RETURN ON PRINCIPLE

 

David Scranton: Hello and welcome to The Income Generation. The show, were, we share valuable financial information for that critical period in life when you’re either in or approaching retirement. I’m David Scranton your host. Even if you haven’t actively started your retirement planning, if you’re over 50 there’s a very good chance that you’ve at least done some research or at least started looking into your options. If so, you’ve probably come across a lot of how to rules and guidelines for saving and investing, in fact most books, most websites and TV shows devoted to financial topics focus mainly or focus entirely on this, how to aspect of investing. In other words, things like; what strategies to use how to pick a stock, when to buy when to sell and so on and so forth. In other words, most books and resources on financial planning focus on external factors or what I like to call the outside game. And while all of that is important, most people don’t realize there’s an even more important inside game that these entire, how to-, books seem to be ignoring. Given what’s happening in the financial markets in the global economy today, I don’t think there’s ever been a more critical time for retirees and people approaching retirement to understand the inside game. Which is why I’m making it the focus of today’s show, simply put, the inside game deals with all of the internal elements required for successful saving and investing. The mindset, the knowledge, the principles and yes the core values. Without those how to- rules and guidelines are not only basically useless, but they also could be downright dangerous in today’s economic climate. I’ll talk more about that on the market breakdown segment of today’s show. You’ll also hear some valuable insights about today’s markets from a guest John Najarian professional options trader. In fact, as regular viewers may recall, when we talk about the inside game, this happens to be the focus of my new book coming out this month Return on Principle, 7 Core Values to Help Protect your Money in Good Times and Bad. The core values identifying the book essentially comprised all of the critical components of the inside game. If you have them and you apply them or if, your financial advisor has them and applies them. Suddenly you’re in a position to understand and judge all, these, how to- rules and strategies with a much more critical eye. You’re prepared internally to address the external elements and I can tell you from experience, this is really the whole key to successful investment planning. To illustrate this, I want to open today’s show by sharing my Seven Core Values and giving one example for each of a well known successful money manager who exemplifies each value. I think it’s a great way to illustrate the importance of each value. And to demonstrate how the pro’s all recognize the importance of the, inside game, and why they embrace it. Oh, and by the way these examples may look familiar to you because all but one of them had been guests on The Income Generation show.

So first, the first core value essential to the inside game is; over protection, which is focusing on financial defense and protecting your assets. In my opinion, no one exemplifies this value better than Warren Buffett, one of the most successful investors of all time. Buffett’s well known two rules of investing are as follows; rule number one. Don’t ever lose money. Rule number two. Don’t ever forget rule number one, in other words, over protection.

The next core value; detail orientation has to do with the ability and willingness to look beyond headlines and basic information and look beyond the basic rules to recognize and understand important details. Let’s face it, investing is indeed all about the details and few people demonstrate that better than economist Peter Morrissey, who was a guest on our show earlier this year, Morrissey studies and articles often show how details can reveal truths and insights that the surface story just doesn’t quite seem to tell. This is crucial to investing.

Diligence is the next core value, which means the willingness and ability to stick with something, day in and day out whether you feel like doing it or not. Let’s face it; investing can be a grind. Particularly if you’re focused on fixed income investing, believe me, I know from personal experience. The fixed income world in fact, requires even more diligence than managing stocks and stock mutual funds, which is why I believe that Mohamed El-Erian, chief economic advisor at Allianz and former Income Generation guest, is a great example of diligence personified.

Coach ability, the next core value is the willingness to change direction when you’re presented with evidence, that it’s the right thing to do. Here’s a great case in point; author and market analyst Harry Dent, whom you heard back in January on our show, discussed how changing his market prognosis. At one point after he uncovered new evidence about the Dow that he had missed previously as a well known market analyst that takes a lot of courage, and it takes coach ability, and it’s especially important, coach ability that is, in this historic age of economic uncertainty.

