker 1 (09:42):
I watch a lot of podcasts, watch President Trump and
even says, hey, we got to get to the other
side of this, and you're basically going to the garden
of Eden. You know, you're basically going to this Nirvana
type place. So so we'll see how.
Speaker 2 (09:56):
That works out.
Speaker 1 (09:57):
You know, looking at that hard data that came out,
you had a year. You have a mix I would say,
retail sales up two tents of a percent, not so much,
three point one percent year over year excluding motor vehicles
and parts up three tents of a percent. You know,
you have the business inventories up three tens of percent,
(10:18):
business sales down eight tens of a percent. The inventory
to sales ratio, it was like the turnover ratio for
businesses up to one point three seven months in January
from one point three five months in December. Export prices
certainly slowed down, up one tents of a percent, import
prices up four tenths of a percent. You had industrial
production up seven tens of percent, capacity utilization up over
(10:40):
seventy eight percent to seventy eight point two percent from
seventy seven point seven percent. Manufacturing capacity up. So you can,
as you're listening, you see an industrial production good, retail
sales not so good. Business sales not so good. Housing
starts up eleven percent. I will say they were down
quite substantially during the prior month, so you have mixed
(11:00):
housing starts. Index of leading economic indicators fell a little bit,
down one percent over the past six months. Initial claims
unemployment benefits as somewhat elevated, but no big deal right now.
And sales of existing homes up four point two percent
during the month of February. So I think you do
have mixed data. You know, I also think and you know,
(11:24):
and I don't know, I'm kind of droning out of it.
Speaker 2 (11:27):
You know.
Speaker 1 (11:27):
The future is that it's always uncertain, you know. I
think right now, you do you know, you you're we're
a little bit cautious right now.
Speaker 2 (11:35):
Yeah.
Speaker 3 (11:36):
I think it pays to be cautious, really, you know.
And it does pay to be cautious now, as you know,
we're still getting you know, four to five percent on
money market funds and bond and uh you know, bondy tfs,
you know, in individual bonds. So I think it pays
to see how this plays out, you know. I think
if you're someone my age, you know, you continue to
dollar cross to average into the market because that works
(11:57):
over time. And I think if you're you know, nearing
retirement or you're in retire vironment, I think it's you
and you you know, rely on this account for most
of your income or will. I think it's just a
prudent measure to to de risk your portfolio and maybe
add some international you know, maybe increase your bond and
(12:17):
money market exposure cow z. Yeah, diversify diverse five of
the things that have worked so well over the past
ten to fifteen years. I think it's just a smart
I think it would be the smart thing to do
even if there was certainties. But I think it's even
smarter to do now with the you know, the economic
uncertainty that's out there right and.
Speaker 1 (12:37):
You know, the Fed's policy statement actually addressed that some
changes that they may to their policy statement includes it
goes from the Committee's judged that the risk to achieving
its employment inflation goals are roughly imbalances to uncertainty around
the economic outlook having East.
Speaker 2 (13:01):
You know, So that's a little bit of a.
Speaker 1 (13:04):
Questionary tone in uh in in what they talked about. UH.
Chair Powell went on to say that at the December meeting,
the median, you know, the same number above and below
of the FED governor was two rate cuts. So come
in and you see broadly speaking, weaker growth but higher inflation,
and they kind of balance each other out, he said. Again,
(13:25):
Powell emphasized the forecasts are highly uncertain. So I think
the market on Wednesday kind of latched onto the two
rate cuts, and and uh you know, rose rose substantially
on Thursday, gave it back and again we're as Aaron mentioned,
we're recording this Friday morning. The market is weaker to
(13:46):
open and you know, probably down eight or nine percent
from its all time high.
Speaker 4 (13:51):
Uh.
Speaker 1 (13:52):
So, you know, I think there's more of that, you know. Pole,
during that same uh press conference, went on to talk
about recession forecasts. We don't make such a forecast. If
you look at outside forecasts, forecasters have generally raised their
possibilities of a recession somewhat, but still at relatively moderate levels.
(14:13):
It has moved up, but it's not high. There's always
a probability of recession. He went on to say, I
did he did say that the specter of higher inflation
some of it. The answer is clearly some of it.
A good part of it is coming from tariffs. We'll
be working with other forecasters to separate non tariff inflation
(14:35):
from tariff inflation. Where do you think we are in
the tariff in the inflation cycle? Where do you think
we are in? Is tariff inflation going to be positive?
Mid mentioned the word transitory again. I don't know why
I would ever mention that, but given where we were
in two thousand, where do you think we are in
in inflation? I know we've kind of in the past,
(14:57):
and I you know it said, Look, you know on
or is going to be somewhat inflation will be somewhat.
Speaker 2 (15:03):
That embedded over the long term, you know, at two
percent or so.
Speaker 3 (15:07):
Yeah, you know, it's hard to think and inflation will
get to that that two percent target. And you know,
I you know, with with the addition of tariffs, and
you know, I think Trump tweeted even earlier this morning
about April second being Liberation Day, So you know, I
think he's it looks like these tariffs will come into effect,
and you know, that's it's not uh, you know, I
(15:29):
guess brain surgery to to to realize that that'll obviously
be inflationary.
Speaker 4 (15:33):
But well, I think that's I think what I think
what he's Yeah, I go on, I'm sorry.
Speaker 2 (15:37):
No, no, no, I cut you off. Will that be offset
by doge and will be offset by a recession?
Speaker 4 (15:44):
Who knows, you know.
Speaker 3 (15:45):
And I think that's kind of what what we've been
talking about with the you know, the rise of there
will be a rise of an uncertainty. And I think
that's kind of where we are at now. And I
think that hypothetically that could work, but you know, we
haven't seen you know, hopefully in the next few months
we'll see some data come out that DOGE is actually
cutting spending. But again that's uh, that's that's yet to
(16:07):
be seen. And I think we until we see some
hard data that this is actually working, the market will
be range bound.
Speaker 2 (16:12):
You know.
Speaker 1 (16:13):
I'm on I'm on the fence about does does Powell
cut in June? You know, he he did say during
his press conference, I do think with the arrival of
the tariff inflation further progress on inflation may be delayed.
That he echoed what you said just a couple of
minutes ago.
Speaker 3 (16:31):
Yeah, and you know, if you have if you have deregulation,
if you have the addition of tariffs, and then you
have the FED, you know, and now Trump is tweeting
at the Fed to cut you know, aren't those all
inflationary measures?
Speaker 2 (16:45):
Yeah?
Speaker 4 (16:46):
Right, So, I mean, if if you just.
Speaker 3 (16:48):
Look at any if you you know, look at like
economics as a science and data, yeah, that.
Speaker 4 (16:54):
Will all be inflationary, you know.
Speaker 3 (16:56):
I think they have the hopes that DOGE coming out
is gonna you know, uh, you know, cut back a
lot of spending, but we have yet to see that, right, So,
and we've never had something really like DOGE before, I
think a little bit in the nineties you had some
you know, government rollbacks and things like that. But again,
you know, I think it it's it's a time to
be uncertain, and you know, I don't think it's a
(17:17):
time to be overly optimistic or really overly pessimistic, because
the consumer is still in pretty good shape, you know.
So I think until we see some cracks in the consumer,
I think, uh, I think we'll still be range bound.
Speaker 2 (17:31):
You know.
Speaker 1 (17:31):
Poul says that some near term measures of inflation expectations
have recently moved up, and I think that's important too,
is that it's the expectation of inflation. Usually I use
an example a lot of going for a picnic. If
if it's the forecast of rain, you're going to cancel
your picnic. You know, it's the expectations. And you had
a uh saved an article about expectations. It was a
(17:53):
YouTube that I think you posted on our We we
keep articles and videos that we like to refer to
back you know, it was I think it was first Trust.
Speaker 2 (18:03):
Yeah, you know how because it is a YouTube, you
know video.
Speaker 1 (18:05):
So, but he talked about expectations quite often, Managing expectations
quite often are more important than the actual data. I
think the inflation expectations, you know, could become more you know,
once they get embedded in the economy, become difficult to
really eradicate, you know. So I think that's something you
have to you have to watch for as well. You know,
(18:28):
we about three or three months ago. Uh, I think
we've been saying it for probably six months five months.
We're at fair value with the stock market, Yeah, in
and around fair.
Speaker 4 (18:37):
I think we'll continue to do so.
Speaker 3 (18:39):
You know, we I think we rely a lot on
uh large cap tech because it kind of you know,
bucks the trends of economics a little bit.
Speaker 4 (18:46):
But you know, sixty percent of large.
Speaker 3 (18:48):
Cap tech uh in in the IT sector in the
s and P five hundred gets its UH profits from overseas.
So you know, I think that's something to look at too.
Is you know what happens, uh, you know, with the EU,
with Brazil, with Russia, with China. You know, as we
continue to you know, tear off all of them, you
(19:08):
know what kind of you know, I guess alliances and
you know, strategic partnerships they make uh that could potentially, yeah,
start to hurt our domestic company.
Speaker 1 (19:19):
Yeah, I think you said I think you said it
you know, you know, we work together literally right next
to each other and desk, so we kind of like
throw stuff out all day. But also we have we
read on our own and listen on our own. And
they're like, but uh so, I don't know it was
you that said it, but you know, does does what
percentage of technology that his purchase needs to be quote
(19:43):
unquote cutting edge? And if it doesn't need to be
cutting edge, maybe other countries technology could supplant ours because hey,
this isn't brain searchery some of the you know, did
you say that? Yeah, yeah, yeah, So you know, I
get a lot of good stuff from you.
Speaker 4 (19:58):
Thank you, thank you.
Speaker 2 (19:59):
I do.
Speaker 3 (20:00):
Yeah, you know, although you know, I think we are
the strongest, most powerful country in the world, especially from
an economic standpoint.
Speaker 4 (20:07):
You know what makes me a little.
Speaker 3 (20:08):
Bit nervous is, uh, you know, other larger countries and
you know, like the EHU like China start to say, hey,
you know, we're gonna we're gonna find partners elsewhere because
you know, we can't rely on the United States like
we once could as a trading partner.
Speaker 2 (20:24):
Right And I think once you.
Speaker 1 (20:27):
Once that, if that relationship is cozy and comfy, then
and no big deal. We're gonna put up with you. You're
gonna put up with us a little bit, and there
we go. But if that relationship becomes you know, uncomfortable
or in a in a in a in a in
a way that kind of makes it very explicit. Hey,
I'm the boss over you, I think then you kind
(20:49):
of look elsewhere.
Speaker 3 (20:51):
Yeah, and I do think that one of the biggest things.
