• Let’s talk about consumer confidence. It’s been fluctuating up and down for some time now. One day it’s the highest since 2011. The next day it’s the lowest since 2011.
• Consumers are just fickle. The market is day to day, week to week, news event to news event. Confidence drives behavior. When people are confident they spend money and we know we’re okay.
• The consumer is 70% of the economy so it’s largely based on consumption.
• Let’s talk about GDP. About a month ago when the GDP numbers were released, they were low. People were concerned. Now GDP has been revised upward.
• With so much fluctuation in several huge economic data points, including GDP, you always have to wait until they go back up again to say, “what is the real number?”
• The same thing happens with jobless claims. Remember when they revised it and they were off by a million jobs? Some of these revisions are very dramatic.
• So in terms of GDP, they revised it upward which is a response to consumer confidence, the tariffs, people buying stuff in advance and so on.
• Right now we’re not actually looking for good. We’re looking for just not as bad as people feared, and that is keeping consumer confidence in a better place than it would be otherwise.
• So the big news that came out was that there’s a court that decided – a three-member court, one appointed by Trump, Reagan, and Obama – decided to halt the tariffs.
• It appears that the court may have just stalled it because the ruling will get appealed to the Supreme Court for sure, and even if the Supreme Court upholds it, there are other ways that the administration can reestablish tariffs.
• The court method is relatively fast. The method to overturn the courts decision is far more time consuming. From the perspective of the market, the tariffs are not going away.
• There’s probably no real news here. We may see some positioning of other countries negotiating with the administration. We don’t know for sure.
• Taiwan said they’re going to proceed anyway. One thing we know for sure is that Trump does not give up.
• So, our investment principles. Let’s talk about that.
• Principles tell you what you should do in advance of changes or shifts in the market. It’s a decision making guide in an “if/then statement” kind of structure.
• The number one principle is committing to having your money last as long as you do.
• How is that different than an investment philosophy that says I want to grow my money as fast as possible?
• I think it’s a different length of the objective. The objective that we support could be 10, 20, 30, 40 years depending on the retirement scenario.
• So, a lot of people based their thinking on when they have wages. Risk in the market is something they rarely think about if at all. They put money in and they don’t need it yet and the belief is that it’s a race to the finish line and that line is retirement. What they don’t realize is that once you get to the finish line, it’s not over yet.
• The finish line, retirement, is actually the starting line. It’s a big shift. People are brought up to shift from accumulation to distribution to decumulation, and how we approach the markets based on those different states.
• The whole paradigm shifts. I like to use the example of a football team. You have an offensive coordinator, a defensive coordinator, and when you’re going toward retirement, within five years of retirement, you become the offensive coordinator. You want to score as many points as possible.
• When you retire, you become the defensive coordinator. That means you have to defend against inflation, taxes, bear markets, spending etc. So, if your money is going to last as long as you do, you have to prolong it.
• From a diversification strategy standpoint, if you’re up three touchdowns, it doesn’t mean you’re going to stop playing offense, stop moving the ball downfield. But it means if you have a risky situation like 3rd down and 30, you’re going to punt rather than assume more risk than you need to based on current circumstances.
• We’re not going to take the risk. We’re going to be very mindful of when to play offense and defense and have more control of the game.
• Sometimes making aggressive decisions can be counterproductive when you should really sit tight and protect what you have. Why move backwards when you don’t have to.
• Some clients will mention something like, “…the market is up 10% and we’re up 6 or 7%. I’m not happy about the return.”
• The way I respond is, “we have to agree on which game we’re playing. I’m playing the game of your money lasting longer than you do, and you want to play the game of getting the most return possible.
• If we’re not playing the same game, we may not be the firm for you.
• It’s hard to adjust because for the vast majority of our lives we’re hard wired to go after the biggest return.
• There are also situations where clients will say, “you should have known in advance and been ready to move really, really quickly.”
• Typically when we’re not doing that it’s because 1) we know the game we’re playing and 2) we know the probability of things working out versus moving against the long term strategy. We want to be very deliberate on when we’re willing to try to score a touchdown. It’s not always easy but staying disciplined is how we make sure your money lasts as long as you do.
• Lastly, let’s mention sanity checks. Those are the way that we’ve devised to help us to distinguish between a big bad bear like Y2K in 2008 and a not big bad bear like NBBB. In the NBBBs they tend to be shorter and shallower. Those checks tell us whether to sell all of our equities or just a portion of them.
• In this last go round, the sanity checks helped tremendously. And so far, we have not seen a big bad bear.
• And that’s our Market Alert video for today.
• We hope this video finds you healthy, wealthy, and wise, all you SCWPerS out there
• SCWPerS stands for second childhood without supervision.
• So. Enjoy your second childhood and we’ll talk again soon.

