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Announcer: It’s time now on KROS for Financial Focus brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representatives, securities offered through Cambridge Investment Research Incorporated a broker dealer, member of FINRA, SIPC, investment advisor representative, Cambridge Investment Research Advisors Incorporated. A registered investment advisor, Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus program.
Gary Determan: First Wednesday of the month. We are going live visiting with Dave Nelson. Of course, I was out at Eastern valley on Monday. Great atmosphere [crosstalk 00:00:52]-
David Nelson: It was. Wasn’t it?
Gary Determan: They had the cake auction going on.
David Nelson: Yes.
Gary Determan: Both fan bases were kind of getting into it, and your girls competed very well.
David Nelson: They did. They did. I don’t know. We’ve got a different look now obviously with… I’ve had Paige [inaudible 00:01:09] who’s been out now for a while, and will be out the balance of the year. Then I lost my would be next starter. She went out at a JV game. We’ve been trying to get her some minutes at that level to try to help her as well as varsity minutes. She went down. Then I had another girl that was sick that would be in the mix. We were down three of probably our top seven, eight players, and yet we hung in there. Annabel [inaudible 00:01:35] been playing like just an absolute animal, just in a really positive way animal.
David Nelson: It’s been fun to see as far as… It’s been a great challenge as far as to try to figure out some rotations and what have you. Yeah, it’s been good. Now we’re eyeballing the tournament. Thursday we’ve got Lone Tree, which we’ve never played in the past, so this’ll be a first. Looking forward to that, and hopefully get through that and then it’s heading up to Marquette and see what we can do as far as, against Marquette.
Gary Determan: This weather has just been so bad for the athletic directors trying to reschedule, getting where both teams can get back together and again, and of course getting officials is also a big concern.
David Nelson: It’s a real challenge. We tried to… I was chatting with our AD, and she was rattling off some options to me yesterday and said, “We want to go this route, but we couldn’t find officials. They’ve already committed as far as to another,” and so on and so on. Yeah, it’s been a real problem. Again, we’ll see if we get the game in tomorrow. If not tomorrow, it’s then supposed to be Friday. Well, Friday, there’s probably already a fair amount of games where these people are committed. We’ll have to see as far as whether this is going to take place or not. What I do now is that we’re supposed to play, in a normal year, 21 games and it looks like this year we’re getting in 16. I mean that’s how many we’ve lost, 16, maybe 17, games.
David Nelson: Yeah, we’d like to play them all to get that extra experience as far as for the kids and, again at this point, pretty meaningless from the standpoint. The conference has already been taken by Marquette. Everybody else is fighting for second, third, fourth. We think we’ll be parked at third place. We had a shot at second place, but to go from the cellar last year to third place as far as in the conferences, I guess you could call kind of a win. Again, considering we’ve got three [inaudible 00:03:30] in the starting lineup and two freshmen, it’s been a fairly successful season overall.
Gary Determan: Visiting with the coaches in the area, not only missing the games, but sometimes you’re missing practice-
David Nelson: Oh, a ton-
Gary Determan: … and your preparation. Of course in your line of work preparation is so key as it is in [crosstalk 00:03:49].
David Nelson: Exactly. As you say, being able to walk the kids through, “Here’s what this, some habits and plays and whatever that the other team likes to do,” and you don’t have time as far as to walk through that. We’ve done a lot of communication just through the old school hard copy, scribbling the plays out, what have you, and getting it to the school. Hopefully they can glance at it at lunch or something like that, and get to the game. Again, the games we are playing, now we’re down literally to, what is it, 10 or 11 players, and we were playing two games as far as per night. We had people going double duty and that’s where we got slapped as far as out at Eastern Valley. One of the players, again ,went down as far as in that game that we had hoped to use a fair amount as far as in the varsity games.
David Nelson: You’re right, practices, I don’t know how many we’ve missed there, but even the ones we’ve run, it’s kind of like what you just brought up with the weather forecast starting at six as far as some potential bad weather coming in. What we’ll end up doing probably tonight is having morph the boys program, and our program probably running side by side in the gym, at one gym, and only a few hours as far as to run practice. You’re limited on shooting and what have you, what you can do. It’s a challenge. I’m not whining, I’m enjoying it. I have to admit, it’s nice to be able to look to these challenges and figure out a solution to it.
David Nelson: The girls have been great. They’ve been competing really, really hard as of late. Yeah, it’s going to be fun. Tournament time is always a blast. We look forward to it. There’s increased pressure, and I think the kids, hopefully, are up to handling that part of it. Now we got to be good enough athletes as far as to pull out some of these games.
Gary Determan: I know in your line of work you do a lot of travel. How has that been affecting you?
