Overvalued Market

Andrew Wilson: And I think what we are seeing is now markets focusing on not the rhetoric which is being very positive from a growth point of view, from a reflation, from a deregulation point of view. But now getting into some of the details of dealing with the Affordable Care Act. The repealing that the relationship that Trump will have with Congress so I think to some extent yesterday we reflected ok so now we have had the rhetoric when we get into the reality is he able to achieve all of the things that he was promising.

 

David Scranton: That was Goldman Sacks Chief Andrew Wilson talking about the brief dip the stock market took on March 23rd as if investors waited on Congress. Most analysts agree that the vote on Trump’s revised version of Obama Care was seen by Wall Street as a test. A test of whether or not he’ll really be able to deliver on his lofty economic promises. Or whether the political hurdles in front of him might just be too high. In fact, we tackled that topic directly on our recent show and also discussed the Trump bump so far has been based more on emotion than reality, more on optimism than on actual change. Today we are going to focus on a growing sentiment among experts if the markets are already prepared for a major directional change no matter what happens with President Trump. It’s time to tune out the hype and focus on the facts. Facts that matter to you the Income Generation.

 

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David Scranton: Hi everyone and welcome to the Income Generation. I’m David Scranton your host. Let’s take a look at some recent headlines about the markets. Investors haven’t been this worried about a market crash in 4 years. Six warnings signs that the stock markets could be heading for a CRASH. An overvalued stock market couldn’t withstand any Trump policy failures. Last but certainly not least, the stock market could still crash and these two sectors hint as its happening sooner rather than later. Of course yes there is still plenty of optimistic headlines out there also which isn’t surprising when you consider how much of the financial media is directly influenced by Wall Street. Increasingly in recent weeks, more and more experts have been taking a cautionary tone. On today’s show, we are going to talk about some of the reasons why and what it could mean for members of The Income Generation. Those of us over the age of 50. This week’s National Guest is Adam Mesh, TV personality and founder of his own successful training group and the author of full contact training. Do we see a potential crash in the offing we’ll ask our guest that question and so much more. As always I’ll be joined by some fellow thought leaders among financial advisors for another edition of the financial advisors roundtable. First, let’s take a closer look at why more pessimistic voices has started to rise among the den of Wall Street cheerleaders. After 5 months of giddy optima, the stock market was issued a bit of a wake-up call recently. As you probably know the slide was prompted mainly by what happened on Capitol Hill the previous Friday. The Trump administration working with Republicans and hoping to pass the new Healthcare bill in the house at least send it to the Senate for further tweaking failed in their attempt to convince all Republicans to back the bill. That failure clearly dip in the optimistic mood that is rained on Wall Street since Presidents Trumps election. This first big shot of doubt about President’s Trump ability to turn his promises and the reality had other impacts. The dollar fell to a 4 month low. US Treasury also took a hit in the interest rate on the 10-year treasury fell to 2.35%. Its lowest level in about a month. Now if you saw our show last week on interest rates, and I know you did. You know that following long-term interest rates if the trend should continue could create a real problem for the Federal Reserve. They hiked short-term interest rates by 1/4% just recently and want to approve additional rate hikes this year. But if long-term rates don’t continue trending upward or at least stay above the 2 1/2% mark it will be very difficult for them to do so because it could flatten out the old curve and slow economic progress. The bigger question for now is…Will all this negativity prove to be just the hiccup or is it a sign of more negativity to come where talk to a normal market correction could possibly turn into talk about the next major market crash. Try to answer that question we’ll need to look beyond the timely issues like politics and interest rates. You have heard me say before that investing is indeed all about the details. In fact, successful investors and analyst know just what details to look at when examining market trends. These usually aren’t the same details that get all the attention from Wall Street cheerleaders or from advisors and brokers who have stock-based business models. In fact, most of those ominous headlines I shared at the top of the show are from recent articles that appeared well before Trump’s health care difficulties within Congress. Here are just a few of the factors many analyst are siding to indicate that a major market correction may just be around the corner. Again, these are details and indicators largely separate from the question we address the few weeks ago on this show…Can Trump do it? That’s still an important issue of course but it’s not everything. First of all seasonal trends. You have probably heard the phrase sell in May and go away. Well let’s face it May is just around the corner and the summer months overall are traditional a rocky time for the stock market. Number 2, the Dow Jones Transport Index is down. This Index is often seen as a leading indicator of wider stock market movements. It has fallen 7% in the last 3 weeks. Number 3, investors are buying so-called safe haven assets such as gold and US government bonds. When that happens it often means read about looking for strategies to protect cash against the possibility of a stock market sell-off. Number 4, volatility has increased. The vex index which measures volatility is also known as the fear index. The markets are largely driven as you know by fear and greed. When greed is in control they could soar but when fear takes over lookout. And 5, last but certainly not least yes most people agree that stocks are overvalued. In fact, US stocks are considered to be among the most overvalued globally. That last details the crucial one related to one of the most important but most frequently overlooked market indicators, price to earnings ratios. I’ll talk more about just why that is a bit later on in this show. Right now we are going to talk more about this overvalue market and some of these other potential warning signs with my guest Adam Mesh. My guess today Adam Mesh is founder of the highly successful Adam Mesh trading group whose mission is based upon discipline, control, and accountability. He is also known for his appearance on the NBC reality show Average Joe and for his acclaimed books Full Contact Trading and the Average Joe’s Ultimate Beginners Guide to the stock market. Welcome to the show, Adam Joe.

