Intro:
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:
Well, what a pleasure to welcome into the studio, Dave Nelson. Dave, it’s been a long, long time since we’ve had you in here. Great to see you.
Dave Nelson:
Yes. Great to see you too. It’s a privilege and I love getting in here and spending some time. My doc was a little hesitant as far as for me to do much of anything for quite some time and he’s kind of loosened the rains a little bit. So it feels good not putting on the mask, not that was that big a deal. But overall health, feeling great and yeah, feels good getting up here.
Gary:
I tell you, you look back at March of 2020.
Dave Nelson:
Yes.
Gary:
From then till now, all that has taken place.
Dave Nelson:
Yes.
Gary:
And not only…
Dave Nelson:
Yes.
Gary:
Us.
Dave Nelson:
Right.
Gary:
But you.
Dave Nelson:
Yes.
Gary:
Individually.
Dave Nelson:
Yeah, yeah.
Gary:
You say you’re doing great.
Dave Nelson:
Yeah. Yeah. It was a long, long battle. I mean, and I maybe have shared this as far as previously here, but I started down at, well, I started in town here and Dr. Barakat said, “Hey, we need to get a neurologist,” sent me down there. I was there four nights and then ended up in Iowa City for about three weeks. And down at Genesis, and I wasn’t throwing them under a bus when I said that, they couldn’t figure it out. They had no idea. And so I end up out in Iowa City, in Iowa City, the doc made a educated guess and fortunately he was right, or I wouldn’t be here today. And it was encephalitis and it was a bizarre type of case. I guess it comes in a lot of different flavors. And I had a bad flavor, that bad flavor was one that really had no symptoms to speak of.
Dave Nelson:
It just started with a little tick in my shoulder and most people that get it, they have an extremely high fever. They’ve had a blow to their head. They have excruciating headaches and what have you, where they just can’t function. And I had none of the above, just this little silly tick in my shoulder that turned into a raging of seizures basically, is what it boils down to. And so I made it through the encephalitis. That was months sitting in a chair, basically looking out. And for those that are listening now, that can relate as far as the era, but those old kaleidoscope things that you used to look through and see all these little crazy designs, whatever, that’s what I saw for months. And so it was a tough situation, but again, there’s plenty of people out there that have suffered a lot more than I have, but that was the [inaudible 00:03:06] part.
Dave Nelson:
And then because of the seizures, I had seizures every four seconds for about two and a half days. It basically ripped my arm out of my shoulder socket. And so that was out and then that had to be repaired, but they couldn’t repair that until I basically made it far enough as far as on the other. So it’s been over a year, closing in on 18 months of not being right. But there’s many that’ll say you are never right. So anyway, so I think there’s a little bit of truth to that. But no, I feel terrific. And I’ve been back to work for quite some time. I start out a few hours a day and boy, that was, ugh. That was really tough as far as to get there and the wonderful thing is that again, when you go through this, oftentimes too, if you do live through it, bottom line is your brain doesn’t come back, it’s been through so much trauma.
Dave Nelson:
Encephalitis for those that don’t know, and I had no clue, never even heard of it before, but anyway, it’s the swelling of your brain. And oftentimes they have to basically cut your skull as far as to be able to handle the size as far as how much it’s blown up. And fortunately, they didn’t have to do that as far as in my situation and just chemicals upon chemicals, upon chemicals going into my body for weeks and that was good enough. But yeah, I got back to work and the fortunate part, finishing that thought, was essentially the part of my brain relating to work came back probably the quickest. Then the part as far as family members, I couldn’t… My wife said, “It was over a week before you could drink out of a straw.”
Dave Nelson:
I mean, I just couldn’t connect those dots as far as to be able to pull that off. That had to be really bizarre. I don’t remember any of that stuff. So that’s the good news. And then seeing, she’d hold her phone in front of me with pictures hour after hour. Who’s this? Who’s this? And it was grandkids. It was the kids. I had no clue. So it was just a horrible period of time. But yeah, I hope I’m through it. So we’ll.
Gary:
I would think so. Yeah.
Dave Nelson:
As far as how time goes.
Gary:
And great, they didn’t have to cut into the skull with that great head of hair that you got there, David.
Dave Nelson:
Exactly, exactly.
Gary:
That would’ve been-
Dave Nelson:
The little that still exists.
