Latest / Financial Survival Network / Go for the Yield -- Anthony Saccaro #5911

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Go for the Yield -- Anthony Saccaro #5911 · Financial Survival Network

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  The inverted yield curve is basically there's a seventy five basis points difference between say
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  a two year and a ten year treasury And the only reason why someone would
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  lock their money up for ten years at three quarters of four percent lower than
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  they can get for two years is because they believe that in two years they
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  won't even be able to get what they can get for ten years. Today,
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  thanks for listening to Carry Lutz's Financial Survival Network, your solution to today's
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  trying times. For the latest, go to Financial Survival Network dot com.
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  Financial Survival Network now more than ever, and welcome. You are listening to
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  watching the Financial Survival Network. I'm your host, Carry Lutz. Well,
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  Anthony Sakura is with us. We're going to be talking about higher dividend yields,
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  how you make money even when the economy is going to hell in a
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  handbasket. Well one of these things. So hey, we're going to get
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  onto it. If you've got a question or comment, or if something you
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  want me to cover, I guess you want me to have on send an
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  email to khl at kryloves dot com. Make sure you whatever platform you're on,
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  you like, share and subscribe. The show. It really helps the
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  show out a lot. Anthony, it's great to have you back. So
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  where's the economy? Inverted yield curve? Feds not raising rates inflation looks like
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  it's taking a breather. But is it just a temporary breather or is are
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  we going to see rices and therefore rates go up in the not too distant
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  future. What's your take on all of it? Gary, Yeah, great
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  to be here. Thanks for having me back. Love the show, Love
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  being on your show. I think that the Federal Reserve not raising rates was
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  the right move. Inflation, as you know, as a lagging indicator that
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  oftentimes takes six months to react to whatever the Federal Reserve does on you know,
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  inflation, and may have twenty twenty two at high I believe it was
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  nine point one percent if I'm correct. Now inflation is down in the mid
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  threes. Their target is two percent, So we've made a lot of progress
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  at this point, but we haven't made as much progress as they would have
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  hold. I think that really hinges around the labor market at this point.
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  The labor market is starting to soften. If we were having this conversation in
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  December twenty two, if my memory serves me right carry I think we were
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  almost at two jobs for every worker available. I think it was one point
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  nine if I remember correctly. Now I think own to like one point seven.
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  So the fact is that there's a lot that there it's come down,
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  there are less jobs per worker. That number is going to need to come
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  down. A lot of people think that the unemployment rate, which is still
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  at record lows, that that needs to get up into six or seven percent
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  in order for inflation to come down. I don't know that that's necessarily the
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  case, although I believe probably six percent. But this is the recession that's
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  never happened at this point. And you know, it used to be six
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  eight months ago. A year ago, we were talking about a recession,
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  whether it's going to be a soft landing or hard landing. Now they're talking
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  about no landing. You know, is it possible that we get no recession
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  at all? And I think that that is possible for the first time,
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  but I don't think it's likely. I think there is going to be a
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  recession around the corner. I think the inverted yield curve is telling us that
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  probably sometime in twenty twenty four. I think we do have to still be
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  careful, all right. Imagine if they threw a recession and nobody came right.
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  Yeah, And it's interesting that you know that's the possibility as well too.
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  But the inverted yild curve is telling us a different story. The inverted
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  yield curve is basically there's a seventy five basis points different between say a two
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  year and a ten year treasury. And the only reason why someone would lock
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  their money up for ten years at three quarters of a percent lower than what
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  they can get for two years is because they believe that in two years they
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  won't even be able to get what they can get for ten years today.
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  And when you look at the economists across the country, you look at the
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  experts across the country, you look at the economical data that's going on that's
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  out there, everything points to the fact that the Federal Reserve is going to
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  lower interest rates in twenty twenty four. The only reason they would do that
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  is if we have a recession, if inflation does come down and we now
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  need to start stimulating the economies. I do think that, you know,
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  odds of a recession in twenty four are still pretty high, and I think
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  you need to treat that as such when you're trying to figure out what to
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  do with your own portfolio. All right, so what are you telling your
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  clients to do now at this point? Anthony? Yeah, interestingly enough,
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  you know, I want my clients to be in a position to win no
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  matter what. And that's a phrase that's kind of caught on. It's a
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  phrase that I've been using recently because Yahoo Finances. When I was interviewed on
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  their live TV recently, they asked me the same question. In this economical
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  environment, with all this uncertainty and things going on with China and Russia becoming
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  friends, and wars and inflation and interest rates and so, how do we
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  invest in this environment? And my answer to them is, if you are
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  invested right, you should be able to win no matter what. And I
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  think that the way to do that is to really focus on dividend paying stocks
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  because if things go well, then those stocks are still going to grow in
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  value, and your dividends are just going to be the icing on the cake.
