Hello everyone, and welcome to the Retirement Planners of America Podcast. I’m so glad you are with us. I am Ken Moraif, the founder and CEO of Retirement Planners of America, and we have a lot to talk about. You know, the interesting thing about how fast things are changing is that, you know, the next thing kind of replaces the previous thing so quickly that you almost forget the previous thing even happened. But a lot has happened over the last week. We want to cover it all for you and give you some ideas of where we think this is going to take the market, which is the most important thing to us—of course, our investments.
And as you may know, I am the founder and CEO of Retirement Planners of America. Therefore, this video is designed for those of you who are over 50, who are retired or retiring soon. We’re going to be talking in the context of, if you’re that investor, if you’re within five years of your retirement or you’re already retired, how does all this impact you? What should you be doing about it? So that’s where we sit. So thanks for watching. And as always, I hope this podcast finds you healthy, wealthy, and wise.
I want to introduce—or bring back with me—Jordan Roach, my Chief Investment Officer, and so we’re going to discuss all this stuff.
So let’s start off with Walmart. Very interesting. You know, yesterday they came out and said that they’re anticipating they’re going to have to raise prices, potentially even have empty shelves, which, you know, we’re so used to—you walk into Walmart and it’s packed with everything—and the potential that that’s not the case could be pretty scary, right?
Yeah, it’s—I mean, Walmart is a huge data point the market’s going to digest on how it’s going to affect consumers. You know, on the whole, it’s going to be price-focused, price-sensitive consumers, right? Walmart is a huge supplier and seller of all sorts of diversified goods—from groceries to apparel to all these things that we get pretty much from everywhere except here. And so the market’s certainly looking to them to see what’s going to happen.
And I think, you know, for the first time, we’re starting to see forward guidance. Because for a while, companies just went on lockdown. “I don’t know. I know nothing about nothing. Don’t ask me.” And to see Walmart come out and say, “We think…”—it’s not only saying what’s going to happen, but it starts a timeline on it.
And not only that, but Walmart gives cover to everybody else. In other words, if Walmart says, “We’re going to be raising prices,” right, then everybody else goes, “Oh, okay, well then Costco and Target and…” get to follow the X and everybody else.
Yeah, so they want to keep that gap, right?
That’s right. So that’s very interesting. At the same time, we had, what, two weeks ago or so, or a month ago, very robust retail sales, right? So the consumer was being surveyed, and they’re saying, “We feel terrible. We’re worried about tariffs. We’re worried about price increases,” but yet we’re going to go shop.
Right, now we just got the retail sales numbers, and they were sharply lower. So maybe the way they were feeling told us something about their behavior. And today, give us some insight into what you think about that.
I think that’s exactly right. I think there was so much uncertainty, but there was no actual data suggesting inflation is going up, prices are going up yet. So I think consumers were front-running a lot of that. Companies were front-running, buying goods ahead of time to stock, to get ready, to set prices, because that would still find the equilibrium with consumers wanting to spend.
And so that was happening over the last month, and it looked like, “Okay, the things that the Fed is considering to make their decision,” which is effectively inflation and growth—the growth side based on spending—like, I think we’re still okay. And now this is coming back—I don’t know.
Yeah, that’s right. So maybe reality is setting in, right? Maybe we had an illusion because people were stocking up, they were pre-buying, and that gave a boost to everything, made everything look good. And now maybe reality is setting in because that inventory could be depleted.
And, you know, there was an interview that I saw with the guy that runs the Los Angeles Port Authority, and he was saying that 65% of all the shipping that normally comes into L.A. from China is still over in China. And he said, at a minimum, it takes two weeks to get over here. So if the negotiations with China take too long, that could have an adverse impact.
Yeah, that’s going to be interesting to see. Because I think it was this week where we’ve had the first ship in like a month actually land. So one has, but the rest of them are still there. And, you know, in the back and forth with—I guess it was the Treasury Secretary from our side—I don’t know who from China was coming into Geneva over the weekend to start talking a deal. I don’t know who’s there on that side, but it looked like, you know, we’re bringing tariffs down from 145 down to like 30, which is still higher than the base level of 10–20. So it’s like—you know, he’s doing that jogging.
Yeah, you know, China brought their tariffs back down on us to like 10%. So you think that theory…
You know, in that world, the market was already pricing ahead of April 2. Maybe we can still exchange commerce, but maybe not.
