Announcer:
It is 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 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:
And we welcome into the studio Dave Nelson. Just prior to going on the air, you said a celebration down on the riverfront for your mom
David Nelson:
Yes, yes. It was fun morning. We got a little window here, thank goodness. As far as for that, as far as between the rain, not that we don’t need the rain, don’t get me wrong, but we had a little gathering. She for years would go down to the. She and her friend would sit up there and hand out coffee and whatever as far as treats to people. And so today it was my wife put together a little gathering and invited a whole bunch of people via social media, said, come on down, have a donut on us.
So there’s probably about 20 people down there when I left and we’ll see how much longer they’re able to stay there because the rain, I think it’s coming. I looked at the radar and it doesn’t look very good as far as for that type of thing. But certainly our farmer friends and everybody with lawns are looking forward to having a little more rain. I think most people down there, they said that they got an inch overnight as far as from this last blast. So hopefully we can get another inch or two as far as from what’s coming our direction.
Gary Determan:
How’s everybody doing? How’s your mom and dad doing?
David Nelson:
Actually, mom, it’s 87. She’s still dry, she’s doing quite well. Dad has had some difficulty, some falls and what have you, and he ended up in the hospital for a period of time, ended up over at Vernal. They just couldn’t have been better as far as over there. Again, I know we talk about this, nobody wants to go there, but to nursing homes in general. But I will say I just can’t say enough positive about, and I’ve told a lot of people this, the Alverno, the care that he had over there was terrific. Long story short, he’s at home now. We have help coming in, not 24 hours a day, but it’s about 18 hours a day where there’s somebody there helping my mom out. But he’s 89, turning 90 here in October. So yeah, good bloodlines. I’m going to be around a while, Gary.
Gary Determan:
There you go, and the great thing is having you as a son, you’re able there to take care of them with financial planning and getting ready for whatever.
David Nelson:
We deal with this all the time as far as people getting older and what have you, and just the demands as far as on the checkbook, as far as what it costs, as far as, again, whether it’s home care like my dad has or whether it’s going to a facility if I need that. It’s staggering. I mean you’re talking about, again, for nursing home, I would say probably low in any anymore, 6,000, 7,000 a month and upper ends probably 8,000, 9,000 a month. I mean that’s big, big money. And again, I saved my whole life. And then you end up in the nursing home and the money can disappear quickly. What’s the saddest, in my opinion at least, is the individuals that end up there and they’re aware of what’s going on. Those that again, mentally don’t know what’s going on, they don’t see all those years of saving and that money going up in smoke, so it’s not as painful.
But those that are aware, my dad is well aware, he mentally is still pretty good shape. He’s aware as far as the cost and what have you. And again, when you’re a disciplined saver and don’t make a whole bunch of money, and again, a lot of these people have been either into the Great Depression or just at the tail end of the Great Depression. That’s tough as far as on those people. Mentally the financial is one thing, but the mental part is really troubling. So you do what you can, we try to stay off that topic as far as with him, changed the subject a lot, but at the end of the day, this is a reality as far as out there for a lot of people. And again, what do you do to get on Medicaid is probably a lot of folks know you basically can’t have really almost any money whatsoever.
And so you got to spend down is what it’s called, and get to a certain level. And again, it’s depressing as far as to know. But at the other side of the coin is people say, well, they should pay it. Well, why should the state have to be responsible for this? So it’s kind of like a Democrat Republican type argument, you’re not going to win. And in this area here, it’s kind of a similar type of scenario. I don’t know what the right answer is. I feel bad for people, I’d have to spend down their money, but at the end of the day, the state can’t pick up all of that expense. I mean our tax rates would just be off the charts. So I don’t know what the answer is, but it’s what we have today and people that have a few dollars are going to have to spend it. I guess the bottom line.
Gary Determan:
I think the most difficult part of what you do for a living is visiting with people about things that are going to be difficult. Does it wear on you at all, David?
David Nelson:
It does, I mean, you hate being the bad guy. I have a way of trying to preface it and people typically know. Occasionally somebody will chime in and say, okay, get to it. We know it’s not going to be good. But at the end of the day, for most individuals that we work with, they’re realistic. But it is tough. I mean, I’ve got one right now, a very good example. It’s a second marriage, older couple. She’s really deteriorating rapidly, mentally. Physically, she’s in good shape, but mentally she’s really, really tailing off. And he has some health issues as well, but he’s somewhat mobile, he can still drive, et cetera. And now you are dealing with, they had separate piles of money and so his pile is okay size, hers is a minimal size, but now that they’re married, the law says that he’s responsible for her expenses as well.
