Welcome to Season 3 Episode 2 of Retire Eyes Wide Open.
In this episode of Retire Eyes Wide Open, Scot Landborg takes listeners on a journey through the intersection of perspective, gratitude, artificial intelligence (AI), and investing. From reflection exercises to market analysis, the episode covers an array of topics that help individuals make informed decisions about their finances.
Scot opens with a discussion of gratitude and perspective, highlighting a simple yet powerful mental exercise that can help individuals become more present in the moment and mindful of the small beauties in life. The exercise involves envisioning oneself at an advanced age and reflecting on what one would cherish or regret, prompting a shift in perspective that becomes especially pertinent in retirement.
The Money Rundown segment analyzes recent financial news, including the debt ceiling resolution, economic outlook, bear market concerns, improving earnings breadth, and bullish historical data. Financial advisor Steven Murphy provides insights on each story, helping investors navigate potential risks and opportunities.
In the Money with Murph segment, Steven explores the hype surrounding AI, with companies leveraging it for stock price increases and media fueling the AI buzz. The podcast examines whether AI could lead to a bubble or mania, comparing it to past investment bubbles and noting common characteristics of bubbles investors should be aware of. While AI holds immense potential, investors must exercise caution, considering companies with solid fundamentals and evaluating their risk tolerance.
The episode concludes with a Listener Questions segment, where Scot and Steven address concerns from the show's audience. The questions range from international investing appeal to windfall elimination provision to target date funds. The team offers investing tips for the current market, including buffered ETFs, barrier ETFs, and careful stock and sector selection.
Overall, the episode shows that gaining insights from multiple angles is key to making informed decisions about one's life and finance. By applying lessons from the past, embracing gratitude, and making thoughtful investment choices, individuals can navigate the complexities of the modern world with eyes wide open.
Welcome to Season 3 episode 2 of Retire Eyes Wide Open. I’m Scot Landborg –
Today we’re talking Perspective about Gratidude and about AI. What a mish mash!
We’ll cover the top news in our money rundown, we’ll take listener questions, Money with Murph we’ll cover the rage of artificial intelligence. And we’ll try to bring some perspective on how you can be more present in the NOW.
This is Retire Eyes Eide Open!
The Best Thing I Saw This Week:
Now for the The Best Thing I saw This Week
Alex Hormozi – founder of acquisition.com, YouTube star, business guru posted a piece on gratitude that really hit me.
He talks about one of the tools he uses to be grateful – is imagine he is 85 years old. He’s only 32 by the way. Imagine himself at 85 years old – and if he had a time machine at 85 and could travel back to right now – this moment.
How would that change his perspective?
Maybe you’re 55? Maybe you’re 65? Imagine for a minute you’re 85 and you travel back to view yourself right now and view yourself. What would you think? Wow, 60 was great! My body was great! Not a medical concern in the world, body felt good. That moment with my wife, the walks, happy hour. Time with my granddaughter. Dinner with the family.
If you looked back at this moment – 20 years from now – what would you think and feel? What would you be grateful for. What would you tell yourself to do differently?
I was at home with my boys – 7 and 4. It was dusk – sun just about to go down. We were wrestling on the couch – we do a lot of that with two active boys – they love it, so do I. As we were playing, a thought I saw something out of the corner of my eye. Something outside the window.
Do you ever get that feeling, every once in a while, somebody is watching.
Probably was a reflection from a car passing by, but for a moment I thought- what if it was me, from the future, sneaking a peak of a special moment as my 85 year old self. As weird as it sounds. For a moment, that’s where my mind was. At 85, wanting to go back to that moment, with 2 boys roughhousing, playing, wrestling.
Be present in now. Be mindful of small beauty.
If you are in retirement or approaching retirement. Know this next phase is not all about fireworks. It’s not all about the big epic vacation.
It’s about doing more of what you want, less of what you don’t. It’s about making the most of those moments even the small ones. And gratefulness and mindfulness can make that journey so much more enjoyable.
How can the perspective of an 85 year old change your mindset and your view of where you are now. Of the challenges that you face of the beauty of day to day. What would you tell yourself if 20 years from now you could go back in time. What would you tell yourself to cherish, to value, to soak in. What would you tell yourself to change, to move on from to not care about.
