#3 – Seesaw Market Reactions, Soft Landing Hopes, and Nick Saban’s Happy Retiree Potential

Wes Moss [00:00:52]:
If you’re a football fan, we do have a last week was financially heavy, and this week I wanted to review the lifestyle secrets that make happy retirees. There’s five of them, and there’s five financial secrets that make for a happy retirement. And I’d like to do that in the context of one Nick Saban, coach Saban. Now, I’m not a giant Alabama fan at all, but I know we have a lot of folks that are listening that are giant Alabama fans. And though I don’t know Nick Saban, coach Saban intimately, they’re one of our producers here on money matters. And frequent guest Jeff Lloyd is pretty plugged in into the Alabama football scene and has a pretty good idea of Nick Saban the man, the myth, legend. And I think it’s an interesting exercise to go through our habits of happy versus unhappy retirees and do in the context of will Nick Saban be a happy retiree? We’ve got ten to go through. Is he get a ten out of ten? Not so fast.

Wes Moss [00:01:54]:
They’re not all that easy, even for a guy that essentially has all the money in the world. Speaking of a guy that has so many things and all the money in the world, Connor Miller, welcome to the studio. Maybe not all the money in the world, but you’ve got everything else that you would want in the world.

Connor Miller [00:02:12]:
That’s right. I got enough. I got everything I need. But yeah. Thank you. Thank you for having me on, as.

Wes Moss [00:02:16]:
Always, two beautiful young girls. You’re good looking, smart guy, you’re the chief investment officer, capital investment advisors. I don’t know. It’s a lot going for you, bud. And you got great sweaters. So we’ve got the Sabin update, but also weaved into that is the first big update we have done to the happy retiree secrets. And this goes back to the financial checkpoint. And it’s a big update.

Wes Moss [00:02:46]:
And it’s one of the cornerstones of the books that we’ve written. It’s one of the cornerstones of our research. It’s a financial cornerstone or checkpoint that happy retirees need to get to. And we’ll do that in terms of coach Saban and his process. But first, let’s talk about what’s happening this week. Connor Miller, we’ve got it’s earnings season, which that is the fuel of equity markets. That is the fuel of what makes stocks go up or down over time. One of my favorite charts, if you ever want to see why the market goes up, overlay it with the growth of profits from companies in the United States.

Wes Moss [00:03:28]:
And guess what? Eventually they match. Pretty much now. The emotional line is the stock market. And it freaks out higher sometimes, and it freaks out lower, but it trends. And typically it has always, over the course of history, it eventually comes back to where earnings are. So we are in. Companies continue to increase profits. Aggregate earnings as a group go up.

Wes Moss [00:03:56]:
Guess what? So stocks follow over time. We’re in the middle of earnings season. It’s just started, but we’re getting some results. I know the banks have usually kick off earnings season. How have those numbers been?

Connor Miller [00:04:09]:
Yeah, so we’ve had about 40 to 50 companies in the S and P 500. So about 10% have reported so far. And as usual, the banks are the first up. And results have been fairly okay. 88% of them that have reported so far have beaten earnings, which is a little better than the average. But the market hasn’t loved it so far. There may be a lot of high expectations. And what we can do is we can look at, okay, when the banks report earnings, what does their stock price do after those results? And on average, when you look at it, the stocks have fallen about one and a half percent on the day after they reported.

Connor Miller [00:04:47]:
So the market hasn’t necessarily loved the results so far.

Wes Moss [00:04:50]:
Think about this time last year. We were starting to get whiffs of something happening in the banking system because rates had gone up rapidly. The market still wasn’t used to that then. We know what happened in March. So a little less than a year ago, we had the Silicon Valley banking crisis. That was a very scary period of time that could have potentially, and we didn’t know at the time. We thought it was contained, but nobody knew for sure. Was this just one bank that was underwater on their fixed income portfolio that led them to go bankrupt? Was that a systemic problem throughout the entire banking system, were all the big banks in trouble, like SVB? And it turned out that it was a contained crisis.