And so had they not been married, she would qualify for Medicaid probably in the very near future. But because his assets come into play, they won’t qualify as far for Medicaid for quite some time. So that’s really a tough conversation. He’s looking at us saying, am I liable even though we’ve only been married x number of years? And the answer is yes, you could be married a day and the bottom line, you’re now at risk. So I don’t know if it would’ve changed anything. Would they have not gotten married if they would’ve known, but her health just deteriorated so rapidly. You go back two years ago, she was fine, and now she has good days, average days I should say and then really bad days.
Gary Determan:
It has to be an interesting decision sometimes. Do we get married? Do we just be together?
David Nelson:
Yes, exactly. And this is a perfect example. And again, had he known this and had she known this, I’m sure the answer would’ve been, we’re just going to live together and not get married and getting divorced now at this stage, people kind of played that. Is that an option? And that’s where the legal people get involved as far as what can that accomplish and what won’t it accomplish? And I don’t know the answers as far as to that, but I haven’t had a lot of these type of cases. Again, it’s generally speaking, it’s a first marriage as far as for the bulk of the people that I work with. And the bottom line is, hey, we’ve been together 40 years. Yes, we got to pay, we got to pay and it’s our money. It’s not just my money, but this situation’s different and unique and really, really difficult.
And we brought the kids into the equation as far as from his side of the family, and you can imagine what they’re interested in. They don’t want to see their inheritance disappear. And the Weiss family hasn’t gotten involved yet. And I think they know the situation that they don’t want to get involved because they know that there’s no real assets there as far as that she brought to the table. So yeah, tough. Not a fun conversation. And again, yeah, we got to be the bad guy a lot of times. I had a call last night, 7:00 was my last meeting yesterday, and we brought in family from all over the country and the topic was estate planning and we were basically doing estate planning as far as for the parents who are give or take, 55 years old, have a substantial net worth.
And I prefaced it with them that is this okay to bring up? My typical response to those types of situations is to say, here’s what we recommended to your parents, here’s what they decided to do. And notice we didn’t ask your opinion to the kids because what we’re trying to do is to really make it clear to them this is their money. This is mom and dad’s money. This is not your money. You may think it’s your money, but it’s not your money. And so they’re going to do what they’re going to do with their money and you can do whatever you want with your money. So as I convey to them, there needs to be a bad guy and in most families, the bad guy is one of the family members. And subsequently we don’t get along, we don’t talk, we hate each other now.
I got ripped off, you took advantage, whatever. You’ve heard plenty of stories I’m sure like we’ve seen. But what we found is that by an outsider being the bad guy, that can really diffuse a lot of issues as far as in the family. And I make it really clear to them that we made this proposal, mom and dad agreed to this proposal, and the bottom line is we didn’t ask for your input. And again, it pushes them back a little bit and probably again has a little venom wanting to come my direction. But that’s their problem, not mines. I’m getting paid by mom and dad, not by them.
Gary Determan:
Do you wear black when they come in?
David Nelson:
That’s right, yes, yes. Whenever we have some bad news, yes.
Gary Determan:
You put on your Johnny Cash looks, exactly. So we are going to be taking a break for the weather. What are we talking about in the second half?
David Nelson:
I think it has to be front and center as far as what’s happening as far as interest rates and the impact that’s having on the market. So we can drill down a little bit on that.
Gary Determan:
All right, very good. Dave Nelson in studio weather, brought to you by Citizens First Bank.
Announcer:
There’s a lot of humidity and moisture sitting out around outside this morning and that means the potential for some heavy rain and some strong storms as we approach the mid-morning, we’ll see temperatures in the low eighties today, some scattered storms tonight with locally heavy downpours as we drop to the upper sixties. I’m meteorologist, Andrew Stukey with Storm Track eights.
Gary Determan:
Overcast skies right now are at 71 degrees. Our update brought to you by Citizens First Bank.
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Gary Determan:
Dave Nelson, good enough to join us in studio. So what’s going on with the interest rates?
David Nelson:
Yeah, we’ve seen interest rates as I think everybody’s well aware as far as over the last year, year and a half. Rates have gone from pretty close to zero to all of a sudden we’re talking 4 and 5% as far as fed fund rates are concerned. And then the ripple effect that has as far as going out to the savers, which again, depending on the type of investment they have as far as whether it’s a money market or a CD, they should be able to get somewhere in the ballpark of 4% today as far as on that type of money. But then you have the other side of it and that are the people that were buying stuff, whether it be… I’ll use homes as an example as far as real estate, a couple of years ago you’re paying two and a half, 3% as far as for a mortgage and today you’re looking at closer to, depending on the maturity and what have you, you’re looking at 6, 7%.
