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Speaker 1 (00:02):
Welcome to the Retirement Wealth podcast. Our goal is to help those retired or soon to be retired investors make more informed financial decisions and live an enjoyable retirement. Our host, Mike Lester is the founder and CEO of Talon Wealth Management. Mike is an investment advisor representative of Retirement Wealth Advisors, Inc., an SEC registered investment advisor. Thanks for joining us today, and let’s get started.
Kristen (00:30):
Connect to us, guardingyournestegg.com. Stay with us as we discuss what some strategists feel is the bread and butter for income investors. Will that be the case for you? We’ll find out that and why some experts are sounding the alarm over a possible return to 1970s style stagflation for our economy, coming up. Mike, I’m having serious FOMO. I have not seen the new … What’s the name of the movie? I forgot the name of the movie.
Mike Lester (01:01):
The new Maverick movie. I think that’s where you’re going with this, right?
Kristen (01:02):
Maverick, Top Gun. Yes.
Mike Lester (01:03):
You blanked on Maverick. Shame on you.
Kristen (01:06):
Shame on me. Here’s the thing. If Tom cruise would just act and not talk, I’m all in. And I hear that this movie is amazing. I have not gone yet, but tickets … It seems like you have to make your reservations online.
Mike Lester (01:20):
I guess it’s the hype they were looking for if people are trying that hard.
Kristen (01:23):
So are you and Katie going to be going?
Mike Lester (01:27):
On YouTube, I looked at the promos for it and stuff, and it seems like it’s probably pretty interesting. Katie did ask me, “Hey, would you like to take the kids to go see Maverick this weekend,” or what have you? And I said, “Yeah, okay. We’ll do that.” But now that you’re telling me that it might be hard to get tickets, I don’t know how enthusiastic I am anymore.
Kristen (01:48):
Well, make the reservations online. And when you do that, I’m curious. What is your movie theater preference? Are you an aisle guy, or do you and Katie like to be in the middle so that you feel you have the best vantage point? Do you like to be down front, in the back?
Mike Lester (02:04):
For me, and the way theaters are constructed now … And I don’t go very often. I go to the theater maybe once a year. But if it’s me, and you look at how they’re constructed, I like the middle. But usually, they’re layered, so there’s kind of like a walkway in between you. And then you could sit middle and get out pretty quick, if that makes any sense. But if I didn’t have that option, I would not want to be crammed in between a whole bunch of people and have to step over them to get out. So I would go aisle.
Kristen (02:33):
Yeah. Especially with children, you’re going to have to get up and down a few times. I am hearing that a lot of industry analysts in the movie and entertainment business are saying that Maverick may have saved movie theaters because there’s not been anything that people have been wanting to go to the extra effort to go see. They’ve just been waiting for online streaming.
Mike Lester (02:53):
[inaudible 00:02:53] pay all that money with everything else is costing so much. Do you really want to spend $18 on a ticket to a movie? So yeah.Kristen (02:59):
Let’s talk about the economy. Let’s talk about what’s happening with the market. And actually things like this, people going to the movies, it is a good sign. Am I wrong, Mike? People are spending and going and doing. That’s helpful.
Mike Lester (03:12):
Well, I think it’s helpful. Everything I’ve seen though is people are spending money in a lot of cases that maybe they don’t have. So a lot of debt is going up, a lot of credit card spending. There’s a lot of pent up frustration from COVID, so people are still traveling. And there’s some confusion around, well, listen, if gas prices are so high, and the cost of food and travel and everything associated with travel is so high, why are people still doing it? And the theory is, it’s just a frustration over not being able to do it for so long. And there’s a potential that people are either burning through cash that they have saved up very quickly or spending money that they don’t have. And so we have to take a look at that as well, if it’s kind of hot with travel early summer and revenues are going up, it might look good initially, but where does all of this ultimately end? When it comes to managing money, we’re not looking at a month out or two months out. We’re looking at six months out. Where do we think we’re going to be? And that’s fearful right now.
