Transcript

Hello, I’m Ken Moraif, and this is our market alert video for the week ended May 21, 2020. The question that we may be asking ourselves right now, is it safe to go back into the markets and into the stock or the bond market? And I guess I’ll answer that question right off the bat with we don’t think so. But let me give you some color on that. So, last week we had an announcement that there was a company that came out with a vaccine for the virus that got everybody very excited. A few days later we found out that the data was maybe not as good as what we thought, but it’s now the second time that somebody’s come up with a vaccine that turned out not to be a vaccine yet. So, I think we’re going to see along the way several times going forward where there are going to be announcements.

So, the interesting thing about the day the “vaccine” was announced and the market, the Dow, went up 900 points, was that a lot of the buying that day was done by short sellers. And that means people who are betting that the stock market was going to go down or that stocks were going to go down, they took their profits and the way they do it is by buying. So, usually when short sellers are taking profits by buying it drives the market up but generally that is not a good sign that pessimists and people who are betting against the economy are the ones that are doing the buying right now. That would not be a recipe for a healthy market. You want people who are optimistic about the future that are buying, not people who are closing out contracts. So, because of that, that day we discount greatly.

Also, one of the things that we have not seen yet, in our view, is the true consequence of the shutdown of our economy. So far, we’ve had a lot of stimulus, a lot of checks given by the government, a lot of forbearance on mortgages and a lot of forbearance on rent and all the rest of that. But that, in our view, can’t go on forever. We’re going to start creating zombie companies which are companies that have no revenue, no likelihood of surviving that are just kept alive by the government and that is not a very healthy situation. And we don’t know how long that’s going to go on.

So, Bill Clinton was famous for saying, “It’s the economy, stupid.” We’re now adopting: “It’s the third quarter, stupid.” The second quarter, this one coming up, we believe no matter how bad it is, it’s already kind of going to be a ho hum. Okay, we already knew it was gonna be bad — yes, way worse than we thought, but that’s okay because we already knew that. We already knew it was going to be bad. So, we don’t think the markets will respond to really bad news even though it’s really bad. The third quarter, however, is what the market is banking on. There’s going to be a big rebound. Everything will turn around, and that’s why we see this big rally. And we just don’t see that happening, unfortunately. So, when that realization comes upon then the whole thesis behind this rally we just saw will go away, and we could very well see this rally turn into another leg down in the markets. So, because of that we think that downside risk is great. We still are not confident that this is a good time to buy. The S&P 500 Index has not breached the 200-day moving average. So again, an indicator that we use does not tell us that it’s time to buy either. And so, for all those reasons we are not confident right now.

Having said that, if we do reach our buy signal, we still are in the mode of 10% of our equity allocation is what we will go in with. So, for example, if you are a 60 stock 40 bond client, then 10% of that would be 6%, and that would be the amount that we would go in with at this time. Now, things could change, and we could decide to do more or less, but for now that’s what it is. However, we have not gotten there, and we actually don’t think we will get there. It’s just planning ahead. It’s what we do.

So, we hope you have peace of mind knowing that we’ve been out during all of this since early March and that the risk to you right now is extremely low. We want you to have peace of mind. We want to wait this thing out as long as possible and see what’s going to happen. We still don’t have true clarity. We think the bankruptcies are going to start piling up, insolvency and the bad news is going to start really piling up. And, unfortunately, we want to wait to see what that looks like before we can make any decisions. So, for now, let us worry about all this so that you don’t have to. Our two goals are for you to have peace of mind and for your money to last as long as you do, so hopefully you have peace of mind and your money right now is out of harm’s way as much as possible, so we hope that that’s something that gives you solace.

So, we hope that you are healthy, and we hope that you are sane and that you are continuing to be as cautious as you have always been, okay, during this whole thing. Do not let your guard down. There are signs in China that there’s a second wave coming, so don’t let your guard down. Continue to be as cautious as you have been. This is not the time to give up on those precautions. We love you. We want you to be a client forever so don’t — we don’t want to lose you, okay?

So, thank you for watching this video, and we will talk soon.

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.