Transcript

Ken Moraif
Hello everyone, and welcome to our market alert video for today, which is May 32,025 I hope this video finds you healthy, wealthy and wise. We have a ton to talk about with you. We’re going to talk about consumer confidence. We’re going to talk about the revision of the gross domestic product. Man, can you think of anything more exciting than that? And we’re also talking about jobless claims, oh my, it’s just going to be so exciting. And the tariffs, the courts just stopped the tariffs, or did they? We’ll talk about that too. So we had a ton to talk about, and we’re going to dive in. So thank you for watching. I want to kind of bring, I’ll bring in Jordan Roach, our Chief Investment Officer here to join the conversation. And you know, Jordan, if you are active, like I’ve been, I’ve played tournament tennis, I think, for 58 years now. Okay, so if you’re an active person, what’s going to happen is you’re going to wear out your joints. You’re going to wear out your knees, already working on it. And what’s going to happen is you’re going to have to replace the aforementioned knees, which I have, and the recovery has been less than what I would have wanted, and I’ve been suffering with tendonitis and all this stuff. And, you know, there are certain moments in my life where I marvel at how incredibly stupid I am. You know, the levels of stupidity that I can reach are truly, like, really amazing. Yeah, it’s like, it’s crazy. So I was over the weekend. I was visiting with some friends. They have a ranch out in the country, and the wife, Roberta, hi, she watches the videos. She said, Ken, you should ice your knees.

Jordan Roach
New concept for you

Ken Moraif
Ice my knees?

Jordan Roach
No way.

Ken Moraif
Whoa!

Jordan Roach
Where is this been?

Ken Moraif 1:46
Who would have thunk. So I did. Holy cow, took away 70% of the pain. So now I’ve been icing them three times a day 15 minutes, and I’m down to almost no pain now

Jordan Roach
I’m glad you discovered that.

Ken Moraif
Yeah, it’s like, Who knew that you could ice your knees. I’ve only been doing it for 58 years every time I played a tennis tournament. Yeah. Oh my anyhow, so

Jordan Roach
Progress is good though, less pain.

Ken Moraif
A little advice, when you get to tendonitis, you know, think about icing.

Jordan Roach
You got it? Okay, all right.

Ken Moraif
So let’s talk about consumer confidence. So the highest since 2011 but I thought, like, a month ago, that it was the lowest since 2011 So what’s up with the consumer? What are they? They’re like, they’re just, they’re not confident. What are they?

Jordan Roach
People are just fickle, The market is, I think, day to day, week to week, news event to news event, trying to sort out. But it is good and that, you know, we think con, you know, confidence sentiment can drive behavior. So people are confident that they’re still spending money circulates. We’re okay,

Ken Moraif 2:47
yeah, and the consumer is 70% of our economy, right? Consumption. So if they’re feeling confident, then, in theory, they’re going to go buy stuff. So that’s a good thing. Let’s just wait for the next reading, right? Well, let’s wait a month, and then we’ll see. Okay, so that’s kind of okay, great, fantastic. And actually, you know, 14 years, it’s a high,

Jordan Roach
Yeah,

Ken Moraif
It is potentially important

Jordan Roach
Sure.

Ken Moraif
So it’s good news, no matter how you skin it, all right, so let’s talk about GDP. So as we talked about again about a month ago, when they had the GDP numbers and they came out, and they were really high or low, they were low. And everybody’s like, Oh, no, GDP has fallen off a cliff, but now they’ve revised it upward, which we said they would do,

Jordan Roach
right? I mean, again, that was a negative print on paper, but you, you know, you peel back the onion a little bit go, it’s really not as bad. And then always with these monthly prints, and there’s several huge economic data points, including GDP, that are monthly, you always have to wait till they go back again to say, what is the real number?

Ken Moraif
Yeah they go back and they revise it. Yeah,
Jordan Roach
That’s right
Ken Moraif
So, you know. And the same thing with jobless claims, which is the next thing we’ll talk about. You remember when they revised it and they said that they missed by a million jobs?

Jordan Roach
Small miss

Ken Moraif
Right? It’s a small a million jobs. So these revisions sometimes are pretty dramatic. You wonder, who’s doing the county wonder that they have to now revise them. But anyway, they revised the GDP upward from the number that appeared to be bad because of the people, the tariffs, and people buying stuff in advance and all that.

Jordan Roach
So it’s good. I mean, again, right now, we’re not actually looking for good. We’re looking for just not as bad as maybe people feared. And that’s we’re still okay there.

