Gary Determan:
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, 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. Well, what a treat we get to hear from Dave Nelson again, live! How you doing today, Dave?
David Nelson:
I’m doing great. Thank you Gary. It’s a cool one outdoors. I’m looking out as we speak. I’m just down the hill from you here, and bottom line, it’s another one of these days that we’re hoping to see it a little sun, but I don’t know if we’re going to, so I’m hoping for it.
Gary Determan:
You live out there around the Valley Oaks area. How are the roads? What was the visibility like out there?
David Nelson:
Yeah, it’s it the roads are drivable. I mean, if you just drive with little common sense. Last night, I was out towards Cedar Rapids, we had a basketball game and it was kind of interesting. Well, actually last two days we were up in Dubuque the day before. So, Dubuque, Monday and Lisbon yesterday and both nights, as far as traveling, heading out, as well as coming back, you would hit pockets. And I don’t recall. And I’m sure it’s happened before, but the intensity from no fog to all of a sudden heavy fog to no fog, to heavy fog, it was just wild. So fortunately got there and wasn’t in a hurry or anything and got there and got back and safely. And I think everybody else did as well, but a little travel time. So, yep.
Gary Determan:
Yeah the girls, you went up to Dubuque to take on Waller the much bigger school, of course. And then last night you were out at Lisbon, but the school is on break right now. How are things going with the girls?
David Nelson:
We’re having, again, we’ve been anticipating success for quite some time, and I guess you could argue most teams would be pretty happy as far as the record we’ve had the last couple of years, my expectations and just ability to and this sounds arrogant, but I get basketball a lot better than I did 20 some years ago when I first started coaching. And so you get a feel as far as for the competition, you get a feel for what your players are capable of. And then you’re just hoping that they are able to deliver what they’re capable of, not to win games, but to just succeed themselves individually, as far as on a what [inaudible 00:02:47] that they have. And so Waller, it’s a big one on our calendar as far as trying to anticipate as far as playing them, because we know, again, it’s a four A school, we’re a one A school.
David Nelson:
They’re in the top 10, I believe as far as out there, as far as in the state level. And prior to this, I mean, we played two other big, big games in both of which the one team was Maquoketa Valley, which is the top team in two A, and then North Linn, who’s just historically just a tiger as far as in the game of basketball, both on the boys side, as well as the girls and they’re ranked one and two in the state and North Linn, we had on the ropes and we let them off. Maquoketa Valley, we never had them on the ropes. They had us on the ropes and fast forward to two nights ago, as far as Dubuque, Waller we were actually neck and neck. I mean, literally I think it was a tie score at the end of three.
David Nelson:
And we ended up giving up some easy buckets quickly, and then things just kind of fell apart because we had to start filing and whatever. And unfortunately you don’t want to put them at the line. They’re really good at the line. So, translation, we ended up losing, I think somewhere in the area to 10, 12 points, something like that. But fast forward to last night, we got back to one A type schools. And again, I hate the excuses, big schools, small schools, as I tell my kids when the ball is thrown up, as far as the start of the game, it’s five and five, last time I looked. And so we’re not hiding behind being a small school, but last night, we’re playing a really tough, competitive, skilled team last night. And we were able to finally, in the second quarter, start getting a little momentum, what have you.
David Nelson:
And so we went into halftime, had a nice spread, and then the third quarter played okay. And then the fourth quarter just kind of held on. And eventually at the very end, we gave them a couple easy buckets, but that’s the way we need to play. And these last two games, even though we lost to Waller, I truly believe it was a really significant game for us. And I think the girls proved to themselves that we can compete as far as with lots and lots of teams, as far as in this area or outside of this area for that matter. So it’s really proud of them as far as the way we’ve been competing. And again, I’m stacked, as you know, Gary with old players now. So my core players, as far as that are starters now are three seniors and two juniors.
David Nelson:
So we should be finding ways to win some of these close games. And we’ve unfortunately found a way to win a few of them, but not enough. So we’ll keep working at it with them being off, we’ve kind of extended practices a little bit, we’re getting a lot more shooting in and we do a lot of conditioning type stuff normally, and we’re continuing to do some of that, but we’re really focusing on, we’ve got to get the ball in the hole. So, we’ll see. I’m kind of excited. It’s nice to see. I’ve been waiting for four years for this, just like the girls have starting basically five freshmen four years ago. This is the time for them to ring the register. I’m hoping this year.