Gratitude is a powerful force.
And that is the best thing I saw this week.
Now for the Money Rundown
Our Money Rundown segment is where we cover recent news
There are a lot of media sources out there that are going to help give you updated information about the economy and the markets.
Our job is to help summarize and synthesize – help pick out a few stories that are most important for you, as a retiree or investor.
Joining us to today is financial advisor Steven Murphy – welcome Steven.
STEVEN: Thanks, Scot.
Story #1 – Debt ceiling resolution?
Earlier this month, the President and Republicans reached a deal to avoid a US default and resolved the debt ceiling risk. What are the biggest takeaways for investors and are there still lingering risks?
SCOT: Oh, man, thanks, Steven. I mean, this is a huge story for a month or two going up to theresolution, the debt ceiling and really thankful that it got resolved. It was scary at the time. Butlike every time before, they fixed it, and they've resolved it.
The biggest takeaways are a few things.
Number one, there isn't going to be any more debt ceiling debate until 2025. That'sbeen deferred. The can's been kicked down the road. There was some small spending caps,there was a clawback of COVID funds, some work requirements for government benefits, someIRS cuts, and student loans are going to have to be repaid. Those are the biggest takeawaysfrom from the bill.
But the biggest takeaway today from investors now, is when we look at thepast debt ceiling issues, there was a lot of volatility around the stock market around that. Andthe volatility continued after there was resolution. And the biggest reason was the downgradeof US debt. So the thing we're keeping our eye on is there was a story recently in Reutersabout there being potential risk of us downgrade still, even after they kind of reached aresolution. So it's something to keep an eye on. Is there are a potential downgrade in US debtand how that could impact the market, how it could impact the economy? And how could impactimpact you as an investor.
STEVEN: Story #2 – Treasury Secretary Janet Yellen testified before Congress this week and said the odds of recession have gone down and the Fed is no longer expecting a recession in 2023.
SCOT: I thought this was an interesting story. Because the odds of recession have been pretty, prettysignificant for quite a while. But our technical models are showing that the technical indicatorsin this market they've been improving. One of our longer term indicators went positive a couplemonths ago, one of our more intermediate indicators from positive a couple of weeks ago. Sothe technical indicators have been consistently improving. I know, Stephen, you run a numberof technical models as well. And things have been improving. So to hear from Treasury,Secretary Yellen, that they don't think a recession is going to happen this year, I think it's kindof aligned with what we're seeing from the technical side. But I think what's important toremember as an investor is often the stock market can rally in advance of the fundamentalsimproving, so the economy can get worse and yet the market can get -- can improve, andsometimes it's hard for investors to remember.
STEVEN: Story #3 – Morgan Stanley’s Mike Wilson warns about a renewed bear market.
Mike Wilson stated earlier this month that economic pressures are still mounting & are likely to “bust” corporate earnings. He added that a fed pause can re-awaken the bear. Wilson has maintained his bearish position despite the market having a strong start to the year and entering into a bull market, which many define as a 20% rally off of lows. This commentary from Wilson came before the latest FOMC meeting where they did in fact pause rates, as he predicted. The market did not react well but a light pullback is very different from a new bear market.
SCOT: Yeah, Mike Wilson. He was right all of last year. He was probably the most bearish of analystson Wall Street at calling the decline of 2022. But this year, he hasn't been right. And he'sacknowledged that and he thinks he's been a little late to the game and the markets had agood strong rally S&P up double digits, NASDAQ up big bonds have been pretty flat. So he'sbeen pretty wrong this year. And yeah, he's stuck to the bullish thesis and he thinks thatearnings are going to come in worse than expected, that the public's going to be surprised by itand that the markets going to see a decline. So Mike Wilson maintains his bearish stanceon the market and he is one of the more bearish analysts on Wall Street.
SCOT: Story #4 – Earnings Breadth Improving
Jurrien Timmer of Fidelity put out a chart showing improving earnings breadth of the S&P 500. What does that mean? It is a measure of percentage of companies that are revising their earnings estimates positively. Three months ago only 27% of S&P 500 companies had rising earnings estimates for the following quarter. Now, it is up to 47%. Not perfect, but a growing improvement, especially as inflation continues to decrease.