Ken Moraif
Okay. So then, of course, the big news that came out was that there’s a court that decided three member court, one was a Trump appointee, the judge, one was a Reagan and one Obama. So yeah, that’s right, but the Reagan guy still going strong, 50 years old, strong. That’s right. I mean, how long ago was Reagan? Geez, unless he became a judge when he was, like, 13,

Jordan Roach
which is relevant because, you know, the act they used to repeal it or block it was from 1977 so I guess that kind of coincide. Was there when they got out there, close to and they when

Ken Moraif
they rolled that out, like somebody was there during when the Constitution, okay, so, but the thing about it is that everybody, Goldman, Sachs. Said that, yeah, that court may have stalled it. It will get appealed for sure to the Supreme Court, and even if the Supreme Court upholds it, Goldman Sachs I was just reading said that there are other ways that the administration can can have tariffs anyway. Yeah, so they did this one because it was fast. They could do it really quickly. The other one requires more time to get it through, but now that they’re started, they can do that. So from from the perspective of the market, the tariffs are not going away.

Jordan Roach
I don’t think so. I think this is probably no real news. We don’t know if it’s going to change, really, positioning of other countries negotiating with Trump, probably, we don’t know.

Ken Moraif 5:38
Yeah, Taiwan said they’re going to proceed anyway.

Jordan Roach 5:41
Right because they’re gonna, I think they’re expecting he’s gonna figure out a way to get some level of this push through

Ken Moraif
One thing I think you can say about Trump is he doesn’t give up.

Jordan Roach
I think that’s right.

Ken Moraif
So likely it’s okay. So ho hum, ho hum, yeah, ho hum, ho hum.

Jordan Roach
That’s a lot of it.

Ken Moraif
A lot of big deal, all right, so let’s talk about something that’s near and dear to our heart, okay? And that is our investment principles. So the investment principles, the reason we have investment principles is because you want to know in advance what you should do. You want to pre plan what you’re going to do in advance, so that it can tell you how to behave when you know a crisis happens, or an emergency happens, or some big deal happens, and also it can guide you in how you make decisions, just on an ongoing basis. Yes, it’s kind of like the 10 Commandments tell you how to behave,

Jordan Roach
Its a framework for everything.

Ken Moraif
It’s like, it’s like the 10 Commandments of how we manage our clients, money and so, and we believe that’s super important, because, as I said, you don’t want to be making decisions, you know, in the heat of the moment, you want to fight it too. First plan ahead. All right, so that’s so investment principle number one is what I wanted to visit with you about today,

Jordan Roach
Foundation.

Ken Moraif
Yeah, and investment principle number one says that RPOA, that would be us, is committed to having your money last as long as you do. Now, that’s really important. The part about having your money last as long as you do. How is that different from a from an investment philosophy, than someone who says, I want to grow my money as fast as possible?

Jordan Roach
Well, I think it’s a different length of the objective. The objective that we support could be 10, 20, 30, 40 years, depending on people’s retirement. So a lot of people, you know how they’re thinking is brought up based upon when they have wages, when risk in the market something they’re not even worried about, because they don’t even see it right? Because they’re putting money in they don’t need it yet, fine, and it’s a race to as fast you can get to the finish line. But what I think they don’t realize is, once you get to the fish finish line, it’s not over yet.

Ken Moraif
No, the hard part does, in fact, the finish line is retirement, and that’s actually the starting line.

Jordan Roach
That’s really the starting point. That’s right? And so it’s a big shift, I think, in, you know, how people are brought up, to shift from a mindset of accumulation to distribution decumulation, and how we approach the markets based on those different states, right?

Ken Moraif
So the whole, the the paradigm, it shifts, you know? And I like to use the example of a football team where you have an offensive coordinator, and you have a defensive coordinator, and when you’re going towards retirement, and you get to probably within five years of retirement, you’re the offensive coordinator. You want to score as many points as possible. You go for it, you know, you’re running the ball, you’re throwing, you’re doing all kinds of stuff to score points. Once you get within five years of your retirement, or you are retired now, all of a sudden, you need to become a defensive coordinator, and that means you have to defend against inflation, taxes, bear markets, your spending, you have to defend against all those things. And so suddenly, now, if your money’s gonna last as long as you do, you have to look to prolong it, and therefore that changes things. So from a diversification, from a strategy standpoint, right?

Jordan Roach
It means you don’ want to take the same risks. It would be like, you know, for instance, let’s say just American football, okay? Because that’s kind of the most popular sport here. So let’s talk about that is, if you’re up by three touchdowns, it doesn’t mean you’re going to stop playing offense, stop moving the ball down the field, but it means that if you have a third down and 30, you’re probably just going to punt and say, not time to take the risk. You’re not going to force it, right? So that’s same with our philosophy. Now, as we say, we still want to take risks, but we’re going to be very mindful of when we want to play the game versus time to say, You know what? Let’s play some defense for right now.

