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 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 into the studio Dave Nelson, always great to see him. Boy, that rain was something else yesterday.
David Nelson:
Holy buckets.
Gary Determan:
My goodness.
David Nelson:
I don’t know how much we got but-
Gary Determan:
Yeah.
David Nelson:
… I mean, it was just came down in buckets. And I’ve been gone as far as traveling, as far as business-related type stuff last couple weeks, so I’ve missed some really important games. The younger kids, as far as softball games-
Gary Determan:
Oh yeah.
David Nelson:
… and baseball games and things that nature. And I’m not joking, that stuff’s really, really … I enjoy and it’s important for me to be there, I love it. And the kids like seeing their papa there as well. But anyway, so I was really jacked off, “I’m free tonight, I get to go to some ballgames.” That didn’t happen. So anyway, yeah, it was pretty ugly. So I don’t know, we got multiple inches, I don’t know how much, yeah.
Gary Determan:
Yeah, I would think so. Yeah, I don’t have a rain gauge.
Gary Determan:
You’d think we’d have one here, but we don’t.
David Nelson:
Yeah, yeah.
Gary Determan:
But Mary and I go out to the Cedar Rapids area quite a bit, and I tell you that Wapsie is something else. Have you been over it?
David Nelson:
Oh yes. When I go down to the Quad Cities office, I’ll take the back roads as far as down there through McCausland, whatever. Oh yeah, there’s going to be a lot of people negatively impacted as far as from this sucker. I know the farmers as far as the rain, we’ve had several in recently that we’ve been chatting with. They said, shockingly it’s starting to get pretty dry and so we really need some rain. And so a day later, two days later, we get this pounding that took place. But boy, yeah, that Wapsie and down McCausland, I mean it’s looking pretty rough. I don’t know if that road’s going to be open much longer as far as with that volume that we got. And I’m assuming up north got some of it that’s going to make its way through here.
Gary Determan:
Yeah, I think got a bunch of rain the other day.
David Nelson:
Did they? Okay.
Gary Determan:
So now you bring up something interesting. Farmers. You do deal-
David Nelson:
Yes.
Gary Determan:
… with a lot of farmers. What a tough thing to do for a living. I mean, you’re so dependent upon Mother Nature.
David Nelson:
Oh, totally. And again, you look at it as far as the pricing and whatever, to my knowledge, it’s the only business that you don’t tell people what they need to pay you as far as for this. You’re being told as far as the corn selling it four and a quarter or whatever it’s trading at as far as today. That’s kind of stunning and again, there’s trade-offs, there’s been a lot of government programs through the years to help prop them up as far as during some of the tough times. But yeah, you’re totally dependent upon Mother Nature as far as giving you some water when you need it. And I guess this year, from what I understand, again, the three different people that come to mind that have been in the office recently are all pretty much saying the same thing and that is that it looks like a really good year.
Timing was good as far as getting stuff in, as far as, can’t put it in too early. Again, with all the people that I work with as far as in that space, I still don’t get it. And it’s like people talk about as far as our business, that man, it’s confusing and what have you. And I said, “Well, if you followed me around for a week or a month or whatever, you’d probably start catching on. But for an hour here and an hour there, it’s difficult.” And I’m the same way as far as in their line of work. And so anyway, the shocker to me was, in order to ensure your stuff, you can’t put it in before a certain date. I didn’t realize that. I thought it was just kind of winging it out there. Well, we think the weather, the forecast says this, and if the forecast was just perfect conditions as far as for a month, let’s say, and we knew that.
But the schedule as far as for the insurance to be able to cover you hasn’t quite clicked yet, you can’t put it in. I mean, otherwise your insurance isn’t going to cover you if something goes wrong. So anyway, it’s pretty remarkable as far as, and like you say, it’s kind of a business where again, you’re out there, you’ve got tremendous risk. I mean a lot of the people through the years, we talk about investing in the markets and whatever, and the response is something to the effect of, I understand risk, I’m a farmer. So yeah, there’s some risks that you’re taking. I’m going to put my corn in and I’m going to hope this stupid stuff grows and it gives me a decent yield. But there’s no assurance of that. And again, that’s reflected in the prices as far as out there. If everybody’s doing well, the prices are going to drop, and subsequently you’ve got more corn, but the price of the corn has dropped and vice versa. So it’s a complicated and tough business to say the least.
Gary Determan:
Again, visiting with Dave Nelson first Wednesday. So we get to go to the bottom of the hour. You wanted to talk about the markets.
