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, Inc., a broker/dealer, member of 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. Now here’s today’s Financial Focus program.
Gary Determan:
Well, it is not the first Wednesday, but we’re going to have the privilege to have Dave Nelson in till the bottom of the hour, and then we’re going to see you again next Friday for our men’s day.
David Nelson:
Absolutely. Looking forward to that. Yes.
Gary Determan:
You’ve always been a part of that. I know in years past it was difficult because you’re always busy with a pep assembly.
David Nelson:
Yes, yes, yes. Going down there trying to get the crowd fired up, ready for the evening games. But now being out of basketball for a while, don’t have that responsibility. Went down to watch Clinton High gals last night. They had a nice outing, played Davenport Central. And Andy Ferguson from the office, his daughter plays in the team. She’s their post-player center rebounding machine. I guess she’s got some numbers as far as from a state level that are really, really impressive. Again, she understands the role. She’s going to give you four, six points it sounds like pretty much each night, but she’s going to give or take 10 rebounds and doing some of the dirty work out there that some of the other ones don’t want to do. But I’m telling you, that’s a nice ball club and there’s a lot of folks that have paid their dues as far as through the years, as far as trying to get these gals ready.
I think what I was most impressed with was the energy that they brought. Now, again, they were playing a lesser team last night, a little softer team in the back conference, but I gauge as far as our people having fun out there, do they seem to enjoy it? Do they have a feel for the game? And that stuff doesn’t happen overnight, and so it was really nice to see as far as last night, again, that team. So anyway, it was good. When I coached, I never got the privilege to get over there and watch them at all, as far as the guys. The gals, I had nieces that played as far as over there. And shoot, I’m in the gym every night we got a game. Pretty much every night that they did, we had them, so never really got that ability to do that. It was really fun last night, good crowd. Everybody was dressed in pink as far as fundraising, as far as for cancer, so that was nice too. So had a really good time.
Gary Determan:
That is good to hear. Cathy Marx doing a great job. She’s in her fifth year. She had a nice quote the other week in the paper talking about getting this thing turned around. She goes, “It takes a while to turn a cruise ship around and we’re trying to get this cruise ship turned in the right direction.”
David Nelson:
Yeah, and that’s no disrespect to anybody else as far as in the past. It just happens. And keeping across the board, and maybe folks know this, but gals basketball throughout the country is falling off as far as the participation rate. In Iowa in particular, we’re suffering between fighting to get officials, because that’s a real need out there, and getting players to come out. They had a big bench down there last night, and I didn’t count the heads, but it was a nice crowd. And from what I understand as far as seventh, eighth grade, as far as the next couple of years, big, big numbers as far as coming there. And I personally know because I’ve got one of my grandchildren in seventh grade, she’s at Prince of Peace and periodically they square off as far as with the Clinton High Girls, as far as in maybe tournaments or just pick-up games.
And I can attest to they’ve got a nice ball club as far as theirs. Again, putting in the time, nobody wants to do it. It’s all behind the scenes type stuff. Scott’s done a really nice job. And Cathy, I’m really happy for her because she had some kind of lean years where the kids hadn’t played a lot at the lower levels, and you can’t throw a switch as far as I don’t care what coach you are. You could bring in Pat Summitt or somebody like that from years gone by. You can’t turn it around if the girls don’t have that experience in the conference. There’s not a lot of easy nights as far as games that you can just put the W on the board ahead of time. So I am really impressed and really happy. Being a Clintonian, a Clinton High guy myself, it felt good as far as last night seeing how this thing has come together.
Just real quick on this, Cathy and I, my last couple of years, we scrimmaged each other and it was kind of interesting. For those that have been to a game that I coach, I’m a live wire on the sidelines, I guess, and generally very positive as far as it pertaining to my team, but demanding at the same time. And so we were scrimmaging one day and she made a comment, “I don’t know. Maybe I’m getting after him too hard,” or whatever. I said, “Have you heard me as far as in the scrimmage?” It was nothing in comparison and I thought she was basically docile as far as in those open gyms. So yeah, it was different to hear something like that come from her.