David Nelson: Yeah, we do. We’ve got clients in, give or take, 40 states. We’re on the road a fair amount and yeah, it’s been a challenge. We’ve had a couple of evenings where we came back from the Chicago area and had one night that there was terrible fog. We had that to deal with. We’ve had a couple other evenings where, again, there’s been snow, but I don’t know what it is, I guess it’s that new stuff they put on the roads, that brine or what have you, in recent years, that seems to make a remarkable difference. It seemed to me, and maybe my memory is just tainted from the past, but I can remember many times driving home on ice, it would appear. Now, those roads relatively speaking, are pretty clear.
David Nelson: Heading to Indianapolis this weekend. We’ve got a individual down there that recently sold a business that is a friend of a friend. We’re heading down there, and have some discussions. Yeah, hopefully the weather cooperates this weekend.
Gary Determan: Very interesting. How is your thing with channel 4 coming along? They still making you drive down on Tuesday mornings-
David Nelson: Yeah, yeah. We’ve recorded a couple, but the bulk of it is live and then, we have great feedback as far as on that. As I’ve told people, this medium we found to be really helpful for communicating with clients as far as on many topics that we’ll discuss one on one, we’ll discuss in workshops. It’s just another way of repeating the important items as far as to help people, maybe hear it differently to be able to absorb it better. That repeating and that repetition is just really, really important. Again, this is a medium that we’re believing will help as far as in that regard. We’ve got offices from Dubuque down to Davenport at this point. We’re still in discussions with us in Muscatine, we’ll see if that goes anywhere.
David Nelson: But just like the other night in the JV game, I’ve got one of the officials that wanders up to me and he’s from Bellevue, and he makes the comment, “Oh Jesus, nice that you came with all the TV time and so on and so on.” It’s good that they’re seeing it up there. Again, he didn’t comment about any of the content. He just commented, “I see your ugly mug on TV.” Anyway, I guess that’s good. The word’s getting out. We really, really care about individuals as far as protecting themselves as things get tougher as far as markets. I mean, this last year, and we can get into it here in a bit as far as some of the data points, but it was a tough year and we want people to… Again, they work hard for their money. We want to help them hold onto that money as long as possible. There’s some things that they can do, and those are some of the items that we typically are sharing as far as through these venues.
Gary Determan: You mentioned the officials, before we take a break for the weather, I thought they did a very good job. The boys game was getting a pretty chippy there a little bit [crosstalk 00:08:37] point-
David Nelson: [crosstalk 00:08:38] with us.
Gary Determan: One of the officials, a young lady.
David Nelson: Yeah, exactly.
Gary Determan: I think you can watch her. She was very intent upon doing a good job.
David Nelson: She was. I have three daughters, so she wanted out the floor. One of the other officials came up and said she was pinch hitting for their team and what have you and I said, “Hey, I’m perfectly fine with that. I love seeing that.” Well, I hope you’re okay. I am okay. I love seeing a woman out there. I mean this is really important as far as to have that. Anyway, I agree with what you said. It was great to see.
Gary Determan: All right, thanks so much. We’re going to continue with more, but first a break for the weather brought to you by Petersen-Hagge furniture.
Eric Sorensen: Good morning everybody, we have some slick slush outside here for this morning, but it could have been a lot worse if we had more ice and less sleet outside. Please, be careful outside. You don’t want today to be the day that you end up in the ditch or worse off in a car accident. Our forecast for today, dry conditions but still could be a couple of passing showers, highs in the mid thirties. For tonight, a new winter weather advisory goes into effect after 6:00 PM, could be some more slush accumulations by tomorrow morning. Weather coverage continues now at WQAD.com, I’m [inaudible 00:09:49] meteorologist Eric Sorensen.
Gary Determan: Thanks so much Eric. Right now. Overcast skies, 30 degrees northeast winds our update brought to you by Petersen-Hagge furniture.
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Gary Determan: Welcome back. David Nelson stays with us to the bottom of the hour. Financial Focus brought to you by NelsonCorp Wealth Management. You mentioned 2018 a tough year.
David Nelson: Yeah, it was, couple of data points I think that are worth noting. This isn’t hide behind numbers, as far as performance, what have you, just interesting as far as I think to the listeners out there. There’s eight major asset classes. You’ve got US stocks, you’ve got gold, you’ve got real estate, you’ve got cash, you’ve got US bonds, you’ve got international stocks, you’ve got emerging market stocks. I think I touched all eight. But anyway, all those eight categories, we have not had a year since 1972 that of those eight categories, that one wasn’t up 5% or greater. It hasn’t happened, and this past year there were none, there were zero that that surpassed 5% gain.
