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 representatives, 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:
Dave Nelson in studio with us and looking awfully dapper over there, Dave.
David Nelson:
Oh yeah.
Gary Determan:
People can see these programs. Yeah. Suit and tie on.
David Nelson:
Be like a basketball player here.
Gary Determan:
But you’ve got other media responsibilities, I understand.
David Nelson:
Yeah. Yeah. It’s a busy day today. With New Year, there’s a lot of requests or whatever. We get a lot of written requests as far as from various publications, CNBC, MarketWatch, organizations like that that are always out trying to get people in my position, our philosophy, our belief as far as what’s ahead. And so the TV station today, we’re going to be recording a couple segments talking about ideas and thoughts as far as going into ’26, as far as what people should be contemplating, thinking about, et cetera. So yeah, that’s why I put on the tie this morning.
Gary Determan:
And the great thing for you is, especially with the weather that we have now, you don’t have to travel. You can do it right there in the office.
David Nelson:
It’s really nice. Zoom. Microsoft has their own version, which is what we use, but at the end of the day, yes, we set up, we’ve got more or less a studio in house now. And so we do everything from there. Used to have to, when we first started as far as on CBS, we would have to go down in the morning. I’d literally leave at like 4:30 in the morning to go down to do the segment as far as at the 6:00, 6:05, whatever time slot that they had us in. And so COVID was actually a positive as far as that was concerned. So anyway, so no, we set things up up here and we’ve got really good equipment.
Jake, the technology, I walked in and saw you talking technology and adjustments being made with Paul here. I’m doing the same thing as far as down there. I have no clue as far as technology and no skillset whatsoever as far as in that area. But yeah, it’ll be probably an hour of filming, what have you, and then they cut and paste as far as whatever they want to use as far as in the upcoming segments that they have.
Gary Determan:
Very interesting. I know you have a number of clients throughout the United States and you would prefer seeing them in person when you can.
David Nelson:
Yes.
Gary Determan:
But it’s great to have the technology where you can talk to them and not have to be there.
David Nelson:
Really is. And it’s not the same, but it’s as close as we’re going to get. And yes, we have clients in 48 states, I think now. So yes, it’s difficult as far as to have that face-to-face. Years ago when we brought on somebody from afar, the rule set was essentially once a year, you come my direction, the next year I go your direction. And so that worked pretty well, but this is so different now. And the one that comes to mind primarily is we got this great couple. He is probably the best Santa I’ve ever seen. When I first met this guy, he’s a high-priced attorney that’s now retired and he is one of the most giving individuals that I’ve ever come across.
So long story short, he and his wife, they do the Santa Claus action and they do it primarily not in like malls or anything like that, but they do little gatherings and they’re typically done for kids that have like some disabilities. And some of them, it’s auditory where they can’t go into a mall. It just kind of freaks them out, whatever, whatever. So they do these sessions and he does it pretty much year round. And it’s just the coolest thing.
And so anyway, whenever we link up with him, the background is always something Santa related. It’s just the coolest thing. And both of them are now, they’re probably in their mid 80s and still doing this. They live in Atlanta. They spend some time down in Florida a few months a year, but they’re on the road a ton making a difference. So that’s an example. We’ve got a guy we brought aboard recently as far as out in Wyoming. So we’ve linked up with him numerous times as far as via the Zoom type connections.
So yeah, it makes things easier for us. It makes it probably better for the client because they have access to us more than what they would have otherwise.
Gary Determan:
Don’t like to get political, but there is a lot of things going on right now. And how does that affect the markets? Because it is pretty much worldwide market now, is it not?
David Nelson:
It really is. I mean, when you look in the rearview mirror, you see quite a disparity as far as… And again, I’ll talk in very general terms here, but over the last 10 years, if you were to look at the performance of our markets versus the performance of international markets, it’s not even close. I mean, we outperform by a long shot. It’s primarily because of technology. So we’ve got a lot of big technology companies in the United States. Technology has worked over the last 10, 15 years, and subsequently you have this massive gap. But if you look over a longer period of time, what you see is that international markets along with US markets kind of move in sync. And so with this, I guess, event that’s taken place down in Venezuela, so far markets have kind of brushed it off. Interesting stat relating to this that at one point, if you go back 20 years ago, Venezuela was 17% of oil production. Today it’s 1%.
