The Financial Perspective
Fareed Zakaria: It feels like we've seen this movie before, which is that Ronald Reagan did cut taxes and the economy did grow. He also tripled the national debt, George W. Bush cut taxes the economy did not grow and the deficit ballooned astronomically. We're now at what its 70-80 percent after GDP ratios are you really comfortable with another wild wager that you cut taxes. The deficit will almost certainly explode and that maybe you'll get a little growth or maybe you won't? It's certainly the last 15-20 to 20 years suggests that cutting taxes is not producing growth anymore.
Stephen Moore: Well, I do not agree with that promise. I mean I look again at the history of when we've had the major tax rate reductions in this country like the 60s and 80s when we had a big boom. And in fact, even under Bill Clinton when we had the big boom in the late 1990s, we had a big reduction in the capital gains tax at that time Fareed. And look at what happened to the revenues, they just exploded.
David Scranton: And so the debate about our country's economic future under Donald Trump continues among economists, among everyday Americans and certainly among big investors. Where each of us stands on this debate is largely a matter of perspective and perspectives change as we age and our life situation changes and sometimes that can complicate our decision making process. The question becomes is your current perspective the right perspective or are you clinging to an old outdated point of view? And if so what can we reasonably anticipate as the consequences of that position? These are some important questions when the decisions you're making involve your entire life savings. It's time to tune out the hype and focus on the facts that matter to you the Income Generation. Let's get started, get ready to separate reality from myth.
Female voice: David Scranton.
Male voice 7: But David Scranton says hey, not so fast.
David Scranton: How does it affect the market? How does it affect the economy? Thanks to efficiencies and new technology and a staff of veteran analysts and portfolio managers sound income strategy try to set new standard and bring institutional style investing your portfolio. Hello everyone and welcome to the Income Generation. I'm David Scranton your host and you know we've been talking quite a lot recently in recent weeks at least about the Trump rally and sharing differing viewpoints about where it might be heading. One thing we haven't really touched upon though is the importance of perspective in drawing your own conclusions. There's always more than one way to look at a situation and maybe not a clear cut right or wrong. But if it's a situation that calls for us to make a decision we want to make sure that we're looking at it in the best possible way. In other words, in a way that helps us make a decision with a positive outcome. Life experience, professional experience and certainly age all play a role and perspective and in how our perspectives change over time. For example, if you're a skier think about the first time you took on a tough black diamond trail. Being young and inexperienced, you were probably really nervous but because you were young and had enough experience on the easier trails you made the decision to go for it. And after a few runs your perspective probably changed. Those tough trails now look inviting and your decision to go for it became a much easier one but, as you got older and skied less frequently your perspective might have changed again and rightfully so. Clinging to an old perspective in that situation might prove to be extremely dangerous and skiing isn't the only situation where that's true. Joining us this week is author and commentator David Horowitz, who was a liberal activist before taking up the conservative cause during the Reagan administration. He's been a major voice among conservative thought leaders ever since. We'll also be talking to author and analyst Christopher Whelan to get the perspective of a Wall Street insider and institutional investment adviser. And as always I will be joined by some fellow thought leaders among financial advisers for another edition of my financial advisor roundtable. Let's listen to one of the optimistic voices out there. Here for instance, is what one equity strategist for J.P Morgan wrote recently. We see a limited risk of a larger pullback. The market is likely to remain resilient. If anything, we see a confluence of conditions potentially coming together in the months ahead and setting the stage for the market to reach new highs. That's a far cry from some of the recent negative headlines we've seen but it's not surprising when you consider the perspective behind it. The perspective of an equity strategist at one of the nation's largest and best-known investment banks. I've discussed previously on this show how Wall Street CEOs have a vested interest in speaking optimistically about markets. They always have to be thinking about increasing shareholder value and let's face it the best way to do this is by keeping you invested in the markets and their financial products as much as possible. And when you're... the question becomes when are you more likely to invest and stay invested? When you're optimistic or when you're pessimistic about where the markets are headed?
