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.
Announcer:
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.
Announcer:
Now here’s today’s Financial Focus program.
Gary Determan:
First Wednesday of the month, so we welcome David Nelson in the studio, and boy, Monday, they roll the basketballs out.
David Nelson:
They do, exactly. November 11th, I believe, and looking forward to it. We had a little team gathering yesterday, and we discussed as far as expectations for the upcoming year, what’s realistic, what we need to do as far as to get where we want to get. I think the kids were pretty pumped and pretty excited. Had a nice volleyball season. Made a good push, a good run. Ran into a good team, Lisbon.
David Nelson:
As far as the cross-country girls, they had a nice season, went out to Fort Dodge and fared well as far as out there, so I’m really pleased. Again, we’ve got some good athletes as far as that will be coming into the gym come three, four days, five days from now, whatever it is, and looking forward to it.
David Nelson:
Attitudes were really good. I never had a problem with this group, not that I’ve really had any problems in the past. Maybe a player here and there occasionally will say something, but no, it’s a hardworking group, and I think the expectations are fairly high. We’re going to have to see if we can back it up.
David Nelson:
People have been talking about it since they were freshmen. A pretty much starting lineup, mostly, if not all freshman, depending on the game. Now as juniors, that group will have to see as far as if they can piece it together, and we as coaches can help them piece it together to have a good season here.
Gary Determan:
A hardworking group. As I told you, I went to mass Sunday evening, and there was Annabel Blunt, and she actually went out after participating with the volleyball team and helped to round out the team–
David Nelson:
She did.
Gary Determan:
… for cross country.
David Nelson:
Yeah, she did. Anna … When you look up the definition of a team player, she’d be at the top of the list. She’ll do whatever is needed as far as to try to get a good outcome. She ran with them on certain occasions during the year. She did it last year as far as to try to help them and again, that’s not her deal. She doesn’t necessarily enjoy those long distances, but she did it as far as to try to, again, have enough runners as far as to qualify as far as a team. So I’m really proud of her as far as in that regard.
David Nelson:
Her younger brother had a nice outing, a freshman going out to state. He fared pretty well as far as … I think in the 40s, give or take, out of 150 kids, I think, as far as that probably competed. So as a freshman boy, that’s pretty darn good, so a good, good future ahead as far as for him as well.
Gary Determan:
And I know you were telling me you really haven’t had a chance to talk to your nephew, but Brian Peterson, who had a great run at Kirkwood Community College. A couple of national champions–
David Nelson:
Yes.
Gary Determan:
… now an assistant at the high level at South Dakota state.
David Nelson:
Yeah. Pretty cool. Maybe I shared this prior, but not everybody’s probably listening, but he now has a DVD out as well, when he was out at Kirkwood and put it out, discussing some offensive sets. It’s kind of a philosophy type thing. I sent him a little picture of that, that I bought it. He was pretty impressed as far as that I’m buying it. Again, you could get it from Coach–
Gary Determan:
He was impressed that you were putting out money.
David Nelson:
Money. Exactly.
Gary Determan:
Yeah. Okay.
David Nelson:
Yes, exactly.
Gary Determan:
Okay.
David Nelson:
Yeah, you can buy the Coach K’s. You can get all the big names out there, and now Brian has one. I’m thrilled.
David Nelson:
As you know, he was a grinder. This is the guy that didn’t know how to quit. He was going to be in the hunt for pretty much every sport participated. Great attitude, great team player as well, and I wish I would have had more time as far as to watch him through the years.
David Nelson:
One of the big negatives, my niece also, Shannon Nelson that played at Clinton High as well, she was competing while I was coaching as far as over at Prince of Peace. So I never really got to see a lot of competition from the two of them, but great players.
David Nelson:
Again, Brian’s still in the hunt. I’m thrilled. I’m excited for him. Hopefully, everything I’ve heard … I haven’t spoken to him probably in 30 days, but up until then, he was really enjoying himself. This has been a good fit for him. My sister and her husband just couldn’t be happier. They’re like a kid in a candy store. They get to go to the games and whatever, and it’s just great. It’s just great. We love sports and participating and/or coaching and/or watching. It’s all good.
Gary Determan:
I can recall that article they had in the Herald with Shannon, Brian, and your daughter all competing.
David Nelson:
Yeah, exactly. That was Catherine, and again, Catherine, a decent player, just not at the level of the other two, but enjoyed it. Then Emma came along, and she was pretty serious as far as about sports than John and James. Really serious. So yeah, it’s good stuff.