And we've been for years, we've been saying, how you know,
the the biggest issue in my opinion with America is
the losing of the middle class and little class jobs
and of the pension. And I think I think bringing
jobs and uh, you know, companies back to America is key.
You know what I'm nervous about is then you get
(21:12):
Howard Lutnik coming on and say, you know, we're gonna
you know, there's gonna be robots producing things, There's gonna
be this, there's gonna be this, and you know, when
you have technological innovation that tends right now, it's uh,
you know, the technological innovation is coming at the expense
of the labor market.
Speaker 4 (21:28):
Right, so you know what makes you nervous.
Speaker 3 (21:29):
And then so basically you have to rely on, you know,
this technological innovation to then create new industries that are
not yet created, new jobs that you know, we don't
even know about yet.
Speaker 4 (21:39):
So again, you know, that brings uncertainty.
Speaker 1 (21:41):
And you're not gonna you don't want to bring back
commoditized businesses to the United States because you know, people
are not gonna pay you know, maybe they do if
you look at some socks, but people are not gonna
pay twice the amount for socks producing in the United States.
Speaker 2 (21:56):
Hey, Walmart built itself.
Speaker 1 (21:58):
On on on that, on that theory that, hey, we
are going to keep inflation in check on a number
of fronts. But but you know, kind of importing what
they need to import, manufacturing domestically, what they need to
manufacture domestically. But the future of the middle class does
not rest in commoditized businesses coming back in the United States.
It rest in high tech, you know, biotech, health sciences,
(22:21):
you know, and and the like.
Speaker 3 (22:23):
Yeah, and I think a lot of the things that
we're seeing that the Trump administration is doing, I think
is you know, you know, I don't want to say that,
you know, maybe it would have worked really well in
the fifties and sixties, in twenties, you know, when we
were much more of an industrial manufacturing based.
Speaker 4 (22:40):
Economy and we're not now.
Speaker 2 (22:41):
In Wage growth is decent. Yeah, we get inflation in check.
Wage growth is decent.
Speaker 1 (22:44):
The last thing that cher Pile said that I want
to address in the first half we brought before you,
and I also want to talk in this second half
about hey, you know, we are not running for the hills.
We are just kind of like saying, okay, let's see
how this plays out a little bit.
Speaker 2 (22:56):
Let's not get over our skis.
Speaker 1 (22:58):
This is not you know, market's up sixty percent un
d and fifty percent over the past couple of years.
Speaker 2 (23:02):
Let's not get over our skis. Let's keep some cash.
Speaker 1 (23:04):
Let's look at the bond market as opportunity, and we'll
talk about that in the second half hour kind of
where we're seeing some value. But in closing the first half,
chair Pile did go on to say it can be
the case that it's appropriate sometimes to look through inflation
if it's going to go away quickly without action by us,
if it's transitory. He said, that can be the that
can be the case, and the case for teriff inflation.
(23:25):
It certainly to be a one time shot and that's it.
I think that would depend on the tariff, inflation moving
through fairly quickly and critically, as well as on inflation
expectations being well anchored. Again back to that well anchored
inflation expectations. So I think there's a lot going on
right now, an eventful week, although maybe again it's uneventful.
Like I said, the second half hour, we do see value.
(23:46):
We're going to talk about where we see value and
also brought out the discussion a little bit on some
other areas it might help you in your investment. Right now,
it's ten thirty on the station depend upon for new
the weather information stuck KAY ten and.
Speaker 2 (23:57):
One to three one WGY.
Speaker 1 (24:00):
Good morning, and welcome back to the second half five
of the Capital District's Money and Investment program. You're listening
to the Fagan Financial Report. Aaron and Dennis Fagan sitting here.
It's a Friday morning as we record this show.
Speaker 4 (24:10):
To snow on the ground.
Speaker 2 (24:11):
A little bit of little little dusting, yeah they call it.
So not going on.
Speaker 1 (24:16):
We're talking in the first half, and we got it
done with the first time. Like now, I'm really happy
with the way the first half came out.
Speaker 3 (24:25):
And yet yeah, you know, I always, you know, feel
bad for sounding, I guess pessimistic. I feel like I
sounded a little bit too pessimistic.
Speaker 2 (24:35):
What do you mean, you know, it didn't reflect how
you feel now.
Speaker 3 (24:38):
It reflects how I feel. Uh, No, uncertainty is how
how I feel.
Speaker 2 (24:43):
You know.
Speaker 3 (24:43):
I think that in you know, any any anytime you're
managing a portfolio or investing your own assets, I think
you have to you have to be you know, transparent
and honest with you know, how you feel.
Speaker 4 (24:54):
And you know, I feel that, uh, you know.
Speaker 3 (24:58):
Some of my I guess thoughts came across is very pessimistic.
And and I think, you know, more than anything, is
that I'm very uncertain with the future. And I think,
you know, when when when there's uncertainty in the future,
you have to de risk your portfolio. It's just the
right thing to do. You know, it could be the
wrong thing to do, but I think it's I think,
you know, the wrong thing to do from a you know,
(25:19):
from a performance metric, but I think it's the right
thing to do with all the available information that we
have right now.
Speaker 1 (25:27):
Well, let me let me, let me, let me talk
about some some wrong things to do.
Speaker 2 (25:33):
That's a good idea.
Speaker 1 (25:34):
Some wrong things to do are to say, you know,
I hate President Biden, I'm going to know cash. I
hate President Trump, so I'm going to know cash. I
think the policies of President Biden are poor, so I'm
going to all cash.
Speaker 2 (25:49):
I don't mean to say no cash.
Speaker 1 (25:50):
I think the policies of President Trump are poor, so
I'm going to all cash. I think to go to
awe of anything is arrogant. It's it's not recognizing that
human behavior is unpredictable, that the situation can change, that
(26:12):
you basically what's worked for life for you and people
listen to show know this works incrementally. It neglects the
fact that you know, over the long haul, equities are
pay more as far as return goes than other sources.
And now I will say that if you're retirement, you
(26:32):
know you've crossed through that door to financial independence.
Speaker 2 (26:35):
You just don't want to go back out it.
Speaker 1 (26:36):
So that kind of mitigates some of the you know
the issues of hey, I've got to get the best performance, yeah,
you know, so you know, I just think that you know,
if we're a little cautious at this point, and I'll
put both of us in together. You know, Aaron does
most of the trading, but we manage money together as
far as decision making goes. You know, we're about thirteen
(26:58):
percent cash in general, which if you tack on some interest,
probably provides you know, for if you're looking at a
four percent distribution, right at least four years of distributions.
I think you you know, you know, we we've scaled
back some of the investments in our portfolio to kind
of consolidate. We still believe in the secular environment for technology.
(27:25):
You wanted to talk about the mag Sevam.
Speaker 3 (27:27):
Yeah, I still believe that we do have the most
innovative companies in the world that are domiciled here. I
still believe that we have the best tech in the world.
Although China does have good tech, we do have the
best tech in the world. We have the freest market
in the world still, so you know, if you look
at us compared to other countries as well, you know,
I might may not agree with, you know, tariffing all
these countries because I don't think it's the right thing
(27:47):
to do from an economic standpoint, but I do think that,
you know, we do have a resilient economy and we
do have the most resilient companies in the world here.
We have a lot of smart people that are that
are working on you know, I guess the problem. So
you know, I'm I'm I'm optimistic in our in our
(28:08):
companies still.
Speaker 1 (28:09):
Right, and I think if you, if you and we
do have a lot of people working on this, you
know the the but the United States has influence around
the world and if if that, if we if we
withdraw that influence, then that could negatively impact, you know,
our industry and we can't.
Speaker 2 (28:30):
We're not a country that can thrive. And then we're
talking about thriving. We're not. We're not talking about, hey,
we will take take this hit, we take that hit.
We we don't.
Speaker 1 (28:40):
You know, these companies need to thrive in order to
you know, have their stock price move forward. So I
think that in a power vacuum, excuse me, if we
with if we withdraw from the global economy, then you know,
someone's gonna someone It's like water, it seeks its own level.
There will be you know, there will be countries that
(29:01):
fill that power vacuum. They fill that vacuum, and their
companies might benefit more than more than ours. You know,
though you know so, but as of now, for sure,
you know, you know, I don't think it's there's any
disputing it and this you know, you know, we both
watch a lot of podcasts and read a lot of history,
especially pertaining to the stock market and other things.
Speaker 2 (29:21):
In the United States.
Speaker 1 (29:23):
Post World War Two, we got a bump in our
GDP as a as a percentage of global GDP. But
for the past fifty years we've been about you know,
twenty five, twenty six, twenty three, twenty four to twenty
eight percent of global GDP, and that hasn't changed, so
that that is encouraging now that you know, those parish
might say, well, this is a whole new paradigm we're
(29:45):
moving forward to on a global economic basis, and that
holds water. Others may say, this is a reset of
of the global economy where we've carried more of the
water than.
Speaker 2 (29:56):
We should have. Our global power.
Speaker 1 (29:59):
Will remain UH will remain dominant, and our country, our
companies will do a lot better. So yeah, time will tell,
you know, go back to what we said initially and
probably again even before the election, the range of potential
outcomes of a Trump administration are much broader than that
of a traditional politician, and that raises the spectrum. And
you know, and I think we've been right on on that.
(30:19):
What are some things that you know you you have done,
we have done you're thinking of for a client portfolios?
Maybe you haven't done. Uh, maybe you're considering, you know,
you know, where where where?
Speaker 2 (30:31):
Where? Where? What is? What is? What is somebody out
there who's listening to the show.
Speaker 1 (30:36):
Do now?
Speaker 3 (30:37):
I think you diversify out of the S and P
five hundred A little bit we buy. We've bought a
lot of you know ETFs. N OBL is the Dividend
Aristocrat ETF. It's symbol as n OBL pro shares S
and P five hundred divin End Aristocrat ETF. You're the
DATA'EP one point eight percent with a two percent dividend
(30:58):
yield spence ratio of point three five percent. Another one
we really like a cow z Pacers Cash Cows ETF.
It's down one point nine to nine percent year to
date with a one point eight three percent dividend yield.
JAVA is JP Morgan Active Value Fund, which you know
is one of my favorite funds, even you know, in
(31:19):
moments of economic or stock market when it's doing really well,
it's up one point one four percent this year, dividendiald
to one point four percent, so nothing to write home about.
In international, we've started to buy some international DGT is
a great way to do that. It's the Dow Jones
Global ETF. And what I like about that, it's a
little bit of both. It's fifty fifty four percent in
(31:42):
America's twenty nine percent in Europe and seventeen percent in
Greater Asia.
