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 and 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:
First Wednesday of the month, so we welcome Dave Nelson into studio. Of course, Dave, we get these all on video as well so they can see how bright that shirt is.
David Nelson:
It’s loud today, isn’t it? Yes.
Gary Determan:
You’re saying you got some road work today so you don’t want people running into you out there.
David Nelson:
Fix some potholes. Yeah
Gary Determan:
Yeah, there you go.
David Nelson:
Exactly.
Gary Determan:
You used to go to Canada all the time. You haven’t done that for a while and there’s a good reason why.
David Nelson:
Yes, yes. Part of it is just get getting a little older and the kids are older and it’s not as convenient, but yeah, we’ve got a place up in northern Minnesota. We head up there and really enjoy that. It’s a nice home as far as to accommodate big families that we have, and so with doing the math as far as the kids, so I’ve got five kids and then we’ve got 12 grandkids and you’d start putting it all together, you need a decent sized place so we’ve never had everybody up there. So it’s about two and a half to three hours north of Minneapolis, and we used to go up to Bemidji once a year and we’d drop a line in the water as far as up there.
And again, this isn’t like Canada where you’re catching fish after fish and they’re good sized walleye. You’re going up there and you’re primarily pan fishing, and so if you don’t know pan fishing, that’s bluegill and crappie primarily. So anyway, we love it, and again, I try to sneak away a little bit here and there. It’s not as easy. You keep thinking, well, as the kids get older, we’ll be able to be doing some of this stuff, but then the grandkids come into play.
Announcer:
That’s right.
David Nelson:
And I certainly don’t want to miss a lot of the sporting events there. I really enjoy that. Not that sports are everything. I sound like some person that cares about one thing and one thing only with that statement as far as sports, but I like sports but I also like a lot of other things too as far as some of the… We had a recital, a piano recital with some of the grandkids this past weekend as well, and so that type of stuff I dig too. So yeah, it’s pretty cool, pretty special, and it’s a fun place to go, but you’re talking nine hours give or take as far as to get up there so it isn’t something you pop up for for the afternoon. It’s a little tough in that regard.
Gary Determan:
So let’s talk a little finance. The debt ceiling prices was taken care of. Talk about that procedure.
David Nelson:
Yeah. Again, for those that have listened before, I think people realize after 40 years that I’m very opinionated when it comes to this type of stuff that basically is people jocking and trying to play to the base, whatever their base is. It could be the extreme left, it could be the extreme right. I have no patience for that. We knew that this thing was going to be resolved. There was never a question as far as if it was going to take place or not, even though you had bucket mouths out there shooting off their mouths saying that it may or may not get done. We have no real options as far as this has to take place. We are the currency of the world and with that privilege and with that ability to have a big enough market as far as to be able to… When we basically catch a cold, the rest of the world basically joins along with that.
But at the end of the day, we need to approach this I think a little differently as far as going forward, and we’ll see if politicians eventually make a change, but it’s really important to get it done. But as I think everybody hopefully knows by now, it isn’t really done. Basically, they just kind of pushed it out and said, “Here’s what we’ll agree to right now.” I won’t bore all the details but the concept is it’s not done done. It’s kind of done but it’s not done done.
Now, the government right now is basically issuing bonds like crazy, so T-bills that were the big question, I think folks probably are well aware that the typical savings account type of interest was less than 1% and has been for quite some time, and then all of a sudden, the Fed starts increasing interest rates over the last year and a half, give or take, and now we’re seeing basically ads and whatever where individuals can get three, 4% as far as on their money. Well, again, without boring you to tears with that, that’s primarily T-bills, which is what the Federal Reserve controls that space, the very short end of the bond market.
And what took place there is that they ramped up interest rates rapidly to try to, again, essentially get inflation under control. And once inflation is under control, and it still isn’t, then again, interest rates will probably make their way back down. But in the meantime, people are getting decent yields as far as on their money if they’re using money market accounts or they’re buying CDs from institutions that don’t have a lot of loans on the books. Again, it’s kind of complicated. I don’t mean to make it complicated, but big picture, there’s opportunities that are out there.
But the debt crises, getting back to that and just honing in on it, basically is meant and created a lot of uncertainty and created a lot of additional costs for the government by these people playing their silly games, because interest rates on these T-bills, basically, were shooting up to six and 7% for a very short window. Well, when the government is basically having to pay higher interest rates as far as to you and me and whoever invest in these things, that’s costing the government more money and part of this was attributable to these people being bucket mouths and shooting off their mouth, and again, the government had to intervene and raise rates to try to bring money in the door.
