The Copper Indicator & Your Retirement Money

by Mike Lester

Aug 1, 2022

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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):

The first half of the year has been the worst one for the S&P 500 in more than 50 years.

Mike Lester (00:36):

That’s a big number, 50 years. Yeah.

Kristen (00:38):

Down more than 20% for the year so far. All three major indexes, the Dow, NASDAQ, and S&P 500 ended June and the quarter in red. Do you think this sell off is over? I mean, you are a fee-only fiduciary financial advisor. This is what you watch all day, every day. What do you think?

Mike Lester (00:59):

I mean, Kristen, I’ve been doing this for 20 plus years now. I’m 48 now and I’m planning on doing this for a long time, but I remember if you look at that 20 plus year timeframe, probably the toughest time that we saw for clients would’ve been 2008, and everything’s about 2008 and the market crash and everything that happened. And we all know the reasons why, but the bottom line is I don’t know that this is going to be another 2008, but obviously markets are down over 20%. That’s a big number. And again, worst start in 50 years, meaning 2008 wasn’t even as bad as this first six months has been.

Mike Lester (01:36):

And what I’m getting concerned about is I’m starting to see or hear advisors, or it doesn’t matter if it’s on TV, or they’re talking about, “Okay, this is a buying opportunity.” So markets are off 20%. Maybe this is, I actually heard bottom. Somebody said, “Hey, this is probably the bottom. Let’s start buying in.” I don’t think so. It doesn’t feel that way. It doesn’t look that way. These people not traveling numbers and people not spending money numbers, that hasn’t worked into the economy yet. Right? They haven’t been reported, and so the market hasn’t had a chance to react. You and I are observing it on our travels over holiday weekend, but it hasn’t been reported.

Mike Lester (02:15):

Now coming up here real soon, we’re going to get numbers on the second quarter. So what was GDP for the second quarter? And every time somebody says, “Well, we may get a recession or the probability of a recession is higher,” but they keep pointing to 2023. Kristen, I think we’re there. I think we’re seeing it. All I have to do is go travel and I can see it just in how people are reacting to the cost of goods and services and things just slowing down. So I would be shocked if we aren’t in a recession and if the second quarter wasn’t another slowdown in GDP, which is technically a recession.

Mike Lester (02:52):

If I’m an investor right now and if I have been hanging in there right now, again, with our clients, Kristen, on the retirement accounts that we manage, we can move money in and out of positions on their account on something like an IRA or a Roth account, because there’s no tax consequence to that, right? So we can move in and out as often as we like. There’s no cost to the trades. And we went ahead and moved our clients that are in IRAs and Roth accounts, out of the market back in March, just because we felt the probability of success in the market, we would be taking too much risk to try to make money for our clients. So we went ahead and got on the sidelines.

Mike Lester (03:27):

Now I know a lot of our listeners, maybe they didn’t do that for themselves or maybe their advisor didn’t do it for them, but I don’t think we’ve seen the bottom, because going back to when these numbers start to hit or if we are in fact in a recession, which I believe that we are, when it becomes technically a recession and they report it, the market, I don’t think, is going to react very well to that. Your portfolio isn’t likely to react very well to that. So, yeah, we’re 20 plus percent down at this point in time. But again, in the past 20 years I’ve been doing this, I’ve seen markets down over 50% in the 2008 market. So I think there’s potentially another 20 or 30% downside from here. Do I know for a fact that’s going to happen? Absolutely not.

Kristen (04:10):

Well, a White House spokesperson recently told Fox Business that the nation’s “historic labor market recovery” with over eight million jobs added could serve as a possible safeguard against any concerns about the impact of hiring freezes. However, in recent weeks, major tech companies have announced hiring freezes. Now, they haven’t actually called them that as aggressively, but it is what it is. And some analysts, such as [inaudible 00:04:42] chief market strategist, tells Fox Business that we may see more Americans take on part-time work in addition to their full-time jobs due to economic worry.

Speaker 4 (04:53):

The guy that I did some business with on my website had a full-time job in a tech company, but he was doing this on the side because he had three kids. He had a family to support. He lives in California. Taxes are high. Cost of living is high, and he was using it as an opportunity to bank some extra cash. And so it makes perfect sense. That also makes perfect sense that if people are going to do a side hustle, they’re doing it maybe in preparation of thinking their current job may not be around next year.

Kristen (05:19):

Just a short time ago, it seemed that employees, not the employers, held most of the power in the job market. But are you starting to see a shift, too?

