Episode Transcript
[00:00:00] Speaker A: Hello and welcome, everyone, to the Annuity Straight Talk podcast, episode number 149. We're racking them up, and I'm gonna have to start organizing them a little bit better because I don't expect anybody new coming in to watch 149 and get the gist. But today I'm taking a break from writing, bringing back a fan favorite guy who hasn't been here since I was in Colorado, which was, I don't know, three, four months ago. Anyway, John in Southern California. How you doing, buddy?
[00:00:26] Speaker B: Brian, it's good to be back. I appreciate you taking the time and inviting me back. It's great to be here and met a lot of your listeners over the last year, and I just appreciate that you have me on.
[00:00:37] Speaker A: Yeah. And just a quick reminder, thanks for being here. Valuable information and good perspective that you add. And that's why I like to have you here and everybody out there. John's not doing this to advertise and to get new clients. If you want to talk to him, you can state your case to me. Do not look him up, do not hunt him down. He's a busy guy, he's a family man, and he's doing this as a favor to me, and I'm grateful. So I don't want him to get the heat from a lot of people searching. I know a couple people have gone around me and said, oh, I'm going to look this guy up, but don't just come on, respect his time and ask me first, and we'll get you there if it makes sense. So. All right.
[00:01:10] Speaker B: Yeah. Brian always appreciated. In fact, I wanted to say hello to Dave g. I know he's a regular listener to the podcast. I just had a chance to talk to him. A wonderful family down in the great state of Texas.
[00:01:24] Speaker A: Yeah. So Dave g. Is a good guy, and we're gonna. Did he tell you that we're all gonna get new camper trailers and meet on the road one day?
[00:01:32] Speaker B: No, I will have to put that on my bucket list for sure.
[00:01:36] Speaker A: Kind of the initial plan, but I mean, you don't have to, but I know it's something I like. It's something he and his wife like, so.
[00:01:42] Speaker B: Yeah.
[00:01:43] Speaker A: Yeah. So. But that is fun, getting it, getting to know people and kind of figuring out what they want to do. And we're here for the numbers side of it, just to make sure it's possible. So I deal with the safe side of a stuff John's getting. I'm going to say you're really good risk manager, which I think is the main reason you hire an investment manager. But yeah, you're shooting for the top line, doing the inflation protection, and getting people really profitable in retirement. So that's the good mix here.
[00:02:11] Speaker B: Yeah, absolutely. I couldn't help but notice the beautiful background that you have for this episode. So I know it's a summertime in Montana is a beautiful time. I had a chance to go up there a couple years ago, and I was in the exact same spot, so.
[00:02:26] Speaker A: Oh, yeah, you got to. I sat up in my cabin and you got to record down here, right?
[00:02:31] Speaker B: That's right.
[00:02:32] Speaker A: That's right. I set you up for the good spot. I thought it was kind of funny. We could sit next to each other, but it was kind of interesting. We're in the same spot where we're doing in different places, which is okay, so let's do. Yeah, we tried to do this a few weeks ago and we can talk a little bit. There was a big market meltdown, what is about three weeks ago where. Yeah, like six or 7 trillion in market value was erased. And we had some technical difficulties, but at the time you weren't concerned long run. And so I think it was okay that because we're not trying to scare anyone, we're just trying to give you good information so you can make the best decisions. If a market adjustment like that affects you, you're not appropriately positioned in the all areas. So that's kind of one thing we want to make sure you don't have to worry about. So kind of speak to like, start with what happened a few weeks ago and then what you thought when you were absolutely right, because here we are, we're pushing highs again. Okay, sure.
[00:03:28] Speaker B: So a couple weeks ago, we started getting mumblings out of Japan. And basically what happened is everyone's probably heard the news of the Japanese carry trade unwinding. And that's typically where there's an arbitrage opportunity. Wherever investors are borrowing at a lower rate and investing in more riskier assets, mainly us tech, us companies, to get a higher rate. So borrowing costs are significantly lower outside of the US. So they borrow in foreign denominations, they convert those to dollars. There's an advantageous position there. And then they invest in risk market risk assets, like, I'll just say us tech, the whole AI trade. And there were some rumblings about some rate changes in Japan, and that started to scare the cat. And we had a significant sell off in a very short period of time. And it was a three day.