David Nelson:
And again, for the community, I think people like turning on the TV on Sunday and hoping that David Johnson … they’ve got the Cardinals on. It’s nice to have that, and then the Harlem Globe Trotter that we have as far as that came from town, and we’ve got Brian as far as up North as far as in the coaching ranks.
David Nelson:
I think this is hopefully just another step in the process. Again, I’m biased. I think he has the talent, the understanding, the demeanor that it takes as far as to coach at a high level. As you said, two national championships as far as in, I don’t know, four years or something like that.
David Nelson:
Again, people say, “Well, but that’s junior college. This is a different level.” I get it. I’m not stupid. But the bottom line is you still have to mold, and you still have to be able to sell kids as far as coming to your place and competing. So as I’m sure you know, the junior colleges are typically the kids that are leftovers that weren’t picked up by some of the other schools. So again, you don’t have a lot of time to work with them, and you have to, again, try to mold and make something out of it. So two national championships, that’s pretty special.
Gary Determan:
Well, if he does get to that head coaching level, he’s going to have to see his uncle for money management-
David Nelson:
That’s right. Exactly. He’ll be [bringing 00:07:08] some money.
Gary Determan:
… because some of those guys make some big bucks.
David Nelson:
Exactly.
Gary Determan:
No doubt about that.
David Nelson:
Yeah, yeah, serious money. I remember that you and I … What was it, probably four or five years ago? They renewed Jacobs, or was it Jacobson?
Gary Determan:
Jacobson.
David Nelson:
Yeah, yeah, renewed his contract, and I think it was 900K. So that’s a pretty good income as far as at a school of that level and what have you. So yeah, it’d be pretty special for him. Again, I think the best part of all of this is he’s a humble, good person, and we need more good people in this world. He certainly falls into that category.
Gary Determan:
First Wednesday of the month, so we continue our talk with Dave Nelson, and now we get into business.
David Nelson:
Oh, do we have to?
Gary Determan:
We get into business now.
David Nelson:
Right.
Gary Determan:
And certainly, if you’ve not lived in a cave, you know that a lot of things going on in Washington.
David Nelson:
There really are, and I think the big scare, or where people are vocalizing their discomfort as far as what tomorrows may bring, certainly center around the impeachment issues right now. Again, I’ve done a lot of gatherings. We’ve had some workshops and whatever that we brought a whole bunch of people in and we’ve chatted, and I set the table saying, “I am not taking a position as far as left or right on this issue.” I don’t want to talk politics. What I do want to talk about as far as when we have these discussions, like we did the workshops and now, is what impact is that going to have on your net worth statement? Because that’s what people want to know.
David Nelson:
I primarily work with people that are really close to retirement or in retirement. Those are the individuals that come in the door, that want to visit with me. Those individuals have worked really, really hard amassing a pile of money, some a really big pile of money, and some a decent sized pile of money. But whatever it is, they want to, as best they can, protect that money and make really good decisions surrounding that block of money that they’re blessed with.
David Nelson:
So our challenge is to try to make sense out of what’s happening out there, and then trying to look into this crystal ball that has cracks all over it to try to determine what tomorrow is going to yield. So from our vantage point, we oftentimes will go to the history books, and we’ll look in the rear view mirror to try to make that determination as far as what took place in the past with a similar type environment, and what do we think is going to unfold as far as going forward?
David Nelson:
So we have two experiences with impeachment, as everybody knows, Nixon and Clinton. Again, the environment that existed back then and the environment that I’m referencing now has to do with interest rates. That’s a big variable that is really different this time than it was back then. So that’s the flaw as far as trying to look at the history book and drawing conclusions that that happened before, this will happen in the future. As we’ve discussed previously here, a great, great quote from Mark Twain, and that is that history doesn’t repeat itself exactly, but it rhymes.
David Nelson:
So what we feel with all of our heart and our brains pertaining to what’s happening right now is that when this discussion first started about possible impeachment, markets suffered some. History says that’s what takes place, but history also has shown that after this phase takes place, that in many ways it’s ignored as far as the markets are ignoring it. That’s kind of what we’ve seen. You see some of the reportings the last couple days, these are pretty damning reports, and yet markets have hardly nudged as far as on a downward move.