The next value that is essential to the inside game is; leadership, in other words do you yourself have the ability to deviate from the pack, when you know that the pack is about to go off a cliff in the wrong direction. Do you have the internal fortitude to deviate and take the path less traveled? If you don’t, then does your financial advisor have the stability? A great example here is our former guests the Steve Forbes who demonstrates leadership in many ways, especially with regard to his flat tax campaign, which he’s done consistently even in the face of adversity over the last 30 years. Whether you agree with it or not, and many don’t, he continues to champion the idea, that is leadership.

Honesty, the next core value means: having the ability to be brutally honest with yourself in every aspect of financial planning. Our guest John Najarian is an incredibly great representative of this trait, who, when I asked him, for example, what percentage of assets, he believes the average investor should have in stock market options right now, which are the thing that really he specializes in. His answer is brutally honest, by giving us a very low percentage.

John Najarian: I don’t think that should be probably more than 10% of somebody who’s within 10 years of retirement. I don’t think they should be taking shots or, you know, making that big investment if you want to call it that, looking for a windfall. I think they need to more or less just grind out steady returns and that as your show implies The Income Generation, is what’s going to make them richer in the long run, rather than taking a bunch of shots, most of which might blow up on them.

David Scranton: The final core value necessary to the inside game is; fearlessness which definitely does not mean recklessness. Fearlessness is actually the value you can achieve by focusing on all the other values, the ability to live a fearless life and to enjoy retirement with peace of mind. And I would argue that all the successful people that I’ve talked about here today and who we’ve had on our show are great representatives of fearlessness. Again this inside game has never been more timely or relevant, because it helps you to understand how a lot of the so called rules and guidelines of the outside game are either obsolete or potentially dangerous in today’s market. Let’s talk about this a bit more on today’s market break down.

Male voice 1:    The closing numbers on the markets today at one point the market fell as if down a well over 700 points.

Male voice 2:     Apple shares were just getting hammered this morning.

Female voice 1:  We are down by between 3 and 4 ½ percent generally across these markets.

Female voice 2:   Let’s talk about the speed with which we are watching this market deteriorate.

Female voice 3:   We have read everywhere essentially down by 4, 5%.

Female voice 4:   Were down over 16%.

Female voice 5:   Down at the same time as fallen about 18%.

Female voice 6:  The stock market is now down 21%.

Male voice 3:      Right now, down 43%.

Female voice 7:  What in the world is happening on Wall Street?

Announcer:   Finally, there is an alternative, read David J Scranton his groundbreaking new book, Return on Principle 7 Core Values to Help Protect Your Money in Good Times and Bad. Discover practical solutions to the financial challenges facing today’s generation of retirees and near retirees. Learn the truth about Wall Street, the financial media and the secrets they try to hide from everyday investors. This isn’t just another book about investing. Working Americans, who have lived through two major stock market crashes and the worst financial crisis since the Great Depression in the past 16 years, don’t need another book about investing. David Scranton approach to financial planning is a holistic system designed for maximum protection, strategic growth and reliable income, regardless of market conditions. Stop planning for retirement with your fingers crossed plan with confidence, knowledge and peace of mind. Read Return on Principle 7 Core Values to Help Protect Your Money in Good Times and Bad. Available now!

David Scranton:   Buying whole is the only way to go. As you approach retirement you should follow the rule of 100 or the rule of 115.Well you know, you need to have some money in the stock market as a hedge against inflation. Chances are you’ve heard or read some of these or maybe all of these investment rules and guidelines. So why is it that these rules and others like them today seem to be pointless and even potentially dangerous in current market conditions? Well, there are several reasons but let’s focus on a couple of the biggest and then we can take a closer look at the rules themselves, and more specifically, how and why they fail.

First, it’s important to understand that the majority of advisors and people in the financial services profession have received similar training and education. In other words, we are taught certain rules and certain guidelines ourselves. And for some advisors and authors financial authors that is, educating the public is simply a matter of repeating these rules, the same rules that they were taught over and over again. That’s definitely an easy way to do it, but it’s also misleading and potentially dangerous, why? Because, first of all it ignores the details, it ignores diligence, it ignores honesty and all of the other core values in other words it ignores the inside game.