Wes Moss [00:05:39]:
A couple banks had some really bad investments and we saw a couple of banks go under, but it didn’t spread to the whole system. We were talking before the show a little bit here about net interest margin. Think about go back three years when rates were at zero and we had almost ten years of very low rates. When you’ve got rates that are ultra low and people are getting mortgages at two and a half or 3%, there’s not a lot of room for banks to have profit. They’re not charging as much, so there’s not as much icing on the cake, if you will, the money sitting in their coffers not earning a whole lot because the federal funds rate was at zero. So they didn’t have a whole lot of, they weren’t making money on their money. And that picture has changed a lot recently. Yeah.

Connor Miller [00:06:29]:
So as rates have risen the last couple of years, that’s allowed the banks to earn more money on those loans, on money that they’ve lent out to people in the form of mortgages or auto loans or just credit cards, any loans in general, they’re able to charge a higher interest rate on that. Now, the net interest margin that you hit at, that’s just the difference between the money that they’re bringing in on those loans in the form of income and the money that they’re having to pay on the money that we have deposited deposits at the bank.

Wes Moss [00:07:01]:
Yeah.

Connor Miller [00:07:01]:
So if the money is sitting in cash or in cds, that’s money that the bank has to pay out. And so that net interest margin is just the difference between those two numbers.

Wes Moss [00:07:12]:
So is it fair to say that the banks, because the federal funds rate is five and a quarter to five and a half, are they able to essentially, if they’re paying you one, and there’s still lots of banks that are paying one or even below that. Are they really capturing a full, call it four and a quarter percent above that?

Connor Miller [00:07:29]:
Well, there’s a fine balance there because some banks are having to pay higher rates on cds. But if you look at some of the more well established, bigger banks, JP Morgan, bank of America, they’re still paying out much lower rates. And so that allows them to be more profitable on net.

Wes Moss [00:07:48]:
And that’s where we see net interest margins really go up. So it’s funny that the banks have kind of been stuck in quicksand for a long time, but they’ve had this big acceleration with higher interest rates and we’ll continue to see. So earnings so far have been pretty good for banks. We’ll see where that takes us. The other thought here is that if you look at economic numbers, so last week we talked about the big picture for 2024. One, we think that we end up with an okay economy this year. A pretty good, we call it the Goldilocks economy. Pretty tough to see a two and a half percent plus rise like we saw in 2023 because we’ve seen some of the excess savings and some of the cushion for consumers get drained.

Wes Moss [00:08:38]:
But at the same time, it’s hard to see a bad economy or a negative GDP print for 2024 when you have jobs numbers still at 3.7%. We just got jobless claims this past Thursday with 187,000 for the week. That’s a decrease. Remember, these are jobless claims, meaning that we want this number to be lower is better, or jobless claims. It was 16,000 less than the prior week, according to the Labor Department. That’s the fewest unemployment claims or jobless claims that we saw that we’ve seen since September of 22. So it’s been a while. So the labor market is still strong.

Wes Moss [00:09:20]:
3.7% unemployment rate means over 96% of people are employed. Inflation data continues to be not quite to the 2% level that the Fed wants us to see, but 3.4% is certainly in the right direction and then we will see where earnings takes us over the next several years. Implication, though, speaking of higher rates, if the economy stays strong, it’s going to be pretty tough for the Fed to lower rates. And even though the market expects a whole bunch of rate cuts, which would be great if you’re looking out looking for a house, the biggest impediment right now is high mortgage rates coupled with high home prices. If you see a whole percent lower in mortgage rates, which the market is forecasting six rate cuts this year, which would be, let’s call that one and a half percent, approximately mortgage rates would get a lot better. So the question will be, if the economy series is strong, why does the Fed really have to cut interest rates? So it may not be as many interest rate cuts as the market is looking at. However, the good news here is that bond rates are still pretty strong. We did an update with just a standard balanced portfolio.

