Latest / Financial Survival Network / Market Gains: Prepare for Cycles - John Grace #6218

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Market Gains: Prepare for Cycles - John Grace #6218 · Financial Survival Network

• 0:00
  Speaker 1: Sixty percent of stocks forty percent bonds. Well, you know
• 0:03
  Speaker 1: everything else has changed, including what the industry can do
• 0:06
  Speaker 1: in terms of limiting losses. So we're suggesting that real
• 0:09
  Speaker 1: estate and stocks may do what it's done before, be
• 0:12
  Speaker 1: off precipitously and take longer to recover. The areas that
• 0:15
  Speaker 1: we do like are outside of traditional investments, outside of cash,
• 0:20
  Speaker 1: outside of homes, outside of stocks. Okay, it might look
• 0:25
  Speaker 1: like infrastructure, it might look like manufacturing companies.
• 0:28
  Speaker 2: You're listening to, Carrie. Let'sa's financial survival network where you
• 0:32
  Speaker 2: get valuable information you just can't find anywhere else to
• 0:36
  Speaker 2: thrive in today's trying times. You need the Financial Survival
• 0:40
  Speaker 2: Network now more than ever. Go to Financial Survivalnetwork dot
• 0:45
  Speaker 2: com and get your free newsletter and gift. Financial Survival
• 0:50
  Speaker 2: Network now more than ever.
• 0:56
  Speaker 3: And welcome you are listening to and watching the Financial
• 1:00
  Speaker 3: val Network. I'm your host, Carrie Lutz. Well, we've had
• 1:04
  Speaker 3: two back to back years of twenty plus percent gains
• 1:07
  Speaker 3: in the stock market. Are the good times going to
• 1:10
  Speaker 3: roll in twenty twenty five or are we seeing now
• 1:14
  Speaker 3: perhaps the beginning of the January effect in January? So
• 1:22
  Speaker 3: it goes January, So goes the market. Well, our good
• 1:26
  Speaker 3: friend John Grace is with us now. John, it's great
• 1:30
  Speaker 3: to have you back on the show. And well, tell
• 1:34
  Speaker 3: us here for investors' advantage, corp your company? What's our advantage? Here?
• 1:42
  Speaker 3: Do we prepare for? In times of war, we prepare
• 1:45
  Speaker 3: for peace. In times of peace, we prepare for war.
• 1:48
  Speaker 3: But sometimes it's neither peace nor war.
• 1:51
  Speaker 1: What do you do we prepare for both? As an
• 1:54
  Speaker 1: old boy scout working on my Eagle Scout badge which
• 1:57
  Speaker 1: I managed to obtain, Yes, it's all about prepared. That's
• 2:00
  Speaker 1: exactly what the advice is. And that works twenty four
• 2:04
  Speaker 1: to seven. And I appreciate being on again, Carrie, and
• 2:07
  Speaker 1: and I see so many people. We get complacent, we
• 2:10
  Speaker 1: get accustomed to well this is Quai. It's been so
• 2:13
  Speaker 1: it's just going to continue. I mean, And we've been
• 2:16
  Speaker 1: here before in the nineties, as you may recall, and
• 2:19
  Speaker 1: that was a very good run. And then it was
• 2:22
  Speaker 1: I believe it was Chairman Greenspan at the time who
• 2:25
  Speaker 1: talked in late nineteen ninety six about a phrase he
• 2:28
  Speaker 1: coin called irrational exuberance. And of course he took a
• 2:32
  Speaker 1: lot of black and people told him he was completely
• 2:35
  Speaker 1: out of step because the Dow and the S and
• 2:37
  Speaker 1: P at the last half of the nineties doubled in value.
