Speaker 1 00:00:05 This is annuity straight talk since 2008. Your host Brian Anderson has helped clients nationwide navigate the complex market for annuities with Brian's assistance. Hundreds of clients have achieved a profitable and secure retirement. I would know because Brian has answered many of my questions concerning annuities and retirement planning so that you can benefit as well. Let's get started. Here's Brian.
Speaker 2 00:00:49 Hello and welcome everyone to the annuity straight talk podcast, episode number 48, you got some good stuff for you today. My name is Brian Anderson, founder and host with a special guest who is in house and actually he he's around enough. I might wanna have to call him my co-host. We'll see, but on a special visit from Southern California to the great state of Montana, we've got John Balmer say hello, sir.
Speaker 3 00:01:14 Hello everyone, Brian. Thanks for having me on, I appreciate you hosting me here in beautiful Polson Montana. If I can say that flat at the, uh, south end of the Flathead lake and can't necessarily see the lake behind me, but it's there and it is got awful, awful. Beautiful. I love it.
Speaker 2 00:01:34 It was great to have you, and because we're both in the same location, we thought about setting up the shot together, but then sometimes it's hard to the sound doesn't mix that well, and I thought, you know what? I'm gonna give him this. That was like some of you guys that have been around for a long time noticed that's where I had my office last year, which on the lower patio of the big house, he's about 75 feet from the lake itself. And then, uh, well, I mean, it's a little blurry in the background. We couldn't get the shot, but you know, we're not professional photo video guys. We're just, uh, we're just really good at the retirement stuff. So you gotta give us a break. And uh, so John tell 'em how your trip to Montana has been so far.
Speaker 3 00:02:11 My trip to Montana has been amazing. Uh, I've seen a lot of the local spots. Brian has been a wonderful host, was treated to an amazing dinner last night, uh, home cooked by Brian and, uh, looking forward to digging into some of those stakes tonight. So I appreciate your hospitality.
Speaker 2 00:02:31 You're not supposed to tell everybody that you get steaks when you come. <laugh> he got, he got a, so far, a pretty decent burger and he got a really good hot dog and some chili, some farm, fresh eggs, really doing it up for John. And he's been sitting here.
Speaker 3 00:02:47 I couldn't ask for anything else.
Speaker 2 00:02:49 He's been talking on the phone, walking outside. Doesn't wanna interrupt me. And I'm busy, uh, putting stuff together and tying up loose ends. So I haven't been the best host, but we're gonna try to get this done and then we're gonna go, uh, I'll show him around Western Montana tomorrow.
Speaker 3 00:03:01 That's right. It's been great. It's been great so far. It's beautiful. So if you ever get a chance to come visit, Brian, take take advantage of
Speaker 2 00:03:09 After we're done with this podcast, I'm going to, uh, run down to his location and I'm gonna jump off the dock cuz it's that time of day. And it's 88 degrees here right now, which we are not used to. So yeah, we've talked about a lot of things is John's usually on to talk about market based stuff. And he and I were having a conversation a few weeks ago, talking about management and everybody that has paid close attention to when he's on this podcast, he's talked about kind of market indicators, market timing. And I kind of brought up a question I'm like, well, and I know that, I think I can say this. John has a problem in his business where there's a lot of people that don't do everything he tells him to do. Is that fair to say, John?
Speaker 3 00:03:47 Yeah, I'd say that's fair. You know, it's a 50 50 blend. A lot of people, everyone pays for the advice. Obviously those who know me know that majority of my accounts are fee based. So as, uh, your money grows, uh, my income grows. So I sit on the same side of the table and when you lose money, I actually get paid less. So if you're gonna pay me for the advice, you're gonna pay a professional for the advice, uh, and you're gonna pay good money for it. You might as well take that advice. And so I think today we're gonna touch on some, some of the things that you can do as an investor, some things that you should do when taking advice from a professional.
