Intelligent Investing with Glenn Leest

Intelligent Investing 10.07.22 - Myth or Fact - Can the Stock Market Go to Zero? Gold or Stocks for long term growth? Offensive or Defense or both?

October 07, 2022 Season 1
Intelligent Investing with Glenn Leest
Intelligent Investing 10.07.22 - Myth or Fact - Can the Stock Market Go to Zero? Gold or Stocks for long term growth? Offensive or Defense or both?
Show Notes Transcript

Intelligent Investing  10.07.22 with Glenn Leest.

Myth or Fact:

  • Can the Stock Market Go to Zero? 
  • Gold or Stocks for long term growth? 
  • Offensive or Defense or both?
  • Life Insurance


Changes to our client investments:

  • Inverse ETF's
  • Commodities
  • Rotating from Growth to Value stocks
  • Increasing cash positions


Market direction for the next 12-18 Months

  • Mid-Term Elections
  • Inflation
  • Interest Rate
  • Global Conflict


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Glenn Leest
Senior Investment Advisor
WT Wealth Management
Office Phone: (928) 225-2474 Office
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...

Welcome to Intelligent Investing. It is Friday end of the week. Cody and I here burning the midnight oil recording one last episode before we take off for the week. So stay tuned. It's going to be a great episode. We're going to do a market recap and talk about just some, uh, business principles and ideas. Stay tuned.

 

Cody, what's going on, man? I'm doing well. How are you doing today? Good. It's Friday. Making. We're working a little late today. Hey, you know, it just, Why not? It's just so much going on during the day, we were busy and. Lots of phone calls. Lots of phone calls, um, interesting week in the market. Um, it's been, it's been a challenging environment for sure.

 

Uh, the, the market has just been just challenging for, for investors. It's, uh, everything is, seems like it's pretty much down at this point. There's not a whole lot of safety, uh, in the markets. Um, you know, bonds have struggled. Stocks have struggled. Real estate has been struggling too. And so, uh, what I want to cover today is just a quick market recap.

 

Some of the things that we've been talking about internally at the firm, uh, some of the things that we've been looking at, uh, doing to kind of hedge against these, these downturns. And then also we'll touch a little bit on some business leadership principles, which I think will be fun. So, uh, Cody, you were in your last semester at gcu.

 

How's it going? Ah, it's going well. You know, it's, Looking forward to getting it done and yeah, moving on to the real world. Yeah. Yeah. Cody's got his last semester. He's a finance major. He'll be with us full time. Uh, he is with us full time right now, but he's just got one last semester, um, at the, the college there at gcu.

 

Um, hey, quick question. So you're a finance major, and one thing that you had told me is that, You learned more in probably the first couple weeks of sitting down, listening to clients, listening to me being in the trade meetings than you learned in pretty much all your investing classes. Exactly. And really part of it is just they're going to teach you the basics, vocab, what this means, what this means, but they don't really prepare you for basing down with clients.

 

In real world situations, they don't really throw you into those situations. Yeah. At all. Yeah, yeah. Yeah. It's um, you know, I wonder how much of colleges like that, where they're just kind of setting the groundwork, if you will, a little, uh, and giving you kind of the basics, the principles, the vocabulary, but the real learning takes place on the job.

 

Uh, because it, that'd be really hard to train you perfectly for a job while in college, because depending on what you do in that field could be widely different. I mean, even in our industry. Being an investment advisor is much different than being a, uh, portfolio manager is much different than being an analyst.

 

And there's all sorts of things you can do within the finance realm. Uh, even you could go into taxes too. That's another realm that's completely different. So anyways, Cody's got one last semester. Um, this week we have been talked with a lot of people, you know, actually want to tell a story. Um, this is kind of an interesting, um, thing that I heard.

 

That, uh, we heard, I was having a conversation with someone about, uh, investing and they were really just nervous about investing. They didn't like investing. They, um, you know, were afraid that their money would lose. In fact, one of the things that they said is, Well, I don't want my investment to go to zero.

 

And, uh, that was. They're, they're concerned with, they're investing. Hey, I don't want things to go to zero. And I asked them, Well, what do you mean? I mean, of course we don't want your account to go to zero, but what do you mean zero? And the person replied, Well, wasn't there like in the seventies? Well, the stock market went to zero.

 

And I said, What? Uh, I don't, No, no. I mean, there's been years and times where the market's been down in a given year during a recession, but zero. Is zero really at play, which is something we've actually heard a few times, uh, clients say is they, they consider zero being at play, which means their, their account goes to zero.

 

Now, my, my follow up with that is what would need to happen in order for that to transpire? So, Caveat, if you invest in maybe one company, the possibility of your account going to zero is definitely there. Because there is a chance that that one company goes bankrupt. Especially depending on which company it is.

 

You know, those chances can either be more or less. So if you were investing all your money in Enron back in the day, Yeah. That company, even though it was a very large company, went bankrupt and the share prices just got obliterated. So, uh, that if you're only doing maybe. Stock. That's definitely in play.

 

Zero is a possibility. Now, if you're investing all your money in Apple with the chances of Apple going to zero and going bankrupt, I mean what? They have a hundred billion dollars in cash and they can cover themselves for over a decade. Yeah, for a decade they could probably not. Sell anything and be, be, uh, solvent.

 

But, you know, if you're investing in multiple companies, which is why we, we talked about diversification. If you properly diversify your co, your, your portfolio, what that means is you're going to buy at a minimum, 25 different companies. So let's think of that. Okay. Same snare. Okay. So you buy all your nest egg in just one company?

