Latest / The Millionaire Dentist™ / Surviving Volatile Markets: CEO Jason Smith’s Playbook for Dentists

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Surviving Volatile Markets: CEO Jason Smith’s Playbook for Dentists · The Millionaire Dentist™

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Hello, everyone, welcome to The Millionaire Dentist podcast, brought to you by
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four Quadnance Advisory. On this podcast, we break down the world of dentistry,
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finances, and business practices to help you become the millionaire dentists you deserve
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to be. Please be advised we do speak with an honest tongue and may
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not be safe for work. Hello and welcome to another episode of The Millionaire
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Dentist. I am your host Jared Bridgeman. Casey is out of town.
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He's actually at an event speaking as we speak right now. So instead I
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have brought in the CEO and founder of four Quadrants Advisory, Jason Smith and
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all around a pretty smart dude when it comes to money and finance and all
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that kind of stuff, and I wanted to bring him in and talk about
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the market and volatility and kind of how our firm deals with that. Jason,
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Welcome, Hey, Jared, great to be back, and what a
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great time to do a podcast on volata markets and investing. A lot is
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gone on the last two years, right right, You know, that's kind
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of where I wanted to start with you was like, let's kind of go
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back to twenty twenty two. Can he kind of walk me through the rate
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of returns, like the NASDAK and the SMP five hundred. Well, sure,
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twenty twenty two was just about a complete whitewash. Here. I'm gonna
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throw a couple of things at you. Sure the Nasdaq was down about thirty
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three percent negative, the S and P five hundred was negative eighteen percent.
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Okay, So we are what's called an active money manager. So we just
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don't sit back and say it's all about long term investing. Though we believe
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in long term investing, we also believe you should look at what's right in
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front of you and what other economic conditions are. And we're a feeling money
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manager. And so we talk about all this dental stuff and dental strategies and
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cash flow strategies all the time with the financial planning and the accounting, but
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at the heart and soul of everything that we do on a daily base,
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and I also kind of serve as our chief investment officer is managing money the
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right way with the opportunity to get really good returns, but knowing that if
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we get about ninety eleven percent on an annulyzed basis, our clients are going
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to be multi multi millionaires, because our guiding light is how much money our
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clients save. We don't have dentists here that save forty thousand dollars a year
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after we've had them for a couple of years. They're saving one hundred and
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fifty thousand. So we don't want to take that excess risk in the market.
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So if you just would have been in a S and P five hundred
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index fund last year, you would have done negative eighteen percent, just a
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regular that's not even like no special alternative investments, no anything. You would
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have done native lost money and over negative thirty percent in the NASA, And
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we tell our clients all the time, negative thirty three percent or negative fifty
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percent is hard to recover from. It takes years to recover from that.
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So that is essentially the Dow is fairly positive. But that is essentially what
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was going on in twenty twenty two as far as a snapshot of the entirety
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of the economy. Interest rates started going up, mortgages started going up,
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and a lot of recession talk. Let me ask you, with do interest
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rates is that kind of a I want to say there's a correlation, but
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is there a trend where if the market's not doing well, it more so
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is if it kind of works the ops away. If interest rates start rising,
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it puts pressure on stocks because usually there's a correlation that if interest rates
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start rising, so do bond rates, and they become more attractive and stocks
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start doing worse. Almost always bonds will tell us and what the bond market
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is doing will give us a little heads up on what's to come with stocks.