• 2:41
  Speaker 1: You know, one hundred went to two hundred thousand dollars,
• 2:43
  Speaker 1: that's pretty good. The Nasdaq quadrupled, one hundred went to
• 2:47
  Speaker 1: four hundred thousand dollars. But then I think it was
• 2:50
  Speaker 1: about March twenty twenty two that suddenly what he had
• 2:54
  Speaker 1: suggested suddenly came into favor, and now he was welcomed
• 2:59
  Speaker 1: back to the dinner table. Right that's where we saw
• 3:02
  Speaker 1: the Financial Crier or the dot com crisis happened, and
• 3:07
  Speaker 1: NASDAK was off. Was it really over eighty percent? And
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  Speaker 1: in my industry, I've only been at it since nineteen
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  Speaker 1: seventy nine, Kerry. You know, we always say, well, it
• 3:15
  Speaker 1: always comes back, and it did. Nas Dak did come back.
• 3:18
  Speaker 1: It just took fifteen years, I believe, assuming you did
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  Speaker 1: not sell a share, you didn't need any money for
• 3:24
  Speaker 1: fifteen years, and then it comes back. So the way
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  Speaker 1: I look at it is, you know, let's be ridiculous
• 3:31
  Speaker 1: and suppose something like what happened in two thousand, two
• 3:35
  Speaker 1: thousand and two, two thousand and eight, it happens again,
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  Speaker 1: only only this time, we've got more people than we've
• 3:41
  Speaker 1: ever had before. Was eleven thousand people a day, turning
• 3:44
  Speaker 1: sixty six this year, I believe, and a lot of
• 3:46
  Speaker 1: people reaching the age where they must take required minimum
• 3:50
  Speaker 1: distributions that only increase every year as a percentage, no
• 3:55
  Speaker 1: matter what your account does for you or to you. Well,
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  Speaker 1: now it seemed to me that we'd want to really
• 4:02
  Speaker 1: look at what can savvy investors do to limit their
• 4:05
  Speaker 1: losses if you have to take the withdrawals and you
• 4:08
  Speaker 1: must pay the taxes as you do from tradition retireing accounts,
• 4:12
  Speaker 1: and those withdrawals rates go up a little bit every
• 4:14
  Speaker 1: single year no matter what. Now's the time I would
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  Speaker 1: submit to look to see where the exit doors are.
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  Speaker 1: Where are the strategies for limiting the losses, as opposed
• 4:25
  Speaker 1: to believing you have to live with the losses and
• 4:28
  Speaker 1: you know we may not have enough time to have
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  Speaker 1: those losses offset by the gains, assuming the gains come.
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  Speaker 1: So it's all about limiting those losses. No different than
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  Speaker 1: what if you don't want the hell Mary passed at
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  Speaker 1: the last two minutes of the game to get back
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  Speaker 1: in the game, and then the game's over and you're Crimingmill.
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  Speaker 3: Yeah. Well, another popular quote out there is everyone has
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  Speaker 3: a plan until they get punched in the face.
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  Speaker 1: Right, That's correct. And I love George Patten's I love
• 4:57
  Speaker 1: quoting George Patten, you know, because what he said, if
• 5:02
  Speaker 1: everybody's thinking you like, then somebody isn't thinking. I think
• 5:06
  Speaker 1: that's true. That's what I think. I think he got
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  Speaker 1: something there.
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  Speaker 3: Yeah, so so do you run for the hills? Is
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  Speaker 3: that what you do?
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  Speaker 1: Well? See, as I say, you know, when I would
• 5:17
  Speaker 1: take my family to the movies, oftentimes we go in
• 5:21
  Speaker 1: and you know, throw our clothes or jackets in the
• 5:24
  Speaker 1: seat and go back for popcorn. So that would give
• 5:27
  Speaker 1: my sons just enough time to do what I asked
• 5:29
  Speaker 1: them to do every time they go intough building, and
• 5:31
  Speaker 1: that's look for the exit doors, the emergency doors. When
• 5:34
  Speaker 1: we come back, I would stand. I would make sure
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  Speaker 1: they could not see the exit doors. So then they
• 5:40
  Speaker 1: get to their seats and I would stand in their
• 5:41
  Speaker 1: way and say, now, tell me where the exit doors
• 5:43
  Speaker 1: are before we go back to our seats. And they
• 5:46
  Speaker 1: would because they knew the drill, and that's what it
• 5:48
  Speaker 1: took to be able to sit down and enjoy the
• 5:50
  Speaker 1: movie and that's my point. This is the time for
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  Speaker 1: investors to determine how much loss can you live with?