Speaker 2 00:04:26 And I think the question I brought up, I said, cuz I was, I've been impressed by your track record. Since you've been on this podcast, John, it seems like you kind of have a handle on the charts and are really good at the leading indicators and whatnot that might suggest some volatility and fluctuations. We always talk about being prepared for it. We certainly don't want anybody, anyone to lose money. Uh, we've both said that before. We want things to work out really well for everyone, no matter what your strategy is. And again, this is for informational and entertainment purposes only. So we're not trying to convince, we're not trying to tell anybody that did anything wrong by any means. And we're just gonna talk about the difference between two people. So he is got some people that kind of go off on their own and take half of his advice and it doesn't always work out that well. And so my question to him was, is there anybody that does everything you say? And I think you got a handful of those, right, John,
Speaker 3 00:05:19 I do, you know, those people value advice. Uh, they don't want to spend their time doing the research they want. They've hired us as professionals to do, uh, what we do best and that's manage money for them or manage their retirement portfolio of the portion that that is variable and in the markets. And some of those people have said, Hey, you know what? I pay you good money to, to, to listen to your advice I want you to, to, I'll definitely listen to you. Do what you think is best for my portfolio. And you know, Brian, you and I have been talking for months about towards the end of last late last year, how, you know, we felt that we were gonna have a, a pretty severe correction. And so my advice to a lot of clients and in fact, most all clients who are over the age of 50 was to raise a significant amount of cash.
Speaker 3 00:06:07 So today we're gonna kind of show you an example of, of two clients, uh, client a and client B. And one of those clients told me that I was totally crazy and didn't know what I was talking about. And the other client said, you know what? I think that's a great idea. I'm gonna listen to your advice. And, uh, you just exactly tell me what you're going to do. So I ended up raising some cash and it's made a pretty significant difference in the life of that client. Now, when the market conditions return and macroeconomic conditions return, we, we will start to reinvest that money. And I think Brian, you and I have done this quite a few times with a couple different prospects. We've talked about saved them tremendous amount of money over time.
Speaker 2 00:06:51 Yeah. A handful of people that were anxious about sitting on the sidelines for as long as they did, and this is not. And the one of the reasons I think this is valuable and I hope everybody that watches this or listens to it on a regular basis understands that I'm very interested in his perspective and his expertise. And I have constantly said, I'm not the investment guy that hates annuities. Obviously I'm the annuity guy, but I don't say, oh yeah, you only have to have annuities. My philosophy has always, always been about coordinating assets between safe and risk to limit volatility and produce higher returns over time. And it really takes as much as time as I spend. And John can tell you guys all today, every single thing I did today, where I got a lot of work done, it was all related to annuities.
Speaker 2 00:07:38 That's what I have time to do. And it takes a different perspective and a little bit more labor to have a professional on that side. So I'm grateful that you've added that to the business. You've taught me a lot about it and I hope everybody understands how valuable this is to see the consistency of the recommendations over the past six or eight months since John's been doing this with us. And then we're actually gonna put some numbers to it and see, Hey, did it really pay off and has it done over time? So I kind of want to get that out there. Uh, first and foremost, John, just to let everybody know, pay attention, because if you're gonna stay in the market to some extent, um, this is not about buying annuities. This is about having professional management that, you know, that can help you kind of weather.
Speaker 2 00:08:22 Some of the storms we're seeing right now. And it doesn't mean you have to lock into a four year MIGA or a 10 year index annuity or a guaranteed lifetime income contract. That's not at all the purpose of this. Our position is to educate. And my goal is to make sure that you guys get, uh, good information in all aspects of asset management, retirement planning, and just generally just winning in the financial side of things. So, sorry. There's my rant. It's about all I'm gonna say for now. I'm sure I'll have something else cause I can't keep quiet, but uh, yeah. John, go ahead. <laugh>
Speaker 3 00:08:57 Yeah. I just think my philosophy is if you can avoid large draw downs in your portfolio, you're gonna have a ton of success. That means that you don't necessarily have to get huge returns on the upside, but it's really, my philosophy is trying to avoid those dramatic downturns 2000 to 2002 oh seven to oh nine. And not necessarily saying we could have avoided March of 2020, or February, 2020, the, the pandemic that was very fast and furious, but this we could have seen coming from a mile away. And if you're a retiree or if you're close to retirement, you can't necessarily have the time or for the 30 or 40% loss in your portfolio. It's just not enough time, particularly if you're taking withdrawal. So that's why we couple it with the annuity strategies that Brian puts together. But then also having that longer term market perspective, but there's a lot of different things that we can do to your portfolio.