 

Well, yeah. There's a chance that that company go out of business depending on which one it is. For what happens if you had two companies you invested and you split it down the middle? 50 50? Okay. Now the chances are a lot less. Now you keep adding to that and the chances of all those businesses simultaneously going bankrupt is much lower, especially if you're buying good quality names, good quality companies that are integral to our daily way of life.

 

So, I'm having this conversation with the person saying, really, um, you think zero is a possibility? Why do you think that? Is that something you heard? Or you really just think the stock market's going to go zero and your account's going to be wiped down? They're like, Oh, yeah, yeah, yeah, I think that could happen.

 

I'm going, Well, that would have to mean every single one of the companies in the, say the s and p 500. Which is, if you're following our, our guidelines for investing and being diversified, we're going to play out that scenario. So that would mean you'd have to have Walmart, target, Visa, MasterCard, Waste Management, uh, energy companies.

 

That would have to be Apple, Amazon, Google, all of them simultaneously going bankrupt. Instantly, uh, am I thinking, what are the chances, even if it was like, uh, World War three, right? And there's nuclear fallout, um, and, you know, massive casualties, those companies are still going to be needed. So I'm trying to, I was just trying to picture in my mind every possible scenario where all those companies would all simultaneously go bankrupt.

 

And I just couldn't, I couldn't come up with a scenario. I was like, Okay, uh, nuclear war. Yeah, there could be some extreme downturns. Really the only ways, if a mediator strikes everything. Price . Yeah. Okay. Cody came up with one is the, the media, uh, scenario. But even then I thought to myself, Okay, so even if that happens, right?

 

Uh, I, I am not a good farmer, right? I do not, I do not have the capability of to farm enough food. I say I really, my wife who's got the, the farming abilities to grow enough food in our backyard to sustain us. It's just not possible. Uh, neither am I a very good hunter. Other people in my family, yeah, they're, they're okay at hunting.

 

So, I, I, I rely on the grocery store and there's really not another option. The grocery store is partially what feeds me, and then there's just that civil society I live in. It's not, not a bad thing, it's just where we're at. Okay. Can I live without electricity? Well, , um, it'd be hard. I probably could survive, but I wouldn't be at the same lifestyle.

 

Um, I wouldn't be operating and, and doing anything in, in modern society, so I really need electricity. Well, what about having internet? Can I function? Without having internet. Hmm. Not, not in modern society yet again. No. So as I'm walking through this, or could I, uh, live without going to Home Depot or Walmart or Target those, where am I going to get my stuff from?

 

Right? Where am I going to get my, not just food, but other household goods, other items. And those companies are all companies we invest in. So the chances of them going bankrupt, if they go out bankrupt, uh, I'm really in a world of hurt, right? , because these companies are so ingrained in our way of life. Even if I didn't like Visa, MasterCard, it'd be hard to operate without them.

 

Uh, if you, if you want to give that a experiment to go pay cash for everything for a month, uh, in most places you can do it. I've actually started paying more cash for it, and it's worked out great, but some places you just can't. Another example of where cash might be hard to do is, uh, my wife says, I've got three little kids, you know,  walking around trying to pull out the exact change, uh, while keeping an eye on all of them.

 

Uh, and I have to keep it in my purse. Who knows if the kid opens up the purse and just takes a dollar bill out and stuff's in their pocket, right? So my wife feels like, okay, cash is an option, but it just, the debit card's so much easier. You think about every single one of these companies, what are the chances of them going to zero?

 

Now you start thinking, okay, even in the asteroid scenario, we're still going to need electricity, still going to need food, uh, still going to need oil. Right? There's so much of our or natural gas, right? Right. If we, unless we all have wood burning stoves in our chopping wood. We still need natural gas to live our, our current way of life.

 

So that was the, that's what's going through my mind as I'm having this conversation with the person of zero being at play and at the end of the conversation, I just wasn't able to change their mind. Right. They just were not changing it. And I asked them, Hey, is there, in your opinion, any company that, So say if everything's going to zero, is there any company that might be immune to that?

 

So he didn't, The person obviously didn't think that Apple would be able to weather the storm, even though we talked about they have. You know, a hundred billion dollars of cash, but their, their outlook was, No, no, no, no company would ever be able to survive. They're all going to zero. And I'm like, Okay. If that's, if that's a philosophy, uh, you should never invest until that changes.

 

You know, if you really think all these companies are going bankrupt simultaneously, and zero is really at play, you have no business investing in the stock market. Because that tells me your philosophy, your belief is that, The impending collapse of the entire world in civilization and, and media, you know, type is hitting.

 

Uh, so, you know, just kind of an interesting conversation I had the other day, but made me wonder how many of us maybe have misconceptions about the stock marker investing, uh, where maybe that we thought that was really an option. Like, is zero really in play? And I think if. You're, you're following this line of thought in this, this conversation.

 

You're realizing, No, probably not. Now. Could, now, could Apple have a. Bad year where they have maybe lower profits or say they create an iPhone that blows up and people are injured. Yeah, they could have a bad year, but they're not going anywhere. Um, same with Amazon or Walmart or you know, and you name any, the companies that we invest in, could they have a bad year where their profits are down?

 

Oh, absolutely. That's a hundred percent reasonable. But are they going out of business? Are they going bankrupt? No, and I, and I think if we're being very candid with ourselves, I always like to ask myself the question. Sometimes clients, you'll hear me ask this, Cody, do we think this company is going to be more or less profitable in two or three years and say, say, even when we look at Amazon?

