Transcript

Hello, and welcome to our market alert video for today, which is Friday, September 16, 2022. And this is a video that I’m going to put under the category of I am of no value to you, if I don’t tell it like it is. And our view is that the beginning of the collapse of the market is starting now. And I want to go through our thinking behind it. And why we think that this is a time of extreme danger and risk for people, especially who are over 50, who are retired, retiring soon. And if that’s you, then I’m talking to you.

So, I want to share my screen with you here. So, give you a moment to play with the technology. And I want to go over with you the investor emotion roller coaster, and I’ve gone through this in previous videos with you. But I haven’t shown you a picture of it. And I want to show you where we think we are on this roller coaster ride, and why we think we’re headed into very dangerous waters right now. So, on the left-hand side, this is the investor emotion roller coaster. On the left-hand side, you see the buildup of bubbles of large run ups in the stock market. And when I say stock market, I mean the S&P 500 index. So, you see a big, large run up followed by a big drop: the bear market, in cases of major bear markets like Y2K, 2008, The Great Depression, you see that big drop that there? And then the rise and as the market behaves in many cases, so does well should I say as people have their emotions and their investments at risk, so does the stock market tend to go with it. So, these two tend to be very highly correlated.

So, let’s start on the left. And what happens here, I’m starting at here at a moment of optimism. And so, this place here is where we’re coming out of a bad period, there’s been some optimistic changes in the economy, in the markets, in sentiment, people start feeling optimistic, they start investing, then what happens is, it becomes exciting, because you know, I’m investing and the money’s going up. This is great, I love this, then we go into a period where it’s actually thrilling. It’s so exciting. I’m having so much fun, I’m making so much money. And then you get to the period of euphoria, which is where people just invest without any thought about risk. They’re not afraid of anything, they are fearless, and you have that euphoric rise in the market. Now, this period here, we believe happened to us leading into the beginning of this year. And the reason why we say that is because when the pandemic hit, the Federal Reserve, the federal government, through $8 trillion into the economy, they got it in a helicopter, they just tossed it out of the helicopter onto the American consumer. And so, the consumer, of course, was locked down during the pandemic. So, they got all this money. And what did they do with it, they were sitting there, they couldn’t buy anything, they couldn’t go out. So, they started putting it into the stock market. And so, you started seeing this excitement starting to happen, because as people bought, then the market went up, then it became thrilling. And that was really exciting. And then you got to the euphoria stage, and this is where investors were just buying anything. I mean, they were buying GameStop, which was a bankrupt company, basically, and driving the stock up 1,000%. They were buying Bitcoin and all these other things, you know, just purely speculative things with no fear, you can’t lose money. It’s great. And you had that euphoria.

Well, of course, then what happens is you go to the next phase, and that is right here, where you have anxiety. There’s a period and usually this is the more sophisticated investors, the institutional investors, that’s where people start saying, wait a second, this is a little much this is not right. You can’t have you know, the stocks like Gamestop go up 1,000% The, you know, the old thing. I forget who said it, but he said, you know, when his shoeshine person was giving him stock tips, he finally realized, Okay, I got to get out. That was during the Great Depression. But be that as it may, when that anxiety period comes in, you see the market have a big drop. And our Invest and Protect Strategy is designed to detect that anxiety period, where you have that big drop, and it tells us it’s time to get out. And of course, our strategy did say it was time to get out several months ago, we believe during that anxiety phase. And so what happened this year, the worst start to a year in decades, maybe ever, that’s because of that anxiety phase where wait a second, things are not good. Sometimes news comes out that helps to feed that anxiety this year, of course, the news is, hey, inflation is coming along, it’s going to be really bad, the economy is at risk. And so, there’s that anxiety phase. And so, our strategy, as I mentioned, is designed to capture that moment that when that first big drop happens, and hopefully get us out without any major damage.