Adam Mesh

Adam Mesh: Thank you so much. Thanks for having me here.

David Scranton: I know you are in the New York studio right now if you were a little bit more south I could actually call you Adam Joe and probably have it be realistic but everybody knows your names is really not Adam Joe. But listen first of all the Trump Bump, have you seen the same sense of irrational, exuberant that I’ve been seeing right now on the stock market?

Adam Mesh: It’s hard to explain how they got here. All of last year seem so real and how we went up and then the expectation was going to the election if Trump became President that we’d go down but then we just continued higher and now it seems that everybody is bullish.

David Scranton: It does seem that way. Have your concerns about the market being high, have they grown after the healthcare bill got shot down in Congress?

Adam Mesh: It just hard to buy up here because everything has come so far already. If you were going to see Hamilton in New York and you didn’t buy tickets because they were $250 would you pay a 1000? It’s the same thing right now with the market.

David Scranton: It’s interesting because when everybody is on one side of a train, everyone is bullish you have to be concerned and that’s what we’ve been seeing. I know I blow the whistle on myself. I didn’t see the Trump Bump being nearly as big as it was. Was this a surprise to you or were you telling investors that they can ride some momentum upward at least between November and now?

Adam Mesh: As soon as he became President it became clear that sectors were going wild and one of the things you saw initially was and the best example is the financials shut up. They were around 17% following the election and now after the first quarter 2017, they are actually down a couple percentage points. So things have been all over the place but totally surprised at how strong we remained.

David Scranton: Yeah were you surprised seeing what happened to the 10-year treasury, the FED raised interest rates a quarter point and the 10-year treasury drop by almost a quarter a point. That doesn’t make a lot of sense does it?

Adam Mesh: That’s what comes with uncertainty you see irrational behavior, the price of gold doesn’t do what it’s supposed to do, and currencies don’t do what they are supposed to do. It’s kind of gives you the statement that nobody really knows how to react and everybody is caught a little bit off-guard. I don’t think there is anyone that could say they knew this was going to happen.

David Scranton: So which sectors are you telling investors today have more upside in the stock market? Which are your favorites? I know financial seem to have gotten a little bit out of favors to mention. So which sectors right now do you think have the brightest light?

Adam Mesh: Tech has remained strong. It had a good first quarter that it’s finishing up right now and with innovation and growth Tech seems a nice place to be, not only for stability but also for upside and the sector I would stay away from would be the retail sector.

David Scranton: I agree wholeheartedly on the retail sector. It’s one of my biggest concerns. So if you are looking at those sectors how do you recommend investors get involved with those, just picking blue chip individual securities or what’s your best recommendation there?