 

So Cody, I asked you this question, Do you think Amazon is going to be more or less profitable in two or three years from today? Well, it's going to be more, and the reason for that is that. With Amazon. It's a ne it's necessary, right? Yeah. And what is Amazon going to create new that we, we haven't even thought of, right?

 

So, okay. So Amazon you think is probably going to be more profitable in two or three years, or the chances of them being profitable, uh, in the future is pretty high. Uh, what about Apple? Do you think Apple is going to be more or less profitable in the future? Another one that's going to be more profitable. They're more profitable, right?

 

They're all established companies. So yeah, the likelihood of them actually collapsing compared to a startup is. Yeah. So, okay, so that you brought up a good thing. So if you are, uh, investing in companies and what companies you choose matter. So if you're picking good, solid names, like some of the ones we talked about, some of the ones we invest in as a firm, we call them culturally significant equities.

 

These are companies that are ingrained in our way of life. And part of the thing that we look for when we choose these is can we. Even if things were to be bad in the economy, even if there's a recession, would we, would we be able to live without these companies? And so I'm thinking, well, Verizon and T-Mobile are two names in our portfolio.

 

Uh, no matter how expensive things are getting, I'm still going to have a cell phone. Right? Uh, what are my alternatives? Right? That's, those are companies just not going anywhere. So I think, you know what companies you choose matters. And so Cody, you said, Okay, what if you buy a startup biotech company or startup company that.

 

Yeah, is the risk, What are the chance of that company going out of business? Well, much higher. They're startup companies, no matter you know what company you look at. If they're just starting to do business, there is a higher chance of them going out of business. But when you look at. Household names. If you look at names that we use all the time, the chances of those, you know, disappearing overnight is so much smaller.

 

I think, here's why I think about it. Um, because people, we talk about risk all the time. Risk is Cody and I putting together our money and opening up a restaurant down the street. That's risk because the national stats show us for small businesses and restaurants after two years, there's a 50 50 chance that they're still in business.

 

So what that would mean is, Uh, after two years, we have a coin toss, right? Whether or not we're in business and we've lost all of our money that we've put into it, just on average. So that's risk, right? Right. But what are the chances of Amazon or Google or Facebook or Visa or MasterCard, Bank of America, what is the chance of them going out of business in two years?

 

Is it 50 50? No, it's not going to be 60. Nowhere close, nowhere close. I don't know what the number would be, but if we're being candid, it's probably a very small percentage. Right. 0.0 0, 0 0, 0 0, 0 0 something. I don't know exactly. You know, it's just, So that's how we look at it, is risk is that first option of us starting a new venture.

 

That could be risky, but a lot of these companies, I, I like to use the word set of risk. What about volatility or fluctuations? Because as we established our, we don't think these companies are going anywhere now. Could they fluctuate in price? Oh yeah. I mean that could totally happen depending on the economy and the product or service they offer.

 

They could fluctuate in their value, but we don't think that they're going to be out of business. Uh, cause if they are, if we do think they're going to be out of business, then we have no business investing in. Right. So that's just, just an interesting conversation I had the other day. I thought I'd brought it up.

 

I really do think that individuals can sometimes have that misconception. And so it's funny, that same individual that I was talking to, I said, Okay, well, Okay. Obviously no company, they, they believe that no company was going to be safe. I even asked, Well, what about a, um, a, a company that produces food? We all need food.

 

We can't live without food. Nope. Nope. Even that company would go to zero. I'm like, Okay. Uh, what about? And uh, and, and they said, Well, what about gold? Gold seems pretty safe. And I said, Oh, yeah. Um, I mean, we have gold in our portfolio. It's, it's done. Okay. It's an inflation hedge. And the person said, I, I, I wish I would've bought gold back in 1980 when it was $300 a share.

 

And Cody, we ran the math because first thing I did is I came into the office and Cody and I were chatting about that, that conversation. And we calculated if you bought a thousand dollars worth of gold in 1980 and that's all you did, you just bought it and it was $300. Now today. A thousand dollars buy in would be like 5,300 and some change roughly about the price.

 

But if you took that same thousand dollars and you bought the s and p 500, that was worth, what was it? Like 32,000? 33,000? Oh, it was only worth like a couple hundred dollars at the beginning in eighties. Yeah, I think the price of the s and p 500 when we looked at 1980 was like $110, whereas right now it's 3,600.

 

So if you took that same thousand dollars and invested simultaneously in gold and in the market, you'd have 5,300 for the gold-ish and like 30 plus thousand in the other one, like, I think it was like 32,000. So, yeah. Um, but that person was trying to convince me that gold would've been a great investment in 1980, and I was.

 

No, no, you would be far better off long term if you can invest in companies in stocks. Cause you, that's where you're going to really build wealth and grow. Because every company, every for-profit company, there's really two main objectives that they have is one is to make a profit. That's right, That's the first, one of the first objectives.

 

And that one is tied with providing a, a good or service to the, to the customer. So, you know, companies, that's their main goal is to. Profitable each year while meeting a need, while providing a service will while solving a problem. And so every company wants to get better. Every company is motivated to be more profitable for each year.

 

So if we're looking at investing in great companies, we should have the mentality that their main goal is to also be more profitable, because that's, In their best interest to be more profitable. In order to do that, they have to be able to sell more or provide a better service or improve upon their efficiency.

 

Companies just don't exist that screw customers over and give them a terrible trade off. It has to be a win-win like companies have to one, be able to provide a good or service, and the clients or the person needs to be able to buy that good or service, you know, at that price and see it be a, a positive exchange on both sides.