David Nelson:
Yeah, it’s a lengthy discussion and thank goodness we have a little bit of time. I’ll just kind of take it in pieces and what have you. And I’m just here again, as a reminder as far as to say that obviously I can’t give any specific advice. Obviously every person out there, their situation’s a little different, but we spend lots of money in research and this research that we get won’t tell you to the day or to the week or whatever as far as what to do. But it’s very helpful as far as trying to look at big picture. We call it macro stuff. So in other words, just kind of looking at the big, big picture. And I think what most people out there again are yearning for as far as kind of a read, as far as where markets are going to go and generically talking about markets.
In other words, stocks as far as are they going to go up, are they’re going to go down? Obviously underneath the covers, what you find is that there’s all kinds of different types of stocks. Good example is yesterday, got to get my days straight here, yesterday, if you had invested in international-type investments and more specifically in emerging markets and even more specifically yet, India, you had a pretty bad day yesterday. Stocks were down pretty significantly and again, it sounds kind of weird, how many people are investing in India? Probably more than you think, and probably a lot of the people that are listening now have some exposure as far as to emerging markets. And subsequently to India, it was a pretty rough day. China’s been kind of moving forward, but the last two, three years, they’ve been sucking gas pretty much in a big, big way.
But when you look within the US, you find a heck of a disparity as well. Two companies that I typically talk to people about as far as in this area would be John Deere and Caterpillar. And again, I can’t get into specifics as far as on anything here, but bottom line is you would think they move kind of consistent with each other. That’s not the case at all. And so again, not saying one’s a better investment than the other. What I am saying is that stocks don’t always move in sync with each other, in particular when things are actually kind of good. When the markets turn upside down and they drop dramatically, and so that happens every five, six years, you get a normal pullback as far as in the market, a bear market, is averages somewhere in the neighborhood of 35%. Well, when that type of event takes place, most stocks move pretty much in sync and that is down.
And so whether I have small cap stocks or mid cap stocks or large cap, whether I have international or I have US, doesn’t really matter at that point in time, they pretty much get clubbed together. Now, going back up, it’s a different ball game, when things are fairly good, it’s a different ball game. So again, there’s opportunities I guess that exist as far as out there. The key is, again, to have the guts as far as to be able to venture into some of these waters. And as we tell people all the time, you need to be informed. You need to work with somebody that’s been around the block more than once and can give you some insight and some guidance as far as on some things.
Mexico, they had the election, this was two, three days ago. The day of that most of the stocks in the stock market in Mexico was down 10%, even though this was kind of the one that was expected to win. The bottom line is the market still dropped and dropped pretty dramatically. Now having said that, the stock market in Mexico has been on fire as far as for quite some time. So again, not saying buy this folks, I want all the disclaimers out there, trying to give you just a big broad picture as far as that things don’t always move in sync and you need to pay attention. I’ll drill down maybe in the second half, a little more as far as some of the tools, what they’re telling us these days as far as, hey, things are getting a little wobblier than they were as far as say six months or a year ago.
Gary Determan:
Before we get into that second half, one thing that I’ve always found interesting visiting with when you come in is how it is such a global market that you people have to keep track of. You mentioned India, you mentioned Mexico, the United States, of course, as you said, China, but there’s Europe, it’s all over.
David Nelson:
It is. And depending on, like right now, there’s talk as far as in Europe that they’re going to cut interest rates so that things are, and again, for those that don’t know, the Fed, again increased interest rates dramatically to try to slow down inflation. You can argue back and forth, did it work? Did it not work? Was it as effective as people want? Et cetera, et cetera. The reality is inflation somewhere in the 3% range now. And so yes, it probably has worked. So Wall Street is yearning for the Federal Reserve in the United States as far as to start cutting rates. And so the speculation coming in the year was roughly a six. Six interest rate cuts at roughly a quarter percent per cut. And now we’re talking, none of that’s happened, if you aren’t already aware. Now it looks like one, maybe two. So from six to one, maybe two.
Why is that? Because the economy is really chugging along in a big, big way. Europe’s numbers, inflation numbers were higher than ours. Europe’s inflation problems are much less than ours today. And subsequently, their equivalent of a Federal Reserve as far as over there is all likelihood going to be cutting rates, and I don’t know exactly when the meeting is, but it’s in the next couple weeks. And so the globe is paying attention as far as is this going to be one of the first big economies as far as that’s going to start cutting interest rates? And generally speaking, the US leads on that as far as on the increases and generally leads on the decreases. And that’s not going to be the case this go-around. So we’ll have to see as far as how that unfolds. Again, all this stuff folks we talk about is not just blabber out there. That doesn’t matter. It really matters as far as your 401(k) plans, your IRAs, things of that nature that are invested in mutual funds or ETFs or individual stocks for that matter. This stuff really does matter.