Yeah, and reality has not set in. Right now, everything is just conjecture. What’s going to happen? Will we have inflation? Will prices go up? Will they not? You know, all this stuff. Will the negotiations end the whole thing and it all be over, or not? We don’t know all that.
The one thing that I find—I don’t know if comical is the right word—but it makes me kind of chuckle, is, if Trump had started off with, on Liberation Day, 30% on China, the market would have gone down like crazy. But now he announces 30% on China—from 145—and the market goes up 3% on that.
Amazing. And 30 is still higher than what happened in ‘18 when we went through this the first time. It’s higher than baseline. So, more—the highest tariffs we’ve ever had on China—and we’re celebrating it.
But markets rally. So maybe there is something to the art of the deal.
Maybe there is. So one of the things that I also—I saw an interview with Ken Griffin at Citadel. And he’s— they’re a legendary investment house, one of the largest in the world. And in the interview on Bloomberg that I saw, he was talking about how, you know, if he had known back before Liberation Day what he knows now, he would have gone to cash. Even though he has the benefit of having seen the market come all the way back. So he said—and they were very aggressive—he said, “We’re aggressive. We’re always, you know, we’re always on offense,” and all of that. But despite that philosophy, you know, I thought it was very interesting that he would say, “If I could rewind the clock and go back, then we would have gone to cash.”
That’s interesting from him. I mean, they’re pretty full tilt most of the time.
Yes. I mean, even through ‘08, you know, I believe they changed a little bit, but they’re still riding through most of those. So for him to say, “We were probably flying a little too close to the sun there. That probably wasn’t a good thing”—that does speak a lot.
Because the other thing about him too is, you know, Citadel has their hedge fund business. So they’re running their own capital and clients’ capital. The other side of their business is they’re actually like the biggest market maker in the world. So they’re seeing client orders. And most of the time, when people are submitting orders, like 80% of the time, Citadel is the one that takes it, does something, and then turns it the other side. So they can take it—not only with running their own money—but looking at what flows are going and saying, “This was way off.”
Yeah, that’s interesting.
Yeah, it is. And for me, it validates what we did, right? Because we actually did what he’s saying he would have done—had he had the benefit, you know, to go back to the past. And we actually did do it without the benefit of that. We did not have the benefit at the time.
You know, we had clients, we had prospective clients saying, “This is all event-driven. This is all going to shore up really, really quick. Y’all are crazy. Don’t do anything there,” which is all just emotion and thinking.
And for the guy that, you know, controls a wild amount of money and data flow to say, “No, no, this was a bad decision for this part, despite the positive outcome.”
Let’s talk about that in the context of someone who is within five years of their retirement, or in the first five years of their retirement, okay? Because philosophically, we believe that that decade is the single most important decade of your entire financial life.
Because no matter how well you have done leading up to that—you may have been the most successful investor in the history of the world—you take a 50–60% drop in your investments during that decade, you may not be able to retire. Or you may not be able to enjoy the lifestyle you wanted to have during your retirement. Both of which are not good. Both of which we do not want for our clients.
So that’s why our bias is: growth is important, but protection of principal is even more important.
Yes. So going defensive—give us some context on why our philosophy for someone who’s in that decade is different than if they were 30 or 40 years old?
Well, it’s a couple things. One is, you know, depending on the duration and magnitude of the decline. So magnitude is how much you lose. Duration is how long does it take you to lose that much money—and how long it takes to get it back—is massive.
So, you know, if you take some of these big, bad bear markets we’ve seen—and it’s hard to know, you know, we continue to try to prove our process to distinguish between “we think it’s a bear” versus “a really big, bad bear.” And it’s hard to get that right. But you think the bad ones—and again, there’s been a handful of really bad 40-plus percenters—typically, those take one and a half to three years from top to bottom. That’s this grinding 48-percenter.
So not only are you in a state of loss for a long, long time, well, if you lose 50%, now I’ve got to double it on my gains to get it even back to neutral. And you can’t be taking any money out during that time, because to get back to neutral implies that you didn’t touch it.
That’s right. Because if you’re taking it out, you’re doing what farmers call eating your seed corn.
That’s right. And if you eat enough of your seed corn, when growth season comes, you ain’t got nothing left to plant.