The answer is simple optimistic, of course. But what you may not realize is that this need to push optimism can indeed spread based upon the relationship between big business, big investment firms, brokerage houses and the financial media. In other words, the perspective of a big name broker, banker or a gung ho stock guru on TV can be exactly the same as that of a Wall Street CEO. Which means a perspective based upon financial incentive to push optimism. But the important question for everyday investors is this is that the same perspective you should be taking on based upon your life, your situation and your experiences? I mentioned earlier that perspectives change for all of us based upon age, experience and other factors and sometimes dramatically. In fact, as it turns out I happen to be a pretty good example of that. Early in my career, my perspective was that of a typical young adviser with a stock market based investment model. It was the late 1980s and we were still in the midst of the best long-term secular bull market our country's ever seen. I was having a fair amount of success with my stock centered approach and my buy and hold philosophy, so that it seemed to be the right perspective for me and for my clients at the time. But as the 1990s wore on and I learned more and more about historical stock market cycles my perspective began to change.
I started to see warning signs in the late 1990s that the bubble was about to burst. As the evidence increased and I became more and more convinced I had a tough decision to make. Do I stay the course based upon my old perspective? Or completely change my business model based upon my new one? Whereas the first option would have been a lot easier I opted for the second option and to this day, I consider it the smartest move professionally that I've ever made. My shift to a business model based on protecting clients assets and generating consistent dependable income has served me and my clients well ever since. It served me well through that first crash from 2000 to 2003 and the next from 2007 to 2009 and the entire experience is a major part of what influences my own perspective as I look at what's happening in the financial markets right now. With the stock market so overvalued and priced earnings ratio so high and with so much uncertainty surrounding the economy my perspective is that it feels a bit like 1999 all over again. Or you might say a bit like 2007 all over again, and with that perspective it feels like a business model focused on protection and income is still the right way to go. Now, let's get the perspective of one of the most influential conservative thinkers of this generation Mr. David Horowitz. David Horowitz has been one of the country's leading conservative commentators for more than 30 years. He's a New York Times bestselling author and a mentor to some of Donald Trump's key advisors. He's founder of the David Horowitz Freedom Center and the editor of its publication Front Page Magazine. His most recent best seller is called Big Agenda President Trumps plan to save America. David, welcome to the show.
David Horowitz: Thank you.
David Scranton: You know in your book Big Agenda you outlined some of Trump's key priorities for the economy. And I'd like to talk to you about those one at a time, and have you tell us what needs to be done and whether you feel like he's moving in the right direction so far. And why do you think he's going to be successful with that particular thing. So number one, better trade deals. Is he making the right move so far?
David Horowitz: I think so, [Inaudible 08:50] TPP's take a name after. I think the most important thing is that the rest of the world knows that there's a dealer in the White House someone who is going to stand up for America. I think that's the biggest in Trump's Arsenal is his persona, is the fact that he and it's so clear that he loves this country and that he wants the best deal for Americans. And that changes the dynamics of all the negotiations.
David Scranton: So you know one of the things that's on his platform is energy independence. Getting free from the dependence upon foreign oil which we all you know everyone who’s an American would love to see that happen. What are your thoughts on that? You think he's going to have success with that? Do you think he's going to find struggles? What steps has he taken?
David Horowitz: Absolutely. He's defied the environmental alarmist’s and wackos to build two pipelines. It's clear that he's not going to be a fan of the anti-fracking laws. He's got an appointee to the Environmental Protection Agency, which is going to put those forces in its place. I mean in some ways the most dangerous threat that we face is from these environmentalists who think they're saving the planet. If you think you're saving the planet, what won't you do? What crime would you not commit? What lie wouldn't you not tell? What control wouldn't you put on the economy? No matter how damaging it is the survival of the planet is at stake? So I think the sobriety of the Trump administration, that' Trump and his appointee's is going to have a very...or already is having a very salutary effect. And the hysterics they cut a third of the EPA budget and the headline in The Washington Post was Trump dooms the planet. These people are off their rockers and not enough people are saying that this is just crazy.
David Scranton: So, I want to talk to you about taxes also. But I want to go back to what we talked about just a minute ago with trade, you know the border adjustment tax do you think it's good? Do you think it's bad? Do you think he's going to get it through, tell us?
David Horowitz: The last question is the big one of whether he'd get it through. Trump has...you know he is unique in many ways and in my view irreplaceable. The Republican Party is used to compromising, dealing, getting out of the way of people you know calling names and... Well look news just had a step down from the Intel Committee that's how powerful the Democrat machine is second by a media, which is not really a media at all it's just an extension of the Democratic Party. So I think that the big question is whether he'll get it. I would be for it but you know I'm for anything that strengthens the border and reverses our deficit towards Mexico and other countries.
