The Pod starts with a recap of our office move from one part of the Kentlands to another location down the street. Moving is no fun, but this one was really easy!* From there, Steve and Dave discuss this incredible stock market run, and how things have changed, both technically and psychologically, since we opened the old office in 2010. If you like financial history mixed with Capitol Retirement Strategies history ( And who doesn’t?), you’ll love episode #129 of Plan For Life Now!
*Because Amy did all the work
Steve:
Welcome to Plan for Life Now, episode 129. Dave, I’m hoping that episode 129 does not have anything to do with 1929 because I was looking and seeing which episode we’re on and the title of the last episode was something about Party Like It’s 1929.
Dave:
Great.
Steve:
But
Dave:
We should have saved that whole discussion of the book review for this podcast.
Steve:
Well, yeah. But we don’t want it to be 1929.That’s hopefully not where we are right now.
Dave:
Yeah. Even though I mean, I am such a non-believer in these types of parallels. I really am. History almost always does not repeat itself exactly. No. But having said that, this summer has really been or the beginning of summer heading into summer has been so much like what the book 1999, the summer before the October fallout was.
Steve:
Are you talking about the book 1929?
Dave:
1929.
Steve:
Okay. You just said 1999, which was another- I’m
Dave:
Sorry. That was another one. Yeah. That was another one. But the stock market just kept going before the crash. The stock market was just going up and up and for no apparent reason except that it was going up. I don’t think there’s even … I wouldn’t equate it like that, but we do have a lot of bad news and the market going up.
Steve:
Yeah. Let’s get into that. That’s a lot of what I had written down that I wanted to dive into what’s going on right now. But before we do that, let’s just get it out of the way, talk about our office move. I know we mentioned this on the podcast last month or month before, but we did move offices. Those of you, we meet almost all of our clients on Zoom nowadays. So you will see a new office background if you’re watching seeing me on Zoom, but just look for that in our email address. It’ll say new address as of, what was it, May 18th. So be sure if you’re mailing anything, send it to the new address. But we are still in the Kentlands in Gaithersburg. So if you ever do come, it’s not much different than it was before.
Dave:
Yeah. I think my biggest takeaway from the move, considering I really don’t work from the office like you do. I work from right now. I’m in our Oceanview Delaware branch in the luxurious my wife’s painting room. Looks
Steve:
Like you’re in a locker room right now. I see some lockers
Dave:
Over your shoulder. It’s my wife’s painting room. Yeah, she has locker to keep her paints in. And so anyway, but my packing up for this thing, which for me was all the files I have. We keep the files because we’re …
Steve:
Well, that’s another thing. We are going to take them all digital eventually.
Dave:
Right, but they were real files.
Steve:
For now, yeah.
Dave:
So I’m packing file after file. It is amazing over the course of a career how many people you meet. A lot of those files were people I’ve met. A lot of them were long-term care insurance, others were the stuff we do. But the amount of people that you come across just by piles and piles and piles of files is very interesting. Had a little bit of a Mr. Holland’s Opus feel to it if you ever saw that movie because let’s face it. I’m 64. The next office move, if it’s the same thing, I’ll be in my 80s or pushing 80 and we’ll see about that. But yeah, it was nostalgic the move for me.
Steve:
Well, I mean, whether it’s an office move or a home move, it’s always … Yeah, you get a litle bit nostalgic about going through stuff and it brings up old memories. I found a lot of stuff from early in my career, 2002, 2003. Yeah, it’s also a good chance to get rid of a lot of stuff. There’s a lot of things that I’m like, wait, we still have this. We’ve had it for a decade and we haven’t touched it. Chuck it.
Dave:
Right. We had the poster from a US Open, it was in Congressional, 1999 that I went to. Did you go to that one too? I don’t know. Oh no, that was way before 1999. Yeah. But anyway, so we had that and it was framed. I’m not keeping it. There’s someplace. But didn’t we find someone who adopted that?
Steve:
Yeah. So you had put trash on it, so I took it out. I put it in the back of the building there and it couldn’t have been out there for more than 20 minutes and somebody adopted it, I assume.
Dave:
It’s a
Steve:
Cool
Dave:
Picture.
Steve:
It’s
Dave:
A cool picture framed. I mean, I’m not surprised. Yeah,
Steve:
It always makes me happy when you’re getting rid of something. It’s perfectly good. You just don’t want it and somebody else takes it.
Dave:
Amazing. When you put anything near a trash bin in public and it’s kind of cool, it disappears instantly. It’s like people just assume it’s for the taking.
