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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 representative. Securities offered through Cambridge Investment Research Incorporated, a Broker/Dealer, Member 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:
And good morning welcome to the program and. First Wednesday of the month, so a pleasure to have Dave Nelson in studio. He’s got a short sleeve shirt on, however today.
David Nelson:
Kind of crazy it seems like.
Gary Determan:
You always go out for walks early in the morning-
David Nelson:
I do.
Gary Determan:
And it was nice then.
David Nelson:
It was beautiful. 72 degrees when I went out this morning. And just a tad bit of humidity in the air, but it felt good. And my dogs, got two Airedales, which I probably brought up a couple times here, they don’t take the warm weather very well. So they are panting up a storm, and they’ll be excited as far as the 50s and the 60s that are coming down the road. But anyway, yeah, temperature’s dropping. So yes, I probably should’ve had something else, but I’ll survive.
Gary Determan:
Looks sharp. Too bad we don’t have you on our-
David Nelson:
Thank you.
Gary Determan:
Our video. Now, you were recently in, a group of you from NelsonCorp, were out at Denver. Tell us about that.
David Nelson:
It’s a big gathering. It’s called Ignite, and the idea is to bring together whoever can make it. Cambridge has roughly 4,000 advisors as far as that use their services. They essentially, they help us execute a transaction, a stock, a bond, a mutual fund, whatever. We call a broker dealer, which is what Cambridge is, it’s what Merrill Lynch is and companies like that, we call them a glorified bookkeeper. To help people kind of understand what is it exactly they do. But anyway, at the end of the day they put on this conference once a year, and bring in a lot of speakers from around the country, what have you. We’re able to get continuing education credits. There’s a lot of good sessions there were various things are being discussed, et cetera.
David Nelson:
This particular year we brought numerous people from our office there. We kind of rotate who goes. It was in Denver, it was a fairly easy get on the plane in Moline and it’s a direct shot into Denver. And we were there roughly four days. A lot of smart people there, lot of opportunity to learn from your peers. That was really a good thing.
David Nelson:
We look forward to it each year. And again, we just try to rotate in as far as various people from the office. Can’t close the place down, it’s one of those things where it’s kind of rotation that takes place as far as within.
Gary Determan:
They change locations? You were in Denver this year?
David Nelson:
Good point. Yeah, next year, I think, is Dallas, I believe, then Orlando, I think. I’ll just kind of move it around, what have you. Chicago’s hosted it probably more than any other place. It makes it, again, very easy for us as far as locations like that. But Cambridge, they have advisers from Hawaii, Alaska, down to Florida, and pretty much everywhere in between, so they try to accommodate the various spots, what have you.
David Nelson:
But the content is very important. Each year they’ll have… I don’t know how many total speakers that’ll be there discussing various things, but this year, most of the time I’ll have a session that I do at the conference. There’s 2300 people that attend this thing, and then they have various breakout sessions, what have you. But it’s a big group and the goal is to try to learn from each other.
David Nelson:
We have a saying as far as in the office, “Fools learn from their own mistakes. It’s much cheaper and better to learn from other people’s mistakes.” And that, to me, is kind of the idea of this event. And so when we go there, what we’re doing is we’re trying to share with people what we’ve learned that they don’t want to do, and hopefully we can learn from them the same thing, what not to do, and here’s some good opportunities. It was a very, very high end educational type session. We drug along the families, so we spend an extra day, to extra day and a half actually, just kind of putzing around and enjoying Denver. It was great experience as far as getting the work plus a little downtime, a little family time.
Gary Determan:
Quite interesting. I’m visiting with Dave Nelson now. As you pointed out, you had an opportunity to talk at this. Now, do they tell you what they want you to talk about, or do you have a specific subject? I would imagine various subjects. How does that all work for you?
David Nelson:
Sure. It depends from year to year. This year they gave me a topic, they have a lot of individuals out there that are having growing pains. One of the challenges as far as an office like ours is at what point do you add additional people? We shared just the growth trajectory. We shared with them some of the things we’re doing to try to better serve and communicate with clients, and we do a lot of things, this being one medium that we’ve done for, I think, give or take 30 years.