And the difference in that as far as your monthly payment is just absolutely staggering. Whether we’re talking about modest price homes, relatively speaking in Clinton, Iowa area or whether you’re talking about owning some real estate in California, what have you. These numbers are real. And again, looking at 10 year, 20 year, 30 year mortgages, when you increase the interest rates by 2 or 3% during that short period of time, it can be absolutely staggering as far as the thousands and hundreds of thousands potentially of additional payments that you’re going to make over a 30 year period of time. So that is by itself as far as looking at it just on the borrowing and as far as on the money market type accounts is significant, but then it rolls into more of the world that I deal with and that is the investing world.
And short term, it had some real negative impacts as far as on primarily technology companies. And they took a beating for a period of time as rates started going up because the speculation was that rates are going to probably go a little bit higher and the end result that that really weighs on profits of corporations, primarily technology type companies that are future earnings, not necessarily today, but big future earnings down the road. And so the market sold off and sold off pretty significantly as we saw last year. Well, this year it’s a whole different animal. You look at technology companies and they’re absolutely dominating and carrying the market. The Nasdaq, which is primarily technology companies, not exclusively, but a lot of the big players as far as technology are in the Nasdaq. And that’s up north of 30% year to date. Now, contrast that to the Dow, which is more of the old school conservative type blue chip type companies, that’s up about 4% this year.
I mean, just staggering difference as far as between them. So it’s not normal as far as to have that big a gap. Time will tell whether it continues. We have meetings as far as with clients, whatever they bring up as far as what’s your take as far as on the tomorrows. And we’re saying technology is probably quite extended right now, which is a fancy way of saying the odds of it probably going much, much higher are probably minimal. Again, we wish we had that crystal ball that was perfect, that would tell us, but again, all odds are as far as that probably it’s not going to go a lot higher. Now contrast that to some of these old stocky old companies that again aren’t as sexy, that are up 3 and 4 and 5% year to date. Those companies I think still have a fair amount of upside potential.
A good example, and you wouldn’t think that it’s… And I can’t bring up specific companies because I can’t. Legally, I’ll be wearing stripes and holding onto bars as far as in jail. But there’s a company not too far from us here down in the Quad City area that’s big into the ag business. And long story short, that stock last year really had a good year when other stuff wasn’t. And this year has had kind of a rough year. So it’s just kind of interesting as far as to watch that because most people, when they think of stocks, they think of the stock market and they think of it in terms of kind just a big clump. But in reality there is a big discrepancy this year that we haven’t seen this massive of a discrepancy between the winners and the losers. We have this year, again, technology companies, there’s many of them.
Again, wish I could name one in particular that a lot of people are familiar with out there with social media, but that’s up over a hundred percent year to date. And then you have other companies that are negative 20% year to date. So it’s just been a really bizarre year. And again, we’re still in the camp of, we think there’s a little bit of upside as far as here, but people better be preparing as far as for this thing, at some point, our best guess is it’s going to roll over, give or take in some level over the next six months.
Gary Determan:
I know you spend a lot of money on the research and different things like that, but sometimes you just feel like getting out a dartboard and throwing a dart.
David Nelson:
Yeah, and people bring it up as far as you know, that again, this is a really, really complicated, tough business. So our method and ways of dealing with it is not trying to identify that one stock. It’s basically to set up a plan and that plan typically entails heavy diversification. Now, one of the areas that we haven’t been as diversified is what some people probably out there have, and this has been a really good call. We’ve made some clunkers too, so I want to make that clear. But the really, really good call that we made over the last 10 years is only US. And when you look abroad as far as the US has just absolutely crushed the different returns as far as throughout the world. Emerging markets haven’t done anything in 10 years. If you look at Europe, Japan pretty much hasn’t done anything for 10 years.
Meanwhile, the US is up a lot during that same period of time. So going forward, don’t know the answer exactly, but we’re still in the camp that the US is probably the place to be, number one. Number two, one of the reasons for it is the dollar. And we don’t even think about it as far as when we invest money, but the dollar is a big variable as far as when you decide to go outside the United States because if you invest outside the United States, basically what hopefully is going to take place for you is we’re going to have the dollar drop in value. So those assets outside the United States are worth more. And so at the end of the day, that’s a pretty tough call. So you not only have to pick the right companies, now you got to make that decision on the dollar going up or going down. And that’s a pretty tough call for most individuals to make.
Gary Determan:
Kind of along those lines, secretary Yellen was recently in China. I want to get your take on that.
David Nelson:
Yeah, China, again, on a 10 year basis, has been a really, really good place as far as to invest. I mean, they’re growing so rapidly as far as over the last decade, actually probably the last two decades. But when you look at it as far as in the very short term here, the last year, two years with Covid and the volume of products that are basically manufactured there and shipped all over the globe, and a lot of that type of stuff really hit troubles as far as getting the parts and whatever that you need, that really, really weighed on the Chinese economy. And even to this day, they’re still struggling. The growth trajectory that they projected for basically a decade was double digits where the US we’re happy with a 2 or 3% increase as far as in GDP, they were looking for double digits, nowhere near that now.
