Similar to Dr. Martin Luther King Jr. (With the exception of the topic, gravitas, historical context, speaking ability, and every other intellectual attribute you can possibly think of), Dave shares his own “ I Had A Dream” speech. Steve adds his financial tidbits and, somehow, Episode 123 of Plan For Life Now is a pretty good potpourri* podcast!
*French word for “winging it”
Steve:
Welcome to Plan for Life. Now, episode 1 23. We are recording this here on October the 16th. Hopefully you’re listening to it in the next couple of days. We’re working on getting our compliance approval process a little faster here,
Dave:
Right? That’s the behind the scenes thing that we have going on. We went to our, which we talked about our conference. I don’t know if we talked about this part, but we went to our conference in August and we did a little, that was the last podcast. Yeah. So I went personally finding, searching for the compliance person, trying to get them. They’re very nice too, trying to get them to help us out to get these things approved faster. So I guess we should set it up by, we can’t just record these and then throw ’em right out there. Doesn’t work that way with a financial podcast.
Steve:
Yeah. They got to make sure you’re not going saying crazy stuff. You’re not promising the world to people and pumping stocks and all kinds of shenanigans that unfortunately have been done many times in the financial media world.
Dave:
Right. I get that. And then my argument was we’ve been doing a before podcast as most of, we did a radio show and that radio show started when I started doing just on long-term care and that would be 2001 if you can’t do the math, how long ago it was, you have to actually do the math. It was 24 years ago and then you and I forgot when you started doing the radio show and we shifted it to this topic
Steve:
2007, I think
Dave:
It was 2007, so that’s 18 years. And we did one every single week and we sent that up and I mean, did we get dinged a couple times on very minor things? Not on what you were talking about, but maybe, oh, don’t use that word. But for the most part, never. How many broadcasts have we done, would you estimate? Over 25 years? I would say we’ve done 500, something like that. Something like that with no blemishes and they’ve listened to every one of these things. So the reality is we’re saying, Hey, can you really crank these quicker? Yeah.
Steve:
I don’t think the delay has anything to do with them saying, oh, Dave and Steve are really a high risk or anything. It’s just a sheer matter of they’ve got a lot of stuff to review and it takes a couple days and there’s kind of a natural built in to get it posted to the website and all that.
Dave:
I talked to the person and she actually, I was bummed because she had a really good argument. I prefer to make my argument and even just be, yes. But on this one her argument is, well, you talk about the radio show you used to have, we have a lot of people in all of Cambridge who have these radio shows. We got to get to those first because they’re going out live broadcast or they have to be done by a certain time because they have to be put out there by the radio station, so they have to come before you guys and stuff and Okay, decent argument. But they said that they would really give it a shot to try to get these out quicker. So things are more relevant.
Steve:
Alright. Yeah, I mean usually when we have really urgent stuff, we try to let them know and they’ve been good about it. Most of the time it’s not super urgent.
Dave:
That’s definitely today’s podcast.
Steve:
Today’s podcast, nothing super urgent going on, but we always like to check in, get a little update on everything, quick update on the market, Dave, and then you can go into your stuff. We’re sitting here, like I said, October the 16th, and I mean this was as of the end of last week s and p 500 up 15% on the year. That’s pretty incredible to me. Just sitting here thinking about where we were in April and May with all of the tariff discussions, the stock market was down about 19% off of its highs to be up over 15% on the year. Pretty incredible. But it’s also a testament to how quickly things can turn around and how you can’t let the news of the day just absorb you and dictate your investment strategy.