Speaker 4 (31:47):
And that is up.
Speaker 3 (31:50):
I think it's seven and a half percent year to
date and a two point six two percent dividend yield.
So you do you still get United States, you get
a lot of Europe, you get some merging market. It's
it's a very diverse portfolio, almost like an all weather
ETF that we're pairing with our individual stocks as well.
You know, although I do think that you can start to,
(32:11):
you know, I guess dip your toes in the you know,
large cap tech again. I still love Amazon here. I
think Amazon's a great company. I like Google, you know,
I really like Meta.
Speaker 4 (32:21):
I don't think these companies will be too.
Speaker 3 (32:22):
Greatly affected by the tariffs, although Amazon, you know, could be.
Amazon does have you know, three different segments advertising, you know,
the Amazon Web services as well as you know, their
their traditional retail that that are you know, have revenues
in the tens of billions of dollars each. So you know,
it's it's it's done a great job diversifying its own portfolio.
(32:42):
So you know, I am optimistic in parts of the market,
and I still think, you know, it can do well,
you know, and I don't think that I think we
could have you know, that time correction. I think that
you know, a year, a year could go buy, a
year and a half could go buy, and maybe we don't,
you know, go down another ten twenty percent, but you know,
maybe we just hover here for a while and wait
for earnings to catch up and see how this all
plays out. But you know, as long as the consumer
(33:05):
is in good shape, which it really still is. You know,
you can see your you can say you're seeing some
signs of cracking, as long as the consumer's in good shape.
I do think there's a floor on the market that
that's within five percent of here.
Speaker 2 (33:18):
Uh, it's just not an actionable item.
Speaker 3 (33:21):
Yeah, that's that's not an actuable item. I think if
you start to see you know, a deterioration in the
labor market, then you bring a lot of other things
into into account. All right, labor market starts toteriorate, then
the Fed cuts rates, then you bring tariffs onto the table.
Then I think you just have more more moving parts
with keeping the economy afloat. If the consumer starts in
the in the workers and starts the deteriorate. So you know,
(33:44):
I do think that as long as the consumers in
good shape, the stock market has a floor around here.
Speaker 1 (33:50):
And I think the consumer, I think you could equate
with the labor market. I think you know, unemployment low fors.
I think it's for one aus of the end of February,
non initial claims for umbliment benefits two twenty three last
week until they get up to around two fifty.
Speaker 2 (34:10):
I don't think that's a The.
Speaker 1 (34:12):
Labor market is in much distress. And I will add
to your list of funds if you want to diversify
a bit away from the SCHB or SPY would be
you know, a jetby it's up a little bit here
to date, basically seeks current income, you know, and yet
(34:32):
it's still a secondary consideration of capital appreciation. They use
options to hedge their stocks and provide income. So I
think that's uh that again.
Speaker 3 (34:43):
It's a point six six percent year to date. Yeah,
you know, greatly outperforming the S and P five hundred,
which is you know, obviously a good thing. The SMP's
down three point five percent year to date, so you know,
I think all these things that we're saying now should
really be taking place already in like retirement account.
Speaker 4 (35:00):
We're nearing retirement account.
Speaker 3 (35:02):
It's just to make sure that you do have a
diverse portfolio, you know, and a lot of times, even
with clients that we have, you know, we bought Palenteer
last year for you know, twenty two twenty three dollars, uh,
you know, and for clients and growth portfolios, and you
know when that runs up from twenty two to one ten,
you know, the prudent thing to do is sell. So
(35:22):
I think a lot of times, you know, the correct
thing to do through how retirement is set it and
forget it. But you know, if you bought some good
stocks in the last five, ten, fifteen years, they could
be quite the you know.
Speaker 4 (35:31):
Outsizeable position in your portfolio.
Speaker 3 (35:33):
And it's just a prudent thing to do is is
to that trim those back.
Speaker 1 (35:37):
I think, yeah, may you maintain your ASCID allocation model
within reasons. So if you're fifty to seventy five percent
in the market and you're a little concerned and you
were seventy coming into the year, maybe go back to
sixty five or sixty if you're if you're eighty percent
and you go, oh my gosh, the equities have done
so well, bonds haven't done that well, and you went
from seventy to eighty because of that, then you go
back to seventy and rebalance.
Speaker 2 (35:58):
Yeah. You know. The other thing too, is that I
would disagree. I think you know you have the sm and.
Speaker 4 (36:03):
What disagree with me?
Speaker 1 (36:04):
And what you said about you should have done these
things already. You know, you said the JAVA is up,
you know, which is a JP Morgan Value Fund up
three one point one four percent year to date. The
SMP is down three three and a half. So I
think there's a lot of time to do this stuff.
I really do, you know.
Speaker 3 (36:21):
Well, I meant like, you know, you should be diverse,
you should you should be diversifying, and I agree in
retirement not you know, not you should have are not
it's too late, just you know, it's things when you're
in retirement you should be doing. You should be diversifying,
you should be raising your you know, money market in
fixed income exposure.
Speaker 2 (36:36):
I agree, I agree with all that.
Speaker 1 (36:38):
What do you think about the RSP the equal weighted
S and P five hundred as a way to diversify
from the market cap driven s P Y the S
and P five hundred.
Speaker 4 (36:50):
Uh, I think there's better ways to do that, you know,
I think that. Uh.
Speaker 3 (36:55):
I think there's a lot of very good value managers
out there. I think there's a lot of good companies
like cow Z and n OBL that'll outperform the RSP.
My my, I guess my skepticism on the RSP is
that it's heavily defensive. You're seeing thirteen percent in industrials.
(37:16):
You're seeing you know, consumer cyclicals at ten percent, financial
service at thirteen percent. So the only thing I'm nervous
about with the RSP is, I guess, you know, terriffs
being a bigger hit on more of the companies down
the line, and you know, the four and five hundred
largest companies than Yeah, I guess that's why I also
(37:37):
think that you know, sixty of the RSP is technically
mid cap right, So a madcap could get hit if
if if we continue to see you know, the tariff
Frederick right.
Speaker 1 (37:50):
And I also think that you know, I'm not gonna
throw large cap tech out the window right now either.
Speaker 2 (37:59):
I don't think that's a really good idea.
Speaker 1 (38:01):
You know, still some of our largest holdings are within
that sector, So i'd be careful about, yeah, you know,
throwing you know, the baby away with the bath water
and and the other thing too. Airs you certainly want
correlation to the S and P five hundred. I think
there's as as as an American investor, as someone who
(38:23):
invests professionally, hey, you want to do your own thing,
knock yourself out, but as a professional investor, as a fiduciary,
you you don't want the S and P five hundred
to be up. And I think that's one thing that
I think we've always kept in mind as well, that
the biggest mistake is it's basically again arrogant too to
(38:44):
think that you're going to be up twenty percent the
SMP is going to be flat because you know, I
think you want to hit yourself to that wagon over
the intermediate long term, Yeah, you can, you can skew
one side or skew the other. You know, that's a
that's a new word for us, rather than you know.
Speaker 3 (38:59):
Uh yeah, like if if the acid piece up twenty
you know, a lot of people can be up twenty
five or thirty percent. If that S and piece up
is flat or down, it's it's very very hard to
be up, you know, twenty percent, ten percent.
Speaker 2 (39:12):
Unless you're taking big bets off of it.
Speaker 1 (39:13):
And that's basically I think it's it's it's not for us,
it's not for our clients. It reduces the correlation, reduces
the level of predictability. We work with skewing and incrementalism.
You know, I like it, and it works over time,
we better. This is nineteen eighty nine. Work at the peripheric.
Speaker 3 (39:28):
I think when there's uncertainties out there, you know, what
we what we can draw parallels on is the historical
performance of the S and P five hundred for the
last one hundred years. So I think that, yeah, you know,
you do want correlation to that S and P five
hundred because you know, you know, over over time, you know,
the companies that do well become larger portions and affect
your portfolio more. So that's one thing that you can
(39:50):
rely on, and I still think you can rely on,
you know, American innovation, and you know, I don't think
that's going away, especially in a deregulatory environment.
Speaker 1 (39:58):
Now, international we've picked up the pace a little bit
on that. It's been good year to date thus far.
And you know you mentioned what did you mention d
G t UH you know as UH.
Speaker 3 (40:12):
Which is nice s c HF is Schwab International Equity ETF.
That's up ten percent year to date. So those are
our two main international holdings A c w X.
Speaker 1 (40:26):
I think you bought a little bit of that this week.
I was noticing in client portfolios, you know, because the
other thing too, I think you're going to see is
that pushed push to uh fend for themselves. These other
countries are going to become more fiscally fit. You know,
you saw Germany just basically take the lid off their
their public spending to upgrade their their industry and to
(40:50):
upgrade their uh, you know, armed forces.
Speaker 2 (40:53):
So I think this year I see a lot more
that you.
Speaker 3 (40:54):
Could see some spending overseas. I think you could you
could start to see some deregulation international, which would I
think would be huge for you know, that entire sector,
which could you know, produce some innovation and obviously some
spending and so companies could do well there. So you know,
I think, yeah, having a diverse portfolio is key right now.
Speaker 1 (41:12):
The SPY over the past fifteen years has produced an
average of I think it's fifteen point three eight percent
or thirteen point five a percent whatever, let me see,
it's a thirteen point one eight percent. The a c
WX is done nine percent. Yeah.
Speaker 3 (41:29):
Even over the TEP past ten years, SCHF is up
thirty two percent. In the SMP's up one hundred and
sixty eight percent.
Speaker 1 (41:35):
That's that's the regression to the mean if for no
other reason that you know, I think looks attractive right now.
Speaker 2 (41:41):
Yeah, you got to keep on keep on keep that.
Speaker 1 (41:44):
On the fixed income side, I think you know, we've
we've done a pretty good job laddering some treasuries e.
Speaker 2 (41:50):
T F ib T O, I b t L, I
B t H. The ib T O year to date
is up three point five nine percent.
Speaker 1 (41:57):
You know, I think you keep on looking at those,
do not you know, I think go down the credit
quality ladder ib T H treasuries that come do in
twenty twenty sevens up one point five three percent, again
on pace for over six percent annual return. So I
think you keep on nibbling at those areas as well. Yeah,
and go from there. In money market, we have the
(42:18):
b I L you know, just as a parking place
for those clients that are out there listening.
Speaker 3 (42:24):
I still like corporate's v c I T is Vanguard
Corporate Bond ETF. That's up total turn of two and
a half percent year to date, so you know, I
do think again, as long as corporations and the consumer
remain in pretty good shape, I think that you'll see
the v C I T do well here.
