Remembering Rush & How Market Mania and Gas Prices Impact You

Mike Lester

by Mike Lester

Apr 12, 2021

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Transcript

Kristen (00:03):

Mike, it’s been a weird time for talk radio, losing the king of talk radio.

Mike (00:09):

Yes.

Kristen (00:10):

Things are not going to be the same without Rush.

Mike (00:12):

No. I’m a fan. I think you’re a fan, Kristen. And even if you’re not a fan, you just got to take a look at what he did. And nobody’s ever done it before. Tons of careers, right, were launched off of [crosstalk 00:00:22].

Kristen (00:22):

Oh yeah.

Mike (00:22):

… essentially the platform that he created. And not just a great entertainer, but the way he formatted everything. And just look at all the people that have had great careers based off what he did. It’s just hard to imagine. The shoes can’t be filled.

Kristen (00:37):

Oh, no.

Mike (00:37):

That’s impossible, but-

Kristen (00:39):

I’m interested to see who they do put in those shoes, though, because you and I would not be doing this radio show with the success that we do if it were not for Rush.

Mike (00:47):

No, absolutely not.

Kristen (00:47):

It has affected so many people.

Mike (00:50):

Absolutely, over the years. And he got his start in the Sacramento market, and that’s over the years just turned into obviously nationwide and the biggest conservative talk radio show of all time. It’s pretty amazing. So he had several people that filled in for him over time.

Kristen (01:07):

Yeah.

Mike (01:08):

A lot of them were really, really great. So I imagine it’ll be one of them that that takes over. But it won’t be the same, Kristen, not even close.

Kristen (01:15):

No.

Mike (01:16):

And I think whoever takes over would admit that.

Kristen (01:17):

I wouldn’t want to take over. I could tell you that.

Mike (01:20):

No. Tough shoes to fill. They can’t be.

Kristen (01:21):

Even President Trump called him a legend when remembering his friend recently on Fox News. And he talked about his decision to award Rush the Presidential Medal of Freedom during last year State of the Union address.

Donald Trump (01:33):

Well, it was an idea that we had that a lot of people suggested to me, frankly, a lot of great people of our country, largely Republicans. It was an amazing night because the Republicans went wild. And the Democrats sat there, but they all respected Rush.

Kristen (01:50):

Now, Rush was open about his battle with lung cancer, but he said in his final months that religion really helped him cope with the uncertainty.

Mike (01:58):

Yeah, Kristen. I literally had a meeting with a client the day that they announced that Rush had passed away. And in this case, it was a phone call with Rose and her husband. And honestly, we called to check in, just to prep for the phone call, and Rose had to compose herself. She said, “Hey, could you just give me 10 minutes?” She had heard the news there that day and she was literally in tears. So obviously, knowing that she had been in tears, I didn’t bring it up a whole lot in our meeting or our conversation, but just sat there and had a very, very nice conversation. And look at that, just the impact, just her hearing that he had passed. And again, it’s not like Rose didn’t realize that he was sick. Everybody knew that. But just hearing the news had that impact on her. Yeah.

Kristen (02:42):

I remember-

Mike (02:43):

And a lot of people.

Kristen (02:43):

… my father used to have in his office “Rush is Right” and “My blood bleeds Rush” and things like that. Such an iconic [crosstalk 00:02:51].

Mike (02:51):

… on loan from God. Yeah.

Kristen (02:52):

That’s right. Talent on loan from God. We could only be so lucky to have the type of talent he does. But Mike, your talent has always been helping people with their financial life when they’re near retirement or already there. And that involves the stock market and paying attention to Wall Street, market mania in full effect. And according to Wall Street forecaster Jim Bianco, he tells CNBC.

Jim Bianco (03:14):

So the great thing about a mania is you make a lot of money fast. The hard thing about a mania is getting out with that money.

Kristen (03:20):

Fast money, yeah, that’s great. But he makes a good point. Do most of us know how and when to get out, or is that really more of a market nerd thing that you [crosstalk 00:03:31]?

Mike (03:32):

Well, it’s a little bit market nerdy. There’s a lot that goes into it. So first of all, there’s a timing aspect. Nobody’s going to know exactly when to get in and when to get out. If anybody tells you, Kristen, they can time the market, you know they’re full of it, right? That’s all there is to it. So we can’t time markets. I don’t profess to be able to time markets, and nobody should profess to time markets.