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  Speaker 1: Is it possible you might be able to limit your
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  Speaker 1: losses within your parameters. For example, if let's say two
• 6:03
  Speaker 1: thousand and eight, the market's off thirty seven percent and
• 6:07
  Speaker 1: the more traditionally managed mutual funds, the equity funds are
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  Speaker 1: off over forty percent, is it possible that your account
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  Speaker 1: might have been off less than fifty percent? Okay, so
• 6:19
  Speaker 1: you ont a million dollars, you don't make it simple.
• 6:21
  Speaker 1: Instead of being off three hundred and seventy overall market
• 6:24
  Speaker 1: over four hundred thousand in most of stock mutual funds,
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  Speaker 1: so many of them, if your account was off less
• 6:30
  Speaker 1: than twenty percent, would that be a good thing? That
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  Speaker 1: would that be following the adage, if you find yourself
• 6:35
  Speaker 1: in a ditch, stop digging. I think so, you know,
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  Speaker 1: if you're down two hundred thousand, that's that's not good news,
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  Speaker 1: but that's better than being down four hundred thousand. And
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  Speaker 1: that's my point. What can we learn from the past
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  Speaker 1: and see what we could do to limit our losses
• 6:49
  Speaker 1: if indeed they happen to be baked into the cake.
• 6:53
  Speaker 1: If the real estate market drops precipitously. If the stock
• 6:55
  Speaker 1: market drops dramatically, the question becomes in advance, how are
• 6:59
  Speaker 1: you keeping your assets from being burned up? Like we
• 7:02
  Speaker 1: looked at the fires going on in southern California right now,
• 7:05
  Speaker 1: where nobody imagined thousands of homes would be burned up,
• 7:09
  Speaker 1: and your elster completely unprepared.
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  Speaker 3: But you know, in every everything that happens in life,
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  Speaker 3: there are winners and losers. Even in California. The contractors
• 7:20
  Speaker 3: who are going to be retained to rebuild these properties hopefully.
• 7:26
  Speaker 3: You know, the governor has said he's suspending well building
• 7:29
  Speaker 3: regulations and permits and everything, maybe not regulations but permitting,
• 7:34
  Speaker 3: so the Queen be accelerated. Jason, deregulating California is like
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  Speaker 3: something I never thought i'd live to see, but quite
• 7:42
  Speaker 3: being quite being like you know, it's it's something you
• 7:46
  Speaker 3: have to think.
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  Speaker 1: About well and look in advance for it. There's a
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  Speaker 1: great story of a gentleman in the Pacific Calisades who
• 7:53
  Speaker 1: who forethought what might happen and he put sprinklers on
• 7:57
  Speaker 1: this rou if he used several large hoses to draw
• 8:01
  Speaker 1: water from his pool to a sprinkler around the house
• 8:05
  Speaker 1: and then he had to exit stage left at the
• 8:08
  Speaker 1: at the last minute, and he was convinced that he
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  Speaker 1: would come home as he's seeing all these homes that
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  Speaker 1: are just destroyed. His was still standing and he was
• 8:15
  Speaker 1: able to help other people. And of course that's the point.
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  Speaker 1: The question becomes, how can you play the game where
• 8:20
  Speaker 1: it might be heads You in tells you in, you
• 8:23
  Speaker 1: want to be able to be able to tell your
• 8:26
  Speaker 1: story as he can, as opposed to the folks crying
• 8:29
  Speaker 1: their hearts out, and you know, our heart goes out
• 8:31
  Speaker 1: to them who lost everything. It's completely unimaginable. But that's
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  Speaker 1: why it's so important to be prepared.
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  Speaker 3: So off topic a little bit, but really on topic.
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  Speaker 3: Natural disasters unavoidable, but it's the reaction to them, and
• 8:51
  Speaker 3: to the extent that you can prevent or mitigate them
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  Speaker 3: shows leadership of rest. Maybe California will learn something from
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  Speaker 3: what's happened here that their leadership is totally not up
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  Speaker 3: to the.