Adam Mesh: That’s a great question and what we have seen this year is more money flowing into ETFs than ever before. ETFs are a way of diversifying so you are not tied to an individual stock. Let’s say you and I both don’t like retail and we want to put a play on we could it by trading the XRT but you know we wouldn’t be exposed in nostrums potentially getting bought or takeover talks about Sears. By being diversified we can be right on retail without the exposure of an individual stock.

David Scranton: Do you recommend that investors go short if they think that something’s overvalued?

Adam Mesh: I like to use options when I am looking for barriers placed because that’s limited downside and you still have some nice ROY but yeah I think there’s definitely ways to make money when the market goes down.

David Scranton: Now do you ever recommend that people just get out of the market and sit on the sidelines for a period of time if things are so undertrained or you feel like there is always some sector that has a lot of upside potential?

Adam Mesh: It’s another really good question. I do webinars every week and I have 100s of individual investors on those webinars and anytime I say I don’t feel comfortable, we are just going to sit out this week they applaud the decision and they are like that. I think the investors and the experts like to take a breath and just sit on the sidelines for a little bit and see what’s going on. It’s ok to say I don’t know what’s going to happen here.

David Scranton: Yeah it just humility. I mean let’s face it none of us knows what’s going happen all the time if we are right 60% of the time we are considered to be a good trader if you are right 60% of the time. Adam if you could stay with us just a bit longer we need to take a quick commercial break right now and for Income Generation member watching stay with us, we have a lot more from Adam Mesh.

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David Scranton: Welcome back, thanks again for staying with us Adam. So hopefully you didn’t trademark this but let me ask you using your own words. You said that you will tell people that sometimes go to cash and sit in cash when you are unsure about the future and the markets. The question becomes how often you recommend that the average Joe if you will makes trades. Make changes and holdings based upon your strategy, your newsletter.

Adam Mesh: I’ve moved away from trading and I encourage others to do the same because we are competing against robust. But if you have that what I call the little encamped which is the money that you want to grow to use for vacation movies, stuff like that. Two to three trades a week with controlled risk targeting about average ROY is what I feel comfortable with. It allows for a lifestyle plus you go after that income every week.

David Scranton: Yeah it’s true when you are trading against the computer it’s kind of like trying to play chess against the computer. Even the grandmasters can’t win. So if you are saying this as though the little account is designed for vacation or something then how do you teach investors to determine the amount of money or their percentage of their assets for which this type of trading is appropriate based upon their age, based upon their goals. Let’s talk about that for just a little bit.

Adam Mesh: So you take an account and you say okay this is my risk capital I am not going to need it for the rent. I’m not going need it for any expenses, I’m going to look to trade with this. Ideally, you want to have a $25,000 account because that allows for margin. But then what I do is I spend a lot of time going over the exact risk per trades. If we are talking about options and you are looking at a $150 contract you know 10 contract is a $1500 risk. One contract worst case scenario is $150. You allocate accordingly and I like to see no more than 10% of equity per trade which might sound like a lot but when you are using control risk it’s not.

David Scranton: 10% of equity per trade. Now how about overall. Let’s just say that there’s an average Joe that has about a half a million dollars invested, now some people may so well that doesn’t sound like an average Joe but today there a lot of average folks that are there are maybe even higher. Let’s say average Joe is 50 years old, has a half a million dollars invested. How much or what range of amount would you say make sense for that person to utilize with which to use utilize your trading strategy?

Adam Mesh:$500,000 I think if you take in account and you took $450,000 of that and had it track in the market with a mutual fund that’s not going to move more than 3 or 4% each year. You could actually beat that with a 25 or $50,000 trading account because if you are being more aggressive again with control risk you are looking at options trades where couple weeks ago if you targeted goal the 117 cause of 98 cents a day later they are $2. That’s over a 100% ROY in a couple days on a low-risk trade by the terms of you are only risking 98 cents or $1.00. I don’t think you need a lot of money and if you get proof of concepts you could snowball and start to scale up as I’ve seen the best traders do. I wouldn’t be taking half million dollars and trading with it. I don’t think you need to. I think it would be irresponsible. I rather than be the conservative money and then that account that you are managing for yourself it could be smaller but it could actually outperform dollar wise the bigger account.