David Nelson: You had many of the areas, you had emerging market’s down 25, 30%, you had international stocks down 20%, you had US long term government bonds that were down five to 6%. You had real estate that was down a few percent. It was one of the better performers. Gold was one of the better performers. Cash, that’s plain still basically zero.
David Nelson: It was a really, really challenging year for individuals when you look at the beginning of the year to the end of the year. During the year, you had some really nice returns that came about, but it pretty much vanished for most individuals as far as in the fourth quarter. Looking to 19, we’re spending a lot of time trying to focus on that. You mentioned about the weather. That was the topic as far as this last week as far as when on TV, and what we discussed was the average temperature in the state of… in our area, I should say. This is Iowa and Illinois. The average temperature on an annual basis is 49 degrees, for the year. As we told people as far as yesterday, I guess it was, is that, if individuals were to dress for 49 degrees last week, they were in deep trouble. They’d also be in pretty significant trouble if they dressed that way, say, August when we have 105 degrees, what have you, they’re going to be very unpleasant.
David Nelson: The problem with most people, the parallel we’re trying to make is that most people when they invest their money, they’re investing one way and that’s it. The money goes in, and there’s no modifications. The risks are higher today so I should probably have less in stocks. The risks are lower, so I should probably have more. There’s none of that. It just, I’m a 60/40 investor, I have 60% in stocks, 40% in bonds, and good days, bad days, I always have that 60 40 combo. We think it’s quite ridiculous and that’s the comparison we’re trying to make to the average temperature of 49 degrees. When is it ever 49 degrees? It’s never 49. It’s 52, it’s minus one, it’s… You get the idea. Investing is very much the same way.
David Nelson: There’s periods of time, like we just came out of, where the market had dropped 20%. 20% for the S&P 500 as far as in the last quarter leading into December 24th, that was a big significant drop that took place. Well, that might be an opportunity for people to start taking a little money out of some of the other asset classes and start buying as far as in those areas. The problem is, again, most people, it’s 60/40 and that’s the way they were, that’s the way they are, that’s the way they’re going to be. That’s why they have this rollercoaster ride and subpar returns over a period of time.
Gary Determan: I like the way you explain things. You talk about bringing in the weather. As you point out, that’s one way you try to get your message across to your clients.
David Nelson: Yes, storytelling is really, really important in anything. This area here you start talking about Beta co-efficiencies, and stuff like that, people just zone out. What we always want to do is we want to communicate to individuals where they can hopefully understand what we’re saying, and hopefully understand almost everything we’re saying. The weather… that was, Jake. He came up with that, and I thought it’s a terrific way, again, of trying to pinpoint a real problem that many people have. That is, that they one day make up their mind that they’re a moderate investor. You’ve got questionnaires in this industry, which are just ridiculous as far as to hand somebody.
David Nelson: We tell people, and we have it on a chart, we say, okay, here we are in, let’s say 2007, and the market’s just been ramping up big time. We’re up 100% from the bottom and you’re looking at your account statement every month and you say, “Oh man, this is great.” I hand you this questionnaire and I say answer these six questions to determine what type of risk taker you are. All you have for a frame of reference is what? Recent past, okay? What’s happened recently? You check the boxes, probably more aggressively than you should and that’s in 07, and the market now rolls over 58%. Half of your money’s thrown out the window right now because of the decision you just made.
David Nelson: Now, we meet that day and I hand you that same questionnaire, and all you’ve heard for the last two and a half years is, “The world’s coming to an end, the market is collapsing. Everything is terrible.” My guess is that you answer those questions in such a way that’s saying, “What’s your problem here, idiot? I want to put my money in the backyard. I don’t want to invest it today.” At just the wrong time as the market goes up, literally 300% from that bottom. Again, that’s emotions and that’s why most individuals when they approach this stuff, they’re checking the boxes and guess what? Everybody always ends up in the same category. They’re a moderate investor, and a moderate investor is a 60/40. Good luck with that allocation when we go into another 07, 08, 09 and we will, and it’s not that far off when we go into that and you’re down 38% on average, a moderate investor during the last pullback, and people are looking around saying, “I didn’t think this could go down that much. I’m a moderate investor.”
David Nelson: That allocation you have. The 60% got clubbed, the 40% went up a little bit, in that net you’re down 38%. Again, what we try to do is we try to give people some insight as far as what we believe with the tools that we use to say, “You might want to start tilting a little more to stocks. You might want to start tilting a little more towards bonds,” depending on the particular period of time that we find ourself in.
Gary Determan: Visiting with Dave Nelson of NelsonCorp Wealth Management. The can of tunas. Have you thrown the can of tunas out?