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  If things don't go well, then the dividends could be the answer to
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  cancer. If you will, the dividends are going to be the one thing
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  that you can continue to dollar cost average in and essentially you're getting paid to
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  wait. And so I think dividends no matter what phase of life you're in,
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  whether you're in the accumulation phase of life or the principal protection phase of
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  life, or the distribution phase of life. I think this next decade,
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  you know, you need to focus on dividends in case things are flat,
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  like a lot of experts are predicting. Okay, so dividends are important.
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  I think we agree on that. But if we get like a major recession,
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  presumably the market's going to get hit as well. Right, do we
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  think the stock market's going to go down? What do you think it's going
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  to go down? If the recession magically appears. Yeah, So if we
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  have a recession, I mean, certainly the market's going to get hit.
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  And that's the time that you are really going to value dividend stock more than
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  anything else, because now you have the ability to get those dividends and the
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  dollar cost average and then back in and to reinvest. And you know,
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  interestingly enough, if you have growth stocks and you know, we have a
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  ten year time period of you know, crashes and recoveries and crashes and recoveries
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  very much like the first ten years of this decade. Well, if you
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  have a growth stock that doesn't pay dividends, you just have a big blah.
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  You know, ten years from now, your growth stocks are going to
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  be worth the same as they are now. Whereas if you're getting dividends,
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  you can dollar cost average those dividends back in, and if the market goes
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  down and your dollar cost averaging your dividends back in, that actually helps you.
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  It doesn't hurt you because you get to buy more of the stage stocks
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  at a lower price. So it's a very interesting dynamic. But you're not
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  going to get dividends through growth stock. You're gonna get dividends through value stock.
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  So the dividends are what's going to help you be able to write out
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  a time period if we do have a lot of crashes and recoveries, and
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  yet at the same time, if you're in dividend stocks now and the market
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  does crash by twenty or thirty or forty, you know, and I think
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  that's possible, then it might be time to reallocate at some point down the
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  road into something that's going to be more growth oriented. But that's going to
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  depend on your phase of life that you're in. If you're twenty, thirty,
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  forty, twenty or thirty years of retirement, reallocating some more to growth
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  may make sense. If you have ten or less years of retirement and you're
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  retired, you probably want to stick with the value stocks or even sharp your
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  portfolio in such a way to where you have maybe a smaller percentage of your
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  portfolio and are living out the income from other things that are not stock market
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  related. All right, So then question becomes what else should you be holding?
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  What else should be in your portfolio besides besides stocks? How do you
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  really really protect against a multitude of threats. Yeah, so there's all universe
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  of options that are are not stock related that are classified as fixed income.
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  And interestingly enough, if you have twenty or thirty years to retirement, I
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  would normally be very fine with you having eighty or ninety percent of your portfolio
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  in equities. I think over a thirty year time period, the fact is
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  you're going to average eight or ten percent. I'm not sure that there's ever
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  been a thirty or forty year time period in the market where it's ever averaged
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  anything less than eight or ten percent. But you have to have a long,
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  long, long time to do that, and so a high percentage of
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  stocks makes sense. But we're at a point in time carry where the fixed
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  income market has just been hit over the last couple of years. It's the
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  worst fixed income market over the last two years. I think in forty two
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  years, first time you can actually buy fixed income as a capital appreciation play.
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  So if you, even if you're younger, even if you have thirty
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  or forty years, where normally I would suggest that you you have the bulk
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  of your money in stocks, I think a sixty forty plan right now works,
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  not for the reasons that they say sixty forty is gonna work, you
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  know for these last decades where that's kind of in the standard mantra. I
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  think a sixty forty plan works now for you because if the Federal Reserve lowers
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  interest rates, that's gonna cause that forty percent of your fixed income port boil
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  to bound. Not because it's gonna because fixed income reacts opposite of interest rates.
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  Interest rates down, fixed income grows, So you can use it as
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  a capital appreciation play. And then and then potentially when the market is down
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  and your fixed income is up, reallocate out of your fixed income into the
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  market, and then you use that going forward. You know, stay fully
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  invested going forward. I don't want you to trade in and out of the
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  market trying to make money that way. But entering the market is totally different
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  than trading. I think you're gonna have a much much better entry point into
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  the market than now, and until then you can use anything in the fixed
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  income category to be getting paid while you wait. On today's environment, you
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  should be able to get five or six percent after fee is pretty easy from
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  fixed income investments, and there's a good likelihood that in the next one to
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  two years they will also shoot up in value. So great double double whammy
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  if it works the way that we think. Okay, so how yield is
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  your friend, but you don't want to take too much risk on yield.
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  You don't want to but yield ahead of everything, right, You got to
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  look for some kind of margin of safety percent. And the biggest mistake that
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  I see retirees make, especially when it comes to chasing hwo yielding socks,
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  is they do just that. They're they're chasing yield, and if all you
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  do is look at the yield, then you might miss the entire underlying story.