I want to say it was a gosh, if I just look at the dip. I mean, it was a 7% sell off in three days. And we had kind of reminded me of COVID where we had those big gap downs, but it just was something of those things. We v shaped recovery. I talk a lot about the year to date, volume weighted, anchored VWAP, a volume weighted average price. What did we do? We broke that one day, traded back above it, became support, and we've just rocketed higher back to all time highs. The markets really kind of was yesterday. I mean, for the last couple weeks we've been kind of recovering. And then for the last five days, we've been really chopping sideways in anticipation of the, one of the largest companies and one of the hottest companies on Wall street. And that's ticker symbol NVDA. They reported last night. I think that was probably one of the most anticipated earnings reports that I've seen in 20 years. It was actually pretty good stocks off today, but markets are higher, looking for a breakout to the upside with potentially our 1st 25 quarter percent rate cut in September, maybe a half a percent rate cut or 50 basis points, hopefully in December. So that will drive more risk assets higher. And if we can get that, obviously that'll sustain us until we have another big anticipated event. That's the election coming up in November. And that could affect markets to the upside or the downside. Doesn't really matter who wins. I just think that the certainty of what the next administration is going to be over the next four years is going to really set the tone for the market.
[00:06:02] Speaker A: No, it usually does because the rules will change a little bit. The environment's going to be affected as well. And then, I mean, any other, any number of places in the economy, I've always said for years I don't, Wall street doesn't care who the president is. They just want to know what rules they're playing by.
[00:06:17] Speaker B: Right? Absolutely.
[00:06:19] Speaker A: And so people get worked up over it. It's a highly charged, emotional election. This is going to be really wild. I'm actually going to do an election podcast. Well, John, you know how I feel. Should I just let loose on it or what should I do?
[00:06:31] Speaker B: You ought to just, what you ought to do is just do a live stream that night and then maybe do a live stream in the morning to see how the market is affected. I would say that whatever the policy is for the next four years is what it's going to be. And like you said, wall Street's going to play by those rules. There's really no stopping the economic drivers of the United States and the innovation that we can create and the impact that we can have around the world. So let's, let's, let's hope for the best and let's hope that that continues to come to fruition.
[00:07:01] Speaker A: Okay? Yeah. Well, interesting. I guess when I'm feeling it, I'll record that podcast and tell everybody what I think. So every four years, maybe every two, if we got some really good congressional stuff doing. I got it in me once in a while. I've just been nervous about it. It's like I'm kind of a weirdo sitting up here in this nice, beautiful, quiet place, just watching the ridiculousness of the world continue on. And I try not to get too worked up about it.
[00:07:25] Speaker B: So anyway, no, I always tell people that. No, I always tell people there's really nothing you can do about it. And whatever flavor of your candidate, I always tell people they don't care about you.
[00:07:38] Speaker A: No, they don't.
Well, it's funny. It's like you go, I think it was when back in 2000, 820 twelve. It's like, oh, this is gonna be bad. I think that's when I really started to grow up and look at it. It's like, what's the difference? I mean, they're all going to spend too much money. They all have an ego. They all want to look good. They're all going to claim to solve all these problems anyway. We don't need to go into the Election podcast right now.
[00:08:02] Speaker B: So, yeah, let's stick to the markets.
[00:08:05] Speaker A: Like, this is something that everybody's really interested about is the interest rate cut. And I got a lot of calls in the last, what was it? Last week, Powell spoke in Jackson and basically confirmed a September rate cut. And a lot of people call me and say, oh, maybe I should get an annuity now if they're going to cut rates. And I want to put a banner on the website or on every video and saying, fed actions do not directly affect annuity rates. It's one rate that's overnight. Lending rate to banks will affect stuff like cds, mortgages, car loans, those kind of things. And the reason it makes such a big difference in the economy is because that's borrowing costs for major institutions, translates bond yields, but there's kind of a lagging effect on interest rates for treasuries bonds, which is more, in my opinion, kind of a supply and demand and a market function. You can correct me if I'm wrong, but talking about the Fed, and it's not something that the average person needs to really be concerned about or put a focus on either.
[00:09:06] Speaker B: No. Yeah, and a lot of people want to time rate cuts. I always look at this. Had you gone to Harvard Business School 20 years ago, and obviously it's a great institution, but they taught you that if you had an inverted yield curve, that it was always followed by a recession. Well, we've had an inverted yield curve for almost 18 months. We're nowhere near a recession. And so the playbook is, it's changed. The world has changed. And so I would say that the yield curve will normalize. I think short term rates will come down, which will bring your money market rates down. I know a lot of clients have been really enjoying sitting in a very non volatile asset class, like a money market fund yielding north of 5%. I know that they've loved the multi year guaranteed annuities that you offer, Brian, at five and 6%, locking in those nice rates. But I definitely think the normalization of rates, they have to be careful about it not to trigger an inflationary environment again, but if they can navigate it properly, you're going to have to see that you're going to get lower yield on your cash. You're going to have to take on a little bit more risk. Some people are comfortable with that. For those who are not, I always say, Brian, you've probably got the great products that can mitigate any risk for the downside.
