Transcript:

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This is More Knowledge, More Wealth, with your host, Gabriel Shahin. Gabriel is a certified financial planner and a registered investment advisor at Falcon Wealth Planning. This show is not intended to provide personalized investment advice through this broadcast and does not represent that the services or securities discussed, are suitable for any investor. Investors are advised not to rely on any information contained in the broadcast, in the process of making a full informed investment decision. More Knowledge, More Wealth, on AM 590 The Answer. Now here's your host, Gabriel Shahin.

Gabriel Shahin:

Good afternoon. This is Gabriel Shahin, Certified Financial Planner, and your host of More Knowledge, More Wealth, here on every weekend, talking about all important topics of personal finance. Our goal is to give you the knowledge you need to increase your wealth. Now, to the listener, you can always reach out to myself or any one of our colleagues here at Falcon Wealth Planning. Our phone number is (855) 963-2526. That's (855 96-falcon, like the bird. We'll go over all important topics related this show to your specific situation.

Now, I'm a principal of Falcon wealth planning, a registered investment advisory firm. We are a fee only financial planning firm. We also do investment management as well, but we really specialize in comprehensive planning, folks, that goes over anything involving a dollar sign. That's where you are today, how retirement looks like. Talking about taxes, investments, insurance, estate planning. Folks, you name it. Anything that involves a dollar sign, give us a buzz. Our phone number is (855) 963-2526. That's (855) 96-falcon, like the bird.

We'll be happy to relate this show to your specific situation. Now, folks, we are coming off on some volatility, no joke. You're getting watching the stock market. It's all over the place. It's going up, down, left and right. Man, we've been seeing some serious losses in the past week and really year to date as the market is double digit losses.

A lot of you folks have probably invested in tech because it's been doing so well historically, but that's down over 20% for the year as well. What is going on, and more importantly, what are you doing? This is the time where you really need to pay attention of what's going on, because some of your portfolio might be in bonds as well. Bonds are also volatile right now, especially as the interest rates are rising.

What the heck do you do? This is crazy. A lot going on right now. A lot of people I see, as crazy as it sounds, probably the first time in 50 years, that people are more concerned about the bond market, even though the equity markets are entering bare market territory, almost 20% drops. What does that really mean, if you're focusing more on the bonds? Because here's why, historically, when the stock market drops, bonds go up. What do you do during that period if everything is dropping? You have the long-term bond index down almost 20%. The 10-year treasury is touched 3%.

Folks, let me put that into perspective. A few years ago, it was less than one. It's like it's gone up over 300% in just a few years. If you look back five years, it's almost gone up 8%. You get my point? There are rising interest rates, in addition to inflation and people are freaking out. We haven't seen experiences like this since the Jimmy Carter years in the bond world, where bonds were at that point and interest rates alone were 10, 12, 15 plus percent. Are we going to get that? Especially, at the speed that we're going at right now.

These are the concerns that you have to acknowledge. With that being said, we are currently, if you look over the past two years, we are currently the third worst. This is everything I'm giving you is at the end of March numbers, Q1 numbers, are the worst, third worst two-year average of returns for bonds. That's terrible. The US bond market is down almost 2% for two years. Your safe money that's supposed to make you money is down. Now, when you look at the first two, which is in the Jimmy Carter years, March 1980 and August 1981, where they've dropped over that 24-month period, 3% and 2.7%.

Both of those years, the following two years recovered double digits, in March 1980 it was up 11.4%, in August 1981 it was up 23% the next two years after that. How can that be, especially as interest rates were continuing to rise? It's because folks, there is a repricing that takes place. For example, right now, you can get short-term rate. In maybe six months to eight months from now, you might be able to get a 3% short-term bond fund out there. As interest rates are rising, there are new issues that are coming out. This is extremely crucial, folks, in your situation. This is big. You have to be aware of understanding. You have to be aware that you cannot look at the logic of interest rates going up and thinking you cannot make bonds or money on bonds at all.

There is an overreaction. We're not the only ones that know that bond prices are going up. That interest rates are going up, which means bond prices go down, excuse me. We're not the only ones that know that. The industry knows that, and the industry gets to oversell. Individuals like yourself, freak out. I know you're thinking, "There's no safe place to put money right now." You have to be aware of being strategic and discipline. You cannot sell out. You've taken the risks to invest and you can't put it in cash. What are you going to do with cash? If you had money, $100,000 in the bank two years ago, today it's only worth 85,000. Think about that. How can I guarantee that? Look at what's happened at gas prices, car prices, home prices, cost of goods, bread, milk, eggs.