David Nelson:
At the end of the day, it’s this type of medium. It’s TV, it’s newsletters that we produce, it’s letters that we send out to people on a regular basis. It’s emails, it’s various clips that we send them from media events that we do. Again, all of these things are designed to do what? It’s to try to make the world that we exist in not so foreign to most people, not so intimidating to most people. What we find as far as the repetition is very, very important. And again, we do a lot of big, big gatherings where we have people come in.
David Nelson:
I think it’s the end of this month, I think, we’re doing a couple of big events in town here. We’re inviting clients and what have you to it, educational stuff. We’ll talk about the embargo, we’re going to spend a lot of time talking about the impact of, of these events that are taking place, Brexit. These are big, big items, and again, what should people do?
David Nelson:
Now, closing your eyes and pretending that it’s not happening is not an answer. Our job is essentially to communicate with clients and say, “Here’s what we’re doing, here’s why we’re doing what we’re doing.” And again, then clients can make a decision, is this the path I want to continue to go down? What we find is that, again, most people in this industry, and what we found from the 2300 people there, and I didn’t talk to each and every one of them, but what… there seems to be a similar obstacle, and that is time that people struggle with as far as having that ability to communicate. And so to be able to price things where you don’t charge people an arm and leg, and to be able to communicate with them, there’s a balance there that that takes place.
David Nelson:
And again, what we found is that this, TV, workshops, newsletters, and letters is our methods and ways of communicating with them, in addition to two reviews a year. And that keeps people loop and keeps them informed, and they understand why, again, we’re doing what we’re doing. At a point like this, playing a little defense feels pretty good. Yesterday down 300 points, today, down 300 points. I’m really glad we played some defense and I think we’ll continue to play defense knowing probably what’s ahead. There’s not really a lot of positive things that are happening that I think can turn this thing around in the next 10 minutes. We’re probably going to stay on the defensive side.
Gary Determan:
Okay. Before we take a break for weather, I’m just kind of curious. 2300 people, where were you guys at? How did they divide this? I mean, it’s got to be a huge complex. Is that a convention center?
David Nelson:
It is. It’s a huge convention center. It’s in Denver, it’s brand spanking new. It’s less than nine months old. It accommodated everybody. If you could imagine the number of rooms, this is a huge complex. And then the meeting rooms were gargantuan. I mean, there were as big as I’ve ever seen. 2300 people, most of the, the big gatherings where we had some outside speakers, there was 2300 plus some spouses and whatever. There had to be 4,000 people, probably, in the room. It was a massive room.
Gary Determan:
Amazing.
David Nelson:
Yeah, yeah. Exciting.
Gary Determan:
All right. Of course, it is the first Wednesday of the month so we continue to the bottom of the hour. The R word, we’re not talking rain. [crosstalk 00:08:51] And you mentioned, I think at the top of the show, global recession.
David Nelson:
Yes. Global recession. It’s been… It’s kind of shocking to me listening to people talk about recessions. They happen, and they happen on a regular basis, and they don’t happen every day. But you’re talking… Again, depending on what data point you listen to, it’s somewhere between every six and eight years, that’s the business cycle. And you have the peaks and troughs, and whatever, whatever. But we’re acting like it’s a depression. We’ve got to do everything we can to keep this sucker going, keep this economy going. And again, I’m not bright enough to know right from wrong, but what I do know is that with the amount of attention that it’s getting, you have people in an uproar, we can’t let this happen.
David Nelson:
Recessions happen. And again, they’re part of the cleansing process to go to the next level. I’ve said, probably, at least three months, I believe, four months on this program as well as at pretty much everything else, we’re in a recession. Now, I say we, we globally, we are in a recession. The US is wobbling right now getting close to it, not there yet. Again, recessions are called months after it’s already taken place. The way it’s calculated or whatever, you don’t know for months until you look in the rear view mirror. I’m saying we’ve been in it globally for quite some time. And now, yesterday there was a very important data point that came out. It’s the ISM Manufacturing Index.
David Nelson:
It hit its lowest level since the Great Recession, going back 10 years, give or take. In addition, orders, this is durable orders, it’s big goods orders hit a 10 year low yesterday, as well. We can pretend, we can act like it’s not happening, or we can look at the facts. And the facts are that globally we’re in a recession. The US, because we’re so interwoven with Europe, and China, and Japan, they’re in it, we will probably in it. That’s not the world’s coming to an end, this is just a process that, again, economies go through.