SCOT: Thanks for that info, Steven. Yeah, I mean, I think it is more fundamental reasons why thismarket is moving higher. naysayers like Mike Wilson had been talking about earnings coming inabout earnings misses, and we just haven't seen that we haven't seen that. We'renot seeing the same level of growth in earnings that we've seen in prior years. But we're notseeing the level of fall off that you might expect with rates where they are now. So it makesyou more bullish on the resilience of the market and the resilience of the economy increasesthat likelihood of a potential soft landing, despite the Fed raising rates. We just have seen morecompanies beating earnings expectations and more than we would we'd normally perspective.And that view is in contrast to what Mike Wilson has been saying and give some ammunition tothe bulls in this market.
STEVEN: Story #5 – More bullish historical data
Ryan Detrick tweeted out on June 12th a statistic showing the previous 15 times that when the S&P 500 reaches a new 52 week high after going without one for a year or more, 15 out of 15 times a year later the market was up and up more than 17% on average. We just hit that new 52 week high on June 12th.
SCOT: I saw that tweet from Ryan. And I thought it was compelling. I mean, the markets had a greatstart to the year. And historically there's more and more data that's lining up that that makesyou more optimistic about the market moving forward from here the market continue to add togains doesn't mean there can't be some volatility in the short term. And it definitely doesn'tmean at all clear, when we look at the beginning of this year. Analysts were pretty divided on ifthis market was going to go higher or lower, but really thought the market would be rangebound. And the market is pushed to the top of that range, and people have had to revise theirestimates of where the market is going from here. Why could it go higher, could go higher,because there's still a lot of cash on the sidelines, a lot of liquidity, it could go lower if the Fed isto keep raising interest rates to slow inflation. We saw that here this last week in the UK, theyraised interest rates as inflation they haven't been able to get a handle on it. So that'ssomething that we can continue to see volatility on. But there's no question there's more andmore technical data backing up the fact that we we likely are not retesting the lows of lastyear, and we could potentially see new highs and and for us, it's one of the reasons why I'vebeen pivoting more and more to make sure we're getting exposure to that upside if the marketdoes recover, and for people that are that are still cautious about the market, you know, theremay be some strategies that you can employ to get some upside potential while still mitigating,risk. And for us, you know, buffer ETFs buffered ETF strategies have been effectivefor people that are cautiously wanting to get back in the market, get some exposure but stillhave some volatility, risk and some risk management.
And that’s our Money Rundown for the week.
And now… it's time for Money with Murph.
Money with Murph:
STEVEN: Artificial intelligence is all the rage. With the hype initially created with the viral explosion of ChatGPT, it’s all we hear about and how it will change everyone’s lives in the coming years. If you follow earnings reports from various companies, seemingly every management team’s golden ticket to receiving an increase in their stock price was to simply talk about how they are utilizing AI, regardless of how the good or bad the company’s actual quarter was.
It's led many people to think that we may be in a “bubble” or a “mania” regarding stocks & AI. But does anyone ever truly know when we are within a bubble, regardless of what the topic is? Well, like many aspects of investing, history tends to be our best guide. We’ve seen plenty of bubbles & manias in the past decades, some larger than others. For example, the dot com bubble, the housing bubble, 3D printing stocks, cannabis companies, SPACs & the metaverse, just to name a few. Let’s take a look at some common characteristics that these past bubbles have had and if we may share some of those common traits now with artificial intelligence.
1. Rapid stock price increases. Looking at some various companies that are considered leaders in the AI movement, this definitely would seem to be the case. Many have had extraordinary gains in very limited time.