Gary Determan:
No doubt a skill set is needed in basketball as well as in what you do for a living. So how’s the ride so far?
David Nelson:
Yeah, it’s interesting. As far as finishing up last year, we had back-to-back 20%+ years as far as the S&P 500, so that’s very rare. I guess I’ll start with that. To follow up with a third year as far as with pretty good numbers is quite rare, but we’re off to a pretty good start. It’s going to be interesting as far as some of the talk. There’s some good. There’s some questionable stuff that’s flying out of people’s mouths. But I think at the end of the day, the idea of trying to put more demands as far as in other countries that are selling to us versus us trying to sell to them, probably some of it makes sense. The question is, and this is the concern that most economists have as far as tariffs, basically it flows through to the consumer. I mean, China’s not writing a check themselves. It’s going to be higher price if you want to buy their goods.
So the idea is that hopefully it shrinks the demand as far as for their goods because the prices have to go up, and now you’re going to buy other stuff that’s potentially made in the United States. And so that’s the theory and that’s the hope. We’ll have to see if it can be pulled off or not. So it’s going to be interesting. So far, we’ve seen the last few days a pretty decent rally. Most of that is looking at the bond market. The bond market, as I’ve discussed numerous times as far as in this program, that pretty much leads the stock market. And so you really pay close attention to bonds, what they’re doing. Bonds, since September when the Fed was increasing rates, we started basically going back, give or take, a year or so ago. Rates were going to start coming down, it looked like. And in September, the first cut took place.
What ended up happening was the 10-year bond, which you would assume would start coming down with the short-term bonds, did not. It actually went up and it went up almost a full percent from the bottom to, give or take, I’ll say about a month or so ago. That’s not what you want to see and that’s why the market was very shaky there for a period of time. Now the last week or so, last couple of days in particular, you’ve seen interest rates as far as on the 10-year bonds start to come down. Subsequently, stocks have started moving upward and we’ll have to see if that can continue. But it’s a complex world. People say stuff out there and, again, it could be interpreted a lot of different ways. But corporations as a whole, their profits have been really, really good. Subsequently, the market has done really, really well over the last couple of years. Is it going to continue? Time will tell as far as that regard.
Gary Determan:
It’s amazing, and you’ve talked about this on the program before. It doesn’t matter what the administration is or how it changes, Democrat, Republican, whatever. The economy is still the driving factor on how people are going to vote.
David Nelson:
Yes. Absolutely. And there’s never been a president, never, that’s won when gas prices were higher than when they first took the reins. And it’s just stunning that that has been that predictable. So again, people think, in terms of inflation, gas prices. Kind of not ignoring a lot of other issues, but gas prices are a big, big item. And again, it’s understandable. People out there, we drive to work, et cetera, et cetera. So again, I kind of get it, but we need to look at the whole picture. It’s going to be, to me, as far as one of the really key things that we’re paying attention to again. Talked about interest rates, but the other part is perception and perception right now is pretty good.
People are pretty excited as far as I’m talking about CEO-type people and, subsequently, stock prices have been moving upward nicely. But again, when you look at valuations, valuations really do matter. You take stocks that have gone up 20% and 30% and 40% over the last couple of years, have earnings match that, and in some situations they have and in many situations they haven’t. Well, that can’t continue forever. That’s what keeps us awake at night as far as worrying about those types of things saying, again, is this justified or is this not justified?
Gary Determan:
That’s interesting. What is your biggest worry?
David Nelson:
Today, it’s valuations. I mean, stock prices as a whole are really, really expensive across the board. I mean, there’s exceptions to the rule. But at the end of the day, again, people that we work with historically, we may have 5% of the people that we work with that are, say, 40 years old or under, the bulk of them are 60 to 80 years old. They do not want to go back to work. And subsequently, if we experience an average bear market, and an average bear market happens roughly every six years, we haven’t had a doozy in a while, the average bear market when we have one is a -38%. I said 38%. That’s a big drop.
