Steve and Dave cover a variety of topics including the dangers of market timing, some surprising tips on “TIPS” (and Gold, but that didn’t sound clever), and a negative spin on the advancement of Alzheimer’s testing. Along the way, you’ll be introduced to the “When They Say It’s Dead It’s Very Much Alive Fund”. It will all make sense when you listen to episode 96 of Plan For Life Now
Steve ( 01:01): All right. Welcome to Plan for Life now, episode number 96. Dave, how are you doing Ready for Thanksgiving? Dave ( 01:11): I am, I am totally ready for Thanksgiving. The question is, is my wife ready for Thanksgiving? I was. We’re having it at our house. We’re having it at our house, so we’re having family. And you know, when you’re the host of Thanksgiving, let’s face it, it’s probably, I don’t know, is it better to be the host? So you have the home field advantage and you don’t have to drive anywhere, right? But you do to it. You have to clean up, you have to do all that stuff, Steve ( 01:40): Right? I agree. I don’t know what’s better if you wanna have that, that home field advantage and, and have everybody come to your house. But it is a pain to have to prepare everything. And I mean, not that I prepare anything, but you still gotta get, uh, the house cleaned up, the extra chairs out, all that stuff. Dave ( 02:00): Okay. I’m actually gonna now say, I think I’d rather have it at my house, cuz if you’re just coming for a day, we have some family staying. Some, some are coming for just the, the meal. And I don’t get the wrong impression here, but it’s nice to be able to have a drink or two because you’re not driving. That may be, especially when you talk about you’re with family. That may be the deciding factor right there, Steve ( 02:23): <laugh>. Yeah, well I will be traveling a little bit over to my sisters about an hour away, so I won’t have that home field advantage, but That’s okay. It’ll, it’ll be fun having most of the family together there. Good. Um, alright, well hope everybody has that happy and safe Thanksgiving. We, we’ll certainly hope you’ll be listening to this before Thanksgiving, but let’s, let’s give a quick update, Dave, on where we stand in the right now and then we, we sort of this hodgepodge of to go through today. So nothing big to cover, but just a whole bunch of little things that I think are interesting. So, you know, the stock market as we sit here today on November the 17th stock market, uh, US s and p 500, still down about 17% on the year, year now 17% obviously that hurts, but it’s a lot better than we were, you know, as of October the 12th we were down over 26%. So we have seen a nice rally there in US stocks up, you know, nine and a half percent or so. And interestingly enough, we’ve seen international stocks. I actually did not realize this Dave until I just ran these numbers five minutes ago. International stocks over the last month have been up over 16%. Dave ( 03:49): Wow. Steve ( 03:50): So we, we’ve seen really strong performance from international kind of close that gap for the whole year there. And then, you know, like we’ve talked about before, um, <laugh>, what I think is actually, you know, I’ve been saying this in a lot of our meetings is that, you know, yeah, the stock market being down gets, uh, most of the headlines and it’s, it’s painful, it hurts, but it is sort of in line with other recession based, uh, declines that we’ve seen. You know, it’s, it’s not sort of outta the ordinary. Wow, this is so much worse than before. But what is so much worse than before is the bond market. And I just pulled this up here as I was talking, bond market is down 15% year to date. Um, that is the, the Bloomberg aggregate index there. And you know, if you’ve done a meeting with us recently, we’ve used this chart where we put that in perspective and say the worst year for the aggregate bond market was a loss of 2.9% back in 1994. And they call that year the bond market massacre. And I’m still waiting for someone, maybe you can come up with this, Dave. I’m waiting for someone to come up with a catchy name for this year’s bond market. Dave ( 05:12): Well, if that was a massacre Yeah, this would be a nuclear destruction Steve ( 05:19): <laugh>. Yeah, right. It’s gotta be something on that order there. Because Dave ( 05:25): Previous this would be, this, this would be the bond market equivalent of the 1929 stock market crash. Steve ( 05:32): Uh, yeah, I mean in terms of, in terms of a decline. Now they’ve only been tracking the, the, the Bloomberg aggregate since the seventies. Um, but you know, like I said, worse before was negative 