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. Now here’s today’s Financial Focus program.
Gary Determan:
Well, it is the first Wednesday of the month, so Dave Nelson joins me by phone. Good morning, Dave.
David Nelson:
Good morning, Gary. How you doing today?
Gary Determan:
Real good. Thank you. How are you doing? That’s the important thing.
David Nelson:
Yeah. I’m making a lot of progress. I’ve got surgery coming up here in about a month or so, which I can’t wait for to get that taken care of and got to get the shoulder replaced. It’ll be a total shoulder replacement, but anyway. Again, once I get through that, looking at hopefully a lot better days as far as moving forward. It’s incredible as far as what we take for granted in our day to day activities and life and what have you when you’ve got good health. I don’t know if I really took it for granted, but certainly having one arm basically to do pretty much everything these days is less than I expected. So again, as I’ve told many, many people, I consider myself a pretty empathetic and someone I guess I would put it in the category as kind person as far as considerate of other individuals.
David Nelson:
But this has certainly given me a different vantage point and certainly made me, I think, even more compassionate as far as individuals out there that again have lingering, ongoing type type issues. Hopefully mine end up being six months, eight months give or take as far as when it’s all said and done. A lot of other individuals it’s probably years, if not, an entire lifetime. So again, I’m very fortunate as far as in that regard.
Gary Determan:
You get the shoulder down, you’ll be throwing that 90 mile per hour fast ball again, Dave.
David Nelson:
Exactly.
Gary Determan:
Right?
David Nelson:
It’s the right arm too.
Gary Determan:
Yeah, there you go.
David Nelson:
I’m right handed. Yeah. Yeah. It’ll be the bionic as a lot of people said, so I’ll be the what? $6 million man, or whatever.
Gary Determan:
There you go. You deal with millions all the time anyway, so you should be able to handle that.
David Nelson:
Yes, exactly, exactly.
Gary Determan:
Now, I would imagine what you do in your line of work can be frustrating at times. Has this been frustrating for you, Dave?
David Nelson:
Yeah, it certainly has from the standpoint of as I’ve shared with individuals, and they’re probably part of here it. I’ve pretty much everything. I eat well. I exercise constantly. I try to stay fit and what have and to pick up whatever. I’m not even to this day 100% certain as far as the disease and all the, I guess the variables that can come out of that. So many people have had it. And it comes in a lot of, as I put it different flavors and my flavor was no fever and basically no symptoms other than a thicken a shoulder that turns into this fighting for your life crises. And so at the end of the day, it’s hopefully a one off and that’s what the doctor thinks. I have a city that’s just a great person and a very bright man thinks that one off and I’ll never deal with it again. I just hope he’s right as far as in that regard.
Gary Determan:
Yeah. You know, we are fortunate to have the University of Iowa Hospital so close by.
David Nelson:
No question about it. And my situation again, I put out a fair amount of comments and praise as far as to them. I’d also reiterate as far as in town here that Dr. Barakat was the doctor that I’ve worked with and he didn’t hesitate. He got me down to the quad cities quickly as far as Genesis. And Genesis basically after a few days, threw up their arms and said, “We don’t know.” I mean, it was really, really bizarre. And here you got somebody in neurology that just doesn’t know, and that’s the area that’s needed. But they had never seen as far as in this form, as far as an individual having it.
David Nelson:
They shipped me out to Iowa City. And fortunately we had a big time player out there and that individual in the short period of time said, “Here’s how we need to treat.” And had he not been, had I not been sitting out there, I wouldn’t be on this phone right now. Put it that way. I’m very fortunate.
Gary Determan:
An incredible story. No doubt about that.
David Nelson:
Yeah.
Gary Determan:
Well, Dave, here we are. We’re into the summer months. What are we doing?
David Nelson:
Yeah. The summer months as we discussed last month, I guess it was two, three weeks ago that you and I were together. And I spoke about the period of time sell in May and go away, which again, is a idea that has been out there for a number of years and historically, there’s some truth to it. That those are softer months as far as rates of return are concerned. They just don’t seem to be the best. I thought I would tie it down a little tighter for people as far as June.
David Nelson:
If we look and we go back 30 years of history, it’s the 10th best month. You got 12 months, it’s number 10. So in other words, it hasn’t been very lucrative to say the least. And we moved to July and that’s the fifth month. That’s a fairly type month as far as return. And then we go to August, and it’s number 11 as far as on a scale of one to 12. These aren’t necessarily, historically, again, this could be a different year, but historically not been good years. Now, if we layer on the fact that if you look up this year leading up to Memorial Day, we’re talking about the markets that are in the double digit category.