David Nelson:
Now, the key is, is you just sit there and hope that you’re going to be okay? Or do you proactively do something about it? And that’s where I brought up earlier, pretty much across the board, we’re playing a lot more defense today than we normally would. Are we all defense? No, we still have exposure to various assets, primarily mutual funds, and things of that nature on the stock side. But the end result is that it probably is a decent time to be playing defense.
David Nelson:
Now, yesterday the Dow was down 300 points. And again, the Dow is a pretty poor proxy for the market, but it’s what everybody’s aware of. It was down roughly 300 and some points yesterday. Today we were down 300 when I came in here. I don’t know where we’re going to finish the day, but again, that’s 600 points. The Dow, give or take, is 25,000. Is this a terrible, terrible thing? No. But again, it’s not pleasant and it might get even worse. All we’re trying to do is to look at the facts, and the facts are saying that things are slowing.
David Nelson:
We see that across the board, not just here, but globally. Globally is in a recession, US not yet, but there’s a very good chance US will be declared in a recession months down the road. But probably being close that it’s already starting as we stand today. The Fed Reserve is trying to do what they can to prevent it. The markets are basically telling the Fed, in essence, “You’ve got to cut interest rates.”
David Nelson:
I had a guy one day bring it up to me and he said, “Is there anybody, any business owner that is going to make a decision with a quarter percent difference in interest?” You know, in other words, if it’s 2% or 1.75, is that really going to matter that much? And I that that’s kind of where I come from.
David Nelson:
The Fed can only do so much, and people’s perception of tomorrow, there’s so much uncertainty. That’s why business owners aren’t out there spending money locally. We had a big company down in the Quad Cities… I can’t talk individual issues as far as on the program, but I think most people kind of have a general idea. They manufacture big equipment that farmers need and use. They kicked out a whole bunch of people… Well a whole bunch of people, define a whole bunch of people. They kicked out 163, I think, people yesterday, temporary layoffs. We hope temporary. We have 6,000 people at GM has let go. This is down in one of the Mexican plants. These are a few of the early ends that we’re seeing, the start I should say, as far as what’s probably coming down the road.
David Nelson:
I was asked yesterday on the five o’clock news, the WHBF, “What’s your perception of tomorrow on this?”
David Nelson:
And I said, “You can’t see anything on the horizon that’s going to change this general direction in the short term. It will eventually, but we just don’t know when.” Rather than, again, having tremendous exposure, recessions, when recessions, do hit markets correct, on average probably 15 to 20% greater than it would a normal correction. Translation, that’s 30% plus, on average. Most people, that’s not going to be a very pleasant experience, hence we take a proactive approach, sold some stuff, and we’re playing a little bit of defense. And it’s probably a pretty good idea. Can’t give, obviously, individual advice here in this medium, but the bottom line as a general thumb.
David Nelson:
We don’t see any catalysts to turn this thing around in the next 10 minutes, as I typically say.
Gary Determan:
Again, visiting with Dave Nelson of NelsonCorp Wealth Management. Here it is, October, so we are heading into the final quarter of the year. And generally toward the holidays, things sometimes do pickup in the economy. Will that help or will that even matte, David?
David Nelson:
It’s a really tough a question to answer. The Santa Claus rally is what you’re kind of referencing. Towards the end of the year you get a nice push into the following year, you typically get a nice push. And it’s referred to as the Santa Claus rally. Will that happen this year? I don’t know. There’s a lot of uncertainty out there now.
David Nelson:
One particular focal point at the gathering we were just at as there’s some new legislation making things harder for people that call themselves financial advisors. Which we’ve been wanting and cheering for for quite some time. There’s a lot of hacks out there that call themself advisors, but they’re not current. They’re hacks because they don’t have the proper, in my opinion, certifications, they haven’t gone to the degrees that they should to understand our business at a much higher level than what they do.
David Nelson:
This law is going to make things much harder on them, and that goes into effect at the middle of next year, 6/30 of… Or 7/1, I guess technically, it’s an in place next year. Why do I bring that up? It’s just one example of, with elections, how things can either continue to move forward because the fear of I don’t want to show favoritism, or we could have legislation being proposed to try to spur the economy. I’m seeing this particular thing, and at the conference it was brought up, this law, if it were to take place say two years ago, it would have been wiped out because the President would not have want the potential… today does not want the potential perception of that he’s trying to water down legislation that protects average investors from crooks, and people that don’t know what they’re doing.