2.9%, still six weeks to go in the year. But right now wow, it looks like it’s gonna be considerably worse. Dave ( 05:54): Right. But, and also putting into perspective the, the, the bond market as far as it being down does not get the national publicity no <laugh> that the stock market gets. As a matter of fact, there are many bond holders who would say, uh, my bonds are down <laugh>. Okay. I didn’t know they were down that much because it just doesn’t get the, the publicity. Steve ( 06:16): Yeah. But you know, when you put it all together, and you know, this is something we’ve talked about many times on this show is that, you know, this is one of the worst years for a 60 40 portfolio. Um, you know, i, I don’t have data that’s up to date to the day, but I think this is, as of the end of last month, a 60 40 portfolio was down, uh, about 16%. And I think at its worst it was down more like 18 or 19%. Um, so <laugh> no, you’re right. People probably don’t notice that their bonds are down. But if you start to look at those 60 40 returns and you say, gosh, I’m down 16, 17%, you know, how did that happen? Well, bonds just haven’t provided that, that ballast that, you know, safe return that you’re used to. Dave ( 07:09): Right. But, and then we’ll leave this, but I do wanna continue, I’m just gonna continue to harp on the market timers. So I’m going back to my story of the friend whose advisor took him out at when the s and p was around 20, uh, 3,600. And it’s not like the s and p is skyrocketed since then to 4,600, but it is up around, around the time, last time I looked today somewhere in the 3,900 range. And that is, again, do the math. That’s whatever that percentage is that has been missed. And now when do you go back in, when you pulled out? Will it go back down? Will it continue to go up? The bottom line is, it’s looking like, again, forget about the theories. There’s so many things you read. There’s so many theories. In this particular case it was the 10 signs that were in a recession and you should pull your money outta the stock market. But, you know, there’s a million different theories. The bottom line is market timing. For someone listening to this show by a firm called Capital Retirement Strategies, <laugh>, where we worry about retirement and long term money that is a loser. And I’ll continue to call it out, even though if you listen to a bunch of episodes, cause you you’re catching up on the last four or five. This is repetitive. Steve ( 08:33): Yeah. Dave ( 08:33): You can’t forget it. And you can’t let that like go by as time moves on. Steve ( 08:39): I think it bears repeating. Cause um, you’re right. I mean, it, it’s just not a long term reliable strategy. And believe me, I, you know, once again, I’ve said this before, I I wish it were, I wish I could sit there and look people in the eye and tell ’em, I feel like we’ve got a consistent way to get in and outta the market. It’s gonna make people feel much better when the market’s down. Um, you know, we, we do as human beings have this bias towards action. So we want to take action. It feels good to have somebody tell you, Mark’s down, we’re gonna get out, we’re gonna get back in when XYZ indicator tells us to. Um, just unfortunately doesn’t work. And you know, even if it’s maybe worked once or twice for somebody, um, it it’s not a good long term strategy. Dave ( 09:32): You don’t, the only thing that should make you can make you feel good, the only emotional thing that you need to rely on is, you know what, it’s down right now. There are very good investments. They’re look at the history of, and in time it’ll be back. We don’t know when. But you don’t need to touch that now and you don’t need to live on it now. And we plan for this already. That’s the only emotional thing that, that you should be relying on. Steve ( 09:59): Yep. Well, and, and I mean this really goes right along with one of the bullet points that I had written down to talk about here, um, which is, you know, we’re talking here on the 17th. So Thursday the 17th, I think it was one week ago today, Dave, when we got that lower inflation print, um, that came out where inflation came out and they said, I think it was an annualized 7.7% and the Dow was up about 1200 points in one day. Right. You know, it was one of, I think it was the biggest rally since 2020. And then I think Friday followed up. It was up a, you know, another 500 point something like that, um, on Friday. So, you know, this is really that, that question of, you know, is inflation over and, you know, one of the stock market Hall of Fame people, you know, if I had to