David Nelson:
We’re at roughly 12% as far as here as date. Last year was a negative 8% rate of return at the same time, so quite a difference. We’ve had good returns, had good returns towards the tail end of last year, had fairly good returns as far as this year. I mean, they’re not the best that we’ve ever had, but you would ask somebody out there that’s investing. If you got 12% by Memorial Day, would you be happy? I think everybody would say yes. And that’s where we find ourselves so far this year. Again, the cautious nature that we are and understanding as far as when you lose money, it’s very difficult to make up.
David Nelson:
The example I always use is if you drop 50%, what rate of return do you need to make just to get back to where you were? And on the surface, it sounds like it should be well, I’m down 50. I got to make 50, but that’s not the case. If you take a $100,000 and you drop 50%, you have 50 grand. Now, that 50 grand has to double to get you back just to where you were. The odds of making 100% are pretty minimal as far as in a relatively short period of time. [inaudible 00:07:33] You stack the deck, Dave. Let’s let’s look the other direction.
David Nelson:
Let’s say you went up the first year. You went up the first year, 50% so your 100,000 turned into 150. Now the second year, you’re down 50%. You’re at 75,000. So the point being these big moves down are very difficult to make up. We always find ourselves in a position where again, if in doubt, we’re always going to play heavy defense versus playing offense constantly, which is the way … Most individuals, they just shoved their money in and they say a prayer, not literally, but that’s basically what’s taken place and are hoping that this thing works out. We don’t subscribe to that same approach. We believe that again, the way you compound and create wealth is you don’t have big draw downs. You have to have positive rates of return as far as … And you’re not going to get those every year. Don’t get me wrong. But when you do lose, you’ve got to be able to control those losses to a very minimal level in order to be able to compound your money over time effectively.
Gary Determan:
Well, they always say defense wins championships, Dave.
David Nelson:
I brought it up for years, those individuals, most people, okay, all he wants to talk about is basketball because he coaches. But you can look at many, many sports. But the one that I use for a number of years was the Chicago Bulls. And a lot of people out there, listeners, I’m sure back when Michael Jordan was around, just loved watching the Bulls. And the Bulls when Michael showed up, the first several years, they weren’t winning consistently. And it’s because they didn’t play defense. They were great offensive players, but they didn’t have that defense that was needed. And so once they got Pippen and once they learned the defense was going to be the difference, all of a sudden, they started winning championships.
David Nelson:
And so in the money management world, it’s very similar. And again, if you just remember that 50/50, up 50 down, 50 down, 50 up 50, whatever way you want to look at it, the reality is that making up that significant loss is almost impossible. And again, so it’s about compounding money and getting a decent rate of return on an ongoing basis. Again, most individuals out there that are probably listening right now, Gary, if you were to give them the option and go back, say five, 10 years ago when interest rates and money markets and CD were paying 5%, 65, 7%, they would sign up and put pretty much all their money in those types of assets.
David Nelson:
What do they like about those? They don’t go down. Now, today we can’t afford to put our money in those types of accounts because they’re essentially paying zero, pretty close to it. And so I have to invest. But what people don’t realize, most people that have never really invested before is how quickly you can lose money as far as in ownership assets, whether it be real estate, whether it be stocks of money to disappear pretty quick. So again, we’re in the business of understanding the market’s ups and downs. We can’t guarantee anything as far as that it won’t go down. But what we are empowered to do as far as when we work with clients is to play heavy defensible when inappropriate.
Gary Determan:
All right, well, we’re going to take our break for the weather right now. We’ll be back with more with Dave Nelson. Our update brought to you by the Clinton Midas.
Eric Sorensen:
It’s going to be with you here on a Wednesday. We’re halfway through the week already. Today, a perfect day. Sunshine highs of 80 degrees. Overnight tonight, lots of stars, quiet, 57. 84 for Thursday. Up into the upper eighties as we approach the weekend. Maybe even touching 90 by Sunday, but heat index values aren’t going to get outrageous because still we’re not seeing real humid weather like we get out in July and August. Our weather continues all the time on the News 8 app. I’m Storm Track 8 meteorologist, Eric Sorensen.