So it can get complicated. I don’t mean to make it complicated, but at the end of the day, most of this is behind us. The stock market has responded as far as over the last week or so, week and a half, in a pretty positive way. It hasn’t been dramatic but it’s been upward trajectory. Bonds, we’re now at the phase where bonds are being issued like crazy, primarily on the very short end to try to again fund the government after the politicians got done playing their games.
Gary Determan:
Not to get too political but when something like this, when they take care of the debt ceiling for now anyway, they always seem to tie in other things to what they are going to be doing.
David Nelson:
Yep. It’s the, “Hey, I’ll help you out if you help me out” type situation here, and again, the political part of it, you’re right. It used to be things were much cleaner and clearer years ago as far as you had Democrats as a general thumb, and again, I don’t want to say every person and every concept falls into this category, but it was pretty much considered to be the more generous when it comes to bringing taxes in the front door and sending it out the back door as far as to supposedly people in need or countries around the world in need. And then you had Republicans that were, again generally speaking, more conservative as far as in their spending habits and we want to reduce tax rates to keep more money in people’s pockets. Subsequently, that’s less for the government as far as to just give away what have you.
And boy, that’s changed. If you look at the deficit, again, everybody out there has a bias. I get that. You either lean a little bit left or hard left or a little bit right or hard right. But at the end of the day, when we look at this stuff, it’s been the deficits that we’ve run up hasn’t just been in the last day, hasn’t been in the last presidency or the prior presidency. It’s been over the last several presidencies that this has really ramped up in a big, big way. Now, we’ve had a Democrat there for part of it. We’ve had Republicans there part of it. We’ve had Democrats controlling the House and the Senate. We’ve had Republicans controlling the House and the Senate during this whole window.
So as I tell people all the time, I’m not a Republican, I’m not a Democrat. I’m an American, and I look at this and it concerns me as far as what we’re doing. The spending that’s taken place, it seems like both parties have really gotten on the bandwagon and there’s not a lot of discipline taking place. And again, right, wrong or indifferent, we have to worry about our checkbook balance as far as that we have in the United States. And with the negative balances that we have today, we’re in a pretty tough situation if and when other countries around the world want to start pulling back.
You have the Chinese that basically sold bonds. They don’t own bonds these days. Chinese were one of the bigger buyers of bonds for decades. They no longer own them. There’s a lot of friction as everybody knows between China and the United States these days, and so one way of doing it was they offload a whole bunch of their holdings as far as in government bonds. Japan still owns a lot. United States, we own a lot of our own bonds. The globe owns a lot of our bonds, but China itself does not own any.
Gary Determan:
Amazing. Again, we’re going to go to the bottom of the hour. What are some of the aspects we want to talk about in the second half, Dave?
David Nelson:
To me, it’s where do we go from here type situation. There’s a lot of argument as far as that stocks are going to go up. We’ve got all this stuff behind us, but we’ve got a laundry list of worries that still exist. And so again, I would say let’s spend a lot of time drilling down, trying to give some people ideas as far as from an investment perspective, what should I be thinking about going forward?
Gary Determan:
All right, very good. A break for the weather brought to you by Frary Lumber.
Announcer:
We’ll see a cooler day. More clouds this morning giving way to increasing sunshine for this afternoon with highs in the low eighties. Nice and cool tonight, air conditioning off as we drop to near 50 with clear skies. Still cool and comfortable for Thursday, mostly sunny. Highs back in the low eighties. With your Storm Track 8 forecast, I’m meteorologist, Andrew Stutzke.
Gary Determan:
Skies still overcast, temperatures 64 degrees. Our update brought to you by Frary Lumber.
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Gary Determan:
Visiting with Dave Nelson, first Wednesday so we get to go to the bottom of the hour. So let’s talk about stocks.
David Nelson:
Yeah, it continues to be a challenging environment as far as decisions. Risks are still present. You have the AI. For those that don’t know, that’s the artificial intelligence. All the breakthroughs that are taking place as far as in that space and it’s becoming a more common discussion point and more corporations are looking at incorporating and bringing this into their operation, hoping in theory to drive down costs and drive up profits. So we’ll see again what transpires, but it’s here to stay. I mean, AI is not going away. Anybody that has an Alexa or I’ve got my watch on here as far as my Apple Watch, and I just say a few words and all of a sudden, I ask a question and I can get an answer, I think an accurate answer most of the time, pretty fast. It’s pretty amazing as far as what we have access to these days.
