Announcer:
It’s time now on KROS for Financial Focus, brought to you by Nelson Core 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 representatives, securities offered through Cambridge Investment Research Inc, a broker-dealer, member FINRA SIPC, investment advisor, representative Cambridge Investment Research Advisors, Inc., a registered investment advisor, Cambridge and Nelson Core Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus Program.
Gary Determan:
Well, of course it is the first Wednesday of the month, so Dave Nelson joins me in studio. Now, Dave, you weren’t able to make it in during February at all, so it’s good to have you in studio.
David Nelson:
Thank you. Appreciate it, Gary. I’m excited to be here today. The weather isn’t so pleasant outdoors. It’s nice to be inside. But I guess it’s supposed to get a little nastier as the day progresses. And I got to make a journey down to the city, so hopefully it isn’t too terribly bad. The temperature is supposed to drop. Is that what I understand?
Gary Determan:
Yes.
David Nelson:
Yeah.
Gary Determan:
32 is going to be your high.
David Nelson:
32. Okay.
Gary Determan:
Well, it’s 42 right now.
David Nelson:
Okay. Okay.
Gary Determan:
But it’s going to go in the other direction right now.
David Nelson:
Yeah. Yeah. Yeah.
Gary Determan:
Got to talk a little basketball.
David Nelson:
Yeah.
Gary Determan:
Of course, your nephew-
David Nelson:
Yep.
Gary Determan:
… Ryan Peterson out at South Dakota State. What do you hear from him?
David Nelson:
Again, it’s been a pretty good season, relatively speaking. For anybody that doesn’t know as far as college athletes can now be paid. And they really had a good player last year that said Adios because Creighton offered him a big, big check as far as to go to Creighton versus South Dakota State. So that hurt. But they were able to build around and get some other players. But again, their concern again is the same thing going forward, that this is probably going to be an ongoing issue as far as some of your better players. They’re upgrading to the bigger schools that have bigger checkbooks and they can pay these individuals.
Now, again, you’re the individual, what are you going to do? One place is going to pay you X number of dollars, the other one’s going to pay you a lot less. I mean, it’s a tough situation that we find ourselves in. So there’s a lot of talk that the NCAA should be doling out the money and having it go through that path to try to even things out. But who knows what’s going to come out of this. But again, he still enjoys it. He was out in the, I won’t go into it, was out west, I guess I’ll leave it at that. And he and one of the other assistant coaches was out there and they were scouting a particular individual and the AD approached him as far as handing them the keys as far as to take over a big school out in the West Coast.
And he turned it down. He just said, there’s just too much uncertainty with the AD’s position. And so this guy hires you one day and now he gets canned. And so anyway, they just said that it wasn’t necessarily the fit that they were looking at and they were going to, he and the other assistant coach, were going to be tag teaming it. So we’ll see. He should have lots of opportunity. I mean, you have, what do they call a, what’s the term? Mid-level division one.
Gary Determan:
Well, they call them mid-major.
David Nelson:
Mid-majors.
Gary Determan:
Yeah. Yeah.
David Nelson:
That’s the term I’m looking for. And as a mid-major, and they’ve been really competitive and made their way into the NCAA tournament numerous times. So I got to believe that there’s people taking a look and hopefully for him the right fit comes along.
Gary Determan:
Of course, we’re talking about Brian Peterson at Clinton High School, athletic standout-
David Nelson:
Yep.
Gary Determan:
… went to Kirkwood Community College.
David Nelson:
Yes.
Gary Determan:
Played there for two years with Doug Wagemester, now an assistant at Mississippi State.
David Nelson:
Is he really?
Gary Determan:
Yes.
David Nelson:
Oh, I didn’t know that. Wow.
Gary Determan:
Yeah. He’s an assistant coach at Mississippi State right now.
David Nelson:
God, I didn’t realize that.
Gary Determan:
Yes. Yes, he is. And then of course Brian got the opportunity after playing at Iowa State to take over the coaching position at Kirkwood. I think he won two-
David Nelson:
Yes. National,
Gary Determan:
… national championships-
David Nelson:
Yes.
