Transcript

Hello, I’m Ken Moraif. I’m founder and CEO of Retirement Planners of America, and this is our weekly market alert video that I’m sending to you. And the reason why I am wearing my purple shirt today, let me tilt my camera down so you can see it better, I’m wearing my RPOA Cares shirt. RPOA, of course, is the acronym for Retirement Planners of America. And RPOA Cares is our corporate nonprofit foundation. And what we’ve committed to this year is that if anybody contributes to the Alzheimer’s Association through our team’s fundraising page, then we will match it up to the first $150,000. So, our goal is to match all that money. So ideally, we would donate $300,000 in total. We just had our client appreciation event in the Dallas Fort Worth area, and we had it at the ballpark where the Rangers play, and it is a fantastic stadium, just incredible, brand new. And we had over 1,200 people there. We told them about our desire to raise money for the Alzheimer’s Association and boy did they step up. We raised $5,000 in just a few hours. And, of course, we match that. So far, we have raised $16,000 for the Alzheimer’s Association. And that’s just fantastic.

And so let me talk about what happened this last week in the stock market, with the Federal Reserve and interest rates, etc. So, as you may know, the Federal Reserve came out and said that they are going to raise interest rates, they raised interest rates by three quarters of a percent. And the important thing with these pronouncements that you get from the Federal Reserve is the language that goes with it. Because that tells us what they’re thinking going forward. And the most important words that we heard in that entire thing was, “We’re not going to stop until the job is done.” Those are very important words in our view, because basically it goes counter to what’s been driving the market here for the last month. Over the last month, we’ve seen the market go up quite a bit on the assumption that the Fed may not raise interest rates as high, they may stop, they will relent, they’re going to pivot, all that kind of stuff. And actually, what they basically said is, “We’re not going to do that. We’re going to keep going until the job is done.”

And as you know, we’ve used this analogy in the past where we think that inflation is like cancer for the economy. And a recession is like the flu. And so given a choice of which one of those you want, you know, you want the flu, not the cancer. So right now, we believe the economy has cancer, it has inflation. And so, in a scenario where somebody who has cancer has been given radiation therapy, if the moment it shows signs of getting a little bit better, they say, “Okay, we’re going to stop with the radiation therapy.” Well guess what’s going to happen? That cancer will come back strong. So, they basically said they’ve studied other central bankers as well as Federal Reserve Chairman Volcker back in the 80s. They studied him. And what they saw was that when they relented, when they stopped raising interest rates before the job was done, the inflation came back really bad and worse than before, and then they had even more work to do. And in fact, Paul Volcker is, we believe, Chairman Powell’s hero. You know, he’s kind of like the Federal Reserve Chairman that everybody looks at who’s saved America when we had our high hyperinflation in the early 80s. Now, he got a lot of heat, from politicians, from economists, from the stock market, from the bond market, everybody was like, “Stop, stop, stop. It’s too much pain, you’re killing us. We can’t take it; you’re going to break something.” And he relented, he actually at one point stopped and felt the pressure, but then inflation came back stronger. And so, he had to go back to work. And he eventually raised interest rates all the way up to 18%. So, the lesson from that, that I think this Federal Reserve has learned is we will not relent until the job is done.

So, what does that mean to us here? Well, it means that they’ve said that the policy error that people are worried about that they might make, which is “Oh, no, they might put us in a recession.” They’re not worried about that. The policy error, in our view, is not that they put us in a recession, we need to get that straight. We think the policy error is that they don’t get inflation down. And the reason why inflation is so dangerous is because it can cause a country to become poor. If you look at Argentina, if you look at Venezuela, these were prosperous countries, very vibrant economies, high standards of living. Inflation took hold and they didn’t defeat it, and then they became poor, and they could barely feed their citizens. And once it gets that bad, it is almost impossible to get rid of it and go back to prosperity again. The Federal Reserve is aware of this, and they’ve told us they’re going to do what it takes, So, what that means in our view is, we’re likely going to see unemployment pick up, we’re likely to see profits fall, we’re likely to see the stock market go down from here. And if they’re raising interest rates, like we think they will, we’re also going to see bond prices fall as well. That’s why we told our clients to be out of all bonds, all stocks in April. This is this is not an unpredictable thing that’s happening right now. You can look into the future and ask yourself, if they keep raising interest rates, is that going to be good for the economy and good for profits and good for the stock market? Or bad? And is it going to be good for bonds? Or bad? And if it’s bad for those two things? Are you in there? Are you taking a beating? Because one day it’s going to come back? And how bad will it get? We’d rather sit on the sidelines in in cash.

Now if you look at what was happening with money market funds, when the Fed raises interest rates, guess what happens in the money market fund? It goes up the interest rate you’re getting paid goes up too. So, you’re getting paid to be safe in our opinion. I feel like I shouldn’t have to convince anybody of this. But I do. So anyway, if you are invested right now, if you’re over 50 in particular, we believe this is a time for you to be thinking about protecting yourself and not thinking about how can I make more money? Or how can I take advantage of this situation? We think it’s too risky right now to do that. Bonds we don’t think are the place to protect you the 60/40 portfolio is getting hammered. The stock market we think is going to get hammered. So come and visit with one of our retirement planners, get a second opinion about where you should be invested in our opinion, and see if we can help you with that. So, thank you for watching this video. Share it with as many people as you would like. Contribute to the cause. We sent you a link there. If you give money, we will match it up to the $150,000 of total. So, we’re happy to help end Alzheimer’s if we can and you can join the cause if you’d like so again, thank you for watching this video and we will talk soon.

Please note: Transcript has been modified after the time of recording.