Dave:
Now more than ever, ignore the news of the day or even the drop in the market of the day and at some point we’re going to have to address, not address, we don’t have to do anything. At some point, maybe the market will address that up to today’s recording and seemingly, with the exception of blip here or there, the market goes up a half percent every day and I made that, you know what I mean? It’s
Steve:
Going on. Well, since we’re talking about that, let me touch on one of the things that I had written down is that this year has been marked by, even with a 19% drawdown this year has had an incredibly low amount of volatility. So year to date so far this year we’ve only had 22 days where the market was down more than 1% and historically we would’ve averaged about 31 days of declines of more than 1%. And you can look at years like 20, 22 when I think we finished the year with 70 some days that we’re down more than 1%. So you’re right, it has been a very calm market out there,
Dave:
But obviously no guarantees for the future. But this morning pivoting out of that, so this morning I basically was trying to think of something to talk about on the podcast. I just had a feeling normally you come up with just a great list of things to talk about and it’s not really fair to you to come up with something, but all the time. But the reality is, like we just said, there’s not a lot going on right now. So I was up, I like it woke me up and I started to think when you’re half asleep you have weird thoughts. These thoughts were weird. But then I wrote ’em down when I got up and I said, I’ll talk about this. So somehow this is going to be about, it was started with Marjorie Taylor Green, and then it went into fire alarm I have, and then it went into Roth Iris. So here we go. Whoa, I’m going to buckle up for this one. This is almost like a dream kind of thing. So basically I’m thinking about, I think most of you know who Marjorie Taylor Greene is. She’s a pretty conservative Republican, way conservative, pretty divisive and I would say probably controversial.
Dave:
Controversial.
Dave:
She’s had some interesting thoughts along the way, but lately, and usually most of the conservative people are sticking with the party line, whatever that is. And right now the party line is obviously with the government’s shutdown that it’s Democrat’s fault and period and there’s nothing to see here and let’s just get the government open and all that. But lately Marjorie Taylor Greene has been going, I only could say off script. Now, one of the off script things doesn’t really affect the economy. The Epstein file thing saying to release the Epstein file, she’d been, that’s not affecting. Well, if it is affecting you, then you have much bigger problems than rambling than I’m on. Hopefully it’s not affecting you. But the other thing that she’s saying is, Hey, this whole thing about the shutdown and hey, are the Democrats using the healthcare, the A CA, that segment of it as a reason to gin up this whole shutdown thing?
Hey, that could be a political strategy, but at the end of the day, Marjorie Taylor Green is, wait a second, there’s a problem here. My constituents forget about the party line. My constituents can’t afford stuff and on top of that, many of my constituents are going to be really hurt by this AC if this were to go through. And what it basically does is what’s the best way of explaining it? If you’re me, for example, you’re a small business owner and you have to buy health insurance on the, we’ll call it Obamacare, the a CA, whatever. If you’re not earning a certain amount of money, then you get subsidies to make the insurance affordable. And that’s sort of what was cut out in the big beautiful bill. And it affects a lot of business owners, it affects a lot, sometimes the employees of those small business owners who are in one of these kinds of plans and she’s saying, Hey, that’s not acceptable for what’s going on. I know it’s not the party line and that’s not acceptable. She’s also talked about how difficult it is to find a job these days, what it’s like to try to live on salaries with the prices, go all these things that are not towing the party line.
Steve:
Well, that’s refreshing to see someone who seems to be actually concerned about the constituents.
Dave:
Yeah, I would say this is a universal political problem that either party refuses or very few leave the party line to say things that are real, but she’s throwing that out now. Then I started to think about what things cost, and so the other day I was basically, I got back from the beach place and the fire alarm thing, the beeping when you have to replace the battery.
Dave:
Yeah,
Dave:
I find which one it is. I think finding which one it is is a pain because you have a bunch. So what do you end up spending a lot of your day doing staring at these things,
Steve:
Right? You stand there and you’re like, wait, it was in that room. Go in that room quick, right?
Dave:
It’s not in that room. Then there I’m staring at these things because the beep is, so I finally find the one that was beeping and I’m so excited. So I get, we’ve all done this. I get up on my stepladder, I am twisted, I put the new battery in, I push the button, five minutes later it’s beeping again. What the heck’s going on? Then I put the battery in a different way and then there’s a way to unplug this one, and then it was fine. And then five days later it starts beeping again and then I do it again because lazy and I don’t don’t want deal this problem, I have to
Dave:
Replace
Dave:
It at some point it becomes denial. I don’t want deal with this problem right now. But then it happened again five days after that and I’m like, oh gosh, now I have to actually deal with getting a new fire alarm.