David Scranton: Well especially in this market if you think about it you and I both are concerned that the market is overvalued so surely you wouldn’t recommend that someone put the other $450,000 in a stock mutual fund right now correct? Because then they can’t even protect that money in the way that you could protect the $50,000 account.

Adam Mesh: Yeah I think typically you want to put money away a couple times a year spread out so that you are not putting it in time in the market or ill time in the market. I also have money in bonds, all different kinds of plans. There is money in the savings account, real estate investments so there is a lot of different ways to go at it. I am not saying to someone today talk half a million dollars and go put it in the market. Definitely not but I think overtime each year I look to put money in my account and grow it and as you know it’s just been an17:21 since 2009 we’ve just gone straight up. So every time you are putting money in each year you are typically buying higher. We are looking at 8 years of going straight up so I mean if you don’t participate then you are not making anything and if you do you feel like you are chasing so kind of double head soar which is why I like having my own account too that I can manage for myself.

David Scranton: Ironically Adam I recommend that when I look at this I would see somebody wanted to have 20 or 30% in the stock market because they are in their 50s or maybe 60 approaching retirement getting closer where they want to reduce the risk and buy more bonds and things like that. I’d actually recommend that they put more in their strategy maybe 20-25% in your strategy because right now the market is being so high buying hold. To me, buying hold is just a soccer bet. At least the thing that you were doing give people a chance to sector rotation and defense the strategies. So I love what you are doing, keep up the great work Adam and thank you so much for being on our show today. I very much appreciate it.

Adam Mesh: Thanks for having me. It was a lot of fun I appreciate it.

David Scranton: So with or without a crash what exactly might you expect from a buy and hold strategy in the coming years. Well, Jack Boggle founder of Vanguard Funds has said that the markets overvaluation suggest to him that stocks are poised to deliver no more than 4% per year average return over the next decade. Other experts have argued that even that might be a little bit overly optimistic of a forecast. Maybe we should look to get Jack Bogle on one of our future shows coming up soon. Some have sited Warren Buffets well known Market Cap the GDP measuring stick and its correlation future tenure returns in the market. They point out that this gage currently implies an annual total return of -2.59% for the SNP 500 over the next decade even worse. The bottom line here is that even you reject all the potential warning signs. The market overvaluation loan suggest a pretty dismal future for committed stock investors, crash or no crash. We discussed this a bit on a previous show where I pointed out that with President Trump impact already priced into the markets even if he delivers on his promise of 4% economic growth additional positive impact for investors might just be minimal. That impact has already been felt. In other words, based on all the hope and optimism since Election Day. If on the other hand, we see tax plan and budget hit walls the same way as healthcare reform just did the downside effects are likely to be a lot more severe. Particularly if it triggers the next major stock market crash. History suggest the next major market drop will reach at least 35% and could very possibly be a steep as 70%. Its actual history that gives us another important detail relative to the markets overvaluation that we definitely should pay attention to. I’ve discussed price earns ratio before on the show and it’s a detail especially important this topic. Every stock price has a price to earnings ratio, a PE ratio and so does the overall stock market. It represents the stock markets price per share relative to its average earnings per share. When average stock prices get too high relative to cooperate earnings one of two things have to happen. Either cooperate earnings need to increase to grow into the over inflated prices. This, of course, takes a lot of time or prices need to shrink to really shrink down into match the new cooperate earnings. This can happen a lot more quickly. What’s interesting historically though is that when average PE rates show for the stock market overall get at or near 30 it seems to serve a clear sign they were about to slip into a long-term secular bear market cycle. This happen just before the crash of 2000 that began what I believe is our current long-term bear market cycle. It happen consistently with every long-term bear market cycle before that just as consistently none of these previous long-term bear market cycles have ended until price earnings ratio have shrunken back down into the single digits. As of right now, average PE ratios are still above 20. Nowhere near single digits. Ultimately then the market overvaluation is telling us two things. Neither of which is especially promising for buy and hold investors. One the markets overinflated and incapable of delivering much or if any additional growth even as the best case scenario. Two, it’s over-inflation relative to price-earnings ratios is another historical indicator that the current long-term secular bear market cycle is probably not over yet. Then another major drop of the stock market is likely still due. Remember history also tells us that every long-term secular bear market cycle last 1 year on average and has at least 3 major market inside of it. This particular secular bear market started in 2000 and as you know has only had two major market drops so far. Coming up in just a bit I’m going to discuss more about the warning signs and what steps you can take to protect your hard earn assets with fellow financial advisors in my financial advisors roundtable. Before that Miranda is going to break down some of today’s financial headlines so stay tuned. You are watching the Income Generation.

