PODCAST EPISODE 242: Market Debacle or Market Maintenance?

WHAT WAS COVERED

      • 00:00 – Episode Begins, Corey Welcomes Listeners
      • 00:55 – Reviewing the scope of todays episode.
      • 01:55 – “The Elusive Obvious”
      • 05:30 – Whats wrong with “The Winners Circle”.
      • 14:40 – What do you do in a downturn?
      • 16:15 – Closing thoughts
      • 17:17 – Episode ends, thank you for listening.

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Full Episode Transcription


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0:08

Hello, everybody. My name is Paul Adams, welcome to your business your wealth. I am CEO of sound financial group, and I’m joined by the President of sound finance group one Corey. best looking guy I know that I talked to on a computer at least several times a week, Shepherd.


0:27

Wow. I’m so happy to fill out that categories. Yeah. That’s amazing.


0:34

Well, I today, you know, we haven’t we’ve been talking about some other topical stuff and haven’t been digging into some of the current news. But we had one that we read over the weekend that was just hit Senator with us, and we thought it would all of you also. So Cory, do you want to roll out for everybody what we’re going to be discussing?


0:53

Yes. So if anyone’s not been living off grid, in the mountains away from internet reception, you’re probably aware that stock market is going through a downward turn, there’s all kinds of names that you could apply, depending on how far it goes a bear, or a pullback and adjustment repricing point is markets go up, markets go down. We didn’t not expect this to happen. It’s just that for the last 10 years, most of the markets only gone up with a few exceptions. And so folks kind of conveniently, it was easy to forget that that can happen at times. So we’re talking about an article that and the way that the media treats these market movements and the things that you’re probably seeing, like this is one article out of probably many you could find. They’re going to be saying these kinds of things and talking about these kinds of things. We want to help give you a little protection against some of these narratives out there in the world.


1:53

Well, in my here is one of my favorite kind of what I love to think of as the elusive obvious Corey, is we’re looking at the article, and many of you listening to the show know who Miranda is on our team Miranda fits you. And the first thing she brought up as it relates to the article, she says they call it a debacle. Don’t we know the volatile markets are always going to show up? Nobody calls it a debacle when they got to get the oil change on their car that they knew was coming in 3000 miles,


2:25

right, just like it’s gonna happen.


2:29

Unless you’re somebody, let’s say you sell an electric car, hypothetically. And then what you’d want to do is to have everybody relate to their oil changes as debacle. So you would buy the car that they have now this is not an electric, I could see this sounding like an environmental thing. It’s not meant to be but just the idea of like, that’s when you would want to tell people their oil change was debacle is if you had something else you could get them to buy. And hypothetically, let’s just say the Wall Street Journal, I think one of the best publications out there still has a lot of advertisers with some funds, they would like to sell us. So of course, it’s a debacle that you didn’t have positive returns in a 12 month period. During a bear market. We’re not supposed to have positive returns in a bear market. And I want to speak to that a little bit more is that if your investment advisor is taking the kind of risk with your money, that would have them moving money in and out of the market, in a promise to help you avoid losses, they are taking an undue amount of speculation risk with your money. But if what we were going to do is say invest like an endowment invest like a pension fund, invest with oh, let’s say an academically allocated globally diversified portfolio, when when markets go down, we will go down. But that’s part of what’s supposed to happen because it also opens up opportunity, the ability to add funds, etc.


4:09

And that, you know, the possibility of decline. And they’re, well let’s call it the ever present possibility. But inevitable inevitability of a decline at some point in the future, is what allows us to earn rate of return in the first place. Because you as an investor say I can take that on, I can handle that I can put my life together and all my other cash and strategies together so I can afford to have some money at play out here. And that’s what buys you that potential return in the future because if there was zero chance of the market going down a lot more people that aren’t currently buying into it would buy into it now. And the price would go up and the actual rate of return would go down.


4:55

Yeah, so right now we any of us listening right now could go get I don’t know 2% Five year CDs, you’d have no risk, you wouldn’t have to think about it. And if publicly traded companies could produce returns so consistently, they would also only have to pay 2%. Right? So it’s the volatility is what opens up the possibility of higher returns over time. So, Cory, let’s talk about the first fund. They’re discussing in this article, which is federated Hermes, strategic value, dividend fund, that sounds dope.


