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.
Announcer:
Now here’s today’s Financial Focus program.
Gary Determan:
It is the first Wednesday of the month, but we are practicing social distancing. On the phone with me this morning is Dave Nelson. Good morning, David.
David Nelson:
Good morning, Gary. I don’t know about you but I’m getting a little tired of it. But I know we’ve got to do our part and we’ll continue to do our part. But I look forward to the day where we can get back together and spend a little time. Certainly from a client perspective, this is a trying time to say the least and certainly adding to it as far as not being able to interface face-to-face and certainly something different than we’ve had in the 40 years that I’ve been doing what I do. So, anyway.
Gary Determan:
Yeah, I think, David, the thing is the uncertainty of it. They try and give us a timeline and they say, “Maybe now the next two weeks are going to be really bad. Then we’ll start to see the apex come down the other way.” But it is that uncertainty. That’s something you really don’t like in the markets is it?
David Nelson:
Exactly. Uncertainty is poison when it comes to the stock market, and for that matter, probably the bond market as well. Bond market feeds off of usually fear. People typically that look to the bonds are typically going to be a more conservative-type investor. Everybody defines themselves the last probably month or two as a conservative investor. Subsequently, what we’ve seen as far as in the bond market has been exactly what we started talking about six months ago as far as that when we have this draw down that there’s going to be a flood as far as people move in that direction. We hope it holds up as far as the bond market is concerned as far as to the demands that are going to be placed upon it.
David Nelson:
I don’t want to imply this virus as far as having the impact that it had, but when we look at it, people would ask, “Do you think the market’s overpriced?” My response was basically very consistent saying, “Yes, it is.” People are looking for an excuse as far as to sell. They got it from this. We’ve had a massive sell-off today when we started here two, three minutes ago live. The market was down. The Dow was down about 800 points. Who knows by the end of the day? I mean, it could be up. It could be down. I mean, these violent moves that we’ve seen, 10%, 12% moves in a day are just unheard of, but the fear is out there.
David Nelson:
We can drill down if you’d like as far as a little more, as far as on the bond market. Because as I’ve again shared with folks, the bond market and the stock market have been at odds for probably over a year. Interest rates were dropping pretty significantly, which normally is going to indicate that there’s concern about not inflation, but concern about deflation. The stock market’s basically running hard. Now I’m going back two months ago, running really hard as far as on an upward basis. Something’s got to give. Either the stock market is right or the bond market is right. As we’ve shared with people, again time and time again, if I had to lay the chips on the table on one side or the other, I’m going with the bond market. The bond market’s generally right. The bond market generally leads as far as the stock market.
David Nelson:
The bond market mess that we had, I’ve spoken about as far as on these the radio, TV call-ins that we’re doing as far as for clients, the bond market mess seems to have subsided, at least for the foreseeable future. The Federal Reserve stepped in with billions and billions. Then we see as far as our politicians stepped in with trillions too. Now we’re looking at probably something else is what’s being discussed in Washington as far as to get to that next level.
David Nelson:
Yeah, it’s a trying time to say the least as far as for individuals day-to-day. I’m sure you’re going crazy like many other people out there wanting to go do other things that you normally would do, but it’s a no-no. We just have to put up with it. Again if we’re good boys and girls, hopefully we’ll get to the other side of this safely.
Gary Determan:
Yeah, I’m kind of like you, a little bit of a sports junkie. I mean, I’m missing out on spring track and field right now. I know your girls were probably looking forward to getting in some practice looking ahead to the next basketball season with that group of young athletes that you do have.
David Nelson:
Yeah, exactly. As you say, for individuals that are into sports and those that aren’t really as heavily into it, just watching it on TV, let alone watching them locally here. It’s big. It’s significant. Everybody’s suffering through the same thing. But, you’re exactly right. We finished the season. I don’t want to dwell too much on this, but we had a nice season. I was really proud of the kids as far as we had a couple of really big wins. We had a couple stupid losses, but that’s going to happen.
David Nelson:
But at the end of the day, the kids I think are ready to get back in the gym. We’re going to go hard this off season. It’ll be just interesting to see what the off season looks like because of this. Obviously, we’re not the only team that’s going to be dealing with this, but it’s a significant thing. Again, for those athletes that are sitting out now, some of these kids, unfortunately, this may be their favorite sport, maybe their only sport. They’re just wiped out as far as the spring season is concerned. A real shame.