Speaker 1 (42:40):
Expense ratio of four point oh three percent and the
dividend of four point four percent or so. Vg s
H is another one, the Short Term Treasury Index Fund
up one point three five percent, carries a dividend of
four percent. So those are some good parking places. I
will say, you got a ladder some bonds. Although we
said in the first half that we kind of think
(43:00):
think that, you know, getting down to getting down to
two percent for the FED is probably going to be
difficult without a recession, you know, So that's that's the
trade off there you know, uh.
Speaker 3 (43:09):
And you know, you know, as long as as much
as we want egg prices to drop, and you know
you're hearing that a lot. You know, dropping of grocery
prices will not be good for you or anyone really,
uh as it's disinflation is.
Speaker 4 (43:22):
Usually uh deflation you know.
Speaker 3 (43:24):
Ye, deflation is usually a product of of of a recession,
the grocery slow slower economic.
Speaker 1 (43:32):
Now you have you have areas that can come down
or egg prices, yes, come down, but I think generally speaking,
stability in groceries or probably what you're going to see.
Speaker 3 (43:41):
And then if you're looking at you know, larger like
the PCE, you know you're a large part of that
is if you start to see that drop you know
you used to you start to see shelter costs, Yeah,
she see, yeah exactly thirty three percent is shelter costs.
So you know, once if that starts to you know,
go down precipitously. You know, it's usually because you know,
(44:01):
you're seeing signs of quite a slow.
Speaker 1 (44:03):
Account because it'll take a while for the housing market
from an inventory basis to straight and self out. So
housing prices, yes, we'd like to see them come down
over time. But I guess what Aaron's referring to as
a precipitous drop in anything is usually indicative of slow
economic growth. And right now, I think if you look
at the forflations, inflation, forflation, forflation, stagflation, disinflation, and deflation.
(44:27):
Let me take a minute and explain whatever inflation. Inflation
is basically rising prices. The connotation is usually is bad.
Oh my gosh, inflation is bad. It is bad, but
it's kind of like rain. You know, you don't have
a garden without rain. You don't have demand without some inflation.
And we're talking broadly speaking. We're not talking, you know,
(44:50):
rampant inflation, nor are we talking inflation in one specific sector.
I think inflation in the housing sector, coupled with inventory
is hurt that market. I think the same with eggs,
and same with groceries in general. But overall, a little
bit of inflation, as long as wages are increasing at
a faster pace than inflation, is good for demand, all right.
(45:11):
And it also is a number that the consumer can
live with because their wages are increasing faster than the
pace of inflation. Inflation is bad, as we saw, you know,
over the past three or four years and the aggregate
although it's coming down. Inflation is bad when you know
it's exceeding wage growth, so that's a negative stagflation. Excuse me,
(45:32):
let's go to Disinflation is when inflation is coming down
from prior levels. So if inflation was three percent year
over your last month and now it's two point nine percent,
that's disinflation. So you still have inflation, but it's it's
at a lower pace. A deflation is actually when you
have lower prices. You know you have exit, you know,
eight bucks a dozen, now you have them at six.
(45:54):
That's deflation. And again in specific cases that's very good,
but they that would be often artificial spike, you know,
historically speaking, but deflation for the broader economy is bad.
Just like inflation is good in moderation. Deflation generally speaking
is bad because if I think, you know, housing prices
(46:16):
are going to come down, I'm going to wait. I
think if you think interest rates are going to come
down coupled with housing prices, You're probably gonna wait. And
Japan just exited within the past few years a thirty
year period of deflation which crippled their economy. I will
say also that their deflation was coupled with the declining population,
and we've got to be careful of that because we're
(46:36):
not replacing our population now in the United States. And finally,
stagflation is when you have inflation increasing at a faster
pace in economic growth, and that can be dangerous as well.
And that's kind of what we see in the seventies
and we're probably going to be going through that over
the next a few months. You're gonna have some inflation
maybe two or three percent, and you're gonna have economic
growth that's below that because of you know, some of
(46:59):
some of the the terariff issues quite candidly and how
they play out. Uh, you know, we'll guess from there.
You know, Nike came out with some earnings. No, they
weren't that good, FedEx not, you know, go ahead.
Speaker 3 (47:10):
And FedEx, you know, cited terriffs. Nike is kind of
in a uh, you know, an innovation cycle. Let's say,
I think they got a little bit too comfortable. But
I do like Nike, you know, over the long term.
I think it's just a you know, a great company.
You know, it has it has a great product, and
I think it just went through a little bit of
a hiccup internally, and I think it will get.
Speaker 4 (47:29):
Itself back on track. It's mojo, it's mojo.
Speaker 2 (47:32):
Back, yeah, or another training run through, you know.
Speaker 4 (47:35):
In down four percent, you know, before Friday.
Speaker 1 (47:39):
So but you know, so I would say in I
guess concluding our radio show, I think if you've listened
to us for the past three months or so, I
think you've heard a consistent theme of uncertain uncertainty, expecting volatility.
I think you've heard that the range of potential outcomes
of the Trump administration as much than a traditional politician.
(48:01):
You know, I can say it, you know, almost verbatim,
you know, And so I think that's what we'll continue
to see more and more of that.
Speaker 2 (48:09):
As you're true now, you know. But the President he
could turn it in a heartbeat.
Speaker 1 (48:13):
If he ratchets back the rhetoric, if he leaves room
for dialogue and discussion and uh dissent, then then I
think we're you know, the market probably, you know, because
right after the election, you know, business optimism was high.
Speaker 2 (48:25):
The market was going well.
Speaker 3 (48:27):
And if you talk to local business owners and you know,
people still seem to be relatively positive. Uh. But yeah,
I think again, you know, there's a lot of uncertainty
out there and gives.
Speaker 1 (48:39):
Called during the week five one four check us on
O but fagan Asset dot com like us on Facebook.
Speaker 2 (48:44):
Have a great day.
Good morning, and welcome to the Capitol District's Money and
Investment Program. You're listening to the Fagan financial Report in
Dennis Fagan sitting here with my son Aaron, as we
do every Sunday right here in news tol K ten
one O three one w g Y.
Speaker 2 (00:12):
Let me ask you a question. How you doing? How's
how's your bracket last? Your bracket is busted?
Speaker 3 (00:16):
I don't know, I haven't checked it. You know, it
is Friday morning, so you know he had one day
Friday morning taping this Friday mornings. We had one day games.
You know, it was fun. It's always nice to uh,
you know. My car broke down on Thursday though, so
that really put a hiccup in like the usual office
March madness. Watch, yes, get a pizza sometimes, yes, but no,
(00:43):
not this not this year. Watched some games last night.
But yeah, it's fun. How you doing?
Speaker 2 (00:48):
Look good? I'm doing well. I can't go playing. You know,
I didn't have one great I don't have a bracket,
you know, I don't know.
Speaker 1 (00:55):
Just the week got away, you know, got away from
it saying, you know, I was going to start the
show a little it by talking about the eventful week
on Wall Street. But if all weeks are eventful, does
that mean that they're now it's uneventful? That's true, you
know what I'm saying. Yeah, if someone says, oh, they're
in rare form, if they're in that same form all
the time, is.
Speaker 4 (01:12):
It rare No?
Speaker 2 (01:14):
Probably not.
Speaker 1 (01:15):
Yeah, So I and I think I think, you know,
and I will continue to continue to you know, despite
my uh, poor joke.
Speaker 2 (01:25):
These are eventful times.
Speaker 3 (01:28):
You know, they're unpredictable times, you know. Really, I think
we talk about it on the show a lot, you know,
uncertain the uncertainty that this this administration brings, uh, I
think heightens the risk in the market. That's just something
that I think we're gonna have to get used to.
Speaker 2 (01:48):
And the potential reward, yeah, you know, and.
Speaker 4 (01:51):
The potential reward.
Speaker 3 (01:52):
But yeah, it's it is a I've been calling it
an experiment with with what's going on, and it's hard
to back test a lot of the policies that Trump
is putting in place other than you know, the small
smooth Holly tariffs of nineteen twenty nine and that didn't
work out well. But you know, other than that, there's
really not many parallels to draw from any other time
(02:14):
in history when you know, when something like this was
going on, especially for the United States. So you know,
I think I think at the end of the day,
the market could go up here, you know, it could
go down here. But you know, I think I think.
Speaker 2 (02:26):
You uh, those are the direction you know.
Speaker 3 (02:28):
I think I think with the I think there's risk
to the market and uncertainty, and that warrants I think
de risking your portfolio a little bit, especially if you're
in retirement or near retirement.
Speaker 1 (02:39):
And we've done that, We've rebalanced as of the last
about three or four weeks ago. We mentioned that in
our Sunday Morning snapshot where appropriate, and I think that
where appropriate is also important to note given your other
sources of income in retirement is a broad statement. I mean,
what are your sources of income? Do you have a pension?
Do you have a soul security? Yeah, came somebody came
(03:02):
in yesterday. Were just retiring. There are two solid securities
and there in a relatively small pension. Uh certainly took
care of their income needs. Now, their income needs were
were less obviously less than their sources of income monthly income.
That sounds simple and and it really is. But a
lot of time it comes down to lifestyle. And you
(03:23):
know this, these individuals had, you know, uh, relatively I
won't call a simple lifestyle, but they had a peaceful lifestyle,
and they didn't have any debt, and uh, they were
in good shape. Now, if your income needs, if your
standard of living is predicated upon the stock market continuing
to go up at the pace it did over the
(03:44):
past eight years, then yeah, you do risk your portfolio.
Speaker 2 (03:47):
I do think we're we we were at a.
Speaker 1 (03:49):
Time or at least for the time being, you know,
and that that dividends and interest are important to a portfolio.
That that you're right, Eric, I think, you know, having
a a level of risk that's commensurate with your objectives.
Speaker 2 (04:05):
Should outweigh any greed that you that you feel.
Speaker 1 (04:08):
There's probably not a lot that people feel right now,
but I guess at some point in time, it's a
it's a clear day, it's a straight road, and maybe
go a little too fast. Now is not really the
time to do that. I think now you just got to,
you know, make sure that you know your t'ser crust
and your eyes are dotted, yeah, because then we'll talk
about it later in this half out and FedEx and
Nike both come out and we hold both of them said, hey,
(04:30):
you know, we're concerned about the tariffs, We're concerned about
the future. FedEx mentioned slow down in the industrial base.
So a lot of things going on. You know, I
did want to, you know, in the FED met this week,
the FED mentions uncertainty and their statement after their Open
Market Committee meeting, the committee that determines the direction of
monetary policy. So those are some things we'll talk about
(04:51):
in the first half. The second half will broaden it out.