Gary Determan:
One final question just to educate me a little bit. Of course, in the United States it’s the dollar.
David Nelson:
Yes.
Gary Determan:
In Europe, is it the euro? What did they all do? I mean, how’s that work?
David Nelson:
For most of Europe, it’s the euro, yes.
Gary Determan:
Okay.
David Nelson:
The UK pulled out of the euro, whatever it’s been now, I’m going to say five, six, seven years, somewhere in there. So they no longer are, but yeah, most is the euro. Then you got Japan, the yen, which is, again, and for those that don’t know, Japan has been one of those big, big winners as far as over the last year or two. They’ve had a really nice run as well. So yeah, currencies really matter. Interest rates really, really matter and subsequently, everybody’s just on pins and needles now as far as are we going to cut rates and if we’re not, why aren’t we, et cetera, et cetera.
Gary Determan:
So is it back to the pound now?
David Nelson:
Yes, exactly. It is. Yes, exactly.
Gary Determan:
I didn’t know that.
David Nelson:
Yes, yes. Perfect.
Gary Determan:
More with Dave, with our Financial Focus, break of the weather, brought to you by Midas.
Morgan Strackbein:
Happy Wednesday. Could see a couple lingering showers throughout the morning, but by the afternoon we’re going to clear out those clouds. We’ll have a little bit of a breeze coming in from the northwest, but mainly sunny skies. It’s going to feel fantastic out there with highs in the low 80s. As we get into this evening, another cold front is expected to pass through, could bring an isolated shower or storm chance. Most are going to stay dry and we’ll see temperatures a little cooler for us in the mid to upper 50s. I’m Storm Track 8 meteorologist, Morgan Strakbein.
Gary Determan:
Good to see the sun. 66 degrees. Our update brought to you by Midas.
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Gary Determan:
Great to have Dave Nelson in studio. We’re going to go to the bottom of the hour and what are we diving into now?
David Nelson:
Yeah, so don’t everybody fall asleep on me out there. Some of this stuff I know is a little dry, dull and boring. People are looking for the conclusion always just like I am as far as what should a person be doing as far as this point in time? And once again, for the third time, the disclaimer that none of this is specific advice and every situation’s a little bit different. But yeah, the tools that we work with are getting more defensive. They’re not basically, so when people invest their money, a lot of us have been told through the years that you just put it in and over time you’ll be okay. And I like to draw comparisons as far as to that to say that’s not always the case. And so the Nikkei Index is a really good example. So the Nikkei Index is Japan, and in 1989, the Nikkei Index was almost 40,000.
The Nikkei Index crossed 40,000 for the first time about six months ago. So we’re saying 1989 to now it just finally got back. It had a collapse for decades. And so when people say it’s always going to go up over time, you got to be patient, blah, blah, blah. These people have waited 30 years as far as to see their money come back. So there’s another tiny little company out there, and they just happened to have a location as far as over in Morrison for a long, long time, big company. And this company was a $64 stock that dropped to under six bucks in ’07, ’08, ’09 during that crisis that we had. And so from 64 bucks in 2000 to at the bottom in ’09, which will be in March of ’09, it was under $6. And hopefully everybody can do the math as far as what company that is over in Morrison, Illinois, that’s no longer there, and bottom line.
So this stuff happens, and that particular company stock has never recovered to that level. The NASDAQ, which is a index, and this big index that’s out there primarily in technology stocks, there’s other stuff in there too. But that index in the year 2000, if you would’ve invested in the year 2000 on the top of the market, you would’ve waited roughly 14 years as far as to get your money back there. So from the peak, when you invested, to the bottom, to now back to this crossing over again, that peak from the year 2000, it was roughly 14 years that you had to wait. So we don’t believe in just putting money into something and closing your eyes and hoping that things are going to work out. I know there’s many out there, and I have people that’ll bring up a famous person in Omaha by the name of Warren Buffett, and Buffett says, “If you don’t have the expertise and whatever, put your money into the S&P,” which is another index, S&P 500, and that S&P Index had two periods of time from 2000 through 2002, it dropped 47%.