Wes Moss [00:10:39]:
What is the aggregate yield here between stocks and bonds today relative to what it’s been over the course of history? Yeah.

Connor Miller [00:10:47]:
So even though rates have come down a little bit over the last couple of months, the yield or the income rate on a balanced portfolio is still above 3%, around 3.1% on a balanced portfolio of stocks and bonds, just using.

Wes Moss [00:11:02]:
The SP 500 and the aggregate bond index. Just something that plain vanilla simple formula.

Connor Miller [00:11:07]:
That’s right.

Wes Moss [00:11:08]:
The highest we’ve seen. So if we go back and look at the 30 year average of what that pays out, again, we’re talking about just yield here. Remember total return, we’re all after total return. It’s a combination of growth or appreciation plus income. And when you’re talking about the yield here, 3.1 is just the I part of that equation. It’s just the income piece. We don’t know what the growth will be in any given year. So that is good news for balanced portfolio investors.

Wes Moss [00:11:38]:
One of our themes for this 2024 year, to continue to use that balance because it’s now paying you a lot more than it’s done in a very long time. The consumer, this is the number, Connor, that I was searching for. This was for holiday sales in December. The US consumer, which is hard to, it’s almost impossible to stop, spent $964,000,000,000 during, according to the National Retail Federation. So it’s just shy of a trillion dollars. The average sales growth during the holiday season was 3.6%. Remember, the NRF was, the national retail Federation was calling for two to 3%, I believe. So it bested that number.

Wes Moss [00:12:26]:
You just cannot slow down the freight train that is the american consumer.

Connor Miller [00:12:30]:
It really is an astonishing number when you think about all the calls for recession and the consumers are running out of their savings and you post basically a record year spending almost a trillion dollars.

Wes Moss [00:12:43]:
It may be the terminology that’s part of the problem. And we know, we see these polls around the sentiment of Americans, and even though the economy is pretty good and over 96% of people are employed, and we also have seen wages somewhat keep up with inflation, Americans still don’t feel good about the economy. Something like 80 plus percent of Americans think the economy is not in a good place. Part of it is the economic terminology. And here’s what I mean. I think we’re going to be in for a soft landing next year or this coming year. That’s what you hear from. That’s from a positive economist.

Wes Moss [00:13:20]:
I think we’re going to see a quote. Soft. Wait, no, what does that mean? Wait, soft landing? Well, it means the plane doesn’t crash, but it’s also going down. So why is that good for the economy? Connor? It’s a terrible phrase.

Connor Miller [00:13:35]:
It’s not great terminology. I guess relative to a hard landing it’s better.

Wes Moss [00:13:39]:
But really it’s just either way the plane’s going down and seems like the plane landing is the economic equivalent of things are going to be okay. A soft landing, I get that. But I also get this visual every time I see soft landing I think of a giant plane coming to a Runway and coming down. And we want our economy going up. We want GDP growth. And we saw great GDP growth last year. The third quarter last year was astounding for a year where the calls from economists were between 70 and 100% chance of recession. Not only did we not go into recession, but we grew over 5% gross domestic product in the United States in the third quarter.

Wes Moss [00:14:24]:
We ended up with about a two and a half percent growth rate for last year on a 23. $27 trillion.

Connor Miller [00:14:31]:
Trillion.

Wes Moss [00:14:31]:
Yeah, that’s a giant number. It’s a giant number. So we saw what the US consumer did when it comes to spending. They spent almost a trillion dollars in the holiday season. So we’re trying to figure out a better way. If you’re using, let’s see if chat GBT gets this right. Another way to talk about the economy. That is going to be good.

Wes Moss [00:14:55]:
Gently touching down. That’s better. Gently meaning like no, but still it’s going down. So that’s no good. Easing into place. Softly setting in, gracefully descending, lightly aligned. See? Chat cheap. I’ve got here.

