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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 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:
First Wednesday of the month, so we join Dave Nelson live here. Dave, we are visiting, as we always do-
David Nelson:
Yes. Exactly. Enjoy it.
Gary Determan:
… talking a little bit about sports, and you were talking about how you had a great experience with KROS Hall of Famer, Hank Dillman, golfing one day.
David Nelson:
Yes.
Gary Determan:
And you do, when you get into a zone in any sport, it’s just amazing.
David Nelson:
Right. Exactly. It’s such a wonderful feeling it was, I should say. It only happened twice. I literally have probably played a thousand-plus rounds of golf, and twice, I had rounds that were just, what a delight. Anyway, one happened to be with Hank. It was a team game, so there was four players, and I was the B guy. You got the A, that’s the best player, B guy, C, D, et cetera. Anyways, so it was fun. I was really striking the ball well, and he paid me two compliments that day. I had never played with him prior to that. I knew him from afar, but anyway, I got teamed up with him. It was quite an experience. I really enjoyed his company, but again, being around somebody like that and having him pay you a compliment. I hit a good ball and whatever it was, and great, and I made some, “Ah, sorry about that, guys.” The comment was, “David, you’re not a machine.” Because the rest of the round was pretty much I was a machine, just did things so well, and then two, three holes later something like that. I just stepped up to the T block and I just killed one. He said, “Pound for pound, you’ve got to be the longest player on both sides of the river,” and I never forgot that, so it was quite an experience. Yeah, I really enjoyed it.
Gary Determan:
Yeah, I know Hank still golfs.
David Nelson:
Yeah, exactly. Exactly.
Gary Determan:
Believe it or not out, where you live out in Valley Oats, and he’s 99 now.
David Nelson:
Yes, it’s remarkable.
Gary Determan:
It wasn’t that many years ago he actually shot his age.
David Nelson:
Wow, no kidding?
Gary Determan:
Yeah.
David Nelson:
That’s remarkable. They talk about, and I’m trying to remember, he’s the guy that won the US Open when it was played down at Davenport CC. He’s a real famous guy. He had a sweet swinging blah, blah, blah, blah, blah. This is back in the ’30s and ’40s, and up until he was like in his 70s, and this had to be about 20 years ago, 25 years ago. Anyway, he did on the tour, and it was just, you know, guy’s like 73 years old or whatever, and he shot 73. Sweet-swinging, what the heck was his name?
Gary Determan:
Could be Sam Snead.
David Nelson:
Yeah, Sam Snead. There you go. That’s exactly it. Yes.
Gary Determan:
Okay.
David Nelson:
So anyway, it’s just oh my goodness. Again, I was a decent player, never a great player, but just two rounds that just stood out. I felt like I could kick the ball that day and it would be great. We just never experienced anything like that. You hear Jordan talk about that in his heyday as far as the zone, and he got into the zone. He got into it on a fairly regular basis, but what an experience it is. So yeah, it was fun, to say the least.
Gary Determan:
Do you ever get into that zone in your business? Because I feel that way sometimes in radio sales, you’re thinking like, everybody’s saying yes. What’s going on here?
David Nelson:
Sure, exactly.
Gary Determan:
What about in your life?
David Nelson:
Yeah, very much so. I’m very critical. Gene and I started back in the early ’80s and what have you, and he made a comment to me probably 10 years in the business. He says, “You’re so critical of yourself,” as far as I’d go to do some public gathering, whatever, and just … But I can tell when, again, to me, it feels just right. It just flows, and I’ll have that. And fortunately in my line of work, that happens on a somewhat regular basis, that it feels good.
David Nelson:
The interesting thing sometimes though is my perception of what I think was a good presentation versus the audience perception of that. Not always the same. They don’t necessarily match up. What I think they want sometimes isn’t what they want. And so, anyway, again, it’s just … I’m a big believer in Johnny Carson, and I’ve probably brought this up numerous times as far as on the program. I start out a lot of my speaking engagements with this, that Johnny Carson was famous for saying, “People will pay more to be entertained than they will to learn.” I find that that’s true.
David Nelson:
And so, in our line of work, we talk about, and one of the things we’ll talk about after the break, is something that easily could put people to sleep. I mean, it just, “Oh, why does this matter? This is boring. Just shut up. Move on. Whatever, whatever.” But again, there’s things that are important, and so you try to take the complexity of the line of work that we’re in and we try to simplify it as best we can. Again, these are some pretty complex, to say the least, topics, but again, that doesn’t do you any good to talk over peoples’ heads. The goal is to try to make it tangible as far as to individuals. So that’s basically what we do.