create a Hall of Fame out there, um, I think Jeremy Siegel would have to go in it. ( 11:00): You know, he’s a Wharton business professor. I think he’s a, an emeritus now, but you know, long, uh, stocks for the long run’s, kind of his famous book that he wrote. And he actually came out, uh, a day or two before that big inflation fueled rally and said that he thought inflation was over and that we would see a possible year-end rally. And man, he <laugh> he looked pretty smart a couple days after that. Um, because, you know, as soon as, as soon as that print came in where inflation was a little bit lower, stocks just took off. Um, but my m my point to all of this is that happened so fast. You know, Wednesday night stocks were down, eh, it was just kind of more muddling along there and boom, you know, next two days stocks just ripped there. If your, your friend sitting on the sidelines there waiting for things to get better, I mean, you could very easily miss out on 10% just in the blink of an eye. You know, it boom, you’re gone. And if you missed out on those big days like that, that really hurts your chances of good long-term rates of return. ( 12:14): It’s Dave ( 12:15): Such short term in the grand scheme of things, way of thinking like, you know, the year to date over inflation in October seven point something. Se what about October, 2023 from today’s inflation to a year from now? Right. Well, talking about inflation a year from now maybe, but certainly not. So again, I I, if I’m playing the stock market, are you playing the stock market or are you using the market as part of a retirement strategy? Steve ( 12:50): Right, that’s a good point. Cause <laugh>, unfortunately, a lot of us, you know, believe me, I fall into this too, a lot of us follow the market as if we’re playing the market, you know, as if I need to be looking at, you know, these tickers every single second and oh my gosh, I’m trading in or out, so I need to do that. No, I really don’t. But sometimes, you know, even I need somebody like you Dave, to, to help pull me back from that and, and look at that. Um, next thing I had written down here, JP Morgan came out and um, you know, this is something that’s interesting in the fact that it runs counterintuitive to the way some people think. Um, but the fact that the stock market has come down and that bond yields have gone up so much. JP Morgan came out and said, well, we see the best returns for 60 40 portfolios going forward, that traditional 60% stock, 40% bond. ( 13:53): We see the best projected returns for that that we’ve seen in a long, long time. And you know, if you step back from everything that’s going on and you think about it, okay, well the stock market being lower tends to mean there’s more opportunity for growth. You know, when it’s down 20%. Not saying it can’t go down another 20%, but the chances are lower that it goes down another 20% than when it’s at a high. And on the bond side of things, you know, we’re coming from bond yields being at 2% to now four 5%. So that 60 40 portfolio that so many people were so eager to declare dead, now they’re projecting their return went, I don’t even know if I said this. I just kinda got carried away with talking about it. Um, the projected return last year, they had projected 4.3%. Now they’re projecting 7.2% over the next decade for, for 60 40 portfolio. Um, Dave ( 14:58): Well again, a lot of this just goes back to buying low, selling high. You’re, you’re, you’re naturally starting from a starting point now of pretty low, especially on that side. Uh, and then certainly also on the stock side. So that totally makes sense. But you know, our theory, which we, this is not something that we’re telling you to do, nor is it copyrighted theory, but when you read something that something is dead <laugh>, whatever investment that is, whether it’s uh, a 64, 60 40 portfolio or international stocks or whatever, youre is dead. What was the Oh, uh, Steve ( 15:38): Value investing. Dave ( 15:39): Value investing is dead. Steve ( 15:41): That’s been declared dead. In fact, I just saw when I was looking stuff up for this, it was a December of 2019 article, I think it was. Bloomberg Business Week is inflation dead. Right? And it only took a couple years for that to come back. And then of course there’s the classic 1982 equities are dead or the death of equities. Dave ( 16:02): So basically if your investment strategy has been, if the, if the pundits media, financial pundits say it’s dead, it’s very much alive, <laugh> and followed, you are probably doing incredibly well. I have just thought of a fund, Steve, you