It’s just shocking numbers when you hear stuff like this. And so you say, “Well, is it going to have impact?” Well, to date, no, but we’ve only taken out one individual. Right now, we’ll have to see as far as what’s going to transpire as far as are we going to continue to pursue things down there? Are we going to go in and try to take out more people? Hard to say. But again, this could have a ripple effect, but to date, it really hasn’t had any impact yet as far as directly there, but there’s a lot of speculation that Russia and China are starting up as far as another massive campaign, as far as trying to disrupt things as far as in the States. In other words, cyber type attacks, and we’ll have to wait and see as far as, again, if that takes place. And all likelihood, probably is going to and what impact is it going to have on the average person? Hard to say at this point in time. But again, if it’s quite massive, which it could be, markets are probably not going to take that very well.
Gary Determan:
Of course, you think of the United States certainly for markets and I would imagine Europe and possibly Japan, Asia and like that. But what about South America? I mean, were they much of a player at all?
David Nelson:
As far as the markets?
Gary Determan:
Yeah.
David Nelson:
Pretty non-existent. I mean, if you look just the last 12 months, Brazil, there’s a lot of progress that’s been made down in Brazil as far as, I guess, cutting out fat and whatever that means. Again, that’s probably a terrible term to use, but streamlining things, making things better. Their stock market last year destroyed ours. I mean, it was like three times the performance as far as the United States, and we had a really good year as far as in the States. You look at Africa, Africa’s an up and comer as far as in that regard.
Again, both of those continents, relatively speaking, are still dots in comparison to what’s taken place elsewhere. But China was a dot not that many years ago either. And Japan, go back 20, 30 years ago, they were a dot. So it’s hard to say as far as going forward, but I’m a believer, and we can probably expand on this as far as in the second half here. But a big believer that people need to diversify a lot more than what people have. And emerging markets as a whole had a really good year last year and are setting up probably for another really, really good year. Can’t predict anything for sure, excuse me, but things do look pretty positive as far as in that space.
Gary Determan:
You know, that is quite interesting. I mean, to diversify and get involved with the various worldwide markets.
David Nelson:
Yes. The simplicity of it. I mean, today with the mutual funds, with ETFs, exchange traded funds, so many of them today have exposure. In other words, they have the stocks of some of these countries as far as some of the companies within those countries. And so it’s a terrific opportunity to diversify. The thing that I find fascinating are what are called frontier markets. That’s beyond emerging markets. Emerging markets are kind of the next probably phase of countries that are going to be bigger players. Frontier markets are below that threshold. So they’re the really ones that probably we’re not going to see for quite some time. But what’s fascinating about that is some of the investments that invest in those countries, when you look at the United States having a good day, they typically have a bad day and when they have a good day, we typically have a bad day. It’s really interesting.
And I guess point being that it’s a good diversifier is I guess where I’m going with this. It can be, I should qualify it. It can be a good diversifier and something that people should be contemplating as far as what’s the next… I mean, did anybody see China being the second-largest economy in the world as far as 20 years ago? I don’t think so, but today they clearly are, and they are a big, big player. So keep your eyes open, look for opportunities. And again, outside the United States, there’s probably a lot of good opportunities that people are overlooking at this point.
Gary Determan:
All right. More with Dave Nelson on today’s program. Our weather update brought to you by SKelly’s Design.
Andrew Stutzky:
Watch out for some very dense fog this morning. Weather impact alert is in place until 11:00 AM for that. And then a dramatic turnaround this afternoon as we bring in mostly sunny skies and see temperatures up to 50 degrees. We’ll have a few clouds overnight, warmer temperatures dropping into the low 40s. With your Storm Track eight weather impact forecast, I’m meteorologist Andrew Stutzky.
