This is Your Retirement on Inflation & Volatility

by Mike Lester

Jan 10, 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):

This story reminds me of my childhood as an ’80s kid and that memorable public service announcement that we heard back in the day.

Speaker 3 (00:39):

This is your brain. This is drugs. This is your brain on drugs. Any questions?

Kristen (00:51):

Any questions? Man, we could not escape those PSAs, and now apparently…

Mike Lester (00:57):

I’m not sure that worked. Did that scare? It didn’t scare me.

Kristen (00:59):

It did worry me. That’s all I know.

Mike Lester (01:01):

You thought your brain would get fried on drugs.

Kristen (01:03):

Yes. The good news is it didn’t work on you, not because that’s what you ended up doing, but you didn’t do it just because it was common sense.

Mike Lester (01:10):

Well, it just wasn’t in my, but yeah. I was like, “Well, I wasn’t going to do it anyway.”

Kristen (01:15):

You didn’t need a fried egg.

Mike Lester (01:16):

[crosstalk 00:01:16] I think if I was going to do that, that seems-

Kristen (01:16):

To change your mind.

Mike Lester (01:17):

Weird. I guess if, well, there’s a good point. I guess if I had been doing drugs at the time…

Kristen (01:22):


Mike Lester (01:22):

And then I saw that. Which, what does that say about you? That scared you.

Kristen (01:25):

I never did drugs.

Mike Lester (01:26):

But if I had been doing drugs… okay. Whatever.

Kristen (01:28):

I’m just saying the commercial did scare me.

Mike Lester (01:30):

Sure. Yeah. It didn’t scare me because I wasn’t doing drugs anyway. I’m like, eh, go play baseball.

Kristen (01:33):

Well, this next part will scare you. Market Watch says this is your brain on inflation. Talking about the real psychological impact that rising prices over an extended period of time can have on our spending mindset. Do you think we’re starting to see that brain on inflation effect?

Mike Lester (01:54):

I think we got to be careful and it’s starting to affect the way people look. I mean, all you have to do is go to the gas pump, run to the grocery store or want to get some thing fixed around your house. It’s all costing more. If you’re still working right now and let’s say that retirement’s pretty far down the road. It stings a little bit, but it doesn’t concern you as much because you always feel like, well, no matter what it costs me, I can go back to work and I’ll make more money and eventually you’ll pay it off. And that’s what loans are all about. That’s what mortgages are about. That’s what car payments are about. Right? Life pre-retirement is all a function of, well, I’ll get up. I’ll go to work. I’ll live my life. I’ll find a way to pay this off. And then people make this transition into retirement and it’s well, I’m not going to work.

Mike Lester (02:39):

So there’s not going to be any income, right? No earned income. Meaning you go to work and you earn it. It all has to be investment income, Social Security income, pension income… pension income, Social Security income are fixed incomes. They don’t change. There might be a little bit of an adjustment for inflation. Investment income is a huge concern because that’s based on start market volatility or however you’re invested. So if you are working, I think this inflation is stinging a little bit, but you’re hoping it eventually goes away. And worst case scenario, God forbid you pick up an extra job. If you’re retired, it hurts and you’re worried about it. And you’re starting to ask yourself, did I work this into my financial plan or can my financial plan survive it? How long is inflation going to last? I think the truth is we don’t know how long it’s going to last.

Mike Lester (03:24):

I think under the current administration, they don’t have a good plan for fixing it.

Kristen (03:29):


Mike Lester (03:30):

This is several weeks back, Kristen, Biden getting out and going well, “Hey, there’s a field problem. So I’m going to release this many barrels.” He released two to three days worth of… zero impact. Right? And when he did it, we all knew that it wouldn’t have an effect and here we’ve seen it. Didn’t have an effect. Meanwhile, they won’t approve pipelines and things like that. So we can’t be self sufficient. So that’s a political thing. Let’s come back to our personal economy and how we deal with all of this. Yeah. I mean, inflation is real. I think that it’s probably… if things go the way… that for now, obviously I’m putting myself out there a little bit, because I could be wrong. But right now I don’t think 2022 is going to go that well.

Mike Lester (04:14):

And if 2022 doesn’t go very well. The market’s over bought the economy has grown too fast. There’s this thing that’s called a recession, Kristen. It’s when… it’s the opposite of an expansion. We’ve had this expansionary period in the economy for a very long time, basically for the most part since after the last crash. So starting in 2009 through current. It wouldn’t be crazy to assume or to imagine that we’re going to get a pullback. So right now, looking at the economy, looking at people not going back to work, looking at all the job openings, looking at all the spending, looking at inflation, looking at taxes, looking at Joe Biden’s plans for 2022, all of these things seem to be things that would slow the economy down, right? And when the economy slows and if it slows to a certain degree, it’s referred to as a recession, right?

Mike Lester (05:07):

And that’s a big, scary word, but it happens from time to time. And it seems to me that we might be headed for a recession in 2022.

