Check out this video to get some insight into David's personal story which lends to the purpose in his passion to help his clients achieve retirement success.
Context is always beneficial to ensuring you are matched with the right advisor and David's story brings you just that; a level of understanding to the WHY he works so hard to create a plan to fit your needs.
Hi everyone and thanks for joining me today. I thought it would be appropriate; I don’t think I’ve shared this with you personally before but my story. Because I think it is important to know where somebody comes from, how they see the world, paradigm about life. Whether it’s a friend that you have, whether it’s a doctor, how do they perceive the world? For me, that’s super important in relationships.
And I can tell you, it started a long time ago, when my parents got divorced when I was 2. Obviously, I didn’t know that they got divorced and I was very blessed to have my grandmother and grandfather, Edna and Kermit, to help take care of me. Because I had a single mother, I ended up having two other brothers and sisters. So very, very difficult for my mom. So I would spend a lot of my summers, a lot of time with my grandparents, Edna and Kermit.
My grandmother passed away way too early. She had a lot of health issues. She died in her early 70s. And my grandfather got to live a full and long life. He use to work for Sears, Sears Roebuck. In fact, they just got saved out of bankruptcy. I think the CEO bought the company. Thank God because what a storied company.
And my grandfather worked there for, I believe, like 30 years. And he was a television repairman back when that was an actual job. Now we can barely fix our cars or our TV anymore. But I use to remember my grandfather behind our own TV – I think it was a Zenith – and fixing the tubes or whatever he called them. He drove the white van with the red letters and the ladder on top. I would be waiting for him to come home. And that was a big, big imagine for me.
In fact, my first, I guess, foray, for a lack of a better term, into business and into finance was my grandfather owned Sears stock, which back then was very, very profitable company. And every Sunday we would go through, I remember putting my finger on the business section looking for the ‘S’ for Sears stock because his whole pension was tied to Sears stock. So he cared very, very much about the value of his stock.
He was a frugal man; saved his pennies, was not wealthy by any stretch. But was free and clear with his house, saved his money, had a little bit of a pension. And fortunately like a lot of folks that were around – a lot of family members and friends – he was diagnosed with dementia. And he private paid so he paid for his own care for about 3 or 4 years, and he ran out of money, which is unfortunate.
He then qualified for MediAccount. It’s called for Medi-Cal across the country. In order to qualify you can only have $2000 in the bank, a burial plot, a wedding ring, a house and a car. That’s basically your life is over. Your life savings is gone, and now you’re basically indigent. It’s a welfare program, Medi-Cal is.
So he was taken care of by Medi-Cal for another couple of years, and then he passed away. Add insult to injury, I received a phone from my mother crying and saying, “I just got a notice from Health and Human Resources that there is a lien on our property for $20,000 due to the fact that he had received benefits from Medi-Cal.” And that was very stressful. And this was the first year I was in the business in 1995.
And so the people who were my clients, my family was coming to me for advise and I know zero about this stuff. So long story short, hiring an attorney – an elder law attorney – figured this stuff out. We were able to save the home. He taught me a lot. But the one thing it taught me – why I do what I do in retirement planning – is that I watched in my first year of the business my grandfather and grandmother lose everything they had. That has an impact on me.
There is a lot of you out there, who are my clients – you included – knew their parents were called ‘Depression Babies.’ Right? Banks failed, 25% unemployment. They didn’t trust banks. They’re very nervous about markets. And so when I came into the business in ‘95, I came from that mindset, “Of, wow. We have to protect what we have first.” And so doing retirement planning for now over 20 years, what it has taught me is that we have to protect capital first, then grow capital, and then create income from that capital.
So I hope that helps you to see the world through my eyes, through my paradigm. And why that we do what we do. Why do what I do. And the perspective that I have and hopefully that helps you learn about me and the firm.
What is happening as we are watching the market shift? The feds are capping rate hikes and the results are stabilizing the market - but are they?
