Announcer:
It’s 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 of 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:
Well, Dave Nelson joins me in studio, so you’re watching, he’s got a T-shirt on.
David Nelson:
All right.
Gary Determan:
A little promotion there in Nelson Corp Field. Have you got an event going on?
David Nelson:
Yeah, we do. We’ve got a little gathering down the Quad Cities. We’re going to be inviting some friends in. Yesterday we had some clients in from Michigan, so we had a little gathering as far as with them. They come down here as far as typically about every other year, and they live in the Northern Upper Peninsula. So it’s Escanaba, great town and up there on a regular basis. But anyway, just a little opportunity as far us to have a gathering and what have you. And again, at the end of the day, it’s a little thank you as far as for clients. Again, some of these people, like the folks that came down here as far as, and we had dinner as far as with them last night. There was about four of us from the office that joined them. It was year number 36, so that they’ve been with us.
So his brother who lives in Freeport has been my longest tenured client, now 42 years. So anyway, good people, and again, good relationship. It’s been a win-win for both parties. And I said, the gentleman, he’s always just so nice, he wraps up every evening as far as when we have a gathering like this, “I got to tell you how much we appreciate everything, blah, blah, blah, blah, blah…” Goes through this stuff. And I said, by the time he’s done, there’s a couple tears rolling down his cheek as far as that we don’t have to think about this stuff because we have somebody that’s doing it for us that we can trust. So anyway, so it’s always a special night as far as to have a gathering with them.
Gary Determan:
I guess. So that community up there, our former general manager, Morgan Marty, him and his wife used to go up there and do cross-country skiing.
David Nelson:
Oh, really? Up in the Escanaba area?
Gary Determan:
Yes.
David Nelson:
Wow.
Gary Determan:
In that area.
David Nelson:
Wow. Holy cow.
Gary Determan:
I know it.
David Nelson:
It’s an area I don’t think I could live in because there’s just not a whole bunch of stuff as far as in close proximity. So for those that don’t know, it’s Green Bay, which is in Wisconsin, and now they’re in Escanaba, which is technically Michigan. But if you just keep going north, about an hour and a half, that’s where Escanaba is. So you’re way up there. Lake Superior is behind you, and you got Michigan as far as in front of you, as far as where they’re located. So it’s a great area, but man, the temperatures can get pretty severe, so it’s up there. I wouldn’t want to be there year-round. It’d be great to visit there and spend a month or two, but beyond that, I don’t think so.
Gary Determan:
I can never figure out how that was not a part of Wisconsin.
David Nelson:
Exactly. Isn’t that the truth? I mean, and again, there’s a time change too. I always have to, if we go up there, “Okay, let’s see, we go to Eastern, that’s right?” So you plan the trip accordingly because you lose an hour, you gain an hour depending on the direction that you’re going, but it just barely ticks over into Eastern time. But, it’s a beautiful area. And for those that go to, what’s the island, my goodness, in Wisconsin, people love to go to, not Mackinac… Anyway, you can see it from their house at a distance. As far as the lake, it’s so beautiful as far as up there. So anyway, I think the water’s fairly clear up there, unlike some other places.
Gary Determan:
The Muddy Mississippi.
David Nelson:
Yes, the Muddy Mississippi, eating some fish and what have you is always a treat. They’re big walleye people. They love to fish for walleye. So, they always have some walleye ready to chomp on. Good times.
Gary Determan:
Visiting with Dave Nelson again, he’s going to be into the bottom of the hour. Well, you were telling me you didn’t get much sleep last night, Dave?
David Nelson:
No, it’s a crazy thing. We had this meeting, whatever, I don’t know if it was that, but yesterday, for those that don’t know, it was a pretty violent day as far as the markets are concerned. And I was just sharing with Gary here that the tools we use, obviously they can’t pick the day or the week or even the month, but if you can get the quarter right, it can really save you a whole bunch of money, but it can also cost you a whole bunch of money too, as far as if the tools are wrong.
So our goal is to get the quarter correct, and we’ve been basically sitting in a very defensive, and I use the term very defensive position for quite some time. And so yesterday, again, it sounds terrible to say, but that’s actually a blessing for us as well as our clients as far as to see the prices go down.
Because at some point, we’ll… Generically, again, I can’t give specific recommendations. I got to be careful and all my disclaimers here, but at the end of the day, we’ll be making our way back in as far as in buying more equities, stocks of big companies and what have you, where again, we’ve been sellers of that because the run has just been unbelievable. If we look just over the last two years, give or take, it’s been a big, big push upwards. So we’re defensive. Basically what that equates to is sitting in a lot of really short-term bonds and cash. And that’s been a good call for the period of time that we’ve been doing it. And certainly yesterday it looked like a brilliant call.