David Scranton: You know David its funny when you talk about the media of course you know newsmax is a very conservative network, but I love it today when all of a sudden we're talking about the overly. You hear people talk about the overly conservative media and the right wing media and it's comical. It's totally different from what we've always heard. So I'm glad to hear you say the liberal media at least we could put people back in to perspectives.
David Horowitz: (Inaudible 12:45) I think they're bigots.
David Scranton: What's that?
David Horowitz: I don't call them liberals, I think they are bigots it's a left wing media and it's in the pocket of the Democratic Party which is an extreme left wing party now.
David Scranton: Extreme exactly. Extreme.
David Horowitz: The Democratic Party is the party in party standards.
David Scranton: Hey David, we need to take a commercial break. We need to leave it right there for now but please stick around. We have a lot more when we come back, words of wisdom from David Horwitz. Stay with us. Welcome back to the Income Generation. Let's bring back in David Horwitz bestselling author of the Big Agenda, President Trump's plan to save America. David, thanks for sticking around. You know let's talk about taxes and his tax reform. First of all, if he struggling getting tax reform through Congress in some way you think that could be the biggest thing that could stop his agenda dead in its tracks if that should happen?
David Horowitz: If Congress stops him. I don't think Trump's agenda is going to be stopped dead in its tracks. Trump...What people forget I mean it's all this inside the Beltway chatter. A lot of it hysterical, the anti-Trump forces are truly deranged but you can't forget how he resonates with the people. He got elected, you know I mean he didn't run in California and New York. If he had actually campaign there.
David Scranton: Sure.
David Horowitz: You know he could have won maybe the popular vote.
David Scranton: David, what do you think is the single most important component of his tax plan?
David Horowitz: Well, I think the cut of the corporate tax rate to 15 percent would be tremendous.
David Scranton: And what do you think is the least important in other words, if he has to compromise and he has to give up one thing in his tax plan that he's trying to get through what would that be?
David Horowitz: If he cuts it to 20 percent it's still a big thing, and as I said earlier in this segment, I can't wait for the tax cut. I mean I need tax relief, I think everybody out there does. And as long as he's moving in that direction it's going to be a win for him. And there's no way that the Congress is going to deny him any tax cut. But, I think that the Trump train is going to gather steam as we go through this presidency. He has been the target of the most egregious and extreme attacks of any president in our history, well at least in our modern history. So it takes time for him to... you know it's going to be tougher going at the outset. But as you look he's bought in all these jobs, he's cut the you know the illegals crossings of the border by 67 percent his sessions is now strengthening the police forces from the attacks of the Obama administration. All these things are going to have a long-term effect and as the months go by in this administration more and more people are going to rally to Trump.
David Scranton: So assuming David he's going to have the success that you're talking about here then how do you think that's going to affect the stock market? You know we've talked a lot about how the stock market has just jump 10-15 percent on optimism. So do you think his success is already priced in? Or do you think there's still a lot more upside if he has the success that you're describing?
David Horowitz: I think there's more upside but I think okay look, starting when he was president elect he started the stock market boom. You know they'll be corrections, there are going to be setbacks along the way like the health care which they may hurry too fast. You know but if you're looking over the long term of this administration I think the stock market is going to love Trump.
David Scranton: Love Trump, okay. So David in the last 30 seconds or so we have left. You know tell us about how you made your paradigm shift? Your change in perspective, which of course, the topic of our show today from being liberal to being as conservative as you are currently? Other than the two words, Jimmy Carter.
David Horowitz: No, I was a leftist and I that's what the... I had the politics of the Democratic Party today although I didn't vote democratic because I was a radical. What happened were two things? One, the Black Panther Party which was lionized as the black revolutionary force of the Left. Murdered a friend of mine and left supported them, I didn't defend and the person they murdered was another leftist. And the second was that the left got its way in Vietnam and forced the American to withdraw and the Communist proceeded to slaughter two and a half million people and there was not a single protest against that.
David Scranton: You know it's amazing when some your closest friends lose their lives. I can't imagine there's any more powerful influence that you could think of to change one's perspective. So David Horowitz, thanks so much for joining us today we really appreciate you being here.