Gary Determan:
… and now it’s South Dakota State, of course. So he is a rising star, still a young man.
David Nelson:
Yes. It’s exciting, as you said, to play at Kirkwood. Had two really good years and then went out and was the starting point guard as far as for Iowa State. Hung around there a couple years and had various roles and whatever, and then came to Kirkwood, and now up at South Dakota State. That’s the industry he finds himself in as far as movement is part of the job description many times. And so far so good.
His wife is able to work from home, so she is up there, but works for a company in Cedar Rapids. And so it’s working out. She has to come down there, I don’t know, twice a year or something like that. So hopefully, if another opportunity comes along and he’s able to jump on that, it will be a really good fit for him. And it’s exciting. I mean, the Nelson family’s a bunch of kooks as far as basketball is concerned, and we really, really enjoy it. And he’s taken it to a whole different level, and again, excited for him.
Gary Determan:
Again, we’re going to go to the bottom of the hour, a lot of things to talk about. Let’s get started with the market.
David Nelson:
Yeah. The market, we’ve seen tremendous volatility over the last week or so, last maybe week and a half, and everybody’s been chatting about, and I did a couple of interviews yesterday as far as for ABC and then one for CBS as far as down in the cities, down in the Quad cities. And both the discussion centered around what are these tariffs going to mean? And the market seems to be gyrating pretty dramatically right now. And the shocker to me was that this has been discussed for months. This was part of his campaign that we’re going to put tariffs in place, and yet the market seemed to be unprepared. And we had a couple big sell-off days as far as that took place, as far as after it was for sure this is going to take place.
So again, we’ve had a really, really good run. The stock market, if you go back again, 10, 12 years, it’s been a really nice push. And in particular the last couple years. I mean the indexes themselves, like the Standard & Poor’s 500 index has been north of 20% the last two years. If you had every dollar that you have in stocks during that period, you really had a nice run. This year started out okay, and then we’ve backpedaled since. And so right now we’re a little below water as far as if you, again, look at that index, that 500 stock pool of portfolio, you’re below water right now.
Nothing dramatic yet. But as we shared, as far as with the interviews that I had yesterday, it was pretty much that I got to believe we’re in the early stages, folks. Whether that is what you want to hear or not, I think that’s the reality. That we’ve basically, one of the members of Trump’s administration, his quote was, “This is the drug war right now, and we haven’t gotten to the trade war yet.” So in other words, we’re trying to punish Mexico and Canada as far as pertaining to the drugs flowing into this country. And so that was pretty much what he was saying. That’s what we’ve done so far.
But the trade war is yet to come. We haven’t done anything as far as Europe yet as far as imposed anything. But other countries like Canada, we put this 25% in, they shot back and have put the 25% back in our face. China, we can probably drill down on that. That’s probably the most important one to a lot of local people here, which pertains to ag as far as our farmer friends, as far as in this area, what that translates into. So it’s a complicated world. I love the concept. But as Warren Buffett said, pertaining to people use the term tariffs and taxes, some use them interchangeably. Others push back and say that that’s not the case.
But Warren Buffett said, and again, for those that don’t know, Warren Buffett, very wealthy man and old, but he’s been around the block a long time and really, really smart, has made a whole bunch of people very, very wealthy. And Warren Buffett’s quote was, “The tooth fairy is not going to pay the tax.” And so again, I think you and I, the listeners out there are going to be the ones that are going to see some things as far as go up in price. There was a estimate as far as on… This is, and I won’t get into the specific truck, got to be careful again, I don’t want to be behind bars, but a really high-end pickup truck and that pickup truck, the estimates are with the tariffs being put in place, will increase about $8,000 bucks, the cost of that truck.
So not what people want to hear, but the reality is it’s going to happen. I mean, pretty much everything as far as that we consume as far as that isn’t 100% made here is going to have a tariff attached to it. So time will tell, we’ll have to wait and see, and we’ll continue to update as far as on here. But I’m looking at this in the short term being a fairly negative event that’s probably going to last a little longer than what people want.