The second reason most, how to- rules, fall short by themselves, is that they neglect to factoring important realities about the financial market. Realities you only become aware of by focusing on things like; overprotection, details and by being diligent and coachable and a good leader. In other words by playing the inside game. The old rule of 100 is a perfect example of what I’m talking about. Now I say old because most of the industry has gotten away from the rule of 100, but only because it’s been replaced by the even more misguided rule of the rule of 115. The rule of 100 is basically saying that the maximum percentage of money that you should have in the stock market at any given time and this includes stock mutual funds, by the way, can be determined by subtracting your age from 100. For example, if you’re 60 the rule of 100 stipulates that you should have at most 40% of your assets in stocks and stock funds. When you turn 70 your market exposure should be 30% at most, according to the rule of 100.With the newer rules of 115, which came along as life expectancies increased, your percentage in the market would obviously be even greater. So for example, at age 60 you’d still have more than half of your portfolio in the stock market. What are these rules designed to do? Well in general they’re designed to reduce your stock market exposure as you get older, which in principle is a very, very good idea. But they completely ignore the fact that market risk is determined not only by age but by other factors including, long term market cycles and their inherent patterns. Take right now for example, when we’re still in the midst of a long term secular bear market cycle that began with the bursting of The Dot Com Bubble, back in 2000. Imagine if you were 60, years old in 1999 and you were following the rule of 100 and you had 40% of your portfolio in stocks and stock funds, and imagine that you stuck with that formula, because buy and hold was another investment rule that you’ve been taught. When the market fell by nearly 50% from 2000 to 2003, how much would you have lost if you had ridden that drop all the way to the bottom? What if you’re following the rule of 100 and committed again to the buy and hold strategy from 2007 to 2009 with the financial crisis when the market toppled once more this time by nearly 60%. Its two drops of approximately 50% or more and subsequent rebounds from 2000 to 2013, that’s what I mean when I talk about market risk being influenced by the realities of long term market cycles. Let’s face it; average investors with common sense don’t want to lose 50% on any percentage of their money just because some rule says that they should. The important takeaway is those drops however, really didn’t come as a surprise to everyone. Some people got out in time, with no or virtually no loss at all. Understanding the market cycles and their common patterns can help you make a much sounder and more educated decision about how much market risk, you should be carrying at any given time. As for today’s market, listen to what our guest has to say highly successful options trader John Najarian. When I asked him again about how much he believes the average investor should have an options right now. The thing in which John specializes, John shared a brutally honest answer because he understands that successful investing requires focusing on details and assessing the markets with brutal honesty today more than ever.