Two more planning topics as we always do, but let's
start off with this are the the f O. M. C.
Char Powell said, I believe in his statement and that
that that as of now, you know, that hard data
(05:14):
is still seems pretty good. It's the sentiment data, this
consumer sentiment that saw to the soft data that that
is really in question right here. And I think if
we take a look at the the economic data that
came out this past week, it's still pretty good.
Speaker 4 (05:35):
You know, yeah, it's still pretty good.
Speaker 3 (05:38):
You know, I think you know, you are seeing some
you know, tourist and Slock he's the chief economist for
Apollo Asset Management has seen, you know, emergency funds decreasing
the risk of the risk of where is it. I
can't see it right now. Yeah, consumer sentiment is deteriorating,
(06:00):
so data soft data, So you know, I think I
think that, uh and here here's one of we said,
hard data is starting to weaken, you know, so soft
data has weaken. Hard data is starting to weaken a
little bit. But yeah, you know, I I think I
still think the consumer is in good shape.
Speaker 4 (06:17):
But you know, I don't. I don't know how.
Speaker 3 (06:20):
From an economic standpoint, you know, it's hard to think
that in the medium to short term that there's a
lot of positivity out there, you know, like our hate
Donald Trump.
Speaker 2 (06:30):
You know, I think there's got to be something like
or hate like or dislike you. Yeah, you know, it's
like hate is the end of the spectrum, Like is
the you know.
Speaker 4 (06:40):
Yeah.
Speaker 3 (06:42):
Yeah, So I don't know what I was I forget
what I was saying, but basically, you know, his will
bring a lot of you know, short term uncertainty to
the markets, and I.
Speaker 2 (06:51):
Don't I don't.
Speaker 1 (06:51):
I don't mean to hedge around it, but you know,
I think the future is uncertain and I think we're
both in the same camp that if President Trump does
not dial back a little bit the rhetoric, which will
eventually for will you assume it's going to be policy.
Speaker 2 (07:08):
Eventually.
Speaker 1 (07:09):
I don't want to put words of your mouth, but
I think, you know, you're you think and I think
that eventually that's soft data, that the hard data is
going to catch up with the soft data or vice versa. Yeah,
that eventually that data what you said Torsen Slock mentioned
some hard data in there too.
Speaker 2 (07:24):
What did he say hard data is catching up with
the soft data?
Speaker 1 (07:26):
Are?
Speaker 4 (07:27):
Yeah, you know, I don't have it in front of
me right now, but yeah.
Speaker 3 (07:30):
Basically the bottom line is that soft data points to
to weakness coming in the hard data. In addition to this,
past week was a survey week from March employment report,
and with uncertainty elevated the downside. Risks to March non
farm payroll when it's released on Friday, April fourth are significant.
Speaker 2 (07:47):
Yeah.
Speaker 1 (07:47):
So the Fed, if their data dependent, they are going
to be late to the party.
Speaker 3 (07:52):
The cut rates and you know, and I think this
is I think this is He has a chart up
here that's a sharp reversing corp for CAPEC spending comes
in uh, spending plans in recent weeks.
Speaker 4 (08:03):
So you're seeing, you.
Speaker 3 (08:04):
Know, a major decline in large corporations CAPEC spending because
of the uncertainty out there. No one's gonna you know,
build a thirty billion dollar plan, you know, five hundred
million dollar plant if they don't know what the next two, three, four, five,
ten years are.
Speaker 4 (08:20):
Going to look like.
Speaker 3 (08:21):
So, you know, I think I think the entire uh,
you know, corporate world right now is kind of on.
All right, let's let let's take a step back here
and you know, see how this plays out, which will
lead to decreased spending and decreasing GDP growth.
Speaker 4 (08:36):
It'll, you know, it just it'll have to, right, I think.
Speaker 1 (08:38):
I think I think if the plant was necessary to
begin with, I think it will be built, and probably
built in.
Speaker 2 (08:46):
The United States.
Speaker 1 (08:47):
You know, you know, if the plant is like, well,
we really don't need it, you know, we did have
it over here, We're going to bring it back to the
United States. I think that's the big uh, that's the
one that will be in question this by what President
Trump is implying. You know, if you need a plant,
I think there's a good chance it'll be in the
(09:08):
United States. Better chance in the United States than elsewhere
as compared to a year ago. If you don't need
a plan. I think that's what you're saying, is that
capital expenditure is, Hey, you're gonna put it off a
little bit to see how this whole thing plays out.
And that circles back to the rhetoric has got to
die down. If the rhetoric and tariff threats of terror,
(09:31):
the tariffs are policy that will continue for four years,
you know. I think I think that's going to just
create a level of uncertainty that's going to be hard
for the market to make much headway.
Speaker 3 (09:42):
Now.
Speaker 1 (09:42):
I watch a lot of podcasts, watch President Trump and
even says, hey, we got to get to the other
side of this, and you're basically going to the garden
of Eden. You know, you're basically going to this Nirvana
type place. So so we'll see how.
Speaker 2 (09:56):
That works out.
Speaker 1 (09:57):
You know, looking at that hard data that came out,
you had a year. You have a mix I would say,
retail sales up two tents of a percent, not so much,
three point one percent year over year excluding motor vehicles
and parts up three tents of a percent. You know,
you have the business inventories up three tens of percent,
(10:18):
business sales down eight tens of a percent. The inventory
to sales ratio, it was like the turnover ratio for
businesses up to one point three seven months in January
from one point three five months in December. Export prices
certainly slowed down, up one tents of a percent, import
prices up four tenths of a percent. You had industrial
production up seven tens of percent, capacity utilization up over
(10:40):
seventy eight percent to seventy eight point two percent from
seventy seven point seven percent. Manufacturing capacity up. So you can,
as you're listening, you see an industrial production good, retail
sales not so good. Business sales not so good. Housing
starts up eleven percent. I will say they were down
quite substantially during the prior month, so you have mixed
(11:00):
housing starts. Index of leading economic indicators fell a little bit,
down one percent over the past six months. Initial claims
unemployment benefits as somewhat elevated, but no big deal right now.
And sales of existing homes up four point two percent
during the month of February. So I think you do
have mixed data. You know, I also think and you know,
(11:24):
and I don't know, I'm kind of droning out of it.
Speaker 2 (11:27):
You know.
Speaker 1 (11:27):
The future is that it's always uncertain, you know. I
think right now, you do you know, you you're we're
a little bit cautious right now.
Speaker 2 (11:35):
Yeah.
Speaker 3 (11:36):
I think it pays to be cautious, really, you know.
And it does pay to be cautious now, as you know,
we're still getting you know, four to five percent on
money market funds and bond and uh you know, bondy tfs,
you know, in individual bonds. So I think it pays
to see how this plays out, you know. I think
if you're someone my age, you know, you continue to
dollar cross to average into the market because that works
(11:57):
over time. And I think if you're you know, nearing
retirement or you're in retire vironment, I think it's you
and you you know, rely on this account for most
of your income or will. I think it's just a
prudent measure to to de risk your portfolio and maybe
add some international you know, maybe increase your bond and
(12:17):
money market exposure cow z. Yeah, diversify diverse five of
the things that have worked so well over the past
ten to fifteen years. I think it's just a smart
I think it would be the smart thing to do
even if there was certainties. But I think it's even
smarter to do now with the you know, the economic
uncertainty that's out there right and.
Speaker 1 (12:37):
You know, the Fed's policy statement actually addressed that some
changes that they may to their policy statement includes it
goes from the Committee's judged that the risk to achieving
its employment inflation goals are roughly imbalances to uncertainty around
the economic outlook having East.
Speaker 2 (13:01):
You know, So that's a little bit of a.
Speaker 1 (13:04):
Questionary tone in uh in in what they talked about. UH.
Chair Powell went on to say that at the December meeting,
the median, you know, the same number above and below
of the FED governor was two rate cuts. So come
in and you see broadly speaking, weaker growth but higher inflation,
and they kind of balance each other out, he said. Again,
(13:25):
Powell emphasized the forecasts are highly uncertain. So I think
the market on Wednesday kind of latched onto the two
rate cuts, and and uh you know, rose rose substantially
on Thursday, gave it back and again we're as Aaron mentioned,
we're recording this Friday morning. The market is weaker to
(13:46):
open and you know, probably down eight or nine percent
from its all time high.
Speaker 4 (13:51):
Uh.
Speaker 1 (13:52):
So, you know, I think there's more of that, you know. Pole,
during that same uh press conference, went on to talk
about recession forecasts. We don't make such a forecast. If
you look at outside forecasts, forecasters have generally raised their
possibilities of a recession somewhat, but still at relatively moderate levels.
(14:13):
It has moved up, but it's not high. There's always
a probability of recession. He went on to say, I
did he did say that the specter of higher inflation
some of it. The answer is clearly some of it.
A good part of it is coming from tariffs. We'll
be working with other forecasters to separate non tariff inflation
(14:35):
from tariff inflation. Where do you think we are in
the tariff in the inflation cycle? Where do you think
we are in? Is tariff inflation going to be positive?
Mid mentioned the word transitory again. I don't know why
I would ever mention that, but given where we were
in two thousand, where do you think we are in
in inflation? I know we've kind of in the past,
(14:57):
and I you know it said, Look, you know on
or is going to be somewhat inflation will be somewhat.
Speaker 2 (15:03):
That embedded over the long term, you know, at two
percent or so.
Speaker 3 (15:07):
Yeah, you know, it's hard to think and inflation will
get to that that two percent target. And you know,
I you know, with with the addition of tariffs, and
you know, I think Trump tweeted even earlier this morning
about April second being Liberation Day, So you know, I
think he's it looks like these tariffs will come into effect,
and you know, that's it's not uh, you know, I
(15:29):
guess brain surgery to to to realize that that'll obviously
be inflationary.
Speaker 4 (15:33):
But well, I think that's I think what I think
what he's Yeah, I go on, I'm sorry.
Speaker 2 (15:37):
No, no, no, I cut you off. Will that be offset
by doge and will be offset by a recession?
Speaker 4 (15:44):
Who knows, you know.
Speaker 3 (15:45):
And I think that's kind of what what we've been
talking about with the you know, the rise of there
will be a rise of an uncertainty. And I think
that's kind of where we are at now. And I
think that hypothetically that could work, but you know, we
haven't seen you know, hopefully in the next few months
we'll see some data come out that DOGE is actually
cutting spending. But again that's uh, that's that's yet to
(16:07):
be seen. And I think we until we see some
hard data that this is actually working, the market will
be range bound.