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  Speaker 1: Task of well, and maybe we should learn we don't
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  Speaker 1: keep building on the edge of canyons. We don't keep
• 9:14
  Speaker 1: getting closer and closer to the ocean. For the view.
• 9:17
  Speaker 1: That's fine when everything's working well, not so fine when
• 9:21
  Speaker 1: the fires come rushing down the canyons in reverse. To Row,
• 9:25
  Speaker 1: it was a hurricane. Now I happened to come across
• 9:27
  Speaker 1: the UCLA study. This was just about the time we
• 9:30
  Speaker 1: were discovering we're drinking the same water, breathing the same air,
• 9:34
  Speaker 1: flying the same airplanes, and here comes COVID. Apparently never
• 9:37
  Speaker 1: saw that one coming, right. But what the UCLA study
• 9:41
  Speaker 1: showed is one the state, when we developed the aqueducts,
• 9:46
  Speaker 1: our leadership happened to choose the most wettest one hundred
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  Speaker 1: years to study. Was that by intentional? Was that a mistake?
• 9:55
  Speaker 1: Maybe we should have studied the one hundred years that
• 9:57
  Speaker 1: were the driest. Well, we made a decision based on
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  Speaker 1: the wedding is And what the study went on to
• 10:02
  Speaker 1: reveal is if you look at the pattern long before
• 10:05
  Speaker 1: most of us were on the planet, including our parents
• 10:07
  Speaker 1: and maybe their grandparents. They history in California. They said,
• 10:11
  Speaker 1: you want to learn from the long term history, Californians
• 10:15
  Speaker 1: get ready for more floods, get ready for more fires.
• 10:18
  Speaker 1: It's the way California is built. And then they had
• 10:21
  Speaker 1: a picture of Governor Leland Stanford being road in Sacramento
• 10:27
  Speaker 1: to his inauguration. Hard to believe, you know, that kind
• 10:31
  Speaker 1: of thing could happen, but it has. And I would say, Carrie,
• 10:34
  Speaker 1: I think part of the problem that we have is
• 10:36
  Speaker 1: we don't learn from history, my friend, because too many
• 10:39
  Speaker 1: of us are so busy repeating it.
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  Speaker 3: Yeah. Yeah, well there's an old saying the only thing
• 10:45
  Speaker 3: we learned from history is that we don't learn from history.
• 10:50
  Speaker 1: I wish that wasn't funny, because it's True's sometimes you
• 10:53
  Speaker 1: got to laugh at the truth.
• 10:54
  Speaker 3: Hey, well, I told you I'm a quote collector, so hey,
• 10:58
  Speaker 3: I love doing these interviews with you. If there's three
• 11:02
  Speaker 3: sectors for the coming year that you think are going
• 11:05
  Speaker 3: to outperform the market, or at least to keep up
• 11:08
  Speaker 3: with it, Yeah, what are they going to be?
• 11:10
  Speaker 1: Great question? The model for the securities industry from day one,
• 11:15
  Speaker 1: for the last idle or at least the forty four
• 11:17
  Speaker 1: years I've been in the business sixty percent stocks, forty
• 11:20
  Speaker 1: percent bonds. Well, you know, everything else has changed, including
• 11:24
  Speaker 1: what the industry can do in terms of limiting losses.
• 11:26
  Speaker 1: So we're suggesting that real estate and stocks may do
• 11:29
  Speaker 1: what it's done before, be off precipitously and take longer
• 11:33
  Speaker 1: to recover the areas that we do like are outside
• 11:36
  Speaker 1: of traditional investments, outside of cash, outside of homes, outside
• 11:41
  Speaker 1: of stocks. Okay, it might look like infrastructure, it might
• 11:45
  Speaker 1: look like manufacturing companies. Okay, owning the warehouses. All this
• 11:50
  Speaker 1: stuff has to be distributed. How about owning the land
• 11:52
  Speaker 1: under those warehouses, that's probably going to be a constant.
• 11:56
  Speaker 1: How about being in student housing. Good clients who own
• 11:59
  Speaker 1: proper USC. He's an engineer, rocket scientist, she's a broker.
• 12:04
  Speaker 1: They have real estate that they own as rentals near USSE.