And people kind of poo-poo it at good times and then in the bad times, “Holy cow. What’s going on here?” So that’s what keeps us awake at night. The average person can’t afford to lose 20%, 30%, 40% of their money. As I say, we rarely have somebody walk in the office that wants to work with us that has an extra million or two, whatever money they have. They pretty much need the cash flow from that as far as to maintain the lifestyle that they’re enjoying.
Gary Determan:
Yeah, I haven’t won the lottery yet otherwise, but you’re going to be one of the first people I contact when I do.
David Nelson:
All right, all right.
Gary Determan:
Check of the weather now being brought to you by Midas.
Andrew Stutzke:
A much more tolerable temperature pattern coming in for your Wednesday, we’ll see some cloudy skies and occasional snow showers with light accumulation possible. Highs today near 30 degrees. For tonight, some snow showers ending early. Overnight low is colder. We’ll drop to 10 above zero. With your Storm Track 8 Weather Impact Forecast, I’m Meteorologist Andrew Stutzke.
Gary Determan:
Overcast skies. We’ve had some snow showers. Our temperature now is 16 degrees, the update brought to you by Midas.
Commercial:
Trust the Midas Touch. Trust the Clinton Midas at 1432 Lincoln Way. Now is not the time to be on the road with a vehicle you can’t count on. See the Clinton Midas for general maintenance and, of course, for brakes, mufflers, batteries, windshield wipers, and a great selection of tires no matter what vehicle you hit the road with. Come to the Clinton Midas, 1432 Lincoln Way. You can trust the Midas touch at the Clinton Midas with the golden guarantee.
Gary Determan:
Just before we went into the weather break, I was talking about if I win the lottery. And like I told you during the break, I just could not imagine what to do with that kind of money.
David Nelson:
Yes.
Gary Determan:
You as a financial advisor, you’ve got to be like, “Whoa, what do I do with this kind of money?”
David Nelson:
Yes, yes. It’s tough. Yeah, the bigger the coal pile, the more responsibility obviously that comes with it. We’ve got a gentleman out in Wyoming that’s a billionaire. It’s the first billionaire that we’ve worked with. And this individual, when he first came to us, essentially handed us a pretty substantial check and we’re going to start as far as with that and here’s big picture of what we want to do. And in that situation, again, the challenge is to find a place that you could put it without pushing the market. In other words, let’s say we wanted a particular … I’m trying to think of even a … Well, I guess I can’t say it. A small company stock, a publicly traded stock. A small one. This guy alone can push that stock up or down. So if we were to go buy that stock, again, we could really impact as far as what’s happening as far as there.
So what you’re pretty much limited to in a big, big way is essentially playing big indexes. And so the S&P 500 is a good example and that’s essentially what we’re using for him, and our objective is to try to ride the S&P 500 as it goes up and then to try to find a good exit point as far as to go to cash and sit in cash for a period of time. With the current monies that we have from him, that’s basically what we’ve been hired to do. The tools that we have have been pretty darn good as far as doing that. He’s looked at the history, he likes what he’s seen. Subsequently, he’s told us, “Here it is. Here’s this amount of money and I want to be adding to that as far as over the next couple of years.”
We’re excited about that, but again the strategy that we’re using there is the same thing that we’re using as far as with other individuals out there. In other words, if you look statistically at the market, in a normal year, whatever the heck a normal year is, it’s about 60% of the time we’re going to be moving upward and 40% of the time we’re either flat or moving down. Statistically, that’s what takes place. IT doesn’t happen that way every single year. Some years, like last year, we were setting new highs literally almost every week. So that’s pretty rare, but it happened. This year, we’ll have to wait and see. The volatility has increased and probably is going to continue to increase because there’s a lot of uncertainty right now.
Our current president wants to try get certain things pushed through. That can be, as I brought up earlier, interpreted differently as far as from the standpoint of Americans versus abroad. And so subsequently, again, that creates volatility, uncertainty. Markets typically don’t like that. But again, if you’re nimble, it may be a nice opportunity as far as to try to take advantage of some of that volatility. But it’s a complicated world. Nobody has the answers as far as to know the day, the week, the month. But as we share with our clients, if we can get the quarter right, we can avoid a lot of damage as far as when markets are moving downward and hopefully we can capitalize and get a whole bunch of the upside.