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So I always look to those bond markets first to see what is going
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on. And so for example, this year, bond rate started going higher
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and you could get a higher bond rate than you could in the past,
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like say on a ten year bond. And when those get more and more
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attractive, all of a sudden, people go, we'ren't a volatile stock market,
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and I'm less interested in owning stocks. Got it? Okay? That
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makes sense, And so there is a correlation. And typically when those things
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go on and interest rates go up, so to interest rates on thirty year
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mortgages for houses. And also if I'm a business owner and I want money,
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got it like business loans or that kind of thought, you got it
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growth business loans? All of a sudden, I go, I can't afford
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to take an eight percent loan for my business, and so I might have
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to retract, maybe let go of some people and just hang tight for and
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on a practice owner level, this might be in terms of maybe money you're
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hoping to use for redoing your office, adding operatories and having operatorries out and
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essentially some of this and going towards a recession is what our government wants right
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now. They want inflation to cool off and they want interest rates to come
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down. But in order to do that, we have to do some of
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the things that we're doing from an economic policy standpoint. So where does that
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leave us? Is just going back to twenty twenty two? Yeah, I
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wanted to ask. So we were down. It was down now, I
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think was down thirty three percent as a paid five hundred, down about eighteen
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percent. How did our clients do? We actually finished between negative nine and
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our worst client was negative eleven percent. And you know, interesting enough,
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we worked really really hard for that to happen, and we only had one
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third of the loss of the market depending on what index you're looking at,
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And so we we wiped out two thirds of the risk that was going on
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for our clients and kept them safe because when you have a negative nine percent
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year, you're not happy about it, sure, but you can recover pretty
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fast from that. I was gonna ask you said, with the larger with
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you know, the larger discrepancy, it takes possibly years, but with only
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nine percent, it's a much short shortened time there. Absolutely, I mean
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you get on it really easy to think, even in a bull market,
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if you go negative thirty three percent for a year, even three years in
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a row, just simple math ten to twelve percent, it's going to take
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you three plus years to break even. And so we did a great job.
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But what stinks, and that is not intended by any clients. I've
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never gotten a high five for doing negative nine percent, and I should have.
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And what a lot of these advisors here did, and our great team
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did to bust our butt to omit risk last year. But then we get
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the twenty twenty three right, So did any of what you saw in the
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market and what you and our team here accomplished, how did that affect or
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change your thought process coming into twenty three, Well after we got done with
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the holidays, every statistic out there set a hard recession is coming. Interest
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rates are going to continue to go up. And then here again, especially
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mid sized businesses, not your Apples and Googles of the world, because they
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have cash for one hundred years at their fingertips. But when I'm a mid
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sized business and I need money, I can't get it now. I can't
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afford that kind of interest, so I can't grow. So then we have
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layoffs coming and everything starting. For simplicity, January one was hold on a
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recessionist coming, and so that immediately puts us in a defensive stature, right
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right, Let me ask you when these rumors and not murders, but you
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know the feeling comes out on the news that a recession might be coming,
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and does that ever become like a self fulfilling prophecy, Like everybody starts thinking
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he's going to recession, so they might be pulling money out of things that
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may have prevented that. There is definitely more emotion and activity in a market
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like this. You know, we had a great client of ours who saw
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a mutual fund that kind of mimics the S and P five hundred or I'm
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sorry it was a Nasdaq and said, hey, if you guys ever considered
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this fund, because that fund is all tech as a retiree, and one
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of our advisors wrote in back and said, hey, doc, if you
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would have been in this last year, you would have been over negative twenty
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eight percent. Probably would have been time to go back to work. Yep,
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But let me give you some statistics for this year. Yeah. Please.
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It's this type of a stock market which makes it very difficult. But
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seven stocks and the S and P five hundred this year are responsible for ninety
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two percent of the raid to return and the performance. And they're all the
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big seven, your your Google's, your Apples of the world, meta.
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Everything else is negative for the year. The Nasdaq has ran away. But
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with that being said, I printed all this off of a couple of days
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ago, so it's still pretty fresh. Sure, the Nasdaq was up twenty
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one point two five percent for the year, which is an incredible number.
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And also for you to have gotten that kind of performance, honestly, you
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would have to be with an advisor who did nothing for the year and last
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year and your money was just sitting in there and they got lucky. This
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is the year of being lucky if that happened, Because no investment house that
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I respect had people fully invested this year they were protecting their client's money January
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first, and even at the end of last year. To give you an
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idea, even the Nasdaq over the last month is negative three point eight percent,
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So the last thirty days have been just terrible. Usually even in one
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month, if you lose a percent of percent and a half, that's a
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turbulent market conditions. So over the last month it's been negative three point eight
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percent. The dal Jones has been negative two point two eight percent, which
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is more conservative than the Nasdaq. Sure, and you're today the Dow Jones
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is negative one percent. So sometimes our great clients don't understand those things are
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going on. That's our job to watch that. Those are reasons and all
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those other conditions that are taking place why we're not keeping up with the Nasdaq
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this year, because we would just have to roll the dice if that happened
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with our clients. And here again, we want them saving a lot,
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and we want that nine percent to eleven percent every year, and we're far
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from being in a bull market yet. To throw another figure at you,
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Even over the last month, the S and P five hundred is negative three
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point two one So every index over the last month has been negative aggressively negative.