Miranda Khan: Welcome back to the Income Generation. I am Miranda Khan. Here is your news max finance update, a quick recap of the stories that moved the markets this week. Energy companies led the stock indexes mostly higher early this week as crude oil prices continue to rise. Congress blocks Obama era rules that would help with tough restrictions on what media companies like Comcast and Verizon can do with your information. More Americans bought homes last month as the weather continues to get warmer. Confidence in the housing market also appears to be a factor. British Prime Minister Theresa May officially files for divorce from the EU. She signed the paperwork Wednesday almost certainly triggering years of negotiations that will test the European Union. May will have two years to settle those terms before they go into effect. For more on these stories visit Newsmax.com/finance. I’m Miranda Khan, now back to David Scranton on the Income Generation.

David Scranton: Thanks, Miranda. Now that you are all up to date let’s hear from another financial advisor in the field and in addition another very special guest to get their insights on today’s topic. It’s another time for our financial advisors roundtable today. I’m joined by Dee Carter President of the Carter Financial Group in Midland Texas with more than 45 years of experience in insurance and finical services. He actually became independent opened up his own firm in 2001 and specialized in conservative financial management. Thanks for joining us today Dee.

Dee Carter: It’s good to be back with you David.

David Scranton: We said we have another very special guest there. Our other special guest today on the show is an old friend of Dee’s Elvis Presley. If you take a look right above Dee’s head on the wall behind him you see a picture of Elvis Presley and today there you go some great collector’s guitars that you have. It’s good to have you here today from the great state of Midland in the great country of Texas Dee. It’s always great to have such a good friend on the show.

Dee Carter: Yeah it’s good to be back with you. I enjoy working with you when we get opportunity like this.

David Scranton: Since you are in Midland let’s just start with oil. It was interesting when I was in Midland it was amazing how people talked about oil prices, just like people around the country talk about the Dow Jones Industrial Average was stored or how the basketball games are going in the brackets and so on and so forth the NCWA. Let’s talk about oil and how oil prices are changing and how do you think that’s being affected by the market interest rates? How do you think it might affect the markets and interest rates?

Dee Carter: Well in fact we have a billboard downtown in the middle that has nothing on it all day long except the number oil wells that are being drilled in United States is somewhere around 800 and being grilled and less tax is like 319 so we have nearly 40% of the grilling operation going on right here and determine base area. The price of oil affects everything in this area. Obviously, the commodity started in the investment situation will affect interest rates I think. Oil prices go up and down fluctuate based on the supply and demand and right now the oil prices are below $50 a barrel which means that the supply is demand at the present time. I do believe what you see in West Texas especially and perhaps throughout the south-west is that people kind of flow with their investment situation. They flow with what they are trying to do with their money and especially in the retirement planning with what they are earning in their oil and other investments but there’s a lot of people in West Texas David that participate and buy stock in oil companies or have bought into a production situation so it makes a real difference. We live in a micro cause up here.

David Scranton: Yeah you do and it’s interesting because lots of the world especially here in southern Florida for example as the stock market goes up real estate goes up. People feel more affluent, they can sell some holdings, and they can go ahead and buy real estate. Right now it’s almost like we are back to 2006, 2007 again with condominiums apartment skyscrapers being built all over southern Florida and where you are it’s all about oil. If oil prices go up people feel better they feel like they are going to be making more money, making money consistently. When oil prices go down people get nervous. So what’s the sentiment right now where you are about oil prices in the future? What’s the general sentiment of people? Are they nervous? Are they confident?