Gary Determan:
We’ve talked about this on the program before. It’s amazing how the United States market affects worldwide markets. They were talking about that on the national news today where Asian, they were all a little worried about what was going on.
David Nelson:
Yeah, it’s significant. And one of the proxies for this, and I don’t even think I can say that, there’s an ETF, which is an exchange-traded fund that basically invests in 47 countries. So this product is designed and put together to have exposure to 47 different countries, and the US being one of them, and the US, I think Gary, it’s 47% of the whole global economies and markets, we’re 47% of it. So when you talk about, yes, when we sneeze other places suffer as far as from it and vice versa. I mean, we basically have carried the markets over the last several years. You look globally as far as whether it be Europe, whether it be Japan, whether it be emerging markets, they really haven’t done anything as far as their markets are concerned. But the US has done really, really well during that period.
So if you own this particular ETF, you’ve got the benefit of that 47, 48%, I don’t have the exact number, but it’s real close to that, that U.S exposure in that product that gave you a really nice return over the last two years. And again, that typically doesn’t happen for extended periods of time. That’s where we get, when you and I get into conversations talking about should you invest in the US, should you be invested globally? It’s a real challenge. And the cop-out way of doing this for years is you have exposure to all the above and then in theory, can’t get roughed up. You’re never going to have great years, but you’re never going to have bad years. Go back and look at the history books folks, if you really believe that, because again, when the US markets get hammered, global markets historically have gotten hammered harder.
So, when things are good correlations, fancy way of saying that things move in sync, and when markets collapse, they really move in sync. And so again, and we’re not talking about over months. We’re talking just in a matter of a few days anymore with the technology that markets can get hammered.
Well, yesterday you had the massive technology company that’s making all these chips that every company around the globe wants the AI, artificial intelligence, that stock was down like 10% yesterday. So again, you have these big, big moves now, it’s been up dramatically. I mean, a hundred plus percent as far as year to date, but you’re getting five and 10% moves in a day. I mean, that’s significant. And again, people need to be aware of that. They need to understand what they own. A lot of the segments that I do, whether it be TV or here, one of the common themes that comes out of my mouth on a regular basis is you need to know what the heck you own.
And a lot of people really don’t know what they own. And so again, we use the example oftentimes when people come in the office, maybe it’s a brand new person, they’re still working, bringing your 401K stuff. We start going through it, “How did you determine as far as that you’re putting your money in this particular mutual fund or ETF as far as in your plan at work?” And typically it’s, “Well, I guess if I were honest, it was a guess.” And I said, “Well, what did you look at as far as?”
“Well, this one has done really well the last three and five years.” I said, “Yeah, in the rear-view mirror.” So what I’m more focused on, almost always, and again, this isn’t a hundred percent guarantee folks, but almost always I want to look at the companies or the products, I guess the mutual funds or the ETFs that have done probably the worst in the last three to five years.
They haven’t had their day in the sun. They’re probably going to have their day in the sun, and this other stuff that’s had their day in the sun probably won’t as far as going forward. It’s like buying, and I use the example, if you’re buying an umbrella and it’s sunny out, like today, you’re probably going to get an okay price, but if it’s raining and you’re downtown Chicago and the guy on the sidewalk is selling it and you’re just getting drenched, guess what? That umbrella’s going to cost a little bit extra. So we try to use common sense stuff like that to try to help people make better decisions. And again, most of the time what it centers around is just not making decisions with your gut, but rather with your brain. And it’s hard to do. It’s really difficult. That’s why very few people out there are wealthy because again, oftentimes they just have made some bad decisions along the way and the neighbor did this, so I better probably do it as well though that’s not a good recipe for success for most people.
Gary Determan:
Again, Dave Nelson in studio, we will continue to the bottom of the hour, break for the weather now, brought to you by the Clinton Midas.
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A little more summer-like feel to the air today for your Wednesday, as winds turn more southerly. That, combined with sunshine, should push high temperatures into the comfortable low 80s this afternoon. For tonight, we’ll continue to see mostly clear skies, not as cool overnight lows in the mid to upper 50s with your Storm Track 8 Weather Impact forecast. I’m meteorologist Stan Tristutsky.
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Sunshine. We’re at 64 degrees, our update brought to you by Midas.
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Gary Determan:
Going to continue to the bottom of the hour, again, visiting with Dave Nelson. So I asked him this question during the weather break-
David Nelson:
Prepping me a little bit-
Gary Determan:
To explain just a little, I know, but does every country have a market?