 

So this is like Capitalism 1 0 1. Cody, if you, um, Cody had a sandwich and I had $5, right? Capitalism says, Hey Cody, I'm hungry. Um, I want that sandwich from you. And Cody says, Well, I'll, I'll give you the sandwich, but I also want $5. So I say, Okay, well let me give you $5. You give me the sandwich, Cody gets the $5, I get the sandwich.

 

My hunger is temporarily, uh, subdued because I'm a hungry guy and Cody got $5. So it has to be a win-win exchange for businesses. And it's even the same in my own industry. I, my number one objective is to help my clients and, and help them. Solve a problem, right? And the more problems I can solve, the more clients I can help, the better I'm going to do, the better the clients are going to do.

 

So when people come in, one of their main things that they're looking to solve is, I need to help manage my investment portfolio. I don't know what to look at. I don't know what to invest in. Or frankly, I just don't have the time and energy to do all the research that you and your team does. And so that is my problem.

 

And your team comes in and is able to solve that problem. And so, There's an exchange that happens. I help solve the problem. They're happy because the problem is solved and they exchange, uh, financially for that. They say, Hey, that's great. A uh, good trade off. It's a win-win business always has to be win-win.

 

Cause if it's not or the scales tipped one side too much, it's an unequal relationship and it usually doesn't last long term. So you think about when I say unequal relationship, what happens if, uh, so let's say a company is selling sandwich. Because that's a good example, right? And they used to be $5, but now they're $50.

 

Right? Well, the client still, you know, maybe the clients or the person is still paying for that because they want the sandwich, but it's way too expensive, right? And the client's just going, Man, that is an expensive sandwich. And the company's saying, Man, we're making a ton of money on these baller sandwiches.

 

We're charging $50 way more money than what we should be charging. It's just absurd. It's this lopsided, you know, equation. The business is really, you know, profiting a ton and the client is, is not getting a, a fair shake of it. The client is, you know, kind of, uh, overpaying if you will, well and above. So that relationship has to be, uh, equal, uh, or within equal.

 

Because if you flip the other way, so the client, you know, is able to buy a sandwich, but they only have to pay 50 cents per sandwich. You know, the, the client's going to say to the customer, These are great sandwiches. They used to be $50, but now they're 50 cents. But the business may look at and say, We're losing money.

 

You know, we can't, we can't operate like this because yes, the client's happy and our customers are happy, but we're not because we're not profitable and we're going to be soon bankrupt. So we have to have that, that, that balance be equal delivered or at least close. Sure. Sometimes it can be temporarily off, but long term it can't be.

 

Um, and I always think of the same thing in my own practice. Uh, my clients need to see value and get value out of the relationship. And for that, they're willing. Uh, pay for that, that value. But if they're not getting the value, then it's a lopsided relationship. So we always have to be providing value and making sure that, that, um, that relationship is in business isn't lopsided one way or the other.

 

It should be a win-win, which is interesting because it's. I don't know why, but some, somewhere in our culture that equation is bad. Is painted as bad, like as in capitalism is a bad thing. Capitalism is a good thing, right? Like you said, that situation where you've got the sandwich, I've got money. My problem is I want a sandwich.

 

And your problem is you want $5. That's a win-win. Capitalism is a win-win scenario. And so, um, we should not be, if we're any, any kind of business, we should not be ashamed of, uh, being able to make a profit. We have to be able to help people and help solve their problems. And if we're doing that and they're happy and we're able to make a profit, there should be, there's, That should be a good thing, right?

 

That should be everyone's goal is it's a win-win scenario because there's no point in, you know, running a business and helping a ton of people, but then you not be able to pay your rent because you're. Not getting enough, uh, compensation and you're not able to make that equation balance. So kind of some interesting thoughts.

 

I want to take a quick break. We're going to come back. Hope you guys are enjoying this, uh, episode on Friday. And uh, we'll be back in just a second.

 

You are listening to Intelligent Investing with Glenn Leest. If you want to give us a call, the number here is 9 2 8 2 2 5 2 4 7 4, or you can email us at Intelligent investing@wtwealthmanagement.com.

 

All right, we're back. Um, we we're talking about the business relationship and how it needs to be equal. Before that, we were talking about, uh, maybe some people's misconception of the market going to zero. Uh, and we talked about what would have to happen for that, and all the companies would have to simultaneously go bankrupt.

 

And the probability of that happening is just it, It's so low. Yeah. Yeah, we, The only thing that we could think about was if a meteor hit the earth and wipes out everything simultaneously, and even that, well, we'd still need, you know, something to power our homes with. We'd still need natural gas, we'd still need food, we'd still need shelter.

 

So all these companies that are providing that in some way, we still need to do business. We still need money. Um, before money was invented, transacting was really hard because you. Barter for everything. And bartering may sound great until what you're bartering with is not what the other person wants. So let's paint a picture.

 

Say, I, I'm really good at chickens, right? . I don’t know why you're laughing. Um, Cause I have chickens, right? Say we're really good at chickens. And, uh, that's what I barter with is like, okay, I can trade either eggs or chickens, uh, as a, as a store of value. Cody may say, um, maybe Cody has something I really want.

 

Maybe he. Um, a car, right? And I'm like, Man, I really want that car. Or I want that sandwich. Let's use a sandwich example. I really want that sandwich here. Cody. I'll trade you some chickens or some eggs. Cody may say, Well, I don't want chicken or eggs. I don't have any use for that. I already got enough chicken and eggs at the house.

 

What else do you got? And I may say, Well, that's the only thing I can barter with. That's the only thing I'm able to use. And so that equation gets fairly hard. Whereas if you use money, Money now says money can buy, anything can be used. It's a store of value that can be exchanged easily. Uh, and you know, so I could say, Okay, Cody, I'm going to buy that sandwich.