Dee Carter: They are confident. It doesn’t matter what you come 27:34 but right now what we are seeing is…

David Scranton: But it’s easy to have confidence because all you all are packed in heat down there wherever you go that’s why you are confident. I’m talking about oil prices.

Dee Carter: That’s very true. The oil prices right now they are predicting right now the oil prices could go within the next 2 years up to around $75 a barrel. That’s a 50% rise from where it is today. That’s going to make a huge difference in the attitude of the people in West Texas and I expect more so maybe around the world because we are seeing a lot of people investing in that particular area but it’s going to make a positive influence on the entire United States as the oil thing grows. I’m seeing a lot of people doing things now that they haven’t done in years.

David Scranton: That’s great and it is interesting you just heard the Adam Mesh the average Joe talked about his concerns about the market being overvalued. I know you well enough and you are a sharp guy that you share those concerns about the markets being high right now. What are you telling people? How big of a pullback in the markets are you telling people they might be able to expect?

Dee Carter: We are looking at and I use a lot of different indexes to work these things, David. One of the things that we look at a lot is the sure index to see where we are. I have a sure index is the only time it’s been higher than it is today was in 2000 and you recall what happen in 2000. You and I both got into what we are doing now about that same time. The only time higher than that was 1929 so what we are telling people right now is that while things look good and while things are going seemingly well you got to be careful because it appears that the indexes most of the indexes that we look at are high which indicated we can have anywhere from a 30 to 50-60% drop and stock prices are in the market. If that happens they can really get caught out there in a bad situation like you did back in 2003 and in 2008.

David Scranton: To show index for or viewers who might or may not remember from last week show we did talk about this and we discussed the fact that the sure index is basically a different version of the price ratio which we discussed a few minutes ago on this show. That index is basically a sickly adjusted or what he calls the cap adjusted price to earnings ratio and many believe that that’s better indicator than regular price to earnings ratio. We need to take a commercial break in just about a minute or so. Before we do though Dee I’d like you to go ahead and tell us the story about that Elvis painting the viewers are seeing right over your head. What’s the story to that?

Dee Carter: It was given to me by a client several years ago and we discovered with some research that it is an actual original painting and not a print and we discovered who the artist was, we check with them find out that she had sold this painting to Elvis many years ago. Somehow or another it got into a garage sale or in a state sale a lady bought it, another lady bought it, I ended up with it. It’s now hanging on my office wall and it’s documented as being an original painting done by an artist that now lives in San Diego, California who by the way would not give me an authorization letter unless I signed up the papers. So it’s hanging here in my office where it will stay and it is well insured by the way.

David Scranton: That’s great. I know the guitars that are next to you are guitars that one of which at least is something that you have used personally as an Elvis impersonator so when we get back from our commercial break I might just put you on the spot. I know you could sing back there Acapulco stuff that without the music. That was called Acapulco I think it is, isn’t it?

Dee Carter: It is Acapella but that’s close.

David Scranton: I might have to just put you on the spot when you come back to see how good you are. I know its many years so it’s good to have you here and stay with us Dee we’ll be right back. For our viewers stay with us we have a lot more words of wisdom from Dee Carter and also maybe just a little bit of Elvis impersonation to go along with it. Stay with us we’ll be right back.

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David Scranton: Welcome back to the Income Generation. Let’s go ahead and bring back my good friend and fellow financial advisor with 45 years of experience in the financial services industry Dee Carter from Midland Texas. Thanks for sticking around Dee.

Dee Carter: Glad to be here.

David Scranton: So the most important question I think I have to ask you is what your 3 favorite Elvis songs are.

Dee Carter: Well I tell you what I can probably tell you that Suspicious Minds is always a favorite, the American gets the response when I do it and probably the one that goes 7 lonely days and a dozen pounds a gold’s. Anyways one of those songs. Those 3 are my top three and I enjoy singing all 3 of them.