Gary Determan:
And those trucks were expensive enough as it was.
David Nelson:
Yeah. Ain’t that the truth. And again, you look at it and we’ve got steel as far as cost that we’re putting on others and what have you as far as the import, 25%. Now people say, “Well, how much steel actually goes into a truck anymore,” or car as far as, there’s a lot of other type of plastics and whatever. But at the end of the day, we’re talking about a whole bunch of stuff that’s going to be affected. And again, the eggs are the great topic that I know everybody loves to talk about as far as how much eggs have gone up. What people forget, is it just as inflation? We’ve had these horrific bird flu issues-
Gary Determan:
Yeah.
David Nelson:
… and we’ve had to put down all kinds of chickens that are no longer laying eggs. And so we act like this is just a one, a very simple thing that somebody can snap their fingers and all of a sudden that’s going to go away. But the reality is we’ve got bird flu to deal with and subsequently it’s going to take a while as far as for farmers to catch up and hopefully the prices revert back. But again, that’s anybody’s guess at this point in time.
Gary Determan:
A lot more to talk about Dave Nelson in studio. We go to the bottom of the hour. Let’s break for the weather. Brought to you by Morrison Community Hospital.
Andrew Stutzke:
A weather impact alert continues for the rest of your Wednesday. We’ll have rain transitioning to a quick round of snow. Accumulation of less than an inch, but low visibility is likely. Along with winds gusting beyond 50 miles an hour at times, as temperatures fall into the 30s this afternoon. Use caution when driving. With your Storm Track 8 weather impact forecast. I’m meteorologist Andrew Stutzke.
Gary Determan:
Right now, overcast still some light rain, temperatures now dropped to 38 degrees. Winds out of the northwest now 20 miles per hour. So Dave, going down to the quad cities, you’re going to have the wind at your back. Coming back might be a little more difficult. Our update brought to you by Morrison Community Hospital.
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Gary Determan:
First Wednesday, so we continue to the bottom of the hour. David, you and your staff do such a great job of keeping your clients abreast of what is going on. I mean, with newsletters, emails, and different things like that.
David Nelson:
It’s important. Periods of time like now, tariffs. Again, everybody’s heard the term. Most people don’t really understand how they work. I mean, we get the concept that there’s a number that is going to apply as far as people bringing their products as far as to the states here. Who pays it, how is it paid, et cetera, et cetera? And obviously I’m not going to go into a lot of that. The key that for the listeners out there is to understand that these are events that can swing either direction. This could be short-term, good news. I’m not in that camp. And it could be short-term, bad news, but I’m clearly in that camp as far as that it’s going to be a period of time of adjustment.
Again, as I mentioned, as far as prior to the little break there, our farmer friends are probably in the middle of, they’ve got the gun pointing at them right now. And again, some data here that I’ll try to simplify it as best I can, but roughly, of all the corn that’s grown as far as in the states, 10% of it is sold abroad. So relatively small amount percentage wise, but that’s a big, big number as far as corn that’s going elsewhere. And that’s going as far as to most of it is going to China.
So now in order for us to be able to sell it over there, China basically is shot back and said, “We’re going to put a number on you guys as well.” And that number is anywhere from 15 to 20% depending on the particular grain, what have you, that’s being sold. So that’s 10% as far as corn, but soybeans is almost 50% of what’s produced in the United States is sold abroad. That too is a big, big number. And that too will have this attached to it as far as the 15 to 20% tariff attached to it, let alone beef, let alone pork. So the meat that’s being sold is going to be affected as well.
So again, locally, I know people are talking about, oh, hopefully this is temporary, et cetera, et cetera. It’s kind of like a temporary pullback in the stock market. People use that analogy. And I said, “Well, define temporary to me.” Temporary to most people is probably a couple months. Temporary could mean, to me at least it does, it could be multiple years temporary. And so multiple years of having my product, the input cost of me putting my product in the ground versus what I can sell it for going forward is going to put a heck of a squeeze as far as on many of our friends out there.