I mean there’s a lot of speculation right now that two and three and 4% over in China is going to be the norm in the foreseeable future. Well, with the demands that they have as far as on people, as far as with the billion people as far as that they have there, that’s not getting the job done as far as they’re not growing fast enough, as far as worrying about within, nevermind the United States and other parts of the world. So they have some real problems. And again, if I were a person out there, and again generically I can’t give advice, but we’re not fans of that space to put it mildly.
Gary Determan:
Got about five minutes left in the program, don’t want to get too political, but it’s been over 500 days now, Ukraine and Russia, and I got to imagine it’s really hurting both of their economies. And in particular, I don’t think Russia saw doing anything like this.
David Nelson:
It was a surprise. I mean, again, you have the NATO meeting that’s taking place as we speak and more countries are joining NATO. Putin had to believe that he could just waltz in and take it just like he did in Crimea, and that certainly hasn’t been the case. You look at the just sheer destruction over there, and I know we’re starting to get some fragmented opinions as far as in the states, whether should we continue to spend this kind of money as far as over there, what choice do we have? I mean, let’s be blunt about this. We either confront him and make sure that this doesn’t go any further and we do it through handing weapons to other people to do the fighting for us or what’s next? Where are we going to get involved as far as next. And again, I agree with you don’t like to get into politics, but my take on this one is we’re just talking about unbelievable destruction.
That one individual has basically decided himself that this is okay to do. And again, I’m 100% behind decisions that we’re making. I think a lot of people in hindsight wish it would’ve been faster in a bigger volume, but the reality is we are where we are and hopefully we can get this thing resolved. And again, the ripple effect is as far as in the markets, have been pretty significant early on. It’s kind of almost on the back burner now, unfortunately. We’re kind of trying to ignore it, but the reality is they have problems over there and we’re trying to do our part as far as to try to resolve this and get this thing over with. And I don’t know what over this means. It’s just ugly.
Gary Determan:
Well, we’ll close on a little bit of a lighter note. Of course, Nelson Corp Field, you are gracious enough to put your name to that facility down on our riverfront. We got the Prospect League now. The great thing about that is we have some local kids that get the opportunity to play down there at that field. And it’s still a great summer activity, even though it’s not professional baseball, at least we got it for a couple months.
David Nelson:
We’re happy to be part of it. It’s just been one of those items as far as for the area, that’s just so important. As far as to our community. We need that. We need to showboat struggle a little bit as far as with COVID, what have you. So anything we can do to help put them on their feet, we’re happy to do. We jumped in and helped as far as with the showboat in a pretty significant way this year with some of the demands that they had as far as the field is concerned. We’re privileged to be able to do it and we’re privileged from the standpoint of having the opportunity and then being in a position to be able to do it. And yeah, I’m a mega fan, as I think I probably shared here, spent a lot of time down there as a youngster and chasing balls down and getting the nickel as far as bringing the things back in, and it’s just hard to imagine as far as that thing not being an option as far as for this area, for those that are wondering, we don’t own the place.
I get that question all the time for people. I do. It’s shocking. No, we write a check to get our name on the place. That’s the extent of it. I have no poll as far as on anything down there. The number of people that think we hire and fire people, we’re not doing that. We’re not involved with that. We just wrote a check and that’s the extent of it.
Gary Determan:
Yeah, I never thought of that, but I would imagine some people do think it’s your park.
David Nelson:
They do.
Gary Determan:
Dave Nelson field.
David Nelson:
Not exactly, you wouldn’t want me running it. I’m not that emotional as far as in my day job, but these guys down there, I got a soft spot for people that are fighters. I just love people that are not literally fighters. Hopefully everybody understands that, but people that compete and when I would see some of those guys down there, young guys trying to compete, I got to do whatever I can as far as to help them as far as accomplish their goal. I’m in something I love and I want everybody to have a job like that. So anyway, yeah, pretty cool.
Gary Determan:
And then finally, just this Jared Simpson, Clinton native, winning the eighth round to the Washington National.
David Nelson:
Isn’t that great?
Gary Determan:
He was at the University of Iowa and of course had an opportunity to pitch in the Prospect League. It was great.
David Nelson:
Yes, it’s terrific. We need it. We’re going to continue to do our part as far as down there, and hopefully this hangs around a long, long time.
Gary Determan:
Great to see. Thank you.
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 on unmanaged and cannot be invested into directly. Registered securities. Offered through Cambridge Investment Research Incorporated, a broker, dealer member FINRA, SIPC, investment advisor. Representative, Cambridge Investment Research Advisors, incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website @ www.nelsoncorp.com.