Announcer:
It is time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker/dealer, member FINRA, SIPC. Investment advisor representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus program.
Gary Determan:
Hey, we got Dave Nelson in studio with us the middle of the month rather than the first of the month. Good to see you.
David Nelson:
Yeah, you too, Gary. Thank you. I appreciate the change. Had a little family gathering and it didn’t work out as far as getting together. We were up and got a place up in Minnesota and we finally got everybody together, so we had all five kids and spouses, et cetera, and then the 12 grandkids, and it was a lot of chaos as far as that took place, but and so. Anyway, it was a great trip and so we were all up there and getting everybody at the same time in one location and with it being an eight and a half hour drive, I mean, isn’t the easiest thing. But it was beautiful. We had great weather. Life was good. So anyway, now it’s back to work.
Gary Determan:
Had to be a great time.
David Nelson:
It was, yeah. I mean, again, with-
Gary Determan:
What are some of the activities you do? I mean, fishing, biking, boating.
David Nelson:
Yes. Boating. Pulling people behind the, tubing. We’ve got a couple wave runners. So we’ve got a fishing boat and then a pontoon boat and then a couple wave runners that John and James have picked up. And so it was a ton of stuff on the water. And again, back here you really don’t have as many options as far as to do that type of stuff and in a safe environment, what have you. So it’s really nice. And three individuals that went fishing with me have never fished before, so that was pretty cool. It’s stressful as far as to try to help them-
Gary Determan:
Bait the hood.
David Nelson:
… Bait it up and take fish, whatever, whatever. But man, it doesn’t get any better. So I really, really enjoyed that.
Gary Determan:
Did you get on Wave Runner?
David Nelson:
I do, yes, I do.
Gary Determan:
Oh my. I’ve never been on one.
David Nelson:
Yeah. I mean those things, depending on what you have, I mean, they’ll go 60, 70 miles per hour, so you better know what you’re doing and you better hold on. So yeah, I enjoy stuff like that. And yeah, we had a good time. I’m not a water person per se, so needless to say, I have a life jacket on all the time. I go in without it, I may not be coming back. I’m just not the most gifted in water and especially if you have clothes and on depending on what you’re doing.
Gary Determan:
Yeah, I know you’re a big Caitlyn Clark fan, of course-
David Nelson:
Yes.
Gary Determan:
… You’ve been following her and the University of Iowa with those last couple of years especially, it seems like she’s starting to get her footing a little bit now in the WNBA.
David Nelson:
I agree with that. I’ve said early on she was making some passes, trying to make passes that got through at a college level. And at this level, the people are just a little faster. The people are a little quicker as far as their hands, and so a lot of those balls were getting touched and when they get touched, oftentimes they turn into a turnover. And so lately, I mean, just some phenomenal numbers. The other part of it is that I think there’s some more rhythm as far as with some of the players that she’s playing with. She has a better feel for what they’re going to do, they have a better feel for what she wants to do. And the combination’s been pretty good. But what a fun opportunity it was as far as to watch her. I mean, we saw all home games for basically a two-year period of time.
We went on the road with them as far as in the tournament, and so we got to watch her live numerous times. And again, I know I’m biased, but I say this is the Michael Jordan as far as on the women’s side and having been a girl’s coach as far as high school for so many years, I don’t know, I just kind of like that game. I just really like it. And she’s taken that silly game that I coached as far as there and brought it to 10 times the level and had great success doing it, obviously is having great success now. And she’s also ringing the register in a big, big way as far as all of her contracts that she’s getting as far as advertising type stuff. So I’m thrilled.
Gary Determan:
I know you deal with some athletes and they certainly have an agent.
David Nelson:
Yes.
Gary Determan:
But how do you keep track of all those opportunities and what is already in your backyard?
David Nelson:
Yeah, it’s a real challenge. The first pro athletes that we started working with were NFL people. And it wasn’t the real mega names, they’re sheltered and protected and whatever as far as you don’t have access to them. But some of the other ones we did, and so we worked with a fair amount of them. And the agent is a really important piece as far as in that. And depending on, again, the size of the contract that the individual has will dictate as far as how much that agent is involved as far as in the process. But there’s a lot of moving parts. And you’re typically working with individuals that are, give or take 20, 25 years old, they’re making a whole boatload of money. And it’s a lot of coaching as far as from a financial coach perspective, as far as trying to help them make better decisions. And trying to tell young people that they shouldn’t be spending money when want to, because many of them never had it before and now they do, is not the easiest task.