Fast forward to 2007 through 2009, it dropped 58%. So in a 10-year period of time, you had two draw downs of roughly 50%. Now you tell me, an individual out there that’s listening right now, that can tolerate that type of volatility. And yes, it came back, but you were 10 years under water and most people can’t take that type of abuse. And so subsequently what we’ve done and what our whole business has built around as far as on the wealth management side is trying to help people define how much volatility they’re willing to accept, and then subsequently invest it accordingly.
And as we say, trying to dodge the big bullets. And so our job is to try to dodge the big bullets. Nobody can take away the 5% drops and the 10% drops, they’re going to happen. There’s nothing we can do about that. But the 40 and 50% draw downs, you don’t have to sit quietly as far as in the sidelines and get abused. Now, I’ll drive it home through this, Gary, I won’t put you on the spot here, but folks, just think about this one for a second. If you drop 50%, what rate of return do you need to get back just to where you were? And the answer is 100%.
Gary Determan:
I knew that.
David Nelson:
Yes. Okay
Gary Determan:
You mentioned this before on the show-
David Nelson:
Okay, good.
Gary Determan:
So I did remember.
David Nelson:
That’s good.
Gary Determan:
I was hoping you were going to ask.
David Nelson:
Yes. Okay, I should. I’m sorry about that. So just think about that. So in people, well, but 50% draw downs don’t happen. That’s not realistic. Oh, but they do, and they happen more often than people remember. Now, 47% isn’t 50, I get that, but that’s close enough. We’re rounding things off. So at the end of the day, you can’t afford that big thump alongside the head. And I won’t get into great detail on this, but there’s many, many articles these days folks, out there, and I want you to be aware of this, need to be aware of this as far as how the Social Security administration is underfunded. I think everybody knows about Medicare, but two recent articles written by some really, really smart people are saying we are heading down the path that in not too many years that everybody’s going to take roughly a 15% haircut as far as on their Social Security.
I don’t know if that’ll happen, but I do know one thing. We can’t continue to pay out what we’re paying out in Social Security with the amount of money that’s coming in the front door as far as from people paying into Social Security versus those that are drawing Social Security. We have a massive baby boom generation, I’m at the tail end of that baby boom generation, and these individuals are retiring and they’re starting to draw as far as checks and the bottom line is the tank is going dry pretty quickly. And so Washington is, and again, I used to kind of care about this, about stepping on toes, I don’t anymore, right? I really don’t.
There’s a lot of wimps that find themselves in Washington that have no backbone to tell people the truth. Now they’ll qualify that and say, “People don’t want to hear the truth, so we don’t tell them the truth.” We all have to put on the big boy’s pants and big girl pants, and we have to be adults about this. And the adults are that we have to either have people pay a higher percentage into Social Security, they’re going to have to wait longer to draw it, or we’re going to have to start cutting benefits because we just can’t continue to have negative amounts of money as far as going out. Our liabilities are much greater.
And it isn’t just this Johnny-come-lately, again, where people stand as far as if I’m a Republican, let’s say, “This is all Biden’s fault,” and if I’m a Democrat, “Trump really screwed this stuff up.” No, we as Americans have made these decisions. We put the people in the White House, we put the people in the house and the Senate, and we need to put people in there that have a backbone and the people that have a backbone to make some of these tough decisions. You can’t bring in a dollar and you can’t pay out a dollar and a quarter for extended periods of time, or you’re going to have big problems. The deficits haven’t come about in the last 10 minutes like people want to imply. These have been going on for 75 plus years. Yes, they’ve gotten worse. Yes, they’ve been magnified as far as because of COVID but at the end of the day, this is a continuous problem that we need to something about.
And again, most people don’t want it, but we don’t want to hear the truth. And the truth is, something has to give. And again, I won’t run for office. I’ll never win, because again, I’m going to look at the numbers and tell people the facts, not what they want to be the facts, but the facts.
Gary Determan:
Again. Well, those are good facts. There’s no doubt about that.
David Nelson:
Scary. I mean-
Gary Determan:
Yeah.
David Nelson:
… it really is, as a country as far as what we’re doing. And I mean I know there’s a lot of other stuff going on out there, immigration and the wars and what have you and yes, there’s a lot of money being spent as far as these areas, but this is a problem that we’ve had for a number of years. Dan Rostentowski over in Illinois, that was a real powerful politician. He was the head of the House Ways and Means Committee, and this is almost probably 25 years ago now. And he actually put in place, he got the votes and put in place a increase as far as for those drawing Social Security that they would essentially a tax applied to that. And within two days it was pulled back. Maybe people remember seeing some of this footage, maybe you don’t. But he was flying back into O’Hare Airport getting into his limo, and there was a whole bunch of senior citizens that were taking their fists and slamming the car as far as “You can’t do this.”
