Transcript

Hello, this is our weekly market alert video for the week ended Aprils Fools Day, so happy April Fools Day, Thursday, which is because tomorrow is going to be Good Friday, the market is closed, so it all ends on Thursday, this week does. And one of the questions that I’ve been asked quite a bit lately that I thought I would address in this video is, are we borrowing too much money, is this going to end badly, should we be afraid and so I want to tell you a long story, but I hope an entertaining one to answer that question. When I was kid, one of my favorite shows was a show called Gunsmoke, and it was Western and the hero of the story was Marshall Dillon, and this particular episode, these bad guys come into his town, they rob the bank, they kill people and then they leave, and they run across the border to Mexico to hide. And so Marshall Dillon decides that he’s going to go get them, so he goes across the border, takes his badge off because he doesn’t have jurisdiction in Mexico, and he goes to get him.

He eventually captures the bad guys, the gang’s leader and he handcuffs himself to him so he can take him back to justice. Well, the rest of the gang is skulking around, they’re stalking, they’re following them, and the whole idea is that the moment he falls asleep or whatever, they’re going to kill Marshall Dillon and free their leader. Along the way, Marshall Dillon joins up with a young Mexican girl and her little brother and so the scene that I’ll never forget is they’re sitting in a canyon, it’s nighttime, they have the fire going, the bad guys are skulking around in the darkness and the bad guy leader says to Marshall Dillon, “I’m going to go to sleep now because I can sleep. The moment you sleep my guys are going to get you, so goodnight”, and the young says to the marshall, she says, “Marshall, are you afraid?” And Marshall Dillon answers in a way that I have never forgotten, and he says, “Young lady, a man who’s not afraid is a fool”.

A long story to get to this, but what I’m telling you is that a person who is not afraid I think is a fool, and so what we have is we have a situation here where we are borrowing trillions of dollars and we’re about to do more. And the question is, will this end badly. I’m a student of economic history, and if you look back and you look at the Greeks, you look at the Romans, the British empire until Queen Victoria, and then you look at the Hapsburgs, the German Empire that ended badly after World War I, what did those empires have in common that took them down. The answer is debt. They all succumbed to debt. They borrowed money to finance all these things that they wanted to do. They kept borrowing and borrowing and borrowing. The tipping point happens or has happened when the country has borrowed so much money that the interest on the debt is more than they can tax their citizens to pay for.

So you look at the French. King Louis borrowed tons of money to finance all his castles and his wars and all of that, and then he taxed people so much that the French Revolution came and he lost his head, and then in our world, in the United States, the king taxed us to death to pay for the same thing, his wars and everything else that he was doing, and we said you know what? We’re going to have a tea party because we don’t want to pay those taxes. So when the great empires have come to an end, as of the predominant economy in the world, in the most cases it’s been when they have taken on so much debt that they can’t pay it back. So where are we in that scope.

Interest rates are very very low right now. The 10 year is at 1.75 percent, so we’re at very very, historically very low rates, and so the cost, the financing of the debt is the challenge, and as long as we can pay that, we can continue to borrow, which is a blessing and a cruse at the same time, because it means we can continue to borrow until we can’t. It’s kind of like having a credit card where you have a minimum payment. You keep borrowing as long as you can make the minimum payment, but the moment you can’t make the minimum payment, they come to you and they say the whole thing is due and that’s when you run into trouble. So are we there yet? Not really, but if we continue to borrow like this, our view is that we’re going to see a big spike in spending. We’ll see the economy is going into potentially the fastest recovery in our history, so we can see the recovery driving profits and driving the stock market to new all time highs. As you know, our fearless forecast is DOW 35,000. We’ve already hit 33,000 and we’re only at the end of March, so we think 35,000 is going to happen and it’ll go on into the end of this year, but that sugar high, will fade, and when that happens we do believe that we’ll have a pretty significant correction. The good news is big spike, the bad news is sometime next year we’ll have a correction and a bad one to come down from that sugar high.

So, should you worry about all this? Well, the reason why we have our invest and protect strategy is exactly so that you don’t have to worry about it. We want to worry about it so that you don’t have to, and our strategy is ready to be implemented should we see a threat to your financial security, and we will act aggressively and take care and get out if we need to. So we want you to enjoy the summer. The pandemic looks like, the vaccine and everything else looks like maybe it might be coming to an end and it’s time to go outside and have some fun, and enjoy life again, and so I wish all the best for all of you and I hope that you are well and thank you for watching this video.

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.