And so you try to paint pictures of the success stories of people that had funds, spent some money, but also made sure that they thought about tomorrow versus the ones that didn’t think about tomorrow. And I mean, there’s case after Case, Kareem Abdul-Jabbar. I mean, the guy filed bankruptcy as far as, again time flies when you’re have fun, but this is probably 10, 15 years ago, and what’s he doing these days? He’s out doing TV commercials as far as for people that have heart issues or whatever, whatever. And you hate to see that. The guy played the NBA for how many years, should have been in better shape but sometimes it’s not them making bad decisions, it’s somebody running off of the money. As far as they had some bad people around them, whether it’s family members, whether it’s a financial advisor that was a crook.
Bottom line, bad things can happen. So I don’t know. I get great joy out of helping people because we’re in a very complex world as far as the financial side of it and making some of these decisions. And I can sit behind my computer and we basically map out as far as this stuff and make nice visuals and whatever as far as, and it’s nice when you start hearing people get it. And early on people don’t maybe want to get it or they don’t think they can get it and when it starts sinking in and they start realizing as far as what can take place… We’ve got a client I’ll meet with, I think it’s Friday this week, down the Quad Cities. He’s done really well for himself. I mean, we’re talking about a pretty substantial account. But just in the last 12 months he’s made $2 million in earnings as far as on his account.
And explaining it to him that way, that you’re up 2 million bucks is hard for people to comprehend oftentimes. And so again, we tell people, and I know Nate’s one of the big ones, I heard him the last week as far as bringing this up. It’s great to make it, it’s better to keep it. And so how do you keep it? So we have to have a very disciplined approach because markets go up and markets go down. I mean, we’ve been on a tear now for quite some time, and at some point there’s going to be a retracement that’s going to take place. The question is, most people, when you ask them, do you want to retrace? Obviously the answer is no. So what are you doing about it as far as so that you don’t? So like with this guy, we spent a lot of time talking about now playing defense.
We’ve played offense for a while, now we need to play some defense. And so that defense is going to be really crucial. And so things have to be done in order to play defense. And so that’s what we’re in the midst of and we’ll be going through with him as far as Friday, I believe Friday morning that we’re getting together with him. So again, whether it’s that sum of money or whether it’s somebody made 50 grand in interest as far as for the year, 10 grand for that matter, bottom line, it’s having a plan and in many, many ways sticking to it, being very disciplined as far as sticking to that plan. And again, we’re in a world that’s constantly changing. Again, I’m not talking about the day-to-day world, I’m talking about the financial world. We’ve got to be current. We’ve got to make sure that we’re paying attention as what’s going on and helping people make the tough decisions.
Gary Determan:
Very interesting. Before we take a break for the weather, something that occurred to me, you and I both have blue collar backgrounds.
David Nelson:
Yes.
Gary Determan:
Both of our fathers were factory workers.
David Nelson:
Yip.
Gary Determan:
You obviously have done a little bit better than me.
David Nelson:
In some ways. Yes, that’s all.
Gary Determan:
But how do you comprehend what you’re doing now and what your father was doing?
David Nelson:
It is different. I said when I realized that I was playing in a different league, it took place, it’s a over in Dixon, Illinois, and he grew up in Minnesota, eighth grade education, moved down to Chicago, started a business that was essentially hiding in trees and finding people that were cheating the insurance companies saying they were disabled, and then getting footage of them as far as doing various things that they shouldn’t be doing. Now that then fed into another business, which was healthcare cost containment. Long story short, the guy’s worth, give or take, probably today, a half a billion dollars. Now lives in Naperville around Chicago. But anyway, I was chatting with him one day about, so we did… This is back in the early days and our emphasis back then was much more on the estate planning and insurance than it is today as far as more on the money management and things of that nature.