Kristen (05:16):


Mike Lester (05:16):

Because of everything that’s going on. And the reason I would say that is just because we’ve had all of this expansion and we had really very little contraction. Right now, again, I keep saying this could change because it could. I’m very careful. I don’t see a catalyst for this to keep going. All I’m seeing are headwinds to this to continue to move forward. So if we don’t get a catalyst to keep growing what eventually we get our headwinds, which we already have. And then we get this contraction which could wind up in a recession. And in that scenario, everybody has to kind of cut back. We spend less. We just prepare. And my question for most people listening, if they haven’t already done it, is probably in your 401k, probably in your TSP, probably in your 403-B, your retirement account, maybe with your current advisor. Right now, at least for the past few years, hopefully past 10 years, I hope you’ve had a plan for growth in your portfolio because that’s where you should have been.

Mike Lester (06:20):

Because with all the government spending, with all the expansion, with all the growth coming out 2009, it would’ve been prudent. And it would’ve been smart to bet on markets going higher and the economy doing better. But right now I’m scared of what’s moving forward. So what’s your plan if that doesn’t continue, because I don’t think it’s crazy to start thinking about, hey listen, I need a plan to protect my money if things don’t go well in 2022, here we are in December. And what I’m doing week after week and what our advisors are doing week after week is sitting down with individuals that are concerned. They’re not quite sure what their portfolio is likely to do moving forward, given their current investments. So we can do an analysis of that. Sit down with you and help you. We can put together a financial plan for you.

Mike Lester (07:09):

If you’re retired or very close to retirement, let’s put together a written plan that says all right, I’m prepared if we get a pullback in the economy next year. I also have a plan if we don’t, but understand what’s likely to happen moving forward and get that written financial plan. And Kristen, that’s why we offer it week after week. I’ve found that most of the people that we talk to aren’t quite as tactical as we are.

Kristen (07:31):


Mike Lester (07:32):

They aren’t necessarily interested in actively managing their portfolio on a day-to-day, week-to-week, month-to-month basis. But they do like to see things in writing because it means something. It’s tangible.

Kristen (07:43):

Crazier than the dot com bubble. That’s how Warren Buffet’s 97 year old right hand man. Charlie Munger, describes the current market. He also did an interview with a financial conference in Australia, slamming cryptocurrency, echoing what he told Berkshire Hathaway shareholders earlier this year.

Charlie Munger (08:02):

Of course, I hate the Bitcoin success and I don’t welcome a currency that’s so useful and the kidnappers and extortionists and so forth that nor do I like just shuffling out a few extra billions and billions and billions of dollar to somebody who just invented a new financial product out of thin air.

Kristen (08:25):

Do you think he’s out of touch with younger investors or is there truly a lot of risk right now with crypto and other high flying stocks?

Mike Lester (08:33):

No, I do think there’s a lot of risk and yes, he’s well into his nineties and he may think a little bit differently about the world, but what about experience?

Kristen (08:42):


Mike Lester (08:42):

How is it that all the young people know more than somebody who’s been through 90 plus years of life. And most of that with markets and economies. Crypto’s very, very new. The concept’s very, very new. Certainly people that want to see the price go up are very, very confident in it. But I agree. At some point it has to come back to fundamentals. What are the valuations? Why is it valued so high? You and I talk about crypto on the program. I get calls about crypto or have conversations about crypto at the office. You know, Mike, what do you think? Kind of have shrug my shoulders and go, “I think it’s something that’s way overvalued.”

Mike Lester (09:22):

There’s really no way to place a value on it. I’m not sure. And then they go, “Oh, well, yeah, it’s just based on demand.” What is the demand based on though? What’s the underlying value? I agree. I think it’s very, very strange. Do I think crypto is eventually going to be a part of currency? Yeah. We went from… I’m not going to go all the way back, but let’s just move forward to when we had coins. That was currency. Then we eventually got into dollar bills. That was currency. Paper, right? Then I’m sure it was pretty crazy that you could actually write a check and that was going to be good. And then it got a little crazier. You could actually swipe a card and then you’d have credit. You’d eventually pay that off. And so it makes sense.

Kristen (10:03):

It’s an evolution.

Mike Lester (10:05):

It’s an evolution. And the currency thing is I can get how that’s the next step in the evolution. The difference between everything else is the crypto isn’t based on what’s in your account or your credit. It’s just based on this demand. It’s worth this. And so the volatility is huge. And I personally wouldn’t want to be sitting there when governments around the world get together and go, “You know what? This crypto thing, we should probably start converting over to it.” Oh, by the way, this thing that somebody started, what’s that going to be worth when go governments get rolling? So we’ve talked about this before in the program. I’d say be very careful with crypto. I think it’s a momentum trade. It’s all over the place. There is some technology there that’s valuable, blockchain. There might be something to that. Be careful with anything Kristen. We’re not talking to clients about crypto on a day-to-day basis, but we are talking to them about valuations in markets.