Gary:
That would’ve been a tragedy. No doubt about that.
Dave Nelson:
Yes. Yes.
Gary:
But the thing is that the business that you have established, even though you were gone.
Dave Nelson:
Yes.
Gary:
Things didn’t fall off at all.
Dave Nelson:
Yeah. It was really amazing. I mean literally, it was about six months that I was gone and the wheels turned round and round. I said for years that in essence, the business couldn’t operate without me. And I said, there was good news that came out of this. They could operate without me. The bad news is they could operate without me.
Gary:
Yeah.
Dave Nelson:
So it’s a kind of double edged sword there, but no, it was terrific. And the only people that really knew about it were those that read the paper and saw that coach Nelson missed another game through illness. And so then the phone started ringing off the hook as far as for clients in this area. But as far as the people outside the area, and we’ve got clients in I think it’s now 44 states, most of them had no idea.
Dave Nelson:
And again, we communicate with them. We have various check-ins that take place and it’s different individuals, et cetera, that are involved in that process. But no, most didn’t, and those that do know now, and probably still, I bet 50% never knew as far as what took place, but those that do it’s quite remarkable as far as hearing other people’s stories as well, as far as so many people have stubbed their toe in some fashion. And so David Nelson isn’t the only one. And I said, “I got a question for probably, I don’t know, maybe 20 people. In essence kind of, did you ever find yourself feeling sorry for yourself?” And I said, “If I didn’t I’d be lying, because again. Okay, I don’t drink, I don’t smoke, I work out every single day. I’m a good person. We give a ton of money away to charity. Why me?”
Dave Nelson:
And that entered my head a few different times. And then you go out to Iowa City and you walk around in there. And the area I’m going is the neurology department and the cancer department. And so when you go to those two places and you see all of those wonderful individuals that are there, that are just probably day to day in excruciating pain. They look like, many of them as far as, and I don’t say this kind of making fun. It just they’re hunched over. They almost look like monsters. And you just say, “My God, I had 18 months of dealing with something. These people, probably their entire life they’ve dealt with this adversity and this pain and me, I didn’t have a tremendous amount of pain, I was very lucky in that regard.”
Dave Nelson:
But so many of these people do. And go to the cancer department and see these people that are waiting to get their chemo treatments and whatever. And they’re just exhausted. And you just, ugh. And I’m almost borderline the last few appointments, skipping in there because I’m almost back to where I was. And so it just, you just feel so bad for them. So anytime, again, even one of those ideas enters my skull, I need to drive out there and just look at those poor human beings.
Gary:
Well said. Again, Dave Nelson in studio. The one thing that did come out of the pandemic was the ability to deal with people not face to face. I know you love to do face to face.
Dave Nelson:
Yep.
Gary:
But the Zoom and the various ways that you were able to still communicate with your clients.
Dave Nelson:
It’s incredible. They adapted and we adapted. And again, we have a clientele that’s probably, average age throughout the office, probably 60 to 65 years old. Mine’s actually older than that. And I thought, “No, there’s no way that they’re going to agree to this.” Yesterday’s a perfect example. We’ve gotten a retired attorney from down in the Atlanta area and they really look forward to it as far as the face to faces, but we haven’t had one in several years because they’re older and he’s had a few health issues as well, and she’s a minister. And so anyway, so they just need to be very careful.
Dave Nelson:
But we had just had a great visit and being able to see people as you’re chatting with them and these people are high energy people kind of like I find myself being, and it just seeing people laugh and get joy out of communicating, it’s terrific. And so yeah, we’ve been on the road a little bit, but we had clients out from Utah that came out here about a week or so ago. And quite honestly, for people out of town, that’s probably some of the early ones and it’s the first time I’ve met with people as far as like that with no mask. And they were quite shocked, but I said, “I think I’m better.” So we’re going down this path. We’re going to find out.
Gary:
Again, visiting with Dave Nelson, far as the program goes to the bottom of the hour. What are we going to talk about after the weather break?
Dave Nelson:
So we’ve got plenty to talk about here today, Gary, as far as all the chaos, as far as in the markets and what have you and what’s driving it, and we’ll kind of give our best feel as far as what we’re doing as far as for clients and trying to navigate through this. This is a trying time right now.