Hi David Reyes here with you. I wanted to give you a market update. It’s been a little while. And I call this the “FOMO market, the fear of missing out.”
We had in October of last year that was the worst October on record, I think, since 1931. And now the beginning of this year since Christmas, we’ve had a nine week straight advance up in the market. So we have gone down 20, up 16. We kind of go nowhere in the last year, year and a half. So this market was really in trouble following October, November, December. And the Federal Reserve stepped in.
So one of the things that I want to talk to you about is the Federal Reserve stepped in and as you may know they have been raising interest rates. Well, they decided for the first time ever, really, to not raise interest rates into the end of a bull market – which technically we’re in a bear market today because we’ve had a drop of 20% from highs to lows. But it is unprecedented for the Federal Reserve to stop raising interest rates, or lower rates, at the end of a bull market, at the end of an expansion.
So this is totally an experiment quite honestly. It’s caused the market to rise very rapidly because when the Federal Reserve lower rates, theoretically, the market will rise. And so the problem with that is you have a lot of issues. You have Europe, who has basically negative earnings growth this last year. I think -1%. You have basically almost all of the S&P 500 companies have reported and 73% of them have been negative earnings guidance on what their prospects are for the future, meaning they’re going to be worse than they were today.
You have S&P earnings growth that was estimated at 3% just in December and now it’s a negative number. I think it is -2.7%. So you have negative earning growth coming off a 2018 where we had the highest earning growth in many, many years.
So the reason I’m sharing this with you is you have to be careful. This whole fear of missing out. The market’s retraced a lot of its losses. I still think there is going to be a lot of volatility going forward. And I just want to make sure that you protect yourself, that you have a game plan. Make sure you understand the risk that you have in your portfolios.
I was thinking back to just October, November and December the sky was falling. Market dropped 20% in about two months, and I want to talk about that today. This is David Reyes, your Retirement Architect, here every weekend. Thanks for listening. If you want to reach out to me personally, you can call me at 1-800-611-1967.
So my, how things change so fast. We have basically gone nowhere for, oh, about a year and a quarter. So, I don’t know, 15 months. We have had 10% corrections in the last year and a 20%, basically, a bear market correction, a down market. We have come up 16% from those lows, so we have kinda gone nowhere. We are still under water a few percentage points from our all-time highs.
And I want to talk to you about this because we have short-term memories and, you know, it’s like the further and further we get away from 2008 those types of times – 2000 – we get a little complacent. And most of you that I see weekly, that listen to my shows or you that come to my workshops, you’re not that way. You are coming to me because, “David, I want to protect my capital. I want to maximize my income. I want to reduce my risk.” All the things that we do.
But, even so, because I remember money over between October and December and I had clients that were losing hundreds of thousands dollars. New clients transferring their assets from their old firm to our firm because the market was so bad. And I want to remind you a little bit of this. I took some of my notes, this was back when I was giving talks in October, November – really November and December. And I will give you some statistics.
The Dow lost 6.8% in a week. It was down 1655 points. It was the worst percentage drop since October 2008. The Nasdaq lost 8.3% a week. It was the worst ever for the Nasdaq. The S&P lost 7%, that was down 17.8% from its record highs. The Dow and S&P are both in corrections and on track for their worst December performance since the Great Depression. I mean think about that for a minute. Just three months ago, that was the night the market was falling, significantly. One of the worst drops ever. And by one measurement, the worst since the Great Depression.
And now, you’ve seen the market rally significantly from that bottom, it was December 24th, Christmas Eve Day, and I’m already seeing people, seeing you be more complacent. “Well, David, the markets come back. It’s coming back.” It’s called a FOMO Market and it’s Fear Of Missing Out. So people start wanting to buy stocks as the market goes higher, and not the opposite. The only thing that we want to buy that’s more expensive. We don’t want to buy stocks on sale. Everybody is selling when the market goes down. People aren’t buying.