David Nelson:
But again, public speaking, I think next week alone I’ve got five different presentations I’ll be doing. I’m going to be recording, I think, four different TV spots as far as … So nine different gatherings, so I better be in the zone next week. It’s probably the busiest public speaking and big events that we’ve probably ever done in a single week. Again, it’s important to try to take the complexity and make it as simple as possible.
Gary Determan:
Did you ever see yourself, when you first started out, doing these many engagements, David?
David Nelson:
Not even close. I just remember early on, back in school, I had no interest in getting in front of a group. I mean, I was terrified as far as just the idea of it. So I had to force myself. I remember back in the day when we had the Holiday Inn as far as in town here, and we do events as far as for the public, and we’d invite them, and we’d have a nice dinner and what have you. It’s kind of how we’d build our business. I’ve had a room of 50, 100 people as far as out there, and at that point in time, that was massive. And it was intimidating to say the least, but through time, I got used to it.
David Nelson:
I don’t do a lot of public speaking outside of the industry, so again, I get in that line of work, let’s say, something else other than what I do, I’m not sure how comfortable I would be. But, if I’m talking about money and finance and taxes and estate planning and things of this nature, as a gentleman told me years ago, he says, “I don’t need to rehearse. I practice 24 hours a day.” I really am that person. I mean, I dream about this work, as bizarre as that sounds, as far as appointments, et cetera, et cetera. It’s just constantly there.
David Nelson:
Now, I’m not saying that’s healthy, by any stretch of the imagination, but it’s a reality, so I really don’t rehearse, per se. And again, the TV spots that we’re doing now as far as on the news, what have you, I’ll get the concept and then spend maybe a couple minutes pondering as far as what direction I want to take, and that’s the extent of it. And people out there may be thinking to themself, “Yeah, you need to rehearse.” Maybe they’re not as impressed with it as I am, but anyway, at the end of the day, it’s just … I love it now. I mean, I feed off it now.
David Nelson:
Do a lot for the industry. I’ll be out in Denver here in, I think it’s two weeks. I’ve got to go out to speak at a conference there. I’ll be in Hawaii as far as in October.
Gary Determan:
Oh, too bad.
David Nelson:
Yeah. I got to speak over there. But, it’ll be a two-day event, when I go over there. My last trip that I went Out West to meet clients, literally, I was in six states in five days. That including Hawaii. I always start in Arizona, Southern California, went to Hawaii, flew back to Oregon, flew down to St. George, Utah, and came home. That was in six days. It was just brutal. I didn’t know what town I was in hardly, so anyway. But yeah, it’s part of the job.
David Nelson:
Again, with coaching, part of it is, people say, “Why don’t you go out and enjoy yourself?” I said, “I can’t because I’ve got too much to cram in a short period of time.” Once basketball starts, I’m not going anywhere. So that trip took place in like May or June. People say, “Geez, why don’t you go in December or January when it’s nice?” I wish I could, but I’m coaching. At the end of the day, that stuff had to be kicked back. This one will be October in Hawaii, and it’ll be probably a two-day event. I’ll probably work another meeting or two in on the way there or the way back. But anyway, yeah.
Gary Determan:
Amazing.
David Nelson:
Yeah, yeah.
Gary Determan:
It is amazing. First Wednesday, so we continue on to the bottom of the hour. Here it is September, David. The summer is over with, and so now you guys really get back into the grind or what?
David Nelson:
Yes, exactly. Busy time of the year. This is, typically, September, October, is probably our busiest months. It just seems to work well for clients. We’re into the year, as you said, kind of got a feel for maybe returns as far as what’s taken place for the year. Got a pretty good idea for those that are still working, I mean, a lot of my clients are retired, but anyway, for those that are working, they’ve got a pretty good idea of their income maybe for the year, and it’s a good time to do some planning. We do a lot of educational stuff, as far as September, October. That’s generally very good time. You get November, people start thinking about Thanksgiving. December, forget it, because that’s not happening. People aren’t coming out to go to anything educational.
David Nelson:
So anyway, yeah, it’s a really important time. We, again, try to as best we can, stay in front of people as far as just trying to keep them current, you know, what are the markets doing, et cetera. We chatted earlier as far as some of the craziness that’s taken place. Yesterday, a significant drop. We were down 400 and some points. It rallied back by the end of the day, only down close to 300. But today, up pretty significantly as far as out of the shoot. Who knows by the end of the day? Just a lot of volatility that’s taking place these days. Many, many reasons for it, but at the end of the day, again, the volatility is increasing, and we’re getting a lot more inquiries from new people, as far as, that are wanting to chat and trying to, again, get an idea as far as what’s our take, as far as what’s taking place, what have you. It’s, again, as we tell people, it’s not a time to be a hero right now. We’ve had a big, big run, and we don’t want to give it back.