Folks, you've seen the prices go up. Listen, I'm not trying to depress you here. I'm just trying to educate you on what to do. 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 on every weekend, talking about all important topics of personal finance. We wanted to discuss the volatility in the markets right now and what you should be doing. If you need help, if you want to help relate this show to your situation, and more importantly, see if you can get some answers of how you're invested in the goals you're trying to achieve, give us a call, folks.

We help people all across the country. Our phone number is (855) 963-2526. That's (855) 96-falcon, like the bird. We'll be happy to help you out. Our headquarters is here right in Southern California. We would love to help, it doesn't matter where you are. The purpose of me going over the bond markets is, do not fear. Everything shall pass. Every negative thing shall pass, whether, God forbid, it's a death in the family, to losing money in the stock market. As long as you didn't put all your money in Toys“R”Us a long time ago, assuming you're diversified, this is just a drop in the bucket. It's normal, folks. I know you're freaking out about rising interest rates.

Inflation, our political climate. I know you're freaking out about the war and be nuked, which by the way, to my last note, America's the only one that's ever dropped a nuclear bomb for extreme catastrophe. We had this worry in the 60s, which I wasn't even around then. My point, we've seen this movie before and this shall pass. Even if we didn't get nuked, God forbid, who cares if you have a million dollars in the bank at that point? You get my gist? The idea to think that there's nothing you can do and there are no answers, are incorrect.

We've seen drops in the stock market. We've had the second and third worst drops in the stock market history in March of last year, March 12th and March 16th. It was a 10% drop, a 9.5 drop and a 12% drop in one day alone. You add those together, it dropped over 20% in just two days. If you look a year later, what happened to those returns? Up 60, 70%. We've had some of the worst drops in the history of the stock market in 2020. If you look at the top 15 that are out there, we had eight of the worst of 15 days in the history of, or since 1950, I should say, we've had those happen in 2020.

It is bad. If you look at the returns, what happened after that? It went very well. Some of the best days in the stock market happened. Also, when you look at the top five days out of the 15, five of those happened in the 2020 alone. Most of the returns come after market drops. Over the last 20 years, 24 of the 25 best days in the market occurred within one month of one of the worst 25 days. Do not freak out. We need people to freak out for us to make money. We need you to sell, to drive the price down even more. That's when we scoop in and buy at a discount.

When my wife goes to Macy's, what does Sophia do? She goes straight to the red racks. Why? Because if she liked that dress at $250, she sure likes it more at 70. Well, if she already has that dress and they drop it to 50, what does she do then? Well, she just buys a different color. They will never give that dress away at no cost. Stock market is the same way. That's why it's important to be globally diversified. I know you're not feeling good right now of what's going on in the market. I'm not feeling good. How can you feel good when you have this type of negativity happening?

You turn on the news all the time. Their job is to get you depressed. That's why we have so much mental health issues these days. My dad was still around, God rest his soul, he would slap me silly. He said, "What is this mental health? Just walk it off. Be tough." That's my father. You know what, it's staying true to me. Because you know what, every negative aspect of everything, has a positive to it. Everything, there's a positive. I know what you're thinking. You want to make fun of our president right now. It's like, "How is this positive?" You know what, it gives the crazies on the left some stability.

At least now, we appease one half of the population. I know they're saying the craziest to the right, you had the last four years where you had some stability. You get my point? There is no right or wrong answer here. Find positivity, just be positive. There's always positivity. Markets drop, it's on sale. What you should be doing right now is taking what you made money on and buy what you lost money on. You should have done that last year when you just made 20% annualized returns from 2019, 2020 and 2021. No, you're, what's the word, a nice way of saying it? I don't want to say stubborn. The word I'm looking for is probably greed. No, it's going to keep going up. No reason not to.

It's important to be disciplined in your approach and be diversified. There's always something you can sell and buy that's on sale. The problem with the stock is, you can go to zero, as we've witnessed in the past. Please, be disciplined in this approach. If you need help with that, give us a buzz. That's what we're here for, guys. Whether your clients of buyers or not, it doesn't matter. If you just need to talk to understand more of the market, we can help. Our phone number is (855) 963-2526. That's (855) 96-falcon, like the bird.

When we come back, I'm going to talk to you about diversification in your portfolio, on why it is crucial to have it. Because there is volatility that's going on. There is problem that do come up and you have to be aware of things to do that can help reduce that volatility and have a future vision of what you should be doing. Folks, we're going to come back after a few words. We look forward to serving you.

