Jim Niedelman:
We’re here with David Nelson of NelsonCorp Wealth Management. Always great to see you, David.

David Nelson:
Thank you. Appreciate it.

Jim Niedelman:
We talked last week about corporate earnings, and it’s one of the big drivers of stock returns, stock values, and that sort of thing. What can people at home do to understand what factors into that, what kind of shape a company’s in, particularly when it comes to an investment standpoint?

David Nelson:
Yeah. Very important. This slide is fantastic. It looks like kind of a mess here, but I’ll try to explain as best I can. What we’re looking at is the credit component, and this is something from the Federal Reserve. And what we’re looking at here is when we see spikes, this is generally going to indicate that recessionary periods here, here. What we see over here right now is a fantastic look at … It’s basically saying credit conditions are really good today. So, individuals have credit available to them. As far as corporations, have maximum credit available to them.

David Nelson:
As a general thumb, this is really good news as far as that it’s being priced as far as, as low as it is today, considering the conditions as far as that exist out there.

Jim Niedelman:
A lot of people might not know the tools like this exist. What other things are available to measure a credit cycle of a company?

David Nelson:
So, chart two will kind of walk us through as far as this, and what this is looking at, here, is interest rates. And one of my favorite stories that I like to tell people when we start talking about this, is Greece. Back in 2011, 2012, they were paying as far as on a 10-year bond, 35% plus. Today they’re paying 2%. What this is looking at is the U.S. high yield bonds, junk bonds, compared to us high quality corporate, and we’re at levels that we haven’t seen, literally, ever.

David Nelson:
And what this as illustrating is that corporate credit is very good. This is very positive. But again, we don’t want people to assume that everything is perfect. It’s just illustrating here that in the corporate marketplace, in other words in the bond market, that things actually look pretty favorable today.

Jim Niedelman:
You’ve mentioned, though, sometimes things do move in opposite directions. What happens in this case, particularly? How can people manage that for themselves?

David Nelson:
It’s a great question and again, when we talk about bonds, what most people don’t realize is when interest rates drop, that’s how you make extra money. We talk about the teeter totter all the time. As interest rates drop, the value of my securities go up. At some point, this is gonna turn. The cycle is going to turn. But if we look at Europe today … I talk about the 10-year German Bund, as they call it over there, today has a negative rate of return of 0.41%. It’s unheard of. And Japan, negative rates of return.

David Nelson:
So we’re kind of moving down that path. The Fed has been talking about cutting interest rates as far as again. We’ll see if that takes place. We think it’s probably going to take place, and we think there’s going to be probably a cycle of reductions. Again, is that going to ignite the economy as far as so that we have better growth? Time will tell, but getting to these close to zero type rate of return, not so favorable as far as for savers. The savers are the ones that are suffering badly, as far as through this. Borrowers, great. Savers, not so good.

Jim Niedelman:
Always good to get advice along the way in these types of things.

David Nelson:
Yes. Absolutely. Very important.

Jim Niedelman:
David Nelson, NelsonCorp Wealth Management, always great to have you.

David Nelson:
Thank you.

Jim Niedelman:
Of course, if you missed any of this discussion, we have more for it online for you at OurQuadCities.com.

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