Speaker 3 00:09:53 And I always say cash is actually an asset class. You know, the hardest thing to do during a bull market is stay fully invested. And the hardest thing to do during a, a bear market is actually stay on the sidelines. So that's what we try to teach our clients to do. We try to ha help them understand and educate them on when to invest, when to raise cash, to buffer volatility. And I think, you know, we've done a pretty good job so far, but I wanted to show people kind of an example of clients who maybe got ahead of themselves and didn't necessarily take our advice, uh, as a firm. And then some that really took it to heart and said, you know, we pay you money to do this. So go do your thing,
Speaker 2 00:10:38 Right? Why, well, why don't you, uh, share your screen and show us what you're talking about. And while you do that, I'm gonna remind everyone that, that you're not allowed to call John and waste his time. If you want to talk to him again, cuz he's not pitching this to you. He's not trying to sell you anything. He's not gonna try to convince you to do business with him. He's a busy guy, he's got a lot going on and he is a good family man too. So if you wanna chat with him as part of what you do with me, or as part of the questions you have about me and it doesn't, you do not have to do business with me to talk to John, but I will, uh, control the inflow of calls to him based on your level of sincerity, no tire kickers.
Speaker 2 00:11:16 There's enough information here for annuities or investments to use the information, to make good decisions, but please respect his time as well. And I'll field the calls. If you want to get ahold of me, it's 804 3 8 5 1 2 1. Talk about your needs. And I will decide if I think it's worthwhile and also talk to John about it too. So anyway, just a disclaimers to, to say, you know, we don't need his phone ringing off the hook cuz <laugh>, I guess he's been around, been around here long enough that he knows minority does. So anyway, there we go. That's it. So John, go ahead.
Speaker 3 00:11:47 So what I wanna show people is, you know, this is a, this is a client, uh, starting in January, you know, late December, we started seeing some economic indicators, some patterns on the charts that were going to really kind of point it towards a significant decline in the markets. No one has a crystal ball, but it was just really inevitable. And so my recommendation went out to clients in early January prior to the first, you know, major pullback in the market was to really start to raise cash. And my, my recommendation was 30 to 40% cash raised in the market. This client is a heavy investor in individual stocks, heavy investor, and the technology side in these, you can see by their portfolio, 96% equities, three point half percent cash, no fixed income. They do have other assets that just aren't showing up on this report.
Speaker 3 00:12:41 But for this account purposes, this is a managed account that I manage. I've picked the allocation. But when I do pick that allocation and recommend individual investments or funds, things like that, do it in a very selective manner, but it's really based on their risk tolerance. This person's risk tolerance is, is quite high, but my recommendation to them in January was to race between 30 and 40% cash. You get be able to have better entry points, maybe rebalance their portfolio, take some cash, set it on the sidelines, wait for that volatility to hit and then look for opportunistic places to, to allocate that capital. So as you can see, we are now middle of June, late June. This is from one, one or January 1st, beginning of this year through Friday, beginning value of that portfolio was $547,000. They did not take my advice. They wanted to stay fully invested.
Speaker 3 00:13:40 And as you can see, 23% later on the drawdown, they're down about $127,000 to put that into real money terms. That's a significant amount of money. This person has saved and invested for over 20 years. They're getting closer to retirement. That's a pretty big haircut to take when things are pretty uncertain like this. So I've talked to this client, informed them that I still believe that we could have a more significant draw down over the next couple months, given the macroeconomic concerns to the market, but they've remained, uh, fully invested. They're not happy about it, but at this point I can't convince them otherwise. So down 23%, the S and P 500. And I did mention that this client was down is, is sort of on the tech heavy side individual stocks. Those are gonna underperform or outperform the different indexes S and P 500 as of Friday, was down about 17 and a half percent year to date. So this portfolio is actually underperforming the market by about, you know, six, 7%.