Kristen (04:12):
It is, especially if you heard JP Morgan Chase CEO, Jamie Dimon recently warning investors. I caught this through Bloomberg, that investors should prepare as the economy struggles against a combination of challenges, including tightening monetary policy and Russia’s invasion of Ukraine.
Jamie Dimon (04:32):
It’s a hurricane. Right now, it’s kind of sunny. Things are doing fine. Everyone thinks the Fed can handle this. That hurricane is right out there, down the road, coming our way. We just don’t know if it’s a minor one or super storm Sandy, Sandy or Andrew or something like that.
Kristen (04:52):
Mike, you and I both originally [crosstalk 00:04:53].
Mike Lester (04:53):
I like how he’s trying to remember names of bad hurricanes as he’s going through his …
Kristen (04:57):
No kidding.
Mike Lester (04:58):
… analogy there.
Kristen (04:59):
You and I both being from the East Coast originally, have lived through quite a few major hurricanes, so it’s an analogy hits home for me. And the comments getting a lot of attention, Mike. So as a fee only fiduciary financial advisor, how do you think investors that are close to or already in retirement should be preparing for the unknowns of the road ahead, given these hurricane comments?
Mike Lester (05:23):
What we’re seeing at the office with individuals that are calling in, particularly in the past few months, is there’s just a real concern over what I would consider either a lack of active management of their portfolio. So a lot of them feel like we’re back into advisors just telling them to hang in there. Don’t worry. Eventually it’ll get better. And because markets have pulled back so much, you have people who have lost money in portfolios. And there’s this sensation or feeling that I’ve already lost so much money, I don’t want to get out now because I would be accepting a loss in my portfolio. And these types of emotions or advisors telling you to hang in there, I really think you need to break out of that cycle and take a look at everything that’s available to you, because it’s very easy for emotion to take over. A conversation I had with a gentleman the other day, he felt like his 401k was already down so much that he just wanted to wait to do anything. People just become frozen.
Kristen (06:30):
Sort of paralyzed by the fear of what if it gets worse.
Mike Lester (06:33):
Yeah. I’ve already lost money, and I don’t want to make changes until I get back to where I was. And what we can do is take a look at portfolios and look at people in that situation say, listen. Let’s analyze why your portfolio or why your investments are doing bad. Of course, it’s because markets are down. But what are you specifically invested in? How much are you down compared to the overall market? What are your investments that you’re in now likely to do moving forward if we get what I believe we’re going to have here pretty shortly, a recession? If we get a big pullback in this economy, what’s going to happen?
Mike Lester (07:08):
So I think markets have a lot of room to move lower. And let’s say you’re down 15 or 20% in your portfolio. Yes, that stings. But look for opportunities. There are opportunities in these markets that didn’t exist three or four months ago because markets weren’t off as much as they are now at that point in time. And analysis will help us show people where the opportunities are in this market. So I’d say, take a look at where you’re at. Get an analysis of what’s likely to happen moving forward. And as we say on [inaudible 00:07:41] program, let’s look at how you’re doing compared to how we’ve been doing for our clients.
Kristen (07:45):
Connect to us when you have a moment at guardingyournestegg.com. Do you remember 1970s, wearing those bell bottom jeans?
Mike Lester (07:54):
Those are coming back. I’m seeing them a lot.
Kristen (07:57):
I know. Especially with women. I am not seeing dudes walking around with bell bottoms like we did in the 70s.
Mike Lester (08:00):
No, that would not be [inaudible 00:08:04].
Kristen (08:04):
I don’t know. Maybe I want to find you … I’ll call Katie and get your size. We’ll find some at a thrift store. Men don’t typically notice things like that about fashion, but for you to notice that women are wearing bell bottom jeans more often, I’m impressed.
