Announcer:
It is 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 Nelson CorpWealth Management are not affiliated. Cambridge does not offer tax advice.
Now, here’s today’s Financial Focus Program.
Gary Determan:
First Wednesday of the month, so we invite Dave Nelson back in. Just saw you a couple of weeks ago.
David Nelson:
A couple of weeks ago. Yeah, yeah, absolutely. This is kind of getting a comfortable spot here for me.
Gary Determan:
There you go.
David Nelson:
Settling in and chatting, yeah. Unfortunately, I had to change it to last month, so it was off kilter for those that aren’t aware. So anyway, we’re back in the rhythm and the first Wednesday coming in, and trying to make some sense out of what’s happening as far as around the globe in the world that I exist in, the financial side of it. So anyway.
Gary Determan:
And this month has five Wednesdays.
David Nelson:
Oh, holy cow.
Gary Determan:
So we’re not going to see you until a little bit later when we get into-
David Nelson:
Look up the calendar, yeah.
Gary Determan:
Into December. Sure. Your favorite time of year. They’re rolling out the basketball around now.
David Nelson:
They are. Yeah, it’s fantastic. I, again, continue to get questions from people. I still have probably maybe a third of my clients that’ll bring it up. “Are you getting all excited about…” Nope. Nope. I’m done. So we’ve got clients all over the country and it’s not like the people in Atlanta know what David’s doing as far as in his downtime in Clinton, Iowa, but yeah, I’m going to miss it. There was a big question mark, whether Prince of Peace would even have a team. This is becoming… I’m hearing this as far as three or four teams in our area that may or may not have a team, and I think we have like 7, 8, 9, something like that, but 2, 3, 4 of them that have never played before at a high school level. Are you kidding me? So I feel bad.
I’d love to be there and participating and trying to help them improve quickly because they’re probably some really good kids, but anyway, that’s reality today. I know across the board, volleyball numbers seem to be doing quite well, and basketball, I know it’s a lot more difficult as far as what you have to go through as far as the effort. And I don’t know if that’s scaring people off or what, but something certainly is.
Gary Determan:
I had heard from one of the coaches. I asked them, “Why is volleyball doing so well? Basketball numbers are down.” And she said, “Well, I think it’s primarily because it is the girls’ sport. They don’t have boys who compete in volleyball. They compete with the basketball and some of the other sports, but volleyball is truly theirs.”
David Nelson:
Good point. That’s possible. I got into a little bit of a disagreement with a gentleman out in Lisbon concerning that, and my conclusion was we don’t want to work as hard today across the board, and subsequently, basketball’s much more demanding. So maybe they’re right and I’m the wrong one, and it’s probably a combination of a whole bunch of different things.
Gary Determan:
But it does free you up to go watch the Iowa women now.
David Nelson:
Yeah, I’ll be settling in as far as out there, and last year was the first year out of coaching and so my wife and I decided to take in a few games, back before everybody and their brother wanted to attend games as far as the women basketball team as far as the University of Iowa team. And so anyway, we went to six games, had a great time. And again, for those that don’t know, I’ll give you the abbreviated version. We went to the Big 10 tournament, watched all those games. We had front row. We were able to get there early and there’s no seat assignments, so I’m there two hours plus early and I want good seats. I want to be able to see. And we went from there up to Seattle. We watched the tournament there and then went down to the Final Four. This year, we have season tickets, so we’re going to be taking in several games.
I don’t know if we’ll get all of them, but we’ll probably get the lion’s share of them, and again, it’s quite an experience. I look at things probably different than a lot of people, and Lord knows, I’m not always right as far as on some of these things, but expectations are off the charts as far as for the women. We only lost two players, we’re bringing back everybody else. And well, those two players are pretty good that graduated, so we’ll see. I’m hopeful that they have a great run like last year and could finish the job this year and get a national title, but boy, there are some really good stacked teams that are out there. And some of the big recruits, some of the transfers that were going from school to school, I guess we had a shot at one or two of them but we didn’t get them.
And so our center is 6’3″, and 6’3″ for a center in women’s basketball anymore isn’t that big. And there’s a lot of 6’5″, 6’7″ girls. There was one from Stanford that was six-seven that everybody was salivating over, hoping that we could get it, get her to come to our place, but didn’t happen. She went to UCLA. So we’ll see. Three, four teams that are clearly the top of the heap, and if all goes the way that it’s on paper supposed to, the Hawks should have a really nice season. But don’t get me wrong, the Big 10 is really tough. I mean, it’s going to be a brutal schedule this year.
Gary Determan:
I don’t know if you know that much about name, image, likeness. It’s been around for a couple of years now, and certainly, Caitlyn Clark and other premier athletes, they can really reap some benefits from them. What advice would you give them?