Stay tuned for more of our interview together with our special guests coming up next on the show. But it’s also worth pointing out that our guests who might have asked about market exposure in today’s climate had been equally as honest and some have offered even more conservative advice than John’s, but what about the rule that says; you should always have a certain portion of your portfolio in the stock market as an inflation hedge. We all hear again, if you understand how long term market cycles work, you know this rule is flawed because the market doesn’t automatically always serve as good inflation hedge. When the market falls dramatically into a long term secular bear market cycle and then rebounds with previous peak, the net gain for buying hold investors who ride the wave all the way down and all the way back up again is zero. And even if it surpasses its previous peak once it falls and rebounds again, the net gain again is zero. And one more time that current cycle that we’re in today, is a perfect example from 2000 to 2013 the stock market fell twice by nearly 50% or more and then recovered. Ultimately experiencing zero growth over the course of those 13 years, now you tell me does that sound like a good inflation hedge to you?  Obviously not, but it’s actually a bit worse than this, why? Because inflation has actually worked against you during that time, decreasing the value of a nest egg, that experienced zero growth. In addition to that, you were also the victim of something economists talk about as lost opportunity cost. Consider for a moment that while you’re waiting and hoping to regain your stock losses twice over those 13 years you could have been earning interest elsewhere from 2000, 2007 for example, you could have had your money in an FDIC insured bank CD. That at that time was averaging somewhere between 3 and 5% annually.  Now maybe those numbers don’t sound really exciting to you, but they definitely beat zero. What’s more, they produce reliable income and are not vulnerable to next major stock market plunge and that’s something to think about, because as I’ve discussed repeatedly on previous shows, the long term bear market cycle that we’re in currently likely isn’t over yet. If, if it adheres to the lessons of stock market history. History, is surely trying to tell us that these cycles last 20 years or more on average experience at least three not two, three major drops in each secular bear market cycle. And when you look at where the markets are right now compared to all the global economic turmoil and uncertainty that we’re experiencing, what does your gut tell you? Does the market being in a record high or near record high pass your sniff test? Or does it look more like a classic case of what Greenspan called irrational exuberance. Even more extreme than what we saw before the Dot Com crash when he first coined that phrase. The bottom line is that these are exactly th                                                                                e kinds of important factors that come into play when you focus on the inside game. When you prioritize on things like overprotection, when you scrutinize details, study the markets diligently look at things honestly, and when you’re coachable and you’re not afraid to be a leader. You’re not afraid to zig while everyone else is zagging if you believe it’s in your best interest. That’s what the inside game is all about, and that’s why, in my experience, it’s an essential part of retirement planning for any member of The Income Generation. Those of us over age 50.We’ll be back in a moment with today’s special guest.

We are pleased today to welcome John Najarian to The Income Generation, you might be more familiar with John and Pete Najarian together or with their ads on options trading or perhaps you read their 2013 book entitled How We Trade Options Building Wealth Creating Income and Reducing risk. John or Dr. J Najarian was a linebacker for the Chicago Bears before you turn to another type of contact sport trading on the Chicago Board of options exchange, he became a member of the CBOE the New York Stock Exchange. The CME and the CBOT and worked as floor trader for some 25 years. Today he’s a professional investor, money manager, lecturer, as well as co founder of Najarian Family Office and Rebellion Partners. John, welcome to the income generation.

John Najarian:  Great to be with you Dave. Thanks.

David Scranton:  You know options are generally considered to be something very complex by your average investor, but they don’t have to be, how do you explain options to just your average middle American investor?

John Najarian:  Right, options you as you say do seem mystifying but shouldn’t be really the most common use of the same for us in everyday life is an insurance policy. Where that’s a put- option, people like Warren Buffett love Put- options because they get to keep the premium for the policy, they issue and they’re providing valuable service. They’re ensuring the downside of some asset. You can do the same thing with a stock and that put- option ensures the downside of Google or Apple and like I say Warren Buffett, Bill Gates a whole bunch of real smart people Michael Dell they sell puts like crazy. Why? Because they’re big risk takers, no, but because they think the premium taken in is worthwhile and they’re willing to buy that stock at a lower price, whereas maybe an individual investor with either a shorter time frame or less money isn’t as willing to take the ups and downs in the market as much.

David Scranton:  You know, it’s interesting because you talked about hedging and, and most investors don’t think of options as being risky they think of it as a speculation, you know, when you’re, speculating what do you tell, the average investor. Somebody who’s retired or, within 10 years of retirement, is to, how much of their money as a kind of a guideline maximum should they be using for speculation? We’ll get to the hedging in a minute. But at this point, what percentage for speculation is a guideline for your average investor?

John Najarian:  You know, that’s a great question Dave, because, I think a lot of investors. The older they get obviously, the larger the nest egg generally is but unfortunately, they probably are taking too much risk with that nest egg, something they wouldn’t have been comfortable with. For instance, after their 30s and even 40s, now all the sudden in their 60s and 70s they’re taking too much risk. I don’t think that should be probably more than 10% of somebody who’s within 10 years of retirement. I don’t think they should be taking shots or, you know, making that big investment if you want to call it that. Looking for a windfall, I think they need to more or less just grind out steady returns and that as your show implies The Income Generation is what’s going to make them richer in the long run, rather than taking a bunch of shots, most of which might blow up on them.