SCOT: We've seen huge gains in a number of companies tied to AI and he hit her in the head Murph. Imean it's it is the rage people are talking about it. Companies are talking about I think there'sjust no question. It's it's on everybody's mind. And CEOs have been using it to booststock prices by talkin about it. So, you know, the question is is, are we in an AI bubble?Has the run up, we've seen in some of these companies been too much. And when you'retalking about common traits that you see, yeah, there's been a rapid stock price at a number ofthese companies, a number of these businesses. So I think you got to be a little bit careful. Thething to remember is sometimes that that bubble, that mania can last a while, right, it can goon for quite a while. So you may be able to profit by some of that upside in some of thesecompanies, and what I think what could make sense is partnering, solid fundamentalinvestment analysis with companies that have exposure to AI. If you can find both of those, Ithink you're in a good place. I think it's dangerous to be buying just companies just focused onAI that don't have any other fundamentals behind that.
STEVEN: Totally agree, Scot.
2. Speculation rather than actual methodology. Many times manias are created by what investors think may happen, rather than actual presentations of steps that companies will take and the value that will be created from those steps.
SCOT: I think you got to be careful about companies with AI in the name that are rallying, but there'sno real fundamentals behind why that's, you know why that's the case. I think if they're, youknow, some of the big the biggest companies on Wall Street that have rallied some of the bigFang names have rallied for good reason, because they have legit earnings. They have legitgrowth capabilities and their price to earnings ratios may sit still seem reasonable. I think oneof the things to remember about P E ratios is sometimes it can get really stretched withcompanies that have potential for growth. So what you're looking for, and companies like thatare not the same p e ratios you're going to see in an energy stock or a dividend stock. That'snot necessarily the metric that you're looking for. But I think I think what's different today thanwhat has been different in past bubbles, is you can find companies that have AI exposure andhave good fundamentals, and good prospects to grow legit existing businesses.
3. Media attention. Bubbles & manias need fuel for their fires and that fuel comes in the form of the media. They know that the next hot topic will draw viewer attention and in turn, it creates a self-fulfilling prophecy. More investors are drawn towards the topic and because of the influx of attention, it incentives the media companies to continue to promote it.
SCOT: I think one of the craziest things we see in media is the companies that CNBC and Fox Businesschoose to cover. They cover the ones that are sexy, that are gonna get eyeballs, and notalways the ones that are necessarily the best investment companies. If you look at some of thebest companies over the past couple decades, as far as growth, you know, a well known littlepizza shop has way outperformed Amazon over the past 15 years. You know, there's an energydrink company has been the best performer over the past two decades relative to some ofthese tech firms. So definitely, you have to be careful. I'm usually really cautious andpessimistic. Whenever the media gets a hold of something. Usually it's too late. I do think the AIthing could have some further legs though. But you have to be careful with how much theNASDAQ has run up. I mean, the NASDAQ's had a big year. So far, we're still off all time highsfor the NASDAQ for the S&P. So there's still room for potential growth. But I think if you can be agreat companies with that have exposure to AI growth potential, that might be your bestopportunity.
4. Herd mentality. This is in my opinion, the biggest one, this is the overarching 1000 foot view of mania and bubbles. This is where FOMO comes in a fear of missing out. Investors do not want to be the one that missed out on the next big thing. There is a lot of psychology when it comes to investing and many people would experience more pain by being left behind than the loss that the entire “herd” itself suffers.
SCOT: Yeah, I think definitely FOMO is a real thing we see it with with people that bring us ideas all thetime, anytime there's been an investing mania, you've got people that are knocking on ourdoor talking about how they want to get into it. And a lot of times you're too late to the party,what I would encourage you to think about is what are those best companies that are part ofthis mania. And if you see ups and downs of the market, is there a better entry point to get intosome of those businesses. If they're great companies and great businesses like some ofthose Fang stocks, you might not have an opportunity for a pullback. You might need to have alonger term view but just know that what goes up quick can come down quick and well with anyone of these mania companies that I've seen over 20 years in this business in this industry, youoften have a better entry point. You think about the shift from to to non meat meat products,you think about it A pot stocks, you think about crypto, you know, a lot of times you get thismania and then there's been a much better buying opportunity down the road. And so that maybe the case here and keep your eyes open for opportunities, those great companies that youlike, there may be other better entry points along the way,
STEVEN: Perfectly said. So only time will tell if we are in a bubble regarding artificial intelligence. If you are considering investing into companies you believe will benefit from AI, do so with caution and understand that there is a huge amount of risk and can be significant volatility down the road.