[00:10:26] Speaker A: Well, and you've got. I mean, I guess if you talk about the inverted yield curve, a lot of people have been loved to be able to get the three year mygas, or even just the short term cash. And people saying, oh, I bought a nine month treasury at 5.6. It's like, okay, what do you do after nine months? And at some point, like, you want that five plus you're going to have to go longer in maturity or in term to get it, because, yeah, that's what's been funny to me, is like, everybody's enticed by that short timeframe, and it does work. And I understand the flexibility angle and kind of the emotional attachment to, hey, I don't want to be locked in forever. But historically, to get five, 6% or more on something guaranteed, you had to go out ten years. So, yeah, and if you say normalized interest rates, that's what that means, is you're going to have to take a longer term, which is good because you get a longer guarantee. It's not all bad. A five and a half percent, six month treasury was great. But then if you did that six months ago. You're coming back and you're getting, what, 3.375, 380 depending, right?
[00:11:28] Speaker B: Yeah. I've seen, I have a lot of clients that for now, whether they want to be in a money market or not, we might trade short term one to six month treasuries. Those have actually come off about 20 basis points, so the yields are starting to move down. When we do actually get that cut, low interest rates are good for risk assets. Let's just put it that way. So small caps, large caps, technology, where they're discounted cash flow models are really suited for lower rates. Those pencil out much better in terms of their long term valuations. That can really drive markets higher. God forbid we get any weakness in the economy. Or another fake revised job report with another. What a disaster that was. How can you go overstate a million plus or 800,000 plus jobs that didn't really exist? They've got to come up with some more accurate way to do that, just from a practical standpoint.
[00:12:25] Speaker A: Well, there's a lot of in that. Let's not talk about the real inflation rate. Right? Sure, sure. Well, they never admit it, but I believe that thing is doctored all the time.
[00:12:36] Speaker B: Oh, yeah. Well, I pay 450 a gallon. I was paid as high as seven a couple years ago. I don't know what you pay for diesel up there, but it's probably some more bucks.
[00:12:47] Speaker A: Actually, it's not bad.
[00:12:48] Speaker B: Yeah.
[00:12:49] Speaker A: And that, I find that acceptable.
[00:12:51] Speaker B: Okay.
[00:12:52] Speaker A: For $200, I can drive my new truck about 900 miles.
[00:12:56] Speaker B: Okay. It's not too bad.
What it'll really do is affect you when it's about $800 to fill up that tank.
[00:13:03] Speaker A: Well, so a couple years ago, I paid 650 or something like that.
[00:13:07] Speaker B: Wow.
[00:13:08] Speaker A: And that was the first time I looked. It was like, oh, it's a little high.
[00:13:12] Speaker B: Yeah. Yeah.
[00:13:13] Speaker A: But you guys deal with it all the time. So, anyway, so anything you want to, like, I mean, as we talk about this and just. It's good to just, I guess, I mean, air it out and we talk about interest rates, talk about the market. We got three or four minutes left, something like that. We don't make it too long. Take your time or anyone else's, just some thoughts and perspective of where you think the market's headed and anything that you can see, let's say, over the next short run, over the next two, three months, whenever we get you back here. And we'll try to. We try to do that when something's happening. Right? Sure, sure.
[00:13:45] Speaker B: Well, let me go ahead and just share a chart with you?
[00:13:48] Speaker A: Yeah, it'll be great.
[00:13:49] Speaker B: We'll just do the s and P 500, make it simple, see if I can get.
[00:13:55] Speaker A: I mean, do you feel. This is a good question because I know a lot of people, they want to chase those big stocks that are responsible for this run up in the market. And I feel like that's kind of a risky strategy because you're going to have, I mean, even Nvidia had a big drawdown, right? I mean, they were off.
[00:14:11] Speaker B: Yeah, absolutely.
[00:14:13] Speaker A: 25% or something like that, right?