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Wow. I mean, if you anualize negative three every month out,
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that's a big, big loss. We've got two indexes that are just doing
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okay. Seven stocks make up ninety two percent of the S and P five
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hundred. But then we have this other little island called the Nasdaq, right
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that has had these runaway returns that is almost non doesn't even function with the
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rest of the market this year or the rest of the economy. Right,
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those seven companies that are kind of doing exceptionally well compared to everybody else,
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and inflation hasn't started coming down, and neither have interest rates. So let
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me ask you this, if you were a really good investment advisor, what
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would you be thinking this year? You know, with with with you,
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you know, talking about how indust rates have not gone down. You know,
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to me, it almost seems like you still want to find ways to
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protect the money. That's a great call on your part for being a marketing
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guy. That's we are still very much in protection, protection, protection mode,
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and we're still sitting on a lot of cash for our clients, but
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we are fully invested in the market now that cash, we're not just keeping
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that under a mattress. Are we well? I do actually some of it.
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The wife and I are going to take a nice vacation here soon.
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You do remember Bernie made off right? Yes, but actually a great point
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on your part. Because of late, bonds have started weakening and they're not
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as good as they were. So we bought some bonds earlier this year and
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we did very well on them. But lately we are almost getting and sometimes
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are getting five percent in our money market accounts with virtually no risk, So
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five percent in the money market accounts, so we have about thirty thirty five
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percent in cash. Sure, then if the stock market does take off,
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we're there to be a part of that because we have enough invested sure and
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good tech companies. We're still big fans of energy and frankly a little bit
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of healthcare and rumor has it we even picked up John Deere the other day.
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Oh right, great company, great stock, a little bit of it's
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classified as industrial, and so we will be We have enough invested to take
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a part of this market takes off. But by having that thirty percent cash,
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if it starts going down and we would make further actions, we go
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down way less than the S and P. Five hundred or the Nasdaq or
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any other index of the Dow Jones because they don't hold cash, correct we
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do, and so we're protected well there. With all of that being said,
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I think there's a great chance we're going to have a Santa rally and
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a lot of people are calling for a bull market next year. So it's
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not bad enough to be totally out of the market, sure, and it's
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not bad enough to be totally in, which is very frustrating. I bet
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you got a lot of you finance guys out there seem pretty competitive if you
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want to beat the market or beat your fellow companies extremely extremely and you're trying
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to make the right decisions always for clients, and especially with what are here.
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Again, I call it our guiding light, but you are investment philosophy
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what we're trying to do because we are the king of savings for dentists.
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I think on Earth, hands down, nobody has our results. And you
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just don't do things like other people. When you have people with their eyeshut
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saving one hundred and fifty thousand a year for retirement, we just can't risk
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it and you can't let your ego get in the way. So would you
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say would be fair to say over the last let's say two years or twenty
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four months or whatever, that we've pretty much been beat in the market.
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If we finish even a little bit positive, which if the market continues to
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go up, we will this year. I don't have a hard figure for
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you, but I would guess it would be probably plus seven percent. But
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if the market, if we have this Christmas rally and where we're sitting right
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now, and then our returns from last year, we will have beat the
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market collectively two years in a row. It's incredible. I can't do that
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much better for clients. I can't give them a plus twenty seven percent out
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of the Nasdaq this year, but well, they look at the last years
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and look at all the economic conditions going on that we explained to our clients
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going it's very obviously you protected the hell out of our money. You bet?
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So. Do you think sometimes you know with clients or people who just
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meet, for example, are not much knowledgeable. Do you find that when
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it comes time for like yearly meetings or when you when people are going through
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the process, how much time and energy it takes to educate that person on
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what we do and what those numbers might mean. Everybody is different, but
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it does take time to educate people, and we are happy to do it.
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It's harder to educate in markets like this because everybody wants to talk about
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the hot sexy stock their buddy has, right and especially dentist and specialist.
