Episode Transcript
[00:00:00] Speaker A: Hello and welcome everyone to the Annuity Straight Talk podcast, episode number 164. Kicking off 2025 the right way. Took a break for a few weeks to clear my head. And if you didn't know me before, my name is Brian Anderson, founder and creator of everything on annuitystraight talk.com it's been my baby for the past 16 years. Coming up on 22 years in the business and a fan favorite is joining me, one of my best buddies. Hey, John in Southern California. How you doing today?
[00:00:27] Speaker B: Brian? Thanks for having me on again. Happy New Year to all your listeners and all your viewers.
What a hell of a year we had in 2024. Looking forward to a new 2025.
[00:00:39] Speaker A: Well, wouldn't you say after 2024 we got a lot of happy people, no matter where they're at, I mean, whether they're in interest based assets or market based assets. It's all been, it's been a good balanced year all around.
[00:00:50] Speaker B: Yeah, I'd say so. I think a lot of people were, some people had really high expectations. Markets don't always go up 15, 20% plus back to back years they did. A lot of people had some really good returns based on their risk tolerance. And maybe we can touch on that, touch on a little bit of the fear of missing out that I'm noticing a lot of people getting lately. But yeah, let's, let's recap it.
[00:01:16] Speaker A: But it goes, I mean, it goes into, I mean, I hate the saying because it's been around for so long, cliche deal. But Warren Buffett said, when everybody's getting in, you should get out. When everybody's getting out, you should get in. So I mean, we talked a lot about that. John and I tried to do this a few weeks ago and couple technical issues and with the holidays and stuff and we're both, man, we both worked a lot this year and let's just take a break. We didn't get it done. So it's almost kind of good now. We've got three, three, four weeks of hindsight to that. But that was one of your ideas back then. It's like, hey, pump the brakes here a little bit. Just because that's what it has done doesn't mean that's what it will do.
[00:01:57] Speaker B: We did, we did see some consolidation over the month of December. We had a little run up that we had a little pause, started to get a little volatility and to be quite frank with you, I think we, I think we run into inauguration and then I, I Hate to say it, but I think we're gonna have a really big bout of volatility and, and I think people need to be prepared for that or expect that. We didn't have a whole lot of that last year other than maybe early April and in August where we had, we had a pretty significant pullback with the Japanese carry trade. Ryan, I think people's expectations have gotten a little over their skis and I think that's something that we should make your audience aware of. Markets don't go up all the time, straight up, like they have.
[00:02:44] Speaker A: Well and honestly like the big traders, the guys that make their living trading stocks like the volatility, because that's where they make the most money.
And a lot of our consumer clients are looking at it as in kind of an annualized return, like an average 8 or 10% or 5 or 6%, whatever it is.
But that's. You look at a 20 year time period and you can calculate that average, but it's not a linear path to get there by any means. Which is why you say the mountain charts and the ups and downs and the cups and handles and all the things that you've talked about.
[00:03:19] Speaker B: Yeah, absolutely. Absolutely. Yeah, definitely. Markets aren't linear. People should know that. People should also know that you're investing for a long time or long term. You're not investing for next week or next month unless you specifically tell us that's what your profile is. And I think people have to really remember that markets can occasionally go down and when they do, they go down a lot faster than they go up. So those are all things that you want to really keep in perspective. If you have a diversified portfolio of whether it be annuities or whether it be stocks, bonds, alternative investments. Keep that into perspective. That we've had a really good run over the last five or so years. We had a pause in 2022 and if people kind of look back to that, they'll really realize markets were down, particularly technology. I think the darling of last year and 2023 was Nvidia. They're the main driver in AI and remember they were down 77 peak to peak to trough too. So even the best stocks can have significant drawdowns and if you're not prepared for that, you're going to get really bit in the behind.
[00:04:32] Speaker A: Yeah. And it's interesting where on some people are really good at keeping it in perspective. I had a annual review with a new client from last year who came in and we got his contracts issued right after the beginning of the new year, he's on a deferred comp package for four or five years of retirement. He thought it was when I did. People remember I did the podcast. He was the first guy that came to me and said, hey, Fidelity is going to be my money manager. They told me I should buy an annuity. So he started researching. Right. And. And he said it this morning, he put that income deal in place to defer income for four or five, maybe six years. And he kept perspective, he said, because a lot of people tell me this and you'll understand, they buy an annuity and they're buying it for safety. And I mean, do you remember a time in the last five, six, seven years where people weren't expecting a downturn? I can't, because it seems like it's always the case.