 

Here's $5, right? Because then that $5, $5 for anything, yeah, you can use that $5 for anything. It's not limited to the chicken or the egg, right? So that's where bartering really becomes a challenge. So, Um, you know, if we're, if we're entertaining this whole idea that the, you know, market can go to zero, we're also have to simultaneously entertain that possibility, which I think is insane and won't happen.

 

Um, that money, you know, we'd have to go back to bartering. So anyways, there's all these scenarios that just I don't think would ever happen, I think are so unrealistic. Um, so the takeaway here is, uh, We really believe that the companies we're investing in, even if they have a hard, uh, hard year or a challenging year, they're not going anywhere.

 

And if they are going anywhere, as in going bankrupt, we're not going to be investing them anyways. They're good sold companies. So we'll put that myth to rest, that the market going to zero really just not possible. Um, even if there's a meteor that hit, which, um, wipes out most of the world, probably not going to happen.

 

Or even if, uh, there's nuclear war or you know, some other event that. You know, my, you, my entertain is just not going to, If we go to, you know, have a huge war, worldwide war, um, you know, these companies are still part of our daily life. We still need them. It's not like if we go to war that we don't need, uh, food or energy, so, Right.

 

Anyway, so kind of interesting things. We're talking a little bit about business. Um, Cody and I, um, I've been, uh, learning a lot from Dave Ramsey. Um, they have a program called Entree Leadership, which is entrepreneur and Leadership, and there's a lot that comes into that that I thought was really interesting that I wanted discuss today.

 

One of which that we talked about was making sure that equation is balanced, where the customer and the business are both, uh, uh, getting something out of the relationship. And it's a win-win for both sides, um, that the client is. Able to get a good or service or have a problem solved and then the business is getting compensated to solve that.

 

But one thing I heard that I really liked is that if you help enough people solve their problems, you'll never have to worry about money. And that is such a true statement. Because my, my philosophy, my vision in this, why I'm even in this industry is I want to help people and I want to help them solve that problem of how do I manage my investments?

 

How do I save for retirement? How do I make these financial decisions? And if I do enough of that, I myself won't have to worry about profitability, because if I help enough people, uh, I won't have to worry about money. And that's a quote directly from Dave Ramsey. And it's so true for business. If you help enough people solve a problem, you know you're not going to have to worry about profitability.

 

Now, if you look at each person as a, just something to sell, you know, someone as you know, this is just a transaction, um, amount of relationship, that's where you can really fall into trouble, um, in the business realm. So, you know, one of the ways I look at each and every one of my clients, it's a relationship.

 

And my job is to help understand them. Find out what troubles them and help solve that problem, help solve that issue. And if I can do that with enough people, um, my own dreams will come true. Right? I don't have to worry about him, I going to make it or not. And so, Lucki. Uh, I've been able to help quite a few people.

 

Cody, Now were actually just looking at my book of business, of how many people I have that I help. And it's, uh, I mean sometimes Cody is like, Glenn, I don't know how you keep up this pace. It seems like you're, you never stop talking to people on the phone and you're always helping people. So, um, that's always been my vision is.

 

I want to help people win when it comes to money. Uh, and I want to help them be intelligent investors. So, uh, not only construct a good portfolio, could pick good investments, manage risk, but also manage their financial, financial lives. Help them make good financial decisions. Help them get out of debt.

 

Help them save, help them think about things that they maybe haven't thought about. In fact, we just had a. And some people I was talking to and, uh, we talked about all sorts of things financially and uh, one of the things that was like, I could just see this weight come off their shoulders is when we started doing some retirement projections, we basically said, Hey, if you keep doing what you're doing now, Just the current savings rate for the next 20 years.

 

Here's what your retirement will look like. And once I calculated out that number and showed it to them on the screen, all of a sudden there was just like this, Oh, okay, so we're going to be okay. I'm like, Yeah, you guys are in great shape. You don't have hardly any debt. You're saving and you're doing a great job.

 

If you keep doing what you're doing, you know, retirement's going to look really good and. But if you want to make some adjustments and save a little bit more, here's how that would look and that could look even better. So, um, you know, one of the, the vision statements is, I want to help people be successful and help be the advocate in their corner to, uh, map out their, their financial lives.

 

Let them know, Hey, you know what? You're on track. You're doing great. Keep doing what you're doing, and here's what retirement will probably most likely look like. Or to say, you know, um, if you want to retire at this age and be able to be financially independent, We gotta make some changes, we gotta make some adjustments, and here are those adjustments that we need to make.

 

If we do that, then things will look really good. So we're doing that. And you know, some of the things that we looked at, that was one area. So there's a whole sudden like this relief, okay, we're in good shape. And then we start talking about, you know, they're playing in really good de or really good offense and they're financial situations, so they're really good at saving, accumulating wealth.

 

But there was one area that they're greatly missing. Can you guess the area that was missing Cody? Is it. Giving away donating. Oh, no close. It was actually defense. Right. So they're playing good offense, but they also need to play a good defense. So, and what I mean by that is they were doing really good at building wealth, saving, accumulating, but they didn't look at.

 

What if scenarios? What if something happened to either one of them, because they, you know, husband and wife and they've got kids. What happens to either one of the spouses if they were either disabled or injured or got really sick, or God forbid they passed away? What kind of impact does that have on them financially?