[00:14:15] Speaker B: Yeah. Well, I mean. Well, let's just take a look at some of those things. So a lot of people do want to chase returns. I have a couple clients who are younger. They really wanted to get into a stock called SMCI. SMCI was a huge darling on the run up. People were getting in. They wanted to get in. They were getting in here against my advice. And they came out yesterday and said that they're actually going to, they're actually going to not file their, their ten q, which was big news. And the stock was down $100. We're back down to 453. So this is what's called a blow off top, a stage three decline. So a lot of people love to get in up here, and then they, they really want to average in down here when the stock potentially could just continue to just trade off down. So don't chase stocks. Know where to buy, wait for pullbacks, wait for strength to re emerge. But I mean, in terms of the, I mean, that's just a single stock story. A lot of people like to, since COVID a lot of clients have really liked to own single stocks. If you pick them carefully, you can be really good. But I always say to people, if you're going to own a single stock, own it for a long period of time, and that doesn't mean just a year or two years. I'm talking 10, 20, 30 years. Have conviction in that stock. Know that you're probably going to have less than what you put into it at a certain point in time. But going back to the s and P 500, I mean, I can just show you here, obviously, we had the carry trade come across here and traded down significantly over the course of, let's say, the month of July. We hit that purple line, which is the volume weighted average price from the beginning. That's the anchored VWap for the year. It held back in April.
We did a podcast on that as well about how it broke through, regained it, and we were back off to the races. Same thing I think people realized that the carry trade wasn't as. It wasn't going to be as severe as possible. They were talking at 1.20 trillion to unwind. That's a lot of money. Had that happened, we're looking at perhaps Covid lows on the S and P 500, which is about 60% lower than where we are now. So keep that in mind. It's possible. You got to know what's possible. Obviously, that didn't happen today or last week. We've really kind of regained our footing, consolidated for the last couple of days in anticipation of the Nvidia report. We had a couple other earnings reports that were really positive yesterday. I just think these companies continue to raise their prices. They're not just actually growing their business, they just like to raise prices. But either way, we're kind of at the. We're kind of at the point where we could. We could break out close to all time high. My thought is we'll probably chop sideways for the next couple months until maybe we get that rate cut in September and we pop up and then the big event is going to be the election, and we're going to chop sideways until then. And then it could. You're either going to go up or you're going to go down. That we see. So that's kind of all I wanted to.
[00:17:31] Speaker A: Stocks go up, stocks goes down. Then we see.
[00:17:34] Speaker B: Yeah, then we see. I love that line. Spoken by a true market wizard who I've had the pleasure of meeting at one point in my life, always told me one thing, you've got to know what's possible. Stocks go up, stocks go down. Then we see.
[00:17:49] Speaker A: So hindsight's 2020. Yeah.
[00:17:51] Speaker B: Yeah. That's really all I've got.
[00:17:53] Speaker A: Awesome. So let's. I mean, let's target. Maybe we'll sit after the election. Hopefully it's clean and done on one night would be great. And then we'll come back at it if we got something to report. You good with that? I mean, we're only six weeks out, aren't we? Something like that, yeah.
[00:18:07] Speaker B: It's getting close.
[00:18:09] Speaker A: Weeks? Yeah, it's like two months.
[00:18:11] Speaker B: It's getting close. It's getting close.
[00:18:14] Speaker A: It'll fly by, man, it's the end of the summer. It's actually kind of cold here. I was going to wear a nice shirt, but I. I was like, no kidding.
[00:18:21] Speaker B: Well, I was just in a heat wave, and it was hot and humid, and it's gonna.
[00:18:25] Speaker A: It's gonna be 85 today, but it's that nice time of year where it's 45 in the morning, cup of coffee in the cool air.
And of course here on the patio, I'm under the shade. You know what it's all about.
[00:18:35] Speaker B: Yeah.
[00:18:36] Speaker A: It's always 2020 degrees colder. Even if it's 95, it's 20 degrees colder and cooler under here.
[00:18:41] Speaker B: So good stuff.
[00:18:42] Speaker A: Okay.
[00:18:43] Speaker B: Hey, I appreciate you having me on, Brian.
[00:18:44] Speaker A: Yeah, thanks for doing it. A huge benefit to everybody out there and to me as well. I am grateful. Good friend and a good man. Appreciate you having us. Episode 149 hey everybody, like, subscribe or comment on any of your favorite podcast platforms or on YouTube. Send it to a friend. Send it to somebody who could, who it could help. Got a lot of subscribers now, and it's continuing to grow. We're trying to make this as good as we possibly can. Appreciate you guys joining me. I'll be back next week for episode 150. Thank you guys and have a great day.
[00:19:13] Speaker C: You have been listening to annuity straight talk.
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