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Years ago, crypto was the hottest thing around. Sure, and ask those
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people how much they have lost, But people don't talk about when they're losing
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money, or what they're doing to protect money, or how much they did
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lose. We're getting ready to do a consultation on somebody and I can't give
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you age or anything because we have several consultations going on. But it's somebody
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that is not a client who might become one, and we've got about ten
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years to get really serious. And it's very evident they have not saved the
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money they have and probably have had along the way some great, great losses,
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because that's usually what you find when somebody's in their late fifties that doesn't
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have the money they should. This is a long term game here, an
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approach to managing money and being smart. It's really easy in a bull market
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when every other day the market's up to make a lot of money. Sure,
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and we know because we have a lot of individual stocks. We know
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our portfolio and the companies and it is very strong. We don't turn a
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bunch of mutual fund companies loose on managing our client's money. I looked at
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a mutual fund the other day and it was a growth fund, just a
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regular, good old fashioned growth fund and good company. I believe it was
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Vanguard was the company. And the fund had over three thousand stocks in it.
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That is so over allocated and diversified that it's there's such a thing as
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too much diversification. So when I look at a fund like that, I
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don't know what we're buying. Sure, like the S and P five hundred,
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I believe twenty five percent of the S and P five hundred, it's
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close to that's between fourteen and twenty five percent. Has to be in financial
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stocks at all times, well, financial stocks, banking stocks. The banking
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crisis we had this year, yeah, like that, what was that bank
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out in California? Yeah, Silicon Valley and banking. We don't want our
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clients to be in financial right now, So things like that. That's how
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they're registered with the SE. See and they have to they have to continue
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to follow those rules and they're here again. That's back to our active management.
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So financial certainly is a place that we don't think we should be in,
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and we certainly don't think we're probably not buying any utilities anytime soon.
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That's just a very weird market. Uh. Mostly it's down. Uh,
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and then about every fourth year you might make a lot of money. Now,
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I know when I playing Monopoly, the railroad seem to do pretty well.
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Yes, I like the railroads and Monopoly too, and I like Boardwalk
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right, oh yeah, oh yeah, And what's the one next to park
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Place and Boardwalk. I wish it was that easy, because if I could
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just put a couple of motels on those two babies, then we might quit
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taking new clients. But we're just continuing to be patient for the rest of
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the year. And I think we're set up are the stocks that we have
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for our clients. If we have a bull market, we're set up to
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do very very well. And so really the name for us, because we're
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organized, we would know what our guiding light is is we've got to be
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patient and we might have some turbulent months coming ahead, but having faith in
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what we're in the type of companies were in long term, We're in great
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like cream of the crop American companies, right, I mean in our The
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team we have here are just a bunch of smart people. Man Like,
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just hearing them talk about this stuff is always mind opening, eye opening for
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me. It is always a team approach and the things they helped me with
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that even did it yesterday on looking at stocks. We looked real hard at
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Caterpillar yesterday. But I think that stock price is going to come down to
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I think it's about two hundred and nineteen dollars right now, and I think
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it's going to hit about two hundred and five dollars and then it gets very
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attractive. We just bod Eli Lilly the other day. Been a magnificent company
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as far as pharma goes. I think it's the cream of the crop.