Risk in the market is still there. Right now, the market is the most overvalued as it’s been since 2016. The problem we have is earnings. So we had earnings peaked, some of the highest earnings ever in 2018 and, now for 2019, we are going to have negative earnings. Into January, December of last year, there was projections we would have like 3% earnings growth. Now, they are talking about -2.7.
73% of the companies that have reported, which is almost all of the companies, for the S&P for this last quarter have negative earnings guidance. What all this means in English, is the fact that, the underpinnings of the stock market are still not good, and yet you’ve seen this massive rally. And why is that? Well, the biggest reason is the Federal Reserve has stepped in and stopped raising interest rates, which this is the first time it has ever happened since, well, ever inside this kind of bull market.
This is the longest bull market ever that we are in. Usually the Federal Reserve will raise rates, slow the economy down, the market will correct and we go on to the next bull market.
So one of the things that I talk about is risk a lot with clients. And part of our process for what we do is second opinions that we offer to all of our listeners, and those of you that tend our workshops, is a risk assessment. So we do a couple of things. First off, we’re going to do a risk assessment for you. We will do a fee analysis. We will talk about fees today because most of you overpay in fees. #3, we are going to do a retirement plan for you, a written retirement plan. And those three things combined are, basically, you could walk out the door and say, “Here’s my plan.” Now, implementing that plan maybe difficult on your own but I’m going to give you all that information.
So risk is a big one. Most of you are walking around with what I call a “30% number” – 30% risk – meaning that if we go through another 2008 or 2000, you would lose about 30% of your money, or about $300,000 per million. And I know most of you are not that aggressive. But your portfolios are invest differently than you are.
So if you want to take advantage of our second opinions, have me do a risk assessment of your portfolio, have me do a fee analysis – show you how I can reduce your fees – do a written retirement income plan. Again, our second opinion – I don’t charge for it, as long as you’re a listener and/or you attend one of our workshops. You can reach us at 1-800-611-1967. Or go to www.reyesplan.com.
So, right now, I think is a great time to reassess because if you’ve been fortunate enough to ride this market up, down and then, now, up again right now, it’s kind of a gift. So it’s a great time to look at your portfolio right now. It’s better to look at today, than when the market is down 20%. So I always tell clients, “That I’m managing your money for today,” that are coming over to our firm I say, “You’re fortunate because we are now moving money in a positive up market right now, which three months ago you’d been down 20%.”
So risk is a big piece what we will look at. So what I want to talk about is, in addition to that, is fees. I want to talk about investments that we don’t like as much as others in the sense of mutual funds vs. exchange-traded funds vs. stocks, those types of things. So before I do that, I want to get into, one of the things that I talk about when I sit across from you, or I am doing a talk or on the radio today, is I talk about the 7 Rules for Retirement Security. So this is important. Pay attention to this.
The 7 Rules for Retirement Security that I came up with. This is experience time, over time you get to distill things down to their essence when you do something, whether you are a doctor or a lawyer or a teacher. We can create, hopefully, bite-size pieces of information to better articulate those. And one is, again, the 7 Rules for Retirement Security, something to start with, these will probably have to go into the next segment with this, but this is important.
So Rule #1 is avoid large losses. I call it the 5-10% Rule. We want to stay within a maximum loss, if we can and we can if we do proper planning, is let’s say no more than a 10% loss, 5-10% loss. I always ask the question, “How much do you want to loss in retirement?” What are you going to say? Zero. Well, your first thought you’re not positioned that way with your portfolios. And that’s not possible unless you had 100% annuities in your portfolio, which is the only way you can get 100% guarantees by the insurance company, based upon their claims paying ability.
So we want to design portfolios, which we will talk about, so we can mitigate the losses into the 5-10% range because if you can do that, it’s better to avoid these large losses than make the big gains. Because if you make the big gains, you’re going to participate in the big losses. So we just can’t afford to that. So avoid large losses, Rule #1.