Gary:
All right. Again, Dave Nelson in studio. A check of the weather brought to you by Van’s Carpet Korner.
Speaker 4:
Much nicer day as we kick off the middle of our work week, we’ll get some sunshine back, especially this morning. Couple more clouds working in for the afternoon, but temperature wise fairly nice. We’ll see high temperatures in the mid sixties. More clouds arriving tonight and that’ll start our next round of rain. As temperatures drop into the upper forties, rain continues at quite heavy at times, Thursday into Friday. Temperatures will be limited to the upper fifties Thursday. Right around 60 for Friday. But the upcoming weekend still looking absolutely gorgeous. Saturday, mix of sun and clouds, highs in the upper sixties. For mother’s day, happy mother’s day to all the moms out there. You’re going to have a picture perfect day, partly cloudy skies and highs in the low seventies. With your storm [inaudible 00:11:02] forecast, I’m meteorologist Andrew Stutzke.
Gary:
Fair skies, 46 degrees, northeast winds. Our update brought to you by Van’s Carpet Korner.
Speaker 5:
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Gary:
Financial Focus presented by NelsonCorp Wealth Management. Dave Nelson in studio with us. Well in the news before you came in, they were talking about interest rates, prepare to pay more.
Dave Nelson:
Yeah, let’s talk about it. Yeah, we’ve kind of gotten spoiled. I’ll use my own kids as an example. Several of them bought homes in the last couple years and the interest rates, they’re just kind of griping and whatever, as far as the difference between 3% and 2.75 and whatever. And I’m sitting there telling them that the first house I bought was 11.25%. It’s just they can’t even fathom that. But the reality is rates are going up. And so the example I use, and this is really crucial. And I brought this up last month and I brought it up the month before, it’s worth reiterating folks. This is important stuff as far as your pocketbook is concerned.
Dave Nelson:
I started in 1981 and you could walk into a bank and put your money into a CD and get 16% back then. We look at a snapshot give or take about a year or so ago, that same CD was paying roughly zero. I mean, so close to zero, we’ll call it zero. And so now what we find is that interest rates have ticked up quite a bit. And we look at the one year rates, you look at three year rates, you look at 10 year bonds and 20 year bonds, et cetera, et cetera, they’ve gone up and they’ve gone up pretty substantially as far as in a very short period of time. Now, if you own bonds, and this is the area of focus that I’ve been chatting with people about, understanding that people don’t buy bonds to get rich, they buy bonds to preserve capital.
Dave Nelson:
And so over the last 40 years give or take, what people have experienced is rather good news pertaining to bonds because interest rates were very high, they’ve come down. And if you think back, if you listen to me before, we use this teeter totter concept where when rates drop, so the one side of the teeter totter goes down, the other side goes up. And so that’s what we’ve experienced for 40 years up until the last couple months here. So all of a sudden interest rates are going up and the value of people’s bonds are going down. So I’ll just put it in perspective. And I want to drive home this point because it is really key. And that is that last year, a 20 year US government bond had a negative rate of return of about 6%. So 6%, very rare event, as far as for government bonds to have negative rates of churn.
Dave Nelson:
Fast forward to this year, just year to date. So from 1/1 to right now, if you had a bond 1/1, you bought it 1/1 and you look at it today, a 20 year US government bond, you’re down 19%. So it’s just hard to imagine, as far as that in a period of 18 months give or take, that individuals can be upside down in a US guaranteed government bond, roughly 25%, but that’s exactly what’s happening. So that’s depressing in itself, but here’s the other part that’s really depressing, Gary. And that is that the coupon rate, or it’s another way of saying interest rate that you get on that bond, is roughly 2-3%. So in order to get back 25%, just do the math on this sucker, at a 2% or 3% per year increase, it’s going to take forever as far as to recover that.
Dave Nelson:
So what we’ve been yapping about as far as month after month, and any time that we have an opportunity as far as to the general public, is to say the rules have changed and you need to be aware of this. And the days of just chucking your money into something and falling asleep and hoping that it works out are gone. They’re gone and they’re gone forever. So point being, what we try to convey to people is that the stock bond portfolio. So I’ll use an example of you had a 90% in stocks and 10% in bonds portfolio. You’re down roughly 15% as far as year to date. Now, if we look at just the exact opposite, so you have 10% in stocks and 90% in bonds, the rate of return or the negative rate of return is almost identical. We’ve never seen anything like this.