Steve:
All right. So let’s transition from our office move to talking about the markets because we are at a really interesting point in time right now where the stock market, I think as of yesterday, S&P 500 was up 9.3% on the year, which is pretty incredible considering how just a month and a half ago it was down almost 9%. And we still as of today, I can’t keep up with what’s going on in the Middle East if the Strait of Hormuz is open or closed, if there’s negotiations with Iran, if there’s not negotiations, I don’t really know what’s going on and the stock market’s positive and doing quite well. And I’ve had a lot of people in our meetings just go, “I don’t get it. I don’t understand. How is it positive?” And the bottom line of it all is that the estimates for earnings for the S&P 500, earnings are estimated to grow by anywhere from 22 to 25% this year.
So when you’ve got earnings going up that much, the stock market will overlook a lot of uncertainty, a lot of other negative things and say, “You know what? If companies are going to earn more money, all right, we’re on board with that. We’ll pay up for that. ” So I mean, that’s kind of what’s going on in the current stocks. And then I’d be remiss if I wasn’t mentioning all of the potential IPOs that are coming up this year. IPOs are initial public offerings and on this show we do not endorse any individual stocks. Anything you hear is not investment advice, all of that, but it is a big story in the market that you’ve got SpaceX, which is Elon Musk’s mainly space company, but also sort of an AI company. He rolled in his other AI company XAI into there. And then you’ve potentially got open AI, which if you follow all of this drama-
Dave:
These are two huge IPOs.
Steve:
Oh, I mean, you’re talking trillion dollar plus IPOs, but if you follow all the drama, and I don’t blame you if you don’t, but OpenAI was a company that Elon Musk funded to start as a nonprofit because he was worried about other AI companies not sort of safely deploying AI. And then OpenAI turned into a for- profit company. Elon sued them, had some sort of lawsuit. He just lost that last week. So that kind of cleared the way for OpenAI to potentially go public.
Dave:
Right. He had no
Steve:
Case,
Dave:
By the way. I read the, before the trial started, I sort of read the facts about it. I was just interested and I think he signed something or I forgot, but they basically said he had no case, but I think he might’ve achieved his actual goal of embarrassing Sam Altman a little bit about how Sam Altman might’ve acted. But I read about that too. It’s like, okay, so somebody started out in the nonprofit mode and then decided to go profit and this is an actual problem compared to everything else going on. That to me seems not like this incredible crime, but whatever.
Steve:
And then let me throw in a third company that’ll probably go public later this year, Anthropic, that might not be a household name quite like OpenAI and ChatGPT. I don’t know if they’re household names, but if you’re into this stuff, you’ve heard of them, but Anthropic is the company that has their chatbot, it’s called Claude and they are exploding and a lot of these big companies are using this as part of their corporate infrastructure. And I believe, don’t quote me on this one, I think Anthropic was founded by a couple guys who left OpenAI because they were worried about the ethical deployment of blah, blah, blah. So there is beyond the existing companies and the earnings that are doing well, there is this buzz out there about all these IPOs. And I’ll tell you personally, this gives me pause and makes me say, “Ooh, gosh, are we going to take this too far?” And what I mean by that is just this overhype, this overexcitement, this overenthusiasm where everybody just kind of loses their mind for a period of time and just go, “Oh my gosh, this is fantastic.
We’ll pay any price you want for these companies.” And then in hindsight, we look back and we might say, “Okay, perfectly good companies, but did we really need to pay these outrageous prices?”
Now, I mean, we could look back in a decade and I could be dead wrong that they are great companies.
Dave:
Yeah, we could wax poetic all we want about it. The reality is you’re on the ride and you can’t really, or you could, it’s a bad idea to hedge the ride or get off the ride because you have no idea when the ride is going to end and then you end up costing yourself money. Absolutely. But it’s always an odd feeling because you know at some point the ride’s going to end. The other day I was doing my own just interest. I’m starting to get more interested in patterns that I’ll decide my own patterns. It’s not like I’m reading about someone else’s stock patterns, but I was like just looking at the S&P for, I don’t know, the last 20 years or so, we’ve been having these huge bull waves for two or three years and then we have a down and the downs haven’t been that down, but some have been 22, perfect example of one of the downs where maybe S&P was down for the year eight, 9%, something like that, everything was down followed by another couple, two or three years of these incredible runs.
And all that you’re required to do as far as investor is basically deal with your emotions through all this stuff. As a 64-year-old guy who I practice what I preach, I always tell every clients that they ask, I don’t look at my money, my personal money unless things are up.