Speaker 2 (16:12):
You know.
Speaker 1 (16:13):
I'm on I'm on the fence about does does Powell
cut in June? You know, he he did say during
his press conference, I do think with the arrival of
the tariff inflation further progress on inflation may be delayed.
That he echoed what you said just a couple of
minutes ago.
Speaker 3 (16:31):
Yeah, and you know, if you have if you have deregulation,
if you have the addition of tariffs, and then you
have the FED, you know, and now Trump is tweeting
at the Fed to cut you know, aren't those all
inflationary measures?
Speaker 2 (16:45):
Yeah?
Speaker 4 (16:46):
Right, So, I mean, if if you just.
Speaker 3 (16:48):
Look at any if you you know, look at like
economics as a science and data, yeah, that.
Speaker 4 (16:54):
Will all be inflationary, you know.
Speaker 3 (16:56):
I think they have the hopes that DOGE coming out
is gonna you know, uh, you know, cut back a
lot of spending, but we have yet to see that, right, So,
and we've never had something really like DOGE before, I
think a little bit in the nineties you had some
you know, government rollbacks and things like that. But again,
you know, I think it it's it's a time to
be uncertain, and you know, I don't think it's a
(17:17):
time to be overly optimistic or really overly pessimistic, because
the consumer is still in pretty good shape, you know.
So I think until we see some cracks in the consumer,
I think, uh, I think we'll still be range bound.
Speaker 2 (17:31):
You know.
Speaker 1 (17:31):
Poul says that some near term measures of inflation expectations
have recently moved up, and I think that's important too,
is that it's the expectation of inflation. Usually I use
an example a lot of going for a picnic. If
if it's the forecast of rain, you're going to cancel
your picnic. You know, it's the expectations. And you had
a uh saved an article about expectations. It was a
(17:53):
YouTube that I think you posted on our We we
keep articles and videos that we like to refer to
back you know, it was I think it was first Trust.
Speaker 2 (18:03):
Yeah, you know how because it is a YouTube, you
know video.
Speaker 1 (18:05):
So, but he talked about expectations quite often, Managing expectations
quite often are more important than the actual data. I
think the inflation expectations, you know, could become more you know,
once they get embedded in the economy, become difficult to
really eradicate, you know. So I think that's something you
have to you have to watch for as well. You know,
(18:28):
we about three or three months ago. Uh, I think
we've been saying it for probably six months five months.
We're at fair value with the stock market, Yeah, in
and around fair.
Speaker 4 (18:37):
I think we'll continue to do so.
Speaker 3 (18:39):
You know, we I think we rely a lot on
uh large cap tech because it kind of you know,
bucks the trends of economics a little bit.
Speaker 4 (18:46):
But you know, sixty percent of large.
Speaker 3 (18:48):
Cap tech uh in in the IT sector in the
s and P five hundred gets its UH profits from overseas.
So you know, I think that's something to look at too.
Is you know what happens, uh, you know, with the EU,
with Brazil, with Russia, with China. You know, as we
continue to you know, tear off all of them, you
(19:08):
know what kind of you know, I guess alliances and
you know, strategic partnerships they make uh that could potentially, yeah,
start to hurt our domestic company.
Speaker 1 (19:19):
Yeah, I think you said I think you said it
you know, you know, we work together literally right next
to each other and desk, so we kind of like
throw stuff out all day. But also we have we
read on our own and listen on our own. And
they're like, but uh so, I don't know it was
you that said it, but you know, does does what
percentage of technology that his purchase needs to be quote
(19:43):
unquote cutting edge? And if it doesn't need to be
cutting edge, maybe other countries technology could supplant ours because hey,
this isn't brain searchery some of the you know, did
you say that? Yeah, yeah, yeah, So you know, I
get a lot of good stuff from you.
Speaker 4 (19:58):
Thank you, thank you.
Speaker 2 (19:59):
I do.
Speaker 3 (20:00):
Yeah, you know, although you know, I think we are
the strongest, most powerful country in the world, especially from
an economic standpoint.
Speaker 4 (20:07):
You know what makes me a little.
Speaker 3 (20:08):
Bit nervous is, uh, you know, other larger countries and
you know, like the EHU like China start to say, hey,
you know, we're gonna we're gonna find partners elsewhere because
you know, we can't rely on the United States like
we once could as a trading partner.
Speaker 2 (20:24):
Right And I think once you.
Speaker 1 (20:27):
Once that, if that relationship is cozy and comfy, then
and no big deal. We're gonna put up with you. You're
gonna put up with us a little bit, and there
we go. But if that relationship becomes you know, uncomfortable
or in a in a in a in a in
a way that kind of makes it very explicit. Hey,
I'm the boss over you, I think then you kind
(20:49):
of look elsewhere.
Speaker 3 (20:51):
Yeah, and I do think that one of the biggest things.
And we've been for years, we've been saying, how you know,
the the biggest issue in my opinion with America is
the losing of the middle class and little class jobs
and of the pension. And I think I think bringing
jobs and uh, you know, companies back to America is key.
You know what I'm nervous about is then you get
(21:12):
Howard Lutnik coming on and say, you know, we're gonna
you know, there's gonna be robots producing things, There's gonna
be this, there's gonna be this, and you know, when
you have technological innovation that tends right now, it's uh,
you know, the technological innovation is coming at the expense
of the labor market.
Speaker 4 (21:28):
Right, so you know what makes you nervous.
Speaker 3 (21:29):
And then so basically you have to rely on, you know,
this technological innovation to then create new industries that are
not yet created, new jobs that you know, we don't
even know about yet.
Speaker 4 (21:39):
So again, you know, that brings uncertainty.
Speaker 1 (21:41):
And you're not gonna you don't want to bring back
commoditized businesses to the United States because you know, people
are not gonna pay you know, maybe they do if
you look at some socks, but people are not gonna
pay twice the amount for socks producing in the United States.
Speaker 2 (21:56):
Hey, Walmart built itself.
Speaker 1 (21:58):
On on on that, on that theory that, hey, we
are going to keep inflation in check on a number
of fronts. But but you know, kind of importing what
they need to import, manufacturing domestically, what they need to
manufacture domestically. But the future of the middle class does
not rest in commoditized businesses coming back in the United States.
It rest in high tech, you know, biotech, health sciences,
(22:21):
you know, and and the like.
Speaker 3 (22:23):
Yeah, and I think a lot of the things that
we're seeing that the Trump administration is doing, I think
is you know, you know, I don't want to say that,
you know, maybe it would have worked really well in
the fifties and sixties, in twenties, you know, when we
were much more of an industrial manufacturing based.
Speaker 4 (22:40):
Economy and we're not now.
Speaker 2 (22:41):
In Wage growth is decent. Yeah, we get inflation in check.
Wage growth is decent.
Speaker 1 (22:44):
The last thing that cher Pile said that I want
to address in the first half we brought before you,
and I also want to talk in this second half
about hey, you know, we are not running for the hills.
We are just kind of like saying, okay, let's see
how this plays out a little bit.
Speaker 2 (22:56):
Let's not get over our skis.
Speaker 1 (22:58):
This is not you know, market's up sixty percent un
d and fifty percent over the past couple of years.
Speaker 2 (23:02):
Let's not get over our skis. Let's keep some cash.
Speaker 1 (23:04):
Let's look at the bond market as opportunity, and we'll
talk about that in the second half hour kind of
where we're seeing some value. But in closing the first half,
chair Pile did go on to say it can be
the case that it's appropriate sometimes to look through inflation
if it's going to go away quickly without action by us,
if it's transitory. He said, that can be the that
can be the case, and the case for teriff inflation.
(23:25):
It certainly to be a one time shot and that's it.
I think that would depend on the tariff, inflation moving
through fairly quickly and critically, as well as on inflation
expectations being well anchored. Again back to that well anchored
inflation expectations. So I think there's a lot going on
right now, an eventful week, although maybe again it's uneventful.
Like I said, the second half hour, we do see value.
(23:46):
We're going to talk about where we see value and
also brought out the discussion a little bit on some
other areas it might help you in your investment. Right now,
it's ten thirty on the station depend upon for new
the weather information stuck KAY ten and.
Speaker 2 (23:57):
One to three one WGY.
Speaker 1 (24:00):
Good morning, and welcome back to the second half five
of the Capital District's Money and Investment program. You're listening
to the Fagan Financial Report. Aaron and Dennis Fagan sitting here.
It's a Friday morning as we record this show.
Speaker 4 (24:10):
To snow on the ground.
Speaker 2 (24:11):
A little bit of little little dusting, yeah they call it.
So not going on.
Speaker 1 (24:16):
We're talking in the first half, and we got it
done with the first time. Like now, I'm really happy
with the way the first half came out.
Speaker 3 (24:25):
And yet yeah, you know, I always, you know, feel
bad for sounding, I guess pessimistic. I feel like I
sounded a little bit too pessimistic.
Speaker 2 (24:35):
What do you mean, you know, it didn't reflect how
you feel now.
Speaker 3 (24:38):
It reflects how I feel. Uh, No, uncertainty is how
how I feel.
Speaker 2 (24:43):
You know.
Speaker 3 (24:43):
I think that in you know, any any anytime you're
managing a portfolio or investing your own assets, I think
you have to you have to be you know, transparent
and honest with you know, how you feel.
Speaker 4 (24:54):
And you know, I feel that, uh, you know.
Speaker 3 (24:58):
Some of my I guess thoughts came across is very pessimistic.
And and I think, you know, more than anything, is
that I'm very uncertain with the future. And I think,
you know, when when when there's uncertainty in the future,
you have to de risk your portfolio. It's just the
right thing to do. You know, it could be the
wrong thing to do, but I think it's I think,
you know, the wrong thing to do from a you know,
(25:19):
from a performance metric, but I think it's the right
thing to do with all the available information that we
have right now.
Speaker 1 (25:27):
Well, let me let me, let me, let me talk
about some some wrong things to do.
Speaker 2 (25:33):
That's a good idea.
Speaker 1 (25:34):
Some wrong things to do are to say, you know,
I hate President Biden, I'm going to know cash. I
hate President Trump, so I'm going to know cash. I
think the policies of President Biden are poor, so I'm
going to all cash.
Speaker 2 (25:49):
I don't mean to say no cash.
Speaker 1 (25:50):
I think the policies of President Trump are poor, so
I'm going to all cash. I think to go to
awe of anything is arrogant. It's it's not recognizing that
human behavior is unpredictable, that the situation can change, that
(26:12):
you basically what's worked for life for you and people
listen to show know this works incrementally. It neglects the
fact that you know, over the long haul, equities are
pay more as far as return goes than other sources.