Gary Determan:
Yeah, and of course you have the nephew who is now coaching, an assistant coach on the Division 1 level in NCAA basketball. To have all those conference tournaments and then the NCAA tournament canceled.
David Nelson:
Isn’t that something. I mean, again in your wildest dreams, nobody could ever envision something like this. But we’re in the midst of it and it’s the right thing to do, to dial it back, what have you. But again, you look at the kids. I think they’re going to get some additional eligibility, their NCAA, you hear them yapping about this stuff.
David Nelson:
But again, some of them it’s just not going to be practical as far as to be able to go back in various sports out there. The basketball, it’s big money. We all know that as far as that it generates. But, the number of kids that this is their opportunity, their showtime as far as to hopefully make a name for themself and maybe make the next step as far as to the NBA, it’s a real shame. You see it as far as across the board in so many sports. Yeah, it’s unfortunate, but we got to get through it.
Gary Determan:
Yeah, and a family I know you’re familiar with, the Laufenbergs. Their daughter, Sydney, of course competing at Illinois State University was getting ready for her senior year. Now, she has already graduated. She was kind of looking toward the Olympics, which is now another year off. So you’re right. A lot of folks in limbo.
David Nelson:
Yeah, it is. Again, you just look at the financial aspect of this as far as, “Okay, I’ll go back. I’ll compete.” How does that work? Where do you stay? What’s the cost as far as that? Are you there the entire year? Are there caveats and catches in order to get back?
David Nelson:
Yeah, it’s just, oh, my goodness. But again, the other side of the coin is you hear the estimates as far as not only how many have currently passed away, but how many are going to pass away with this. I don’t want to whine too loud. We’ve got to again do our part and try to help out. But, yeah. It’s really, really, really sad times.
Gary Determan:
David Nelson, again, visiting with us by phone. We’ll be talking more after the break. We’re going to be taking that in about a minute, Dave. But to what are some of the steps that you’re taking because you have a physical building?
David Nelson:
We do, yes. It’s important to keep our people safe as well. Our industry obviously as people can probably imagine, we’ve got a lot of people that come through the door for the accounting side of our operation as well as the planning side of our operation, the financial planning side, the investment side. We’ve got a skeleton crew here. We’re flip-flopping people day-to-day. We think we’ve got the best recipe. We’ve got everybody linked up as far as to their cell phones so we can transfer calls out.
David Nelson:
But to get the actual call coming in, we’ve got to go through this process. We want people to know that somebody is here. Periodically people need something. Somebody in their life has an event, somebody passes away, they need to come in and sign some documents, what have you. Yeah, we’ve got to stay open. We are, we want to, but at the end of the day, it’s very minimal as far as the number of heads. I think normally we’ve got 15 people probably at any one time at this location. Today, I would guess there’s probably three of us that are here today.
Gary Determan:
Interesting. What are some of the things you’re going to be addressing, Dave?
David Nelson:
Yeah, I think the most important thing, Gary, is just to try to help people keep their wits as far as during periods of time like now. We’ve been asked as far as by individuals that have come in that we don’t work with as far as over the last couple of weeks as far as, “I’m down this percentage.” Most of the time we’re hearing roughly 30%. “Should I sell? Should I buy? What should I do at this point?”
David Nelson:
Obviously, there’s no perfect answer across the board. But, I want to, again, try to as best we can, obviously nobody’s crystal ball works about tomorrows, but I think this thing, this is a big problem. This big problem is not going to go away in minutes like I think people are hoping for. Because of that, again, it’s going to be really, really important that people do keep their head and don’t make rush decisions.
David Nelson:
Now, if you’re down 30%, historically 35% to 40% if we go into a bear market as far as while we’re in a recession, which is I think where we are today. If we’re not, and people argue that we’re still not, it’s bogus. We are. I mean, anybody can just look out your front door and just see as far as the number of cars that are going by in comparison to normal times, et cetera. If we’re in a recession, and again, my prediction is we are. Number two, we’re in a bear market, which we know we are as far as that just the definition that we’re 20% down. Historically, you’re looking at the high 30s as far as the is the normal pullback.