Steve:
I’m dying to figure out how does this tie back to fire? It’s
Dave:
All going to tie in. I find the model I have and my wife, so we’re looking up the model, okay, the same model’s available with the special plugin to our electricity system. Also this little alarm thing that you stick to batteries in, it went for $125. What? $125. I was stunned. So now what I ended up doing was shopping around and getting it instead for $50 as if that’s, that seems
Steve:
More reasonable,
Dave:
But let’s go back to the one. So let’s go back to all this stuff. You have Marjorie Taylor Greene talking about the real issues that’s affecting America and these real issues are things about using some money, moving it out to pay for tax cuts and stuff like that. And then we’re hurting on services. We have an inflation problem that’s not going away. We have a looming problem with all these expenses being higher besides the work you and I do to work out retirement plan, what about social security?
Steve:
Yeah,
Dave:
Right.
Steve:
I mean that was a topic at the seminar we did a couple nights ago. People were saying, Hey, what’s going to happen to social security? They’re not fixing it,
Dave:
But with all of these things going on, all these things that we can’t control, a lot of people like to complain. I’m not trying not to complain. I’m not really complain. I can’t control a lot of the things I just said. What could you control? In all the work we do, the notion that the big beautiful bill came by and a lot of people are saying, yeah, I don’t know if I need to do Roth conversions anymore. You know what? Taxes seemingly are never going to go up. And I was thinking to myself, what if it makes sense? In other respects, sometimes it doesn’t make sense to do Roth conversions, but if it makes sense, you probably should do these Roth conversions because it looks like we’re going to have to pay for all this stuff somewhere down the line to make America hell, it’s a new hat. Make America be able to live again, that’s a very long mabiala, whatever that is, it’s not as sketchy. So that whole thing led to I become bullish on Roth conversions for those who should be doing it.
Steve:
Okay.
Dave:
Told you this was somewhere,
Steve:
I like how you landed the plane on that one. You brought it in there.
Dave:
Oh, that was a Sully Sullivan.
Steve:
Yeah, that was good. You landed in the Hudson on that one. That was nice. Yeah, but I think your point, without knowing your story in advance, I think your point is a good one. I mean that was the immediate reaction from a lot of people was, oh, we had always talked about this kind of base case idea that taxes would go up in the future, and that was sort of out there maybe sometime, but more concrete idea had been the Trump tax cuts from 2017 were set to expire at the end of this year, and most people’s tax rates, federal tax rates were going up three to 4% and the big beautiful bill got rid of that three to 4% increase was off the table. So we definitely had people say, do I really still want to do these Roth conversions? And yeah, I think it takes some of the immediate need away, but longer term, I’m totally on board with what you’re saying.
I mean, there is going to come a time some point in the future when we are forced because we’re not going to do it voluntarily. We’re not going to do it because we think, oh yeah, this would be a great thing. Let’s go ahead, pay more in taxes. We are going to be forced at some point, either by bond holders, by creditors, whatever, to have to raise taxes to pay for everything. And the only way to really combat that or prepare for that is by doing those Roth conversions. So I am long term, if you’re defining that as 10 plus years long-term bullish on Roth conversions.
Dave:
Yes, that was the whole point of that.
Steve:
Good. I like that. Let me touch on just a couple of, I mean these are just random odd lot type of things. You ever sort of, as an aside, do you ever listen to that podcast, the Odd Lots podcast?
Dave:
I have not. I listened to Commander Podcasts now, so I know everything about my beloved middling team.
Steve:
I’m trying to think the names of the people. Joe and Tracy can’t remember their last names, but it’s a really good podcast, a Bloomberg one. I mean some of them are way in the weeds, but odd lots podcast. Interesting. No, I’m not going down that much of a rabbit hole. But there were a couple of odd lots that I had written down here that I wanted to talk about, and these are just things that come up when we’re in meetings, things that I think people are hearing out there in the media. And one of these things we’ve touched on some of these before is just this idea that valuations, and let me back up for a second and just explain. If you don’t know, when people talk about valuations, what the heck do they mean? All we mean when we say valuations is what is the price of the stock relative to the earnings per share?