David Scranton: Now to put you on the spot without you going to Mexico sing that Acapulco stuff we were talking about. I’m afraid to go because if Donald Trump puts his fence up you may not be able to get back ok. Without going to Mexico can you give us just a few notes of Suspicious Minds? Let’s hear it.

Dee Carter: [singing]. That’s all you got to pay for it.

David Scranton: That’s great and speaking about trap for caught in a trap you know the stock market today record highs could be viewed by many as being caught in the trap. People have referred to it as a suckers bet. What are you telling people about the stock market today besides the shoulder index they call it? Are you telling people still buy and hold the smaller part of your money or you are telling people don’t play the game at all just get out? Are you telling people to invest actively and be an active trader with some small part of their money as Adam Mesh recommend, our guest just a few minutes ago? Tell our viewers.

Dee Carter: Actually what we are looking at obviously depends on the individual and where they are and how old they are, what they are trying to accomplish. If they are looking for growth if they are looking for retirement if they are looking for preservation of their state whatever it is. We try to figure that into the situation. We know that 60% of American people think they got money but they don’t know what they got and we best by actual research in the past 3/4 of that 60% really don’t have any idea about fixed income products. They really don’t have the education for it. One of the things we try to do is to educate them about what the market does. I think Warren have a great line. he talk about if you are going to buy something you need to buy something that you don’t mind holding for at least 10 years in case the market close for 10 years. I think that has a lot of sense in it. So what we are telling people is simply this. If you can afford to put your money in a place where you could lose 30-50-60% of it perhaps even more without killing your retirement then we have some opportunities for you there. If you are more concerned about long living and living with your money and making sure your money comes through you might want to take another look at fix index or fix products and fix interest product that have been around for a long time David but really have been kind of pushed to the back shelf.

David Scranton: Don’t just blindly follow the 60-40 balance portfolio is that Wall Street likes to push because it’s a little bit of everything and they feel comfortable. It’s kind of a CYA. You are saying, it’s okay to take a common sense departure from that financial textbook. That textbook was written by Wall Street if you think about it and use common sense and make sure that your investments fit your goals. Is that what I’m hearing?

Dee Carter: That’s exactly right and I have been doing this you mentioned earlier on the show that I have been doing this for 45 years and I don’t look that old but I am. I haven’t ever had two people come in the office and we have 5 to 6 people a day come through here. I have never had two people coming in a row that had the same problem, the same age. I don’t have anybody that’s got the same birthdates after all these years. It’s amazing that has happened that way but you never really want to get a cookie cutter product or program to a group of people. Everybody has got a different situation. I think the main thing we have to do and if something I think is really lacking in the financial service industry is to educate the people as to what is out there and let them find something and work within to find something that would fit their particular needs and will solve their problems. If they don’t recognize those problems then you really can’t solve them.

David Scranton: At the end of the day as much as you care about your clients and I happen to know that you care about your clients most and better than probably almost every financial advisor I have ever met but regardless nobody cares more about your clients money than your clients themselves and that’s just reality. Now people also say the markets are have a lot of upside potential left. They might go up in 5-10 even 20%. In 30 seconds or so that we have before commercial break what do you tell those people who say there is another 5-10 maybe even 20% upset?

Dee Carter: Would you risk taking 5-10 or maybe 15% with potential losing 30-40-50%. David, I walked into a casino and sit down at the table and they said if you want to bid $20 we’ll give you 5 if you win but we’ll take your 20 if you lose I wouldn’t even sit down at the table. So we are trying to get people to understand how that works and to understand exactly what will happen if you put your money out there and the market to do what. Most people now are saying it’s wrong to do.

David Scranton: Again it’s all common sense, its simple advice I love it. We take another commercial break so Dee stick around, stay with us and we’ll talk more about common sense approaches to the stock market, to the financial markets and to your hard earned money as an Income Generation member we’ll be right back.

[Break]

David Scranton: Welcome back to the Income Generation I am David Scranton and I am blessed to be here today with the great Dee Carter from Midland Texas. Dee, you need to tell me the truth now are you wearing your blue suede shoes today?

Dee Carter: Today I am not but you would have caught me with them on yesterday probably. I do have 2 or 3 pair of blue suede shoes. It comes with the territory man what I can tell you.

