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Hello. This is our weekly Market Alert video for the week ending November 5, 2021. I am Ken Moraif, the founder and the Senior Retirement Planner at Retirement Planners of America. Before we get going this week, I just wanted to address something that clients have been telling me for years, which I have found to be not true. And that is, “When you become a grandfather, it’ll change your life. It’ll be the best thing that’s ever happened. You have no idea how great having a grandchild is.” Well, I’m here to tell you that being a grandfather stinks. And I’ll tell you why. You’ve probably heard the expression that when your son gets married, you lose your son. When your daughter gets married, you gain a son in law. Well, I’ve got a new one for you. When you gain a grandchild, you lose a wife. Our grandchild lives a two-hour drive away from us. My wife gets in her car, and she’s gone for two or three days at a time. And she announces it to me with 13 seconds advanced notice, I’ve become second fiddle. And now I’m thinking if I have four grandchildren, I’ll be fifth fiddle. I don’t like being fifth fiddle. I like being first fiddle. So you know what? That grandson of mine, he may think he’s got cute, and he’s got newness, and he’s got all that. But I’ve got 37 years of marriage working for me. I will win this. He’s going down!

Anyway, let’s talk about what’s going on with the stock market. As you may have noticed, what we’ve been saying will happen the past several weeks is playing out. The Dow and the S&P are again hitting new all-time highs, despite the supply chain issues, despite the inflation issues, despite all the worry and angst that’s been going on. What we’ve been telling you would happen has, and one of the things that has driven the market upward, in our view here particularly, has added fuel to the fire if you will. The Federal Reserve has announced their plan to “taper.”

You may be wondering what that even means What does tapering mean? Well, one of the things that the Federal Reserve wants is to keep interest rates low because that stimulates the economy. They have two dials they can turn to try to keep interest rates low. One of them is the short-term interest rate, which they have direct control over. And that’s when you see the headline that the Federal Reserve just raised or lowered interest rates—that’s the short-term interest rate. The Federal Reserve controls that directly, and that’s a straightforward thing.

The Fed also has a tool that is far more subtle, and that is what is called bond purchases. The Federal Reserve has been buying billions of dollars of government bonds over the last few years. Every month, they’re buying billions and billions and billions of dollars in bonds. When you have a big gorilla like the Federal Reserve out there buying stuff, you’re creating a huge demand for something. When you create a huge demand for something, what does that do to the price of that thing? In this case, it makes the price go up. If the price goes up of bonds, then in most cases, there is an inverse reaction, which is interest rates go down.

As you guys know, we’ve talked about it in this video and in our podcast, that there’s an inverse relationship between the price of bonds and interest rates in most cases. As the price of bonds goes up, interest rates go down and vice versa. So, what the Fed is

doing with these bond purchases, is they want to keep interest rates low. They’re creating this big demand that’s keeping interest rates low. Well, they’ve decided that they’re going to taper their purchasing, meaning they’re going to reduce the amount of bonds they’re purchasing, which therefore kind of takes the pressure on the balloon, they’re holding underwater to kind of rise a little bit. So, this is a very subtle, behind-the-scenes, doesn’t-get-a-lot-of-attention move the Federal Reserve has announced they’re going to do.

So, if interest rates are going up because they are tapering, then why on earth are we seeing new all-time highs in the Dow and S&P? Well, the reason behind that, in our view, is that if they have decided that it’s time to let interest rates gradually rise. They’re doing that because they think the economy is now healthy enough and growing well enough that they can do that, and that’s a good sign. If the economy is getting better, companies should have better profits. If companies have better profits, then they should see their stock prices rise. Therefore, the stock market is anticipating that, and we believe that’s why we’re seeing this big rise.

So, we believe this continues the narrative that our economy is healing, and that we’re getting back to work. We saw the jobs numbers come out today, and they’re terrific numbers that are higher than expected—although the one number that we look at continues to be stubbornly low. That’s the labor participation rate, which is the number of people who are of working age who are actually working. That number is about 61, almost 62%, which means we have about 38% of the people who are of working age in this country who are not working. So, when those people go back to work, I think we should see a big rise in productivity and profits. Our outlook is still positive. We think we can see continued growth in the markets, and new all-time highs continuing.

Now, having said all that, as you guys know, we do not have a crystal ball and we don’t know the future. We can only prognosticate, and that’s what we’re doing now. Therefore, it is always important, in our view, to have a strategy to address when the bad times come. As we spoke about last week, what causes bear markets and causes the market to go down is the unexpected, not the expected. The pandemic was unexpected, the crisis in 2008, with the crash of the banks, that was unexpected. Those kinds of things are what causes that, and because they’re unexpected, the only way we know of to address it is to prepare in advance and be ready for when the unexpected happens. We don’t know when it’ll happen, but we want to be ready when it does, and that’s why we have our Invest and Protect Strategy™. And you guys know we’ve acted on it many times in the past, and we will when the next time comes. We hope this gives you peace of mind.

So now you can all impress your friends by talking about the Fed’s tapering at the next cocktail party, and you’ll be so smart! Thank you for watching this video. We appreciate you beyond words. We are so grateful you’ve chosen us to be your retirement planner. We will always do everything we can to help you to enjoy your second childhood without parental supervision, and to have your money last as long as you do so you can have financial peace of mind. So again, thank you for watching this video and we will talk again 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.