Rule #2, minimize fees. This is a big one. People don’t realize the impact. You don’t realize the impact of fees on your portfolio and it’s something that we pay a lot of attention to. Part of our analysis for you, as I talked about, is #1 is we are going to do a risk assessment. How much risk are you taking? You’re talking on too much, I can tell you. #2 is a fee assessment and where the most hidden fees are is in mutual funds. And whether you have a 401k plan – 401k plans are expensive. Most 401k plans hold what for investments? Mutual funds. So you’ve got the 401k fees, you got the mutual funds fees – we will talk about what those are.
So you have a lot more expenses than what you believe that you’re paying. And I’m looking at some statistics here and, basically, 71% of Americans believe they pay no fees whatsoever for their 401k plan. But 92% admit they have no idea what fees they are paying. That’s about accurate.
So how about if I enlighten you on that. So, again, we are talking about the 7 Rules for Successful Retirement for Retirement Security. Rule #1, avoid large losses. Let’s stay in the 5-10% range. We’ll talk about some ways that we do that. Minimize fees, which we are discussing now. In the next segment, I will talk more about that because there is a lot of hidden fees, especially mutual funds, planned administration fees that you’re unaware of.
So this is part of what we do, if you want to take advantage of our second opinion, it’s complimentary. It’s something that I can charge $5000 to do, it takes probably 10 hours of work between meetings and preparation time, but we decided many years ago that it’s better just to do a complimentary. And if you go through the process, there’s probably a good probability we’ll work together, if we like each other and we believe in the same things, philosophies.
But, again, we will do three things for you. #1) We will do a risk assessment, make sure you’re not taking on too much risk. #2) We’re going to do a fee analysis and show you how to cut your fees. Sometimes in half. And then 3) We’re going to do a written retirement income plan. So you want to take advantage of the second opinion, give me a call, personally, David Reyes, 1-800-611-1967. Or go to our website at www.reyesplan.com.
What is happening in the market? Are we approaching a recession? Many experts seem to think so.
Follow along as David Reyes, The Retirement Architect discusses the current state of the market, and strategies to protect your assets during this unsteady time.
All of our Second Opinion Meetings are free and we are a fiduciary, which means we are not here to sell any products. Rather, we guide you through the process to creating a plan that will have you covered in and throughout retirement. Come to one of our workshops found on the Events page. Or call our office for more information (858) 597-1966
Well get ready for the ‘R’ word I call it. It’s a bad word. It is recession. And you’re probably not hearing many pundits, or many people, on your favorite stations like CNBC, or any type of business news, because most of the people on those shows are selling stock. The continuable market.
Thanks for being here. I want to talk to today again recessions. I want you to be ahead of the curve. I don’t want you behind curve because if you are, that can be disaster for your portfolio and for your retirement.
So recession. Why am I concerned about recessions? Well, a couple things. First off, we’re now 10 years into a bull market, which technically we’re not anymore. We’ve had a 20% correction from the highs in the NASDAQ and the S&P, which is officially was called a bear market.
People say, “What’s a bear market? What’s a bull market?” And a bull market is when the market is going up. And a bear market is when the market is going down. And, officially, a bear market is when the market has gone from a top to bottom a minimum of 20%. Now, that’s arbitrary. I have different ways I look at when we’re in a negative market and when the market has shifted. It’s not an absolute number because that would be ridiculous. That’s just kind a rule of thumb.
I think we’ve been in a bear market for about 3-6 months in a minimum now. October is when we had the high market going into December. It was down about 20%. And now we’ve recovered about half that loss. And the problem is when you have a market that shifted like it has right now, in my opinion and a lot of people a lot smarter than me opinion, is that these rally’s you have – they are called bear market rallies – they are vicious. And they fool people into thinking the market is okay. It’s okay to get back into the water.
So when you have like a 20% decline, you have a 10% move – 10-12% move – in six weeks – You have like Netflix fall 30% and be up 30% in a six-week period. I mean there has been a lot of stock that has done that. And if you own those stocks, you are still underwater. Significantly underwater. Because if you’re down 50%, let’s say in the stock some of you own, stocks that have done this, you have to get a 100% to get back to even. So if you get 50% gain in your – You say, “I lost 50% and now I made 50%. I’m back to even.” No. Half of 100 is 50 and 50% of 50 is $25, or now a total of $75. So you’re still 25% underwater.
