More Knowledge, More Wealth - Episode 159: "How to Manage Your Stocks"
More Knowledge More Wealth-Oct15[00:00:00]gabe:Good afternoon. This is Gabriel Shahin, certified financialPlanner and your host of More Knowledge, More Wealth here on everyweekend, talking about all important topics of personal finance. The goal is togive you the knowledge you need. To increase yourwealth not to the listener.You can always reach out to myself or any one of our colleagues here at FalconWealth Planning.[00:00:18]Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon like thebird. We can help customize your questions and giveyou the answers that you.To make sure that you can help relate this show to your specific situation, andyou can call now as we have people working that can help address your callsand answer your questions, Folks, I'm a principal of Falcon Wealth Planning.[00:00:43]We are a fee only, not fee based, but a fee only financial planningfirm that's really specialized in comprehensive planning and that goes over.Everything involves a dollar sign. That's where you are today, how yourinvestments look like. Talk about taxes, state planning, insurance, mortgage,renting, folks, you name it.[00:01:00]Anything that involves a dollar sign. And folks, we are offering acomplimentary free assessment to help relate this show to your situation. Folks,give us a callwe would love to help yet, like I said, we got people right nowthat are working. Uh, our phone number is (855) 963-2526. That's eight five. 96Falcon like the bird, or visit ourwebsite@falconwealthplanning.com.[00:01:25]That's Falcon WP dot. For short.Now folks, we are gonna talk abouta handful of things cuz there's always so much going on. The market is on anegative tear. Uh, you are looking at still increased of rates through the treasurythat's hitting four and a half percent almost. I mean, folks, there's, it seems likenot a lot to be happy about right now, and I understand it.[00:01:49]I get it. As we discussed weeks ago, months ago, you have almostevery asset class that's down of the 112 asset classes. Hundred and four assetclasses are done. We haven't seen anything that bad since 2008. On top of that,you have still geopolitical issues going on, whether it's with China, whether it'swhat, Russia and Ukraine.
[00:02:10]And then on top of that, now you have energy crisis that's happeninginEurope right now where imagine if you're paying $300 a month for yourelectricity, it's now 3000 a month. Yeah, that's an issue, folks, and that's what'shappening. And you're gonna see a long term effect of that. Heck, Germany.Has had one of their electrical companies now taken over by the governmentbecause of their in insolvency.[00:02:33]So heck, you might be seeing nationalized energy over there as well.So there are some issues that are coming up with all this. There are some issuesstill happeninghere domestically, especially with midterms coming up. Sothere's always something to be fearful about. So what to do? Well, what to do isfolks, nothing has changed.[00:02:53]We've seen this movie before, there's always gonna be something toworry us,and when you look at where the stock market is right now, I'll throw'em into two separate segments. You have the growth and value segment, andthen you have the large cap midcap, small caps, and international segments.When you look at these segments right now, you can look at value companiesand where they're at right now, and they're efficiently.[00:03:20]you know that by seeing what the price of something is versus whatthey're earning. I'll give you an example. Let's say you want to go and buy abusiness. Let's say that business net's a hundred thousand dollars a year. Nowyou would have to work in this business. If you wanted to buy that business offthe person, they're probably gonna sell it to over a hundred to $200,000.[00:03:38]That's amazing,right? It's a 50 to a hundred percent return on yourmoney on year one. That's how this stuff works. Now, a Fortune 500 company,it's like a 20 to 30. Your return. So if it makes $1 billion a year net, it sells for20 to 30 billion. Okay? So that's how youknow. Now, currently on a valuecompany side, it's roughly at 15 x, which is pretty cheap.[00:04:06]Like I said, historically, it's north of 20 to 30, it's considered cheap.That's on the value company side. Now on the growth side, The growth, we'llcall it the nasdaq, the tech companies and so on. Now you have companies likeApple, which are still in the low twenties, Google, Amazon, that are very stillwell priced.[00:04:29]They're not like expensive. They're historically known for being 50 xa hundred x. Heck, Tesla had point of time was like a 2000 x. It was alwaysbased on what they're expected to make, and they were making losing billions