put a fund together, it’s, they said it was dead fund, but we think it’s, and you together a whole fund based on that. And you see how you did. Steve ( 16:32): If we can come up with some good metrics and ways to track that, I think we could make a killing mark. Dave ( 16:38): We’ll be on nbc. Yeah, Dave and Steve came up with, they said it was dead fund, but it’s very much alive and that’s doing very well. But how well the very much dead fund that they say is alive is dead. Steve ( 16:51): But here’s Dave ( 16:52): When that occurs, then, you know, the very much debt fund that they set alive is alive. But if people jump on our fund too much, it may in fact be debt. Steve ( 17:02): I was gonna say that, you know, all of those things, all of those trends and statistics work until they don’t, you know, that’s gonna be one of those things. We introduce a fund that, that that might, how do we say it? It it might be dead fund or whatever you called it. That’s gonna change the whole dynamic in the market and everybody will invest in that. So, um, well, <laugh>, speaking of things that might be dead here was the next bullet point that I, I had written down here. Um, and, and I wanna go into the weeds just a little bit and describe the difference between IBOs and tips, right? IBOs were those things that we’ve been talking about and a lot of people have been talking about for months now where you buy ’em directly from the treasury, you can’t buy ’em on your own own. ( 17:49): And for a while they were paying a six month rate of 9.62%. I think the, the rate has come down to 6.89%, but it’s basically a, a bond, you know, from the government that’s linked to inflation there. Um, the big downside of it is that as an individual you can only put in $10,000, you know, per person. Um, you know, those are still a nice option, but it, you know, it’s relatively limiting when you can only put in 10,000. Um, the interesting thing to me is tips. Now tips are treasury, inflation, protected securities, um, <laugh>, if we had to guess a year ago, what’s gonna do really well if inflation picks up? I, I think most people would’ve said, Hey, tips are going to do very, very well. Um, because they’re just like IBOs, they’re linked to the inflation rate there, right? Um, tips have lost just a little bit less than the 10 year treasury has lost this year. So tips have not held up particularly well. Dave ( 18:57): Why is that? Steve ( 18:59): Why is that? Um, because with tips it all, you know, with IBOs it’s very straightforward. Here’s the interest rates you get, inflation came down, you get a lower rate, it went up, you got a higher rate with tips the price of the bond cuz these things are traded and bought by mutual funds and big pensions and things like that. The price of the bond is all dictated by expectations for inflation. And when you have expectations very, very high that it basically means inflation’s gotta come in even higher than that to get any sort of rate of return on those. Um, so, you know, I just thought that was interesting that you, you have something that sounds like it’d be great to protect against inflation. Um, you know, but it really hasn’t. And, and I would say for different reasons that has also happened to gold this year. You know, gold has been historically something where people have said, oh, this is the best hedge against inflation. You wanna own gold, blah blah, blah. Um, gold hasn’t done terribly this year, but it’s down four and a half percent or so, you know, this year. Dave ( 20:11): Yeah. But the people who are the big gold enthusiasts, you would think gold would be doing great based on the reason pre this whole inflation thing, you would get gold, Steve ( 20:22): Right. And <laugh> Well, I mean we could talk about, you know, cryptocurrencies and, and all of that. People have said, oh yeah, it’s the new digital gold. There’s been a whole lot of other things going on, but certainly inflation has not treated Bitcoin well. Um, I mean, I I think there’s more going on than just that, but, uh, you know, bitcoin’s probably down 70% this year, you know, know so has not proved to be a good inflation hedge. Um, Dave, before I, I shift gears to talk about the long term care stuff you wanted to talk about. Have you followed or or tracked any of the, uh, the, the crypto stuff that’s been going on over the last week or two? Dave ( 21:05): I, because I never really understood. I have, I’ve noticed there’s some guy with a beard who is in the news and he had, he ran something and apparently it ain’t going so good. Steve ( 21:17): <laugh>. Yeah, I mean, I don’t