SCOT: Great. And that's our Money with Murph segment. Steven, thank you so much. Great job.
And now for our listener questions –
if you want your questions answered during the show. Go to our website retireEWO.com and click on ask a question. Steven, you got our first question?
STEVEN: I do. Charlie in Huntington Beach asks - Is international investing more appealing now? I’ve been mostly a US market kind of guy but wondering if I should have some international exposure.
SCOT: I've been getting this question a lot lately. Thanks, Charlie, for the question. I thinkinternational investing for us is more appealing than it's been in a decade. If you lookhistorically, us investing versus international developed economy investing, US hasoutperformed for the past 14 years. The last time international outperformed it was 2001to 2008 and international did significantly better. So I think now may be a time again forinternational International has been lagging significantly. And there may be a period ofoutperformance so I think it does make sense to consider some of those developedinternational markets again. Another driving force is the value of the dollar, which is fluctuated,but it's about as high as it's been over the past 15 plus years, so that can be a driving forcehelping international investing as well. So I think you want to reevaluate in your overallportfolio over the past decade it has, it's made sense to really underweight your internationalsegment. But now it may make sense to have a more typical weight to internationalinvesting and maybe even overweight to get some more upside potential if markets havecontinued to improve.
SCOT: Alright, next question comes from Brian from Anaheim, Brian writes – I’m a teacher and part of CalSTRS. I’ve heard of windfall elimination provision – what does it mean and will it affect me?
STEVEN: Great question, Brian. Yep, so Windfall Elimination Provision commonly referred to as WEP,that's what you'll hear it as it is a reduction in your own social security benefit due to noncovered pension work. So what does that mean in in plain English, so being a part of CalSTERS,you will receive a pension. During your time as a teacher paying into CalSTERS, you did notpay into Social Security. So Windfall Elimination will affect your own benefit. If you have at least10 years of covered work. So covered work, meaning you worked in the private sector you paidinto Social Security, any employment that you've accumulated throughout your life, that addsup to 10 years worth will give you a benefit at retirement, Windfall Elimination, will reduce thatamount. So keep in mind, when you get your Social Security statements in the mail, when youstart hitting age 60, they will say an amount, hypothetically, let's just say that amount is $700.Now, keep in mind, that is not reflected of a WEP reduction. So don't necessarily bank ongetting that $700, Windfall Elimination Provision will lower that amount. So make sure if ifyou're doing your financial plan yourself, or if you have a planner that's doing it, make surethey're aware of this provision, and that the amount on your Social Security statement likely isnot going to be the amount that actually hits your bank account.
STEVEN: Jim in Los Angeles asks - What about regular bonds? Is it time to get out of short-term bonds for longer term? What happens if rates get cut in the future?
SCOT: Jim, thanks for the question. Yeah, I think bonds are really interesting, safe money investing ismore appealing today than it's been in 20 years because interest rates are much higher thanthey were a year ago. If you look at CDs and savings accounts, you're getting four to 5% versusa year ago, you're getting paid less than 1%. So there's a lot more opportunities for a Safe Moneyinvestor and bonds are one of them. A lot of people have piled into short duration bonds. But asthe Fed gets closer to saying enough is enough with raising rates intermediate and longer termcould become more appealing. You're not going to get a higher rate but you could getpotentially more appreciation potential, and I think the thing to remember as a short term, SafeMoney investor is what is your reinvestment risk. If you buy a one year CD, if you buy shortduration treasuries, and if the Fed cuts rates a year from now or two years from now, andnow you can only reinvest that at 2% or 1% how does that change your investment thesis?And how does that play into your long term picture? So I think you need to start thinking abouthaving a more intermediate to longer term view about your bonds, you're not going to actuallymake more money in yield. But you might get some appreciation potential if the Fed cuts ratesin the future, some appreciation potential and get some of those higher yielding instruments.
SCOT: Alright our next question comes from Terrance from San Juan Capistrano, Terrance writes – My 401K at work is invested in a target date fund for the year I plan to retire but I keep hearing negative things about them, are they bad?