Gary Determan:
You mentioned we went on air, you were going to be talking about something today.
David Nelson:
Yeah.
Gary Determan:
It went over my head, naturally.
David Nelson:
Sure. Sure.
Gary Determan:
What are we talking about?
David Nelson:
Sure, it’s the yield curve. There was an inversion that took place. That’s a fancy way of saying, and I brought this up last week, as far as on TV, and had a nice visual, so I’ll try to paint this picture as best I can for you. You’ve got the 30-year bond, you’ve got a 10-year government bond, and then you’ve got some short maturity bonds, as well. Again, this is a simplified explanation of it. And historically, what takes place is the longer you’re willing to tie up your money, the higher the rate of return that I, the US government, will pay you for that.
David Nelson:
As an example, I got to go back a few months ago, actually maybe a year ago, and the 30-year bond was paying, give or take, 4%. So, 4% there. If you go to the 10-year bond, it was probably, let’s round it off, again, in simple terminology, 3%. You go to a two-year bond, it was give or take 2%. What took place on August 14th was an inversion, meaning that the long bond came down very dramatically, and it cut through the shorter maturity bond, and that is a very rare event. The last time that took place was 2007. 2008 and 2009 maybe people remember, it wasn’t a very pleasant experience as far as in the investing world. Historically, when an inversion takes place, again, the long bond yield goes below the shorter maturity bond yield, so you have them crossover, and history says that on average, 22 months after that takes place, that you have a recession.
David Nelson:
Now, why is this important? Well, in a recession when we look at returns, returns drop quite dramatically. When we look at average returns in all of the recessions that have taken place, and the way it’s being discussed on TV these days, it’s like they’re almost talking about a depression. I mean, literally, we can’t let this happen. You know, a recession, history says they happen every four to six years. It’s just part of the cycle. But the Federal Reserve is intervening. Our president is pounding people as far as to cut interest rates because at this point, we think it’s going to help as far as his version. Mine couldn’t be more opposite from that standpoint.
David Nelson:
Dropping the yield as far as on a 10-year bond today from, say, 1.5% to 1.4% or 1.3%, I don’t think is going to change peoples’ behavior. It just isn’t. So I don’t think that that’s going to matter. But the point being, is that when they cross, and you have a recession, let’s say, and again, not every one of them turned into recession, but almost all of them did, and the bottom line is the returns after that took place have been really ugly as a group. Again, some exceptions in there, but as a group, we’re talking about negative rates of return.
David Nelson:
However, when you don’t have the recession, bottom line, you have bigger returns. And the returns, historically, have been pretty good on the positive side. So it’s a really important thing that everybody’s trying to get the hand up on because if this truly is going to be a recession, we better sell now and move to the sidelines, because again, it could be really, really nasty as far as down the road. Time will tell whether that takes place or not. But we’re in the camp of don’t be a hero as far as this point in time.
Gary Determan:
It is amazing listening to you and all these things that are going on, and I’m thinking to myself, do I react on a daily basis? Do I stay back, react after time has passed? What do you do?
David Nelson:
We use the term weight of the evidence. On any given day, you can find plenty of problems. You know? Today, I mean, there’s a list of 20 things that you could rattle off. I mean, China is front and center. You got Brexit. Those are probably the two big dogs that are out there today, but there’s plenty of other things. Iran, as far as what’s happening over there with oil, et cetera. You know, we put the clamps on them. They’re not happy about it. A ship disappears as far as yesterday or the day before that was carrying what they think was two million barrels of oil. I mean, there’s all kinds of reasons to be nervous. There always are.
David Nelson:
The key is to be able to try to weigh the stuff out and make decisions. What we do is we’re very active in money management. We don’t subscribe to, which unfortunately most people in this industry do, and there’s many reasons for it. One is it’s easier. But, the bottom line is we don’t subscribe to buy and hold. We call it buy and hope. And we don’t want to hope. This is peoples’ serious money. This is their life savings that they’ve entrusted with us. We’ve got to be on our game. On our game doesn’t mean we’ll never have a bad day, a bad week, a bad month, a bad quarter, maybe even a bad year. But it’s never going to be a horrible year. It’s never going to be a horrible event. We have a sell discipline.