of dollars. So what's my point with this? My point. That is still roughly at abouta 25 x now, which is considered fairly.[00:04:51]It's not cheap yet. It's efficiently priced. By the way, folks, if you'rejust joining us, you're listening to Gabriel Shahin, certified financial planner andyour host of More Knowledge, More Wealth here on every weekend, talkingabout all important topics of personal finance. And we are discussing right nowlooking at the current valuation of the markets.[00:05:08]And so there is still room in growth companies that here's why for itto drop and why? Because, and there is a directcorrelation of this in a lowinterest rate environment. What does growth companies do? They're normallylosing a bunch of money. Look at Tesla. Tesla's losing billions upon billionsupon billions of dollars.[00:05:25]But look at, they had a great sales guyon. They had a great product,wasn't making money. They needed a bunch of money, so they had to borrow abunch of money. They had to go file for an ipo. They had to issue more stock.They had to do bonds, which were junk bonds because he was such a goodsalesperson.[00:05:42]People were still buying those things and they were able to survive,and now they're currently profitable. Actually, their PE is at 40 . Which isconsidered fairly cheap since there's still, I'm not telling you to go buy Teslafolks, it's still considered risky and it's still, uh, trading at high multiples and itstill has a lot of other variables.[00:06:04]Like right now, Elon seems pretty unstable and so, uh, but the pointwith all that is of course is that there are still room for it to fall when you look atwhere it should be trading at versus a value. That is not that bad in price, Iwould argue it's a really good deal and that, Think about this, it hasn't droppedas much.[00:06:27]I mean, the value index is down, what, 10 to15% for the year,depending on when you're hearing this . Uh, and the growth is down over 35%.In a rising interest rate environment. These growth companies, not only arethey, that money's not easier for them to borrow, but it's more expensive forthem to borrow it, and then eventually their debt.[00:06:50]You listen, these are balloon payments. It's not like a 30 yearmortgage. You just keep making it and it's fixed. They're variable loans and ontop of that, they come ballooning. They may not be ableto refinance that debt,
so you may be also seeing bankruptcies that are gonna come out, especially inthe tech world.[00:07:05]This is basic economics. What we're. Nothing is new here. There'snothing's like, Wow, we've never seen this. This is unprecedented times. I mean,you could say that for whatever the reason is because of specific situations that'shappening overseas or specific situations that's happening here throughinflation.[00:07:21]I mean, there has been times, stocks and bonds have both droppedsignificantly in the nineties, so what is that? 30 plus years? So it's not like wehaven't seen it before. We've seen a crazy re interest rate environment in theseventies and eighties. Now, none of you probably remember that or evendirectly impacted by it.[00:07:39]But what's the point with that is that you have to position yourselfaccordingly. You know the rates are going up, you know that our fed chair saysit. You know that inflation is continuing to rise because of rates, because of themoney we printed, because of shipping costs, because of gas prices, because ofbeing able to have, uh, in a supply chain that was easy for you to get the goodsthat you need and to have a surplus of them, now you don't.[00:08:11]So you have to make the margins off it that you weren't able. Theseare the things that now has to have you decide what you want to do. Andhistorically speaking, the bond price already baked in the rate increases that thefeds are talking about. But what's crazy is as they're raisingthe rates, the bondsare dropping.[00:08:30]Well, we already know it's gonna happen. We already know rates aregonna go up, but yet again, the bond prices are dropping. They should dropwhen they announce that they were gonna raise rates in 2019. They kind of did,but now it's dropping significantly more. It's so bizarre what's happening. It'salmost like it's a textbook situation.[00:08:51]Like looking back and even now looking in the future, you have todo something about your bond portfolio. You can't just sit there and do nothing.You will lose folks, if you need help with this, if something like this soundsright, folks, we got people right now that can take your call and help you out.[00:09:06]Our phone number is eight five five nine six three.25, 26. That's 8 55 96. Falcon like the bird. Give us a call. We can help relate this show to yoursituation and making sure you're not in position in your target date fund in your