Gary Determan:
With fair skies, we are now up to 69 degrees. Our update brought to you by the Clinton my trust, the Midas Touch. Trust the Clinton Midas on Lincoln Way. Now from Midas, save $100 rebate on a set of four tires for your vehicle. Be ready for those summer road trips with tires for Midas. Clinton Midas also offering 25% savings on lifetime brake pads. At the Clinton Midas, they take care of everything. Brakes, tires, oil changes, regular maintenance, everything. Call for your appointment, 242-2511. That’s 242-2511. The Clinton Midas 1432 Lincoln Way. Trust the Midas touch.
Gary Determan:
On those first Wednesday of the month, we continue to the bottom of the hour with Dave Nelson. Dave, you talked about the Chicago Bulls playing defense, getting to that championship level. They had overcome a hurdle by the name of the Detroit Pistons.
David Nelson:
Yes.
Gary Determan:
Now, they got very successful. You’ve been successful in business certainly. Was there a hurdle early that you had to get over for NelsonCorp Wealth Management to reach the level that you’re at right now?
David Nelson:
Yeah, I think probably the biggest impediment for me was age, day one. I mean, it was just, I’m youngster or whatever, and I’m talking to individuals that are older and they’re thinking, “Okay, what’s this young guy know?” But but probably the greatest adjustment that we made as far as in our business was understanding that the belief that you could just put your money in and over time you’d be okay. And so we were trained as far as in this industry to more or less look at charts. And if you would have put in $10,000 here today, you would 30 years later, 50 years later, whatever the case may be, you’re going to have a billion dollars. It’s just that looking at these numbers and saying, yes, it’s factual, but the reality is no normal human being could have lived through that.
David Nelson:
The volatility that they would have encountered along the way would have been more than anybody could really endure. Having draw downs and just go back to the 2007 through the bottom of 2009, which would have been March of ’09. Again, we’re talking about two and a half years roughly. That if you looked at the NASDAQ during that period of time, so the NASDAQ is not all technology, but it’s heavy technology type companies. It was down over 80%. Now, if you were to ask somebody, you got a 100 grand, and you woke up one day and it’s two years later. You put it in. Two years later, you wake up and you’ve got 20. I’m guessing that individual never got to the 20 because they flipped out at about 50. They flipped out at maybe 60. They never made that whole drop because they panicked.
David Nelson:
And so by panicking again, they locked in those losses. And people talk about, well, they’re not real losses until you basically act on it. And that’s a true statement as well. But the reality is normal human beings can’t look at statements month after month showing up in the mailbox where they’re losing lots and lots of their money. And for most people that we deal with, these are retirement dollars. These aren’t 30-year-olds that have a million dollars. These are individuals that are 65 and 70 years old that are dependent upon that money, whether it be a quarter of a million or a half a million or a million dollars that they have. They’re dependent upon that principle to generate the income for the rest of their life. And they’re not interested in gambling with that money. Put it in just as far as real life type stuff, margin debt is a fancy way of looking at you’re trying to leverage a purchase.
David Nelson:
In other words, I’m going to buy, let’s say a stock. Just pick whatever. Let’s say Apple or something like that. And I don’t have as much money as I’d like, and I really believe that Apple is going to go up so I could get what’s known as margin, which is a fancy way of saying a loan. I’m going to put in 10 grand and I’m going to borrow let’s say $5,000 so that I could buy extra Apple stock. And hopefully this will go up. And I’ll parallel this back to the ’80s around us with farms that were being lost because I took my farm and I used it as collateral to buy more farm land. And as we saw back in the mid-80s and the late ’80s that these farmers that did that were losing not just the farm that they just recently bought, but they’re actually losing their collateral, their property that they own. They lost too farms.
David Nelson:
Today, we have margin debt. Just last month alone, there was 847 billion with a B, billion for the month of April in margin debt. You talk about speculation, and this is six consecutive months that we’ve had higher and higher, the highest of all time month of margin debt. Again, I look at that and say, maybe these people are right, but what has a tendency to take place in the investing world is that the average person starts getting excited too late in the game. In other words, things are already at lofty level.
David Nelson:
Just to put it in perspective as far as oil. Let’s look at oil. And again, I got to be real careful that I have plenty of disclaimers here, that I’m not giving advice. The bottom line is this is just generic type information. But if you look at oil and we go back one year ago, what we see is that a barrel of oil was 33 bucks. Today, you’re looking at it’s up 97%. It’s roughly $66 a barrel. That’s in one year it’s essentially doubled in price.