Connor Miller [00:15:11]:
Smooth descent on mine again.

Wes Moss [00:15:13]:
Descent. It’s no good. It’s about economic growth. Hey, I think we’re going to have a good economy next year. We’re going to have a soft landing. Wait, we’re going down.

Connor Miller [00:15:20]:
Well, think about it in. If we’re sticking with airplane terminology, think about it. When you’re taking off, sometimes there’s weather and you’ve got to get above that really quick. How about just reaching cruising altitude? We had to get through some of the storms, get the plane up there really quick. It’s still going up, but it’s just kind of leveling off a little bit.

Wes Moss [00:15:40]:
I like that. We’re staying at cruising altitude. That’s a better way to think about growth. We need positive numbers, not negative. That’s how we get to our economic goals. That’s how companies battle through inflation, increase their earnings, and that’s what the market is dictated by to a large degree. That plus a giant dose of human emotion and human sentiment. This is Connor.

Wes Moss [00:16:06]:
We didn’t talk about this this week, but I’ll bring it up here is that we talk a lot about this concept of the army of american productivity. That’s one of the things that we see, it’s one of these gravity, almost the law of almost a newton like laws of inertia and gravity and force. Part of the way I see the United States economy. And, yes, we go into expansion modes where we’re growing really fast, and then we’ll have periods of time where we’re contracting, particularly after big financial events like the great financial crisis and a housing bubble. But the underlying churn is really going in one direction, and that is humans that are collectively working to forward. Let’s say they’re working and it’s their job to go in and do a little bit more every single day, put food on the table, and that is this army of american productivity. So the concept around this, you’ve got 167, almost 170,000,000 people in the US workforce, and that’s the driver of economic progress. But if you think about what’s in the fuel tank, what drives around.

Wes Moss [00:17:26]:
The way I think about this, Connor, is that that army of american productivity has an unlimited supply of fuel, almost as though better than nuclear power. It’s unlimited because it is driven by our own human emotions that are really inherent to being human. So you can’t have a human without the emotions of fear and optimism are two main drivers here. And then, really purpose. And humans need purpose as well. And those are always going to be in the tank in some ratio. And if you look at that workforce of 167,000,000 people, that’s the army pushing the ball forward every single day to be a little better, a little stronger, a little smarter, a little more efficient, something new. What is fueling that? Well, we know by Gallup.

Wes Moss [00:18:18]:
The most recent Gallup workplace survey says that the United States and Canada, which happen to be one of the happiest workforces, the people that are engaged at the highest level, it’s only about 30% of the whole global workforce is really engaged, meaning that they actually like their job. That means about 70%. Either they can take it or leave it, or they just plain don’t like their job. In fact, we do know that there’s a percentage of folks that dislike their job so much, they’d like to see their company fail. They’re trying to bring their company down. That doesn’t go well into the army of America productivity, however, we are driven by, because we have to put food on the table. There is an element of fear around money. And even if you don’t like your job, you are still forced to go be productive and still go to work and still do a good enough job.

Wes Moss [00:19:16]:
Not to get fired, which is a fuel that will never go away. And even if we have people that don’t love their jobs, we’ve got to do it for survival. So that’s a human emotion that fear is a perpetual driver of. Even the folks in the workforce that don’t like their jobs to continue to push further and further and create progress. Then you’ve got the kind of the other end of the pendulum, which would be optimism, and that’s another human emotion. And these are people that are thinking, oh, I can do a little bit more for my life, a little bit more for the company, and do a little bit better. And we get these breakthroughs, like we saw last year with new obesity drugs that are now working in an enormously health from a healthcare perspective and economic way, huge developments. Last year, we saw the first FDA approved Alzheimer’s drugs to be able to slow down something the scientists have been working on for decades.