And so you have corporations out there, and again, I’ve got to be real careful on what comes out of my mouth from a compliance perspective, but you have a lot of technology companies, specific companies that have been absolutely on fire this year. Several that are up over a hundred percent as far as some of the chip makers and whatever out there, and as we all know, chips are in everything these days so those companies are really doing well. The real question I guess comes back to if I missed the run as far as that’s taken place so far this year, because you have technology as a whole that’s probably up, and again, I’m talking indexes typically, that are up north of 30% year to date. And then you have the Dow, which is more… It’s another index. It’s 30 stocks and kind of more old school type stocks. That’s up probably in the 5% range. I haven’t looked in the last few days, but that’ll get… At least you’re in the ballpark.
So you can see the huge difference as far as between the two. I’m talking both examples that are stocks, but stocks are obviously much different. You have your old school stocks, you have the high-tech stocks that we think is going to be the future tomorrow. Those are up dramatically, but you’re also speculating that these things are going to be around in a few years, where primarily, the Dow type stocks are probably going to be here. They’ve been here for 50 years, a hundred years many of them. They’re going to be probably around for quite some time, and that’s just the US.
I mean, you go outside the United States, you look at Europe, which I think kind of surprises people. Europe has actually outperformed the US if you look at the major indexes in the US. And then I think the shocker as far as to many individuals out there is Japan. Japan for a 20-year period, 25-year period has basically been flatlined. They really haven’t done anything. It’s a grain society, they have a shrinking population, and because of this, it’s tough to look to the future as far as Japan that has a bright future. But they made a lot of wholesale changes in the last several years and their stock market is responding accordingly, and it’s up even more than the United States.
So there’s opportunity out there. The key is having a disciplined approach to investing, and I know that sounds boring and I know that sounds… Again, tell me the stock to buy that will make me rich. That’s what everybody’s looking for and they’re hard to identify. So a disciplined approach, putting it away, saving, putting it away on a regular basis, investing on a regular basis, not trying to pick the day or the week as far as to invest everything and then pull it out one day or one week. But that discipline over a period of time typically is going to yield individuals some really nice profits.
I just mentioned at the commercial that we had somebody wander into the Quad City office here recently. 36 years old, has $1.3 million, needs some help. I said, “You need some help as far as on this, you’re doing obviously a lot of things well,” but his point was that he’s been lucky. He put it into some individual stocks, has never owned a bond in his life, but when you go into some of the stuff that he owns, you have tremendous volatility and that volatility cuts both ways. Sometimes you’re right and it goes up, sometimes it’s wrong and it goes down, and when you have the type of stocks like he owns, these things don’t go down five or 10%. These things go down 50 and 60 and 70 and 80%, and some of them go to zero, so you have to be really, really careful. Again, it goes back to a discipline approach as far as planning is concerned.
Gary Determan:
Visiting with Dave Nelson, NelsonCorp Wealth Management. Of course, you’ve been around for a while. You’ve been very, very successful. What do you base your success on, Dave?
David Nelson:
I think from a business perspective, it really comes back to understanding better today than I did say 40 years ago when I started as far as what it really takes, I think I fell into the same category like a lot of individuals back in the day that you’re looking for that one stock or those two or three stocks as far as to put your money in, roll the dice and see what happens. But I, like everybody else, have made plenty of mistakes along the way. One example, and if I said the number, I think most people would gasp, but went into an individual biotech stock and the stock went to zero. So again, just a massive blunder, massive decision that I made as far as to go in that my wife and I made, I should say, and we rolled the dice. And again, more often than not, things have worked out. This is part of the price.
I’m in another stock right now that’s a broker dealer, which is a fancy way of saying an investment entity that I’m actually invested in, and that things up five times of what I put into it, and that’s in a period of probably about six or seven years. So occasionally, you get lucky as far as with something like that, and occasionally, you get pounded like I had the biotech company. So I think from a business perspective, it’s really being blunt with people and telling them the truth as far as that things can go down. We spend more time talking to people about what can go wrong than what can go right, and I think people appreciate that.
And what can go wrong today, there’s still a lot of things out there that could go wrong, and one of the biggies is the war. Is it going to escalate? A dam all of a sudden broke as far as over in Ukraine. Who’s to blame as far as for that that? We’re trying to investigate, trying to figure it out, but at the end of the day, I think I can come to conclusions that are probably going to be right and this thing could get out of control. We’ve got inflation. There’s still a lot of talk out there. You’ve got two of the biggest, and I think they are the biggest in the bond arena, that are at opposite ends of the spectrum when it comes to the bond market. One is saying interest rates are going to continue to go up. I mean, stop and think about that, folks. Is that good news for you? For many individuals out there that are savers, that’s good news for you. But if you’re one of those individuals that’s borrowed money or needs to borrow money, that’s not good news as far as for you.