David Nelson:
Yeah. For those that don’t know, essentially, athletes, college athletes can now strike deals to essentially make money as far as while they’re in college. And so the Caitlyn Clark’s of the world, I think the last number I heard, she’s over 4 million a year.
Gary Determan:
Oh, my.
David Nelson:
So she’s doing quite well. And again, probably if you look at it, worth every penny. The University of Iowa, as far as the women’s basketball tickets are all gone. They’re all sold out. I’m curious if that’s ever happened in women’s basketball, ever, any place? I don’t know. This is before the season even started, folks, so that’s quite shocking to say the least. So that in addition to all the shirts and whatever that are being sold, there’s a shoe that Nike I guess is doing a Caitlyn Clark shoe. State Farm has picked her up as far as we will be seeing her on some commercials before too too long. And again, she’s paid the price. I love the people that talk about the Michael Jordans of the world and the Caitlyn Clarks of the world. They’re just blessed. I mean, they’re just good athletes. Well, spare me that discussion. There’s all kinds of good athletes out there, but they’re paying the price in the gym, putting in the time, et cetera, et cetera, so what she’s been able to do is to basically capitalize on that.
The hope is that she has some guidance as far as at the home front from mom and dad. The hope is that she has an agent that will basically help her strike some good deals and keep her on the straight and narrow. There’s a lot of things that can go wrong. I’m keeping my fingers crossed. Somebody being thrown this kind of money this quick at this age, oftentimes ends badly. I’m hoping that mom and dad are going to be there and basically keep her focused as far as what’s really important, and at this point in time, that’s basketball.
Gary Determan:
We’re not going to see her when she comes out in her uniform with a State Farm logo or anything like that, are we?
David Nelson:
That, Nike, all of them. I think there’s four or five.
Gary Determan:
They could be Nike anyway. I’m sure a lot of them do it that way.
David Nelson:
Sure.
Gary Determan:
But there are certainly advantages, possibly disadvantages as well, but colleges have really cashed in on some of the athletes and how these athletes are getting the opportunity to reap that.
David Nelson:
Yes. Well, you look at Iowa, and I don’t have the exact statistics but I think it’s a $90 million football season, and I think it’s, what, six games? That’s a lot of money coming in.
Gary Determan:
Six or seven, yeah.
David Nelson:
Six or seven. That’s a lot of money coming to the university in a very short period of time. And so again, in the past, the explanation was, “Okay, we pay our coach a whole bunch of money and assistant coaches,” et cetera, et cetera, et cetera, but there’s a lot of extra money that essentially has been marketed in such a way that it supports other programs that don’t generate. I don’t know how much swimming generates, I don’t know how much lacrosse generates, softball, baseball, what have you. So football really is the cash cow for many universities, and again, as you say, now the players that are there, the big name marquee type players have the option of being able to take advantage of that and use that to their advantage to try to make some money. So it’s happening in a big, big way out there, and again, these athletes, I know the purists think it’s bad that college athletes shouldn’t be getting paid, but somebody was getting that money yesterday and now it’s being shared as far as with the athletes, and the universities are having to dole out a little bit of money.
Gary Determan:
It’s always been there. There’s no doubt about that.
David Nelson:
Yes, exactly. Exactly.
Gary Determan:
Either it was under the table or now, above the table, the money has always been there for some of the athletes.
David Nelson:
Yes.
Gary Determan:
Let’s go take a break for the weather, brought to you by Electronics.
Announcer:
We’re expecting a warmer day, and no, no snow showers today either. With partly cloudy skies, we’ll see highs in the low forties for this afternoon. For tonight, it’ll still be partly cloudy but not as cold. We’ll expect lows near 30 degrees. With your WQAD Storm Track 8 forecast, I’m meteorologist, Andrew Sudsky.
Gary Determan:
Thank you, Andrew. Partly cloudy conditions right now. We’re at 26 degrees, winds light today out of the west. Our update brought to you by Electronic.
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Gary Determan:
First Wednesday of the month, so Dave hanging around till the bottom of the hour. Now, I heard in the news, November and December, historically, traditionally good months for the market. Talk about that.
David Nelson:
Definitely. This time of the year, and what is a big contributing factor to that, again, there’s not a lot of black and white in the world that we live in. There’s a lot of gray, but if we were to look at some of the statistics pertaining to why does this happen, it really comes down to flows. And this time of the year, people are, “Oh geez, I probably better get my contribution in for my IRA, and so I want to get the check off in the mail.” Well again, understanding that the stock market is a big auction. If you want to buy GE, somebody has to be willing to sell you GE. I want to buy Apple, somebody’s got to be willing to sell me Apple. So we’ve got this massive auction that’s taking place and so we have money flooding in looking for a place as far as to put it, as far as to buy some stuff. Again, that’s driving prices up because we’ve got more demand than supply, and historically that’s been the case.