 

And we were looking at life insurance and I said, Hey, you know, On all transparency. My wife and I both have almost the same amount of life insurance. It's not like the husband has it and the wife doesn't. The wife has it and the husband does it. We both equally have almost the same amount of coverage, even if one person works and the other person doesn't.

 

Cause I look at it as both roles are equally important. So kinda with the division of how division, divisional labor, or however we have it set up in our house, whatever you want to call it, is um, My wife, bless her heart, we should nominate her for statehood. She stays at home with the kids and she homeschools them.

 

She really just runs the household is, is in charge of most of their care, their schooling, all that, right? So that's her main, one of her main jobs, uh, in the house is to run the household and take care of the kids. And yes, I do take care of the kids and I watch them and I'm there to help them with schooling here and there.

 

But really that is one of my, my wife's main jobs, which is a pretty tall order, right? So my, my, that frees me up to really go, um, Full speed in my career. I can, you know, work late hours, I can come in early, I can really put my full time and attention into my career, um, and I can earn and, and provide the financial backing.

 

And then my wife provides, you know, the support, the care, the schooling, you know, the actually watching the kids throughout the day. And so that's how we've had it set up. And so we think about life insurance. Um, one, one, you know, you really can't have one without the other. In that, in that setup, if something happens to me, obviously the income dries up and stops, and so my wife needs to be protected and, and vice versa.

 

If something happens to my wife, I'm not going to be able to devote as much time and energy to work. Uh, one, it's going to take me time to grieve and be with the kids and, and take care of them and figure out, you know, what I'm doing for school. Probably still want a homeschool. So what does that look like? And all this.

 

And so I want to stress the importance of both spouses, you know, they both contribute equally to the financial situation. So anyways, we're all that to say is we're talking with a couple, and the husband had life insurance, but the wife did not. And it was one of those things where like why? And uh, the husband was kind of like looking around and he is like, well, It's kind of a hard subject to think about, Glenn, and I'm like, I, I a hundred percent understand.

 

We, I don't like to think about what if something happens to either one of us, but if you're unprotected in that way, it could really devastate you financially. And it's not just. That person's earning potential, which is obviously very important, but everything else that they would've probably done in their lifetime too.

 

So not just earn money and, and do that, but you know what if happens, if the either spouse, like the game plan was, Hey, we want to send our kids to college. We want to pay for the wedding, we want to help our kids get into their first home. All these things. And so you start adding that in to the potential amount that you need to cover yourself from, and then you start realizing, Wow.

 

Um, I'm probably way undercover. I think one of them had zero, the, the, the female. The mom had like zero and the husband maybe had like 250 or half a million dollars. And so my, my rule thumb with that was, um, and this is where something like, they just never even thought about it. But as we're looking at their full financial picture, looking at their retirement planning, still a young couple, we said, Hey, this is a hole in your game plan.

 

Which if. That whole stays there and something, god forbid happens, it can completely negate all the great offense you've played all those years. Like one bad event can wipe it out. So that's why I say you gotta play good offense, but you also have to play good defense because that'd be insane to have a football team that was really good at scoring and getting touchdowns.

 

But they couldn't hold the line . It's like, well, you're not going to win that way. You have to play a good defense and offense. So we had that conversation and they said, You know what? We're we're, you're right. And I think the husband was like, I just didn't want to ever think about it. Um, but that was something that as their advocate in their corner, I could say, We need to just get this taken care of.

 

It's not going to be super expensive, but we need to. Um, have that what if scenario covered because that could really just be detrimental financially. So that was just a great rural world example of, uh, you know, now I don't do a ton of life insurance anyways, but it's just one of those things I immediately noticed.

 

Um, well, wow. What happens? I mean, that'd be the same as not having health insurance. I think all of us would say that'd be crazy, right? Um, one young and healthy, I don't need health insurance. Yeah, maybe, but. What happens if you're in a car accident? What happens if someone, you know, rams their car into you?

 

How does all that get taken care of? Right. So sometimes it's, you know, looking at a lot of different situations, a lot of different things that we may not think about, which is where when you have someone in your corner, you know, your advocate, which is what, what, what Cody and I do for a living is our job is to help our clients win.

 

You know, when it comes to money, help them achieve their goals, but also maybe help them think about the things that they may not have always thought about. So Cody, what are your thoughts? Um, well, a hundred percent agree with that. In life insurance, it's, you never know what could happen to you. All of a sudden if you have like a major injury that costs a lot of money or you can into a car accident, it, it's things that we don't think about typically, but those can happen any day we're on the road, we're the risk is driving, which, Yeah, yeah, yeah.

 

We don't think about that typically, that there's, there's a potential for an accident. We just drive and take it for granted, but yeah, you know, you never know it would happen. All a sudden you bring up a good, good point. You just don't know. And so why carry that unnecessary risk when there's a solution to that?

 

Right? Part of my job is to help solve problems like, great, okay, we identify the problem, here's how we solve it. Yeah. Put in an application. Get some life insurance coverage. Boom, problem solved. Right? Done. You know, that that issue is taken care of. Okay. What's the next issue that we need to look at? Right?

 

And so that's just one real world example that I really wanted to cover, um, that I think is just so important is when you, Alex said, have that person in your corner. They're looking at all the different areas, able to help. Be unbiased and help really give you good, objective feedback of what's going on, what you need to do.

 

Or even as we talked about earlier in the episode, uh, dispel some misconceptions, right?  is, uh, just because we think it to be true, is it really? Um, and my job is like, I always want to respect people and uh, you know, do a good job for them. But if there's a preconceived notion that they have that's not accurate, I want to help them unpack that so that way they can be as successful as possible.