Gary Determan:
Well, again, from the airport, visibility is still just a quarter mile. Still freezing fog is what they are reporting. 30 degrees are winds out of the south. Our update brought to you by SKelly’s design.
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Gary Determan:
First Wednesday of the month, so we get to continue on with Dave Nelson. First Wednesday of the year. So I know you can’t get into real specifics-
David Nelson:
Sure.
Gary Determan:
… but how do you see 2026?
David Nelson:
Well, so we’re breaking records in a lot of areas and probably the big one comes back to the last three years. We’ve had three big years back to back to back. The odds of a fourth happening in a significant way are pretty slim, but that doesn’t mean that people can’t make money as far as in that environment. I mean, we spent a lot of time talking on this program as far as the importance of being realistic as far as returns are concerned, but also the fact that we don’t subscribe to this concept and this idea that’s been put in people’s heads for generations. And again, I questioned the rationale as far as why this was the approach. But the end result is that market timing, as far as the way most people would define market timing, getting in, getting out, whatever, is not an answer as far as that people should be contemplating as far as with their monies. However, understanding that markets do correct and markets can correct in a significant way on a fairly regular basis.
So the example, I was blessed to spend time with probably the greatest money manager of all time. His track record was 26.9% average rate of return over a 13-year period of time. He retired several years back. But anyway, I spent time with this guy. He said, “Everybody needs this test.” And I know I’ve spoken about this as far as on this program before, but I want to reiterate the numbers and really drive home this point that if you go back to the year 2000 through 2010, there was essentially two periods of time, two different events that took place that were basically 50% drawdowns. In other words, the stock market dropped 50%. One was 58, one was 47%. So we’ll round it off and say 50% for each one.
So play along with me here folks for a second. So you’ve got $100,000. I know that’s a big number for some and not very big number for others, but for round numbers, I want to use 100 grand. If the first year you invested your money today and 12 months later, it was down 50%. What rate of return do you need to make just to get back to where you were? Well, on the surface, it sounds like, well, I went down 50, I got to go up 50. Wrong answer. If you had 100 grand, your 100 grand now looks like 50 grand, and your 50 grand has to double. So in other words, when you lose 50%, you need to make 100% just to get back to where you were. Well, David, you’re playing with numbers, blah, blah, blah.
Let’s reverse it. So let’s say the first year you’re up 50%. So the bottom line is your $100,000 went up to $150,000. Now let’s drop 50% the next year. And the bottom line, it sounds like you should be back to where you started, but you’re not, you’re at $75,000. So the point of all of this is that when the wind starts blowing in your face, it’s really important to really analyze should I subscribe to this philosophy that I just put my money in and I forget about it. And these geniuses that live out in Boston or New York or whatever that are overseeing this block of money of mine really care about me and they’re going to make sure that I don’t lose money or not that much money. Well, the reality is folks that those investments have a prospectus attached to it, which is basically a fancy way of saying a rule set that they have to follow. And that rule set says that if they’re in stocks, they have to stay in stocks. And so your money drops 50% whether you like it or not.
And so our approach is totally different and it has been totally different for over 20 years. And that is that there’s periods of time it just probably makes sense to sell some, to sell a lot of it and sit and wait for a period of time. I don’t know if this will be one of those years, but if I were a betting person, I would say we’re going to have a couple of those events that take place this year. I’m not saying 50% drops, but to say that a 15, 20% drop is very possible this year, I would say that it’s probably better than a 50/50 shot that that’s going to take place.