wanna go too far down the rabbit hole, but I I do actually find it fascinating. Um, and he doesn’t have a beard. He has an Dave ( 21:26): Apple. Oh, that’s right. A shaggy. You know what he has, he has hair like I had about <laugh> 40 years ago. Steve ( 21:34): <laugh>. Yes. I I think Dave ( 21:35): You’re right. It’s not beard, it’s Dave’s hair circa 1980, Steve ( 21:40): Right? So this is Sam Bankman freed that we’re talking about. Um, and you know, if you didn’t follow it or you don’t really care that much, basically he ran ftx, which was one of the biggest cryptocurrency exchanges in the world out there. And, uh, you know, I wasn’t even really aware of this guy. I’m not deep into the crypto world, but I wasn’t really even aware of him until this past summer. And what happened this past summer is, you know, the crypto industry is filled with, you know, maybe it’s the wave of the future, I really don’t know, but it’s filled with some sort of unsavory characters, you know, at, at the start of any technology, you’re gonna have people just trying to take advantage. And so there were a couple of big funds that went down this past summer, but Sam Bankman free came in and bailed them out. ( 22:30): And all this fall, there were all these glowing articles about how brilliant he was. You know, he was, it’s not my term, he was the crypto Jesus, you know, that <laugh>, he was just so brilliant. He’s, you know, he, he knows all this stuff. He’s gonna be the savior of the industry, blah, blah, blah. Long story short, uh, he really just had no clue what he was doing, the risk that he was taking it, it even appears maybe they were taking some customer funds to plug holes. This is all alleged, you know, who really knows. Um, but it just kind of goes to reinforce what we’ve always said about crypto is it might be the wave of the future, but I wouldn’t put money in there unless you can afford to lose it. You know, I, I wouldn’t put money in there where you’re counting on this to retire off of. Um, I’d put money in there saying, okay, I’m gonna speculate on this and if I, if I make a lot Right. But if I lose a lot, you know, it’s, it’s not gonna be the end of Dave ( 23:33): Me. Yeah. And I, I always looked at it more analogous to the uh, dot com bubble around 1999, 2000, all these coming out, the internet was just starting and at the time it was just too early <laugh> and there was no way to make money on these things that was legit and it all blew up and crashed. But look what happened, you know, really starting, uh, uh, over a decade later Yep. And to where we are now. And I I, it’s possible certainly the crypto is in that mode right now where we could look a decade from now in the 2030 range or 2030s sometime and say, okay, you know, they got their act together for a bunch of different reasons. It is now a mainstream kind of thing. That’s how I’ve always looked at it personally. Steve ( 24:28): No, I think that’s a a, a good take. I mean, it’s gonna take several of these probably to wash out a lot of the bad players and have, you know, have some regulation come in and actually, you know, set some rules for these companies. Um, I I just, I’ve just found it fascinating cuz this guy, I mean he just has to be ignoring the advice of his lawyers because he keeps, and this is now a week since they’ve filed for bankruptcy, he keeps tweeting about it, just talking about, well I tried to do this and this didn’t work and then I tried to do this. I imagine his lawyers have to be screaming at him to stop doing that. But anyway, makes for good drama. Um, Dave, what was the stuff you wanted to talk about with Long? Dave ( 25:13): Yeah, just briefly. It’s, uh, I was reading an article today in the, it was pretty big article in the post about, uh, they’ve come up with a, as time has gone on, especially since, since say five years ago, which isn’t that long, they’ve come up with much better testing for Alzheimer’s to see if you’re, you might have Alzheimer’s, you might be getting Alzheimer’s, and now more recently a blood test to see if you have a really, really good chance of having Alzheimer’s. You know, and while all of that is good for medical science, it’s good to know these things. It’s especially early on in Alzheimer’s or dementia. Hey, I didn’t, do I have this or not. And then you could find out from a blood test that you do. Steve ( 25:59): So does this work that, you know, somebody like me is 43, I could take this and it would gimme a a tell me or is it Dave ( 26:07): Nah, it’s more like you’re older, you’re more like mine and Steve ( 26:11): You’re, you’re trying to be diagnosed