David Nelson:
I’ll put it this way, that most do, yes. And you have… Again, hopefully I won’t put anybody to sleep when I go through this explanation folks, but you have the developed markets, which they’re pretty much household names. You got Cairns, Australia, Europe, Japan, etc. US. Then you have the emerging markets, which would be, still India is in that category, still China’s in that category. And companies that are the next tier down as far as usually sophistication and just as far as established like economies and what-have-you. And then there’s another tier down called the Frontier Markets.
Frontier markets, probably two out of three of those are in the Middle East or in Africa. And so that’s probably the next tier. And so some of those countries, I mean literally they may have five or six stocks that trade on their exchange, their market, and they’re massive in those countries, those particular companies, and most of them are banks as far as that would be in those areas that are the hub of the economies in many of those places.
But in comparison, I mean they’re just literally a dot, as far as if you look at the US market in comparison. I tell people often, I don’t have the exact date on this, but if you look at just the state of California and what’s produced there and the size of that economy, it’s larger than, I think it’s literally number seven or eight in the world if you just busted that off separately. So US, than you got China, as far as big market, Japan, European countries, etc. I think they’re number seven. So we absolutely dominate as far as just from a size perspective. But again, there’s a lot of creativity in whatever that comes from some of these other places.
There’s a term probably coined, I’m going to say now, 20 years ago. And it was the BRICs, B-R-I-C, and the BRIC was Brazil, Russia, India and China. And so you could buy products out there that just had their money in those places, and there was almost like an index created for the BRICs. And so that was a really, really lucrative place to invest your money, say 20 years ago, through probably 10 years ago, as some of these economies were exploding on the upside, they’re growing at a rapid rate. And so you were able to some degree, exploit some of that opportunity and invest when you put your money into something like that, essentially your money’s going into these companies in these countries that are producing whatever, whatever. And you’re going to be part owner of those companies and then prosper.
In recent times, now they’ve changed that. There’s very few. I don’t think there’s any anymore that trade under that, and primarily because of Russia. So they’ve been taken out of that as far as, and they’ve got another name that they’ve coined this as, and another country that’s been added, but most countries, getting back to your question, have some type of market. It’s just a question of, “Should I think about investing there?” I bring up some of the Middle East countries as far as with all the volatility and whatever, as far as over there and dictatorships and whatever. Would I feel comfortable investing in some of these places?
And again, you can do it. You don’t invest in a particular company necessarily there, but you could do it through a mutual fund or an ETF, then you’re hiring people essentially to hopefully buy the right stuff for you. But again, that specific advice, but I don’t think I would be venturing into those waters if I was an average person out there. But, it’s a changing world and the US economy dominates. We’ll continue to dominate probably in the foreseeable future. But you just look at India, India’s probably one of those countries that if you look 20 years from now, I mean they’ve got the largest population, they’re becoming much more sophisticated. They are creating a middle class over there that they haven’t had. And the end result is that there’s probably tremendous opportunity there, but it’s pretty pricey right now as a whole compared to what it was say just a couple years ago.
Gary Determan:
You know what I found interesting? You were talking about the size of the economies, China and India, but the economy’s an emerging market?
David Nelson:
Yeah, and that’s a really, really hot topic as far as primarily on China. China has basically, and again, this can get really, really deep, but big picture by law are still defined as an emerging market.
And it’s just wild. I mean, you look at Korea’s not, you look at Philippines, they’re not, I mean, how can China be as far as the big gorilla that they are over there as far as the economy? And they’ve chosen to do that because there’s preferential treatment for companies that are defined, or countries, I should say, as emerging markets. And so they’ve got a lot of incentives with that. And again, that’s where you listen to somebody that’s in the know. They get a little upset as far as some of the games that are being played as far as by the Chinese government.
Gary Determan:
One thing I did hear in the news too is talking about September being somewhat of a difficult month for the markets, and I know you have the Santa Claus rally, you got different things like that, but how does these things work?
David Nelson:
It’s a true statement, and the answer is, historically it’s been rougher as far as at the end of the month versus the beginning of the month.
I mean, with the technology that’s out there, I mean, you can cut and paste this stuff all you want, slice and dice and what have you, but we basically used there, there’s different items. If the year that you’re in with 2000 being an example with zero as far as being the last number, there’s certain patterns that historically have taken place there. Not always, but many times. And the one-year cycle, the presidential cycle, there’s just these different cycles and there’s a company that we buy their data from and they combine four of these cycles together. And if you look in a given year, it does follow that cycle. And again, it certainly wouldn’t want to make recommendations only on that item, but it can be one of the variables that you weigh in on as far as saying, “Okay, this could be a good month or a good year, whatever the case may be.”