David Scranton:  You are using options spec…From speculative basis is usually something like people think about buying call options if they think a stock is going to go up, you know. Can you give us a recent example of where you’ve had success speculating with maybe even for some member of The Income Generation, with a small percentage of their money? Just to give an example we’re using options on speculative basis actually made you significant gain.

John Najarian:  Sure, you can take a look at US Steel for instance symbol X. US Steel courses is a Steel stock biggest one in the world right now is me tall but US Steel is still a pretty significant competitor. We bought some at the money calls in US Steel the stock made about a 4% move over the next week, but the options more than doubled. So in other words, you could make 4% on, for instance, on a $20,000 investment that comes out to about what $800 or you could put that same $800 into options and turn it into 1600 dollars. So those are examples that exist every day, whether it’s Cisco, whether it’s Microsoft or Google, where you can basically buy an at the money or just out of the money call and it doesn’t take a big move in the stock Dave to turn that into a big winner for you.

David Scranton:  Absolutely. Its leverage and leverage works great when, when things are going well accentuate your gains and of course can do the opposite of things work against you, as you well know. So we’re talking today on the show about the market in general and what’s your take on this? The market seems to be at a high level today, it seems to be defying gravity. What, what’s going on in your personal opinion?

John Najarian:  Well, I think, as stated by, you know the likes of the Fed Chairman Janet Yellen or Abe over in Japan or Kearney and Great Britain or Draghi in Europe. These are all people that run central banks for these countries and they’re trying to force us, you and me into riskier assets. That’s one of the purposes of lowering interest rates is to make it unattractive to leave your money in a bank. They would rather have us commit capital to financial markets and thus by getting us out of bonds and into fixed income investing. They can hopefully drive some demand by these big companies by Apple by Google by Microsoft and so forth. And to a certain extent that has worked, but obviously a lot of investors as they get closer to retirement are feeling a little unease with the market here at these record highs. But I think lower for longer on interest rates Dave means higher for longer out of the stock market as well.

David Scranton:  So with all, without all of this, external stimulus, you agree that the market is on the highest side. But with all this, external stimulus it could go higher before it takes its next significant drop is that what I’m hearing?

John Najarian:  That is correct, and there could be an incident, though, there could be you know. None of us want to see a terrorist incident but it certainly could be that it could be banks in Europe that all of a sudden have more than just a hiccup that could cause us to make that correction, whether it’s 10% or more that could still happen even with very low interest rates and that’s more or less, I think, why our Fed is trying to get a little further away from zero. That’s why they moved rates up a quarter of a percent last December and it’s why we’re likely to see another increase a small one and very small one this coming December, but between now and then, David, I don’t think we see any rate increases.

John Najarian:  That’s the biggest thing that our Income Generation members struggle with every day is trying to figure out, gee, if the market is defying gravity fed shouldn’t normally be at this level, but it’s there for reasons external reasons that we understand. The thought is, you know, how much money I really want to gamble in common stocks or stock fun. So when we come back from the break we’re actually going to talk about that. We’re going to talk about ways that John uses options to head in times like this and also to increase income for members of our Income Generation. Stay with us. We’ll be right back after the break.

Male voice 1:    The closing numbers on the markets today at one point the market fell as if down oh well over 700 points.

Male voice 2:     Apple shares were just getting hammered this morning.

Female voice 1:  We are down by between 3 and 4 ½ percent generally across these markets.

Female voice 2:   Let’s talk about the speed with which we are watching this market deteriorate.

Female voice 3:   We have read everywhere essentially down by 4 or 5%.

Female voice 4:   Were down over 16%.

Female voice 5:  Down at the same time as fallen about 18%.

Female voice 6:  The stock market is now down 21%.

Male voice 3:      Right now, down 43%.

Female voice 7:  What in the world is happening on Wall Street?