• 12:08
  Speaker 1: They tell me USC reports they have eight thousand rental
• 12:12
  Speaker 1: units with forty thousand people on the waiting list. I
• 12:15
  Speaker 1: bet that waiting list just went up. My point is,
• 12:18
  Speaker 1: if we own those kinds of real estate investments, you've
• 12:23
  Speaker 1: got a lot of demand for it, and you can
• 12:25
  Speaker 1: manage the market with all of that demand. And I
• 12:27
  Speaker 1: would suggest being outside of southern California, out of California altogether.
• 12:31
  Speaker 1: The other area that I really am found carry that
• 12:35
  Speaker 1: I think has a lot of promise and a couple
• 12:37
  Speaker 1: of vehicles have been around for over seven years now,
• 12:40
  Speaker 1: is owning data center infrastructure, all the real estate necessary
• 12:44
  Speaker 1: for all the artificial intelligence that we're getting accustomed to
• 12:48
  Speaker 1: embracing and using well, it requires three hundred thousand square
• 12:53
  Speaker 1: foot buildings again outside of California, solid deal, solid returns
• 12:58
  Speaker 1: net to the investor. A star the last sets. That's
• 13:00
  Speaker 1: one of the things that I think will hold up
• 13:02
  Speaker 1: well no matter what happens in the economy, what happens
• 13:05
  Speaker 1: in Washington, what happens in Sacramyl.
• 13:07
  Speaker 3: All right, well, I don't know. The data center thing
• 13:11
  Speaker 3: looks like could be a modern day gold rush. We know,
• 13:15
  Speaker 3: we know what happens to gold rushes.
• 13:17
  Speaker 1: John to your point, Levi Strauss is still a name
• 13:21
  Speaker 1: we know, right, and he got famous doing what he
• 13:24
  Speaker 1: wasn't going after the gold. He didn't do picks and shovels.
• 13:27
  Speaker 1: He did close and I think they've been around for
• 13:30
  Speaker 1: what eighteen twenty five something like that. I think you
• 13:34
  Speaker 1: made a nice parallel there. Look for the where the
• 13:37
  Speaker 1: knee is not going away has nothing to do with
• 13:40
  Speaker 1: demographics so much we're going to be using all this technology,
• 13:44
  Speaker 1: we may as well own the real estate that has
• 13:46
  Speaker 1: to be in place to provide all this technology.
• 13:49
  Speaker 3: How about electric utilities, looks like we're heading for shortages
• 13:55
  Speaker 3: and key markets, and one in Virginia or probably the
• 14:01
  Speaker 3: biggest data centers in the world that you never heard
• 14:03
  Speaker 3: of in the Langley of Vicinity. You can't build a
• 14:08
  Speaker 3: data center there without a two year reservation, right. And
• 14:14
  Speaker 3: what does it mean for alternative energy sources? Are we
• 14:18
  Speaker 3: going to see a boom in solar and wind? Certainly
• 14:21
  Speaker 3: we're seeing a boom in battery storage.
• 14:25
  Speaker 1: Yes, sir, that's going to continue, no doubt about it.
• 14:28
  Speaker 1: A lot of opportunities. Just as I say, I think
• 14:31
  Speaker 1: we have to expand our thinking. If we look at
• 14:35
  Speaker 1: Yale endowment, was it like forty point seven billion dollars?
• 14:38
  Speaker 1: What's astonishing to me, Carrie, is there exposure to US
• 14:42
  Speaker 1: docs is last time I looked, and I tend to
• 14:44
  Speaker 1: look once a year, it was around three percent. I
• 14:47
  Speaker 1: didn't say thirty. I didn't say forty. I didn't say sixty.
• 14:50
  Speaker 1: I said three. And what I find is they have
• 14:54
  Speaker 1: maybe six or seven different assets legs if you will
• 14:58
  Speaker 1: under that portfolio stool for more stability. And if you
• 15:01
  Speaker 1: spend some time on their site, they explained what they
• 15:04
  Speaker 1: used to do back in the eighties, what they're not
• 15:06
  Speaker 1: doing anymore, which is very different from the securities industry.