And again, I knew I was in the big leagues when this took place. So his premium per year as far as for his insurance was a little over $160,000 a year that he’s paying for life insurance premiums. And one day I’m sitting there chatting with him about this stuff and he says, “Tell me again, is that a semi-annual premium or is that an annual premium?” And I knew if you can’t remember, if you’re paying 160 twice a year or 160 annually, that’s when I knew I was in the big leagues as far as talking to people that were just foreign. Because again, at that point in time, I was dealing with people that had 20 grand and 50 grand and whatever, and this guy’s paying 160,000 in insurance premiums and he can’t remember if it’s annual or semi-annual, he has to pay that. Woo. That opened my eyes up. So it’s different. And again, the people are still as a general thumb, very kind, caring individuals that I work with. Very, very lucky. But yeah, there’s different numbers. And with 1,500 clients that we have in this general area, we have some that are doing quite well and we have some that are up and comers. And whatever it is, it doesn’t matter, again, we’re here to help so.
Gary Determan:
All right. Again, we’re going to go to the bottom of the hour. What are we going to talk about in the second half of the show, Dave?
David Nelson:
Well, I think that one of the big questions that everybody’s asking about days is is the Fed going to cut interest rates and what impact is that going to have? So we’ll try to get a little clarity as far as to that one.
Gary Determan:
All right. Let’s check for the weather now. Brought to you by Awesome Carwash.
Announcer:
A gorgeous Wednesday expected to across The Quad cities, mostly sunny skies, lower humidity and cooler temperatures in the low 80s for us this afternoon. Tonight, mostly clear skies continue, we’ll see overnight lows dropping into the low 60s. Get those windows open, give the air conditioning a break. With your Storm Track 8 weather impact forecast, I’m meteorologist Andrew Stutzke.
Gary Determan:
Sunshine, Northwest winds, where it’s 72 degrees. Our update brought to you by Awesome Carwash.
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Gary Determan:
Back visiting with Dave. We were just kind of joking during the break, of course. NelsonCorp field-
David Nelson:
Yes.
Gary Determan:
… You don’t own the field-
David Nelson:
No, we don’t.
Gary Determan:
You run the ballpark.
David Nelson:
Exactly.
Gary Determan:
But you get calls sometimes…
David Nelson:
We do. We got a call around July 4th trying to get some tickets to the, watch the fireworks, watch the game, watch the fireworks, what have you. And again, yeah, we have contacts, but at the end of the day we don’t print the tickets or anything like that. But it’s nice. And again, you and I have chatted about this before, it’s such an important piece as far as for our community here and something that we felt that it was a fond memories as far as growing up as a kid, remembering the joy that I had as far as shagging balls down at the Pilot stadium. I really, really truthfully enjoyed that, the competition as far as trying to get it. Trying to have the ear for being able to hear the bat hit it and know that that’s a foul ball and what direction it’s going. There’s a skill to that, and I had it at one point. But anyway, no, it is great for the community and we’ll continue to support any way that we can. And hoping other people step up, those that are of the means that have the ability to do it will do it and fill some obligation as far as to do something like that.
Gary Determan:
Yeah. The PA announcer used to yell off to the right or off to the left.
David Nelson:
But everybody would hear that, you’d want to get that little edge and try to get one step ahead of them as far as the direction it was going.
Gary Determan:
Okay. Well, we wish we knew what direction the Federal Reserve may be going.
David Nelson:
Yeah. I wish we knew exactly as well. We’ve got a decent feel of what we believe… Again, I’ll get back into my disclaimers here saying obviously all this stuff is, they’re educated guesses, but there’s still some guesses that have gone into this. But the big question that people are asking is you hear so much hype about when the Fed starts cutting interest rates, generally that’s very good and the market will explode as far as on the upside. So we just can’t wait for this to take place, but all we have to do is look in the rearview mirror a little bit and see that we’ve already been on a huge run. And so is that because the markets are anticipating as far as rates being cut or is it some other variable? And now as far as after what took place as far as in politics, as far as the ex-president, as far as past president, having his ear almost taken off, what impact is that going to have?