David Nelson:
Now again, many individuals just say, “Well, this thing could go higher.” It could, but understand it’s up 100% already. Do I want to get in the game as far as that late in the game, or should I look at some other areas potentially that haven’t done as well? And what hasn’t done nearly as well, we’ve been chatting about this as far as for probably 60 days as far as with clients, is international investment. You look at the U.S., I mean, we’ve been the place to be and have all your money in the U.S. over the last give or take probably eight to 10 years.
David Nelson:
Now, what we’re starting to see is that the dollar is weakening even more than it had been. And the result of that is you have, and I don’t want to say that Europe and places like that are getting the coronavirus under control, but it’s lessening as far as the severity. And what’s what this is translating in is the markets are getting more excited about this just like the U.S. market did you ever take a year ago and you see that the, what we call the ISA index, which is essentially Europe. It’s Japan, it’s Australia, places like that. That index is starting to really move at a nice clip. And it’s outperforming as far as the United States, the S&P 500.
David Nelson:
Again, I don’t know if this is going to continue, but my common sense brain, which is what I tell clients all the time. They walk in the door, Gary, and they say something like, “Oh, this is so confusing, and I just don’t understand it.” I said, “Put on your common sense cap.” Which all of our clients have. They have that common sense part of their brain. We just have to use it. You don’t know the day, nor do I know the day, nor do we know the week or the month or the quarter as far that would the perfect day to invest. But what we do know is that oil is up 100% in a year.
David Nelson:
I just don’t know if I want to venture into those waters. However, if we look at Europe as a whole, it’s underperformed in the United States dramatically over the last 10 years, and history has said that they perform in a very similar manner. I look at that and I say, well, if history repeats itself, they’re probably going to outperform the United States maybe over the next year, maybe over the next 10 years. That might be an area that I want to try to exploit. Last night, and real quick, as far as in this explanation, as part of it is, and I know I brought this up before, but I want to reiterate it.
David Nelson:
There’s primarily two types of stocks that are out there. You have value stocks, and you have growth stocks. Growth stocks historically have been categorized as technology. These are companies that aren’t necessarily making a whole bunch of money, but bottom line is we believe tomorrow that whatever it is that they’ve developed is going to be part of society and subsequently, I want to buy those types of stocks, et cetera. Okay? That’s that brand.
David Nelson:
Then you’ve got the value stock. The value stocks are the other extreme. Maybe it’s old school type stuff. Maybe it’s something that’s out of favor, a stock that’s been clubbed, and it was a $100 and today it’s $30. Is that worth taking a look at? And some people say, “Well, it’s down for reason.” And I’m saying “Sometimes that’s true, and sometimes that isn’t true.” Again, what we try to get people to think in terms of is growth stocks for the last 10 years have dominated. As far as value stocks, the last six months give or take, which you find is that value stocks have dominated growth stocks. And so maybe this is a trend. Don’t know for sure, but maybe this is something that people should be looking at as far as the value of space.
Gary Determan:
We’ve got about three minutes left in the program. What are we going to be looking for here in June, David?
David Nelson:
I think the biggest thing for most individuals is just to try to sort through as far as what we’re going to get out of Washington. I don’t want to put too much stock. I had a long discussion with somebody. It wasn’t in work. It was outside of work, but it basically centered around work as far as getting my opinion. And it was a political discussion, and this individual lean real hard towards right, the right to, in other words, Republican ticket, and was convinced as far as that with Trump out of there that the economy is going to fall apart, et cetera, et cetera. That may be true, but people give and the statistics back this up, anytime somebody starts talking, whether it’s Barrack, whether it’s Biden, whether it’s Trump, I don’t care who it is. They give the president way too much credit as far as for what markets do or don’t do.
David Nelson:
And the reality is, if you look at the House and you look at the Senate, they have a lot more impact as far as on returns that we’re going to get from stocks or not get from stocks. So point being, if I could get something through to individuals and, again, we do this in workshops and what have you as far as, and try to share the actual data, not the biases that are brought to the table by the left or bar by the right, but the actual data. And the data says that the president, whoever’s in office, has very little impact when it comes through through return.
David Nelson:
If you just looked at the numbers and ignored all the other stuff, the markets had done better with the Democrats. But again, you factor in two or three events that have taken place while Republicans have been in the White House, that’s used the numbers. And so my point is stop getting focused on the political side and carrying that forward as far as in the market. The markets are going to go up or down based on how well those companies are managing the products that they sell. That’s more important than who’s in the White House.
Gary Determan:
David, as always just a wealth of information. Hey, best of luck in the surgery that is coming up on that shoulder. And you take care of yourself.
David Nelson:
You too, Gary, thank you.
Gary Determan:
All right.
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.