Announcer:   Finally, there is an alternative read David J Scranton groundbreaking new book, Return on Principle, 7 Core Values to Help Protect Your Money in Good Times and Bad. Discover practical solutions to the financial challenges facing today’s generation of retirees and near retirees. Learn the truth about Wall Street, the financial media and the secrets they try to hide from everyday investors. This isn’t just another book about investing. Working Americans, who have lived through two major stock market crashes and the worst financial crisis since the Great Depression in the past 16 years, don’t need another book about investing. David Scranton approach to financial planning is a holistic system designed for maximum protection, strategic growth and reliable income, regardless of market conditions. Stop planning for retirement with your fingers crossed, plan with confidence knowledge and peace of mind. Read Return on Principle, 7 Core Values to Help Protect Your Money in Good Times and Bad. Available now!

David Scranton:  Welcome back, we’re here today with options expert extraordinaire John Najarian. John we, we talked about using options for speculation but I know he’s being a retired linebacker for you. It’s more about defense than it is about offence in many ways. So can you talk about how an average investor can use options to protect the downside at a time like this when he may feel as though that the market shouldn’t be here, it’s high but yet understands why it’s at this level and still increasing.

John Najarian:  Sure, and Dave, I think a lot of investors probably are over weighed in stocks and they are because of what you and I mentioned in the previous segment. The federal banks or the central banks have pushed them into riskier investments taking them out of fixed income which might be the equivalent of their age. In other words, 60% in fixed income 40% in stocks doesn’t really work when fixed income goes down to zero. So a lot of people are probably finding themselves with stocks that have more risk because of these elevated levels. So one of the things I would do is, in particular, if I’m in a tax free or tax deferred status like an IRA or Roth, or Something like that is. I would get in there and sell out some of these stocks and instead get into either in the money longer dated options, where I have a defined amount of risk, less risk than in that stock even great stocks like again Microsoft or IBM or Apple. I would rather be in the options, deep in the money options there or an option spreads than I would like to be in those stocks. I think I can control my risk and I think as you say, I’m a guy who likes to play defense. Offenses is great but in particular, as you get closer to retirement, you want to have that grinder mentality, you know you’d rather hit like Ichiro and get you know base hits and doubles rather than swing for the fences.

David Scranton:  They’ll sell the stocks by call options to protect your downside. So you haven’t stopped the upside, but we’d less downside, and also put- options, you know, buying puts to protect the downside, you know, stop losses in a volatile market like today. People put trailing stops in as you know and, and of course the market takes a big drop you get stopped out. It runs up and then you’re sitting in cash. So do you use put- options also to protect downside oftentimes?

John Najarian:   I do, in fact, depending on the stock, whether it’s Fire-I which is a volatile security stock. It’s a cloud based security stock. I would definitely have put options against my stock. If I was in a volatile sector like that, but then you look at a lot of these retailers, they’re having their lunch eaten by Amazon and others soon to be Wall-Mart now with their acquisition of jet. And you have big downside moves, Kate Spade for instance handbag company you, wouldn’t expect that stock to lose, lose a third of Its value in a single day, but it did. Just in the recent past, if you would have had a put- option under the market that put gives you the right to sell at that strike Price. So, just as you say, Dave that gives you the protection so you don’t have a 30% draw down because those can kill you or at least really inhibit your returns and keep you from living the lifestyle you’d like to live.

David Scranton:  And most people don’t realize that even if you buy a put to protect your downside, and let’s say the strike prices 10% below the price of the stock. You don’t have to crash through the strike price on the down side for it to work because if it fills half that gap its worth more and people don’t realize you can sell that put and actually make money on the put itself. But let’s talk about income for a second  because The Income Generation is the name of our show a lot of people don’t want to buy the put their say, well, the put is you know I’m only getting a 2, 2 ½   percent dividend I by the put that’s going to eat up my dividend. Yeah, those people and said they want to increase their dividend. So how about covered calls are those good for retirees who still want to hold some stock?

