Join Gregory Ricks as he explores the financial lessons hidden within the movie “The Biggest Little Farm” and the innovative approach of “Moneyball.” Discover ways data-driven strategies and tactical asset allocation can help enhance your investment portfolio.
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Gregory Ricks 00:00
Hey, welcome. I’m your host Gregory Rick’s a financial advisor here to answer your questions and help you win with your money.
Podcast Intro / Outro 00:09
Also, we have a complimentary download waiting for you on this topic if you go to Gregory Rick’s dot com slash podcast 103. Again, that is Gregory Rick’s dot com slash podcast 103.
Gregory Ricks 00:21
That movie title was the biggest little farm. Like seen it four times on my way back from Europe a few weeks back, I watched it again. I’m like, gosh, that’s such a great financial movie. But the description tells you it’s about a couple buying a farm that the farms dead, the trees were dead, there was no grass grow, and there’s no animals. The birds didn’t even want to go there is a great story. Fun. But me I see financial stuff when when I see movies, but you would expect that from me regarding, you know, financial talk show. There is an another movie that I think is. And it’s kind of a financial movie, but it’s finance of baseball, Moneyball. That was like, wow, there’s some great money concepts in that. But in the Moneyball what Brad Pitt is, it’s about being data driven, and baseball kind of altered baseball when they change their thinking. And instead of going on gut instincts, well, he looks like you could just say, he’s a baseball player. Now it’s in sight. Now it’s really more about the data. Not his stride or how he looks, or how he talks more data. I think data in financial services is really important. And what I was talking with you about in last segment, is how data driven you know. Most of market cap 97% of market cap is made up of less than 1000 companies 50% of market caps made up of less than 50 companies, there’s over five, there’s somewhere around 4500 to 5000 stocks out there. And you’re going stock picking most of the market cap is concentrated. So you had gotta go out there trying to figure it out. But what we have to have is diversification, yeah, I like me some stocks, but I’m not gonna go pick crazy stuff, like the indices that skews a higher return than stock picking. And we’ve I’ve got podcasts about this topic out there as well. That we don’t have to read and invent the will we can let that cycle of financial life work for us. But let’s, let’s talk about the other shift that where you can have that balance of, of asset and I like multiple asset classes. So I want to stock asset class I want to bond asset class but I also want some buffers I won’t tactical into the mix, because tactical. I’ll define as I won’t money, a block of an asset class, so to speak, that follows momentum a Watson favor is where it shifts to if nothing’s in favor, it goes to cash. The biggest problem people have with investing for most people is the going down. things not working, even in the short term. They people humans cannot see very far into the future, because the market go down like Oh, I’m gonna lose all my money. You know, I had many conversations over the past couple years where somebody call a little bit worried I’d say Do you realize you’re setting in 50% of your money sitting in treasuries? Short term? Oh, I thought I was all invested. Now, because you get 50%. In quantitative tactical, meaning it’s follow momentum. There’s no momentum so it’s shift Did the cash, the stock stuff were there for the long term, we’re not going to let that disrupt us. But we also like some bonds bonds that farewell for the short term. So we adjusted those to shorter duration. Because of the impact, it’s, once again, it’s also data driven. But I also like another asset class. That’s really important. And that’s index linked investing, we use insurance companies to pick up the risk. And we capture the upside of the market. Because what did we talk about earlier? By decades, the market historically is up seven out of 10 years, I want those up here. So those negative years, I’d like it to be zero, I don’t want to participate in those. So I, because one of the things you understand, you know, the problem with being heavily invested in stocks, and when it pulls back like it has the past couple years, you have to make up that ground. You have to get back up to get even then to growth. But if you don’t participate in the downside, or tacticals, Ltd that are buffers protected you from that or index link does it let you protect, participate in the downside. So when it goes up, you’re capturing the upside, immediately. You know, when war school, you know, what’s the problem with war, losing ground, it’s very expensive to go get it back costs a lot in equipment, and it costs a lot in lives. That’s war. Generals don’t like to have to recover lost ground, because why they don’t want to lose the ground because they gotta go back and get it. It’s very expensive money, we don’t want to lose money takes time to go get it back, I don’t want to have to recover much in losses. So I don’t want big losses, what I want is a cycle where momentum is keeping me ahead. Overall, I don’t worry about an asset class here or there, that’s pulled back a little bit, because I’m ahead in other areas, and I’m will make that up in the not too far out as well. But everything is cycling in and gives us a higher probability of having success. In the future, that’s how you have to think about it. Now let’s shift to income. One thing that I have found through data is, depending on your asset class, you probably should be around three to 4% on an income stream from assets, meaning your assets should last 30 years, maybe more. If you violate that, it’s probably going to last less. Now I’ll define it this way, I always kind of say if you’re taking a 4% income stream from assets, it’s probably going to strip that 4% income stream is probably going