So that’s the goal. It’s tough to do. We have really expensive tools that we use that historically have had decent results above market returns, but there’s nothing to guarantee that that’s going to happen as far as going forward so we got to be patient. And again, for a typical person out there, they don’t have a lot of extra money sitting around as far as that they can gamble with, so they need to have somebody at the wheel that knows what they’re doing as far as to know how to navigate this as best possible, and that’s essentially what we’re hired to do. We’re hired to do the worrying for a typical person that we work with.
Gary Determan:
I’m visiting with Dave Nelson, NelsonCorp Wealth Management, on Financial Focus. It’s going to be interesting. It’s the start of the year.
David Nelson:
Yes.
Gary Determan:
And we’re going to have you back in again on the 5th, so it’s going to be kind of a quick turnaround. Of course, Men’s Day as well …
David Nelson:
Sure.
Gary Determan:
But we’re not going to talk business on Men’s Day.
David Nelson:
Yeah, yeah. Sure, sure.
Gary Determan:
We’re going to talk other things, but it’s going to be interesting these next couple of weeks, Dave.
David Nelson:
It is. And again, we’re already seeing as far as President Trump took the reins as far as the threats abroad, as far as the tariffs are concerned, that’s changed twice already as far as the mindset, as far as how we’re going to do this. So it’s tough. I mean, these are not easy decisions. I mean, there’s all kinds of people out there that are second-guessing everything that’s being discussed now, but they also did that for Biden. They also did that as far as prior administrations. So we got a lot of backseat drivers that have all the answers and whatever, but again they’re shooting off their mouth behind the scenes. We’ll see if this stuff works. There may be some positives to it. There may be some negatives that come along with it. Drill, baby, drill has been one of the philosophies as well and the theory behind that is that, again, we need more production in the US so the need as far as from abroad is less.
What people don’t understand is that we’re already drill, baby, drilling right now in a big, big way. And so to ramp it up more and to open up other spaces, we’ll have to see if there’s really a need for that because there’s a lot of permits that are out there that haven’t been used yet. And for whatever reason, don’t know why, we’re concerned that if we go there, the past administration would maybe change the rules or something. I don’t know. But at the end of the day, energy is a big, big item. We’ve seen energy prices over the last couple months go up.
If you happen to own some of those equities, those stocks, as far as in those companies, you’ve done quite well. We’re very, very thankful that we’re in that category and we had a really, really nice run as far as on some of that. So we’ll have to wait and see as far as going forward. But you’re right. Between now and February 5th, I’ll have to be paying close attention as far as to what’s going on and, again, the impact that it could have as far as on our listeners here.
Gary Determan:
Yeah, not often we get that quick turnaround with you so that’ll be something to hear. You mentioned Andy Ferguson earlier in the program.
David Nelson:
Yes.
Gary Determan:
Well, he is starting to ramp up him and the other folks down there involved with the taxes.
David Nelson:
As I was leaving the office this morning to come up here, Gary, the parking lot is literally already full. It’s really surprising to me that it’s this early, but people want to get … I shouldn’t say people. I would say a fair amount of people that we work with can’t wait to get it done. They want to get that behind them, what have you. So yeah, things have really ramped up, will continue to. We do a lot of tax returns as far as down there, and the people that we have in that space is really, really good. We’ve added help as far as to that area because last year was a pretty rough year as far as on our accounting people, and so this year we have additional help.
I think things will run smoothly. And again, it’s nice to have legislation that we know. Last several years, we’ve had issues with Iowa as far as some question marks there, as far as what they’re doing, and we’re going into tax season and still don’t know/have answers. In the federal government a couple years ago, that also was happening there. So this year it’s pretty black and white, and so doing the tax return, I think, is going to be a little simpler as far as easier, as far as for our accounting people.