 

So that way they're not, uh, a hindrance to themselves or they're not letting some sort of things they heard or some sort of myth stop them from being successful financially. Um, so, and it was great, great conversation. So, uh, I want to take one quick break. We'll come back with a closing segment and then we will call it a.

 

You are listening to Intelligent Invest with Glenn Leest. If you want to give me a call, the number here is 9 2 8 2 2 5 2 4 7 4 or are there questions? Are there comments that you have or are there topics you'd like to hear us cover? If you do, you can email us at Intelligent investing@wtwealthmanagement.com.

 

We're. Welcome back. Okay, so I showed you the, the video of me breaking bricks, right? Yes. I remember that for last week, . Yeah. Last week I told Cody we were listening to some of the outro music, and I'm like, Man, this is like karate kid intense brick breaking music. And I said, Oh yeah, I've actually broken bricks before.

 

And Cody was like, What are you talking about? He's like, No. And then I. Pulled the phone out, showed him, and he was like, Oh, okay. You can break bricks. This is, I got questions. Lots of questions. Anyway, Sory to here, Uh, late in the, the, the week and just wrapping up the week. Um, one last thing I want to part with and, uh, parting thought is some of the things that we're doing as a firm to stay ahead to, to be.

 

Um, really tactical with how we're positioned client portfolios because we, my firm belief is that what makes us part of what makes us unique, aside from great customer service and competitiveness and, you know, great value add is that we are more tactical and more dynamic than maybe just your, your average fund.

 

You know, that you can just buy out there because um, I think changing times. Call for at least my opinion, call for a little bit more of a proactive approach. And so we were on the phone talking to a lot of clients and telling them, Here's what we're doing. Here's some of the changes, here's some of the thoughts that we have towards the market, how we're able to position your investments to.

 

Um, really stay ahead or to buoy or to maybe even opportunistic, take advantage of some of these, some of these, these changes. So, um, if you feel like your investment portfolio is just a buy and hold and is not really being dynamic or tactical, um, that's fine. We, we believe in that buying, holding for long term too.

 

But we also believe that having some tactical overlays or some dynamic or opportunistic place can really generate alpha, which is really just additional performance. So, um, one of the things that we've been doing, We've actually been doing quite a few things is that, um, we are looking at the landscape and wondering, um, what are the reasons for the market to go up?

 

What are the reasons for the market to go down over the next, say six to 12 months? And when we're talking with our investment management committee, we just saw. More potential downside than there was upside. Um, and why, why do we say that? Well, um, continue inflation issues, maybe lower GDP numbers, reduce consumer spending, reduce consumer confidence, higher interest rates, um, all these, these things and more.

 

And the only thing that we really looked that, that would really clear up or change that is depending on how the midterm elections go. And so we looked at that, all that information said, Okay, now we know kind of short term what our prognosis is. What can we do? Uh, how do we position our client portfolio?

 

So we, uh, rotated out of some growth companies into more value based companies. So a good example what that might look like is, um, no, not that we're investing this company anymore, but we were is Netflix is a growth company. And so if you're in a high growth company, um, higher debt costs, uh, are really going to impact a lot of growth companies because most of those companies are.

 

Using borrowing as part of how to finance their future op operations. So if the cost of borrowing goes up and that's your business's main way to grow and you're not paying cash for everything, well your, your business, uh, output's probably going to slow down a little bit. So we rotated out of growth. So say we.

 

Got out of a, a Netflix or high, you know, you know, high growth company, like maybe like a Square, PayPal, and, and rotated into some more value based names. So that might be like a Johnson & Johnson McKesson, um, you know, Mondelez, those are some names that we've. I'm naming them all off coat as like Monda. What?

 

Mondelez. They're a food based company. Uh, think Oreos. Uh, they make Oreos. They're like a spinoff of craft. Uh, McKesson is one of the largest pharmaceutical companies in America. So my thought process, and same with our team, is, well, even if there's a recession, you're still going to pay for your medications, right?

 

There's not like a, Oh, I'm just not going to pay for my heart medications this month. You're like, No, you kind of need those. Uh, so, uh, McKesson we think will really, uh, Whether the storm quite well. Another name that we had in there is Johnson & Johnson. So one of my, my sayings on that is, uh, toothpaste and, uh, toilet paper really never goes out of style.

 

Like, we're still going to need those products. Uh, we really can't get out of, I mean, , I don't know how you not have those products in your home. Uh, maybe I don't want to know. Um, same as we made some of , some of those adjustments out to, uh, growth into more value. We started looking at also expanding our, our allocation to the commodities.

 

Uh, if we think in inflation's going to continue to rise. The, and even fuel costs are going to rise, that's going to cause commodity prices to go up as well. So, uh, we've been expanding into, um, more commodities, higher percentage of them, and also looking to add in some more. We've been kind of doing rare earth metals for a while, but that's an area that we think will probably continue to grow over the near future.

 

Um, one of them is lithium ion, you know, so lithium is used in, you know, pretty much all of our batteries and electronic vehicles. Um, and then last change we. Uh, last two changes is up, uh, uh, increase our cash exposure a little bit more and then continue to have that, um, inverse hedge in our portfolio. So the inverse hedge, um, just to give you a quick uh, summary of that is whenever the market goes down, if you have an inverse fund and say it's an inverse s and p 500 fund, it would do inverse to whatever the s and p does.

 

So if the s and p 500 is down 1% on the day, Inverse fund should be up 1%. So basically, if we think there's going to be a prolonged downturn and we buy inverse fund, we can actually make money on the way down. Now how they're doing that is through options, contracts, and all sorts of other things behind the scenes, which, um, is another conversation for another day.