When they’re up near all- time highs, they’re like, “I’m going to go look at my money because it feels good.” And you know what I do when they’re down? I don’t look at my money. Who needs to see something down? I know it’s down. What’s the point of seeing it? But it’s been a lot of looking at my money lately. And at the end of the day, I’m going to make an argument. I guess this is an argument for the 60 / 40 portfolio or that feeling. I’m making the argument because that’s what I have. It’s not what you have to have.
Steve:
No.
Dave:
I’m just telling you, I like the notion of if you’re good at rebalancing and timing of rebalancing, which doesn’t take, this isn’t like timing the market, but of a 60 / 40 portfolio and you’re rebalancing it in the right way, you are basically doing what you need to do to ride this last 20-year wave of big ups, down, big ups, a down, normal kind of pattern. You’re doing what you need to do. I would say the vast majority of our clients, this has been an incredible time period to secure a retirement that looked very difficult to secure 20 years ago, or I’d say more like 18 years ago.
Steve:
Right. I would go right back
Dave:
To 2020. 18 years ago, 17 years ago, 2010 when we moved into the initial capital retirement strategies
Steve:
That’s right.
Dave:
Good example of things were coming back, but then there’s always that fear.
Steve:
I mean, it looks so easy in hindsight, but you got to remember that all the way through 2013, the calls were out there that, “Oh, we’re not really out of the great recession, the financial crisis yet. There’s going to be a double dip. There’s going to be this hyperinflation.” I mean, you can say there’s always calls like that, but I mean, that drumbeat was really loud for those first couple of years. But I mean, your strategy and your approach is a really good one because I think that it minimizes the amount of regret that you have. You’re invested in stocks, you’re getting some growth, you’ve got money and bonds, that’s going to minimize that regret when the stock market is down, but you at least know you’re getting most of the growth when it’s up.
Dave:
Right. But it’s also started back to our clients, back to the bigger picture of we’ll call this, “Hey, this is a moment to reflect moving offices that we’ve been in the same office building anyway since 2010.” What’s happened since we’ve moved to that building? Was that 29 or whenever it was? We
Steve:
Moved initially- 2010.
Dave:
When we left the place we were at to start capital retirement strategies, that was 2010.
Steve:
March 4th, 2010.
Dave:
So what’s happened then, and I would put myself as a younger client if it was one of our clients younger, a litle on the younger side, how old was I then? Well, we didn’t have too many in their forties, but whatever, late forties. You have that period of time where the emotional part is difficult. You don’t know how much you’re going to have when you’re in your 60s, when you’re in your 50s, starting in 2010. And through diligent behavior, I say it’s always making the right moves because you can panic at any time. And there are plenty of opportunity, like you said, to panic as recently as April 2025.
Steve:
Tariff tantrum.
Dave:
But it makes sense to not panic. And then I think it’s everything else that we do all, by we, I’ll say the advisor community, which is taking advantage of all the little things, the weeds like tax situations and everything else that we’re supposed to do to get people and this is again, I feel good about this moving into the new office and we’ll say we’ll get new clients and keep our old clients. I feel like the group that had not retired yet, this is most of the people we were meeting in 2010 and now they are in the heart of their retirement are in a position to not only feel good, but to look at more like legacy of their money as opposed to just surviving, which was more of the feel when we started Capital Retirement Strategies in 2010.
Steve:
Totally. But that discussion about returns and the variability returns, that’s actually a really good lead in to the next thing I had that I wanted to talk about. So a lot of you have heard me talk over the years about different financial authors and writers that I like, respect, read, all of that. So one of the ones that I have read his blog religiously for probably a decade plus is Ben Carlson. Now he writes a little bit more targeted towards financial advisors versus just towards regular folks, but depending on how interesting you find this stuff. So he’s got a new book coming out. I can’t do my book report on it yet, Dave, because I haven’t listened to it as listeners to this podcast know I am an audiobook guy, love audiobooks. I discovered those probably a decade ago and I just find it much easier to listen than to read, but that-
Dave:
Well,
Steve:
You could do it
Dave:
While you’re doing things.
Steve:
Right. I could have
Dave:
To- Else is a voracious audiobook reader, my wife.
Steve:
Yeah, probably different topics. She probably does not. It is. Financial history or- It’s her book club
Dave:
Books. Whatever those book club books are, none of them were by Ben Carlson.