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  There are companies out there that the price has dropped, and if you
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  know how yield work, when the price dropt, the yield goes up.
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  And if you're an unsophisticated investor and you're just looking for yield, because you
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  know, here Anthony is sicaro on, you know, as saying that you
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  got to go find yield, and you get off for this interviewing. You'll
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  find a yield. You're like, oh, well, that one's paying you
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  know, five percent, six percent, seven percent, I'll get on on
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  that. Well, the reality is it might be paying a high yield because
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  the price just dropped in value. And the question is did the price drop
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  in value because of just some systemic drop of what's going on in the markets,
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  or did the price drop in value because the underlying fundamentals of that company
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  are not good and you may not know that. So whereas you know,
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  the professionals are trying to make this determination whether a high yield, there's a
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  good value play where you can buy something with the high yield and get and
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  get a company that is under valued. As an un sophisticated investor, you
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  might not be getting a value play. You might be getting on board the
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  sinking ship, which we often refer to as a value trap, where all
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  of a sudden you buy it for the high yield and then they cut the
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  yield. Then then the price goes down more, and then now now you're
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  on a sinking boat. So you have to be really careful. You can't
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  just chase yields. You have to look at the fundamentals under the hood too,
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  to make sure getting something that's that's really true value, not something that's
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  falling apart very true. Yeah, you just don't become a yield tour as
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  they call them, right. You need to look past past the yield and
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  really look under the hood because a lot of these cyclicals they pay these huge
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  dividends, but it could be right at the end of the cycle and then
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  they're going to take a hitt and then they'll be cutting their dividends. So
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  who needs that? Hey, So besides dividends and besides looking for yield,
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  is there anything else you can do to help defend your portfolio and your will
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  against the potential volatility that seems all but inevitable. Yeah, I mean leaving
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  some in cash right now, it's probably not a bad idea as well.
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  Right, this is the first time in many years that you can actually earn
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  something out cash. But you've got to be careful if you put your money
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  in cash too. We we've talked to a lot of people that have said
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  something like, you know this, why I put all my money in CDs
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  that are earning five percent And they're excited about the fact that they got a
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  one year CD that's earning five percent or so, and they come to be
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  almost thrilled. The challenge, though, is that a lot of people are
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  using that short term CD for long term strategy, and I think that's a
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  mistake. The fact is that we do have an inverted yield curve, and
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  if you get five percent now for one year, you're gonna feel good for
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  one year. But what if we do have that procession. What if the
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  Federal Reserve lowers interest rates to where they were just a couple of years ago
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  pre COVID, and all of a sudden, you're CD matures at five percent
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  for that one year, and all of a sudden, you can you can
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  only get less than one We go back to the tide period where or maybe
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  you can only even get too. Well, that's what I often refer to
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  shooting yourself in the foot. If you have this money set aside, you're
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  getting needed in a year for a large purchase, to put it down on
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  real estate, or you know, college planning for your kids or wedding,
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  or if you're gonna need this stuff and this money and one or two years,
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  absolutely short term CDs, give what you can out, and then when
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  the CD of a church you have access to the money. A great strategy.
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  But if this is your long term retirement plan and you're not going to
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  need this money for ten or twenty or thirty years, regardless of what age
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  you are, I wouldn't recommend locking it up all executing a short term strategy
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  for a long term plan. You can get long term. You can get
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  five and six percent today NETA fees by using fixed income for the long run
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  and not just for the short run. So it doesn't mean don't have anything
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  for the short run. It doesn't mean said at all aside having some for
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  the short having some for the mid term, having some for the long run.
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  It's probably the best way to do it in order to maximize your yield.
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  But your yield is the only thing you can count on. For the
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  next decade. Yeah, I totally agree with you. Well, Anthony,
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  appreciate you coming on. Tell us where we find you, how we connect
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  with you on the whim Yeah, absolutely so why company has Providence Financial?
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  You could search for a Providence Financial in Woodland Hills, California, and we
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  come up everywhere on the first couple of pages. Our website is Providence Financial,
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  Inc. Dot com. And if anyone watches your show and they are
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  interested in getting a blog, I have a new book, More Life than
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  Money, that talks about ten different mistakes that retires can make in retirement that
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  they don't even know they're making. And if they let me know that they're
• 15:16
  calling in from having watch this show, I'll send them a copy of the
• 15:18
  book apps a little all right, great, well, we'll put that in
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  the show notes along with a link to your site. If you've got a
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  question for Anthony myself, it's kl at carry Lutz dot com and make sure
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  you go to the site Financial Survival Network dot com and get your free newsletter.
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  Anthony, always a pleasure. We'll talk to you a getting real soon.
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  Dark. Thank you so much for having me, God blessed, thanks
• 15:41
  for listening to Carry lets's Financial Survival Network your solution to today's trying times.
• 15:48
  For the latest, go to Financial Survival Network dot com. Financial Survival Network
• 15:54
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