 

But at least you can buy a fund that is going to do inverse in the market. So we bought some of that. Put that in our client portfolios. I think we're doing anywhere from on the low side, 10% all the way up to 20%. Depending on the risk tolerance of the client. And the idea with that is if the market goes down, that fund will go up and it's actually a three to one inverse.

 

So market goes down two like today, Two-ish almost three. That fund was up almost, uh, eight to 9% today. So, um, and it's a very short term play because betting against the market long term is an awful idea. And so really we just use that hedge as kind of a stop gap temporarily until we have more clarity. Um, so come midterm.

 

If the market responds negatively to the results, that Inverse fund will continue to provide outperformance and say the market responds favorably, then we may say, Okay, let's time to exit out of that position and go back to, you know, buying more great long term companies. And so, um, I want to reiterate the majority of our clients, we're still long term investors, but we look to be.

 

Have added some short term Dynamic Ness, Short term tactical allocations, then even some opportunistic ones so that that inverse hedge is only really just a very short term play. We've only been in it for since the 15th of September, so very short, and I think we're looking at some of our client accounts, and that one position is up right around the neighborhood of 30%.

 

Don't quote me on that, but roughly the market was down almost 10% in that same timeframe, so it's. Position that's worked out well for us. But if the market starts to recover quite nicely, uh, an inverse uh, fund will really just crush you. Cause it goes both ways, uh, both in the downside and the upside. So that's just a couple things that we're doing.

 

Um, we pride ourselves as being unique and different and adding in more tactical, um, things to our portfolio so that way, you know, if we have a, an environment like this where there's just a lot of uncertainty, that probably gives our clients a lot more of. Confidence to know and uh, maybe a little less nervous.

 

It, like I, when we were talking to all of our clients in the last couple weeks, when I told them these were the changes that we've been making to try to, um, reduce or, I, I was calling a stopping the bleeding a little bit when it comes to losses. They were so thankful. They're like, Wow, thank you for doing that.

 

That's exactly one of the reasons why I work with you guys is you're more hands on than just my regular mutual funds. I buy and hold. Because if you can buy and hold and just set it and forget it. That's a really good strategy. However, it's not accounting for human nature, because human nature in a year like this goes, Oh my gosh, what do I need to do?

 

I need to just get out and go to gold or get out of completely. I mean those, all those ideas come up where if we have a portfolio that we can say, Hey, we have a game plan. If things go down, we have a a game plan, we have something set up, and if things go really well, which we're hoping on, you know, we also will profit that way.

 

So I call it like a heads, you win, tails you win type approach. So with that, Cody, any closing thoughts for the week? Other than that, the inverse fund, it's, it's great. And honestly, what I've learned is a lot of these AI systems that they've developed for investing, they don't think about what's going on in the markets too much where they can use an inverse fund.

 

Yeah, Yeah. Okay. So that's a good, good, good closing thought. And you want to have a can of worms there, so, um, Even if you have an algorithm or some automated systems or trading things, they can't read a newspaper. They don't know necessarily what's going on. Sometimes they're only as good as the person programming, so, uh, only as good as the box of their program to be in.

 

Whereas we pride ourselves with always being. Open to look outside the box to look at, hey, should we be adding that inverse hedge? Should we be expanding our commodities? Should we take some of our gains and, and sit in cash for a little bit? Um, should we be even all entertaining alternative investments?

 

That's, you know, we, you might call them like more exotic, uh, investing or just alternative that maybe aren't correlated to the stock market at all and can continue to deliver, uh, even in tough times. So like an alternative investment. Um, there's one that was. We're looking at basically premises is there's a company, say there's companies out there that are looking to be bought out and say six months, right?

 

They're going, they're going to have a merger, but maybe the next two or three months they need some cash flow, right? They're hurting and they need some cash flow. So the way that this fund might work is a company may be, goes in. And bar lends them the money. So the, you know, the company that's going to get merged out borrows the money and maybe it's an expensive interest rate, maybe eight or 10 or 12%.

 

Um, but they just need like a bridge loan for three to five months, something like that. And so as an investment opportunity, if you're the lender lending on those, you'd say, Okay, Well's, the risk, Well, yeah, I'm loaning mine to the startup company, but they already have an agreement to get merged out. So the chances of the them going out and me losing all the money is probably.

 

Lower because that big company that's merging out is rock solid. So those are things, um, that we can incorporate that we're looking at. That's just one idea. There's a lot of, there's like 10 of them for every one or two ideas that we actually put in the portfolio, we've looked at like 10 or 20 and tested them too.

 

So anyways, with that, thank you for joining us on this Friday afternoon. Uh, stay tuned. Next week, uh, I'm going to be doing a couple episodes on my renovation. My rehab progress that I've been doing at the house behind me. Um, I've got pictures, I've got videos. It's been a fun project, but uh, I also really like real estate a lot too.

 

So, um, not just a stock guy. I am a real estate guy as well. So, with that, uh, thanks for joining us this Friday and we will see you guys soon. Take care.

 

Cody, I can't believe that you didn't think I could break bricks, Man. , I've seen it before. You saw it. 11 bricks, right? Just smash right there. I mean, the video said nine, Showed nine, so I didn't see 11. All right. Yeah. You know what? That video was nine. The 11 went in. I didn't have a video for it. Can break them.

 

Those were thick bricks too, man. They were just, they were rock solid, just huge. So anyways, I don't know. Cody might look at his boss a little bit differently knowing he can break bricks, . All right. Have a good rest of your week.