• 15:10
  Speaker 1: They also represent. This is their report, not by that
• 15:13
  Speaker 1: they didn't lose money in two thousand and eight, So
• 15:15
  Speaker 1: I'm submitting that, you know, we can learn from the
• 15:18
  Speaker 1: best in the brightest. We can't replicate what the endowments
• 15:22
  Speaker 1: and the institutions do, but they have been in private
• 15:25
  Speaker 1: credit and private companies in private equity long before retail investors.
• 15:30
  Speaker 1: Those are some of the areas we want to follow
• 15:32
  Speaker 1: the best in the brightest to see how we might
• 15:34
  Speaker 1: put some more legs under our portfolio stool so that
• 15:38
  Speaker 1: it's less wobbling a little bit.
• 15:40
  Speaker 3: I also remember reading an article that Harvard had gone
• 15:44
  Speaker 3: all in on payday lenders too, so you know, through
• 15:51
  Speaker 3: their homework. Yeah, but I guess it was good. Well,
• 15:54
  Speaker 3: I guess it was good until it wasn't. Like so
• 15:57
  Speaker 3: many other things, John, tell us how we connect with you,
• 16:01
  Speaker 3: how we find you on the web, and what you
• 16:04
  Speaker 3: can do.
• 16:05
  Speaker 1: For us investors advantage. You know, to your listeners, Carrie,
• 16:09
  Speaker 1: I'd be delighted if they have some questions they'd like
• 16:12
  Speaker 1: to talk about what we're discussing. Will give you allow
• 16:16
  Speaker 1: fifteen minutes right to see if there's something we can
• 16:18
  Speaker 1: do a way that you might be better prepared to
• 16:21
  Speaker 1: see how you might limit the losses. Maybe there's something,
• 16:24
  Speaker 1: maybe not, but that's without any cost or obligation. And
• 16:27
  Speaker 1: then if that makes sense, we can help prepare up
• 16:30
  Speaker 1: an actual plan to help people see what it takes
• 16:33
  Speaker 1: to get from here to there and arrive on time
• 16:35
  Speaker 1: safely to make work optional. But right now we really
• 16:38
  Speaker 1: are on a mission to show investors as we were
• 16:42
  Speaker 1: in two thousand and seven. By the way, sometimes it's
• 16:44
  Speaker 1: better to be lucky than good to limit losses. That's
• 16:48
  Speaker 1: what I think is so crucial. The industry simply says
• 16:51
  Speaker 1: you have to live with your losses. The good news
• 16:53
  Speaker 1: is that is not true. But too many of our
• 16:56
  Speaker 1: my peers haven't really been advocates or been, you know,
• 17:00
  Speaker 1: being about the business showing investors what might you do
• 17:03
  Speaker 1: to limit your losses? Happy to spend fifteen minutes with
• 17:06
  Speaker 1: your audist.
• 17:08
  Speaker 3: Y X spouses say the same thing. But we got
• 17:12
  Speaker 3: a link in the show notes to this interview on
• 17:14
  Speaker 3: Financial Survival Network. Just click it, take your right to
• 17:17
  Speaker 3: John's site and if you've got a question for John myself,
• 17:21
  Speaker 3: shoot me an email. While you're on the site. We
• 17:23
  Speaker 3: just ask you to please sign up for free newsletter
• 17:27
  Speaker 3: like sixty five thousand other FSN community members have done. John,
• 17:32
  Speaker 3: appreciate you coming on the show. Best of you, Best
• 17:35
  Speaker 3: of twenty twenty five for you and yours. We'll talk
• 17:39
  Speaker 3: to you again real soon.
• 17:40
  Speaker 1: Look forward to surviving and thriving in twenty twenty five.
• 17:42
  Speaker 3: All.
• 17:43
  Speaker 1: It is good to be with you.
• 17:43
  Speaker 2: Carry thanks for listening to Carrie Letz's Financial Survival Network,
• 17:48
  Speaker 2: your solution to today's trying times. For the latest, go
• 17:52
  Speaker 2: to Financial Survivalnetwork dot com. Financial Survival Network now more
• 17:58
  Speaker 2: than ever, CRUs