to stress your assets over time. I’ll define what I mean by stress, meaning the principles not going to stay completely intact. There’ll be some sort of spin down and if you live longer, there’ll be more. So one of the questions are is our objective to make sure we don’t run out of income or is it to keep all assets intact? Because sometimes discussion is Wow, Josh, I want to leave everything behind to the kids. Then some discussions is I’m not worried about leaving behind, we’ll leave some I’m just wanting to make sure I don’t run out of money that I can continue my lifestyle. That’s easier. And when they said well, I just want to make sure everything is intact. That’s probably not going to happen the way you’re envisioning it, but you should be a belief a great deal behind in your case, but to leave it all might not be realistic. In some cases. There’s enough assets subject income like let’s just say I pathetically you have $2 million, but you’re taking a two and a half to 3% income stream from assets and you’re never going to move out of that rage. Why and that person’s case they’re probably leaving more behind as a gross amount depending on tax ability of those accounts, qualified money, Uncle Sam’s going to get his part because they’ve got those non spouse beneficiaries got to take it out over 10 years. So yes, taxes are going to impact that’s what Why we should be focusing on how we can get more money into Roth accounts. Or our max income strategy, or max funding strategy to get more money, and a tax free cash flow during retirement. And so you’ve always got to think about taxes into the mix. So we can have those proper asset classes. But we also have to provide data regarding what strategies gives me the most efficient income stream, subject to taxes, I want to minimize taxes, I want to get as much as I can into a tax free income world some of that means we can pay some taxes right now. Because the back and think about this, if I can get $100,000 after tax money, and then it grows, tax free going forward. By decades, I use a rule of somebody to add 7.2% It doubles every 10 years 100,000 goes to 200,000 200,000 goes on 400,000 400,000 goes to 800 that I just took you through 30 years of retirement. And so you leave it to them in a Roth they have another 10 years for they have to take it out because it’s in a Roth account that 800,000 $1,001.6 million of tax free money that you’ve left behind. But how about in addition to that creating other tax free income, that’s where you have that financial world cycling in your favor in a tax efficient manner. Now we’ve got you know, possible possible recession coming fed in the previous meeting stated they see it as end of the year generally the Federal Reserve does not predict that but they did. So we’ll see we know there’s a lot of tightening going on out there we still just got another quarter point rate hike and we’ll talk about the money supply but possibility layoffs is 10 Step layoff survival guide this might help you if you think there’s your company might be tightening they’re moving, so forth. 10 Step layoff Survival Guide, go to Gregory Rick’s dot com slash layoff. And if you’ve got some questions on anything that I’ve talked about so far today, reach out to my office, I’ve got offices in Baton Rouge, Louisiana, Mandeville, Louisiana, matterI, Louisiana, and Gulfport, Mississippi. And of course, we could help you by phone, do video meetings, there’s one number to call just one number. If you just need to use this as a sounding board, start a conversation or have a sit down. We’re going to give you that number. It’s 504832 9200 The website is Gregory Rick’s dot com. All of our conversations and meetings are non threatening, you’re not going to be you’re not gonna have to make a decision. Nobody’s gonna like, Oh, you got to become a client today. You got to sign here, do this. No. It all starts as a fit. Conversation. If you’re looking to talk about seeing if we’re a fit working together, because we we see it as a fit meeting as well. To get a question answered, just call and ask question. We’re going to help you. We are we are of service to you. But if you’re looking for somebody to work with ongoing going forward, it’s going to be a fit visit to see if we can bring value by putting your interests first. And is this Can we bring value can we have a long term relationship and that’s how you should be looking at at that, again, is adding value for long term and we can have that discussion. And if we’re not a fit, it’s it is okay. We totally get that. So 504832 9200 Gregory Rick’s dot com is the website and we’ve had a request of that. That financial move be about a farm. And it’s about a farm and the cycle of life but way I think and it is a great fun movie to watch for. It has great entertainment value, but I see things and cycles and data. And it’s the biggest little farm must see. Fun, fun movie. I think I’ve seen it three or four times over the past few years. I just thoroughly enjoy it. The big ol hog making friends with the rooster, great part and center of the story and the success of getting everything working. Like in that movie. So we gave you a 210 step layoff Survival Guide, Gregory Rick’s dot com slash layoff. Okay, so let’s talk about the Fed rate hike here a little bit. Federal Reserve’s signaled that they might be done raising interest rates for now after approving another increase at their meeting that concluded Wednesday, I’m referencing a Wall Street Journal article. People did talk about pausing, but not so much at this meeting. Fed Chair said at a news conference, we feel we’re getting closer, maybe even there. It was a unanimous decision. At their 10th consecutive rate increase aimed at battling inflation. All 11 members of the rate committee agreed on the increase. So there wasn’t any end decision or head butting there. So one of the things they’re looking at as they are becoming more data driven. At this point, instead of focusing on they’re going to take a look at the impact of their decisions, and