Mike Lester (08:16):
I notice all kinds of things. Yeah. I’m out and about, so I noticed that. Also, the jeans have gotten … Instead of low hip, they’re high. I don’t know what you call that, but you know what I mean? Where the jeans were-
Kristen (08:30):
No, I’m just going to let you keep trying to describe.
Mike Lester (08:30):
For a while, they were … Let’s say your belly button was average how high a jean would go. And then they got real low, like several inches below the belly button. And now they seem to be back over the belly button.
Kristen (08:42):
Yeah. Some call them mom jeans from the 90s making a turnaround too. It’s crazy.
Mike Lester (08:46):
Got you.
Kristen (08:46):
But the bell bottom jeans you’re noticing, yes. Very, very astute on your part.
Mike Lester (08:51):
Well, the bell bottom jeans and the over your belly buttons tend to go together. It seems to be the same jean. But I’m not sure.
Kristen (08:58):
You know what? You’re right. We’ve got that, we’ve got surging oil prices and inflation. Mike, it’s kind of like the 70s all over again in a lot of ways.
Mike Lester (09:06):
I know. I hope we don’t get those car lines.
Kristen (09:08):
Oh, my goodness. Let’s don’t even go there.
Mike Lester (09:11):
I saw it at Costco the other day, remember? My new index. How bad is the economy really? Well, if the line to get gas at Costco or Sam’s Club is more than 10 cars deep, you know there’s a problem if you’re willing to wait that long. So keep an eye on that. It’s an early indicator of our economy, and it should scare everybody.
Kristen (09:29):
You must be talking to the folks at Fox Business because I saw an article they posted about things happening right now with the US economy that have a lot of experts sounding the alarm over a possible return to 70s style stagflation. Now, for those that may not be quite as astute with financial jargon, first things first. What is stagflation? And then I’ve got another question.
Mike Lester (09:54):
Okay. So a complicated word, but basically it’s the combination of economic stagnation and then high inflation. Basically, consumer prices are soaring, but then also high unemployment. And our employment rates are pretty good, but people’s willingness to go back to work isn’t where it probably needs to be because a lot of companies or businesses, mostly I think restaurants that I’ve seen personally, are having a hard time hiring. There are some scary numbers out there with companies like Amazon, retailers. They’re starting to see people pull back on their spending. And then they’re starting to look at what is the opposite of having it grow. They’re starting to look at letting people go. And when those numbers start … And we talked about this several months ago on a radio show, I remember. But one of the issues is eventually, things become so expensive that people stop buying them. And then if people stop buying them, the store doesn’t need the employee anymore because they aren’t selling anything. And then they start laying off people. So all this bragging about how low unemployment is, one of our concerns is that we’re going to see that number go in the other direction because of the cost of everything. People are just going to cut back.
Kristen (11:05):
So let’s keep talking about this stagflation style 70s that a lot of people are concerned about. As a fee only fiduciary financial advisor, do you think we’re about to relive that not so fun part of the 70s?
Mike Lester (11:19):
Obviously, that’s a very, very tough thing to gauge. I think some parts of it would be similar. Part of the 70s would be lack of fuel, right? I don’t think we’re going to have that necessarily because the prices are so high, people are going to cut back. But this inflation scenario, I don’t think goes away anytime soon. I don’t think the current administration has a plan to fix it. They don’t want to admit it, but I think we’ll find out later on because that’s how these things work. You find out after the fact that they’ve lost control over it. I don’t think they could do any policy right now to regain control. And this is just going to run its course, and that’s what economies do. The government can’t control everything.
Mike Lester (11:57):
But ultimately, I think where we’re at is markets are likely to come down further. So if you’re invested in the stock market right now, take that into consideration. Do some analysis. But that has also created opportunities in markets that we wouldn’t normally have, so there are some sectors that I think are going to be pretty attractive.