But October, most people would define as the worst. But if you look at August and September, historically haven’t been very good. But again, it depends on is it election year? Is it non-election year? Is the incumbent likely to get the job back? That can influence things. So there’s just a lot of variables. But as a whole September, again, we’re very defensive right now for a reason. August, September, October can be extremely volatile. We saw it yesterday, volatility spike in a big, big way. And when things spike like that, oftentimes that can trigger computers as far as to do trading, because there’s a lot of offices out there that basically have certain variables built into the system that if this takes place, boom, they sell or boom, they buy. And so with volatility spiking like it did yesterday, a lot of those tools kicked in and subsequently, that can itself move the market.
Going back to basics, and I know I’ve shared this before with folks, but if you look at the stock market, it’s just a big auction. You’ve got people that want to buy. So bring up, well, again, I can’t bring up a company here, so a big company-
Gary Determan:
Don’t do that, David, don’t do that, David.
David Nelson:
I don’t want to be behind bars. But you take a big company and today there’s a whole bunch of people that feel like that big company’s going to do well, so they start buying as far as that stock. Well, there’s only so many shares out there, so the price of that goes up. So that’s good news as far as for the people that own it. Look at the other side of the coin, and, “Boy, I think so-and-So this company has really had some bad reports that have come out lately on it,” and all of a sudden you have a whole bunch of people looking to sell that’s going to put pressure on it to drive the price down more and more.
So again, it’s an auction. And at the end of the day, you want to be on the correct side of that. And it’s hard to do because there’s a lot of really, really smart people out there, and there’s a lot of really, really good tools out there that can help people navigate some of this stuff. But keep in mind, nobody has the secret sauce. I mean, people want to believe they have it. We’d like to believe that we have an edge, but we don’t have the secret sauce. And the secret sauce doesn’t exist because every day everything changes. I mean, the environment is different, the global landscape is different. Do you have an outbreak of a potential war that could really impact things? Stuff happens, and subsequently that can impact things.
Again, it’s not to say you shouldn’t invest. I tell people, we got a great chart, if anybody’s interested, you can swing by, maybe we can fix you up with a copy of this. But it shows the market, the S&P 500, which is 500 big companies, stocks, going back, I think, don’t quote me on this, but you’ll get the idea from this, something like 1953, you had 10 grand, today, you got over a million bucks and a really, really nice rate of return. And so then people say, “Yeah, but this person’s probably going to get in an office as far as the president, and I hate that guy, and I hate that party, and so I’m not going to dust, I’m going to sell everything.” So, if you were the Republican that said that, and you are only going to invest from that date, the 1953 again to roughly today, and instead of having a million bucks, you have literally, and I’m not exaggerating, so hold on folks, this is fact, this isn’t a guess. You got roughly 150 grand.
Now, the Democrat says, “I’m only investing when there’s a Democrat in the White House.” So bottom line, that person has about 250 grand instead of a million just putting your money in and forgetting about it. So what we try to convey to people when we go through these data points is that get your political views out of it. When I’m XYZ CEO of XYZ company, this major corporation, I don’t make decisions based on who’s in the White House. I make decisions on the marketplace out there, and can I sell my product, whatever my product is. And so people get on this high horse and they start yapping about the other dummies as far as on the other side. And my response is always the same. It has very little impact as far as on the market.
If you were to look at something, the Senate historically has had a tighter correlation than the presidency. So get over the president, whoever it is that you hate or you love, get over that as far as the investing has very little to do as far as who’s in the White House. And again, you can do a lot of damage to your rate of return by letting that influence your decision.
Gary Determan:
Amazing. How do you keep up?
David Nelson:
It’s tough. And that’s why last night there’s many hours sitting, watching what’s happening as far as around the globe. But this is a great point because-
Gary Determan:
You get excited about it, though.
David Nelson:
I do get excited about it too. I had a guy yesterday, it was one of my early meetings, and he says, “I don’t see you retiring probably anytime soon.” I said, “No, I don’t think that’ll happen.” But, the great joy that you get is helping people get what they want, and again, helping them get what they want typically translates into you’ve got to be a tough leader and let them know when things don’t make sense. And with the elections coming up, there’s not one person that comes in that doesn’t have a strong opinion one way or the other on this one. And if they’re start bringing that up, and many of them do, we typically try to shut it down pretty quickly saying it has very little to do as far as with your investments, and if you let it get in the way, it can really cost you dearly. And we don’t want people to miss out on returns that they should have gotten had they just kept that part of the equation out of that decision-making process.
Gary Determan:
Seems like good advice.
David Nelson:
It is.
Gary Determan:
Hey, enjoy your day.
David Nelson:
You too, Gary. Thank you very much.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. 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. For more information, visit our website at www.NelsonCorp.com.