Gary Determan:
Again, visiting with Dave Nelson it is kind of an interesting season, no doubt with the COVID, but January, February for basketball always seems to be an important part of the season. The holidays are over, you’re getting into your conference and you’re looking ahead to the tournament. So all of a sudden you’re playing games and things are coming at you quickly.
David Nelson:
Yeah, really. And it’s so true. And again, the excitement can build, and those teams, we would talk about it in years past, and we really haven’t had an issue as far as this year, but this is the time when some teams basically start packing it in and saying, “Hey, we’re out of the hunt. We’ve lost X number of games”, and they start thinking about the next season or whatever. And keeping people focused is just really, really crucial. And we’ve got some kids that are excited about it. Our JV team is playing much better, again, which kind of, hopefully for the future is good news as far as for the program. And we’re going to be graduating, I mean, half of our team, literally. We’ve got 13 and I’m not very good at math here, it sounds like, but it’s six kids that are pushing on as far as seniors. So we’ve got to get some of the younger kids to step in and start carrying a heavier load. And hopefully we’ve got several kids that are going to be coming out next year, as far as for the program. So, anyway, yep. Good stuff.
Gary Determan:
Last week, of course, we had a chance to visit with you as we closed out 2020, we are now into 2021. We’re going to be taking a break for the weather here shortly. What are we going to be talking about this week?
David Nelson:
Yeah, to me, probably the front and center continues to be, as far as this election, today, as far as we’re hope going to hopefully get some news as far as what’s happening down in Georgia, the markets have been kind of a yo-yo here for the last couple of weeks trying to anticipate, is it going to be a clean sweep as far as both of the seats going to the Democrats, it’s going to be a split? Is it going to be a clean sweep the other way, as far as Republicans getting involved? The way it looks right now, it’s one for sure, it looks like, I say for sure, kind of, for sure that’s a Democrat. And again, this is important as far as allowing or not allowing as far as certain decisions to be made in Washington.
David Nelson:
And what does that mean as far as to the average person out there from, from a taxation perspective and from the standpoint of the investing perspective. So I thought we would really try to put the thinking cap on and the crystal ball. Was it not Carnegie? What’s the guy? Johnny Carson [crosstalk 00:08:23] as far as… Yeah, Karnak, there you go. We’re going to reach in, and we’re going to look into the future here as far as on the second half of, of the program and talk about what we think is going to take place the rest of this year.
Gary Determan:
Not to get real political, but they got the electoral college thing going on today. And Donald Trump just could not believe that he lost this thing. So what are you hearing from your investors? What’s their comments?
David Nelson:
So we’ve got lefties and we’ve got righties and the lefties are, I think, fairly quietly enjoying what’s taking place. And I think they’re pretty comfortable. And anybody that’s on right believes that the stock market is going to take a big dive. And I keep reminding people that they put way too much stock in who’s in the white house. I mean, just look at the data and the data basically says it’s more important as far as who’s in the Senate. And it’s more important for the decisions that are being made as far as at the corporate level. And so there’s just so much bad information out there and not just this presidential cycle, whatever, but it’s been historical. I mean, when you had Obama in people are basically saying if we get a Republican in, things are going to come unglued too.
David Nelson:
So I just stepped back from it and say if you’re talking about your pocket book and what it’s going to mean, as far as the investments, again, we’re probably in a pretty favorable environment. The problem is the market’s already anticipated that. I mean, if you look where we are today, compared to where we were two months ago, I mean, we’re up depending on what index you look at 10, 15, 20%. I mean, so it’s not telling me the market’s going to roll over in a massive way if we get a Democrat in the white house and we do, and the market didn’t collapse. So there’s just a lot of ignorance pertaining to what takes place when Washington changes hands, and both sides are guilty of it. And again, we just try to step back, look at the facts and make decisions accordingly.
Gary Determan:
All right. Very good. We’ll have more with Dave Nelson but a break for the weather now presented by the Clinton Midas.