And so again, we’re concerned about that. Again, we know that there’s going to be change that’s going to come about. We know that we’ve gotten our way in a few issues as far as talking tough. So there’s some positives that have come out of this. The concern is, again, selfishly for a lot of our farmer friends, I think in the foreseeable future it’s going to be a tough time as far as for those individuals.
Gary Determan:
You mentioned China and Canada, of course, but South America, Brazil in particular, I know they’re a big agriculture. And then Europe, their sector, how are they viewing this?
David Nelson:
Yes, so you’re right. It used to be we were the breadbasket of the world. I remember early on in my career as far as working with a lot of farmers and that was a term that was being tossed around all the time.
Gary Determan:
Yeah.
David Nelson:
You don’t hear that you used to. And the reason for that is just what you brought up, the volume that Brazil is producing as far as down there, we’ve knocked down part of the rainforest, whatever, and we’re planting corn everywhere that we can plant. Oh, and by the way, we can get two seasons in a year as far as the corn crop is concerned versus up here it’s one. And so this is a big, big item as far as for our farmer friends. So profit margins have been squeezed. We’re talking about, I think currently roughly $4.50 a bushel as far as for corn. It wasn’t that many years ago that that was $8.
And so again, these are big, big important items and people say, “Yeah, but the volume that they’re producing is greater today than it was then.” That’s true, there’s no doubt about that. But the reality is, it’s going to impact all of us and some just a lot more than others. And again, the farmers as far as selling their products abroad, Europe, as far as the grains that are produced there, Australia is now a big producer of grains. So we’ll have to see as far as if the Chinas in the world decide to go elsewhere for some of their products in the short term, will it be short term or will they fall in love with the corn crop that’s coming from Brazil and not so much from the United States? That’s a big, big concern if I’m a farmer out there trying to make a living.
Gary Determan:
Yeah, I didn’t realize they get two crops in a year.
David Nelson:
Yes. Exactly. And many different type of crops too as far as, again, they’ve got more sunlight, more heat, whatever they’re able to get it. I mean, up here you’ll see people that’ll try to get two seasons as far as on some of the ground and that typically they’re planting alfalfa or something like that, something that can add to the soil and maybe we can sell it as far as to dairy operations, et cetera, et cetera, things of that nature.
So anyway, yeah, it’s a really competitive landscape out there. And again, go back and look at, I can’t mention a name, but this company that’s real close to us, that produces a lot of farm machinery, that particular company, look at where they’re selling some of their biggest products. The biggest products that they produce, the big tractors, whatever, most of those are going to South America. They’re not in the United States any longer. These things are massive as far as in comparison to what’s being used up here. So it’s really interesting.
Gary Determan:
Yeah, it is interesting having listened to you through the years now and how things are worldwide. I mean, we’ve thought about Europe, of course, but South Africa, you’ve got Australia.
David Nelson:
Yes.
Gary Determan:
You’ve got Asia.
David Nelson:
Yes.
Gary Determan:
I mean it’s incredible.
David Nelson:
Yes. And everybody wants a piece of the action and understandably so, as far as that, “Hey, whatever I can produce as far as on my ground, again, I want to go out to the marketplace.” The example I use oftentimes, and I don’t have the specifics, but I’ll give you the concept, and that is Ford with the internet, when the internet came about… Well, let’s go prior to that. Prior to the internet, if I’m Ford, I need to chat with a whole bunch of individuals as far as about tires, just want one item, tires, as far as for my vehicles that I want to sell. And so I would talk to many wholesalers that are selling the tires, what have you.
Well, when the internet came about, all of a sudden that piece of the overall pie went away because we no longer need to have this middle man involved. I’m going to buy it directly as far as from the company. So just one example of what the internet and how it changed things for the better, as far as for us, not for the individuals that lost their jobs in the middle there, obviously.
Gary Determan:
Yeah.