And what we find—this is why we kind of systematize our risk management framework—is, if you look at some of the biggest inflows into the market and outflows, it’s exactly the wrong times. Meaning in ‘07, certainly in 2000, those are two of the biggest periods for inflows into the stock market in history—which are literally at the peaks.
And if you look at two of the biggest periods for outflows—most outflows are not happening in the first 5, 10, 15%. No, it’s once the market’s down 30, 40, 50. That’s when people say, “I’m done. I can’t take it,” which is the worst part to do it.
Right. By then, it’s like, you know, you’re closer to the bottom than not.
Yeah. And so we just have to try to make a framework to have a consistent decision-making process to where it keeps us out of the emotions, because there’s plenty of that to digest.
Yeah, it’s easy to chase returns or to panic when the market is dropping like a stone. It’s natural. And having a disciplined approach—and actually having a plan in advance—you don’t want to be reacting to a tornado when it’s upon you, or a hurricane. You want to have a plan to address it.
And you know, especially—one of the questions that we ask people in our seminars is: Between now and the rest of your life, what do you think the odds are of having a big, bad bear?
What’s the average? I hope people give a pretty high probability on that.
It’s usually 100%.
Because I’m thinking people in the last 15 years forget what “bear” means.
Well, that’s true, yeah. But it was a while back, so memories have faded. People think those can’t happen again.
So let’s also talk about, you know, the yield curve, okay? And where we sit right now in terms of our posture—you know, defensive versus offensive. As we sit right now, we’re still in a defensive posture, right?
Right. And we did so because not only did our strategy—our Invest and Protect strategy—say time to get out, but the yield curve also said recession coming. And the yield curve has predicted every single bear market we’ve ever had, so it’s a very reliable indicator.
Yes, right?
So tell us—you know, where are we? What is the yield curve first, for those who aren’t familiar? And then secondly, what does the yield curve do when we have a bear market that is attached to a yield curve inversion?
Yeah. So first of all, the yield curve—how we look at it is, we use the stock market, you know, technical signals to tell us what we think the stock market is doing, and that’s nice and reliable. We use the yield curve to tell us what’s the other side of the market telling us—the bond market.
And it’s basically looking at the relationship between short-term interest rates, which kind of have a basis based on what the Fed is doing—but short-term interest rates move up and down because the market’s setting baseline expectations—and longer-term interest rates. And what you’re looking for in a healthy environment: short-term rates should be lower than long-term rates.
That would be because the Fed wants to slow the economy down because it’s doing so well, so they want to raise interest rates in the future.
But the reverse is also true. They’re viewing that there’s a recession coming, then interest rates will be lower in the future—presumably.
That’s right. And so when the yield curve is inverted—meaning long-term rates are lower than current rates—yes, that generally forecasts a recession coming.
And when we’ve had a bear market with that inverted yield curve, what has been the result in most cases?
If you go back to the early 1900s—you know, because prior to then, we didn’t have a good history of the yield curve—but every bear market that has been associated with a yield curve inversion has been a doozy. And that’s not to say that every yield curve inversion leads to a bear market, but every bear market has had a yield curve inversion prior to it. So, when you get that signal, it’s a pretty reliable one. And it doesn’t mean the market crashes tomorrow—it can be a long lead time. But it’s a flashing yellow light.
Exactly. And I think that’s important, because you hear this from people—“Well, the yield curve’s been inverted for a while and nothing’s happened.” And they start to dismiss it, and then boom—something does happen. So, we don’t know when or what the catalyst is going to be, but the conditions are certainly present. So, we remain defensive.
That’s right. And I think the key takeaway for our clients and listeners is that when you’re in that retirement red zone—that five years before and five years after retirement—you don’t want to bet your financial future on a hunch or hope. You want a disciplined strategy that puts the odds in your favor.
Exactly. And that’s what we try to do with our investment strategy, our protect strategy, and the financial planning we do. We want to help people grow their money, but more importantly, protect it, especially during that critical decade.
Well said. So, as we wrap up today, we want to thank all of you for joining us. As always, we hope this podcast finds you healthy, wealthy, and wise. And if you’d like to learn more about how we can help you with your retirement planning, please visit our website at retirementplannersofamerica.com. You can schedule a free consultation with one of our retirement planners and see how we can help you enjoy your second childhood without parental supervision.
Thank you again, Jordan, for being with us.
My pleasure. Always enjoy these conversations.
All right. We’ll see you all next time. Take care.