Eric Sorensen:
Good to be with you here on a Wednesday. Hope you enjoyed the sunshine that we’d had the past 24 hours, because it’s not going to happen again today. I think the sun will be quite limited over the next few days, mostly cloudy some fog this morning, 33 this afternoon. And we will add that same weather pattern around to get more fog tonight, down at a 23, back to about 33 Thursday. It’s rinse repeat for Friday, rinse repeat Saturday. Hopeful that we’ll see some sunshine by Sunday. Our weather continues now on the News Aid app. I’m Storm Track 8 meteorologist Eric Sorensen.
Gary Determan:
23 degrees again, just a bit of a missed out there. Visibility up a little bit, three miles now out at the airport. Once again, 23 degrees are update brought to you by the Clinton Midas. Trust the Midas touch. Trust the Clinton Midas on Lincoln Way. No matter what the weather may bring Midas will have you prepared. Have your battery tested, and if you need to replace that battery, Clinton Midas features interstate batteries. Make sure of good visibility with new windshield wipers and grip the road better with their selection of quality tires. Of course, the Clinton Midas provides quality maintenance of your vehicle. At this time, call for your appointment at 242-2511, the Clinton Midas, 1432 Lincoln Way. Trust the Midas touch. First Wednesday of the month, first Wednesday of the year. So we continue with Dave Nelson of NelsonCorp Wealth Management. So, Dave, what are we diving into?
David Nelson:
Well, I think that the big headlines, as far as for most individuals out there is what if both of these seats go to the Democrats, now they control the Senate. And what’s that going to mean as far as to one’s pocket book? And obviously none of us know for sure. What we can look at our prior proposals that have come out from PRI primarily the new to be president, Biden, and pertaining to income taxes, which is I think what people are interested in, and it is very black and white if he stayed with that approach and he was able to get it through, which I think most people believe is doubtful. So I want to make darn sure that people understand that. It’s doubtful, but even if it happens, the people that are going to be affected are those individuals out there that make $400,000 and up, if you make under 400 grand, your income taxes, aren’t going up.
David Nelson:
So, again, a lot of bad things, information out there as far as pertaining to this. And again, this isn’t a political statement. I’m interested in facts, not somebody tilts and not somebody’s twist that they want to put on it. And again, this is both sides, have a tendency to do this, but read the proposal, and what you find is that the proposed tax system going forward would impact those individuals making 400 grand and capital gains is another hot topic. So people like the benefit of capital gains and not everybody probably understands that, but essentially you’ve got ordinary income. So if I work a job and I find myself in a, let’s say a 20% tax bracket, as far as for the earnings that I make from that job, if I have some investments.
David Nelson:
So, I was lucky enough to buy Apple stock, and I put in 10 grand and grew to 30 grand and I want to sell the 30 grand sell the whole thing, I’m going to pay income taxes at a different rate. It’s called the capital gains tax rate. And that tax rate is substantially lower than it would be if those were earnings from your job. And so some people argue that’s not fair because the average person out there that’s just trying to make a living and eke out a living, doesn’t have those types of investments and subsequently doesn’t get those favorable tax rates. Well, again, it is what it is. I’m not going to argue as far as the tax code, our job is to try to educate people and try to help them make good decisions. But let’s go back to that. My ordinary income that I made working for a job let’s say was at a 20% rate.
David Nelson:
If you’re at a 20% rate there are give or take, you’re probably at either a 10% rate on capital gains or zero, literally zero. And so eat again, is that fair? I’m not here to say as far as whether it’s fair or not. I’m just saying, again, at the end of the day, there are some opportunities that are out there. Now, the capital gains rate has been discussed as far as part of the change, and that change would come into play on a million dollars and up as far as capital gains, does it come into play for that person that made the next or five grand on a stock that they bought, it’s a million dollars. And so again, a lot of bad misinformation out there and people are accepting it without verifying, and the end result is people are making kind of some ridiculous assumptions.
David Nelson:
And the bottom line is it’s probably not going to happen. Even though the Democrats have control of the Senate now, and they’re going to have a lot more say on things, if this thing comes the way that it looks like it’s coming right now, and I emphasize the way it looks, we don’t know for sure we’ll find out probably in the next few days for sure. But the bottom line is that’s going to give them a lot more power, but at the end of the day, that’s still is a very narrow, if somebody wanders one way or the other, as far as on the democratic ticket or the Republican ticket, it can really skew things as far as one direction or the other, but without people wondering, it’s going to be very difficult to get any major changes as far as put in place. So I think that’s really key, Gary, as far as trying to again, look forward and I’m saying, I don’t think most people out there have anything to worry about from an income tax perspective.