Gary Determan:
Just a little bit of a plug, Marion and I have had our taxes done with you folks the last couple of years and you do a tremendous job, and you’re so reasonable.
David Nelson:
We try to. It’s important. I mean, I think sometimes people forget where they came from. I’m not in that category. Like last night, talking to Scott down there at the basketball game and I went and told him a story of somebody from the Quad cities as far as shooting off their mouth about Clinton, Iowa and I got really defensive really, really fast. I haven’t forgotten where I came from and as far as the accounting world is concerned, yes. I think it’s overpriced oftentimes out there when somebody comes in to us and they show that they’ve got a pretty basic tax return and they’re paying X number of dollars and it’s kind shocking to us.
And so yes, we’ve priced it fairly. We can make a small profit as far as on it, and the consumer that’s coming in to us to get their taxes taken care of not only get a good deal, but again they can interface as far as with the tax people, if they so choose. If they don’t and they just want to drop it off, so be it. But yeah, we’ve got some great people there and do a nice job and, again, as you said, a fair price.
Gary Determan:
I’ve been seeing the billboards with you and your boys, and you’ve got investments, taxes, and Medicare.
David Nelson:
Yes.
Gary Determan:
How did that come about?
David Nelson:
Yeah, we just kind of tried to look at what the need is. And again, understanding that when you work with 60-year-olds and 70-year-olds and 80-year-olds, those are really the important ingredients as far as healthcare obviously, but I can’t put that up there because we’re not MDs. You take healthcare and then you start looking around and saying, “What are some of the other really important things in their life?” Taxes are a big, big item. Again, most people don’t realize it, but from retirement age to the day they die, for most individuals, their biggest expense is going to be taxes. So again, really, really important as far as to know that. Number two, Medicare, it’s so complicated. It is so complicated, the changes that are coming about. For years, I mean, I’m talking 30+ years, people would come in and they’d bring up Medicare, and I would just cringe because I don’t have the expertise in that area and it’s very specialized.
Anyway, so that’s crucial. I don’t know. I guess this was four years ago when the decision was made and actually implemented, as far as two-and-half years ago, that we need to be a reliable resource for individuals as far as for that type of information. And then the investment side, that goes back to 1981 when I started and that being so crucial as far as people and, again, understanding your responsibility. I think I’ve shared this and I know we’re tight on time here, but …
Gary Determan:
Oh, you’re good.
David Nelson:
When I was out at the John Kennedy School of Government at Harvard years and years ago, I went out there and did coursework as far as basically centered around exploiting other people’s mistakes. So in other words, the stock market is a big auction and when somebody wants to sell, you need another buyer as far as on the other side. And so basically, what the meat of it was was as far as emotions. And so when I went out there, you share with the professors and whatever, “Here’s a typical situation/scenario as far as with a client.” And what I used to tell clients back in the day is, “Essentially, my job is to make you money. You’re going to have to deal with the volatility.” And this guy looked at me and he says, “You’re a complete idiot.” I mean, that was verbatim what he said. “You’re an idiot.” And so I said, “What do you mean?” He said, “An extra quarter-percent difference in return means nothing if people can’t sleep at night. Your responsibility is to let them sleep at night.”
So what’s the difference? The difference is we need to recognize the volatility and do about something about it so that the buying public doesn’t have to endure these massive drops. You hear people say, “Just buy and basically close your eyes and you’ll be fine over time.” Well, that translates into 30%, 40%, 50% drops periodically and the average person out there can’t withstand that. They’re going to make an emotional, dumb decision at just the wrong time. We can’t let that happen. That’s our responsibility as far as to educate them and do the right thing as far as in advance.
Gary Determan:
You’re not an idiot. You’re fine.
David Nelson:
Thank goodness.
Gary Determan:
We’re going to talk to you again on Men’s Day.
David Nelson:
Yes.
Gary Determan:
You’ll be in at 8:30 that morning and then, again, we’ll have you back here on February 5th. David, as always, thanks so much for your time.
David Nelson:
You bet. Enjoyed it.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research, Inc., a broker/dealer, member of 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.