What’s different maybe this year, and again, I don’t want to be real negative as far as some things. We’re not paid to have our head in the clouds. We’re not paid to be negative all the time. The paycheck basically centers around trying to be right more than you’re wrong, and when you look at the situation right now, especially after yesterday as far as some of the strikes that took place over in Israel and the world is really getting upset, part of the world I should say is getting upset over this, it’s hard to say what’s going to transpire. And boy, I hope we don’t find ourself in the middle of a bad, bad situation, and it seems day by day, it’s potentially getting worse.
The Israelis are essentially saying we need to defend our country, and again, people can argue that any way they want, but it would appear that they have a legitimate reason for that. But at the end of the day, boy, the number of people that are dying, the innocent people that are dying as far as day by day, it’s really, really hard and it’s hard to watch. And again, I don’t know when it’s going to end and I don’t know how it’s going to end, but what concerns me as far as pertaining very specifically to my job, forgetting about the emotional side of it that certainly enters into many of my thoughts on other things. This area, it can’t and it doesn’t, and so the bottom line is what logically can be the outcome as far as from what’s taken place today?
So what we do is we look at that, and again, it comes back to a risk-reward, and is the risk worth it as far as where we stand today? And quite honestly, for most of the people that we work with, the answer is no.
For literally, and I’m not exaggerating when I say this, about a 10 year period, if we wanted to sell, say, some stocks or all of our stocks and basically hide for a period of time, we could put it into a money market account that’s paying point something percent rate of return. Not 1%, but less than 1%. And so you really had that struggle of I can sit it there and get nothing, or I can keep it in stocks and I can get a dividend of two or 3%, and maybe it’ll go up but it may go down too. That was the dilemma that you had as far as prior to what’s taken place in the last couple of years.
Again, I don’t want people to take this wrong, but this is the reality of a lot of the people that are listening today and the people that we work with. You hear all of the upheaval pertaining to interest rates going up as far as the people that are borrowing money are now borrowing as far as to buy a house, seven and a half, 8%. But the other side of the coin, and that’s a lot of the people that are out there that are listening now are individuals that have maybe a few dollars and they want to make a decent return on their money, and some of that money, they want to have in a fairly secure investment. Well, those individuals can get four or 5% today. They were getting less than 1% for the last 10 years. So looking at that side of it, it’s kind of attractive as far as for many individuals.
So point being, we have a lot of our clients’ monies today, so they hand us the check, they roll over their 401k from work. They have a quarter of a million, a half a million, whatever the case may be sitting in their account. Our job is basically to allocate it between some stocks, some real estate, some bonds, some cash, and that will vary from time to time as far as what makes sense. I will say today, there’s very little in real estate. I’ll say today, there’s very little in stocks. Most of it’s in short-term bonds and a good percentage of it’s in a money market type account today. Short-term bonds, very little risk. Money market, very little risk. Both of them paying give or take 5% today.
So again, I hate it as a long-term investment because what people forget, Gary, that are out there looking at investments like this today, number one, probably interest rates aren’t going to stay at this level for an extended period of time, that’s number one. But number two is factor in inflation, factor in taxes, and almost always in a money market CD type investment, you’re a negative rate of return. After taxes after inflation, your actual net take home pay is negative. So there’s very few times that it’s actually a positive number there, but people psychologically like it because they don’t have to worry about the ups and the downs.
But we tell people all the time, you’ve got to make six, seven, 8% on your money period to stay ahead of taxes and inflation. That is if you want to eat. And you say, “Well, what the heck does that mean?” Well, that means you have to have a little extra to be able to go out and do things. I want to buy a new car, let’s say. I want to travel a little bit. I want to go out to a few restaurants occasionally. Well, the only way you’re going to be able to do that is you have to stay ahead of inflation and taxes, and again, in order to do that, you’re going to be in the probably five, six, 7% range, which again is in a cakewalk these days, but it’s something that you need to shoot for as an average over a period of time.
Gary Determan:
This is something that really drives you. Finance is something that has been a part of your life. It’s something you wanted to be a part of your life. For other people, they look at that and they go, “Wow, this is so overwhelming. I don’t understand this. What do I do?”