David Nelson:
And if we talk about markets, that’s a whole different ball game. And again, stepping back, looking at facts, we had two years ago, the S&P 500, which most people would call the markets. So that’s 500 big stocks. And if we look two years ago in 19, in 2019, that index was up 30%. And that same index last year in 2020 was up 17%. The odds of this year being up double digit are extremely slim, maybe even negatives are probably as a viable of an option as far as ending the year as it being up. Now, why do I say that? It, again comes back to a situation of markets historically pay eight to 12% somewhere in that range in any given year. So there’s an ever been years where it’s been just spot on, you’re going to be at 20% or you’re going to be at negative five.
David Nelson:
But again, if we look at the average is going to average somewhere in the eight to 10, maybe 12% range, if you’re lucky. So we’ve been overpaid the last two years is my point. People argue well. Yeah, but we were probably underpaid before that. No, we really haven’t been underpaid that we’ve had above average returns for quite some time. So then the argument comes back to, “Well, what are the other alternatives?” You look at interest rates right now, as far as money market accounts and CDs and things of that nature. Basically, it’s pretty close to zero. People say the money market account, it’s almost that I have to pay the institution anymore, even all my money. And it’s almost gotten to that point. So that’s a somewhat legitimate arguments as far as that, “Well, they’re not going to put it into bonds, so I might as well put it in stocks.”
David Nelson:
Well, bonds when they get roughed up, maybe down five or 10% in a year when stocks get roughed up, they could be down 50%, 60%, 70% in any given year. So you got to be careful as far as on these decisions. What we’re trying to coach people on is that people have to look at the facts and the facts are we’re in a different climate now, as far as rates of return are concerned. And to believe that you’re going to get double digit returns with a balanced portfolio, in other words, with stocks and bonds and cash, I think is just crazy. It’s not going to happen. If you had in the past a 50/50 mix of stocks and bonds, so when the stocks get roughed up, usually that benefit the bonds and to some degree the exact opposite, but that 50/50 mix years ago, the stock side again, would give you eight, 10% as an average over a period of time.
David Nelson:
And the bond mix historically would give you three, four, five, 6% over a period of time. That’s not the case today. If you have half your money in bonds, you’re basically getting probably a 1% return. So you got to make all the return basically from the other side. And that puts the tremendous amount of risk as far as in your portfolio, as far as to get you a good rate of return. So we’re trying to get people to think realistically and set the expectations a little bit lower, that you’re not going to be getting an average of eight and 10% going forward. More realistic as an average over a period of time is probably going to be five, 6% as far as going forward. So it’s not just bad news. It’s just trying to be realistic and look at the facts and say, “Okay, yesterday we’re overpaid today. The chances are we’re going to be underpaid as far as going forward for a period of time.” So we want people to be aware of that. And again, adjust their investments accordingly.
Gary Determan:
And visiting with Dave Nelson of NelsonCorp Wealth Management. Now you’re talking markets, how did the markets and the economy play off of each other?
David Nelson:
Yeah, that is really a centerpiece of the discussion when we talk about the investing world. The economy, most people would assume the economy is going to dictate as far as how the stock market does, and that’s not necessarily the case as we’re clearly witnessing now. We’re having, again, a super high unemployment. The economy, as far as, as a whole, if you look at most stocks, they’re really not doing that, that well. The stocks that have done quite well have been what? They’ve been the stocks that through this COVID event that we’re going through have been able to capitalize on it and then front of the center. And I don’t get into talking about necessarily individual stocks as far as buying and selling the darn things, because we can’t legally do that, but I’ll just one example, as far as a company that was able to capitalize on this and that would be Amazon.