David Nelson:
So we’re fairly optimistic as far as going forward. We’re somewhat a little pessimistic, very short term. We’ve had a really good run, as people may or may not know. We had a month that was up pretty significantly, and so we think it got a little ahead of itself, but history says Santa Claus rallies happen most of the time.
David Nelson:
We’re in the camp of believing that that’s probably going to take place this year, but we’re probably going to have some bumps as far as in the short term because we probably got a little ahead of ourselves the last 30 days, give or take, and subsequently, again, we look three months, six months, probably a year out. We think that there might be some decent possibilities.
David Nelson:
Again, we need to be careful. We need to understand as far as pricing and where things are. We still think the US is probably the most expensive, but it has been for a while and it has continued to lead, but we’re not convinced that that leading’s going to continue.
David Nelson:
If you look at Europe, you look at Japan, you look at China, you look at emerging markets as a whole, these areas are from a price to earnings ratio, which is again a term that just basically says, “Is it fairly priced based on historical levels?” What we find is outside the US is significantly cheaper than within the US, and even within the US, large cap stocks have been the big gainers. Small cap and mid-caps haven’t. So you need to be selective, and we think there’s going to be, again, midterm, longterm, some pretty good opportunities out there.
Gary Determan:
Yeah.
Gary Determan:
I’m visiting with Dave Nelson of NelsonCorp wealth management. This is something we’ve talked a lot about on the program, the emotions of putting your money into the market. As a coach, you know sometimes there are players, you need to hold their hands, and other players, you need to kick their butt.
David Nelson:
Exactly.
Gary Determan:
Is it the same thing in the market?
David Nelson:
It is. It is. It is. Again, people know they have limited options today. A good percentage of our workshop was built around just looking, again, at today and being honest about it. When you have interest rates globally … So the number is right now $27 trillion dollars of bonds that have negative interest rates, if you can imagine that. People just can’t even fathom it. What do you mean that we’re going to lose money if we invest in it?
David Nelson:
So the yield on it is negative. So you are going to … So you have $100,000 that you want to put into a 10 year German bond, so a government bond issued by the German government, so a fairly safe investment. The yield today is negative 6.5%. So in other words, you bought it, you put a hundred grand in, and you expect a hundred grand back. You’re not going to get it.
David Nelson:
So the way it works is you pay up front. So I’m rounding this off just to give you a quick analogy, but you’re going to put like $110,000 in, knowing for a fact, in 10 years you’re going to get back a hundred. $110,000 in, knowing for a fact you get a hundred back. So it’s just hard to imagine. So in the United States, we have these high yielding government bonds that are paying 1.6%, 1.7%, 1.8% depending on the day. They look really attractive as far as in comparison to what we see around the globe.
David Nelson:
So our discussions with the clients that came as far as to the these events is just to try to explain to them in the olden days … In a simplistic way, if you had 50% in stocks and 50% in bonds, in the olden days, the bonds were yielding 5%, 6%, as an average, and your stocks as an average were maybe 8% or 10%.
David Nelson:
That was yesterday. Today, we look at that 50% of the money you put in bonds, if we go the safe route, you’re getting a percent, percent and a half, on the 50% of your money. The other 50% is really going to have to make you a boatload of money to try to get your average rate of return at a decent level. That’s the challenge that exists out there today.
David Nelson:
So what we’re trying to explain to people is that it really is different this time, and what we need to do is we need to understand interest rates at these low levels. When they go up, and at some point they will go up, you’re going to guaranteed lose money as far as interest rates go up. So you need to be very careful as far as in the purchase of those. The guarantee that I’m referencing is that if interest rates just go up 1%, 10% of your money, if you own a 10 year government bond, will disappear short term.
David Nelson:
Now if you hold the bond to maturity, then the money will come back to you, but again, you may be owning these things for a 10 year period of time and watching your money along the way have huge negatives next to it. That is really hard emotionally for people to do, to sit there quietly and say, “Oh well. I don’t care because again, 10 years, 20 years down the road, all my money will reappear.” It’s hard to do.
David Nelson:
So our point, again, is that people need to understand the rules today, and most people are still looking in the rule book from 10 years ago, not today. It is different today.
Gary Determan:
Just listening to you, I would think as you approach various customers or clients, it all depends upon where they are age-wise.
David Nelson:
Correct.
Gary Determan:
If you’re looking at somebody just getting started … As you point out, you’ve never started saving money soon enough.
David Nelson:
Right. That’s right.