Mike Lester (05:30):

Well, I think we really are. I mean, certainly not at Talon when it comes to employees and stuff, but I think we’re seeing it in markets. And we were talking about how things just really seem to be slowing down. Your holiday weekend in South Carolina, some of my travel lately. Listen, if it’s slowing down at restaurants, at movies, at, again, he said tech companies, I think that, yeah, we were in a situation where the employee held the upper hand and a lot of people just weren’t working and we had this labor market that needed more people and people weren’t going back to work. I think those people are going to be very surprised that the labor market, I don’t think, is nearly as strong as it was maybe six months ago. I think it’s going to continue to get worse.

Mike Lester (06:21):

And just going back to investments and how we should manage money, as we start to notice these things, what that most likely means is if companies are pulling back and they’re hiring less, that probably means that their sales are down. And if their sales are down, that means their profits are probably down. And if their profits are probably down, their stock price is probably going down. And this isn’t just going to be the technology sector, Kristen. I think we’re going to see it throughout.

Mike Lester (06:48):

And we’ve finally gotten to a point, I believe, where we just reached critical mass on people’s willingness to pay prices to travel, pay prices to go out, pay prices for groceries. This whole thing that we suspected would eventually happen, which is why we pulled our clients’ retirement accounts out of the market back in March, is we suspected that this wasn’t sustainable. This can’t continue. Markets are over bought. Stock market was too high. The housing market’s still too high. We didn’t even talk about that, Kristen, but look at real estate now. Go to, I don’t know, whatever your favorite, if you have. I do this, because I think it’s fun. I look at real estate and then I-

Kristen (07:29):

Zillow or something like that.

Mike Lester (07:30):

On Zillow or something. Go to Zillow. Look at how many of the people that had their house listed at a certain price are now reducing it. That [inaudible 00:07:38]-

Kristen (07:37):

I’ve noticed that.

Mike Lester (07:38):

You’re noticing. So all right, I’m going to bring my sales price down. So all of this is slowing down. I daresay it seems like it’s coming to a screeching halt. So ask yourself. You’re looking at volatility in the market. We’re looking at things haven’t been too good, but these numbers just haven’t been reported yet. So we start getting labor numbers that are bad, right? We start getting more employers laying off. We start getting certainly prices are still high. If we find out that we are in a recession, as you know, I believe that we are right now, but second quarter GDP numbers here come out shortly, and I think we’ll find that the GDP went down again for two consecutive quarters, which is the definition of a recession.

Mike Lester (08:24):

So if we start reporting recession, start reporting people are getting laid off or not hired or hiring freezes, start reporting that consumer sentiment, which has already been down, consumer confidence is going down, all of these things lead to a stock market that isn’t likely to do well. I mean, where are you at on your investments right now? Are you working with somebody who’s saying, “Hey, don’t worry. Hang in there”? Well, I mean, I guess the great thing about telling your clients to hang in there, Kristen, is eventually you’ll be right. Eventually the market will bottom.

Kristen (08:58):

Eventually the market will come back, but is it going to be at the wrong time for you, right?

Mike Lester (09:01):

Yeah. I mean, eventually it comes back. I mean, that’s why they’re like, “Well, Hey.” I can tell, these advisors who tell their clients to hang in there, they know eventually the market will come back. But the problem is if you’re retired or close to it, you’re not 20 or 30 something years old, you’re late fifties, early 60s, maybe even 70s, that type of volatility, you don’t get the opportunity to recover from that. And hang in there doesn’t really work because you’re trying to pull money out of your account every single month to supplement your income. So it’s not as if you just hang in there and eventually it comes back. It’s as if, well, your portfolio’s going down and then maybe you’re paying fees for management on the account, and then you’re pulling money out of the account. Hang in there doesn’t work in that situation.

Mike Lester (09:45):

So Kristen, we just want to encourage everybody to, I know it’s tough right now, but take an active role in taking a look at your statement. Look at how you’re invested. If you don’t understand your probability of success moving forward, give us a call. We’ll sit down with you, do an analysis, show you what your investments are likely to do moving forward, and then help you understand how much money can you pull out of your account in retirement and not run out of money? How much risks should you be taking in retirement? How can you get efficient in your portfolio?

