Transcript

Hello, my name is Moraif, Ken Moraif. And on this show, we’d like our bonds shaken and not stirred. Unfortunately, many of the other podcasters, videocasters, and radio shows, they stir their bonds.

Anyway, thanks for watching this video. I am Ken Moraif, and I am the CEO and founder of Retirement Planners of America. And we’re a firm that currently serves over 7,000 families across the country. And so, what we’re going to talk about this week is what happened, what we think is going to happen, and what are the important things that we think you should be looking at. And so, you know, as I said, at our firm, we’d like our bonds shaken and not stirred.

So, I’m going to talk a little bit about the bond market with you, and why we think that is an important thing to be looking at. And the reason why is because we’re going to learn from history. Now, history does not predict the future. But there is also an expression that says that if you don’t learn from the past, you’re doomed to repeat it. So, pick which one you like. We want to learn from the past. So back in the early 1980s, we had high inflation and the Federal Reserve, just like today, decided that “We have to get rid of inflation, we have to wring it out of the system. And we’re going to raise interest rates. And if in the process, we likely to create a recession, so be it.” That’s exactly what the Fed today is saying now. And so, what people are looking at, if you go back and you study what happened then, when did that bear market end? Well, interestingly, it coincided with when the entity, the Federal Reserve, which was trying to improve economy and that could result in a recession, which caused the stock market to go down and caused the bear market. When they took their foot off the gas is when the bear market ended. And we saw a recovery start.

So how can we measure that? What can we look at? Well, there’s a very relevant number, it’s called the 10-year Treasury yield. So, what is the 10-year Treasury yield? Well, let me tell you. Let me show you. I’m going to share my screen with you. This is a chart that shows you the 10-year Treasury yield. It’s the interest rate that the market, the bond market, is expecting the Federal Reserve to raise interest rates to, if that makes sense. Okay, so it’s a prediction mechanism for what the Fed may do. So, what the market right now is saying is they think the Fed is going to raise interest rates all the way to 4.239%. Pretty specific number there, right? Three decimal points, man, the market is like really specific when it predicts the future. But the other interesting thing is, if you look at this is that you can see that interest rates earlier this year, this is January through October. And if you look at the beginning of this year, interest rates are less than 2%. Now they’re over 4%. All along the way, the bond market has been wrong. It has been indicating that the Fed is not going to raise interest rates, they’re going to stop, they’re going to slow down. We think that’s what’s happening today, as well.

There’s this drumbeat of optimism, if you will, that the Fed may not raise interest rates to the point it would result in harm to the economy, that they’re going to let up at some point. And right now, there’s a feel that they might let up. But be that as it may, you can see how rapidly that yield the interest rate that the 10-year treasury note is paying, which is a reflection of the expectations of what the Fed is going to do. So, if you go back to the 1980s, what happened was that when interest rates peaked, and folks, they peaked at 18%. We are at four now. We’re a far cry from where it was with inflation, not as bad as today. So, we don’t believe that interest rates are going to stop at 4 ½ or 5%. We think they’re going to go beyond that. But that’s what the bond market seems to be predicting right now.

Now, if you go back to the early 1980s, and you look at what happened when the 10-year Treasury yield peaked and started coming down in a sustainable fashion that coincided with the end of the bear market and coincided with a what was potentially a good time to buy back in. Why? Because the Federal Reserve was raising interest rates that would likely put the economy into a recession, and in so doing, was driving the stock market down too. The moment they stopped doing that then it was like okay, it’s safe to go back in now because the big gorilla has left the room if you will. And so, this is a very important number to watch in our view. And as you can see, you can find it on MarketWatch. You can find it on Google, but if you want to do this at home, you can do it for yourself.

The other thing we look at in our firm is we have a number that we measure, that we quantify, in our view, which is the when the market has reached capitulation. And historically, when the market reaches capitulation, meaning that investors have given up all hope, and they’ve sold out, they panic and the baby’s been thrown out with the bathwater. When that happens, then what happens is that the bear market is usually over. And we have looked, we’ve done our research, and we think we have a way of measuring when that capitulation point comes. That’s when we’d be looking at buying back in, but we haven’t reached that yet. So, we think the worst is still yet to come. It ain’t over yet, in our view. So, if you’re asking, “Is this bear market over?” The answer is, “We don’t think so. We think was there’s a lot more downside still to go before we’re done.”

So, what should you do? Well, one of the things that we’ve done with our clients is we are in cash, we’re in a money market fund. And the good news about the money market fund is that as the Fed raises interest rates, the interest rate we get on a money market fund usually goes up right along with it. So, in our view, you’re getting paid to be safe. We think that’s a good thing.

So, what I encourage you to do is visit with one of our retirement planners, and you can do that by going to our website. And that’s RPOA.com. If you’re over 50, we’ll visit with you at no charge or obligation, we’ll build a retirement plan with you. We’ll talk about how you should be invested in our view right now. And we’ll help you to make some decisions and hopefully survive this big mess and this terrible time that we think we’re about to head into and that we are already in.

Now you may be wondering, why is Ken wearing a tux? Well, the answer is because I appreciate you watching this video. That’s why. No. I’m wearing this tux today because I’m going to a wedding. My youngest daughter’s best friend is getting married. And I’m not in the wedding. I’m just a spectator. I thought I could go in a T shirt and a pair of shorts. But my wife said no, you are going to wear the tux like everybody else. So that’s why I’m wearing my tux. But you know maybe from now on I think I look good in a tux. What do you think? Maybe I should wear this every time I do the weekly videos for you. Anyway, thanks for watching this video and I will talk soon.

Oh, and by the way, share this with as many of your friends as you wish. Okay, please do. We want to try to help as many people as we can. So again, thanks for watching this video.