Gary Determan:
But then when they get to the middle age, you think, “Oh boy, maybe I ought to start getting in the ballgame a little bit.”
David Nelson:
Correct.
Gary Determan:
And then they get a little bit older.
David Nelson:
Correct. Exactly. And again, as you say, the different tiers, and it’s … Young folks, again, the best lessons they can have is to talk to the older person. Again, your explanation we talk about on a regular basis here: in 38 years, never had a client walk in the office and say, “I saved too much and I started too early.” That’s never happened. It never will happen. So let’s learn from other people’s mistakes. It’s much cheaper that way.
David Nelson:
But when you start investing money, you need to, again, understand the difference between stocks and bonds, and people really don’t. Even the large investors oftentimes don’t understand that, and it’s really, really important.
David Nelson:
Then as we get older, as you say, the importance of capital preservation at some point, now that can overwhelm people at times as well, saying, “Oh, I can’t afford to lose anything.” Well, that then translates into you’re going to have a 1% rate of return pretty much the rest of your life. So that isn’t a good package as well.
David Nelson:
So we’ve got to understand there’s risks in everything. There’s a risk of running out of money. In other words, my money didn’t grow fast enough. There’s risk in investing because the stuff may bounce around. Oh, and by the way, it could permanently lose money.
David Nelson:
So when people look at all of that, again, it’s a tough decision. Hence, the importance of education. Hence, the importance of the ongoing communication as far as with somebody that’s been around the block and somebody that’s willing to tell you the truth. In other words, not show you some stupid chart that shows, “If you want to put 10 grand in here today, you got $8 billion and you live happily thereafter.” That’s just nonsense, but that’s what a lot of people as far as do in this line of work and they shouldn’t be.
David Nelson:
What we should be doing is to say, “What’s your threshold of pain? In other words, you got a hundred grand. Where are you flipping out? Are you flipping out at 90 grand? Are you flipping out at 80 grand? Are you flipping out at 70 grand? Where are you flipping out?” Because the advisor should be asking these questions so that they can invest accordingly.
David Nelson:
What we don’t want people to do is to bury the money in the backyard, thinking that that’s the best approach because again, for a year, two years, three years, that may be okay, but if you plan on living, like most people do plan on living, for an extended period of time, and the average person going into retirement is going to be on the doorstep of 25 years, that 25 years, your money has to grow because inflation is going to really cream you if it’s not.
David Nelson:
So it’s that entire view of it, and it’s having somebody across the table from you that’s willing to tell you the truth, the good and the bad. The bad can be dealt with to some degree if people have a plan. Again, it comes back to our explanation is this financial roadmap. It really does make a difference.
Gary Determan:
As always, interesting, and as always, the time flies by. Let’s end with the good.
David Nelson:
Yes.
Gary Determan:
We are getting into the holiday time of year, and it won’t be long. The folks at NelsonCorp, your clients will be, again, generously giving toys and food to those who need.
David Nelson:
So important, and again, to whom much has been given, much is expected. We all have heard that as far as going to church or from friends and whatever. Many of us have been blessed and have received more than our fair share. Hence, the importance of giving back and making a difference in the world, leaving this earth better than when we got here, hopefully. That’s the goal.
David Nelson:
So we have so many kind, generous clients that we work with that lead by example, and we follow their example. So what we do is with pretty much everything that we do as far as in the office, we do a match. We challenge as far as our competition, the other individuals, the financial advisors out there to do the same. We continue to. We think it’s really important. The community needs it. It needs our leadership as far as out there, and we’re certainly going to do that.
David Nelson:
The bottom line is it’s a different world that these kids are growing up in today than what we grew up in. Not that it was all wonderful as far as for us. I’m not implying that. I came from a family with six kids. Dad worked at a factory, didn’t have a lot of assets, didn’t have a lot of toys and what have you.
David Nelson:
But we want to we want to make a difference, and we have clients that have and will continue to support this. We’re just the vehicle to help make it happen, and we want to encourage people as far as to drop the stuff off at the office. The sooner the better. We’ll make sure that it gets in the right hands and put a smile, hopefully, on some youngster’s face, and Mom’s and Dad’s as well as far as that aren’t in a financial situation to probably make something like that happen. So we want to be that difference, and we hope that many individuals out there will join us in that endeavor.
Gary Determan:
As always, a pleasure to have you in the studio. Thanks so much.
David Nelson:
Thank you, Gary. I appreciate it.
Gary Determan:
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.
Gary Determan:
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.