STEVEN: Terrance, great question. This target date funds in general are gonna be a little bit moreapplicable no matter what account you have, in Tarrant his case, it's a 401k I think it'd be a 403b 457, an IRA, a Roth IRA. It's just an investment selection, like, like any other stock or ETF. Butto your question of, are they bad, it's going to be relative to you. You're probably hearingabout a lot of the negativity about target date funds is that they probably are gonna be a littlebit too conservative as you approach retirement and go into retirement. So when you're, youknow, when you're 35-40 years old, a target date fund might have the equity exposure youneed to meet to meet your goals for your portfolio. But target the funds are notorious forgetting way too conservative, way too quickly. It's a common misconception, you know, I'mapproaching retirement. I'm not 25. I'm not 35 anymore, I need to be conservative, which thereis an element of truth to that. But you have to keep in mind, hypothetically, let's say you retireat age 65, you still can have, there's a 50% chance you're gonna live till 90-95 years old, youstill have 30 more years of investment ahead of you. So you need to make sure that yourallocation, even though you're retired, is still going to meet your goals as you live to90-95 years old. So that's probably where you're coming and hearing from some negativityabout target date funds, is they get way too conservative, way too quickly when you still have along time ahead of you for your investing journey.
SCOT: Steven, Let me chime in on that. You know, one of the other challenges with target funds, isyou have this more passive allocation that is not necessarily reflective of what's happening inthe market of economy today, they've been set up with giving you more equity exposure anddialing down as you get older, increasing your bond exposure. But the question is in anenvironment where interest rates went up last year, target funds got hit because you didn'tpivot to more short term bond allocation, you had a more passive bond allocation intermediateand longer term was in there, even though we know the Fed was telling us they were going toraise interest rates and bonds were going to get hit hard. Last year bonds down 15% worst yearfor bonds in four years, that wasn't helpful. So you know, target date funds are really a bluntinstrument. And with anyone, there may be a more precise way of investing other than targetdate, you could put together a list of those available strategies. Maybe you want to have moreexposure, exposure to US, more exposure to NASDAQ more exposure to international, maybethe type of bonds you have, could be more laser focused to help optimize long termperformance. So I think the challenge with target date funds if you if you've got a little bit ofmoney, and you don't want to take the time to look at it. They can be an interestinginstrument, but they're really a blunt instrument. And there can be some ways to optimizeinside of those asset classes if you're willing to take the time.
STEVEN: Yep. Great point, Scot, and our final question is Angela from Minneapolis – Do you have any investing tips for this market? Nice run up this year but will it last?
SCOT: That's a good question. I think this market is interesting. We have had a really good run upalready. And how much further can we go? We'll see we're still off the highs for all the majorindices, S&P, NASDAQ, we've seen the lion's share of the move in this market has been the top10 stocks in the S&P, the bottom 490 have been kind of flat. Now we've seen some movementin those bottom 490 stocks that makes us a little bit more optimistic. But strategies forinvesting. I think number one, you want to look at buffered ETF strategies that could give youupside potential with mitigating risk. You want to look at barrier ETF strategies that might beable to give you a higher yield if you're willing to take on a little bit of risk. I think you want tolook at some of your individual stocks and individual sector selection to see where there mightbe some opportunities to grow and some opera opportunities to catch up with the market as it'sgone higher. And then finally, you want to think about how does your investment philosophy fitin the longer term and fit into your overall plan. If you're a younger investor with a lot of timeahead of you, it might make sense to pile on some more risk and think for the long term. But ifyou a retiree or close to retirement, it might make sense to evaluate some ofthose more conservative strategies, considering that they're paying a higher, much higher yieldthan they were likely paying a year ago. And there's more opportunities in that space for aconservative investor. So those are some of my top tips for this environment.
That’s our show for this week. If you want your questions answered during the show. Go to our website: RetireEWO.com and click on “Ask a Question”.
If you want to sit down and talk more about your situation one on one – go to our website and click on schedule a consult. We're happy to help.
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We’ll see you next time where I’ll show you more how to retire with your eyes with open.
Don’t go into retirement with your eyes closed, go in with your eyes wide open. I’m Scot Landborg, here with Steven Murphy – we'll see you soon!