Now, the alternatives are what historically people have done to try to prevent some of these massive drawdowns is just spread out your money and you put it into everything under the sun. I’ve got some long-term bonds, short-term bonds, I’ve got stocks in the US, I’ve got stocks internationally, I got everything all the above. And so that type of event can’t take place because I’m diversified. Well, that diversification, if we look again in the review mirror and look at what’s happened previously, those drawdowns that took place in the year 2000 and through 2010, those two big events, both events, you lost roughly 30% of your money. Even though the market dropped 50, you still dropped 30. So point being, most people can’t take a 30% punch in the nose because all of a sudden now they’re going back to work if they’re retired, not because they want to, but because they need to. So diversification is a great concept, but when things get really, really ugly, people sell everything. And when they sell everything, everything moves in sync and the bottom line is you’re going to drop a lot more than you probably realize.
Gary Determan:
Listening to you, what struck me is that you certainly were talking about 2026 and looking ahead.
David Nelson:
Yes.
Gary Determan:
But you often refer to what has taken place in the past.
David Nelson:
It’s really important. Mark Twain has one of the greatest quotes relating to our business, and that is that, “History never repeats itself exactly, but it rhymes.” And so I share that with clients all the time because again, we just don’t know. And could anybody have anticipated a couple planes going into the towers in New York City? As far as nobody could have imagined that, and yet that happened and could it happen again? Things like this can happen. But beyond that, if we take that out of the equation and we just look at normal conditions as far as markets, they do correct and they correct pretty significantly. So all we try to do, I mean, the bulk of the people we work with, Gary, are, they don’t have hundreds of millions of dollars. We’ve got a billionaire that’s a client. We’ve got people that have that kind of money, but the average person that we work with doesn’t have an extra million dollars sitting on the sidelines there that, “Oh, well, if something happens, no big deal.” What they do have, they need, and they need the income from that.
And so protecting capital when somebody is close to retirement or in retirement is really, really crucial. And again, looking at past history can be a really good guide to help people make better informed decisions.
Gary Determan:
Always great to have you in. One of your visions would imagine has retired, but he’s still coming to the office every day.
David Nelson:
Yes.
Gary Determan:
Your thoughts on that?
David Nelson:
Yeah. Warren Buffett, I mean, what he’s brought to the table is, other than my high school basketball players, when I would bring up the name Warren Buffett and they’d all look at me like, “Who is that?” So other than that, pretty much-
Gary Determan:
Yeah, is that Jimmy Buffett’s brother?
David Nelson:
Yeah, that’s right. Exactly. That’d be a better guess for them.
But Buffett basically made investing kind of cool and he could relate to a lot of people. I saw a segment on 60 Minutes and they were showing some different events and whatever that he participates in and trying to get younger people interested in investing. Again, one of the things I’m going to be chatting about later on TV is essentially that money markets and CDs and things like that, they feel good short term because they don’t have any downside risk. But when you look at the facts, and the facts are that that money market CD will not over a period of time outperform taxes and inflation. You got a problem. You got a big problem as far as five years and 10 years and 20 years down the road.
So we have to think about other type of investments. And the way that I try to illustrate it, Gary, again, just trying to paint a picture, investing is kind of like this. It’s, “Do you own your own home?” And the bulk of the people we work with, the answer is yes. So I said, “Okay, when you own your own home, does everything always go right?” And they look and they smile and say, “Oh, no.” And I said, “Yeah, occasionally the air conditioner has to be replaced. The roof has to be repaired, et cetera, et cetera.” I said, “That’s like investing, but over a period of time, does it make sense to own your own home?” “Oh yeah, yeah, renting doesn’t make any sense.” I said, “I agree with that most of the time.” And so the reality is investing should be viewed pretty much the same way. Over time, owning the house makes sense. Over time owning stocks makes sense, but you have to get through some of those periods of time where things don’t go the direction that you want.
Now contrast that to the other type of investments as far as that are in whether short term bonds or cash type investments, that’s like renting. And so again, the good news is that if the toilet backs up, it’s not your problem. If the roof needs to be replaced, not your problem. But over a period of time, it doesn’t make financially a lot of sense as far as to go there. So folks should, in my opinion, think about it that way. If I’m a little nervous about investing, I have to think on a bigger scale and probably a longer term timeframe. But the other part of it is, again, people say, “Yeah, but what if things all go to heck?” I said, “Rattle off about 50 massive companies, okay? Whether it’s Google, Microsoft, Warren Buffett’s, Berkshire Hathaway, rattle off 50 of these suckers and say, ‘Folks, what are the odds that all 50 of these are going to go broke? And if they do, will it matter where you have your money?’ It won’t matter, okay?”