David Nelson:
But for the bulk of the people out there, this was good news. So again, many of these countries out there are competing with us and with the ability to use technology as far as to be able to advertise their wares and be able to sell them any part of the globe is a really, really powerful thing. So the farmers that, again, we talk to, they talk about it as far as the competition out there, they’re aware of it. And again, we’re trying to do the best we can as far as to help them do a better job as far as selling their product. That’s the whole idea of the government and the government’s role as far as in that equation.
Gary Determan:
Again, visiting with Dave Nelson, got about five minutes left in the program. You have diversified yourself. You guys are doing very well with the taxes of course, at this time of year.
David Nelson:
Yep.
Gary Determan:
I don’t see as many cars down there, so they must be doing their job.
David Nelson:
Yeah, we are. The good news is that unlike years past, last year was a little better organized, but we went from zero to 60 miles per hour as far as overnight, as far as with the business. We went out and bought out three CPA firms and brought it under one roof, and it was a chaotic mess. And we had people working 12-hour days and 16-hour days for a period of time. We’ve got it better organized. And so this morning, it was a little lighter there, because we had no meetings as far as those type of meetings until 10;00, because it’s the people behind the scenes that are basically organizing and restructuring and what have you as far as trying to put the pieces in place as far as there. So it’s much better. The volume that we’re doing is increased dramatically.
Gary Determan:
Yeah.
David Nelson:
But we’ve got more heads and we’ve got a better system, I guess, as far as to handle it. It’s a crazy business. You got a three-month period of time where you pretty much do the bulk of the business in three months and the rest of the year, not so much as far as in this space.
Gary Determan:
I get here about a quarter to 5:00, and there’s always one car down in your lot there.
David Nelson:
Yes. Yes. Yes. Yeah.
Gary Determan:
I have one guy who gets there early.
David Nelson:
Yes, from Fulton. Yes. Illinois plates.
Gary Determan:
Exactly.
David Nelson:
Mike’s there early.
Gary Determan:
Exactly. How are things going with the Medicare and things along those lines?
David Nelson:
It’s busy, really busy as far as there. We’ve got three people that are kind of in that space as well, as far as that are keeping current. Trying to make sure that, again, we understand as far as from the standpoint of keeping current as far as on rules and regulations and what’s changing. And some of the discussions that are now being tossed around, is Social Security going to be impacted? Is Medicare going to be impacted? Is Medicaid going to be impacted as far as with us? So staying current is really, really crucial.
And again, we’ve got some really, really smart individuals that that’s part of their job. And yeah, I don’t know how many people right now that we’re handling as far as their Medicare type issues, but it’s a big, big number and that’s come about and give or take about a year and a half.
Gary Determan:
Well, as we close up, hold our hands here-
David Nelson:
yes.
Gary Determan:
… as we get to ready, what should be an interesting time?
David Nelson:
Yes.
Gary Determan:
What do you have to say to our listeners, to your clients?
David Nelson:
Yeah, I would say, again, just that term is that we’ll keep you as best we can informed as far as the general public out there. As far as our clients are concerned, we’ve proactively already made massive adjustments as far as the first of the year. So again, could be a bad decision as far as in a simplistic way, we sold most of our stocks and we’re sitting in money markets and short-term bond type stuff. So that’s generically across the board. I would say probably the bulk of our clients are in the 20 to 30% range as far as all the equities that they have, all the stocks that they have today.
So they’re pretty defensive right now. We could obviously go more defensive, but we think we’re in a pretty nice spot right now. As I shared with you earlier, Gary, for a couple weeks of the early part of the year, we didn’t look so smart. We sold and things kind of moved up on us, and oh, geez, maybe we sold a little too soon. But we’re feeling pretty good about where we sit right now as far as in a very defensive position.
Gary Determan:
All right, well drive careful. Always good to have you and thank you.
David Nelson:
Thank you, Gary.
Announcer:
Financial Focus is a production of NelsonCorpWealth 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 representatives securities offered through Cambridge Investment Research Inc, a broker dealer, member FINRA SIPC, investment advisor representative Cambridge Investment Research Advisors, Inc 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.