David Nelson:
Well again, we roughly got there and it didn’t quite get there as far as maybe about a week and a half, two weeks ago. We’re probably in the neighborhood of the bulk of the damage being done, but I’ll refresh people’s minds as far as what took place in late ’08 and early ’09. We had the really massive sell-off that took place in ’08. Then we had a nice rally as far as it dug us out of there. I think most people believed that it was over. To their unfortunate surprise is that there was still over 20% down that took place leading into March 9th being the low then.
David Nelson:
Certainly that can happen. One of the messages we’ve been basically spelling out to everybody that’ll listen is that if you look at the history book, and this is different. I hate when people say, “This has happened before,” blah blah blah. It hasn’t happened before. But the reality is that conditions that we find ourselves in right now are pretty similar to what we have seen in the past as far as for various terrible things that have happened in this country.
David Nelson:
Now, the market has what’s known as a waterfall decline, which we had. That took place again roughly three weeks ago, four weeks ago, right in there, this big drop-off, fast drop-off. Then historically what you see, Gary, is that the market has a tendency to hit some type of bottom there and then it pops up. People start feeling good about it and people start diving in. That’s a mistake in most situations. Because history says it takes the dive, it rallies pretty hard, then you get another retest down as far as in that retest normally is going to be greater than the prior one. In other words, you’re going to get to a new low, then you rally from there.
David Nelson:
Now, statistically that happens over 70% of the time. Not always, but normally that happens. Sometimes you won’t get the V, which people are hoping for. I was just describing what we call a W. So it goes down, rallies up, it goes back down. If you can picture the W, sometimes you get a triple bottom. The triple bottom is the most dangerous because, again, if it rallies up that second time like I was illustrating earlier, you could get another significant drop as far as on the downside.
David Nelson:
Now, we have working in our favor is we have governments around the world that are throwing literally trillions of dollars at this problem just like they did in ’07, ’08, ’09. In ’07, ’08, ’09, they’re a little slower about doing it and subsequently this thing lasted probably longer than it needed, but nobody really knew how to deal with it because that was the first time something like that took place. This time people didn’t really putz around as far as in the United States. The Federal Reserve came in quickly with hundreds of billions of dollars to try to stabilize the bond market subsequently, hopefully feeding over into the stock market. To some degree it worked.
David Nelson:
Well, then the politicians got their act together and we put a $2 trillion bill together and the market just believed for three days that that was going to be the answer. It rallied and it rallied hard. I think we picked up close to 20% in a period of three days. One day alone was 12%. That was a big, big move up. But then, again, we had this kind of stagnant-type movement lately and nothing big up, nothing big down until today. Today looks like a pretty significant day. Again, we don’t know by the end of the day, but 700, 800 points is a big, big day.
David Nelson:
Again, we’re just saying to people this volatility is not going to go away as far as for quite some time here. Politicians are going to do what they can, federal reserves around the world are going to do what they can, but the reality is the market has been spooked. It’s spooked because all you have to do is look around the world and see as far as what’s taken place. The best variable to look at is oil. Oil has been crushed. We’re down $20 a barrel. People are excited when they go to the pump. But as far as the economy is concerned, this is a big, big item as far as from the standpoint of what’s tomorrow look like.
Gary Determan:
Getting great information from Dave Nelson. Dave, we got about six minutes left in today’s program and again, I appreciate you taking time to visit with us. Because I would imagine how busy are you right now, Dave?
David Nelson:
Most people, I mean, we’ve had clients that we’ve spoken to. We were very proactive getting on the phone and calling clients and letting them know as far as … and again, over the last year, two years, I think people got tired of hearing me in particular yap about how bad things could get. Yet again, things are rolling along. As Warren Buffett says, be excited when other people are nervous and be nervous when other people are excited. We fall in that camp. You got to be willing to go against the grain and that’s hard to do. We’ve been prepping people for a long time about this. The phone, literally, I think John in the office had four calls. I think James had like three. I think Brad had a couple. I had zero. I had literally zero phone calls that came in from clients. That’s a really good indication that, again, that we’ve positioned them correctly. We’ve coached them correctly as far as to know how to deal with these types of situations.