401k, your 2030 or 2050 fund, whatever it is. You wanna make sure that youare taking advantage of the volatility that are ha that is happening right now.[00:09:34]You have to be making moves in your account. You just have to,because what used to be straight. Your allocation. Let's say you had 10 holdingswith 10% each. Wellnow some of those, those 10 percents, maybe a 7%, maybesome of those 10 percents are a 12%. Maybe those tens are nine eights and soon. These are the times you kind of make some moves, guys, if you are notmaking moves.[00:09:54]Now, in the silent recession that we're having that nobody isannouncing yet, every indicator is saying there is outside of unemployment thatI don't know what we're talking about here. What I mean is it just not importantto. Just curious. I'm, I'm justasking is it not important because you have to careabout this more than the people that are trying to help you with it.[00:10:20]And so if it's something that you need guidance, maybe you're justblindly putting away and you're occupied with family, with kids, with work,with whatever the personal or social life that you have is, I respect that and I getit, but you have to be able to prioritize your. It's like when you go fly on anairplane.[00:10:39]What do they say? Put the mask on you first and then give it to yourchild. We would love to help with that. Folks, give us a call. We're offering afree financial assessment. We've got people right now that can help you. Giveus a call. Phone numbers (855) 963-2526. That's 8 5 5 96 Fal. Like the bird.There are lots going on right now, and this is important for you to take a look atyour specific situation to see how you can incorporate it.[00:11:06]I'm gonna share with you some, uh, ideas, some information. Ofwhere we're at currently, comparing it to what's happened and just where are wein this unprecedented time? What do you expect going forward? Cuz we canonly have history to help us with the future, even though our industry says allthe time, pastperformance has no guarantee on future results.[00:11:27]So we're gonna discuss more of that when we come back. Folks,we're gonna have lots to go over. We'll be right back after a few words.[00:11:43]Welcome back folks. This is Gabriel Shahin, certified financialplanner and your host, More Knowledge, More Well, talking about all importanttopics of personal finance. And I wanted to go over with you today just
understanding what's going on in the markets and just comparing it to othertimes that we've had historically speaking.[00:12:01]So we have what's called a Falcon Flyover that we, we have at thefirm I work for and, uh, the firm I founded. Seven, almost eight years ago now.Uh, and we are blessed. We've been rated through Wealth ManagementMagazine, ria, Intel City Wire Financial Advisor Magazine, Advisor Magazine.We've been put in there as some of the.[00:12:22]One of the top RIA firms in the country, Rising star advisor towatch, uh, one of the fastest growing firms in the country. So really, it's cuz ofthe honest work that we do and because that we do tax planning as well. I mean,the investments ends up being the easiest part of our job. And so I did, uh, wantto give you that.[00:12:39]Uh, but let, let's talk about the, And by the way, if you want access tothat, feel free to give us a call, shoot us anemail@radiofalconwp.comor justgive us a call at eight 50. 9 6 3 25 26. That's 8 5 5 96. Falcon like the bird. Wecan help with your personal situation, her help relate this show to your specificsituation.[00:12:59]So I wanna give you some highlights that one of my colleagues puttogether, and that is number one. We are currently in the worst start to a year forbonds. Okay. In history and the fourth worst start for stocks. Okay, Sothat'snumber one. Uh, this is also number the, the, this is the third consecutive quarterof both stocks and bond losses.[00:13:21]The only ti other time that happened was during the GreatDepression. Okay, That's not, doesn't sound too good. Uh, US stocks. Acrossthe election cycle since 1926, the fourth quarter of midterm election years.That's where we are now, uh, has been the strongest performing fourth quarterfor US stocks across all election years on average.[00:13:43]All right, so hopefully it's on the up and up, so we'll see. All right,number four, there's five total bonds lose money over the a five year period forthe first time ever. And oh, by the way, our fed chair says they're gonnacontinue to raise rates until next year, q2, Q3 of 2023. Number five,performance falling peaks in inflation.[00:14:08]Following peaks in inflation rates, stocks and bonds have returned21.3% and 7% respectively over the next 20. Months, Huh? Just interesting tonote comment. So let me take this into more detail. When you look at the worst
