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 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. Now, here’s today’s Financial Focus program.
Gary Determan:
Welcome to the program. I guess you could call it a special program on phone with us is David Nelson of NelsonCorp Wealth Management. Good morning Dave.
David Nelson:
Good morning, Gary. Thank you. I appreciate it.
Gary Determan:
Go ahead. It’s your show, sir.
David Nelson:
Appreciate it very much. First of all, welcome everyone. I’m calling from, as I said in the past, on the top of the hill, now I’m on the bottom of the hill at my office and calling in today. Better be safe than sorry. We’re trying to follow the rules and not be carriers as far as of anything. I feel great. The folks at KROS all feel great, but today we want to do our part. Part of my part is to try to, I guess, put out information to try to help people make better decisions. ’07, ’08, we were very blessed as far as to get in front of that crisis, as far as from the standpoint of decisions that we’ve made, as far as being willing to sell not just buy and hope that things work out, but actually proactively make adjustments. We got in front of folks as far as and had massive gatherings as far as up at Australia. We had three different gatherings with over 200 people that attended that wound up a better insight as far as what’s taken place.
David Nelson:
We also have tried to do the same thing. We’re on TV as far as CBS every Tuesday morning talking about this type of stuff. Tuesday morning at 6:00 in CBS and we go on Fox at eight o’clock. Then, we come back at 6:00 P.M. at the CBS and continue to talk about this. We’ve had workshops set up. Any of the listeners out there. Hopefully, you tuned in and heard me discuss some of these things about a week or so ago. Today it’ll be a little bit of an update. We’re limited time. Last one, we have 30 minutes. We want to do face-to-face but we can’t so this is the best medium as far as for us to try to.
David Nelson:
We want people to make good decisions. We don’t care if you work with us or not. We want you to make good decisions and good decisions sometimes is difficult. We’re certainly in a period of time that it’s difficult to making great decisions for not letting our, as I put it, your gut makes the decision but rather your head, is very difficult because many individuals out there have bought into the idea that you just put your money in and you just more or less fall asleep, and over time everything will be okay. We’re not in that camp. We don’t believe that. We think there’s a lot of flaws to that in particular with individuals that are older. Individuals that are in retirement or close to retirement, this is a very dangerous game to be playing in. I hear people all the time say, “Well, they were told that you know, over time it will recover.” I have case after case after case that I share with clients where it hasn’t and we don’t want people to find out again the hard way.
David Nelson:
That’s kind of the backdrop. This is just, again, a quick summary. We only have roughly 10 minutes total. I want to be brief. Quickest, bull market. Bull market meaning up. Running market’s going up versus the bear market is going down. The bear markets is defined as a 20% or greater drop. This is the quickest we’ve gone from bull to bear ever in all the history of the United States. It’s the fastest. Not something that we wished for by any stretch of the imagination, but it certainly took place. The Coronavirus is front and center. It’s created this. I’ve been asked by numerous people thus far is that the only thing that’s caused us to take place in my humble opinion is no, there’s been a lot of individuals out there. We’ve gone a decade without a recession. It was the first decade ever that we went without a recession. This last decade we came through.
David Nelson:
It would take seven years as far as with Barack, and then we had three years as far as with Trump, and again no recession during that period of time. It hasn’t happened before. Because of that, the markets, I actually really had a great decade and so I think there was many individuals out there that were looking for an excuse as far as the sell. Nobody, but nobody could have envisioned as far as this Coronavirus having the impact that it’s had globally, as far as on the markets. But it has, and again, we need to deal with it.
David Nelson:
Bonds as an example, leading into this, we had $21 billion in bonds two weeks ago that were redeemed. It’s the highest number since ’08. Just unprecedented shifts that have been taking place. Again, back in ’08, maybe you folks remember maybe you don’t, we had a 57% drop by what most people define as the market. We had the NASDAQ, which was primarily technology and what have you. That dropped over 80% in that period in late ’07, all avoid in the early part of ’09, and just huge drops.