Ken Moraif
You know that reminds me of a game. I think it was a Philadelphia Eagles,

Jordan Roach
Okay.

Ken Moraif
And I think it was a playoff game. Somebody will probably correct me, but I believe it was the Eagles, and I think it was a playoff game where they were ahead by eight, or something like, that points, and there was two minutes left in the game, or there abouts and they had the ball, and it was first down, and they threw a pass. The pass got intercepted. Yes, the guy ran the ball all the way down. They scored like two, two plays later, onside kick recovered. The onside kick went down, kicked a field goal. Won the game.

Jordan Roach
Yeah.

Ken Moraif
And everybody’s like, What on earth did they throw a pass for? You know, they should run the ball. That’s why were they trying to score more points? What the heck was wrong with them? That’s right, you know. So at some point you have to look at, where are you in the in the game, right? What’s the score?

That’s right. You play the game, won the game, then taking risks to try to score more points could be actually counterproductive,

Jordan Roach
Yes.

Ken Moraif
Versus, you know, protecting what you’ve got.

Jordan Roach
That’s right, we can’t go further backwards and on the, you know, short term and get ourselves back behind the game again. So it’s being mindful of the game we’re in.

Ken Moraif 10:33
Yeah? And, you know, I’ve had conversations with clients and SCWPerS where, you know, they’re, they are. They said a version of, you know, the market was up 10% and we were up six or seven, or something like that. And I’m not happy about that, you know. And I, the way I respond to that is probably rude, but I say, you know, we have to agree what game we’re playing, yes, okay, because I’m playing the game of your money lasting as long as you do, and you want to play the game of getting the most return possible.

Jordan Roach
Yes

Ken Moraif
So we have to agree on which game we’re playing, because this is the game I’m playing. And if that’s not what you want, then then maybe, you know, we’re not the right firm for you, because our goal is, when you go there’s still money left over, or at least it lasted as long as you did.

Jordan Roach
Yeah, it’s so hard. And I do understand the perspective, because 1, they operated in that state of thinking for so long. And 2, there are times where fields like, well, you should have known in advance and like, been been ready to move really, really quickly. But typically when we’re not doing that is because 1, we know the game we’re playing. 2, we know the probabilities of things working out versus moving against us, and so we can just be very deliberate on when we’re willing to swing the bat make a pass, and it’s not always easy, but we have to maintain that discipline to make sure money’s lasting as long as they do.

Ken Moraif 11:50
Right? And that discipline goes back to the investment principles, and you know, all of them address different parts of what we do given certain circumstances.

Jordan Roach
That’s right.

Ken Moraif
So the other thing also that we have, and I would encourage everyone who’s watching this and tell your friends and family who have not watched this to watch it, is that we also have created a series on our sanity checks. And the sanity checks, just to refresh everybody, are the way that we’ve devised to help us to distinguish between a big bad bear like Y2k in 2008 and others, and a not big bad bear, a NBBB, right? And in the NBBBs, they tend to be shallower and shorter, and therefore the sanity checks help us to decide, are we going to sell all of our equities, or are we only going to sell, you know, a portion of it? And in this last go round, the sanity checks helped tremendously.

Jordan Roach
They absolutely did. Informed our decision to say, look, we see risk here, and risk could be, you know, as much as downside we saw, or even, you know, way bigger, but we did not see the way with evidence suggesting that we’re seeing a big, bad bear,

Ken Moraif
right? And in so far as it turns out, we have not so far.

Jordan Roach
So far we’ve not.

Ken Moraif
Ladies and gentlemen, make sure you click on the link that you see right here and it’ll take you to the videos on our sanity checks. I think you’ll find them very educational and helpful. We want you to be as informed as possible about how our strategy works, because the more informed you are, hopefully the more peace of mind you’ll have, and that’s we want for you. So thank you for watching this video, and hope it found you healthy, wealthy and wise. Make sure you like and subscribe to this and share it with your friends and family, and we’ll talk soon.

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

Economic indicators and stock market performance cannot be predicted. Opinions expressed regarding the economy and the stock market belong solely to Ken Moraif on behalf of Retirement Planners of America and may not accurately portray actual future performance of the economy or stock market outcomes. Opinions expressed in this video is intended to be for informational purposes only and is not intended to be used as investment advice for individuals who are not clients of Retirement Planners of America. All content provided is the opinion of Ken Moraif, CEO and Founder of RPOA Advisors, Inc. (d/b/a Retirement Planners of America ) (“Retirement Planners of America”, “RPOA”). ©Copyright 2023