Speaker 2 00:14:52 And so, yeah. So if you were just in an S and P index fund that you wouldn't have had as a dramatic
Speaker 3 00:14:57 Losses, no. And you can see here, Brian I'll show you I'll just scroll here. The light blue line is the S and P 500 and the dark blue line here is actually the client's portfolio. So down right around 24%. And we had a pretty significant bounce back last week. And you can see over time, but it, as we had rallies into the market, this client was contacted and said, you know, I'd like to raise some cash and they still have some gains in their portfolio because they, they have been invested for a long time. But for investments over the last two years that they made they're fully underwater, that never we're able to capture those gains. And now it's just gonna be a waiting game. And who knows how long it might take. Remember in the 2000, uh, to 2009 period, we had the lost decade, the S and P 500 actually lost money over the, over the 10 year period of time. It took the NASDAQ almost 15 years to break. Even from if you'd invested a dollar in the peak of the NASDAQ and what, 1999, it took you to almost what, 2013 to break, even on that NASDAQ, getting back to 5,000. So pretty dramatic. You never know we could have another lost decade. No one has a crystal ball, but when we kind of look at the indicators and we say, let's, let's try to see if we can raise some cash. This is the difference between people that take our advice and don't take our advice.
Speaker 2 00:16:29 You know, I started in the business right after the.com bubble and five years into it. Then I see the, the mortgage crisis and all that. And I, I remember every time, something like that happens, I meet with people that seem determined to not ever let that happen again. I've gotta do it differently now because I've since learned or come to realize that pain is easily forgotten. And, uh, I wanna say greed is a bigger driver than fear. Honestly, we're not trying to scare people by any means, but these are things you gotta pay attention to. It doesn't always go up. I mean, I wish it did, but if, but if it did, then we wouldn't, you know, you wouldn't need us. You wouldn't need any crazy strategy anyway. So there we go again, blabbing blabbing about nothing.
Speaker 3 00:17:20 No, I, I mean, I definitely agree when you, in retirement, particularly for those individuals who are taking income, you can't afford to have draw downs like this. This will completely blow up your retirement, either that, or you gonna have to start spending less, take less income. It just becomes it's significant draw downs, like a 24, 27, 20 1% draw down. Those are really tough pills to swallow and they can really make it long term detrimental impact into your retirement. So that's when, you know, when it comes to distributing your assets and Brian, you're the expert at this distribution is a lot different than accumulation. Would you agree?
Speaker 2 00:17:59 Oh, well, absolutely. I mean, if you're taking, uh, down 23% and you take a distribution from that, you never, ever gonna get a chance to climb back with that money. You wanna pull four or 5% out, or maybe you needed 5% of the bigger number. And so it's more like six or 7% of the smaller number, and you're just, then you're out, you're really out and you never, ever get to climb back. And so you're enhancing the volatility by taking systematic withdrawals. That's where the annuities come into play or cash. I've heard a lot of people say, nah, I'm not gonna do the annuity. I'm just gonna, I'm gonna keep three years worth of cash on the sidelines. I mean, that strategy works fine. You know, there's some differences, but we don't need to get it too far into that. Cuz John's got some other numbers that look dramatically different in this situation. So what's, what's the difference with this portfolio?
Speaker 3 00:18:46 Well, this is a portfolio of a client who I've had a long term relationship with. I called them in January and I said, Hey, look, you have a portfolio. You are fairly close to retirement. They have money elsewhere as well with another advisor. And that money is down significantly. But I, I called this individual and I said to her, I'd like to raise a significant amount of cash in your portfolio. And she said, you know, and I don't do anything by discretion. I think I might have explained that to you, Brian. I, I review trades with, with clients every time we either buy or sell something or make it make a recommendation.
Speaker 2 00:19:24 Can you explain the difference? Discretionary control?