David Horowitz: Thank you for having me.
David Scranton: My next guest Christopher Whelan brings the perspective of a Wall Street insider with a unique understanding of the relationship between politics and finance. In fact, over the past three decades he's worked in Washington and on Wall Street including organizations such as Bear Stearns, Prudential, Tangent Capital Partners and the Federal Reserve Bank of New York. He's currently the chairman of Whelan Global Advisors, editor of Institutional Risk analyst and a bestselling author whose books include Inflated, How Money and Debt Built the American dream and his newest book From Inspiration enterprise the study of Ford Motor Company and the Ford family. Christopher, welcome to the show.
Christopher Whelan: Thank you David.
David Scranton: You know our show today as you hear or hearing is we're all talking about perspective. People's perspectives when it comes to politics and markets and investments and so on. Tell me, do you look at this market differently in other words, has your perspective changed in looking at it from the institutional side versus looking at it from the none-institutional side?
Christopher Whelan: Well during the past eight years really since the financial crisis, there has been a pretty dramatic decline in the participation by retail individuals in the financial markets. It's still largely dominated by institutional players and they tend to set the trends, they certainly have an enormous amount of power when it comes to how companies choose to issue stocks and bonds. And I think that you know the streets been doing their best to lure Main Street back to the game but it's nothing like the period before 2008. I remember the barbershop I go to every month used to have CNBC on all the time and they were watching stocks. Not today, they were all watching Oprah or something else.
David Scranton: That's right. It's probably a lot more fun that way right? You know but...
Christopher Whelan: Well, yeah.
David Scranton: Have you found... What do you think this recent rally we've seen in the stock market? You know have you seen that this rally has come from really insiders on the institutional side? With Institutional optimism or do you think its Joe Q. Public just getting back in the market?
Christopher Whelan: Well there was a couple of factors. First and foremost the election of Donald Trump when he was talking about tax cuts and spending increases. The 10-year Treasury bond backed up a full point in yield...
David Scranton: I remember that.
Christopher Whelan: And stocks rallied, deregulation you know all sorts of good things for business a change in the narrative just different people compared to the eight years of punishment and recriminations we had with Obama. So I think just the whole atmosphere changed and that drove a lot of it. I mean banks for example, went up 30 percent between October and the end of the year and there was no change in their earnings.
David Scranton: But again is that...? Do you think most of that optimism that bounce is institutionally led because Wall Street loves the concept of less regulation and so on and so forth? Or do you think its investors led ultimately?
Christopher Whelan: Yes. I think primarily institutional for this cycle. The sell side analysts got on board and a lot of managers for example, again and financials were underweight financials. So as soon as they thought that there'd be less capital regulation, in other words, banks could raise dividends, do more share repurchases, less regulation that sort of thing. You know the floodgates opened and that you probably saw at least a 50-75 percent increase in the allocation by institutional investors in banks for example. This quarter we're going to give it back.
David Scranton: I was just going to say that in the minute or so we have left in this segment. You know you said recently in an interview you expect a 10 to 15 percent pullback on financials.
Christopher Whelan: Yes.
David Scranton: You think it's going to happen later this year or you think it's going to happen sooner rather than later. What's your best guess? I know it's hard to tell.
Christopher Whelan: It's going to be a grudging process over the next few weeks because when we see earnings next week you know starting with the bigger banks Thursday. I think people are going to realize that there isn't a whole lot of change yet. For example, everybody thinks rising interest rates will be good for banks. I put a post-up this morning on the institutional risk analyst kind of try and explain that to people, it takes a long time. It'll take years for that effect to be really evident in earnings.
David Scranton: Yeah, I guess the best hope financials have right now is a repeal of Dodd Frank. That might help them stay high but otherwise I tend to agree with you I think they're a little over baked. But listen we need to take a quick commercial break. Chris if you can please stick with us, I'd like to come back and ask you a lot more, pick your brains, your words of wisdom and for our viewers stay with us. We'll be right back with a lot more from Christopher Whelan.
Miranda Khan: Welcome back to the Income Generation, I'm Miranda Khan and here is your Newsmax finance update. A quick recap of the stories that move the markets this week, economist Peter Morici warns that the stock market could tumble if investors honeymoon with Donald Trump's campaign policies comes to an end.