David Nelson:
The verbiage was at this conference, and I agree, that will go into effect. Again, people can’t… the other party can’t use that against the President if they believe that this is good. Will we see new legislation, proposed legislation as far as infrastructure and things like that to try to push this economy forward, to try to create jobs, to try to offset the jobs being lost? Of course. And that isn’t just a Republican type approach, that’s whoever’s in the White House is going to do that. That’s just the way that it works. If I looked at the economy as a standalone, I’d say no, I don’t think the markets are probably going to respond in a very favorable way for quite some time.
David Nelson:
But when you look at the hope of what could take place, I think that that’s going to be a nice buffer to keep this thing from probably plummeting too much, but yet not seeing, probably, the big Santa Claus rally. Keep in mind, market’s up very substantially year to date. Depending on what index you look at, it’s probably double digit-ish. If that’s the case, normally a lot of that’s baked in already, and we probably aren’t going to see it. I’ll put it this way, I’m not betting the ranch on that we’re going to get a big rally far as the end of the year. That’s just, again, my opinion, doesn’t apply to client situation, but my opinion, don’t see a lot happening to balance the year.
Gary Determan:
And as we close the program, you’ve mentioned this a couple of times, you’re playing defense. Now, when you say that, what do you mean by that?
David Nelson:
Good point. Again, a lot of jargon in our industry. Stocks, the perception of stocks is you’re going to probably, historically at least, make a higher return, but you’re going to have to live with a fair amount of bumps along the path. In other words, you could be up 20% in a year, but you could also be down 20 or 30% in a given year with stocks. And that could be individual stocks, or that could be stock mutual funds, or stock ETFs, same concept. They’re going to be more volatile. Historically, they’re going to pay more, but they’re going to be more volatile. As far as defense is concerned, that’s primarily two categories. Cash, which is the simplest. Most people get that as put it into something that doesn’t go down, and whether it be a money market account, a CD, something like that. That’s one way to play some defense.
David Nelson:
The other would be bonds. And bonds… People have heard bonds, most people don’t understand them, but in theory, if you buy a government bond, that money is protected if you hold that bond for a certain period of time. Again, heavier defense. When volatility takes over as far as and stocks, and things start dropping dramatically, you typically get a rally.
David Nelson:
Yesterday, stocks got punched in the nose, bonds went up in value. Again, if your crystal ball is perfect and you can play that sucker, which nobody can, but the bottom line is you try to get the general direction. What we’ve done playing defense is taken some out of stocks, and put it into some of that safer stuff. It doesn’t mean that there won’t be a drop, it just means that if things drop, your drop will be significantly less than the going rate.
Gary Determan:
Just a final question for you, because I know you love the game of basketball. Are we playing half-court? Or are we full court pressing this?
David Nelson:
We’re playing heavy defense and it’s full court here, yes. Great analogy. I like it.
Gary Determan:
Very good. And of course, with that we’ll close. It won’t be long and you’ll be rolling the basketballs out, right? October sometime?
David Nelson:
Yeah, looking forward to it. It’s weeks away, I’ve got a whole bunch of stuff. We’ve got workshops here, we’ve got workshops down in the cities that we’ve got to do. But yeah, it’s… We think it’s going to be a fun season. I had somebody yesterday jump me down in the cities that we played in the past and they said, “What’s the team look like?”
David Nelson:
And I won’t walked through it as far as the record the last two years. And the conclusion was they said we’re going to have a pretty good year this year. We’ve played against a lot of local teams, had a good off season. Again, it’s a tough conference we’re in-
Gary Determan:
And still not a lot of seniors.
David Nelson:
Still not a lot of seniors. I’ll have one, I think she’s going to go out this year. We’re junior heavy ,and we’ve got two sophomores that carry a heavy load as well. We should be okay. And we’ve got a freshman… we’ve got a few freshmen that are pretty decent, but I’ve got, I’ve got my biggest player, six footer, and she’s been around basketball a lot, so she’ll add some value probably mid season, the end of the season. We’re excited about that.
Gary Determan:
All right. Now, go get a sweater on.
David Nelson:
Yes, exactly.
Gary Determan:
Thanks for coming in.
David Nelson:
Thank you, 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 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. For more information, visit our website at www.nelsoncorp.com.
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