Think about that for a minute. If you own a stock, it goes down 50%, you make 50% back, you’re 25% down. Really. So people don’t realize that the math. That’s why you want to avoid catastrophic losses. If you own securities, if your portfolio is predominantly stocks, or the volatility is too much for you, now is the perfect time to reallocate the portfolio. Because you’ve had a gift – what I call it – that the market has now recovered about 10-12% from the bottom. So it’s not a time to get all excited. It is time to take advantage of a reallocation, or re-balancing a portfolio.
So again why do I think we’re in a recession, or we’re going to be in a recession sooner than later? #1 is interest rates. The interest rates are the driver of economic growth and contraction of economies. So the Federal Reserve has raised rates several times going from July of 2016, where we had basically zero interest rate policy. Now, today, we have about 2-1/2% Federal Funds rates. So what that means in English is the fact that rates have risen and what happens is rate increases the price of mortgages, auto loans, consumer loans, corporate debt. All these things are head winds and the biggest headwinds for stocks and consumers. So that’s the biggest tell. So that’s a big issue.
Of course, you have China, which is a problem. The tariffs. More important, China has been slowing. China’s stock market is down over 30-35% from its highs. So that market has been crashing for almost a year now. Forget about tariffs. Then you have the German DAX was down 20-30%. Europe is slowing. I just read a report from the IMF, which is International Monetary Fund, and they’re basically saying that we are going to have slow growth across the world, which we are. And it’s something that I’ve been talking about for a while.
So interest rates is a big one. Corporate earnings are another one. The corporate earnings peaked at about 2018 in the second quarter. Now most prognosticators said for 4th quarter of 2018, you were talking about 6, 8% growth in earnings. And now, we are talking about 1-2% going into next year. Anytime you have earnings kind of roll over like they are, it’s another tell.
So all these things, I could go on and on and on. Goldman Sachs just came out with a report about a month ago, and they were saying it’s about a 50% probability of a recession in the next 6-12 months.
So if you want to learn how to avoid these types of these situations, and avoid these times that when we are in markets where it’s difficult to navigate, if you want to get a second opinion from me and review your portfolio, look at what you have, I look at ways to migate risk. I look at ways to make sure you’re paying the least amount of taxes possible, make sure you have an income plan. We do all this for our clients. We do it for prospective clients, as well.
So if you would like to sit down with me personally call my office at (858) 597-1966 and I would be more than happy to sit down with you.
So what happens typically is the markets will roll over, or fall, usually about 6-12 months they will peak before a recession. I think we have already hit that. Let’s say October was the month because that was the top of the market before it went down 20%. You’re looking at now March to let’s just say the end of the year. Sometime in 2019 there is a high probability of a recession. I know that doesn’t sound realistic because of what is happening with the economy, with unemployment, that is what I believe is going to happen, based upon experience and just people that I rely on, that I follow that are again a lot smarter than I am, but want to make sure that you are protected.
So how do we recession-proof our portfolio? How do we make sure that we’re not affected? I mean a lot of you I met with during the 4th quarter of 2018, I tell you, people’s portfolio got devastated. I met with clients I talked about in some other shows that were moving money from another firm to our firm. So that money in transit – I had a client that had about $2 million coming over and they lost about $300,000 just in the transfer. That is how fast this stuff happens.
There is an old saying in markets, “Markets go up like a stair step, and they fall down like an elevator.” So it’s hard. If you’re not prepared for this, you can get really beat up. In October, the 4th quarter was a perfect example. The market from top to bottom dropped 20% in basically less than three months.
So if you’re on the wrong side of that and you’re too aggressive with your portfolio, you’re really going to get hurt by that. And meeting with you, I will tell you most of you have way, way more risk than think than you do. Typically, when I do an analysis of your portfolio, I would say the average person out there, the average person listening to me right now, would lose about 30% in a 2008 type financial crisis, or recession. And you just have no idea.