Speaker 3 00:19:27 Yeah. Discretionary versus non-discretionary. So, so discretion is if I just could trade your portfolio at will. I don't have to call you, you sign off on all the regulatory disclosures where I can put you into cash a hundred percent or I can buy whatever I feel is right for you under whatever's in your best interest. I don't have to clear those trades with you carries a lot more liability in business. We tend to as a firm like the non-discretionary model. So we want you to know, and we want you to have an active hand in how your portfolio's performing, what you're invested in. We're gonna try and educate you on all the positions you have, if you want to get to that granular level, but we're gonna clear everything with you. So I made all these calls beginning of the year two clients and said, this is what I'm gonna recommend based on these factors.
Speaker 3 00:20:23 And so it's up to them to make the final decision. No, I don't want your advice. Just continue to keep me fully invested or sure. I, you know, I pay you money to take your advice. We're gonna go with your recommendation. So this was the client I made the recommendation. Initially I raised about 30% cash. You can see here that cash level's up to 64% and that's been over the course of the last few months, still 24% equities. But you can see this client, the S and P 500 is down 17.3%. As of Friday, this client is down 0.7% a translate into a $2,219 loss on a year when the market, you know, we saw that other client, there were down $127,000. This is gonna make a dramatic increase in this client's portfolio in the performance, because now I have ample amount of cash and Brian, you can see the, the, you can see this on the right.
Speaker 2 00:21:28 Yeah, it's interesting. That's the one you showed me last week and, or a couple weeks ago, whenever we talked about this and that to me was just, it's impressive.
Speaker 3 00:21:36 You can see the pretty much the straight line is where their account balance has been all year. Now, this client is a little concerned that we have, you know, a little bit too much cash, but that cash is really buffering the volatility for the remaining part of the portfolio that is still fully invested in the market. Very large position in the NASDAQ 100, the QS by positions, some of this portfolio late last year into some energy equities, uh, or some energy sector equities, which have actually performed fairly well into this year, uh, best performing asset class this year in, in my world. And that wasn't by chance that was really kind of by design. But now this client has actually has a significant amount of money sitting on the sidelines, waiting to be put, to work opportunistically. And as that those opportunities present themselves, we will allocate that capital and this client will enjoy some of the fruits of, of her labor and, and some of the fruits of mine when they are be being able to buy stocks or equities or funds at much lower prices than they had been previously.
Speaker 2 00:22:48 Well, and if, if macroeconomic factors kind of seem to settle out and I think it's gonna be awhile where we see that, then you know, the cash is gonna allow you to go make some really good value purchases and any recovery that's, uh, subsequently comes, you'll see an enhancement in that. So to be able to, I mean, dang, that portfolio looks like an index annuity was not
Speaker 3 00:23:10 <laugh> no, it's not. Oh,
Speaker 2 00:23:12 I had to put my annuity pitch in there, right?
Speaker 3 00:23:14 Yeah, <laugh> it it's actually, I removed the energy position, you know, energy in the last, what two weeks has been down about 20%. Uh, I took off the XLE position at right around $76 a share missed the final upside. I think it went up to what I think it was 95 on the XLE, which is an ATF, but it's well below the $78, $76 range right now. I think it was close Friday at like 70, maybe 72, the market was up energy could have traded up today. I wasn't, I was enjoying, you know, Montana with you. So I didn't really check the market, but it's, uh, definitely we, we traded out of that position. We added a little bit of tech exposure, but when it's down, the NASDAQ has been down 30% year to date. Uh, we felt that it was a good time to invest a little bit of that money, but that was more or less a 3% allocation of that cash.
Speaker 3 00:24:16 So as of last week, the cash has gone down from about 64 to about 62 and a half 61 and a half. And there's more cash to put to work, but we've gotta look for opportunistic places to put that cash. And we know that we're never gonna hit the bottom of the market and we know that, but it allows us to avoid a huge, you know, 25, 20 7% draw downs that we've seen. Um, and we think that it'll be way better for the client in the future. So it's kind of winning by not losing. If you can avoid those big draw downs, I don't have to invest this, this client's allegations super aggressively for her to get a pretty decent rate of return. Have a fantastic retirement.