Is he now going to win the election? And then the perception as far as what that’s going to mean and the ripple effects. So we could talk about this stuff for hours, I mean literally, and we can probably give people a little bit of an edge but there’s still to some degree guesses. So here’s my guess, here’s my prediction as far as what’s going to take place. That is rates are going to be cut probably this year. We’ll probably get a cut this year, would be my best guess. And what that’s going to translate into is, and if you think about this logically, if they’re cutting interest rates, why are they cutting interest rates is what people should be asking themself. And the answer is that the economy’s probably slowing to some degree. You raise interest rates to try to slow it down so it’s not at hyperinflation type problems, but you’re cutting because you perceive that maybe the economy needs that little extra boost.
So we’ll get rates lower and maybe that’ll encourage people to go out there. So I don’t know, is that a positive thing as far as the perception of that? So typically what takes place, and this is where people miss the mark, is typically it’s the anticipation of that because the hope is that as rates are cut, that maybe that will help people borrow money and keep the economy moving. So generally speaking, I’ll put it this way, the first cut, sometimes you’ll see a bump as far as up. Generally it’s already taken place, the lion’s share of the bump as far as upward. But when you get that second cut, and again, people are saying how many cuts you think there’s going to be and they’re hoping that we really start gouging and cutting and cutting and cutting. Well, if you’re borrowing money, you’re hoping for that. But if you’re an investor, I don’t know if that’s what you’re hoping for because if the Fed has to cut a lot of times it means that the economy is probably starting to tank.
So I don’t think that’s good necessarily as far as for stocks. So if I were a betting person, I think we’re going to get a cut. If I were a betting person, I would also say that the market is probably priced in almost all the good news, and be prepared, I guess, is the bottom line. We talk a lot about it, and I brought it up earlier, the offense versus the defense and people love offense but people ignore the importance of defense as far as the way they invest. We’ve been told that you just put the money in and over time you’ll be okay. I don’t quite understand that. When people understand that 50% corrections do happen, we had one in 2000 through 2002, we had another in 2007 through 2009. We’re talking about 50% drops folks, if you don’t remember, not 30, not 15, 50. And so those drops, when you drop 50%, what rate of return do you need to make just to get back to where you were?
And the answer is 100%. And so when we ask people, how quickly do you think you can make up 100%? And the answer is oftentimes it’s going to take a long time. The Nasdaq, which is primarily technology stocks, we saw it crater years ago 82%. 82% peak to trough, 82%. It took 16 years to recover your money. So if I put my money in day one, when it first started coming tumbling down, it took me 16 years to get back my money. So stop buying into the idea, stop listening to people that tell you, you just got to ride it out. That’s nonsense. When you drop 30%, you need to make something like 45% to get back to where you were. You drop 50%, you need to make 100% to get back to where you were. These are tough things to recover from.
So point being, nobody’s crystal ball works to the day, nobody’s works to the week or the month. But if you can get the quarter right, if you start sensing that all your pals are getting excited about investing their money, that’s probably a pretty good indication to run for the hills. I hate to say, it sounds terrible to say that. And this is why, again, this one also will sound terrible, Gary, but it’s worth saying if these people were right, they would be loaded. So there’s very few people out there that are really, really rich because to get really, really rich, you have to go the opposite direction of the masses. And it’s unfortunate, but that’s reality. And so again, be willing to go against the grain, be willing to sell when you’re up quite a bit and the news seems to be wonderful, that’s probably a time you want to start taking a few chips off the table.
And I hate that term, but people can relate to it. It’s the gambling. And what we talk about isn’t gambling, this is you’re investing in, you’re buying big companies and you’re jumping in bed with those big companies hoping to make money along with them. And at some point it’s probably worth taking a few dollars off the table.
Gary Determan:
And visiting with Dave Nelson. So is that how a Warren Buffet plays the game a little bit? And I hate to call it a game.
David Nelson:
Yeah, yeah. No, it’s true. And again, people say, well, he doesn’t market time. Are you talking about market timing? I don’t understand what market timing is. I’m going to try to time the market for the last 10 minutes. Is it for a day? Is it for a week? So again, just this stupid statement as far as that’s out there. But to put it in context, Warren Buffet leading up to the ’07, ’08, ’09, basically massive correction. He hadn’t bought in years anything. So the money’s coming in the door to hand to him as far as to go out and spend it and buy these wonderful companies. And he’s essentially saying during that period of time, no, everything is really expensive today. I’m going to wait. And once the correction started happening in ’08 and ’09 and it got pretty ugly and pretty bloody, he had all of this cash sitting on the sidelines and he started buying like crazy. Today, and today is probably about a month old now as far as the data, but he’s sitting on today over $100 billion in cash. Not in investments, in cash.