Wes Moss [00:20:15]:
So we have people that are trying to go just a little bit further every single day. And that’s that spirit that is also part of the fuel tank. And then you’ve got, I think, that maybe the most noble of those three components, or fuels, in the tank, and that’s just purpose. And humans have to have a purpose. And this is not just about you doing better, but these are the folks that are thinking about, how can I make the world better? And the tank that fuels this army of american productivity is full of those three human emotions at all times, and they do not go away. And that to me, is that when we get. Unless you’ve got some sort of exogenous event or some sort of bubble, like the financial cris, the wheels are churning forward. And that’s part of the reason we see a Goldilocks economy, at least some growth in 2024, unless there’s some big outside event.

Connor Miller [00:21:14]:
Yeah, it really does work in this kind of beautiful cycle. At its core, at the baseline of protection, of, yeah, I need to put food on the table for my family. I need to put a roof over our head. Then you move up to that next level, and it’s like, okay, I have this iPhone sitting next to me. You want the next product. And so the company is innovating, and then once you reach the top of purpose, now you’re just refueling the whole thing. And it really works in this nice cycle.

Wes Moss [00:21:43]:
I think you said the word beautiful, so you put that all together. It is a beautiful combination of economic progress, and that’s what keeps me optimistic about the future. However, here we are. This has been the Davos week, the World Economic Forum. And one of the stories out of Davos was that the IMF, the International Monetary Fund, says that the headline essentially reads that 40% of all jobs are going to be taken because of AI. Now, you read further into it, it was really 40% of jobs could be impacted by AI. But I clicked on it. Wait, 40.

Wes Moss [00:22:18]:
Wait, 40% of jobs? This is the International Monetary Fund that says this, the IMF, but again, impacted. And that makes sense. Of course, 40% of jobs will be impacted by artificial intelligence, maybe more. So with that, what we’re going to turn to here is this thought around the process. We’ve been thinking a lot about this word and so much about retirement planning is a process which then leads us to the biggest sport retirement story in really probably the last decade. And that is the retirement of, or the sooner than expected retirement of one, of course, Nick Saban, who of course is, if you watch college football, and there’s really only two things to watch on television, one is NFL football and one is college football, and that’s essentially where all the ratings go. We have a lot of lessons we can learn from Saban. And I want to talk about his process in his life because he’s really been a life coach to so many.

Wes Moss [00:23:26]:
And of course, in football, how that relates back to retirement planning. Now, couch that by saying, I’m not an, I was a friend of mine was telling me this week, who works here, he’s in Atlanta, but he’s always in Alabama. Is that the culture in Alabama? And I’d never heard this for the football culture, and the Alabama football culture is so significant in that state that a common greeting and exit is just roll tide. Coming to a table, a couple guys, sit down. Roll tide. Hey, guys, not that roll tide. See y’all later. Roll tide.

Wes Moss [00:24:07]:
It’s in the fabric of Alabama. And I don’t know if it’s been that way forever or not.

Connor Miller [00:24:12]:
Alabama’s version of aloha, roll tide.

Wes Moss [00:24:15]:
It’s about right. We don’t say aloha here. We say roll tide, which is. It is a great phrase. So again, I’m again, not an Alabama fan, but I don’t dislike Alabama at all. And I’ve been in awe, and I think unless you are a rival, you’ve been in awe of what Saban’s been able to do. So, yes, he’s the goat 28 years now. He’s stepping down and we’re going to talk through the process that his life process, which is translated to football one that as soon as we get back for break, focus on the process of this is Saban, not the outcome, which is exactly what we need to be doing when it comes to our retirement planning.

Wes Moss [00:25:00]:
Attention to detail that he has, that we know how attentive he is when it comes to the plays, what the players eat, what the players watch, how they review film, how that relates back to what we’re doing. From a retirement planning standpoint, it’s extremely important building a team culture which we know that he’s been able to do that’s not dissimilar to what we need to do as we’re planning for retirement. Understanding what our team is handling, success and failure, that’s investment 101 when it comes to being a better investor. And then, of course, his thought around how he prepares not just for the upcoming season, but for really five seasons out, no longer as he’s leaving early. He’s eight years left on his contract, leaving about $72 million on the table. But that long term vision has been paramount to his life and football success, and it’s exactly what we need to think about when it comes to investing. So we’ll get to the saving process and how we can learn from that when it comes to retirement planning, more money matters. Straight ahead.