And now I will say that if you're retirement, you
(26:32):
know you've crossed through that door to financial independence.
Speaker 2 (26:35):
You just don't want to go back out it.
Speaker 1 (26:36):
So that kind of mitigates some of the you know
the issues of hey, I've got to get the best performance, yeah,
you know, so you know, I just think that you know,
if we're a little cautious at this point, and I'll
put both of us in together. You know, Aaron does
most of the trading, but we manage money together as
far as decision making goes. You know, we're about thirteen
(26:58):
percent cash in general, which if you tack on some interest,
probably provides you know, for if you're looking at a
four percent distribution, right at least four years of distributions.
I think you you know, you know, we we've scaled
back some of the investments in our portfolio to kind
of consolidate. We still believe in the secular environment for technology.
(27:25):
You wanted to talk about the mag Sevam.
Speaker 3 (27:27):
Yeah, I still believe that we do have the most
innovative companies in the world that are domiciled here. I
still believe that we have the best tech in the world.
Although China does have good tech, we do have the
best tech in the world. We have the freest market
in the world still, so you know, if you look
at us compared to other countries as well, you know,
I might may not agree with, you know, tariffing all
these countries because I don't think it's the right thing
(27:47):
to do from an economic standpoint, but I do think that,
you know, we do have a resilient economy and we
do have the most resilient companies in the world here.
We have a lot of smart people that are that
are working on you know, I guess the problem. So
you know, I'm I'm I'm optimistic in our in our
(28:08):
companies still.
Speaker 1 (28:09):
Right, and I think if you, if you and we
do have a lot of people working on this, you
know the the but the United States has influence around
the world and if if that, if we if we
withdraw that influence, then that could negatively impact, you know,
our industry and we can't.
Speaker 2 (28:30):
We're not a country that can thrive. And then we're
talking about thriving. We're not. We're not talking about, hey,
we will take take this hit, we take that hit.
We we don't.
Speaker 1 (28:40):
You know, these companies need to thrive in order to
you know, have their stock price move forward. So I
think that in a power vacuum, excuse me, if we
with if we withdraw from the global economy, then you know,
someone's gonna someone It's like water, it seeks its own level.
There will be you know, there will be countries that
(29:01):
fill that power vacuum. They fill that vacuum, and their
companies might benefit more than more than ours. You know,
though you know so, but as of now, for sure,
you know, you know, I don't think it's there's any
disputing it and this you know, you know, we both
watch a lot of podcasts and read a lot of history,
especially pertaining to the stock market and other things.
Speaker 2 (29:21):
In the United States.
Speaker 1 (29:23):
Post World War Two, we got a bump in our
GDP as a as a percentage of global GDP. But
for the past fifty years we've been about you know,
twenty five, twenty six, twenty three, twenty four to twenty
eight percent of global GDP, and that hasn't changed, so
that that is encouraging now that you know, those parish
might say, well, this is a whole new paradigm we're
(29:45):
moving forward to on a global economic basis, and that
holds water. Others may say, this is a reset of
of the global economy where we've carried more of the
water than.
Speaker 2 (29:56):
We should have. Our global power.
Speaker 1 (29:59):
Will remain UH will remain dominant, and our country, our
companies will do a lot better. So yeah, time will tell,
you know, go back to what we said initially and
probably again even before the election, the range of potential
outcomes of a Trump administration are much broader than that
of a traditional politician, and that raises the spectrum. And
you know, and I think we've been right on on that.
(30:19):
What are some things that you know you you have done,
we have done you're thinking of for a client portfolios?
Maybe you haven't done. Uh, maybe you're considering, you know,
you know, where where where?
Speaker 2 (30:31):
Where? Where? What is? What is? What is somebody out
there who's listening to the show.
Speaker 1 (30:36):
Do now?
Speaker 3 (30:37):
I think you diversify out of the S and P
five hundred A little bit we buy. We've bought a
lot of you know ETFs. N OBL is the Dividend
Aristocrat ETF. It's symbol as n OBL pro shares S
and P five hundred divin End Aristocrat ETF. You're the
DATA'EP one point eight percent with a two percent dividend
(30:58):
yield spence ratio of point three five percent. Another one
we really like a cow z Pacers Cash Cows ETF.
It's down one point nine to nine percent year to
date with a one point eight three percent dividend yield.
JAVA is JP Morgan Active Value Fund, which you know
is one of my favorite funds, even you know, in
(31:19):
moments of economic or stock market when it's doing really well,
it's up one point one four percent this year, dividendiald
to one point four percent, so nothing to write home about.
In international, we've started to buy some international DGT is
a great way to do that. It's the Dow Jones
Global ETF. And what I like about that, it's a
little bit of both. It's fifty fifty four percent in
(31:42):
America's twenty nine percent in Europe and seventeen percent in
Greater Asia.
Speaker 4 (31:47):
And that is up.
Speaker 3 (31:50):
I think it's seven and a half percent year to
date and a two point six two percent dividend yield.
So you do you still get United States, you get
a lot of Europe, you get some merging market. It's
it's a very diverse portfolio, almost like an all weather
ETF that we're pairing with our individual stocks as well.
You know, although I do think that you can start to,
(32:11):
you know, I guess dip your toes in the you know,
large cap tech again. I still love Amazon here. I
think Amazon's a great company. I like Google, you know,
I really like Meta.
Speaker 4 (32:21):
I don't think these companies will be too.
Speaker 3 (32:22):
Greatly affected by the tariffs, although Amazon, you know, could be.
Amazon does have you know, three different segments advertising, you know,
the Amazon Web services as well as you know, their
their traditional retail that that are you know, have revenues
in the tens of billions of dollars each. So you know,
it's it's it's done a great job diversifying its own portfolio.
(32:42):
So you know, I am optimistic in parts of the market,
and I still think, you know, it can do well,
you know, and I don't think that I think we
could have you know, that time correction. I think that
you know, a year, a year could go buy, a
year and a half could go buy, and maybe we don't,
you know, go down another ten twenty percent, but you know,
maybe we just hover here for a while and wait
for earnings to catch up and see how this all
plays out. But you know, as long as the consumer
(33:05):
is in good shape, which it really still is. You know,
you can see your you can say you're seeing some
signs of cracking, as long as the consumer's in good shape.
I do think there's a floor on the market that
that's within five percent of here.
Speaker 2 (33:18):
Uh, it's just not an actionable item.
Speaker 3 (33:21):
Yeah, that's that's not an actuable item. I think if
you start to see you know, a deterioration in the
labor market, then you bring a lot of other things
into into account. All right, labor market starts toteriorate, then
the Fed cuts rates, then you bring tariffs onto the table.
Then I think you just have more more moving parts
with keeping the economy afloat. If the consumer starts in
the in the workers and starts the deteriorate. So you know,
(33:44):
I do think that as long as the consumers in
good shape, the stock market has a floor around here.
Speaker 1 (33:50):
And I think the consumer, I think you could equate
with the labor market. I think you know, unemployment low fors.
I think it's for one aus of the end of February,
non initial claims for umbliment benefits two twenty three last
week until they get up to around two fifty.
Speaker 2 (34:10):
I don't think that's a The.
Speaker 1 (34:12):
Labor market is in much distress. And I will add
to your list of funds if you want to diversify
a bit away from the SCHB or SPY would be
you know, a jetby it's up a little bit here
to date, basically seeks current income, you know, and yet
(34:32):
it's still a secondary consideration of capital appreciation. They use
options to hedge their stocks and provide income. So I
think that's uh that again.
Speaker 3 (34:43):
It's a point six six percent year to date. Yeah,
you know, greatly outperforming the S and P five hundred,
which is you know, obviously a good thing. The SMP's
down three point five percent year to date, so you know,
I think all these things that we're saying now should
really be taking place already in like retirement account.
Speaker 4 (35:00):
We're nearing retirement account.
Speaker 3 (35:02):
It's just to make sure that you do have a
diverse portfolio, you know, and a lot of times, even
with clients that we have, you know, we bought Palenteer
last year for you know, twenty two twenty three dollars, uh,
you know, and for clients and growth portfolios, and you
know when that runs up from twenty two to one ten,
you know, the prudent thing to do is sell. So
(35:22):
I think a lot of times, you know, the correct
thing to do through how retirement is set it and
forget it. But you know, if you bought some good
stocks in the last five, ten, fifteen years, they could
be quite the you know.
Speaker 4 (35:31):
Outsizeable position in your portfolio.
Speaker 3 (35:33):
And it's just a prudent thing to do is is
to that trim those back.
Speaker 1 (35:37):
I think, yeah, may you maintain your ASCID allocation model
within reasons. So if you're fifty to seventy five percent
in the market and you're a little concerned and you
were seventy coming into the year, maybe go back to
sixty five or sixty if you're if you're eighty percent
and you go, oh my gosh, the equities have done
so well, bonds haven't done that well, and you went
from seventy to eighty because of that, then you go
back to seventy and rebalance.
Speaker 2 (35:58):
Yeah. You know. The other thing too, is that I
would disagree. I think you know you have the sm and.
Speaker 4 (36:03):
What disagree with me?
Speaker 1 (36:04):
And what you said about you should have done these
things already. You know, you said the JAVA is up,
you know, which is a JP Morgan Value Fund up
three one point one four percent year to date. The
SMP is down three three and a half. So I
think there's a lot of time to do this stuff.
I really do, you know.
Speaker 3 (36:21):
Well, I meant like, you know, you should be diverse,
you should you should be diversifying, and I agree in
retirement not you know, not you should have are not
it's too late, just you know, it's things when you're
in retirement you should be doing. You should be diversifying,
you should be raising your you know, money market in
fixed income exposure.
Speaker 2 (36:36):
I agree, I agree with all that.
Speaker 1 (36:38):
What do you think about the RSP the equal weighted
S and P five hundred as a way to diversify
from the market cap driven s P Y the S
and P five hundred.
Speaker 4 (36:50):
Uh, I think there's better ways to do that, you know,
I think that. Uh.
Speaker 3 (36:55):
I think there's a lot of very good value managers
out there. I think there's a lot of good companies
like cow Z and n OBL that'll outperform the RSP.
My my, I guess my skepticism on the RSP is
that it's heavily defensive. You're seeing thirteen percent in industrials.
(37:16):
You're seeing you know, consumer cyclicals at ten percent, financial
service at thirteen percent. So the only thing I'm nervous
about with the RSP is, I guess, you know, terriffs
being a bigger hit on more of the companies down
the line, and you know, the four and five hundred
largest companies than Yeah, I guess that's why I also
(37:37):
think that you know, sixty of the RSP is technically
mid cap right, So a madcap could get hit if
if if we continue to see you know, the tariff
Frederick right.