The next day, it’s repealed. So you tell me again, as far as the backbone of some of these politicians and people say, “Yeah, but I’ve paid in.” That’s true, you paid in, but most of those individuals that are paying in are going to draw out four to $5 in benefits for every $1 they put in. Nobody wants to talk about that. The reality is, that’s the facts as far as what’s taking place. So again, I’m advocating, let’s be adults, let’s talk to each other. Let’s not scream at each other. Let’s make some decisions that we need to make as a country that are going to make this place a better place. And again, at the end of the day, we want it to sustain. We’ve got a good thing going here, let’s just make some better decisions as far as going forward.
Gary Determan:
Always interesting having you in studio. No doubt about that.
David Nelson:
Opinionated. There’s probably some people throwing shoes at the radio right now-
David Nelson:
… but anyway, so I apologize to those people, but again, I have kids, grandkids. I want this opportunity to be there for them.
Gary Determan:
Yeah.
David Nelson:
And the path we’re heading down right now, it’s not going to be, so we need to do something about it.
Gary Determan:
Okay, well lighten it up just a little bit here.
David Nelson:
All right, all right, let’s go for it.
Gary Determan:
Your name is of course on the stadium down along our beautiful riverfront-
David Nelson:
Yep.
Gary Determan:
… NelsonCorp Field. And of course the season is just getting underway-
David Nelson:
Yes.
Gary Determan:
… for the Prospect League.
David Nelson:
Yes.
Gary Determan:
What you got planned for the summer?
David Nelson:
Well, we’ll be down there a fair amount. Really enjoy it. We’ve already had a client event as far as down there. That was the last week, I forget the day exactly. It was fun. We had 440 some people as far as that came out with us and had some beverages and some hot dogs, et cetera, et cetera, brats. It was really, really good. And I know they’re working really, really hard. I had my neighbor jump me yesterday, and he said he had just come back from watching the kids, I guess, two days ago as far as down at the field down there. It doesn’t even sound right coming out of my mouth, NelsonCorp field, but anyway, he said that Prince of Peace was playing against Comanche down there. So anyway, it’s great that it’s getting used.
Gary Determan:
Yes.
David Nelson:
And he said “At the end of the day, how many of these kids would have an opportunity to play in a facility like that had it not been for this?” And so I guess that’s one small benefit of not having the true A-team as far as in town, that there’s not as many games, so there’s more opportunities as far as for others to play down there. So yeah, I don’t know. It’s great. For those that don’t know, our name is on the building down by the river, and it wasn’t something that was high in my list as far as to do, but when Ashford pulled out of town, there was a huge void, a huge financial void as well as just a void as far as the facility and so we tried to push a lot of the local industries to write a check because they could write that check a lot easier than NelsonCorp Wealth Management can write that check, but it didn’t happen. And so we just couldn’t let it happen. And growing up as a kid, I’d go down there and shag balls and whatever.
I spent a lot of time down there and have some great, great memories as far as down there. And at the end of the day, we’ve got to support it just like we have to support the showboat. Many other non-for-profits in this area. So we’re happy to do it. It’s great. We encourage people to get down there.
Gary Determan:
Yeah.
David Nelson:
We don’t own it. That comes up oftentimes. People bring it up and we don’t own it. We just wrote a check to put our name on the building to help their finances down there. That’s all it boils down to but we’re happy that we did it and we’ll continue to do it. It’s a really important piece of the puzzle in Clinton, Iowa.
Gary Determan:
Yeah, taking a ball game, it is the Prospect League. We’ve had local kids, Max Holy, Jai Jensen, the Simpson Brothers.
David Nelson:
Yes.
Gary Determan:
Who’ve all played there.
David Nelson:
Yes.
Gary Determan:
And they’re just hoping to chase a dream.
David Nelson:
Yes, exactly. And we want to help support that dream and everybody go down and watch them. You’ll be surprised as far as the talent level as far as there. I mean, yes, they’re better as far as the ones on TV, but man, these guys are young and they’re hungry and they want to make it, and we want to do our small part as far as to try to help.
Gary Determan:
Great to see you. Thanks so much.
David Nelson:
You too, Gary. Thank you.
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 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. For more information, visit our website at www.nelsoncorp.com.