David Nelson:
The other thing that helps a lot, Gary, is that we’re down, but we’re not down nearly what the market was down. Peak to trough, the market again didn’t touch 40, but it got pretty close to it if you look at the Dow. During that particular window, we’re down between a third of that. I’ll put it this way, we’re 40% or less as far as that loss that we absorbed. We’re really pleased as far as with our tools that they worked and they’re able to deflect a lot of the damage. That could be part of it as well as far as why the phone didn’t ring off the hook.
David Nelson:
But we’re going to be doing a call here tomorrow, I believe it is. Yeah, today’s Wednesday, Thursday, yes. These kind of run together all screwed up with the working from home stuff. But anyway, tomorrow I believe it’s at 6:00 where we’re going to spend a half an hour. We’ve got some nice handouts for folks if individuals are interested as far as in calling in. We can email this stuff to you. Then I’m going to walk through for give or take probably 40, 45 minutes where we’re going to drill down as far as things that people should be thinking about now. Again, trying to help people make better decisions.
David Nelson:
We did something very similar back in ’07, ’08 when we had this crises. What we find is that there’s a lot of individuals out there that are either trying to do it on their own or they’re working with somebody that I put in the category of a part-timer. That individual that really doesn’t put in the time needed to help coach people as far as on what they should be doing. That they drank the Kool-Aid as far as from that you just throw your money in and it’ll be okay-type scenario. Those individuals need some help. They need some guidance. They need somebody to reach out and basically say it’s going to be okay. But they need a plan and many of them don’t.
David Nelson:
Not that in 45 minutes we can lay out individual plans for people, but what we want to do is we want to help not only our existing people as far as to get a better grasp of what’s happening, we want it for the community. As I told people back then, the more we can help people as far as their net worth statement not having a drop as much, the better it is for our local community. I think people probably get tired of hearing me talk about it as far as the community. I wish this guy would just shut up on this concept, but we’ve got businesses that are really hurting right now. They were hurting back in ’07 and ’08 as well. We’ve got to do what we can.
David Nelson:
If we have information that we believe can help individuals, we’re going to share it. We’ll have our disclaimers. There is no guarantee that this stuff is going to unfold exactly as we describe, but the insight that we can give people, they’re not going to get anywhere else. We want to be a value to them. We want to help. We want to make a difference for everybody in the community. Again, back in ’07, ’08, ’09, we did. We were very proactive on that. We were able to diffuse a whole bunch of it. Our clients didn’t go broke during that period of time. Subsequently, they were spending money in the community. It makes the area a better place. We want to do the same thing as much as we can now. We’re here to help as far as in that regard.
Gary Determan:
As always, when we visit with you, this time just flies by. We’ve got about two minutes left in the program this morning, Dave. Again, thank you so much for-
David Nelson:
You bet.
Gary Determan:
… your time. Now you’ve mentioned ’07, ’08, ’09. You’ve been down this road before. How big of a benefit is that to your clients?
David Nelson:
It is. If you look in the history books, there’s been now 17 bear markets. We’ve dealt with four as far as during my career. The four that we’ve dealt with have been pretty significant, to say the least. ’07, ’08, ’09 being the most significant. It really is helpful because again, it opens your eyes to what can happen. You don’t wait to react. You have to be proactive. The key is, again, prepping people in the good days about the bad days ahead. Making decisions and not getting selfish during the good days because, again, the battle is won in the down years. The up years will take care of themselves. It’s the down years. I’ve been around some really brilliant people. I’m very blessed to be around them. Every single one of them says it’s all about protecting your capital in the down year.
David Nelson:
That’s the problem that, again, this industry has is that we’ve coached people as a whole to put it in, forget it and over time you’ll be okay. We just don’t buy into that philosophy. Again, I’ll drill down. Folks, you’re more than happy. Just contact our office here at 242-9042. We’ll get a packet to you via email. I don’t know if we’ll have time to mail anything, but if you have an email, you can follow along. We’re going to walk through, I don’t know, 15, 20 slides and hopefully give you a little better insight as far as what we think tomorrow is going to look like. Again, hopefully we’ll get you in the correct neighborhood and help you make some better decisions.
Gary Determan:
I appreciate your time. Thank you so much for keeping us on top of what is going on. We will not visit again until May 6th, which is five weeks away. Hopefully things will be at a much more stable condition by then.
David Nelson:
Agreed.
Gary Determan:
All right. Be safe, Dave.
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 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. For more information, visit our website at www.nelsoncorp.com.