Speaker 1 (37:50):
And I also think that you know, I'm not gonna
throw large cap tech out the window right now either.
Speaker 2 (37:59):
I don't think that's a really good idea.
Speaker 1 (38:01):
You know, still some of our largest holdings are within
that sector, So i'd be careful about, yeah, you know,
throwing you know, the baby away with the bath water
and and the other thing too. Airs you certainly want
correlation to the S and P five hundred. I think
there's as as as an American investor, as someone who
(38:23):
invests professionally, hey, you want to do your own thing,
knock yourself out, but as a professional investor, as a fiduciary,
you you don't want the S and P five hundred
to be up. And I think that's one thing that
I think we've always kept in mind as well, that
the biggest mistake is it's basically again arrogant too to
(38:44):
think that you're going to be up twenty percent the
SMP is going to be flat because you know, I
think you want to hit yourself to that wagon over
the intermediate long term, Yeah, you can, you can skew
one side or skew the other. You know, that's a
that's a new word for us, rather than you know.
Speaker 3 (38:59):
Uh yeah, like if if the acid piece up twenty
you know, a lot of people can be up twenty
five or thirty percent. If that S and piece up
is flat or down, it's it's very very hard to
be up, you know, twenty percent, ten percent.
Speaker 2 (39:12):
Unless you're taking big bets off of it.
Speaker 1 (39:13):
And that's basically I think it's it's it's not for us,
it's not for our clients. It reduces the correlation, reduces
the level of predictability. We work with skewing and incrementalism.
You know, I like it, and it works over time,
we better. This is nineteen eighty nine. Work at the peripheric.
Speaker 3 (39:28):
I think when there's uncertainties out there, you know, what
we what we can draw parallels on is the historical
performance of the S and P five hundred for the
last one hundred years. So I think that, yeah, you know,
you do want correlation to that S and P five
hundred because you know, you know, over over time, you know,
the companies that do well become larger portions and affect
your portfolio more. So that's one thing that you can
(39:50):
rely on, and I still think you can rely on,
you know, American innovation, and you know, I don't think
that's going away, especially in a deregulatory environment.
Speaker 1 (39:58):
Now, international we've picked up the pace a little bit
on that. It's been good year to date thus far.
And you know you mentioned what did you mention d
G t UH you know as UH.
Speaker 3 (40:12):
Which is nice s c HF is Schwab International Equity ETF.
That's up ten percent year to date. So those are
our two main international holdings A c w X.
Speaker 1 (40:26):
I think you bought a little bit of that this week.
I was noticing in client portfolios, you know, because the
other thing too, I think you're going to see is
that pushed push to uh fend for themselves. These other
countries are going to become more fiscally fit. You know,
you saw Germany just basically take the lid off their
their public spending to upgrade their their industry and to
(40:50):
upgrade their uh, you know, armed forces.
Speaker 2 (40:53):
So I think this year I see a lot more
that you.
Speaker 3 (40:54):
Could see some spending overseas. I think you could you
could start to see some deregulation international, which would I
think would be huge for you know, that entire sector,
which could you know, produce some innovation and obviously some
spending and so companies could do well there. So you know,
I think, yeah, having a diverse portfolio is key right now.
Speaker 1 (41:12):
The SPY over the past fifteen years has produced an
average of I think it's fifteen point three eight percent
or thirteen point five a percent whatever, let me see,
it's a thirteen point one eight percent. The a c
WX is done nine percent. Yeah.
Speaker 3 (41:29):
Even over the TEP past ten years, SCHF is up
thirty two percent. In the SMP's up one hundred and
sixty eight percent.
Speaker 1 (41:35):
That's that's the regression to the mean if for no
other reason that you know, I think looks attractive right now.
Speaker 2 (41:41):
Yeah, you got to keep on keep on keep that.
Speaker 1 (41:44):
On the fixed income side, I think you know, we've
we've done a pretty good job laddering some treasuries e.
Speaker 2 (41:50):
T F ib T O, I b t L, I
B t H. The ib T O year to date
is up three point five nine percent.
Speaker 1 (41:57):
You know, I think you keep on looking at those,
do not you know, I think go down the credit
quality ladder ib T H treasuries that come do in
twenty twenty sevens up one point five three percent, again
on pace for over six percent annual return. So I
think you keep on nibbling at those areas as well. Yeah,
and go from there. In money market, we have the
(42:18):
b I L you know, just as a parking place
for those clients that are out there listening.
Speaker 3 (42:24):
I still like corporate's v c I T is Vanguard
Corporate Bond ETF. That's up total turn of two and
a half percent year to date, so you know, I
do think again, as long as corporations and the consumer
remain in pretty good shape, I think that you'll see
the v C I T do well here.
Speaker 1 (42:40):
Expense ratio of four point oh three percent and the
dividend of four point four percent or so. Vg s
H is another one, the Short Term Treasury Index Fund
up one point three five percent, carries a dividend of
four percent. So those are some good parking places. I
will say, you got a ladder some bonds. Although we
said in the first half that we kind of think
(43:00):
think that, you know, getting down to getting down to
two percent for the FED is probably going to be
difficult without a recession, you know, So that's that's the
trade off there you know, uh.
Speaker 3 (43:09):
And you know, you know, as long as as much
as we want egg prices to drop, and you know
you're hearing that a lot. You know, dropping of grocery
prices will not be good for you or anyone really,
uh as it's disinflation is.
Speaker 4 (43:22):
Usually uh deflation you know.
Speaker 3 (43:24):
Ye, deflation is usually a product of of of a recession,
the grocery slow slower economic.
Speaker 1 (43:32):
Now you have you have areas that can come down
or egg prices, yes, come down, but I think generally speaking,
stability in groceries or probably what you're going to see.
Speaker 3 (43:41):
And then if you're looking at you know, larger like
the PCE, you know you're a large part of that
is if you start to see that drop you know
you used to you start to see shelter costs, Yeah,
she see, yeah exactly thirty three percent is shelter costs.
So you know, once if that starts to you know,
go down precipitously. You know, it's usually because you know,
(44:01):
you're seeing signs of quite a slow.
Speaker 1 (44:03):
Account because it'll take a while for the housing market
from an inventory basis to straight and self out. So
housing prices, yes, we'd like to see them come down
over time. But I guess what Aaron's referring to as
a precipitous drop in anything is usually indicative of slow
economic growth. And right now, I think if you look
at the forflations, inflation, forflation, forflation, stagflation, disinflation, and deflation.
(44:27):
Let me take a minute and explain whatever inflation. Inflation
is basically rising prices. The connotation is usually is bad.
Oh my gosh, inflation is bad. It is bad, but
it's kind of like rain. You know, you don't have
a garden without rain. You don't have demand without some inflation.
And we're talking broadly speaking. We're not talking, you know,
(44:50):
rampant inflation, nor are we talking inflation in one specific sector.
I think inflation in the housing sector, coupled with inventory
is hurt that market. I think the same with eggs,
and same with groceries in general. But overall, a little
bit of inflation, as long as wages are increasing at
a faster pace than inflation, is good for demand, all right.
(45:11):
And it also is a number that the consumer can
live with because their wages are increasing faster than the
pace of inflation. Inflation is bad, as we saw, you know,
over the past three or four years and the aggregate
although it's coming down. Inflation is bad when you know
it's exceeding wage growth, so that's a negative stagflation. Excuse me,
(45:32):
let's go to Disinflation is when inflation is coming down
from prior levels. So if inflation was three percent year
over your last month and now it's two point nine percent,
that's disinflation. So you still have inflation, but it's it's
at a lower pace. A deflation is actually when you
have lower prices. You know you have exit, you know,
eight bucks a dozen, now you have them at six.
(45:54):
That's deflation. And again in specific cases that's very good,
but they that would be often artificial spike, you know,
historically speaking, but deflation for the broader economy is bad.
Just like inflation is good in moderation. Deflation generally speaking
is bad because if I think, you know, housing prices
(46:16):
are going to come down, I'm going to wait. I
think if you think interest rates are going to come
down coupled with housing prices, You're probably gonna wait. And
Japan just exited within the past few years a thirty
year period of deflation which crippled their economy. I will
say also that their deflation was coupled with the declining population,
and we've got to be careful of that because we're
(46:36):
not replacing our population now in the United States. And finally,
stagflation is when you have inflation increasing at a faster
pace in economic growth, and that can be dangerous as well.
And that's kind of what we see in the seventies
and we're probably going to be going through that over
the next a few months. You're gonna have some inflation
maybe two or three percent, and you're gonna have economic
growth that's below that because of you know, some of
(46:59):
some of the the terariff issues quite candidly and how
they play out. Uh, you know, we'll guess from there.
You know, Nike came out with some earnings. No, they
weren't that good, FedEx not, you know, go ahead.
Speaker 3 (47:10):
And FedEx, you know, cited terriffs. Nike is kind of
in a uh, you know, an innovation cycle. Let's say,
I think they got a little bit too comfortable. But
I do like Nike, you know, over the long term.
I think it's just a you know, a great company.
You know, it has it has a great product, and
I think it just went through a little bit of
a hiccup internally, and I think it will get.
Speaker 4 (47:29):
Itself back on track. It's mojo, it's mojo.
Speaker 2 (47:32):
Back, yeah, or another training run through, you know.
Speaker 4 (47:35):
In down four percent, you know, before Friday.
Speaker 1 (47:39):
So but you know, so I would say in I
guess concluding our radio show, I think if you've listened
to us for the past three months or so, I
think you've heard a consistent theme of uncertain uncertainty, expecting volatility.
I think you've heard that the range of potential outcomes
of the Trump administration as much than a traditional politician.
(48:01):
You know, I can say it, you know, almost verbatim,
you know, And so I think that's what we'll continue
to see more and more of that.
Speaker 2 (48:09):
As you're true now, you know. But the President he
could turn it in a heartbeat.
Speaker 1 (48:13):
If he ratchets back the rhetoric, if he leaves room
for dialogue and discussion and uh dissent, then then I
think we're you know, the market probably, you know, because
right after the election, you know, business optimism was high.
Speaker 2 (48:25):
The market was going well.
Speaker 3 (48:27):
And if you talk to local business owners and you know,
people still seem to be relatively positive. Uh. But yeah,
I think again, you know, there's a lot of uncertainty
out there and gives.
Speaker 1 (48:39):
Called during the week five one four check us on
O but fagan Asset dot com like us on Facebook.
Speaker 2 (48:44):
Have a great day.
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