5:37

Like we never really like the name of the article is the winner’s circle. The few funds the few mutual fund managers who avoided the debacle and the sub subtitle, it’s like a Lesley know, only a handful of stock funds managed to scratch out a positive 12 month return during a bear market almost come losses. So the words debacle succumbed. That means, like you, you died, you’re done. But I don’t think that’s the case for for most ones. It’s always part of what, oh,


6:17

we certainly wouldn’t say that about changing the oil in the car.


6:19

No, your car succumbed to the oil,


6:24

same to an empty gas tank. So the the first fund that they talk about is this federated Hermes strategic value dividend fund, or SP, AIX. And kind of while we’re talking about doing this article, Corey kind of pulled up the returns of it. And I think


6:47

any one of you can do a just you see ticker symbols, those all caps, five letter codes after funds, just start getting in the habit of punching those into your web browser while you’re reading the article. And just to see for yourself, what you see in the first few results, the Google or Yahoo Finance data on what that fund has done.


7:08

Indeed, Yeah, cuz it’s amazing how much that it’ll a lot of the puffery and narratives sort of fall away when you look at the real numbers. And as we look down, it’s like, wow, really great. This first six months of the year, he was up 4.9%. This is Daniel Paris. So that’s the guy. He looks very smart. But the trouble is, he did do well over this, you know, six months in the year and the prior year to date. But if we look at the actual performance, it’s not nearly as good. In fact, I had the Google performance up, I don’t know what happened to it. So I’m gonna go grab it right now.


7:54

Well, he, and his strategy is not trying and the article, this is from the article, we’re not trying to buy low and sell high, says, Mr. Paris, he’s taking a different strategy than most where he specifically buys companies that pay hefty dividends, have a record of raising dividends regularly and have the ability to continue doing so now. That’s his assessment of the ability, the potential ability we never know. And we’ve actually seen dividend investing start to rise up to the top of the current of the media, especially as the market was going down because it feels comforting, yeah, but we’ll find is the actual rates of return of those companies tend to be lower over time than the overall index. And if you’re investing, which, by the way, it has to, it would have to be that way. The company is saying, oh, instead of reinvesting all this cash to grow and find other ways to return values to shareholders, there, we we got no other ideas, we’re just getting to get back to you. Like that’s what they’re saying, when they’re turning a dividend to shareholders. So,


9:02

and we, you can see here, that the fund the just the value, the price of the shares of the fund were $5.10, back in 2005. And going up through today, it’s $6.13. But meanwhile, they’ve been attempting to pay overtime about a 4% dividend is what they mentioned in the article. So the trouble is, like, I may have gotten a 4% dividend, but I just held these, this selection of stocks in this fund, picked by an active manager, which we have talked plenty about the ineffectiveness and the lack of real academic grounding that in these, any of these active managers can outperform the market. And yet, what you actually have is a fund that did about 4% for the last 17 years, when you include its dividend and its share price, and the only really Good news about is it did really well this year. But that would not be a good reason to hold that fun forever. But they’re perfectly happy to put that in our head in an article. In fact, we can go down here, I’m just going to pull up on the screen quarry, you know, it’s like the score at the quarter and all these folks have lost money. But they call it the winner’s circle survey, and then it gives more of the funds that have won. And one thing that I just found interesting, I don’t have an assessment about a quarry. But I just noticed, none of the mutual funds are linked UCL domain stocks are linked like Broadcom, Philip Morris, click on none of the tickers for these individual funds, like this integrity dividend harvest fund, one of them they talk about. Except it’s not like I don’t know why.