So that's why I got out of the business of really predicting it. You're better at that because you're a technical analyst and. But even your predictions on stuff is like, kind of where it's going to move in the short term. But I told him and he said, I realize I could have made a whole lot more money if I hadn't bought the annuity.
I keep perspective because. And he said, just exactly what you did. He said, sure, it's been great, but it will pull back at some point in time. And I always have that to lean back on no matter what happens. And that's the purpose of doing what I do. And we never know what I always say, like, in 10 years, we'll know exactly what we should have done. Right?
[00:06:00] Speaker B: Yeah, sure. I mean, it's. You do have to keep things into perspective. You're never going to hit the top, you're never going to hit the bottom. I like to look at technicals on the charts and see advantageous entry points, but by no means is anyone ever going to tell you that they can time the market perfectly because you have to be right twice. You gotta be able to get out, you gotta be able to get back in. And that's just not possible. It's not realistic. I want people to know that technical pullbacks in the market are healthy. They allow things to consolidate, kind of regroup, and currently the trend is intact to the upside. And I think potentially we get a run to. And I've been told, telling people a lot of this going back to August, we've got a nice measured move, maybe up to 64,6500 on the S P500.
And then, quite frankly, I would be very cautious going forward. And Be ready for perhaps a significant pullback. I mean, you and I have talked about this several times. New administration coming in, There's a lot of uncertainty. There's obviously a lot of global uncertainty. We had, we had the big T word over New Year's, we had a terrorist attack. A lot of stuff could change in the next six months. And you just want to be able to keep things in perspective and be prepared for that.
[00:07:24] Speaker A: Markets, I mean, and you're going to have, there's going to be, no matter what side of the aisle you sit on, it's better if we have unity in Washington, which we'll never have.
But there's going to be a lot of political fighting and backstabbing and the media, as always, is going to play in that and exacerbate it, depending on what side you sit on. So there's always going to be emotional considerations on either side and certain sentiments like that will in fact swing the market and economic outcome. So anyway, we're just talking, I mean, you're talking about risk management and making sure stay in the market, but do it at the right time and for the right reasons. And I'm saying, and we both agree with each other, but I'm saying, like, take some chips off the table and protect what you got. Make sure you got what you need when you retire.
[00:08:09] Speaker B: So, yeah, absolutely. In fact, you know what's funny? So, so there's a big hedge fund manager. Some of, some of your audience may know him, some of them may not. He's a big tech guy. His name's Dan Niles. He came out with his top five stock list. He's puts it out every year. His number one pick for the year because of the uncertainty was cash, because cash is yielding three and a half to 4%. Yeah, that was his number one pick. And then he followed it up with Microsoft and Meta and some, a lot of these, Amazon, what they call the Magnificent Seven, those big mega cap technology companies that have really strong balance sheets and really good cash flows. That kind of fortress, fortress type companies. They're not immune to pullbacks in the market, but they have really good business models that are continuing to grow. But his number one position was cash. I found that really the irony in it, in the type of returns that we've had, that he would pick that. And he's pretty, he's, he's typically a really bullish guy.
[00:09:11] Speaker A: Yeah, well, there's nothing wrong with hanging onto the money you have for a little while.
[00:09:15] Speaker B: No, it's, I like to say, and you've heard, probably heard me say this. Let's win by not losing. Let's, let's protect your assets. Let's grow them consistently over time. Let's not. If you're 65 or 70 years old, even if you're 55, you don't need to be taking these 20 to 30% drawdowns. If you are, your allocation is probably wrong. You're getting over your skis. You need to put things back into perspective. The markets generally, the average has gone up for like, let's say the last 80 years. The market has averaged on 100% stock or portfolio, about 9 to 10% annually.
So people who were expecting, I mean, I had a client, younger client of me, he's, he's pretty successful guy. He's, he came back to me and he said this to me several times over, over the last decade.
He expects double digit returns every year. And I just told him, look, flat out, you, you're either with the wrong guy or you have the wrong expectations, because that's just unrealistic. So people need to really have realistic expectations when it comes to having their money managed by a professional. We're not taking swings on big moves in the market on a daily basis. We're gonna make sure that you have a comfortable retirement, that you don't run out of money. And I think that's really something that you do well. Brian is making sure people don't run out of money. Having that risk management side of their portfolio is just, it's super important to have.
[00:10:55] Speaker A: Yeah. When I tell everybody, whether it's somebody that works with you or if they've got their own asset management.
And a lot of the people I work with, they don't need an annuity. And there's a lot of investment advisors that don't like annuities. So maybe you don't need one or you don't like them, but sure as hell will make your life a lot easier going forward.
