Transcript

This is our weekly market alert video for the week ended May 1, 2020. April is over already. An interesting week. It appears to us that, in the famous words of Winston Churchill, “This is the end of the beginning.” And what we mean by that is that the big rally that we saw over the last few weeks, where we saw big rebound in the markets and the S&P and the Dow, was just the beginning cycle of what we think is going to be a really bad bear market. And, unfortunately, we’d like to say that that’s not the case, but that’s what we see. And, so, we are concerned about people who are invested right now because we think that this rally may have given them false hope. But, in our view, the rally that has just happened, and I think has ended, is an opportunity to get out while the getting is good, as the proverbial saying goes. So, kind of a downer way to start this video, I know.

But one of the things that we want to talk about is that we go into May, with now, the landlords holding their breath to see how many people are going to pay their rent, mortgages. The number of people that are now unemployed is record setting, how fast it’s happened, and those people are not going to be able to pay their rent, and they’re not going to be able to pay their mortgages. And so, we think the number of people that are not paying is going to increase dramatically over where it was in March and in April. And, those things combined, are going to be difficult for companies, banks to overcome. Twenty million landlords are what they call mom and pop, meaning that it’s individuals who have rental properties to give them retirement income, and that kind of thing. They are going to be affected dramatically by that. Also, right now, the record number of bankruptcies that we’re going to see with small business, and the government can’t bail them out.

The other thing that’s concerning is that, in Wuhan, which is the center of all of this, they’ve seen the curve flatten. On the other side of the infection curve over there, the government in China said everybody go back to work, everybody open up, restaurants, hotels, everybody open up; and we read an article where a restaurant owner said, “Okay, I’m going to open up.” And he opened his restaurant, but the customers didn’t come, and he said, “I have to now close it because I can’t stay open, incur the cost without any customers.” So, yes, we can be on the other side of the infection curve and, yes, we can open stuff up, but that doesn’t mean that people are going to immediately start going back into these businesses, and spending money. That’s going to be a slow process, as we’re seeing in Germany, as well, the same dynamic is happening there.

So, because of all of those things, we think that there is the potential here that the market is going to, the S&P and the Dow, will fall dramatically from here. The thing that, to put it into perspective, is that, where the market sits now is about where it was in March of 2019. And, usually, the stock market is forward looking, meaning it’s looking six months to a year into the future and it’s saying, “I want to invest today based on what I see happening six months to a year from now.” So, for the market to be priced today at the same as it was in March of 2019, you have to extrapolate from that that investors are seeing the same thing that they saw in 2019 in March, as they’re seeing today. Meaning, that in March of 2019, those people thought the market was properly valued because they also, at that time, which they did, saw bankruptcies, unemployment, COVID virus shutting down businesses, and all of the things that I just described. Not possible, and so the valuation today, in our view, is a bear trap, and we believe it’s going to go down from here. So, where does that leave us?

In our investment committee meetings, we have been talking about the fact that this rally has been so strong, and that we can actually see our buy signal, I mean it’s still far away, but we can see it now. Before it was so far away, we couldn’t even see it. And, so, as we’ve described to you in previous videos, we’ve been concerned that we would reach our buy signal, and that we would then have to make a decision of whether we go in or not. And the decision that was reconfirmed this week is that, if we do hit our buy signal, we are not smarter than the market. We don’t want to make that claim. And, so, we’re not going to ignore our buy signal, but, at the same time, we do want to temper the enthusiasm with a little bit of rationality. Therefore, should we reach our buy signal, the plan right now is that we would go in with 10% of our equity allocation. So, what that means is that if you were a 60 stock 40 bond client, then 10% of that 60% would be 6%, is what we would be going in with if that makes sense. So, we’re going to, if we do go in; however, as we just described, we don’t think we’re anywhere near going in, and don’t think we’ll get there. We’re just thinking ahead.

The other thing, also, that we’ve heard critics of what we do say is that we’ve missed out on this big rally, and there’s thing called FOMO, which is the fear of missing out. Well, first of all, as I record this video, we are still below; the S&P, the stock market, is still below where we sold. Okay, so we haven’t missed out on any gains, so let’s dispel that one, first of all. But, the important thing, you know, we were interviewed by CNBC, and what we told them was, and they put that in big bold letters in their quote of us on the internet, and that is that our biggest mistake is participating in losses. We’re not so much worried about missing out on gains that we could have made, and that’s true. But, you know, if we want to talk about what we have missed out on, then I would say that we missed out on, from when we got out to where the market bottomed in March, we missed out on one of the most rapid, savage declines in stock market history, if not the most savage decline in stock market history. Worse than the Great Depression. And right, you know, and for us, the peace of mind of not participating in that, we hope we’ve delivered to you that, because that is one of our primary directives, is your money lasting as long as you do, but also, peace of mind. So, we hope the fact that we are not invested right now gives you that peace of mind, and you’re not worried. Because, at this point, we’re not worried for you. So, we hope that you’re not worried.

So, right now, like I said, the rally we’ve seen has been tremendous. We believe that this was a God send for people who did not get out, and they should be considering getting out now, if they haven’t. Now, we try to stay away from biblical references, but this reminds us a great deal of Noah’s Ark, and those of you who are clients, you’re on the ark with us, and there’s a great financial storm coming. It already started but, as the rebound made us think that maybe it is gone but, as I said, this is we believe, the beginning of the end, or the end of the beginning, should I say. And, so, if you have friends, if you have family that are on the ark with us, help us help them. Send them our way; at least send them to our website. Have them attend our seminars online, our virtual seminars. We want to help as many people get past this without severe financial damage as we can. That is our noble obligation; it is our reason for being. So, help us help them.

We’re glad you’re a client. Thank you for letting us guide you this. We will get through this. It may take longer than people think, but we will get through this. And, again, we thank you so much.

MMWKM Advisors, LLC (d/b/a Retirement Planners of America ) (“Retirement Planners of America”) is an SEC registered investment adviser with a primary business location in Plano, Texas. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. References to the “invest and protect strategy” (the “Strategy”) and recommendations made under the Strategy from 2007 through 2009 refer to strategies collectively employed and recommendations collectively made by Retirement Planners of America’s principals while employed at Eagle Strategies, LLC., and also at Cambridge Investment Research Advisors, Inc. Four of the five principals remain as principals today, including the Retirement Planners of America’s founder, Ken Moraif, and Chief Investment Officer, Eli Dragon. Retirement Planners of America has been employing the Strategy since its inception in 2011. Therefore, any references to Retirement Planners of America’s performance or its investment advisory recommendations predating 2011 generally refer to recommendations made by Retirement Planners of America’s principals at the respective other firms described above. Like all investment strategies, the Strategy is not guaranteed. It is possible that it can incorrectly predict a bear market (generally accepted as a 20% drop in a market index), which has, in-fact, happened before at Retirement Planners of America and affected its clients accordingly. When the sell / “protect” portion of the Strategy is implemented, affected investors will incur transaction costs and taxable accounts will incur tax consequences. However, when implementing that portion of the Strategy, Retirement Planners of America generally believes that the benefit of avoiding bear markets outweighs the burden of these transaction costs and tax consequences.