Now, the next thing that happens is you go into a period of denial. And the denial phase is where wait a second, it’s not as bad as we thought, you know, the Fed isn’t going to raise interest rates to the sky. Inflation is it’s bad, but it’s going to be gone by January. And you know, it looks like the consumers hanging in there and profits are okay. And so, I’m not going to get worried, I’m not going to get scared, I’m not going to do anything about it. I’m going to just live in denial. And in fact, we entitled one of our videos a little bit ago, are you in denial with your investments, okay, because the denial phase comes with a large rise in the market. And usually, this denial phase, the market recovers about 50% of the losses that had incurred during that first anxiety all the way to denial phase. And what happened this year, in July, the market, the S&P went up so much that it basically erased half of all the losses that happened in the first six months of the year. But of course, that period is also called a bear market rally. There’s also the expression catching falling knives. There’s lots of visually, you know, picture-generating ways to describe this denial period. But here’s the thing. What happens after the denial period is that the economy starts to give news that validates why the anxiety phase happened, it starts to say, wait a second, things are now actually real. And that moment happened when Jerome Powell, the Federal Reserve Chairman, came out and said, guys, you’re not listening to me. I’m telling you; we are going to raise interest rates until we beat this inflation beast. And he said it in no uncertain terms. And then it was like, oh, wow, wait a second, maybe this is real. Oh, my gosh. And so, then what happens is you had 1000-point drop, you have this week happen. And that’s where fear starts to come into the picture. And that’s where people start to get scared, because maybe it’s really bad. And more and more data from the economy starts to come in. And it becomes scarier and scarier.

Case in point, FedEx just came out and said that things are deteriorating so fast, that they didn’t even anticipate it deteriorating that fast. So, they’re cutting way back. They’re not hiring anybody; they’re closing 90 stores. I mean, they are reacting quickly because they see the writing on the wall. And that kind of news then feeds into the market, and investors now start to get out of that denial phase, then they go into the fear phase. Now, when the fear phase happens, the selling starts. And that’s where we believe we are now. We’re starting to see the selling, accelerate again.

The next phase that happens is desperation, then comes panic, oh, my gosh, I have lost so much money. I can’t take it anymore. I’ve got to get out. I’ve got to do that now. And you know, we felt that in 2008, as you know, our strategy said to sell in November of 2007, which we believe was in that anxiety phase where suddenly there was a shake in the consciousness. And so, we counseled our clients to sell all their equities, before 2008 before the calendar year even started, and that that desperation and panic period happened around October-ish of 2008. And then what happened then was people just sold everything. There’s a capitulation, which means that the baby gets thrown out with the bathwater. People are just so panicked are so scared that they just sell everything. And this period right over here is the definition of selling at the bottom, which unfortunately, a lot of people do they get they hang in there. They don’t want to sell; they don’t want to get out. They don’t want to protect themselves. But eventually they get to the point where they say I have to I can’t do this anymore. And then they go into despondency and depression. You know, they’ve lost so much money. They don’t know what they’re going to do. It’s awful. How is this ever going to come back? Am I ever going to rebuild it? How long before I can retire? You know, now that I’m retired, I wish I hadn’t. I can’t support my lifestyle. All kinds of very, very negative and bad emotions come into this place.

But then it’s eventually, and you know what 2008, it took about five years and Y2K, it took about three years to turn itself around. And now you start seeing things starting to come back. And then you get to a place where we called hope. And then you come to oh my gosh, thank goodness, it’s over. And then you get to optimism, and you rinse and repeat. The important thing that I want to share with you in this video is we think that we are coming out of this fear phase right here. And we are headed into this desperation, panic and capitulation phase. And we’ve said that we think the Dow, it’s not unrealistic in our view, that the Dow could see 25,000, which is about a 20ish percent down from here. And if it takes years to recover, my question to you is, you know, are you going to be able to retire? If you lose that kind of money? Are you going to be able to stay retired? Are you going to be able to take the trips and visit your family and do all the things that you want, if this happens, so my strong encouragement to you is at least get a second opinion, come in and visit with us and learn about whether we think based on your circumstances that you should still be in this market.

We believe right now that the best place to be, you know, there are times when cash is king, and the money market fund out of all equities, out of all long-term bonds and medium-term bonds. Again, why? Because interest rates are going up bonds tend to go down in that environment. And we think the stock market is really not a good place, particularly if you’re over 50, if you’re retired or retiring soon. So come in and visit with us visit with one of our retirement planners look at get a second opinion build look at what we can offer you to protect your retirement This is a time when it’s not a joke anymore. It’s about to get very real in our view.

So, like I said, this wasn’t going to be a fun video for me to make for you, because, you know, I usually like to give good news and things are rosy and nice, but I’m of no value to you, if I don’t tell it like I see it. And so, we’re very concerned for you. I encourage you to share this video with as many of your friends and business associates as possible. We want to help as many people get through this, we think going to be a very terrible time as possible. So again, thanks for watching this video. Our website again is rpoa.com. Go there avail yourself of our resources and visit with one of our retirement planners as well. So, thanks for watching this video and we’ll talk soon.