see how it looks going forward to see then, are there any signs of adjusting their monetary policy by looking at the data going forward, steady job growth and brisk wage gains could sustain higher inflation, the Feds preferred inflation gauge the personal consumption expenditures price index rose 4.2%, in March from a year earlier that was down from previous months 5.1%. Increase? I think it’s good because now they’ve gone to instead of focus on raising rates and forecasting, they’ve got raises, they’ve basically forecasted a pause, and they’re going to look at the data powered push back against expectation of rate cuts this year, but he acknowledged that investors expecting inflation to fall quickly could take that view, we on the committee have a view that inflation is going to come down, not so quickly. In that world. If the forecast is broadly right. It would not be appropriate to cut rates, we won’t cut rates, the markets kind of pricing in rate cuts into the year we hear and talk about it. Some of our institutional guidance is that so some of the we’re having to take that in to consideration that rates might go down a little bit, I would not think it’s going to move down much. We’re not like going back to a 1% world from this 4% world. 10 year treasuries are a bit above three and a half percent mortgage rates depending you’re around six and a half percent ballpark on 30 year mortgages at this time, I’m not expect some big rate reductions coming forward. If they’re tweaking, it’s probably at a quarter point going down. I just don’t see us moving in that world. I know the markets pricing in some rate reduction at the end of the year. And we are looking at asset allocations and making adjustments and some of the upgrades. You know, one of the things I’ve spoken with you about is your fixed index annuities, your fixed interest, annuities, your Maiga annuities. This is not variables. This is fixed annuities where the insurance company picks up the risk. And if you’ve picked up an annuity over the past 20 yours you might look at maybe that needs to be updated, because your underlying portfolio under that is from the 1% world where you could get higher caps, higher interest rates going forward, even if interest rates pulled back some because you’re previously locked into the 1% world of those, and you need to update upgrade to more of that. And that needs to be a consideration. So we’re working through that with our clients in the next quarter, because there’s some talk that the interest rates might pull back, so we want to get maximum value for clients. With that said, I don’t feel we’re going to get an interest rate reduction this year. From that standpoint, it’s a couple of things that we need to think about also that the feds not talking about. And that’s mtwo measure of money, the money supply after surging about 40% In the past two years of COVID M to hit a plateau in early 2022 and then started dropping last summer m two is down 4.1% In the past eight months the steepest decline since the early 1930s. If this decline is real, there are some reasons for skepticism given that the Federalists releases this data less frequently than in the past. And if it continues through 2023 Then by 2024, the economy could be in not only a recession, but also a sudden sharp decline in inflation.
Podcast Intro / Outro 21:55
Also, we have a complimentary download waiting for you on this topic. If you go to Gregory Rick’s dot com slash podcast 103 Again, that is Gregory Rick’s dot com slash podcast 103.
Gregory Ricks 22:07
Thanks so much for listening to ask Gregory where we answer your financial questions. You can find us anywhere Podcasts can be found and on YouTube and Facebook Live every Saturday from 10 to one subscribe, leave a review and tune in next time.
Investment Advisory products and services are made available through a wealth management LLC a registered investment advisor. insurance products are offered through the insurance business Gregory Rick’s and Associates Inc. a wealth management does not offer insurance products. The insurance products offered by Gregory Erickson Associates Inc are not subject to investment advisor requirements investing involves risk including the potential loss of principal any references to protection, safety or lifetime income, generally referred to as fixed insurance products never securities or investments. Insurance guarantees are backed by the financial strength and claims paying ability of the issuing carrier This podcast is intended for informational purposes only it is not intended to be used as a sole basis for financial decisions nor should it be construed as advice designed to meet the particular needs of an individual situation Gregory Erickson Associates is not permitted to offer and no statement made during the show shall constitute tax or legal advice our firm is not affiliated with nor endorsed by the US government or any other governmental agency. The Information and opinions contained here in provided by third parties have been obtained by sources believed to be reliable, but the accuracy and completeness cannot be guaranteed by Gregory Rick’s and Associates. Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increase the taxable income from the Roth IRA conversion may have several consequences, including but not limited to. A need for additional tax withholdings are estimated tax payments, the loss of certain tax deductions and credits and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions with your IRA. Neither a wealth management or advisors providing investment advisory services through a wealth management recommend or facilitate the buying or selling of cryptocurrencies third parties and guests of the show are not affiliated with nor do their opinions reflect those are Gregory Rick’s and associates or AE Wealth Management AE Wealth Management provides services without regard to political affiliation. And the views of individual advisors do not necessarily reflect the views of a wealth management. We are as Gregory