Steve:
Right. So anyway, Ben Carlson has a new book coming out called Risk and Reward. I’m very excited to listen to it, but also when I buy the audiobook, it apparently comes with a PDF of all the graphs and charts and whatnot and it’s apparently chalk full of them. So one of the charts, and I’ve seen this one before, but it always helps to see it again. And it talks about how you never … What do we talk about the long-term return in the stock market? We always say, “Oh, long-term returns around nine or 10%.” And I think most casual investors kind of have that number ingrained in their mind. “Yeah, probably get around 10% return. I know it won’t be that every year. “And he has this chart that shows that on average you very rarely get a return close to eight to 10%. In fact, depending on the metrics you use, it’s about 5% of the time that you’re getting a return in that range there.
Because most of the time what the stock market does is you get big gains, 20 plus percent gains, or you have losses, 15%, 20%, 25% losses. And yeah, over the long term, it averages out to 10%, but that’s a very different feeling. If we could all sign up for stocks and we got 10%, 10%, 10% every single year, that’s a lot easier. There’s no problem dealing with that. That’s great. The quote unquote problem, the reason we get paid that additional amount is you don’t get that every year. You got to ride out the ups and the downs and everything in between there.
Dave:
And also the reality is this reminds me, today’s podcast, first of all, the fact that we did not plan this at all and said we have nothing to talk about yet my comment led into your thing about Ken Carlson. That is, I should have just let people think that we actually planned this out because that would’ve sounded good. But yeah, there’s no guarantee of … This is one of those things where it sounds great, but the 1970s, the stock market basically sucked.
Steve:
Really sucked.
Dave:
2000 to 2010.
Steve:
Really sucked.
Dave:
Really sucked. None of this two years, two year high, one year low or three year. It wasn’t like that and there’s no guarantee it will be like that.
Steve:
That’s
Dave:
Always the challenge to all of this stuff. When I look at things a pattern, I always say it’s a historical pattern, but how we go forward, we never know. The only thing that we truly believe in is to not get over crazy hyped up when times are like now and certainly do not panic when the panic times come.
Steve:
Well, not that we planned your comment there and my last topic that I wanted to talk about, but it is a pretty good segue as well. Dave, have you ever heard of this portfolio? And I got asked this question recently and it was something I’d heard of but had to look up again. Have you ever heard of something called the permanent portfolio
Dave:
Because I’ve heard it but did not read it, but
Steve:
Go ahead.
Yeah. Well, I mean, same thing. I kind of heard of it. I’m not sure who came up with this. I don’t know. Somewhere in here I thought I read somebody who first coined it, but it’s a very simple portfolio. The idea is you put 25% of your money in stocks, 25% of your money in long-term bonds, 25% of your money in cash and 25% of your money in gold. And the numbers on it aren’t terrible. I mean, it has performed less than a 60 / 40 portfolio, but not maybe 20% less return, but it’s also had 20% less volatility.
And I’ve seen this before and people talk about, “Oh, this is great. You just set it and forget it. You don’t have to think about it. ” But I just think this would be a very hard portfolio for someone to hold as they watch stocks go up again and again and again and they only have 25% of their money in stocks and then they look at cash and they hold cash for 2008 through 2022 where it earned almost nothing. So you got to put up with that and then you’re in gold, which yeah, of course that feels great the last couple of years, but gold went nowhere for a long time. I feel like when you look at the numbers for something like this, the numbers look okay because yeah, a little bit less return, but it’s also less volatility. But I do feel like it all comes back to, can you hold a portfolio?
Can you stick with it? And if the answer is no, or if there’s even a possibility of no, then it’s not a good portfolio.
Dave:
Yeah. I think part of that is also, and that portfolio would lead to this in some years, sort of a not good comparison with your friends.
Steve:
Exactly.
Dave:
Oh,
Steve:
Exactly.
Dave:
“How come my friend made 17% last year, but I made four?” Why? “Oh, because you wanted the permanent portfolio.” That’s why. “What do you mean? One, who cares what I want? You’re the
Steve:
Advisor.” But that’s the problem is yeah, it might look okay over a 15-year back test, but you’ve got to go through five years of brutal underperformance where you’re like, “Oh, my buddy’s getting 17, I’m getting four.” Anyway, I had that just as one last thing to throw in there. It dovetailed nicely.
Dave:
Yep,
Steve:
That
Dave:
Worked also with our … Oh, you guys always pretend like you don’t plan the show. You must be working hours on prep.
Steve:
This is our third run through actually. We have a table read where we sit down and we do the table read and then we … No. All right. Thank you everyone for joining us and listening. Hope everybody, this is, what are we here? May 22nd. So hope everybody has a good start to the summer, good Memorial Day and we’ll check in again soon.