Transcript

Hello, and welcome to our market alert video for today, which is Friday, September 2, 2022. And we have a ton to get into a lot of changes, we saw the jobs numbers come in. And that seemed to make the market feel better about things. And I want to go over that as well as a lot of other stuff with you as well. One thing I want to share with you is, as you guys may know, I have my first grandchild, grandchild grandson, and September 1 is it’s crazy is his first birthday. And so the whole family, literally the entire family is going over there on my side of the thing to visit with Nathaniel for his first birthday. And I asked my wife, I said, are we setting a precedent here? I mean, are we going to go to every if we have 10? Grandchildren? Are we going to every single birthday for all 10 of them? And she goes, Yes, we are. So we’ll see.

But anyway, I guess the first one always gets all the spoils of being the first right. Anyway, let’s talk about what’s going on here with the stock market our view of it. And as you know, I’ll start this off with we have our invest and protect strategy. And right now we are in protection mode, which basically says that we are out of stocks, and we are out of any longer term bonds as well, because of what’s going on. And we’ve been so for many months now. And there is a very prescient person who agrees with our view. And that’s a gentleman by the name of Jeremy Grantham. And he runs a very, very large investment fund. And he actually has been around for quite a while he predicted in the late 80s, that the Japanese stock market would crash. And he was right about that. He predicted the y2k crash, he predicted the 2008 crash. And in January of this year, and I’ve quoted him to you before, he actually predicted that what we’re going through right now would happen. And he actually said it in so many words, he said, This is a super bubble. And it’s going to burst. And he said it’s going to be dramatic and could see a drop of about 50%. before it’s all said and done. And so the market has gone down quite a bit. Now, he said in an article that I read yesterday, that what has happened in July is further confirmation in his mind and validation that the super bubble is bursting. And that we are in the Third, we’re beginning the third leg of what’s going to what he thinks is going to be a tragedy to use his word between now and when this is over with.

So let me kind of give you where he’s coming from. And by the way, I agree we actually as a firm agree with very a lot of what he has to say. And those of you that are over 50, if you’re retired or you’re planning on retiring within the next five years, you have to ask yourself, do you want to take the kind of risk that is in this market right now that is out there? And so kind of as I’m going through this, ask yourself that question. So he says, first of all, listen, how did the super bubble come into being in the first place? Well, what happened was we had the pandemic, and the Federal Reserve threw $3 trillion into the economy. We saw that happen. And then what happened, our Congress decided that’s not enough, we need another $3 trillion to be thrown into the economy. So we had the largest amount of money in the history of mankind, basically, helicopter just thrown into the economy as fast as possible to help avoid what was a concern, which was another Great Depression because of the shutdown of the economy and the pandemic. Well, what resulted from that was that people had lots of money, and they were locked at home. So what did they do? They started speculating, they started buying stocks. And you saw GameStop, and Bitcoin and all these super speculative things, just get hundreds of billions of dollars dumped into them. That is in his view. And I agree that the that speculation that investing without any fear, because the Fed will save us is what causes super bubbles.

So you see the stock market go way up because of that. And then there’s a point where it’s gone up so much, that it starts to come down. And there’s a point in there. So he says, that’s how the super bubble gets created. Now, the first phase of the bear market is that you have a big drop, you have a sudden realization by investors that maybe things are really not this great. And maybe things are getting bad. And there’s this this this shock to the system, and you see the market go just way down. And of course, did that happen this year? Yes. We’ve had the worst start to a year the first five months of the year, basically on what I’ve read in history, okay, this is the worst start to the year ever. Now. The next thing that he says happens is that you get what’s called a bear market rally a relief rally. Why? Well, because it’s gone down so much. Maybe it’s oversold, maybe we’re overreacting. And we’re in denial. We don’t want to believe that things are as bad as they are. And you know what, maybe the news, we’re getting some news that’s not so bad. And maybe everybody’s like, you know, everybody needs to calm down and take a chill pill. Well, guess what happened? The Federal Reserve said, at some point, we may stop raising interest rates, duh. Yeah. But the market said, Oh, my gosh, inflation is over, they’re gonna, they’re gonna beat it by January, they’re gonna be lowering interest rates, inflation is gone. It’s all up in the rearview mirror, nothing but sunshine ahead. And so he says that what happens when you have these relief rallies, these bear market rallies is that they recover about 50% of the losses that were experienced at the beginning. Because what happened in July, the mark the S&P, the stock market went up. And sure enough, it recovered about half of the losses for the year. And he says that is par for the course, it validates exactly what he thinks is going to happen, which is the third leg is coming. The third leg happens when and he says what happens is that the economy does not yet reflect what’s going to happen. And so that’s why you get that kind of semi-good news, guess what, we just got jobs, numbers, economy’s fine, everybody has a job, you know, there’s no problems here, step away from the vehicle. There’s nothing to see here, right? And so there’s this denial phase that happens.

But then once you start to see the economy deteriorating, once you start to see what’s going to happen in Europe, once you start to see the consumer not running out of their savings from all the money they were given during the pandemic, once you see inflation start to really kick in the effects of the interest rates from the Fed wants that sinks in, then he says that’s when the third leg happens. And that’s the most vicious part of when a super bubble bursts. And so that’s what he thinks is coming next. And it’s hard for us to disagree with that. Now, as I said, at the beginning of this video, if you’re over 50, if you’re retired or retiring soon, do you want to be involved in this kind of risk? What’s the upside for you? And what’s the downside? And you know, we have tattooed on our forehead, you can’t see it, because I’m wearing makeup, but we have tattooed on our forehead whenever we make a decision for our clients. And that is what’s the biggest mistake that we can make for our clients. When we make an investment decision. What’s the biggest mistake? So I asked you what’s the biggest mistake to be in this market because it could go up from here or to be out of it because it could go down from here. So if you make the decision that you want to stay in and it goes down, that’s the mistake. If you get out and it goes up, that’s a mistake as well, which is the biggest mistake to you. In our view. If you stay in and it goes down like Jeremy Grantham thinks which he says another 25% From here, then what about that is that a bigger mistake than missing out on what could happen if it went up and you are out? Our view right now for our clients is we are not in stocks. We are not in any longer term bonds, we are in protection mode. And the thing about that also is that by being in the money market fund, which is where we reside right now, for the most part, what’s happening is that the Federal Reserve is raising interest rates. And as they raise interest rates, money market funds reflect that very quickly. And there the rate you’re getting in your money market fund goes up as well. In the late 80s, many of you are probably old enough to remember, you could get 10%, 16%, and CDs and money market funds because the Fed had raised interest rates so much. So the Fed right now is the enemy of growth. They don’t want growth, they want to slow it down. And Neel Kashkari, who’s one of the voting members of the Fed said, I’m happy the stock market went down this week, they want that they want, they want it to slow down, they want to get rid of inflation.

So if you’re in the market, you’re fighting the Fed, if you’re out of it in a money market fund, you’re on the same side, they’re helping you. So I asked you to think about that. And more importantly, I asked you to visit with one of our retirement planners and help them to build your retirement plan. Take into account your taxes, take into account where you are, how much money you have your Social Security, your insurance, we want to give you a global picture and include in that our Invest and Protect strategy. And as I said, right now, we think you should be thinking about protection more than growth. So that’s where we are. And our website again, is our RPOA.com. Which is RetirementPlannersOfAmerica.com. This is a really long video I know but I’m concerned, I really think that we’re on the verge of something terrible. And I’m hoping that I can help you with that. So thank you for watching this video. Share it with as many friends as you want. Please do as many people as we can help the better. And I will talk soon.