Mike (03:49):

But what we can do is be smarter about investing. And so we can take a look at numbers, we can take a look at statistics, and we can say, “Hey, listen. The probability of something doing well at a certain time is high,” or, “The probability of something doing poorly at a certain time is low.”

Mike (04:06):

Right now, if we took a look at markets, we’d say they’re overbought. That’s all there is to it. But once markets are overbought, does that mean they’re going to crash or something? Not necessarily right now. We have to take a look at, well, what’s the alternative to investing in the stock market at this point in time? Well, the alternatives aren’t very good. Real estate’s overpriced. Bonds aren’t a good option because of the Fed and interest rates. Interest rates are really, really low. Fixed rate options aren’t very good.

Mike (04:32):

So you take a look at all of those components and you say, “Well, where’s the best place to put money right now in the short term?” I believe probably in the market. But the problem is we’ve been talking about that for a long time, Kristen.

Kristen (04:42):

Right.

Mike (04:42):

And fortunately, we’ve been right over the time we’ve been talking about it. But that just means we’re looking at the numbers and we’re looking at the statistics and we’re looking at the probabilities of what’s likely to happen. That will change, Kristen. Our forecast will change even on this radio show, as we talk to people about what we think is going to happen. But that doesn’t mean we know exactly what’s going to happen.

Mike (05:01):

The other point or the other issue that people are dealing with when it comes to timing is taxes. So there are a lot of people here in 2020 worrying about taxes. Excuse me, in 2021. Kristen, it’s already 2021 [crosstalk 00:05:13].

Kristen (05:13):

I know. I wrote it down wrong the other day.

Mike (05:15):

I’ve done it a couple of times. Here we are in 2021, worried about taxes next year, because some of the things that President Biden’s been talking about. And people are going, “Well, do I sell in 2021, take advantage of tax rates now? Because I believe they’re going to be higher in 2022.” And they probably will be. That’s a conversation you should be having with your financial advisor. And if you don’t have a financial advisor, have that question.

Mike (05:38):

Another issue is, is it in an IRA or is it in an account like an individual account or a joint account or a trust account? Because if it’s in an IRA or a 401K, you’re a little bit worried about what’s going to happen in markets down the road, you can get out of those positions. There’s no tax consequence.

Mike (05:54):

I was talking to a very nice lady and her daughter. She listens to the radio program weekly. So she’ll know who she is as I’m talking about this.

Kristen (06:03):

I hope it’s something good.

Mike (06:04):

But she … No, it’s great. But she’s been very, very fortunate. We all know of the company Apple, so she’s done very, very well in that position. And it turns out that there’s a large capital gain there, but it’s not in an IRA. It’s in basically an individual account.

Mike (06:18):

So when you have a large gain in an investment and you’re sitting here staring at it, going, “Well, Apple’s doing very good right now. I know I could sell it. I know I’ve got a lot of profits, but I’m going to pay tax on that, right? And I’m going to pay a lot of taxes in it.” So the question becomes, “Well, do I just hold on to it? Because over a long enough period of time, 20 years from now, if I pass away my beneficiaries get that with a step-up in basis.” But Biden’s talking about getting away from or doing away with the step-up in basis. So there’s a lot to think about when it comes to investing and taxes and strategies.

Mike (06:53):

And the conversation I was just having with her and her daughter was, “Well, we just want to know what our options are. That’s all we want to know. We probably wouldn’t sell it because we have so much in gains. But before we make the decision not to sell and just wait for a step-up in basis that might not exist 20, 30 years down the road, what are our options now?” So literally, we’re going to walk them through that process, have that conversation later after we do the analysis. And that’s really, I think for me, what it’s all about, is just helping people be informed, understand their options, and help them make informed decisions.

Kristen (07:24):

So Mike, when you’re talking about things like Apple, it reminds me about the headline I saw. I think it was on CNN Business, that Bitcoin’s market value topped one trillion dollars. And that puts them into a big club.

Mike (07:38):

It does. A more volatile club of investing.

Kristen (07:42):

True.

Mike (07:43):

Yeah. They’re in a club now for sure.