David Nelson:
Yeah, and that’s the typical person that walks in the door, and they walk in the door and day one, they don’t have a clue. So we start with the basics, what is a money market type account? Stocks, everybody gets the concept there. It doesn’t take a big explanation as far as with that, but bonds people don’t really understand. Cash type investments, real estate type investments, they don’t really get. So we have to educate and make sure that you word it in such a way that they’re grasping part of it. But it’s a process. It’s like anything else is that we tell people as far as upfront before people become clients, we’ll typically have 2, 3, 4 meetings as far as before we start moving forward. Once they become a client, they’re going to come in.
This is a good idea, but this is going to be what we demand of you, is you’re going to come in at least twice a year as far as to go through your stuff. Let’s talk about the important things, not just what the market has done, and I hate that term when people use the term, what’s the market doing today? Well again, what market are you referencing? There’s all kinds of different markets, but I get it as far as that’s terminology that they’ve heard. We’ve got to retrain them as far as to understand, what does that really mean?
But at the end of the day, this is one of those decisions that you need, in my opinion, you need help. You can’t do this stuff part-time. This isn’t something an hour a week that you can figure out and you can compete out there, because again, remember, it’s a big auction, and a big auction basically says you have some really big players that are out there that are swinging billions of dollars and they’re trying to do basically similar stuff or opposite stuff of what you’re doing, and that can really cost you in a big, big way.
So creating a fiduciary relationship with somebody that can assist you in that process. And oh, by the way, for this small fee that you’re paying them, hopefully they’re making you that plus more as far as helping you make better decisions.
Oftentimes, those decisions are not making dumb decisions in periods of time like now, meaning, “Well, I read this article or I heard in the news that this is happening, so I think we should sell today. I think we should buy today.” No, it doesn’t work that way. This is very, very important as far as to get these decisions right. We want the odds stacked as much as we can in our favor.
Gary Determan:
Again, visiting with Dave Nelson. Now, we’re getting toward the end of the year, we’re looking at 2024. What are some things people should really concentrate on?
David Nelson:
Well, I think one of the big things, and we spend a lot more time on this these days than what we did in years past, bringing the accounting in-house. And one of the big, big items, for those individuals that are contemplating doing something as far as from a charitable perspective, in other words, giving some money away. Maybe we didn’t do it during the year, we always do it at the end of the year. There may be better ways as far as to give money away as far as to charity. We talk about them a lot as far as with clients. There’s a vehicle called a donor advised fund. Essentially, it’s a bucket where you put your money into, and by putting your money into that bucket, you get a tax deduction for that and then you can dole out that money over a period of time to charity.
So here’s why a person might want to consider it. I’ll make this as simple as I can. That is most people out there today can’t deduct contributions going to charity. The rules have changed several years back where they made the standard deduction much higher, and so that’s a good thing. Don’t get me wrong, that’s a good thing. But for people that are giving money to charity and were hoping for the deduction, they probably won’t exceed that threshold, most people, and subsequently, they can’t deduct it then. So the avenue to get around that is to use this donor-advised fund, and what you do is essentially put in extra money, maybe two years of contributions, if you can do this obviously. But if you can put in a couple of years contributions, two, three years, that number probably now goes above that threshold and now makes those contributions deductible. So yesterday, not deductible. Today, deductible. I like the deductible better than the not deductible.
So again, it takes a little bit of explanation. It doesn’t work for every person out there. Not everybody can afford to do this, but if you can, this is a pretty good way to go about it. The other is talk to your tax people, talk to your financial advisor. Should you be doing something different as far as doing an IRA contribution if you’re eligible? Should you be putting a little bit extra just at the end of the year into your 401k if your 401k provider permits that? And so these can make big differences as far as in your tax liability.
Most people forget that from one bracket to the next, one example I’ll use here is the 12 to the 22. The 12 to the 22 is one bracket, and so you go from 10 to 12 to 22. So if you were on the edge of the 22% bracket and you wanted to get to the 12% bracket, maybe a charitable contribution, maybe a little bit extra into your retirement plan can make that big difference and save you a whole bunch of money as far as on your taxes.
Gary Determan:
Well, just give them a call. They’ll explain everything to you.
David Nelson:
Absolutely.
Gary Determan:
And just closing things out, we’re going to be starting your commercial for the toy and food drive, so that is going to be getting underway.
David Nelson:
Yep, we’re excited about that as always. There’s a lot of need out there folks, and we’d appreciate anything you could do. We match… It’s just really important. The big box is there and the big box that’s there is probably two thirds full, so that’s the good news. The bad news is it isn’t full yet and we want a whole bunch around it as well, so do what you can, folks. We understand, some of you can, some of you can’t. We get that, but if you can, we’d certainly appreciate it. And again, we’ll match as far as the contributions.
Gary Determan:
Great to see you. Thanks so much, 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 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.