start ever, 2022, where the first nine months where bonds are down, 14.6% onaverage.[00:14:33]Now, historically speaking, the next 12 months, like in 1981, bondshad a 35% return. In 94, it had a 14% return, and 87 had aover 13% return.Now there is times like 1958 where it's still lost 0.3% or like last year, 2021,where bonds. We're down 14.6%. It's also including where we are right now,cuz it was last year to this year.[00:14:56]Now, when you look at the Bo uh, stock side, we're in the fourthworst history since 1926. Uh, 1931, where the stock market lost 35%. That, uh,the first nine months, the next 12 months still lost almost 10%, 9.6. Now, 1974when it lost 32, over 32. It made 38% the next 12 months in 20 oh 2002, when itlost 28%, it made 24% in the next 12 months.[00:15:24]So really every other time was positive outside of 2008 and 1937.So, uh, but 2001 was also negative, uh, as well, uh, lost 20% and then lostanother 20% after that. So, uh, there are times on average, the first nine months,when you look at the worst times of stock market. Acts the average of losing22%, the average it makes 10% over the next 12 months.[00:15:47]Yet again, this, we're not saying that's gonna happen. It's just so youknow. These times aren't forever. As long as you're continue to work for apaycheck, that means the company you work for is trying to make money. Themarkets work on that precedent of capitalism that you will eventually, thecompanies will even.[00:16:06]Beprofitable and they already are profitable. The profits have justgone down and because the stock market's a leading indicator, that's why,because of cost going up, that's why the markets are doing what they're doing.By the way, folks, if you're just joining us, you're listening to Gabriel Shahin,certified financial Planner, your host of More knowledge, More Wealth here onevery weekend.[00:16:25]Talk about all important topics of personal finance, and today we aregoing over just what's happening in the markets, and I'd like to discuss with youthat what we're seeing now is. Crazy. It's not like dire times. I know this kind ofseems like a longer bear market that we're in, but on average there's a 20% dropin the market once every four years.[00:16:47]So this shouldn't be like, Oh my gosh, I've never heard of thishappen ever. It's just we had a 14 year bull market up until this year from 2008
to now, and then of course we had that covid hiccup. But man, but by the timeyou got your statement, the market was already. And so, and if you had a greatadvisor, you were able to buy in on the low and even make more money in 2020than the 20.[00:17:11]Gain that the market yielded. So, um, so anyway, uh, let me continuethe conversation on volatility so you can, uh, see here. Um, based on theprevious conversations that I've had, that we are able to see that what we've hawhat we've seen happen. We've seen recoveries historically. Now, when youlook at the volatility this year alone, okay, there's been single.[00:17:38]Plus or minus 2% moves this year. It comes in the top percentilesince, uh, 10 percentile since 2001, and we're still only three fourths of the year.Remaining. So we've had 15 positive 2% days and 18 negative 2% days. Sothat's 33 total. Now,in 2020, because it was covid, it was crazy, there was 44that was in third place over the past 20 years.[00:18:08]Now, in 2008, to put it into context, it was 72 plus or minus negativetwo days, or positive two days. So now in 20 2009, the massive recovery thathappened after that, there was 50. 2002, which was also, uh, a volatile year withthe tech rack. Uh, and, uh, the nine 11 happening in late 2001. It was 52 plus orminus.[00:18:33]So we are on track for a very historic volatility year. Now, whenyoulook at all years on average, when you look at fourth quarter return, on average,there's a 3.8% return on average. Uh, uh, for returns on fourth quarter. Okay?That's on average. And a lot of it's, cuz you know, you have Black Friday, youhave positive things happening, uh, during that fourth quarter.[00:19:00]Now, when you look at a non-election years, okay, non-electionyears, the average fourth quarter return is 2.7%. Okay? That's for a nonelectionyear. During your presidential election historically speak. Since 1926, it's been a3.3% return. So it is better historically speaking. Now get this on midtermelections.[00:19:22]Historically speaking, fourth quarter does 6.5% returns almostdouble about the other ones. So I'm just saying don't freakout when those arefreaking out. That's when you have to worry. You don't wanna be that personfreaking. Of what's going on or what may happen because yes, there's nothingthat seems positive right now.