with it or not. You know Dave ( 26:13): What? I dunno if I have it or not. I have a family history of it. I can take a blood test and, and more and more as time is going on and this, you know, medical science when it comes to this exponentially moves fast. Yeah. You know, you’ll be able to take a blood test probably and see if you’re, you’re have the Alzheimer’s gene or you’re gonna have it. And certainly if you’re at the very, very beginning stages, you’ll probably be able to take a blood test and then Oh yeah. You’re, you’ve got this For sure. So it, this is interesting and, and beneficial when it comes to the future of Alzheimer’s. Mm-hmm. <affirmative>, um, especially the care for Alzheimer’s. It is horrific if you’re buying long term care insurance. Steve ( 26:54): I was gonna say how long till the companies start to incorporate this into under Dave ( 26:58): Not long. So already, let’s start with this already. A long-term care insurance company is asking if your parents have Alzheimer’s. Right? Has your mother or father ever been diagnosed with Alzheimer’s or dementia? Many times you can answer that question. No, because while they’re, you know, they might be forgetful, they’ve never been diagnosed with it and you don’t even know if they haven’t or not. Right? So what happens when they’ve now taken a test and they’ve been diagnosed with dementia or even diagnosed with the genes that could lead to dementia Alzheimer. Now you gotta answer yes to that. Now you’re going to get dinged on the price of your long-term care insurance or not get it at all. If two parents, if you both your mother and father, there are a lot of companies, if your mother and father both have dementia in Alzheimer’s, you can be a hundred percent fine. ( 27:47): They will not give you long-term care insurance. You’re uninsurable. Now take it back to the next stage is you, Hey, I took this test, it appears I have, I’m fine. It appears I have the gene cuz I just wanted to be sure cuz one of my parents had Alzheimer’s or dementia. I just wanted to take this test. I have the gene that could lead to Alzheimer’s. Do you think an insurance company is gonna see that and say, Hey, here’s a policy for you. No <laugh>. No you’re uninsurable forever. Yeah. Yeah, but I don’t have it. Yeah, you don’t understand insurance <laugh>. So, so especially long term care insurance. So the reason I bring that up is why whenever we talk about long term care insurance, the time to get it is when you’re healthy enough to get it. And even taking into account things like what I’m talking about as medical science gets better and better at seeing things you might have, this gets worse and worse for getting insurance. And when it comes to anything related to the cognitive function of your brain, the more they find out before you get the insurance, the less chance you have of getting it or getting it at an affordable price. So this is what we always say to everybody about long-term care insurance and when it comes to this radio show, radio show. Hey, wait a second. Wait a sec. Dave <laugh>, have you been test Steve ( 29:11): Taken that test there Dave Dave ( 29:13): <laugh> when it comes to this, most of you already have long-term care insurance just by the nature of being a client or the nature of being so involved financially that you’re, you’ve taken protective action men. Some of you don’t have long-term care insurance. I would, if you don’t have it and you’ve been thinking about it, I would, uh, contact us or somebody you trust to look into it. I would recommend me, but also I would. But also, um, if you know people who are looking into it, it is, it is something and you have it, it doesn’t hurt to really push it on people that they should get it cuz they’ve heard different things. But until you really start dealing with it, um, you don’t know what’s going on, what’s going on, it is becoming more and more expensive. It’s still a good move and affordable for a lot of people, but they gotta find out first where they stand and more and more of this medical stuff that’s great for medical science and so great for getting the insurance. Once you get the insurance, remember now they can’t take it away from you. All these other advancements that come now you’ve been diagnosed with Alzheimer’s or dementia or even with the gene. Oh, well that’s why you got this stuff before that happened. Steve ( 30:25): Yep. Dave ( 30:26): So that was my point on that. Steve ( 30:28): No, that’s good and scary sort of <laugh>. All right, thanks for joining us. Have everybody have a good Thanksgiving and we’ll check in again soon.