[00:11:14] Speaker B: That's right. That's right. The best batters in baseball don't always hit home runs. They hit consistently. And that's what you really kind of want to shoot for, is to have consistent returns over time. You're going to have a great career, a great retirement. If you want to stack it up towards baseball, it's all about statistics.
[00:11:33] Speaker A: Yeah. There's only one Tony Gwynn, right?
[00:11:36] Speaker B: That's right. You're a Tony Gwynn fan, aren't you?
[00:11:39] Speaker A: I'm a fan of any incredible athlete, to be honest with you. It's Impressive what they do. So that's one thing that we did. What was it? First weekend in December, John and I met up in Tampa, Florida, to see a Raiders game with the Bucks.
[00:11:51] Speaker B: That's right. That's right. We had a good time. A little bit of business, a little bit of personal, personal time. It was. It was fun. I actually was fortunate enough. I got to go to Las Vegas on Sunday for one day to go to the Raiders and see them lose again to the San Diego charger. I'm sorry, L.A. chargers.
[00:12:11] Speaker A: It's okay here if you always call them San Diego Chargers.
[00:12:14] Speaker B: Yeah. Well, like I told you, those tickets came to me kind of out of the air at no cost. And if something that I didn't want to pass up, always nice to take a day trip to Las Vegas and avoid all the chaos that goes on there at night. So obviously, I'm not a gambler, and I was in and out of the airport as quick as I. As quick as I got there.
[00:12:35] Speaker A: Now Vegas wears you out. I do know that the times I've been there, if it's more than three days, I get real sick of it. So.
[00:12:41] Speaker B: Absolutely.
[00:12:42] Speaker A: Anyway. But it's been several years anyway, so what do you see as going forward this year? Do you want to share something with. You got. We got about five minutes left, maybe to keep it brief for everybody. And while you pull up maybe a chart and kind of explain what you're seeing and what you think, I remind everybody, don't bug John, don't look him up or call him. He's not here for advertising, for clients.
I have introduced some people to him. Get a hold of me first if you want to chat with him. Respect his time. We're both very busy and I'm the only one sitting here go said saying, go ahead and make an appointment on my calendar. You've not once, in all the podcasts he's been gracious enough to do with us. Has he ever said, oh, just give me a call or jump on my calendar? So he's a family man, he's got a business to run, and we need to respect his time. So please do that and get a hold of me first.
[00:13:32] Speaker B: I appreciate that, Brian. Yeah, let's. I think expectations are a little tempered going into the new year. Obviously, we don't know what's going to happen. If we had a crystal ball, we'd all be. We wouldn't be doing what we're doing. So our job is to make sure that we can try to manage expectations and manage risk and that's what you and I have gotten a knack for. But I would say the year is going to be a lot more volatile than it has been in the past couple years. You're going to see a lot more 1, 1 and 2% plus up and down days. I could share a chart with you to kind of see where we're, where we are. If you want me to do that, I can, I can do that. I'm just going to share with you the S&P 500. So let me know if you can see that.
[00:14:17] Speaker A: Yep, I got it.
[00:14:19] Speaker B: So we've got a chop since November. We're kind of in a consolidation zone here. It's, it's been pretty interesting to see if we just kind of look here at this area here. We've kind of chopped sideways since maybe end of October. We had a really nice run up into after the election and it things have kind of chopped. We had a couple down days in the market and here we are, we're chopping. We'll see.
[00:14:49] Speaker A: We're.
[00:14:49] Speaker B: We're kind of stuck right here on this blue line. And if you can see it, if you can see, see this blue line here, that's the 50 day simple moving average. I'll kind of draw it in here. That's this line here.
[00:15:05] Speaker A: Oh yeah, it's very faint. Glad you drew that in there.
[00:15:08] Speaker B: We're kind of stuck here. This, this larger yellow line here. And I'll draw that in here. That's our 100 day. And then all the way down here is our 200 day moving average. So you can kind of see here, if I zoom out, I have this red line down here. And this is the potential downside that I see in the market to 4, 800, which is really ugly because it takes us back to the beginning of January in 2024 where we kind of exploded off that really nice 2023 year. So there's my downside target. That's a pretty big drop. That's about an 18 drop from where we are. Right.
[00:15:53] Speaker A: And this is S P 500. Correct. I don't know if we said, yeah.