Welcome back, folks. This is Gabriel Shahin, Certified Financial Planner, and your host of More Knowledge, More Wealthier, here on every weekend, talking about all important topics of personal finance. Today, we are talking about the volatility in the stock market, folks, and there is a lot to discuss. The markets have dropped substantially. They are down 10, 15, 20 plus percent, depending on the industry that you're looking at. There's inflation issues, there's currency issues. There are interest rate issues. There's war issues internationally with threats to America. Yeah, I can see how it can be pessimistic here. Just know, as I mentioned in the first part of the show, this shall pass, it always will pass, always. That's just how it is.

Us, as humans, are survivors. Simple as that. Our goal is to survive. Whether that's working, whether that's running your company or whether that's just putting food on the table. There is going to be a way that you will survive. There's no difference in capitalism. There's no difference in companies. There's no difference in anything else. My point is, is right now, this could be one of the buying opportunities that you've been looking for in a long, long time. I know we've had very few buying opportunities of a lifetime. Last one I remember was in COVID. That was very opportune to take advantage of that. One prior to that was 2008.

It seems to happen every 10 to 15 years. Well, if this continues to drop, this could be the buying opportunity you were looking for. Please, take advantage of that. Just remember, not everybody is fully invested in the market at one time. Investing in the market isn't just all or done, it's either you're all invested or all out. No, you can be partly invested. That's why people have fixed income or we'll call it for simplicity, bonds, in their portfolio. It could be really that simple. Sometimes people say, "Well, I know stocks are going to make more than bonds long-term." Well, let's put that to the test. We did an analysis through our partners at Morningstar. What it looked like, if you were to invest $1,000 in 1926, what have that grown to by the end of last year, 2021? You would've had $14.1 million. Yes, that's a lot.

That was almost 100 years of investing and compounding, that's what it gets. Let's continue to see what that looks like. If you maybe didn't invest all your money in stock, what if you just invested 89% of your money in stocks? Less than 90. Means, you had 10% in bonds. Well, you would think because stocks outperform bonds long-term, you would have in fact more money in the option one, with the 14.1 million, 100% of stock. Well, the reality is, in that same situation from December 31st, 1925, so January 1st, 1926 to the end of last year, you would've had not 14.1 million, but 16.1 million. You get my point? You actually have more by being diversified. Why? Because you have money sitting on the sideline that doesn't lose money.

When you look into that and I'll give you one quick example, if you have 100,000, you lose 50%, you get 50,000. If you make 50% on that 50,000, you're not back in 100, you have 75,000. You get my drift? You have to make 100% after losing 50. Sometimes it makes sense to have stability in your portfolio. Sometimes the best way to make money is just not to lose it. This is why it's important to understand how you're invested, to have a proper plan in place to your specific situation and goals. Maybe your goal is, "Hey, I'm going to work for the next 20, 30 years. I want to be invested pedal to the metal. I don't care what happens in the stock market." Well, what are you investing in? How diversified are you and do you need to be 100% in stock?

These are the questions you need to ask yourself, because if the market drops like it did in COVID of 2020, your portfolio was down 37% at the bottom. How would you be able to buy on sale if everything was down? You get my point? Strategic, being opportunistic is crucial. If you need help with that, give us a call. If you have questions on it, if you're our clients listening to this, give us a call. We are happy to help and explain. Our phone number is (855) 963-2526. That's (855) 96-falcon, like the bird. We'll be happy to put a personal confidential assessment for you to answer these questions that you may have. This is what we do on a daily basis.

By the way, folks, if you're just joining us, you're listening to Gabriel Shahin, Certified Financial Planner and your host of More Knowledge, More Wealth, here on every weekend, talking about all important topics and personal finance. If I sound a little stuffy, it's because I am a little stuffy. No, it's not the stock market making me sick. It's just the allergies here in beautiful Southern California. It is going from 62 degrees one day, to 95 degrees the next day, so on and so forth. Allergies are on an all-time high, folks. You know what, that's human nature. Find me a person that's healthy 100% of the time. No, our heartbeat goes up and down, up and down, up and down. That's if you track it on a monitor. That's how the stock market is, it's natural.