Peter Morici: Investors could easily become disappointed and skeptical about today's valuations. The market could take a dive and that in turn could create an environment to pessimism that ripples through the economy.
Miranda Khan: Morici warns that consumers are already not spending their money pointing to a decline in car and retail sales. If you're worried about a high yield junk bond meltdown don't, this according to Jeffrey Gundlock the leader of Doubleline capital says there's no cause for concern because the risk of recession is low. Gundlock also says that he does not think financial markets will see 3 percent on the 10 year Treasury this year. And here is something to chew on JAB holdings plans to gobble up another chain, this time Panera Bread the more than 7 billion dollar deal includes a side order of 340 million dollars’ worth of debt. JAB already owns Caribou Coffee and Peet's Coffee and tea. The company has been looking to expand its tea and breakfast empire. Panera Bread has 2000 bakery cafes throughout the U.S. The office supply chain Staples may also be up for grabs soon. It's reportedly in talks with private equity firms. The potential sell off sent shares of the retailer up more than 10 percent. The sale could provide relief to Staples following a failed merger and increasing online competition. And Amazon.com now live stream NFL games starting this year. Right now, it streams 10 of Thursday night games online but it's only for Prime members, the same games will also be broadcasted live on TV. For more on these stories visit Newsmax.com/finance. I'm Miranda Khan back to David Scranton and the Income Generation.
David Scranton: Thanks Miranda. Now let's bring back in Chris Whelan. Chris, thanks so much for sticking around and allowing us to pick your brains.
Christopher Whelan: My pleasure.
David Scranton: You know we're talking about interest rates and we just did an entire show recently devoted to interest rates and I'd like to know what your take is on that. Do you believe like many that low interest rates overall are going to be what's called... what they call the new norm? Or do you think we'll get back to maybe 5 percent on the 10 year eventually?
Christopher Whelan: Janet Yellen thinks she's raising interest rates and investors have another idea. I personally and I've been saying this for a while, I think 10 year could go back to 2 percent yield. So it's going to take quite a lot to re-balance the markets away from this enormous emphasis on bonds and the hunger that investors have for bonds right now. Like give you an example I mean you know the Fed has been sitting on 4 trillion dollars for the Treasury bonds and mortgage banks and they're fretting about whether to sell them. Fannie Mae and Freddie Mac are going to issued 30 percent less securities this year because of the movement and interest rates since the election. You would think the Fed would take notice of that and start dribbling some of their portfolio back out into the market. I think it's going to be very hard to get long-term interest rates to rise just for the obvious reasons. The Fed has forced investors away from equities into fixed income products and there's not enough product out there. That's the amazing thing and I don't think they understand that.
David Scranton: No, and I think your perspective is so good. I talk about this all the time but most people think that when Janet Yellen raises short-term rates, long term rates are going to react and move upward. And it doesn't work that way, the reality is that the long-term rates act as a governor that keeps short-term rates down. But you know I agree with you it’s going to be tougher...
Christopher Whelan: Banks control long-term rates you know. But banks and investors control long-term rates.
David Scranton: Banks and investors exactly and you know my concern right now is when you look at the demographics and the baby boomers aging and looking for income you know. I agree we might just be in a low and straight environment where the so-called bond bubble everybody's talking about could make... could remain a bubble for years to come so... What do you see?
Christopher Whelan: Definitely and you know meanwhile yeah, go ahead.
David Scranton: No, no. Go ahead finish what you were saying on interest rates. I was going to ask you...I was going to change the subject and ask about the stock market.
Christopher Whelan: We have bubbles, you know David we have bubbles all over the place. Commercial, real estate, the auto sector. Janet Yellen's low interest rate policy is what drove the growth in auto sales up to 18 million units last year. We're not going to do 18 this year. In fact, we'll be lucky to do 16 based on my assessment of the recent earnings. You know Ford and GM just put out their report on sales. It was dismal, passenger car sales were down by 27 percent and this is all because Janet Yellen and the social engineering of the Federal Open Market Committee. They don't want to accept the fact that they really don't have a way to goose income, goose consumption so they manipulate asset prices and the aftermath is always bad.
David Scranton: I think they do realize it they just don't want to admit it would be too politically unpopular is my interpretation but... So let's talk about the equity markets for a minute. If you were to handicap the equity markets almost as in a collar type fashion what do you think would be the best case for this year? And what do you think is the worst case for equity markets this year moving forward?