So if your earnings per share are $1 and your stock is trading at $20, that is a 20 price to earnings or PE ratio. And the PE ratio in the market right now is a little bit elevated. So I think the market as a whole, I think it’s around 22, 23, something like that. Historically the market’s traded a little bit closer to 18 or 19. So you can definitely look at that and some classical investors, investors are going to look at that and say, that’s overpriced, right? I mean that’s pretty simple math right there. What the PE ratio doesn’t take into account is growth. So if earnings are going to grow by 30% next year, well then maybe that valuation is justified,
Dave:
Right? Well, AI is going to make this that equation. So this is my analysis. I’m not one of these experts, but to me it’s not that high considering the AI factor that’s baked in there. Just like you said, growth is going, we’re really, that growth factor is really baked in when you think about how these things are trading with ai.
Steve:
Well, and let me just give you some numbers to put this in some perspective, and I’m saying growth is a factor in there, the discount rate. So interest rates should also be a factor because the higher interest rates are the less future earnings are worth. But just to give you some perspective, we talk about the magnificent seven, the big seven stocks in the market that are kind of dominating everything right now. Those stocks have a PE ratio of 27, so it’s even a little pricier than the market in general. If you go back to the tech bubble in the early two thousands, and you look at the big seven stocks from then, they had a PE ratio of 50 two’s way, way higher there. Wow. If you go back to the Japanese financial bubble, 1989, by many people considered to be the biggest bubble in history valuation there was 67.
Dave:
Wow. Okay.
Steve:
Going back a little further, one more data point here. The nifty 50, this is back in the 1970s, Dave, were you in high school there? You’re in middle school maybe.
Dave:
Depends what year. In 1970s,
Steve:
The nifty 50, the largest seven stocks had a valuation of 34. So those were all things that did come crashing down that were overvalued but much more overvalued than we are now. And the second part of this is valuations can be wrong for a very long time. So you can go back and look at these valuations and see them elevated for years before anything happens. So valuation is not a good mechanism for timing the market valuations can be wrong for several years and then they could correct or not, or they could grow into those valuations.
Dave:
Yeah, this just makes me think about, and we always say, I don’t want to fall into the same trap that other people say. It’s like, wow, now is so much of an argument for, it’s different than before. It’s never different than before, but now is factors that are very, very unpredictable that are going to tug on the emotions or the media tugging on me. Remember, media people have to make money. They make money by you looking at their stuff.
Steve:
Yeah, exactly.
Dave:
And then somehow they’re brilliant at reading your mind and showing you things you like to see. They are great at that. Just ask every 32nd golf video. I see. And then classics all of a sudden today, led Zeppelin, Robert Plant and Jimmy Page doing an acoustic thing of Stairway to Heaven. How did they know? I was really interested in that. It’s scary.
Steve:
Well, what’s scary now is I’m probably going to see those things. My phone is listening and all of a sudden I’m like, what are all these Led Zeppelin videos? I don’t get it right.
Dave:
But within all that stuff, the notion that everybody’s writing about an AI bubble and then you have one day where the market goes down a lot, it’s very much an emotional play to start messing with any kind of strategy that you’re doing. Not only the long-term strategies
Steve:
That
Dave:
You and I employ, but even for people who have short-term strategies.
Steve:
Oh, totally.
Dave:
Because we’re talking about just things set up for a knee jerk reaction and you just can’t do it. But I think you’re what you just talked about with these PEs, and I’m not surprised with what you said, mainly because I know that some of these AI companies, they’re earning money. It’s not like whoever, c Everett coop’s pet.com thing back in that earned zero and was trading at a hundred something dollars a share at one point NVIDIA’s, not c everett coop’s pet.com.
Steve:
That’s an excellent point. I mean, these companies are, they’re making tons of money and they are growing very quickly now. I mean, is there a risk there that all of this excitement and expectation around AI takes? I mean, is there a risk that it doesn’t pan out at all? I don’t think that’ll be the case. I think there will be something there, but I think it certainly could take four or five years instead of a year or two. And the example that I use is I bought a Tesla in 2019, and when I bought it in June of 2019, I specifically remember it talking about later this year, your car will be able to navigate city streets and drive you coast to coast with no human intervention. Okay, we are now here in 2025. Could it drive me to the mall?