David Nelson:
The key is to put all this stuff together to make that decision. The three main ingredients is sentiment. Sentiment is a fancy way of saying, “How do most people feel and how do corporations feel today about what’s happening out there?” If people are really, really nervous, that’s a good sign. That’s the time you want to invest. When everybody’s excited, is probably a time you don’t want to be invested. Number two, the trend is your friend. What does that mean? The trend is your friend. You look at the trend of the stock market, and if it’s trending up, you want to get on board as far as that. That’s another variable. So sentiment, trend, and then the last one is basically government policy, in other words, the Fed, primarily. Is the Federal Reserve friendly towards the market, or is the Fed more negative on the market? In other words, are they anticipating increasing interest rates, or are they thinking about cutting? If they’re cutting, that’s generally very, very good as far as the market.
David Nelson:
So you take the three and you put them together, and it doesn’t, again, guarantee success. What it does do is it allows you to make rational decisions, and when you make rational decisions, over time, it’s going to be very, very good. The other thing that it does is it takes the emotions out of it from the selling side of it. Again, most people that will come in the office, and they’ll want to talk about this, that, whatever … So somebody brand new that comes off the street, let’s say they’re fairly well informed, and they’ll start chucking at us, “What do you think of …” maybe they’ll say a stock. Maybe they’ll say like the stock market or something like that. And so our job is to answer that, but then to now challenge them, as far as with, “Okay, so we answered this. That hopefully answered your question. Now, what is your sell discipline?”
David Nelson:
What you find is they have none. Zero. And nobody ever wanders in the door and says, “I’m going to buy, let’s say, XYZ stock, if it gets to 50 bucks. I’m going to run for the hills.” What they do is they say, “I’ve done my homework. I really like this stock. I’m thinking about buying it.” We say, “No problem. We’ll help you get that transaction taken care of, but I have two other questions. You said, bottom line, you like it at this price. What if it gets cut in half tomorrow? You liked it today at 50 bucks. Tomorrow it’s trading at 25 bucks. Are we still buying it?” “Well …” You get a lot of that going on.
David Nelson:
And then the other question is, “Okay, so let’s assume that we bought it, and it doubles the next day. Are we selling or are we holding? What are we doing?” “Well …” They don’t know. They haven’t thought it through. So never buy something without a price. And then number two, never buy something without the price and a timeline. In other words, “Well I’m buying it today at 25 bucks. When it gets to 50 bucks, I’m selling the darn thing.” And then my response is, “Again, what if it takes 30 years to get to 50 bucks? Is that okay?” “Well …”
David Nelson:
So again, it’s not saying, “We’re brilliant and everybody else out there is an idiot.” It is to say we’ve got to think about this as far as the buy side, as well as the sell side, because this is your real money. This isn’t play money. This is real money. We want to make sure that we make good decisions with that.
Gary Determan:
You’re so interesting to listen to.
David Nelson:
Sometimes. Not always.
Gary Determan:
Very interesting. Very interesting. We got a couple minutes left in the program.
David Nelson:
Sure.
Gary Determan:
Again, we’ll be getting into the holiday season, and I know you folks always make such an effort to help out the community.
David Nelson:
Yeah, it’s really important to help out the community. And again, as we talk about all the time on this program, to whom much has been given, much is expected. We’ve been very blessed. We need to give back. We will give back. And again, the community has been good to us. The community is in need. We’re doing whatever we can. I just say the last day or two, a new drive that’s taking place as far as with the Regional Development Corp. We’ll be part of that. We care about this community. We challenge. We always are challenging as far as folks out there, to step up their game a little bit. Primarily, I guess the challenge that we put out there is primarily for the folks in our industry that are out there.
David Nelson:
We’ve had a very good run, as far as the markets are concerned, and translation, for anybody in this industry, they’ve done quite well over the last eight or 10 years. We think it’s imperative that they give back, and give back more than they’ve given back in the past. Obviously when things drop and incomes are down, the people out there, their net worth is down, our income is down in proportion that, let’s say. Bottom line, at that point in time, it’s a little harder. I get it. But today, we need a lot of those folks to step up. We need other folks to step up. Let’s make a difference. Let’s keep pushing for our community here, and let’s make a difference.
David Nelson:
I think we’re on an upswing. I heard a data point just recently that the population has turned, and we actually have an increase, as far as this past year. That’s fantastic news. Let’s keep it going. Let’s be more positive, and let’s make a difference as far as that can be lasting. Make a real difference, as far as for the community long term.
Gary Determan:
As always, great to have you in. Thanks so much, [crosstalk 00:22:15].
David Nelson:
Thank you, Gary. Appreciate it.
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 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.
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