Mike Lester (10:15):

Efficiency to us just means how do we invest our money so that our return is as high as it can possibly be given the amount of risk we’re willing to take, right? So there’s nothing wrong with taking risk in your portfolio, but you have to be compensated through returns for the amount of risk that you’re taking. And I think there are a lot of people out there right now that are taking a lot of risk in their portfolios, their 401ks or their IRAs or their whatever managed accounts they might have with an advisor. They’re taking a lot of risk and they’re losing money. They’re not getting return. So you have to make sure that’s balanced, and we just want to encourage people not to just hang in there.

Kristen (10:51):

As of early July, the latest consumer confidence survey showed short-term outlook on the US economy reached the lowest point in about 10 years. A separate survey of consumer sentiment by the conference board fell to its lowest point on record. And according to the Wall Street Journal, Federal Reserve Chairman Jerome Powell said recently that he’s more concerned about stopping high inflation than about the possibility of raising interest rates too high and pushing the economy into a recession. In fact, he acknowledged that their recent turn towards lifting interest rates at the most aggressive pace since the 1980s raises the chances of an economic downturn. So he’s acknowledging what is possible here finally. Is the Fed’s mindset in the right place, or are they really just in a lose/lose situation?

Mike Lester (11:45):

First of all, Jerome Powell’s job is horrific. I mean, I would not want that job ever. And I don’t even know what it pays, but it doesn’t pay enough to have to do what he’s doing. Personally, I think he’s not in a good situation. And the way government and the way politics and the way everything is playing into this, I personally think that they’ve lost all control over what this economy is actually going to do. So to sit around and think that, well, if they raise interest rates or don’t raise interest rates or is this going to have some sort of an impact? I think we’re already moving in a direction that they really can’t. This idea of a soft landing in this economy, which is what they’re looking to do, personally I think they’ve lost the ability to soften that landing.

Mike Lester (12:37):

Now, could they screw it up even more from the standpoint? Yeah, I think they probably could make it significantly worse than if they just left it alone from this point on, but I don’t think it’s going to be a soft landing, and we’re starting to see it. And what I mean is just things are slowing down at a pace that is, I think, way faster than they believed it would. And then I think he’s under pressure to look like he’s doing something about inflation, and to look like you’re doing something about inflation means you go out and you say, “Well, hey, I’m going to raise the Fed rate to slow this economy down,” but the economy is already slowing down. So I think I’d be really worried if, I know they’re saying they’re going to do another rate hike, but if they actually do it, I think that would be pretty scary, because things are already really, really slowing down, as we’ve already talked about on this program.

Mike Lester (13:30):

And I just want to point something out that we haven’t really talked about, Kristen, but for our listeners who maybe are interested in nerding out about stuff the way that I do, we haven’t talked on our program about copper, the price of copper and how copper works. So we all know what copper is, but we don’t always take the time to think about how copper is an indicator of what an economy is likely to do or what the world economy is likely to do.

Kristen (13:54):

Can I ask a dumb question?

Mike Lester (13:56):


Kristen (13:56):

Does this equate in any way to people stealing copper?

Mike Lester (14:01):

It could. So here’s the thing. When people are stealing copper, it’s probably because economies are really good because the price of copper is really high. So they’re stealing it, so then they can go sell it. Here’s the problem. They’re less likely to steal copper now because the price of copper is tanking.

Kristen (14:18):

I see.

Mike Lester (14:18):

And when the price of copper is tanking, again, we hear about people investing in gold and silver. Copper is something that’s usually manufacturing around the world. And when the demand for copper starts going down, it’s basically companies around the world telling you that demand for their product is going down, and it’s a leading indicator of problems.

Kristen (14:41):

Oh, gosh.

Mike Lester (14:41):

So as we go through all of these things and the Fed and whether they raise rates or not. And I mean, I just think about all of these indicators that things are likely to get bad. It’s a lot of data that isn’t in the market. And I know we have a lot of people that have been struggling in this market, maybe that currently aren’t working with us and they’re just looking for a way to say, “Hey listen, how far could it go down? Maybe I’m being told to hang in there. Maybe I’m sitting in a 401k with limited investment options.” If you’re age 60 or older or if you’re currently retired and you’d just like to have a conversation about what the options are, we’re available. It just takes a phone call.

Speaker 1 (15:19):

If you would like to have a comprehensive financial plan and an analysis of your current portfolio, go ahead and visit our website at and we can do that for you complimentary.

Speaker 1 (15:35):

Thanks so much for joining us on today’s show. Be sure to subscribe to our podcast. Visit our website at 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 (15:52):

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.


Mike Lester

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The Copper Indicator & Your Retirement Money