10:58

And there’s dividends again, which is kind of funny. So here’s the theme I’m seeing, and I haven’t run any statistical analysis on this. So this is just theory. And we like to be really clear if we’re just kind of talking about opinions or speculating, because a lot of times folks aren’t. But it feels like you know, with the market coming down, dividends are on the top of everyone’s radar, maybe a lot of people are buying into it. So either for some reason, there’s always going to be something doing good out in the market. So maybe it’s dividend stocks turn for a few minutes. Or maybe it’s someone thought it might and a lot of people are running after him. And so it’s just giving a boost, just because people are chasing some kind of safety, but it’s just the time of the moment. And there’s nothing wrong with dividends as a part of a portfolio. But remember, our general philosophy is no one thing is the magic solution. Because we don’t know when it’s going to fall in and out of favor.


11:57

That’s it, you’re still speculating if you’re right, even if you call it strategic asset allocation, you’re saying oh, we’re gonna tilt toward health care right now or dividend stocks right now? Because it’s still market timing and speculation. Yeah. So from the winner’s circle, some of the top ones for those of you that aren’t able to see the screen, or haven’t read the article, of course, the links to all of that and to our page with all the other links will be right in the description here. Here’s some of the names federated Hermes, strategic value dividend, integrity, dividend harvest, Buffalo flexible income, Hennessy Cornerstone value. There’s one called Mulan camp with a que. I don’t know what that is, but that is the most original one. I would like to say that that means in German horse hooves. I have no idea what that actually means. In the house


12:54

of horses, House of horses. We’re what I’m just


12:58

gonna live Google it with everybody. German, meaning I don’t even know if it’s German word. Who lived near mill. Nice. I think Horseheads was better. Okay, Mulan camp Voya. Corporate Leaders being why Mellon income stocks center American select equity, si que je partners, Citi national, Rockdale equity, all active managers. And think about this for a moment how poorly active managers perform is that they took in this I’m gonna scroll back up to the top because I need to look at the number of the 1340 to actively manage US stock funds tracked by Wall Street Journal, only 32 ended the rolling 12 month period in positive territory by the end of the second quarter. So even out of 1300 that they tracked, not even 1%. Just a little over 1% got an actual we we did it we outperformed the market. Right. They were all trying. And so I think kind of in finishing, there’s this last quote that you really liked for it. And I’ll read it here. And it’s kind of the last of the fund managers they’re interviewing. This is the kind of market that makes Contrarian investors feel like kids in a candy store says Mr. Are not


14:40

and, and that’s like, yeah, the market is on sale for anyone who has cash on the sidelines like anyone who’s in a strategy has available capital. They should like anyone with cash on hand would feel like kids in a candy store. Because it’s an opportunity to buy


14:57

low. I would even go so far as to Anybody who weathers this, like it wasn’t that long ago, we got a great exercise in the dip of the COVID pandemic. It was just march of 2020, that we had a big drop in the market. Everybody had the opportunity to rebalance, hold their strategy, not blank, and watch the market come back in a way that was unpredictable. Like it always is, it never comes back in a way that the experts thought it would like we thought it would now sometimes we think it comes back the way we thought because we change we didn’t write down what we thought. And then the market shifts, and then we later revisit our own memories, and it misinforms us. But bottom line is anybody who makes it through these downturns who rebalances who has extra money from their income they’re able to add or cash they happen to have on the sidelines, they were able to put to work should, to Korea’s point feel like a kid in a candy store. But that feeling always comes later. It comes after the rebalancing comes after the investing it comes after we have outlasted everybody else’s fear. So with that, I think we should wrap it today we got another one coming up for you this next week on why it is you are the single point of failure in your finances. So that is little Sunday, guys could look forward to just a little bit of a philosophy to roll out and roll around in your own head in your own life. And we’d love to hear what you guys are able to do with it or think about with it. And we’d love to hear what you thought about this episode. Don’t hesitate to comment below. Like the episode share it with somebody. And of course, if you go on to iTunes, Spotify, any of them, give us an honest review. Send us that review to info at SFG wa.com and we’ll send you our latest book your business your wealth, just as our thank you for being willing to say something about our podcast publicly and just be give us great honest feedback. And with that, Corey will bid them Adieu, do we we hope that this episode has been a contribution you being able to design and build a good life


 


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PRODUCTION CREDITS

Podcast production and show notes by Greater North Productions LLC