Christopher Whelan: Well, I don't expect equity markets to sell off very much because there's a lack of supply. If you look at share repurchases by large cap and medium cap companies the lack of IPO activity began because companies can issue debt at very low rates. It's kind of the same situation we see in residential real estate there's no supply. You know my friends in that business have 20 qualified applicants for every house they can show them so there's a constraint on supply and stocks in housing and other asset classes. And I think for that reason you're probably going to see it stay more or less where it is but that doesn't mean you won't see some volatility. It's just there's not enough new companies coming to market to satisfy the demand.
David Scranton: Wow, so Chris it sounds like you're saying then that there's bubbles all over the place. These bubbles could remain for a while so don't worry too much about it. So what would you're... in the last minute or so we have left tell what would be your best advice today for everyday investors. People, aged 50 and over members of the Income Generation for the year 2017?
Christopher Whelan: Well, I always tell people to invest in what they know. Invest in their own businesses number one but I think in terms of the security's market, there is still a lot of values there. It's just a question of doing your homework and finding stocks and bonds that represent a disruption if you will in the norm. I love Fintech that's a sector I'm spending a lot of time on as an analyst because there's a lot of company whose in that space that are basically just doing what banks and other financial Institutions do better. Banks are big and dumb and they don't move very quickly so when you see a company that can get in there and provide service it's meaningful for the customers. They can create a lot of value and I think that's where I like to focus people on things that are relatively new and have a disruptive component to them.
David Scranton: Well, I love what you're saying. It is always good advice to invest in what you know. You basically just described Warren Buffett so Chris thanks so much for joining us today. We have to go but we appreciate you being here. Chris Whelan.
Christopher Whelan: No, my pleasure. Let's do it again.
David Scranton: Alright, thank you sir. Now, let's introduce our financial advisor’s roundtable to get their thoughts and insights on today's topic, the overvalued market. Yes, it's time for another financial advisor’s roundtable and joining me today are Brad Williams. Brad Williams is owner and president of Brad Williams’s financial services at Huntsville Alabama. His extensive knowledge of investments and insurance comes from 25 years of experience. Most of that focused on particular financial challenges of retirees and people approaching retirement as well as business owners. Al Caicedo is owner and president of CKS Summit Group in Clinton Township Michigan. He spent well over 20 years working to help clients protect and preserve their assets. His practice also focuses on addressing the specific needs of people nearing retirement or already retired. So gentlemen, we have to take commercial break but as soon as we come back we're going to talk about more about paradigm and perspective. And I want to get your feedback is to how your clients... How your perspective has changed throughout your career? But also how has your client’s perspective changed from the late 1990s through the mid-2000s to today? And including the change of perspective that's most recent right after the election of President Trump. So stay with us Income Generation members. We'll be right back with lots of words of wisdom from both Brad and Al, we'll be right back. If you're near or in retirement head over to the Income Generation dot come and download your special report written specifically for the needs of the income generation. Again those born before nineteen sixty-six. I'm David Scranton and you've been watching the Income Generation. We'll see you all next Sunday. Okay, let's jump right into it then. Brad, now thanks for sticking around. Brad, let's go to you first has all ya'lls perspective... See the reason why I do that is because you're Alabama. I have to say all ya'll. How is all ya'lls perspective on the financial markets changed from the late 1990s to present times?
Brad Williams: Well, I think my perspective is you know after being in the industry as long as I have and watching the ups and downs. Is that you know when we get to the top like we are now that's a time to be defensive, looking for income instead of growth and protecting my clients hard earned assets. Because I've always had the philosophy you know they can lose their money on their own, they don't need me so I need to protect it.
David Scranton: Good advice. Very good advice Al, (speaking Spanish 34:22). Oh, I'm sorry I forgot most of our viewers don't know Spanish. AL, how has your perspective changed over the many years that you've been in the financial industry when it comes to financial markets?