David Scranton: I know that you have been known to wear them on more than one occasion so good for you. See it’s a fair question I had to ask that so if you are telling people that from an investment standpoint it’s not worth trying to squeeze the last 5 or 10% out of the market and maybe you lose 20 or more along the way then what kinds of the things are you telling a lot of your clients might just be appropriate for them that might also help protect their money.

Dee Carter: If they want to stay in the market David we take a look at how are your bonds. We are looking at that particular situation, preferred stocks but we also look at fix index products, insured products, and all the things across the board that will fit their situation and mostly income. What we are trying to do is convert people from the idea of growth. They have been working for growth all of their lives and that’s ok and trying to preserve it now but there’s a time when you’ve got to move into an income mode and that’s what we are trying to move people into. So we look at things that will last them for as long as they last. My question is do you want to run out of money before you run out of breath? Most people say no they like to have some money as long as they are alive. So we try to move them into the income mode idea and there is number of ways you can do that. It really move the risk down to a very controllable level and that’s what we are trying to accomplish.

David Scranton: Isn’t it amazing Dee that so many people you speak with don’t know there’s an alternative to crossing your fingers and toes and hoping that growth or capital appreciation. Most time people seem to think hey the markets are the markets. It’s where we should be. We need to take a commercial break we come back I am going to ask you briefly about your experience. Let’s start right now. In the 30 seconds or so we have left why don’t you tell me how much it helps you having 45 years of experience in this business? Having lived through the bear market in the 1970s, how much that help you really give wisdom to your client base?

Dee Carter: I can look back and see what taken place and I knows that history is a teacher. I know what the curves look like. I know where the particular curve potential right now with market to do a bad thing but that 45 years tells me that something is going to happen. I think soon and we need to be really careful where we are.

David Scranton: If you think about if an advisor generally speaking is not been in the business now for 37 years since the 1970s. They either have had to study in great detail market cycles and facts around history or like yourself actually been in the financial industry back in the 70s when you couldn’t touch the stock market with a 10 ft. pole. Most people didn’t want to go anywhere near it. Dee, please hold on for one last time. When we return we’ll finish up just talking a little bit more about Dee Carter and about the Financial Markets and how Midland Texas, how you can protect your money. We’ll be right back.

[Break]

David Scranton: Welcome back to the Income Generation. I’m David Scranton and let’s go one more time to Midland Texas to my good friend Dee Carter 45 years of experience in the industry. In the 45 seconds or so we have left tell me how did you explain to your clients back in 2008 why they lost so much money with a financial crisis? When they were your clients you were supposed to protect them, how do you explain that to them?

Dee Carter: It’s one of the most difficult things I’ve ever done David because I was in the market doing it with another company with a breakage group and we had to try to teach them what the market cycles were and it was very difficult to bring them along. What we tried to do is educate them. I’m a believer in education. We educate them as to what the market is doing and believe it or not if you educate people if you show them what they need to know and help them to learn if they will follow you and they will work with you as close as you ever had in your life. That’s what we do is we educate, educate.

David Scranton: There you go you have it right here, right from the horse’s mouth. It’s all about experience. At that point 35 years of experience and still learning lessons that help protect your client’s money. Dee thanks so much for staying with us till the end of the show.

Dee Carter: Happy to be here.

David Scranton: Before we go I’d like to thank all my guess as well as you are new and returning viewer. Without a Crystal Ball, no one can really say where the stock market or the global economy for that matter is headed in months ahead and no one has a crystal ball. The best that we could do is consider all the evidence and make sure that we are focusing on the right details. Consider the potential impact of every possible scenario. If you are retired or near retirement, you should be asking yourself is the upside of hanging on to my riskier investments comparable to the potential downside? Do I have as much to gain as I have to lose by hanging in there and hoping for the best? With the market surpassing all-time highs ask yourself has it topped out? If it has do I have a lot more to lose? If so wouldn’t now perhaps be a good time to reduce my risk and start focusing on what should be my number one priority? As Dee Carter said it best reliable retirement income. Thanks for watching.