Dave Nelson:
So the traditional approach of 401ks and the traditional approach of most financial advisors advising people invest their money, is in stocks and bonds. Both of which have stunk as far as year to date and probably are going to stink for a while. So what has worked generically, and I can’t get too deep into this because there’s all kinds of rules and regulations relating to commodities, but commodities as a whole have done quite well. Now, again, I’m not saying to go out and do that. I’m saying there’s very few things that have worked. Real estate down for the year, bonds down for the year, stocks down for the year. Commodities are up for the year. And again, most individuals have stocks and bonds in their portfolio and subsequently they’re down and they’re down pretty substantially.
Gary:
So interesting. And what’s it going to take for things to go, because I know it’s always ebb and flow, up and down, but we’ve been on such a high tide for so long.
Dave Nelson:
Exactly. That’s part of the problem. We look at from the bottom. From the bottom of the market, as far as in this so-called bull market. So we’re going back to ’09 to now, again, and this is a round number folks, we’re up roughly 500%. Literally 500% as we speak. Now, having said that again, people just can’t believe and many people do, is that this sucker is going to keep chugging along at this level. Now I have some people that like to refer to me as negative Nellie. So the last name is Nelson for those that don’t know. So negative Nellie, “Hey, you’re always looking at the bad.” No, I’m not looking at the bad, I’m looking at the facts and the facts are that people have been overpaid as far as the last number of years. This 10 year run is just unprecedented, as far as what’s taking place in stocks, but also in bonds.
Dave Nelson:
And so our point with people is that they can’t continue. There’s no way this can continue. And all you got to do is just turn on the TV and listen to some of the big name stocks that everybody’s been in love with for so long. And I’ll pick on Facebook for just a second, and it’s down quite substantially. And again, I’m not saying buy it. I’m not saying sell it. I’m just giving it as an example of something as far as that was doing really well, has really had a tough run here. So point being individuals out there that are invested, you need to have what we, I guess, refer to as is guardrails around your money. And most people have no guardrails around their money. They just shove it into this mutual fund and they just hope that darn thing is going to work out.
Dave Nelson:
And our approach to it is totally different. And that is that we have some safety nets that we tell people that they need in place. And if people don’t believe they need it in place again, they’ve gotten their eyes opened up. Look at your statement as far as when you get it from last month. Last month, the NASDAQ, which is just one of the indexes out there, was down 13% for the month. And so again, individuals are getting slammed. And again, I’m not trying to rub salt in the wound. I’m basically trying to say, we got to learn from this. And many individuals have forgotten about the lessons of ’07, ’08, ’09, when things really got roughed up as far as then. And this thing is by no means over.
Dave Nelson:
I don’t know if it’s over for bonds. I think there’s still a little bit of downside risk there. But stocks still could have a lot of downside, none of us know for certain. I want to emphasize could, and it might and all these things, because we don’t know for sure. But at the end of the day, it’s really crucial that people have a plan and many people really don’t have a plan. They just chuck it in and hope that things work out
Gary:
Again, visiting with Dave Nelson. He is in studio to the bottom of the hour. Now, Dave, you talked that a lot of your clients are older.
Dave Nelson:
Yep.
Gary:
Address the people that are younger, because I’ve always heard you say, “Nobody complains I started too soon and I never put too much money in.”
Dave Nelson:
Exactly.
Gary:
What is your advice to the 20 and 30 year olds?
Dave Nelson:
So again, I was very blessed as far as early on in my career to spend time with this gentleman, his name is Peter Lynch, really bright man. He oversaw money, invested money as far as for a big investment firm. Long story short, he basically said, “Everybody needs this test.” It’s the 50/50. I know I brought this up probably a hundred times over the years, literally, as far as in this program. But just to reinforce it, he said, “You got to block of money. You’re up 50% the first year, you’re down 50% the next year. Where are you?” Well, the answer is you’re down 25%. Sounds like you’re even, but you’re not. You’re down 25%. Now let’s put it a little differently here. First year you drop 50%. What do you need to make as far as rate of return, just to get back to where you were? And the answer is a hundred percent.