David Nelson:
This one, depending on what index you look at, prior to yesterday, all this will be prior to yesterday, yesterday if you don’t know was a huge update as far as for the market. Then, leading into that, we’re in the mid thirties for most individuals as far as that the market was down. Just big, big numbers.
David Nelson:
Another trigger of this was oil. We have Saudi Arabia and Russia basically locking horns. Two major producers that are saying we’re not going to subsidize any further; and the bottom line, they’ve cut back as far as trying to prop up as far as the oil market. Subsequently, they squared off and they said they’re going to just produce as much as they can pretty much, and the bottom line is oil plummet. Well, short term, that was frightening for the markets. Short term, that’s horrible as far as if you own oil stocks. But the average consumer out there, this is really good news when you go to the pump. We’ll see if it continues.
David Nelson:
A couple more things real quick. The VIX, which is a measure of volatility and risk as far as in the market, back in ’08, this is a really important statistic and this may be the good news that a lot of you are hoping for and looking for, but in ’08, the VIX peaked out at an 81 number. Eighty-one. That was in November of ’08 and the market finally stopped dropping March 9th. It wasn’t that that was the triggering event, but it generally is a pretty good sign. Now, what we went through recently, this goes back about three days ago where we hit 83. Eighty-three. It was 81 back then, 83 this time as far as for the VIX index and we had two consecutive days where the market actually dropped and the VIX came down. That is a really good sign.
David Nelson:
I’m not saying this thing’s turning around tomorrow. I’m not saying that at all. What I am saying is that’s a pretty good indication as far as we’re probably getting a little closer to the bottom. Not calling the bottom by any means. I mean, we’ve been basically in the camp of and still are that we’re going to retest the lows so I wouldn’t be rushing in as far as putting money in. A lot of times people get excited, the market starts turning on anything they’ve got, they’re looking to deploy it instantly and we’re saying, I don’t think I would. History says, and there’s no assurance of this so I want to qualify that, but history says that the market typically is going to retest and that’s a fancy way of saying you’re going to rally up some and then you’re going to retest the lows.
David Nelson:
Now, which could be a significant variable that comes into play with this is the supposedly $2 trillion stimulus package that’s being negotiated as far as in Washington and hopefully today is resolved. But the bottom line, that could be a variable. In short term, that’s clearly going to be good news. Just like yesterday, I mean, the market was up north of 10% again, depending on what index you’re looking at, and it was the highest since 1933. A one day move up the highest since 1933. So we’re in some goofy, goofy times.
David Nelson:
]Real quickly I’ve got about a minute and a half here, I just want to touch on some … there’s a lot of different ways to value the market. There’s different forms and processes that we go through is try to come up with a number of what’s fair value. What should the market be realistically trading at today? We were saying for over a year now that the market is overpriced. We’ve been pretty consistent as far as that message. Markets can stay overpriced for long periods of time as we saw leading into the year 2000. I mean, things were really overpriced back then and we saw that massive correction that took place in 2000, 2001, and 2002.
David Nelson:
What our tools are saying in a simple way today is that we are still roughly just slightly above fair value. In other words, with this big correction, it did not bring us into bargain territory. It brought us back to what historically is fair value. I don’t know if that’s good news for you folks out there, if that’s bad news, but I’m just saying again, I wouldn’t be a hero at this point in time. I think I’d be very disciplined and patient as far as in your investing. If you have questions, comments, let us know.
David Nelson:
Last thing I want to bring up real quick because we have a really nice piece here that managing through the Coronavirus crises and part one what is happening, part two, how does this compare to OEAs, and then is there a path forward? If you would like a copy of this, it’s a one-pager. We can email it to you, we can send you a hard copy. It’s a pretty nice summary that I think would be very helpful to a lot of listeners out there. You can call our office at (800) 248-9042 or go to our website and send us a message call, et cetera, et cetera and we’ll make sure that you get this. Gary, I’m going to send it back to you folks. Thanks for tuning in today and we’ll be back next week and give you an update as well.
Gary Determan:
All right. Thank you very much again, Dave Nelson of NelsonCorp Wealth Management.
Announcer:
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 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.