My son just mentioned he had gotten a truck and the interest rate when he started having these discussions, because it took a while with the chips not being available. Bottom line, it took roughly a year as far as to get the truck. Interest rates doubled in that period of time. So again, that’s the reality out there. So the bond market, again, are we going to go up or are we going to go down? We’re kind of in the camp thinking interest rates, the trend line, not in the next day or the next month, but the trend line over the next 12 months is probably going to be heading down slightly, and if it is, if you’re an owner, a holder of bonds, that’s probably going to be some really good news for you.
So we’ve pretty much done it the old-fashioned way as far as boring type asset allocation, talking to people about taxes. And I think, again, that’s what people want to hear. The people that have substantial money, they’re not interested in swinging for the fence. They’re interested in a disciplined approach and that’s pretty much what we bring to the table.
Gary Determan:
Memorial Day of course has passed and we’re here in the summer months. How has summer changed for you as an investor? Before, it used to be, what was that saying?
David Nelson:
Sell in May and go away.
Gary Determan:
Yes. Right. Not anymore?
David Nelson:
Not anymore. It’s because of the speed in which information is transmitted, because of the speed of being able to make massive trades in a very short period of time. I mean, literally, when we make a trade, we’re making a trade… I’ll put it this way. As far as with the assets that we have, any trade we make these days is usually going to be moving somewhere in the neighborhood of probably 30 to 50 million bucks, and we can do that in literally two seconds, literally. It’s just stunning. And so those type of movements can bully things as far as a stock or an ETF or something if you’re not careful, and that bullying can work the other direction too. So again, investing is really, really complicated if you allow it to be, but if you take a discipline approach, again, putting X number of dollars as far as in more conservative stuff, putting X number of dollars in more aggressive stuff, over a period of time, history has shown that you’re going to be okay. The problem is the volatility and dealing with the volatility.
And again, it takes a lot of coaching as far as to keep people focused, keep them going down the right path. Our job is, I guess in that regard, we get people in the general neighborhood and then we tilt portfolios. That’s basically what we do. And we’re tilting right now as far as have been for about the last six months in a pretty conservative way, which has been okay, not great but okay, and going forward is the real challenge now again, like always. Is the market overpriced today? Probably, most people think that it is. When I say market, I’m generally talking stocks so I just want to clarify that. Yes, they probably are overpriced today, and again, people should be probably somewhat cautious as far as going forward.
Gary Determan:
As we close the program, we’ll visit with you again July 12th is when our next live program will be. I asked you about the success that you have attained and I would think a part of that success, surrounding yourself with pretty good people.
David Nelson:
It is. We’re north of 20 people these days as far as between Davenport and Clinton. We’ve got a lot of talent. We’ve got a lot of really smart people as far as in the tax arena. We do a lot of tax planning. I think we take a really unique approach as far as to that, getting together with people, talking to them about their tax situation and how the investments can help and/or hurt that situation. We’ve got a lot of really smart people as far as that are overseeing the money. Again, for those that aren’t aware, we’ve got offices from Honolulu’s the furthest, that’s a branch office out in Honolulu. We’ve got one north of Chicago, and most of them are in this general area, Kansas, Des Moines, et cetera, et cetera. So we oversee a fair amount of money, and because of that, again, we’re able to buy additional expensive research that I think a lot of others can’t afford. And that research has been quite valuable in helping us minimize the downside as far as over the last several years as far as for folks.
So we’re excited about that, and again, going back to your point as far as having talent, that’s really the key. I can only do so much and other people down there can only do so much, so again, sharing that heavy load is really, really important, and it’s certainly worked as far as over the last, again, 30, 40 years as far as that we’ve been in business. Incrementally adding quality staff, quality advisors, it’s really made a difference as far as in our operation.
Gary Determan:
And it always amazes me. You went from rolling the dice, going from Eagles to what you thought was a stable job.
David Nelson:
Yes, exactly.
Gary Determan:
You took the chance
David Nelson:
For two years… Holy cow. I literally, my income dropped about 75% two years later from what I was making at Eagles, and I thought, “What did I do?” Yeah, it wasn’t a pretty time, folks. I’ll put it that way. A lot of stress back in the day.
Gary Determan:
But I think you made a pretty good decision.
David Nelson:
Yeah, I think so too.
Gary Determan:
All right. Thank you so much.
David Nelson:
Thank you. Gary.
Announcer:
Financial Focus is a production of Nelson Core 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.