John Najarian:   Absolutely. It’s a great strategy income generation from basically I look at it, Dave, as if you own an apartment. You’re in South Florida a lot of the time so, South Florida hotbed of real estate. How many people want to own an apartment in South Florida and if they’re not living in it they just leave it empty. They’d rather rent it out and collect that rent every month with an option, you could sell an option every month. You could even do it every week, but most investors; especially close to retirement age probably makes more sense to sell monthly or quarterly options. But again, you’re getting a nice chunk of income enhancing the yield of that stock and it’s just like letting that apartment out to a renter except they can’t wreck your stock. They could wreck your apartment. They can do all kinds of damage to the apartment, but they can’t do anything to your stock. They just are participating in the upside of the stock from wherever that strike price is. I think that’s a great way to play the market.

David Scranton:   Let’s say the S&P 500 stocks, today let’s say the average dividends two or two and a half percent by writing covered calls you can get your income from two to two and a half up to what level, would you say in today’s market?

John Najarian:   Well, especially on an annual basis. I think you could take it into the double digits, take it to about 11 or 12%, which is phenomenal. When you’re looking at zero or a quarter of a percent even half a percent for you know the, the two year Treasury is right around I think point 6%. So in other words, if I can get 10% for owning a stock like Apple owning a stock like Cisco or whatever and selling calls against that stock. I think You’re in a great position to like I say, live a better life in your retirement years because you enhance the yield rather than just sitting there with that empty apartment.

David Scranton:   At the end of the day to get 10% in the fixed income market, you’d have to go down to the C rated range of junk bonds and here you can own blue chip stocks and right covered calls and get similar income. So that’s absolutely great advice for people who still want to have some of their money in common stock, even though they’re retired or on the brink of retirement. So, John we’re out of time, all Good things must come to an end. I appreciate our time together today. Thank you.

John Najarian:  Thank you, David pleasure to be with you and The Income Generation.

David Scranton:   And for our viewers, stay with us. We’ll be right back after the break. We’re Morgan and I go together on set to talk about today’s financial markets and what you need to watch out for. We’ll be right back.

Morgan:  David it was so fun to watch your Interviewer JD now a little birdie told me that he was actually the first person to ever interview you and launch your TV career. Is that true?

David Scranton:   Absolutely. It’s funny, after the last several years between Fox Business and CNBC and Bloomberg and so on. My first interview ever was right here on Newsmax. And it was so funny because I was a nervous wreck, nervous wreck and he was just such a great guy. He just looked at me and said you know just, just its just two of us. It’s two of us guys sitting here talking about money. And that’s it. Just relax, take a deep breath and he calmed me right down. And that’s our good friend JD.

Morgan:  Yes, as you probably know JD and I were co-host for quite a bit and he’s just so fun and really wonderful and definitely will put you at ease.

David Scranton:   Absolutely. That’s right.

Morgan:  So now it’s my turn to interview you and you alluded a little bit to that you’re, you’re doing TV, you’re doing Radio, and you have the advisors Academy. You are literally the busiest person I know. How did you find the time or the need to write another book?

David Scranton:   Well writing the book itself was actually quite interesting you know. It was a process and, you know, most people don’t realize when you write a book. Its several iterations, I mean it gets to the point where after 10 or 12 times going through a book. You’re not sure if you read the last change or not. And it gets confusing and overwhelming. So you got to kind of do a brain dump in between clear your head and start all over again. But it’s something I just felt compelled to do because I felt like if something I just I had stuff to say that nobody else has really talked about in books recently.

Morgan:  Now important is it to kind of step back and maybe have somebody else review your material or is that something you don’t do?