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Been a magnificent company especially always, but the last five years especially, and
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we will continue to probably dollar cost average into that and if we get some
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buying opportunities or the bottom line is, when it's been a shaky market for
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a couple months, virtually all stocks go down. Sure, it's very rare
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that you have that one stock that did the opposite of what the entire market
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did. So what we've kind of done over the last couple of months actually
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when the market has been bad, as we've seen that as a buying opportunity,
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and we like to buy things on sale as much as possible. Deal
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Absolutely, who doesn't. But when you buy stuff on sale, it takes
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a few months for it to start producing. And especially if you had,
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for example, of stock that their price is down thirty or forty dollars or
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call it thirty five plus percent for the year, sure there's probably a reason
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for that, yep, or a pullback, or that industry as a whole
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just isn't doing well. And so when we buy something like that that is
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that far on sale or let alone, if it's down sixty five percent,
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the chance over the last or the next three to five years to make a
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lot of money on that is huge. But is it going to take nine
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or ten months for it to probably turn around? Absolutely, But that's where
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you get the real deals too well. And I feel like a lot of
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times people who who aren't as familiar with the market and finance, they're looking
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for more of that instant gratification, like why isn't it going up? You
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know, whey am I not making money now? Or why am I losing
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money this quickly? Or you know, most people don't have enough organization and
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knowledge on why they buy a stock yep, or even if they put it
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in a mutual fund, which a mutual fund is going to probably mirror the
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sm P five hundred because it has a ton of stocks in it, So
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there's S and P and we have that much diversity, it's going to trend
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the same way ups up, down is down. And you don't get more
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specialized than that unless you are in a giving year and you omit industries that
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aren't doing well, and so when you get that's an easier investment versus buying
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an individual position. And why I like buying individual positions is because I feel
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like we know what we're paying for sure, and we can research the company
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the industry a lot more. But having a plan when you're going go into
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buying something is a big ass deal. And if we get into we own
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a lot of Marathon and Chevron right now, and when we bought it,
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we expected to buy it two or three more times and continue to get good
23:48
deals. But we want to establish a position because right now energy is going
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nowhere, and we know they're good long term companies and they pay wonderful dividends,
24:00
and so far retirees, we'll take those dividends home every month and live
24:04
off of them or every quarter if they pay that way, some pay monthly,
24:07
some pay quarter, and then for our young people, we'll just reinvest
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those dividends. It is the epitome dollar cost averaging back into the market and
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compound interest. And we don't want our whole portfolio to be dividend paying stocks.
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It's usually growth minded companies like Google don't pay a dividend, or they
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pay a very little low dividend. Sure, but we want some of the
24:33
portfolio to have some of that. And it's more defensive, less risk and
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all that fun stuff. But the bottom line is, whatever you're buying,
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you've got to have a plan while you're buying it and what you're going to
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do with it. And if you don't have a plan, I may not
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hurt to find someone who can help you with that. That is one hundred
24:52
percent true, because there's nothing worse than seeing a We do it every day,
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seeing a really talent dentist and with all of our events across the country.
25:03
My god, I think we're up to about seventy events a year.
25:04
And now, yeah, we're so fortunate to be able to meet those people
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who just haven't found the advisory to be at the level of their talent as
25:15
a dentist. And they're damn good producers, yep, and they're running a
25:19
good practice, but they don't have anybody in their corner that's as good of
25:26
as good as they are, or has any industry knowledge right, or have
25:32
the capabilities of having all the services that we do in one house. So
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the accounting team speaks with the finance team and the investment team and all that
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kind of stuff. I'm going to be really honest with you. The average
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investment person or financial advisor that would have a dentist as a client out there
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and no offense to them, doesn't understand that that practice or that doctor is
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probably capable of saving one hundred and fifty to two hundred thousand dollars a year
25:57
because they don't have other CLIENTI it's like that, and they don't know that's
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the standard and it should be the standard, and it is here and that
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yeah, they can do that and take a ton of money home. And
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when we do all of those things and we get good practice decisions like are
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we going to merge your practice into your practice at some operatories or frankly not
26:22
buy something sometimes too. And when you get all those things and good tax
26:26
control working your way same practice, that is now a game changer. And
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I couldn't think of any way to end on a better note than that.
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Thank you Jason. Folks, if you're out there and you're wanting to take
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a look at some finance stuff, please feel free to give us a call
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if you want to learn more about four Quadrants and how to master the business
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side of dentistry. We're hosting events all over the country. In fact,
26:51
coming up we're going to be in the Phoenix area and as well as Louisville
26:53
Laulville. Go to four Quadrants Advisory dot com slash events and click on one
27:00
of those if you're in that area. Jason, thank you so much for
27:02
popping by today, and thank you so much for popping bye today. Thanks
27:04
Jared, appreciate the time today and Rechter for those events fast because they are
27:10
selling out very fast. So that's all the time we have today. Thank
27:15
you to our guests for their insight and for sharing some really great information,
27:18
and thank you to you the listener for tuning in. The Millionaire Dennis podcast
27:22
is brought to you by four Quadrance Advisory to see if they might be a
27:26
good fit for you and your practice. Going over to four Quadransadvisory dot com
27:30
and see why year after year they retain over ninety five percent other clients.
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Thank you again for joining us and we'll see you next time.