Al Caicedo: Well you know back in the... You know I came into this business back in the 1990s and one of the reasons I came into this business was because I thought that you know I was pretty darn good. I thought that you know I was doing so well with my own personal portfolio with everything else I thought hey I can help other people do the same thing. But little did I know that it was just a wave that we were riding and as our practice grew and everything else that we did become more focused on pre- retirees and retirees only. And we started seeing that writing on the Wall in early 2000 where we said hey if we continue going down this path then what's going to happen is that most of our clients are going to be in trouble when it comes to income. If we ride that coaster of ups and downs it does not bother us too much when we're accumulating asset but we knew that our clients were going to be de-cumulating assets, so we had to change our focus. And that focus was to really start preserving assets and driving income.
David Scranton: But let me ask you when you started doing this first in the early 2000s you know you saw the writing on the wall, you made a change but how about other people's perspectives how about your clients? Did you get some push back then because people were used to the 1990 stock market that went in only one direction and that's straight up or did people tend to follow you pretty easily?
Al Caicedo: No, absolutely not. As a matter of fact, I remember when my father first retired back in the late 1990s he...you know we sat down together and I said dad you know the writings on the wall and...
David Scranton: Dad didn't want to hear it, did he?
Al Caicedo: He didn't want to hear it. He said no you're doing a good job and I said I well don't think we can continue this, he says well you're going to, so think about this my own father said this. So I was managing a lot of my own clients and things like that, people were coming around kicking and screaming because again, we were so addicted to the 80s and 90s and we have that mentality of the 80s and 90s that the markets can only go one way and that's up.
David Scranton: Yeah, of course. Brad how about your experience did you have the same experience when you first started talking to people and giving them the conservative message and concerns about the market after the year 2000? Or did you find that people in Alabama were maybe a little bit smarter than people in the Michigan area?
Brad Williams: Well, you know it really took some educating Dave and I did get pushback because as you both had said we went through about 20 years of some really good markets with you know a few ups and downs but really good markets. So you know getting people to realize you know look you need an exit strategy, you need an entrance or not entrance but exit strategy and an income strategy. Because you know when you...I use a casino analogy a lot and there's a reason those casinos are beautiful, have cheap food and free drinks. Is because most people that go there don't have an exit strategy, they keep thinking it's going to keep going up, up, up and when the bottom falls out they don't know what to do.
David Scranton: That's right and if the bottom falls out first they still don't know what to do they stay there? So that brings me Brad to 2007 when the market was at its peak. How do you see people's paradigms or perspectives being different in 2007 and through the drop in 2008? You felt like that changed it at all from when the top bubble had initially burst?
Brad Williams: Oh, I most definitely. Because after being through two major drops in that short period of time I think my clients especially were more attuned to the fact that you know this is not a one-way market it can go either way. And the fundamental shifts in the economy you know commercial real estate, financing that type of thing you know all that cheap money that was flowing so freely you know after 2000. You know it dried up and that caused for example, rates they got killed in the commercial rates never really ever recovered after that and in a blood that's a paradigm shift in how people are consuming. You know people are buying online and not mortar, brick and mortar.
David Scranton: So Al, in the 30 seconds we have left in this segment. Tell me about how you saw your clients and prospective clients change their philosophies and perspectives right around 2007-2008?
Al Caicedo: Well with our clients being the fact that we were in the distribution phase I think it really impacted them really hard. I think they finally saw that the fact that if the changes that were made in that portfolio it was what kept them afloat. Understanding that if we had kept going and wishing for growth and hoping and crossing our hands and fingers for growth. We knew that we wouldn't be able to replenish that portfolio so...
David Scranton: So people became more amenable to that message as time went on which makes sense. Guys, stay with us please if you can. We need to take a quick commercial break when we come back we're going to talk about the most recent prospective change right after the election of Donald Trump. Stay with us. Welcome back to the Income Generation we're here today with two highly regarded financial advisers Al Caicedo from Michigan and Brad Williams from Alabama. Al, I had to cut you off there right before the break but I'd like to go to you first and have you tell us what did you see as the most recent paradigm in people's thinking in Michigan from the day before Donald Trump got elected to what's transpired over the last five months or so?