Why does he have that much in cash? Because he, like we, believe that things have gotten a little ahead of themself. We believe, like he must believe, that things are going to probably start correcting, in other words, a fancy way of saying dropping in price. And subsequently, he wants to swoop in then and buy a bunch of these good companies for pennies on the dollar. So yeah, that’s exactly what he does. People that are disciplined are disciplined and it works over time. It doesn’t work to the day and the week, whatever, but be disciplined and you want to invest when other people are running for the hills, as Warren says. And vice versa. When they’re excited, you be nervous. When they’re nervous, be excited. What
Gary Determan:
Interests me, intrigues me is I know how you got yours start. You were at Eagles-
David Nelson:
Yes.
Gary Determan:
… And then you put all your eggs in one basket.
David Nelson:
Yes.
Gary Determan:
What about a Warren Buffett, people along these lines, what are their backgrounds like?
David Nelson:
His is quite similar as far as coming from very little and being willing to bet on something. He bet on himself. I bet on myself, and trust me for years I wasn’t sure I made a good bet. Leaving a job, I was making 22 grand a year, basically at Eagles, and I had benefits and whatever, whatever. Two years later, it was under 10 grand that I was making supporting a family. Good luck. So it wasn’t all good, but it’s having the courage. And Buffet will say, if you want to become wealthy, you’ve got to concentrate your bets. And once you have some money, you’ve got to understand if you want to keep it, you’ve got to diversify. And so that’s the mode obviously that he’s in at this point in time and spreading it out into a whole bunch of different companies. I mean, he owns like Dairy Queen is one of them I like to bring up.
I mean just kind of what I would call boring companies and whatever. Just not the exciting technology type stuff. He buys companies like that, that he literally owns the entire company. Others he invests in. He didn’t invest in Apple until, I’m going to say five years ago, something like that now. Why? Because he didn’t understand it. He didn’t really get it as far as what they were doing. Then he got on board and it’s really helped make him a whole bunch of money for his investors. But it’s a tough business. And yes, you’ve got to have the belief in yourself and you got to be able to make it. And one last piece of advice, totally off kilter, but it’s talking about beginnings. And that is any speech that I give, I talk to the Ambrose people, I’ll talk at various graduations periodically, and I’ll bring up, don’t have a plan B. Don’t have a plan B because it’s an excuse to fail as far as your plan A. And so I didn’t have a plan B, I had to make it. And it’s the only reason that I made it because I didn’t have another alternative. I had to make it work. And so eventually you figure it out. And so I’m not big into Plan B’s is probably obvious.
Gary Determan:
Oh, that’s interesting.
David Nelson:
Yeah.
Gary Determan:
Don’t have a plan B.
David Nelson:
Yes, yes.
Gary Determan:
Now, when you say that statement in front of a graduating class-
David Nelson:
Yes.
Gary Determan:
… What are kind of the reaction?
David Nelson:
Shock. I think the parents probably as much as anything, because how many people say, well, it doesn’t work out, you do something else. And I’m saying no, I mean, focus on what you like. It doesn’t mean you have to be tied to it forever. But, again, a plan B, my version of it’s an excuse as far as to fail as far as on plan A. And so we don’t need an excuse. We commit to it, we make it work. And, again, takes discipline, it’s hard work. And trust me, you’re going to get your teeth kicked in. I mean, I’ve had my… Jordan talks about all the shots that he missed, Michael Jordan, again basketball talk. I’ve made more mistakes than people could ever imagine. And we’re talking with seven figure type costs many of them. And yet we’re still here. So it is just something you have to do.
Gary Determan:
You’re still here, and we’ll visit with you on August 7th-
David Nelson:
Looking forward to it.
Gary Determan:
… We’ll talk to you then. Thanks so much.
David Nelson:
Thanks, Gary.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker/dealer, member FINRA, SIPC. Investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.