So what you have to do is you have to diversify and you have to have some of those long-term investments because most people are going to live longer than they think. And if you do, you have to have investments that can run faster than taxes and inflation.
Gary Determan:
Have you ever met Warren Buffet?
David Nelson:
I never have. No.
Gary Determan:
Really?
David Nelson:
No.
Gary Determan:
I can’t believe you had never.
David Nelson:
Yeah. Nope. Nope. And what a superstar he is. And again, you look at his track record as far as performance. It was phenomenal in the early years. The latter years was good, but it wasn’t that extraordinary. But what he did is he, again, tried to make investing a little… He didn’t try to do it. It just happened because of him and the personality that he has made it a little bit cooler for people to invest. And again, he’s made people, lots of people, millionaires. And it’s just because again, he would subscribe to basically what we do when there’s… It sounds bad folks, but when there’s blood in the streets, you need to think about buying and it’s hard to do. And when everybody, the neighbors are talking about how much money they’ve made in investments, blah, blah, blah, that’s typically the time to sell. I know that sounds bad to say something like that, but it’s a reality. Most people’s instincts, gut feeling are wrong.
Gary Determan:
I know we’re going to have you in on men’s day.
David Nelson:
Oh, yes.
Gary Determan:
Yes. That’s all set up already.
David Nelson:
Perfect.
Gary Determan:
You better talk to Val.
David Nelson:
Okay. She tells me what to do every day.
Gary Determan:
Well, it’s going to be Friday, January 30th.
David Nelson:
Oh, okay.
Gary Determan:
So you’ve got some time.
David Nelson:
All right.
Gary Determan:
I think we’ve got you scheduled for 8:30 in the morning as you were last time.
David Nelson:
Good.
Gary Determan:
So we can talk outside of investment.
David Nelson:
Yes, yes.
Gary Determan:
We can talk about your family, how’s everybody doing.
David Nelson:
Sure, sure.
Gary Determan:
Your interests-
David Nelson:
Excellent. Yes.
Gary Determan:
… and different things like that.
David Nelson:
Yeah, we can do it now. No, historically, these have been tough times to come in here because it almost always ends up on homecoming for the Prince of Peace basketball teams.
Gary Determan:
You’re done coaching.
David Nelson:
I’m done. Exactly.
Gary Determan:
You no longer have to inspire them before they start on the ballgame.
David Nelson:
Exactly.
Gary Determan:
So again, we’re going to have you in for that men’s day-
David Nelson:
Look forward to it.
Gary Determan:
… and we’re just going to have fun then.
David Nelson:
Love it.
Gary Determan:
But we’re going to talk business again-
David Nelson:
Yes.
Gary Determan:
… when you come in on that first Wednesday. Any idea how January might play out?
David Nelson:
Yeah. Well, the Santa Claus rally that people like to reference as far as is already taking place. So in other words, it’s I think… And there’s different definitions, but it’s the last five trading days in the previous year and then the first two days. Well, that’s been a flop. So historically, when you look at the data points, those years that that hasn’t happened as far as the Santa Claus rally, markets have been pretty flat. So we’ll see. Again, look for opportunities folks as far as also outside the United States. Obviously, there’s no guarantee. David’s not giving you specific advice. I’m just saying, generally speaking, it’s worth diversifying.
Gary Determan:
Do you have to put makeup on when you do these TV things?
David Nelson:
No, I don’t.
Gary Determan:
I’m just checking on that. David, thank you so much.
David Nelson:
Thanks, Gary.
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 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. For more information, visit our website at www.nelsoncorp.com.