Speaker 2 00:25:01 Absolutely. Well, that's the name of the game to smooth out the returns over time, you can do it by using certain products like annuities, bonds actually. Well, we don't need to talk about bonds. That could be a separate discussion. They're getting hit hard too now, you know, but you also want to have a professional manager when I like take on paying fees, it's gotta be worthwhile. And I think for certainly one of those clients, like, you know, listening to what you had to say, even if they're not happy about it right now, you know, the proof is in the charts and you can see the result of that over time, much stronger position, whether you jump back into the market now, or if you continue to be patient with it. So, no, I appreciate you showing that to us. And I, again, I wanted everybody to see, like this kind of backs up what he's been saying since he's been coming over here and we'll certainly post updates on this going forward. We got something quality to share something interesting. We'll let you know.
Speaker 3 00:25:54 Yeah. Brian, I appreciate you having me on it's just so everyone knows those are both clients. They're both relatively the same age. One just decided to heed the advice that I was giving that they were paying for one decided, decided not to. So obviously with, with our non-discretionary portfolios, if they say, Hey, let's stay fully invested. We've gotta stay fully invested.
Speaker 2 00:26:19 No, it's understandable. So again, it's not that anybody's doing anything wrong, but there's a difference. And I just, I don't know, say it again. I think it's a good example, a real life example of what you've been talking about since last October, was it? Geez, it's almost been a year. It's almost July.
Speaker 3 00:26:34 If you can believe it.
Speaker 2 00:26:35 Yeah. It's been great.
Speaker 3 00:26:36 It's been a fun ride. I'm really enjoying your podcast. Uh, I listen to them all and there's a lot of great advice that you give and, and your clients should be thankful, uh, for the advice that you give them. You know, you're super knowledgeable, you know, uh, you know, what's going on in the marketplace and you know, I have a lot of respect for what you do. So I appreciate you having me on annuity straight talk podcast.
Speaker 2 00:27:00 Yeah, no, it's great to have you. You've been an excellent contributor to it. A lot of people call me and uh, really appreciate what you've done. So I'm grateful for you being here. I did get my first. I'm not saying everybody loves it. I'm sure there's some people that roll their eyes and think, oh yeah, he's just trying to sell something. But I did get my first real piece of negative feedback. Last Saturday, I got an email from a guy and he said, I hate to say it, but I'll never get that 38 minutes of my life back. I'm like, whoa, <laugh> I guess you don't want a hat. That's brutal
Speaker 3 00:27:30 By the way, Brian, I do have an annuity straight talk hat. Thank you for the gift. I love it. I will be wearing it. Representing your firm going forward.
Speaker 2 00:27:39 Well, there's a lot. There's a lot of people on vacation here. And if you were wearing one, as we walk around town and go see the different things, they might think we're a couple wearing matching hats. So it's probably better, you know, just for appearances as they are. <laugh> so anyway, you guys, uh, thank you everybody for joining us again. This has been the annuity straight talk podcast it's available on YouTube or your favorite podcast platform. You can subscribe to either to see, get notified. When one comes out, you can schedule a
[email protected]. If you want to talk to John, you can talk to me on the website, upper right corner. Schedule a call, super easy, super simple, or call me at (800) 438-5121. We're gonna go out. Enjoy Northwest Montana tomorrow. We got a lot of work done today, both of us. And so I'm gonna try to show 'em around a little bit, John, thank you again for coming to visit and thank you for being a contributor.
Speaker 3 00:28:30 Thanks, Brian. I appreciate it. I'll see you soon.
Speaker 2 00:28:32 All right. Sounds good guys. Well, everybody have a great day. Thanks again for stopping by. And we'll talk to you next week for episode number 49. Goodbye.
Speaker 1 00:28:53 You have been listening to annuity straight talk. The preceding information is for informational and educational purposes only and does not represent tax legal or investment advice. The views expressed by on this program, their and do not necessarily reflect the district, his partners, no information presented to should be acted, meeting it important. I.