[00:15:56] Speaker B: This is the S P500. I, you can look at the spy. You could look at the voo, which is a Vanguard 500 index. Any of the major ETF providers or mutual fund providers are going to have a fund or a ETF or a mutual fund that's going to mimic the S&P 500. I'm just actually using the index here. Right now we're at 5,924. You can't seem to, can't seem to get over 6,100, which is kind of the ceiling. We've run up to it a couple times. But that's a potential risk to the downside. And you can kind of see that's an ugly drop that takes us back to the 2024 for a year to date. Year to date moving average. So remember, we're only a couple days into 2025, so it has the potential. Not saying it's going to happen, but it is possible. But I think before we get that, I think we're going to hit our upside target. And that upside target is illustrated here at 6500. Now we may not exactly get to 6500, but that from here is about another 10% upside. 9.82. Don't know where it's going to go. We'll have to see what the news is, what the new administration brings. And if we get, if we get a move to that upside, I think it'll be short lived. And then let's say we do, and we do make it down to that downside. From where we are now, that was an 18% drawdown. If we were, and that's a, it's possible. But if that's a big, if we were to hit 6,500 on the S&P 500, it has the potential to drop about 26% to the downside before you have a consolidation and a move back higher. So that could be really damaging to people's portfolios. Like I always say, keep things into perspective. I'm going to remove these drawings here because they're really kind of ugly.
Close enough that you want to keep into perspective. Now where do we go here? I think we probably get down to the 100 day, you know, in the market. We'll see where that goes.
But you know, the biggest thing that's on my mind and what's kind of driving the markets to be, you know, let's call it flat to negative is the 10 year yield. And again we see the 10 year yield up another 1% to 4.689. That is, that's a big concerning point here. We're kind of hitting a ceiling here. I think rates could potentially go to five and if they do, you're going to see the market really fall off. And you're talking about lowering interest rates. Chair Powell has lowered interest rates what, two or three times now? I'm going to stop sharing this, but you can kind of see the 5% mark up here relative to where we are, let's just call it 4, 6, 9 on the 10 year. So remember that the, the 10 year is not 10 year drives mortgage rates. It's not the overnight rate. It's not what pal comes out and says I'm going to lower rates, 25 or 50 basis points, that's the overnight rate.
[00:19:19] Speaker A: How many times we got to say that, John? You get tired of saying that. It's like, oh, I better do something, they're going to drop rates and they've done it. Yeah, three or four or five times.
[00:19:27] Speaker B: What I mean the market has taken the 10 year, the 30 year, the 20 year, the market has taken those remarkably higher while the overnight, the short term rates are going down. So although we don't have an inverted yield curtain curve anymore, at least I don't think so. I'd have to look at the chart. It's a little concerning. If we do have that, that March up to 5%, that could do some real damage because that's, mortgages are based off the 10 year and the 30 year. I mean just things could get really ugly. So be aware of that, know that it's possible and make sure that you're talking to either Brian or I, or if you have your own advisor talk to them and take a look at your portfolio and see where there's some outlying risks that you can manage.
[00:20:17] Speaker A: Yeah, I mean we're going to keep you in the game. You're definitely going to have opportunities to continue to grow. But if it involves me, then we're just going to make sure that. I mean it's like again, we're talking about retirement planning, we're not talking about 28 year olds saving on a 401k right now.
[00:20:35] Speaker B: That's right.
[00:20:36] Speaker A: So it's like, and it seems like the higher net worth individuals certainly understand that because they're kind of grateful for the asset balances they have. But it's, it could be short lived, it'll come back in the long run. It always will. When you need the money. You can't take those, can't take those hits. So.
[00:20:54] Speaker B: That's right. Particularly if you're close to retirement or in the income phase. If you're 10 to 15 years out from retirement, maybe you can dial down your equity exposure in a falling market, maybe you can raise some cash, look for opportunities to put it to work in more favorable spots in the market. But never take, never take sight off your, your retirement goals. If, but if you don't have time, you have to, you have to have a plan and you have to stick to it, right?
[00:21:23] Speaker A: Okay. Well, John, awesome always to have your perspective. I know everybody really appreciates it. The diehard guys love to have a little breakup. We don't have to talk about annuities all the time. Markets, interest rates, those are hot topics coming into the new year. So let's make the best for you and me and everybody else. How about that?
[00:21:40] Speaker B: Yeah. Cheers, everyone. Happy New Year.
[00:21:43] Speaker A: Yeah. So, yeah, thanks again for doing this, John. Really appreciate it. If you guys want to get a hold of me, top right corner of any page on annuitystraighttalk.com book an appointment, schedule, a call, whatever it says, name, time, zone time, few notes about what you want to talk about. I will call you. I need to put that on the page because some people don't remember it, but this has been episode164. Thank you for joining us. I'll be back next week and we're going to go on a roll in 2025. Episode 165 coming up. All right, thanks so much, guys. You have a great day. Okay, bye.
[00:22:12] Speaker C: You have been listening to Annuity Stray Talk.
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