Kristen (07:43):

And it’s worth about 225 billion more than Tesla last I read. That is massive. And this is this whole cryptocurrency thing. Have people been calling you about this?

Mike (07:54):

I’ve certainly been getting phone calls because it’s in the news so often. It’s similar to, but dissimilar from Game Stop here a little while ago.

Kristen (08:03):

Yeah.

Mike (08:03):

When things are in the news, Kristen, certainly we get phone calls and people just want to know what about that. So I think probably the biggest call or concern that we get with regards to Bitcoin is, “Should I be involved in that? I keep hearing about it. It’s going up and up and up and up and up.” And I think the biggest thing that I could tell our investors, our investors are pretty much individuals that are either retired or very close to it, “It’s not our job to be a stock picker. I’m not sitting in a room, a boiler room so to speak, with a hundred other advisors with two phones in front of me, just calling up somebody with the hottest stock tip of the week, or buy, buy, buy, sell, sell, sell.”

Kristen (08:40):

Right.

Mike (08:40):

What we’re doing is we’re managing portfolios for the long term for individuals. And I really can’t tell you or anybody else where Bitcoin is likely to be a month from now, a week from now, a year from now. There’s just no way to know. What I suspect is that it’s going to get so big that the government comes in, starts to regulate it.

Kristen (09:00):

Because that’s the appeal right now is it’s not regulated.

Mike (09:03):

Exactly.

Kristen (09:03):

As I understand it.

Mike (09:04):

Yeah. So what I suspect is governments around the world, I don’t think, are going to just allow a currency to get too big and allow it to go unregulated. They come in, they regulate it. And I personally would not be wanting to hold shares of Bitcoin when that day happens, because I think it’s going to be a bad day.

Mike (09:19):

So I’d say to you and anybody else who asks about Bitcoin, I’d say, “Listen. Enter at your own risk. There’s a lot of volatility. I don’t think you want to be holding onto it just indefinitely. You need to have a mindset that I know when I want to get in, I know when I want to get out, and I know there’s a lot of risk associated with it.” So it’s almost like playing the lottery to me. Very risky, chances of doing extremely well.

Mike (09:44):

I have no idea, Kristen. But we forecast things that are predictable. We forecast things that we can do analysis on. We forecast things that are likely to do well for our clients. And so we have actively managed portfolios, utilizing math and science and statistics. If the probability is things are going to do well, we’re going to be more aggressively invested. If the probability is things are going to do poorly, we’re going to get a lot more conservatively invested. Our clients are typically retired, like I said, or close to it. So they’re not trying to swing for the fence at this point. They just want a stable, average rate of return they can rely on. They want the highest rate of return they can get. They’re just not willing to take a lot of risk.

Kristen (10:21):

What I’m hearing is that if you’re over 50 and you have a 401K, don’t get distracted by these shiny, catchy headlines. Stay focused. That doesn’t mean hang in there. That means have a true financial plan that accounts for the what ifs in life and also does pay attention to things like this, but not focus on them. Connect anytime at GuardingYourNestEgg.com.

Kristen (10:43):

Life has become a little more complicated and expensive since the ’50s and ’60s.

Mike (10:55):

Yeah. (Singing). And commercials have changed a lot.

Kristen (10:56):

A lot. I miss that type of advertising. It was very personal.

Mike (11:02):

We don’t have … I don’t know what that would be. I want to say a quartet or something. But you just don’t see that anymore.

Kristen (11:04):

You don’t. You also don’t see gas prices at a reasonable rate anymore, too. This is where I’m going on this whole inflation thing, because the price of a gallon of regular unleaded has climbed to a national average, last I looked, of two dollars and 58 cents. Again, it’s different in specific locations. That’s a national average.

Mike (11:23):

True. Yeah.

Kristen (11:24):

And the folks at Gas Buddy say that in the next couple of weeks, the average could reach two dollars and 65 cents to two dollars and 75 cents. So my question [crosstalk 00:11:34].

Mike (11:34):

Thank you, Joe Biden. I should say President Joe Biden. Yeah.

Kristen (11:36):

This is what I was going to say. Is this an example of inflation that you talk about, or is there more to it? And it sounds like there’s more to it.