Kristen (10:59):


Mike Lester (10:59):

Stock markets overvalued. I think crypto is certainly overvalued, but the market’s overvalued by depending on what day you’re looking at it as much as 30 plus percent. That should be a bigger concern, not crypto to our clients. If markets are overvalued, they’re more likely to go down. So you have to ask yourself, where are you when it comes to markets? what are you looking to accomplish? And what are you going to do about it? Or what is your advisor going to do about the fact that markets are overvalued? What about 2022? Do you have a plan for that? I think that’s a concern. So what we’re doing for our clients and certainly our listeners when they call in is we’re sitting down taking a look at current, certainly political events, current economic events. Again, we’re not looking a lot at crypto. It’s not a real big part of our financial planning process, but we are concerned about interest rates next year.

Mike Lester (11:51):

We are concerned about taxes next year. We are concerned about inflation next year. And we are concerned about markets. Right now, I understand why markets are going up. That’s a very tangible thing to me. People are spending money. Next year, I can’t see a catalyst for that to continue. I can see this economy sort of plateauing, even slowing down. I believe, personally right now, we haven’t seen the numbers yet, but I believe based on people that I’m talking to that it’s slowing down in the fourth quarter. Those numbers are going to be reported for most companies in the first quarter of next year.

Mike Lester (12:25):

What’s your plan for that? Kristen, we’re in the holiday season. I get it. Makes me happy, makes my kids happy. But I do think we need to take the time to take a look at our portfolio and find out what’s likely to happen if next quarter we start getting bad earnings. Because if we do, you want to be prepared and you want to have a plan for that.

Kristen (12:45):

Connect anytime at A friend of mine unfortunately lost his mom not too long ago. She was in her late eighties, lived a wonderful life, but he’s now getting concerned that his dad could be making some financial moves strictly out of fear because of what he’s going through emotionally. As a couple, they had over about a million dollar set aside. Did really well for themselves. And for some reason he’s really focused, the dad, on an annuity that the bank is offering him. What would you as a fiduciary financial advisor and other advisors on the team at Talent Wealth Management, what would you tell his dad if you guys sat down with him?

Mike Lester (13:27):

Well, Kristen, anytime we hear the word annuity makes us a little bit nervous. Sometimes people come to the office and go, “Well, Mike, I know you hate annuities,” and I’m like, “No, that’s another guy that does those advertisements,” but I’m just not a necessarily a fan of how they’re marketed. And when I heard you talk about this and you said, “Hey, listen, my friend’s father, situation, bank, he’s 80, annuity.” In my experience annuities are typically marketed through scare tactics in fear. It’s usually how they promote them. And there’s a lot of things that people are afraid of right now. They’re in some cases afraid of current government, afraid of taxes, afraid of inflation, afraid of stock market volatility, just afraid of a lot of different things. One thing that an annuity will do is will provide some sort of a guarantee, so that might be a guaranteed rate of return. It might be a guaranteed… you can participate in the stock market but can’t lose. It might be a guaranteed income stream for the rest of your life. And so if you’re looking at being afraid of things like that, then annuity might be attractive.

Kristen (14:34):

The word guarantee is very attractive.

Mike Lester (14:34):

The word guarantee is very attractive. And so if you look his age, he’s going, “Well, hey.” Now Kristen, it’s our job as fiduciaries not to try to push somebody somewhere. And I would argue that anybody that tries to push people into annuities, there’s a pretty good chance they’re maintaining their fiduciary standard. Because it’s, to me personally, it’s very hard to make an annuity work in a situation unless somebody’s extremely, extremely conservative or maybe they had an existing annuity that was terrible and then we had to find a way to put him in a better situation. And I remember five years ago, Steve came in my office, one of our clients and he said, “Hey, listen… ” he wasn’t a client yet, “but I wanted to compare you to the other advisor. They want me to go into this annuity account.” He’s telling me that it’s stock market participation, no risk of loss and it’s this great thing.

Mike Lester (15:19):

And I told him at the time I said, “Steve, yes, there’s stock market participation, no risk of loss, but they’re going to cap your participation if you do that.” It’s also a 10 year contract and you have minimal, I should say liquidity. And basically the way we got around that conversations is I said, “Listen, there may come a point in time where you’re more interested in an annuity account, but currently the way these annuities work, the way that we think markets are going to go, if you move into this annuity account, you’re going to miss out on the majority of gains in the stock market. You’re going to be locked into a 10 year contract.” Because the one he was looking at was a 10 year contract. “And by the way, these annuity accounts, most of them are based on when we talk about fixed or fixed index annuities. They’re based on the 10 year treasury and 10 year treasuries are extremely low right now. So you’d be locking in at or close to an all time low on what you’re going to earn. So why do it? Why not wait?” Well, it turned out to be great because Marcus did very well over that time period, the last five years. He wasn’t locked in an annuity contract and we did well. Now, be careful when it comes to these annuities. If you have any questions we can review them for you.

Speaker 1 (16:27):

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 (16:43):

Thanks so much for joining us on today’s show. Be sure to subscribe to our podcast, visit our website 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 (17:00):

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 invest.


Mike Lester

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This is Your Retirement on Inflation & Volatility