Dave Nelson:
So young people have had it put into their skull by individuals that tried to give them good advice, but it’s really flawed advice. And that is that you just got to ride it out. You’re young. You can take these bumps in the road, blah, blah, blah, blah, blah. Well, again, it doesn’t make any sense because again, losing 50% of your money and then having to make a hundred, just to get back to where you were, doesn’t make any sense whatsoever. Just think about it. Logically, I’m just going to accept dropping 30, 40, 50, 60, 70%. The NASDAQ, by the way in ’07, ’08, ’09, was down 82%. So that stuff happens. That’s primarily technology companies and things of that nature.
Dave Nelson:
So younger people need to invest. They should be focusing on, our opinion here, should be focusing on stuff that hasn’t worked as well. Most people, they have a 401k at work. The young people that you’re referencing, a 34 year old, they look at it and say, “Well, the last three years, this one’s done the best. So subsequently that’s the one I’m going to put my money into.” And we’re saying as a general thumb, that’s probably the exact opposite of what they should be doing. The name of the game is accumulating shares and how you accumulate shares is you have to buy the suckers on sale. And again, the idea is the more shares I can buy and control today, the more income I’m going to have tomorrow as far as from those shares.
Dave Nelson:
And so again, the only way that happens is you have to be prudent. You have to be smart. You have to go against the grain. When your buddies are all putting their money into X, you want to put yours probably into Y. You do not want to follow the masses because again, and I know it sounds terrible to say, but it’s the truth. If everybody had the game plan and they understood it and they followed it, the bottom line is everybody would be rich. But what we know is that most people aren’t rich because they followed the masses. I’m saying, don’t follow the masses, be different. And again, being different basically translates into, in most situations, you’ve got to go against the grain. And that’s really, really tough for people to do.
Gary:
Okay. You know of course, tax season is over.
Dave Nelson:
Yeah.
Gary:
Now it’s tax planning time.
Dave Nelson:
Tax planning, exactly.
Gary:
And of course, you’ve got now NelsonCorp tax people down there.
Dave Nelson:
Yes. Real crucial. And we’re in the midst of trying to roll out a new offering as far as for individuals, as far as clients that we work with, as far as, again, even being more proactive. We think we’re in a different world and to some degree we hope we’re wrong, but the new world that we think we’re in as far as, from a tax perspective, the rules have changed a little bit there. But as far as incorporating the investments and making the decisions on the investments and factoring in all those tax situations is really, really key. And unfortunately, most people don’t do that. And so what we try to do is to incorporate some of those concepts and ideas, we have some new technology to be able to help illustrate this stuff in the future. That’s always been the big challenge is you could talk concept to people about this, but at the end of the day, most people don’t get it.
Dave Nelson:
So we’ve got some real talented people as far as in that area. We’ve got some real talented people on our side as well, the wealth management side. We’ve added two heads, as far as in the last, give or take two months. We’re excited about that, as far as one that will be primarily behind the scenes as far as assisting advisors, we’ll have another one that is becoming an advisor. It’s really needed. I mean, we are in a growth trajectory like we have never, ever witnessed as far as in our career, not just locally here, but down in Davenport, up in Dubuque, we’re getting a lot of people that are coming in saying, “Help. I need help. I’m confused,” et cetera, etcetera. And we’re saying, “Okay, again, here’s the information that we’ll need.” But being thorough and understanding as far as where you are, what you’re trying to accomplish, again, it’s not a one person job. It needs to factor in a whole bunch of things.
Dave Nelson:
The other thing just real quick, and I know we’re almost out of time here. As far as the estate planning issues, we’ve had two individuals that have come into us just in the last probably 30 days, where somebody has passed away and the ducks weren’t in a row and man, they got a mess. So we talk to people a lot about the importance of doing their estate plan. And people say, Estate plan’s just for people that have big money.” Trust me, you either have an estate plan for yourself or when you die, the state has one for you. Illinois has one for the Illinois residents, Iowa has one here. And it’s not what you want. So you want to put something in place. It’s not as complicated as you think. It’s not as expensive as you think. And the bottom line is we can help on the front end. We don’t draft any the documents, but we can help advise you as far as some of the ideas and some of the things that you should talk to the attorney about.
Intro:
Dave, great to see you.
Dave Nelson:
Yeah, thanks.
Intro:
Thanks so much for coming today.
Dave Nelson:
Thanks, I appreciate it.
Intro:
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.