David Nelson:
And again, there’s many others, don’t get me wrong. I’m just using them as an example. And they were able to take their business model from yesterday and amplify it for people that no longer want to go to the grocery store that no longer want to go to the mall. We’ll just have it shipped to your house and you don’t have to put yourself at risk. And so, because of that, they’ve done really, really well. So, historically there’s been, as far as in the, in the stock market, you look at the economy and the impact that it’s going to have, et cetera, it can’t be ignored. And it’s kind of been ignored the last six months, give or take, but talking about the economy, when you have a drop like we had the hope is that it’s going to be a V-shape recovery.
David Nelson:
In other words, the market drops dramatically and now we recover rapidly. So it’s a V looking down and up. Okay? Now there’s also what often is referred to as a W shape recovery, where it drops, it rallies some, then it drops again, usually to the low level that it was at before, then it takes off from there. So those are typically going to be the norm, if you will. Then you’ve got an L-shaped and that’s what people don’t want to see is a drop, so then it stays down there for a long period of time. And then this year there’s been a little, or this year being 2020, I apologize, last year. We had what most people would define as a K shaped recovery. So the stock market side of it has been more of a V, it went down and went up. So that’s the top of the K, okay? The letter K. So boom.
David Nelson:
But if you look at the average person, the impact that it’s had, they’re the other way. They went down and basically they stayed down, they rallied a little bit and now it’s dropped again. So we’re in a K shaped recovery right now, and we’re hoping it doesn’t stay here. That’s the whole idea of the stimulus, whether it’s right or wrong. The people that are attacking it are saying, it’s being sent to everybody. And some people aren’t being affected. We should be targeting those groups that are out there that have been on the front lines. Those are the people that need that money. Well, again, way over my pay grade, as far as how to handle that type of situation. But what we do know is that when you have crises like this, just like we had in ’07, ’08, ’09, that was a major crisis.
David Nelson:
And what people do in the situations like that is they literally stopped spending. And when people stopped spending, man, you got big, big problems and they could be extended prompts. So the idea of stimulus is to get money out to people. So hopefully they’ll spend it. And if they spend it, then the economy can start getting a little momentum and we can start moving forward. But again, the numbers don’t back that up. If you look at the savings rate before, we’re one of the worst saving countries in the world, by pretty much a big degree, but now the savings rate, you just heard it this morning, as far as across the board is up to 13%, the average person, and again, it’s skewed from the higher end because they’re saving a higher percentage, but when we look at it historically at somewhere between two and 4%, we’re at 13 now.
David Nelson:
And so that 13%, a lot of people out there would like to see that drop because if it dropped, that means people are spending more money. Now, to me, the educated people, there’s a gentleman by the name of Ned Davis Research, that’s an organization. We write big, big checks to every year, as far as for research and data, as far as to try to help people make better decisions. And there are a bunch of brainiacs that sell data to other brainiacs. And so we buy the stuff from them and what they basically show and try to prove is that high savings rates is really healthy for the country. People are going to spend, but they need to spend correctly.
David Nelson:
Their definition of correctly is basically making sure that you save first, and when we have savings rates over 10% as a country, we prosper. And the numbers really are very, very impressive as far as the economy and how well it does as well as stock markets. So I’m not rooting for people to go out and spend money foolishly. I’m just saying, we got to get through this tough time and we have to go through this adjustment that we’re going through and people need to look at their individual situation and make decisions based on that.
Gary Determan:
Dave, our half hour has gone by so quickly. We could go an hour or two today with you.
David Nelson:
Thank you. Again, important stuff for individuals making really important decisions as far as looking into 2021. And we want everybody out there to succeed. We want everybody out there to feel better informed, to make some of these really important decisions that are going to impact their life. And the one that, again, I started with, which is the politics side of it, try your darnedest to put that aside folks, because it’s not helping either direction. We’ve got to work together as a country. We’ve been saying this for a long, long time. We’ve always had the left and the right, but not to the extremes we have now. We won’t even listen to the other side anymore. It’s just crazy. So we’re just trying to get people to look at the facts and the facts basically say that we’re probably going to be okay. We just need to, again, cooperate as far as if we care about this country. And I think some people do. And I think there’s a lot of people out there, unfortunately, that don’t give a damn. They’re worried about their own pocket book.
Gary Determan:
Dave, thank you so much.
David Nelson:
Appreciate it, Gary. Have a great day.
Gary Determan:
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, 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.