David Scranton:   Well, we do, we are you know, you have a series of editors when you write a book, it’s not just you writing the book. It’s your writing it, and then you have one copy editor. A second copy editor at the end you have a third copy editor. In my case, I guess I’m such a bad writer that they actually had to have, three copy editors on it. But at the end of the day everybody comes back with good feedback and what to put in and what to take out. Because sometimes when it’s your baby it’s your own stuff you don’t have as good of a view, as good of a vision as others do. So when the Outsiders read it, they come back. They really give you some good input that’s, that’s valuable and now that the preliminary feedback because we’ve got a product that, that is really helping educate people a lot it’s not it’s not a lot of financial jargon. It’s nice as simple as down to earth language.

Morgan:   Well, I know from your first book, you’re so good at that, you know, I’m no financial genius. But you take very complicated, you know, strategies and theories and you put it in something that’s very easy to understand for anybody you know and I love that. So tell me. You said you had so much more to say, what type of things did you feel, you didn’t cover in your first book that people really need to know that we’ve covered in this book?

David Scranton:   Well, it’s funny because my first thought is, I was thinking, gee, I’ve got to write something because our country has problems. Our country has concerns with the deficit. The national debt going on politically and so on, but then I thought that was going to be some, some deep seated economic, you know monologue. That was just people, the average folks, we’re going to read it and not be interested in. And I thought wait a minute, there’s a bigger issue. I looked out started looking all the books out there and I realized that every book it’s kind of like my old book. It’s talking about; when to buy when to sell what to look out for, even though my old book has some, some wisdom in it that, that most books don’t have they’re being sold today, their financial books. I still felt as though it was more about the inside game, like just about anything else in the world. Most of success comes right between here. It doesn’t have to do with how you do things. It’s your mindset going into them. And when I realized that there were seven core values that truly do help keep investors money safe in good times and bad and I realized that a lot of do it yourself or type investors really don’t have the inner game what it takes on the inside game to do it and a lot of advisors don’t really have the inner game. I said, you know what, I’ve got to write about this is something that everybody can understand.

Morgan:   You know, and more importantly, probably most of the advisors and personal investors. They don’t even know they don’t have the goods, if you will.

David Scranton:   That’s right. And a lot of times you just read a book and you think, oh, I know how to do this right and the best analogy I make is it’s kind of like flying a plane, you know. Of course, being a pilot, it doesn’t matter. I’m that I’m a private pilot, instrument rated pilot, a commercial pilot at the end of the day it’s all about ours. It’s all about ours and experience and you know some people are some people who are never fit to become a pilot, there’s some people that should never fly an airplane. Because they don’t have the head for it they don’t have the mindset for it. And the same is true that some people should really never be investing their own money. And so people right now that are financial advisors and they got into the business because they’re interested in finance, but also but just like a lot of people might be interested in flying an airplane. It doesn’t mean that you have the mindset or the inside game to be good at it. And that’s why I thought it was so important to write that book.

Morgan:   Well, I think everybody needs to have a copy of your book, like you said, whether you’re great at being your own investor or your own advisor and maybe you’re not. So how do you find out, well read your book.

David Scranton:   Read my book that’s right. And I believe that everyone within 10 years of retirement should go out and get a copy of return on principle. Why? Because remember it’s at 10 years right before retirement that 10 years right after retirement. That is a time when it’s crucial to make sure you don’t make any mistakes. In fact, you’ll see a commercial for my books to how you our Income Generation viewers can order the book right after the show. But Meanwhile, I don’t want you to get away from basic so in wrapping up the show today. I want to thank all of you for being part of our show. Once against our loyal weekly viewers, but also, don’t forget to white papers that are very, very important.

If you’re not using someone who’s well trained in fixed income and you’re born before 1966. It may just be time for you to break up with that advisor and move on. I would suggest someone who will care for you through these important years of your life. If you need help finding someone call or write us. I’d also like to remind you of the special report entitled The Income Generation. It’s available free to you our loyal viewers online. If you haven’t downloaded your report, pick it up after the show.

If you’re near or in retirement, head over to The Income Generation.com and download your special report written specifically for the needs of the income generation, again those born before 1966. I’m David Scranton, and you’ve been watching The Income Generation, we’ll see you all next Sunday.