Mike Lester (12:16):
You know, we pulled our clients out of any of our IRA or Roth IRA clients. We pulled out of markets back in March. And of course, I didn’t know it at the time, that markets were going to do as poorly as they did as soon as they did. But the way that we manage money is we know our clients are retired or very close to it. So if the probability of markets going up isn’t very high, and the probability of markets going down is high, in our opinion, we’d rather just be on the sidelines. So it’s possible that we’re wrong, and our clients would miss out on some gains, but it’s also possible we’re right, and we’re avoiding big losses.
Mike Lester (12:51):
So in this case, we avoided a lot of losses in portfolios. Had we been wrong and missed out on a portion of gains, our clients are more willing to give up a portion of gains than they are to capture big losses because we work with people that are retired or close to it. They’re looking for the highest rate of return they can get. They’re just not willing to take big risks to get there.
Mike Lester (13:11):
Looking at are we moving into the 70s again and the 70s style stagflation again, which by the way, is a horrible situation to be in, whether we are or we aren’t, I think it’s fairly predictable that we aren’t headed in a good direction. Everything’s very negative. And like I said, I don’t think the government could pull us out of where we’re headed, even if they wanted to. And by the way, I’m not convinced they want to. It seems almost like they’re doing it on purpose. So right now, take a close look at your portfolio and come up with a plan for a bad economy. Come up with a plan for a bad stock market. But come up with a plan that’s good for your personal economy because that’s what should matter most to you in retirement or close to it.
Kristen (13:52):
Mike, this is what I’m excited to ask you about. Yahoo Finance recently posted-
Mike Lester (13:59):
Okay. You sound very excited.
Kristen (13:59):
Well, I’m intrigued. Let’s put it that way. They recently posted an article saying that dividends are the bread and butter of income investors. They even listed suggestions on how to put together a portfolio that generates at least $1,000 in dividends each month. But they also said this strategy takes some focus and work. Now, do you suggest dividend portfolios to your clients to help them create income in retirement? Is this a good idea?
Mike Lester (14:26):
Well, disclaimer. It depends on what you’re looking to accomplish. A dividend portfolio, for listeners who don’t know, is basically a portfolio of stocks that pay dividends. And different stocks pay different dividends. But you could build it out and have a, I guess, fairly reliable income on that, and then sometimes less market volatility because stocks that pay dividends tend to have less volatility than stocks that don’t pay dividends. But it’s not the silver bullet for everybody’s financial issues because the dividends typically aren’t guaranteed. It’s at the company’s discretion whether or not they pay a dividend. And if the market goes down, those dividend company shares many times can go down too. So you can still have volatility, and then you can lose the income. I think a dividend portfolio or dividend investments are nice for a portion of an overall portfolio. So you’ll see us layer that in, but maybe that’s an allocation that would represent maybe 20% of someone’s overall portfolio and provide some income.
Mike Lester (15:27):
But at the same time, take a look at other investment options. There needs to be a growth component in there. We’ve talked about structured notes on the program for income. If I look at structured notes versus dividend stocks, I’d say most of our clients, once we explain how structured notes work, they’re more interested in notes than they are in dividend portfolios because many times the structured notes can have a higher distribution than say, a dividend portfolio, but then also some layer of protection to the downside. And those are conversations we want to have at or near retirement.
Speaker 1 (16:04):
If you would like to have a comprehensive financial plan and an analysis of your current portfolio, go ahead and visit our website at retirement.tips/plan, and we can do that for you complimentary. Thanks so much for joining us on today’s show. Be sure to subscribe to our podcast. Visit our website at retirement.tips for more free retirement planning and investment resources. Thanks for tuning in to today’s show, and we’ll see you next time on the Retirement Wealth podcast.
Speaker 1 (16:37):
Exposure to ideas and financial vehicles discussed should not be considered investment advice or recommendation to buy or sell any financial vehicle. This information should not be considered tax or legal advice. Individuals should consult with professionals specializing in the fields of tax, legal, accounting or investments regarding the applicability of this information to their situation. Past performance is not a guarantee of future results. Investments may fluctuate and when redeemed may be worth more or less than originally invested.