It's human, volatility is expected in life, so don't freak out over it. Be opportunistic, find the positivity in it. It is crucial because guess what, for every person losing money, there's somebody that's making money. Don't guarantee your losses to solidify somebody else's gains. Be strategic, find a partner. Find somebody that talks you off the latch, whether it's your significant other, whether it's a sibling, whether it's a family member, whether it's a friend or coworker or whoever it may be. You need to get stability in life, especially with investments. Don't listen to those who say they got rich quick, try duplicating that. If you're timing the market, you can't just get right once when you get out, you have to be right when to get back in. We don't see that often. You have to be strategic with these things, please.

If you need a partner to do that, we can help. We've got offices all across Southern California. The phone number here is (855) 963-2526. It's (855) 96-falcon, like the bird, or visit our website at falconwealthplanning.com. That's falconwp.com, for short. I might add all across, I guess you could say the Western US, and we help people nationwide as well. I did want to continue to talk about this yield curve and people are freaking out. You hear about these inverted yield curves. This was a big thing about a year ago. Of course, we haven't heard about it then, because the stock market only went up because the news is trying to scare you so other people can make money, but you don't know that. You just listen and hear what everybody says.

Everything on the internet has to be true. Sorry, but you get my point. Talk to a professional who does this on a daily basis, with a team of people and research and processes and proven academic research that shows you what to expect. We have seen this movie before, we do this every single day. On top of that, what strategies you should be taking advantage of to make sure you come out of this storm ahead. Because if you look at when inverted yield curve happens, the stock market historically does 9.2% since 1976, why is that important? Because that's when interest rates started going up during the Carter years. 9.2% on average. Now, if it's a flat yield curve or less than 1%, it does historical 16.5% returns. Then if it's a steep, which is greater than one, does 11.1%. Which means that it's not inverted, that's just a steep.

Let's focus on what bonds does. Now, on a flat situation, bonds historically do 6.8%. On a steep curve, it does 6.3. What do you think it does on an inverted? It actually does almost 8%, 7.9, to be specific, when you look at the aggregated bond index. Short-term does 8.9% during inverted, compared to 6% when it's flat and steep at 4.4. You get what I'm saying? What is everybody freaking out about? This is crazy. You know what does get punched in the face, is high yield bonds, it gets junk. Are you chasing yield and junk bonds? Because you're in a flat yield curve, those do %7.5 In a steep one, they do 9.6. Pretty great. Inverted, 5.4. Yes, it gets punched in the face. It's significantly under-performing.

Regular bonds or short-term months do well, so stop freaking out. Get your information from credible resources. If you want help, if you want to see how you're invested, what bond diversification you have, how diversified is your equities in your portfolio? That's what we can help you with, folks. The clients in Falcon Wealth Planning should be happy. Are they happy if they lose money? No, but when they compare it to the 20% drop, they are happy. You're not losing as much. That's crucial to understand. Because right now, when you look at the performance of the recession, historically, US bonds are solid, or US stocks do very poor, 1% on average and the US bonds on average, 8% is 60/40 breakdown is a 4% return on average.

I'm not telling you to invest 60/40. I'm not telling you anything. What I am telling you is that volatility is normal. Depending on what you need this money for is how you should invest the money. Do not freak out. Everything bad in life shall pass. I promise you. When my father passed away, I was 23 years old. He was the primary breadwinner of the house. I was the eldest, me and my sister. She's older than me a couple of years. We were all looked at each other after everybody left a funeral, we said, "What the heck are we going to do?" Guess what? We all figured it out. Every one of the kids, I'm one of four, is a homeowner, is married, is happy, healthy, successful in their own right. We are blessed. We figured it out.

My point is, every negative thing, find the positive in it. I promise you that's 90% of the battle, is keeping your head straight. If you need help pointing you in the right direction, keeping your head straight, that's what we can help with. Our phone number is (855) 963-2526. That's (855) 96-falcon, like the bird. Give us a call. We'll help relate this show to your situation. We've seen this movie before. I hate to tell you it's boring. Spoiler alert, it wins at the end. You don't get as much drama in between, so it's kind of a boring movie, but do you really want a boring movie with your finances? You get my gist? Just take it easy, everything will be fine.

Folks, what a fast, fast show. I want to thank you for joining in with us this weekend. Feel free to listen to us on our podcast, Spotify, or just tune in on the radio. We'd be happy to help. Give us a call if you want to relate this show to your situation. Our phone number is (855) 963-2526. That's (855) 96-falcon, like the bird, or visit our website at falconwealthplanning.com. That's falconwp.com, for short. We'll help put a customized assessment for you to help all the answers that you have. I want to thank you for tuning in with us this weekend. Have a great week and God bless.