Dave:
Yeah, probably. Unless your car is a Waymo cab in San Francisco that you don’t own, then I think the answer is no right now.
Steve:
No. It makes a lot of mistakes. No. Is it better than it was? Yeah, it’s better, but it’s not driving me coast to coast,
Dave:
Coast to coast.
Steve:
No, I’m, I’m not lying down in the backseat taking a nap while it’s driving. That’s the dream. So I think some of these things, some of this ai, yeah, it’ll get better and better. There will be improvements, but maybe it takes a little longer and some of the valuations do get stretched. Okay, that could certainly happen there. One last point I had written down, Dave, and we’ve talked about this before and I’m sure a lot of our clients have heard this, but I think it bears repeating because I got this question from a good friend of mine who’s an advisor, and he said he had a client come in and he said, just curious, take how you handle this. He had a client come in that wanted to take a big position in gold and this client, he had his reasons why he thought gold was going to be great.
And by the way, if you haven’t been paying attention, gold was up, I think 25% last year and has been up about 50 some percent this year. So gold is on an absolute tear right now doing very, very well. So my friend said, this client wants to take a big position in gold. What is your response to this? And I told them what I always tell people when they ask about including gold, I don’t have any problem with gold in and of itself. I don’t have any problem including that in a portfolio. The reason why we don’t include it as part of our base allocation is because gold is an incredibly volatile asset. And I think a lot of people think of it and they think of it as a conservative asset. And I say that I think it’s because of the way that it’s marketed and the commercials that maybe you’ll see on Fox News or targeted towards older people where they say, oh, own gold, it’s this safety, security, blah, blah, blah.
And intellectually that makes sense. But when you actually look at the numbers, oh my gosh, gold will fluctuate all over the place. And I would apply this same concept to something like Bitcoin, and I own some of that. I think of it like digital gold, but it is not a conservative asset. It is a super, super aggressive asset. So if we apply that lens to it that it’s not conservative, it’s aggressive, but it could provide us with some diversification, then let’s treat it like an individual stock. And what I mean by that is with an individual stock, we don’t want that to make up more than 5% of our portfolio. We don’t ever want to say, okay, I’ve got one stock and it makes up 20% of my portfolio. No, that’s bad risk management right there because obviously what can happen, well one stock can get wiped out or go down significantly. So if we treat it like that and we say, okay, it’s going to make up 5% of our portfolio. If it goes on more of a run, we’ll be sure to rebalance and pair that back. Then I don’t have a problem including whether it’s Bitcoin or Gold
Dave:
Or if it’s just a long-term play because it’s not. I mean, this is sounding like the classic, my friend who I mentioned on this podcast, not by name, not a client, because I don’t want friends to be clients who are, but anyway, but the bottom line is, yeah, he loves his advisor because what, from the stories he tells me, he tells his advisor what to do all the time. So he’s his own advisor basically. And is this a long-term play or is this just the classic buy high, sell low, which last time I checked is the opposite of what you’re supposed to be doing?
Steve:
I mean, if we even step back from the idea of including or not including gold in a portfolio, the fact that gold is up, I don’t know, round numbers here, 70, 80% in the last two years, and yeah, it would make me a little more hesitant to add to that. I’m not saying it’s going down tomorrow, but things don’t just go straight up. At some point there’s going to be a balance of supply and demand and could go down or be flat or whatever. So I strategically probably wouldn’t be too aggressive at adding to that. Alright, Dave. Well I think for a podcast where we didn’t have anything to say,
Dave:
Well we did, we
Steve:
Said an
Dave:
Awful lot. We had Hazy, we had a Hazy Dream by me and tidbits by you, and we’re still able to do really probably a pretty long podcast.
Steve:
I
Dave:
Think we
Steve:
Copied it together well.
Dave:
We may have to send this one to the potties, the National Podcast Awards that I just made up. Now
Steve:
This feels to me like when you don’t have any plans for dinner and you look in the fridge, you manage to piece together some things and comes into a pretty good dinner, you’re happy. Alright, thanks for joining us. We will check in again with you real soon.