Mike (11:43):

Well, I think inflation is going to be an issue, but this is really too short of a term. I think this is in reaction to things like the Keystone Pipeline and reaction to the current administration’s policy when it comes to fuel and the whole green energy thing. So if you do the math, it’s a knee jerk reaction to some of the changes that are happening. It’s a little bit early. Typically, we see fuel prices peak in the summer because people are doing more traveling.

Kristen (12:09):

Yeah.

Mike (12:09):

But here they are peaking a little earlier, I think, for those reasons. And if these restrictions or shutdowns, when it comes to pipelines and stuff, if it remains, I don’t think that 2.75 is really too far away. You get to the summer. Kristen, it wasn’t that long ago, gas prices were, I don’t know if you remember this, but [crosstalk 00:12:27] about four dollars a gallon.

Kristen (12:29):

Yeah. Yeah.

Mike (12:29):

That’s within the past, I think, six years. I don’t remember exactly when that was. I just remember … What I remember was filling up the boat, and that was expensive.

Kristen (12:37):

Oh boy, do you burn up gas in a boat.

Mike (12:39):

Right. Yeah.

Kristen (12:39):

Yes.

Mike (12:40):

So-

Kristen (12:41):

Which, by the way, can we address one thing on boat etiquette? If someone invites you out on the boat, you throw in on gas. Why are people forgetting that? Because you’re burning up a lot, right?

Mike (12:48):

It’s weird. Yeah. Yeah. I’ve had that happen.

Kristen (12:50):

But anyway.

Mike (12:51):

And I think most people realize this, but if your friend has a boat and they invite you out on it, you cover gas, they cover the boat.

Kristen (12:58):

Exactly.

Mike (12:58):

That’s what it is.

Kristen (12:59):

Exactly.

Mike (12:59):

Yeah.

Kristen (12:59):

So anyway, just a little PSA. If you get invited out on the boat, at least throw in on it, if not take care of it. Anyway, you noticed it with gas prices in the boat is when this hit home for you.

Mike (13:08):

You’ve got all this stuff. And so … But certainly, I think inflation is more of a long-term conversation. And obviously, things cost more. We were talking about in 1954, a $2,900 T-Bird. If you could buy a T-Bird, which we pointed out you can, it wouldn’t be $2,900 anymore.

Mike (13:23):

So when it comes to planning, Kristen, this is, I think, one of the most important things when it comes to financial planning right now that a lot of times gets overlooked in the process. I think individuals that are investing are very aware of inflation or they’re certainly aware of taxes. I think they’re a little more concerned about it right now with all the spending. I’m getting a lot of questions about the gold commercials we see on TV and allocating to gold, because theoretically it’s an inflation hedge.

Mike (13:47):

But short-term, listen, I’m thinking about things costing more. Fuel is going to affect all those RV sales that we talked about. That’s a big deal. That fuel is going to cost more. So just make sure your portfolio is inflation adjusted. Fuel isn’t likely to cost less in the future. It’s probably going to cost more, no matter what happens. The things that you want to buy in retirement, take it from something as simple as not just a gallon of gas, but a gallon of milk or a home. Home prices right now are crazy expensive. Try to buy a home right now.

Mike (14:19):

I was having a conversation with one of our clients Jay. He’s building a house up in Minnesota right now. And he was lucky to lock in his deal when he did, because a neighbor down the street is now building a house and just the lumber costs alone has doubled for that neighbor. And that neighbor signed the contract to build the house six months later.

Kristen (14:37):

Oh, wow.

Mike (14:37):

I said, “Jay, did you get the price locked in?” He said, “Yeah. Thank goodness.” I said, “Well, I guess good for you. You’ve got instant equity in your house right out of the gate.”

Mike (14:44):

But all of these things are going to impact us all moving forward. And it just has to be a part of the overall financial plan. So understand how much money you need to be successful in retirement. Success to us, like I say all the time, just means maintaining your current standard of living, adjusted for inflation and taxes moving forward, that inflation component being very important, because if you aren’t getting more and more income every year out of your portfolio and your portfolio won’t support that income the way it’s invested, you’re going to run into problems further down the road.

Mike Lester

Mike Lester

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Remembering Rush & How Market Mania and Gas Prices Impact You
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