There was a study that I read just the other day, which I think was generous, said 1 in 5 retirees have no idea what they own. I’ll tell you it’s probably 90% of you don’t really understand what you own, and don’t understand the risk that is associated with what you own.
So, again, part of what we do on our second opinion – First thing I do is look at your risk. And most of you, again, you’re talking about 30% max losses during severe bear markets, or severe recessions. And we’re quite due for one. Second thing we do is we’re going to do a fee analysis. Most of you are over paying in fees. Typically, including mutual funds cost and adviser fees and all that, you’re looking at an average cost of about 3-1/2%. Put that in perspective on a million dollar portfolio, that’s $35,000 a year. So we are going to do the fee analysis, we are also going to do a complimentary retirement income projections for you to help you make sure you never run out of money in retirement. We are also going to do a written plan. We will do all that complimentary for you as a second opinion. You don’t have to hire us. We will do that for you.
People say, “Why would you do that?” The time we spend is about 10 hours between planning appointments, but I found over time, if you’re willing to go through this process with me, there is a high probability you will hire us. And if you don’t, that’s okay.
So if you want to take advantage of our free complimentary second opinion, again no cost, very, very thorough, give me a call at (858) 597-1966
This segment I wanted to talk to you more about how to protect your portfolio, so what we’re going to do, hang on. I’m going to discuss with you how to recession-proof your portfolio to ensure this type of volatility enough to worry about. I don’t get one phone call. When the market dropped 20%, I got no phone calls. Zero, none. Because the fact if you have a proper plan and then you’re comfortable with what you have – you can see your statements, too, it’s pretty simple – you’re not going to freak out. So I don’t want you to panic.
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Today, I want to share with you the market. I don’t talk a lot about the stock market. When I do my workshops and teachings, I do. But I felt it was a really good time to give you my insights on what’s happening right now. We’ve had a bull market, the longest bull market ever now – over 10 years. Market has been over 330%, you know, since 2009. If I was going to give this a baseball analogy, we’re in extra innings. And so, I’m just concerned.
I do a lot of reviews for you out there, radio show listeners, people attend my workshops, people that are referred to me. And you have way too much risk in your portfolio. During the one week here recently in October, just recently, the Dow dropped 1500 points in three days. I mean, unbelievable. The market lost about 7%. The S&P 500 was up 9% year-to-date. It went all the way down to basically flat at 1%. You have the NASDAQ down 9%. You have NETFLIX down 15%. Amazon down 13%. These are big moves in one week. This is in a few days period.
So I want to make sure that you’re prepared for this type of volatility – that most of you are not. And, fortunately, the longer we’re into a bull market, the more complacent you become. And that’s when it’s dangerous. You always use the Warren Buffetism, “When other people are fearful, be greedy. And when others are greedy, be fearful.” And everybody is greedy right now. Everybody is jumping on the train of owning stock, especially technology stocks.
Right now, the S&P 500 is overweight by about 30%, meaning that 30% of the S&P value is technology. Every time we’ve had that type of overvaluation of technology in 2000, it was that number, we lost 80% in technology. In the Financial Crisis, we had about 25% of the value of the S&P 500 was financials. Financials lost 80%. Kind of rhyme and reason, here. We’re getting, now, 25-30% overvaluation in technology because everybody is jumping on technology.
Again, I don’t want to scare you but you are probably talking the next time we have a down move, a bear market, you’re talking 30, 40, 50, 60%. I know it sounds outrageous but it’s not. So I just want to make sure you’re protected. You know, we have a philosophy at our firm. “We want to participate and protect every thing we do.” Participant and protect.
If you want to reach out to me to talk more about your portfolio, your risk, trusts, taxes, we do a complimentary second opinion that’s very, very powerful. A lot of information. So just reach out to us. Give me a call and look forward to talking to you.