Al Caicedo: Well, I think here in Michigan we're seeing a lot of what I call the Trump enthusiasm. Thinking that they’re you know putting a lot of confidence in the fact that Donald Trump especially because we are (inaudible 40:17) auto markets and everything. And you heard that we're bringing back a lot of manufacturing, the jobs are going to keep kicking, that plants are going to be built, that a lot of investments are going to be made in the state. And so what we're seeing is that a lot of people around here are thinking that if he comes through with this then the current market conditions that we currently have right now will only continue to grow at the rate they're going. And what they're not seeing is that you know what we're having an issue here and challenges is helping our clients see that there's a... If things don't go the way they should go for example, like with Obamacare where he got an issue with that. He's got a few issues with a lot of other things that he's wanted to put forward and he could get it on his agenda yet that things can quickly change on them. So right now I think we're still riding the waves especially here in Michigan riding that wave of enthusiasm.
David Scranton: You're worried that in essence, optimism about Trump having successful outcome with his economic policies already priced in the market and your concern that if that does not come through as well as the market hopes we could turn the other way. Brad, you know I know in Alabama people are extremely, extremely politically liberal so they must be really, really concerned in Alabama about what they're seeing right here. Tell me about the paradigm shift you have seen from right before the election to today.
Brad Williams: Well, you know fortunately, what I'm seeing with a lot of my clients most of my clients and the people down here is a cautious optimism. They understand the markets overvalued you know interest rates are going to have to go up and they're looking at... well maybe there is a short-term opportunity here but what I'm hearing from people is there's a lot of problems in Washington that you know it's going to take a lot for one man to fix. And so why not take advantage of some short term opportunities as the markets going up but be cautious because that can turn at any time.
David Scranton: I see well it is good. It's always good to take a conservative approach like that because you're right you don't know you're... You've talked about the casino and I would say just like imagine walking into a casino where if there's a gaming table there where if you win, you win 10 dollars. And you lose, you lose 50 dollars that's in some ways where the stock market sits today at least in my opinion. So gentlemen stay with us, we're going to be back one more time. We're going to talk a little bit more about the markets and for our Income Generation members we're going to put these two guys on the spot. And we're going to ask them what they think is going to happen through the rest of 2017 with the financial markets? So don't go anywhere we'll be right back. Welcome back to the Income Generation. I'm David Scranton and joining me today is Brad Williams from Alabama and AL Caicedo from Michigan. AL, 30 seconds tell me what's your best prognosis for the stock market at the end of this year? Do you think it's going to be slightly higher, the momentum's going to carry or do you think a correction is going to start before the end of 2017, best guess?
AL Caicedo: I always say don't let realism...don't let optimism not realism. There's a lot of issues going on right now in our financial markets, a lot of things that are not determined. I feel that there's going to be more volatility going down towards the end of the year and I think that the correction is really right around the corner for everyone.
David Scranton: Alright, so you're thinking we're not going to make it through the rest of the year. Brad, I've always known you to be kind of sort of an optimistic sort. What are your thoughts about stock market performance over the next few months?
Brad Williams: Well, I think if the Trump programs continue to progress forward we could see some modest gains. You know the talk about draining the swamp, we've got to also remember there is a lot of nasty creatures in that swamp that don't want it drained. So they're going to try to derail that agenda and we also have you know in North Korea we've got a lot of geopolitical issues that can cause the markets to act pretty funny. So you know I'm cautiously optimistic for moderate gains but I think a correction can happen at any time.
David Scranton: Alright, and for our Income Generation members, our Income Generation viewers that is what makes this decision so difficult, opposing views. Al, Brad thanks so much for being here today.
Al Caicedo: Thanks for having us.
Brad Williams: Thank you.
David Scranton: Before we go I'd like to thank all my guest as well as you our new and returning viewers. Now, I've talked a bit about my own perspective on today's show but in the end, the perspectives that matters most when it comes to making financial decisions is yours. Pay attention to the experts yes, but don't ever adopt an opinion or blindly follow advice or recommendations without knowing whether it's based upon a perspective that's compatible with your own. And in fact, that's how you know that you have the right financial advisor what he or she is willing to work with you on a personal level. When he or she helps you tailor an individual plan to make decisions based upon and agreed upon perspective that suits you as the client. Because again, yes, perspectives do change and the one you had towards saving and investing in your 30's and 40's is probably not the same one that's still right for you in your 50's, 60's or 70's. Thanks for watching. I'd also like to remind you of the special report entitled the Income Generation. This is available free to you our loyal viewers online. If you haven't downloaded your report pick it up after the show. I'm David Scranton and you've been watching the Income Generation. We'll see you all next Sunday.