David Nelson: We love the can of Tuna concept.
Gary Determan: Okay, that’s still good there yeah-
David Nelson: Yeah, it’s still good, and for those that haven’t heard it’s real simple. You go into the store and tuna today is $3 a can and so you buy your one can, and you walk in the next day and they’re selling that same tuna, those same cans of tuna for a buck. What are you going to do? You’re going to load up the grocery cart with cans of tuna. Stocks are kind of the same way, if your disciplined. The key is most people aren’t disciplined. What we try to do is, again, look for those opportunities as far as out there. The can of tuna is a great analogy, and obviously you remember it. I don’t think I brought up in a few years, so that’s a good thing.
Gary Determan: It sticks with you no doubt about that-
David Nelson: Yes, it sticks with you.
Gary Determan: Well, of course it’s tax time, and now you of course have incorporated that into NelsonCorp Wealth Management.
David Nelson: Yeah, it’s a really nice addition. Deb Montgomery’s been a terrific longterm, I guess I would say, indirect partner going back literally probably now 15 years. She came into our current location as far as the office, four years ago, I think, something like that, give or take, and she’s been running the operations since, and will continue to. We’ve added additional person to assist as far as in that regard. It’s been a great, great partnership. The beneficiaries are our clients, because again, we have much better control over understanding the impact. If we sell this, what impact is it going to have as far as tax return? We can walk in and talk to Annie, we can go in and talk to Deb, say, “Can you run this scenario and see the impact that it’s going to have?”
David Nelson: Again, to most people it sounds pretty simple. “Well, I had a gain of $2,000. What’s it going to mean? I’m in a 15% bracket, so no big whoop, that’s 300 bucks. That’s it.” But it’s not that simple. The way the tax code is written could literally cost you maybe half of that gain depending on, again, how that that affects your other income. In other words, what most people aren’t aware of is if they’re drawing social security, and they have a spike in their income that can negatively impact as far as their social security, and make more of it subject to tax.
David Nelson: It can also affect their Medicare premium for those individuals that are on Medicare and are on social security and they make a sale, they could be looking at, again plus 50% of that additional gain, that $2,000 I just referenced, could go on the form of either additional taxes and/or higher Medicare premium. Medicare premiums are five tiers. Warren Buffet pays a much higher premium than most people as far as in our area. The bottom line is, we have to be aware as far as, “If we do this, what’s it going to translate into as far as on your tax return?”
Gary Determan: Interesting. You do this weekly program and we will be getting updates from Nate and I know you’ll bring Andy on a few of the shows.
David Nelson: Yeah, it’s really important again, to communicate. It’s no different than what we’ve been chatting about, and that is repetition. Most people, when the term taxes comes up, they just shut down. I mean, totally shut down. They don’t want to think about it. They don’t want to talk about it. They just shut down. What we need to get people to do is to understand, “Yes, we want to be proactive and we need to be proactive. Not reactive, but proactive.” But again, being proactive translates into having the bodies available to run these scenarios because none of us are geniuses in every area. We think we’re pretty good in money management. We think we’re really good as far as in tax planning, but we got to have the tax preparers as well that can can jump in and, again, assist as far as in some of these really tough decisions.
David Nelson: It’s important. Again, what does it mean at the end of the day to most people as we talk about as far as taxes? Taxes can actually add, maybe a half percent, 1% depending on a person’s situation, additional return for them as far as focusing on those tax issues and the ramifications. It’s important. It’s not something that you trivialize. That’s why, again, we love having it in house.
Gary Determan: Just, we got a minute or so, and wrapping things up. I know we don’t like to get political, but the State of the Union address was last night, will that play any role into what’s going on.
David Nelson: Yeah, I think so. I think what we’re hoping to find at least, we want some type of settlement, what have you, as far as with China. This Brexit thing is hanging out there. There’s been a lot of heavy, big items that have been weighing on the market, and the market’s kind of accepted a few of them and started rallying. Since December 24th, we’ve had a little bit of a pushup. I think we’ve retraced is a beautiful term as far as in our industry. We’ve recovered roughly 60% that we went down. That’s, again, pretty good news. But we get a few of these other things cleaned up. We’re overall pretty optimistic as far as for 19, and we’re hoping that the returns are going to be good. Again, if we can clean up the China situation and Brexit can get straightened out over in Great Britain, this would be really, really good news as far as for investors.
Gary Determan: Appreciate your time as always. Safe travels and best of luck to the Irish girls in the tournament. [crosstalk 00:22:23] day and it’s going to be at the jail.
David Nelson: Yes. At the jail. Absolutely. Thanks Gary.
Announcer: Financial focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only, and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered 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.
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