[00:19:43]When you look at what's going on in the stock market, the bondmarket, what's going on with inflation, what's going on with interest rates,what's going on with cryptocurrency, what's going on with almost every assetclass that's out there. Yeah. There's not a lot of positivity right now. I get it.There's very little to be excited about and I respect that.[00:20:03]But you cannot shut down. You cannot fold. You can't afford to beon the side. Because as I went over in previous episodes, if you miss out onsome of the top just 10 days, in the past 30 years, you could be given up almosthalf of your return. That's the thing. People don't realize that I'm just trying totell you to be disciplined, and if you can't be disciplined or if you just wannamake sure the current approach that you have makes sense for you folks, give usa call.[00:20:34]That's what we. We have helped thousands upon thousands uponthousands of people. Let us help you cuz at the very least, even if we can't workwith you, you can spread the good word of what we've done. We take pride inthe quality that we offer. We take pride in the people that we help. We cast avery large net out there, whether you or somebody you.[00:20:59]You can pass the good word and send them our way, but take a freesample. That's why we're offering a free financial assessment. Folks, to helprelate this show to your situation and answer the questions to make sure you arefinancially sound, that you are gonna be fine, that you are gonna be safe. That'swhat we can do.[00:21:19]So don't hesitate. Give a call now. Our phone number is (855) 963-2526. That's eight five. 96 Falcon like the Bird, or visit ourwebsite@falconwealthplanning.com.That's falconwp.com for sure. Folks, forevery negative news that's out there, be positive. Don't always look at thenegative. It's so easy to be negative.[00:21:46]Go on your social media. It's designed these days to get a negativereaction. Some of the things you read there, it's just designed to get you upset.Cause the more upset you are, the more you turn on, you know what's proof ofthat? Whenever there's some national disaster, God forbid, I remember nine 11like it was yesterday.[00:22:02]It's crazy to believe it's been 21 plus years since then. You couldn'tstop turning on the news. Whenever there's a mass shooting, you can't stopturning off the news. You have to watch. So the, the goal of social media is tohave you to continue to watch it. Any negative news that comes out, be. For it.
[00:22:21]Markets are down. I lost millions of dollars. How to be positive,Gabriel? Well, it's a buying opportunity. Have you could do your requiredminimum distributions right now? Put 'em into a brokerage account and letitgrow at a more favorable tax rate outside of the broker. Uh, outside of the IRAinto the brokerage account.[00:22:39]Do a Roth conversion. Let the growth happen outside of theaccounts, uh, tax free. Infuse more money into the account. Be happy that youlocked in your mortgage. At 2.75%, be positive what's out there and if you needhelp with that, give us a call. We can let you know that there are still things thatyou can, that you've done that's great, and still things that you can do.[00:23:01]That will be great. Phone number's (855) 963-2526. That's 8 5 5 96Falcon. Like the bird. Folks, that was a fast, fast show. I wanna thank you fortuning in with us. Feel free to reach out if you have any questions. We gotpeople working right now that can take your phone calls and help you. Wannathank you for tuning in with us.[00:23:20]We want to wish you a great week and God bless.
More Knowledge More Wealth - Oct 15.docx