Wes Moss [00:26:12]:
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Wes Moss [00:26:44]:
We’re talking about the Sabin process. Speaking about attention, maybe we’ll would it be attention to detail? No, it’s number one. Focus on the process here. You have the winningest coach. I think a lot of us know these statistics. 28 years head coach. He was the number two winningest coach in a single team in college football history with two. One, Bear Bryant, who was also at Alabama, had 232.

Wes Moss [00:27:15]:
But he had nine SEC champions at six national championships at Alabama and a championship at LSU. 28 years as a coach. One of those, I guess. Was it one year as a dolphin? As a Dolphins head coach?

Connor Miller [00:27:33]:
Yeah, one or two years, I can’t remember.

Wes Moss [00:27:35]:
But in 2022 signed another contract with Alabama worth $93.6 million. It was supposed to run over eight years and he was listening to the retire sooner podcast, I guess, and just called it quits. And even though he’s supposed to keep going until the year 2030, here he is. He’s done with leaving $72 million on the table. And I think that most people understand for a guy like this who’s had to deal with, who’s a tried and true three decade coach from almost all of that’s in college, I think it’s hard for a guy like that to deal with all the new things happening with nil money and paying players and then looking for other places to get paid more or more playing time. And now you have the transfer portal. I think it just makes sense that someone who has had such a magical career hurricane has hit the industry that is college football. And I could see him just say, look, I have enough.

Wes Moss [00:28:33]:
It’s time for me to go out.

Connor Miller [00:28:34]:
And, you know, with a guy like that, mediocre would never be okay. So he would need to do everything to excel. And then in this new environment, that’s going to require even more work than what he’s done the last two decades.

Wes Moss [00:28:47]:
Well, you think about this. So, number one, we’re thinking about focus on the process, not the outcome. And with this, we know that this is something that Saban, again, is famous for when he talks about his process, which is daily tasks, daily habits, doing the right thing every single day. And not just, hey, we want to win, not just looking at the goal, but looking at the process to get there. You were saying something about how after was it his first national championship? It was the first or the second.

Connor Miller [00:29:18]:
I heard this on one of the local sports stations last week after they won the national championship. He called a coach’s meeting at 730 the next morning, not to praise them, but to tell them all of the things that they could have done better that year after winning the national championship.

Wes Moss [00:29:35]:
Talk about a process. So think about this. If our goal is to get to a million dollars saved for retirement, we can’t just say, oh, we’re going to get there. There’s years and years and years of doing the right things and the right habits to be able to get there. Saving in our 401k, maxing that every single year, turning on automatic savings so that we’re not missing a year or two or more. And that’s part of the process. Just like when it comes to retirement planning, I think we can learn a lot, even if you’re not a big Alabama fan, from Nick Saban about the process to get where we want to go, there’s one really big update we have not shared on money matters ever, and we’re going to do that today. And it’s for one of the most important financial secrets.

Wes Moss [00:30:26]:
I’d say they’re all equally important, but it’s a big one and it’s a big change. And as you can maybe imagine, it has to do with the massive inflation that we have seen over the past decade or so since I first published. You can retire sooner than you think. Now, when it comes to the economy, we are seeing a Goldilocks economy. And so far now it’s a brand new year. But if we’re looking at rolling data, we’re getting a lot of data from December of last year. Here we are in January, but the consumer is just still unstoppable for us. Connor Miller, how much did they spend last year?

Connor Miller [00:30:58]:
Yeah, so in the holiday season for the month of December, almost a trillion dollars, about $960,000,000,000 was spent on retail sales in December. So just an astronomical, meanwhile, the consumer.

Wes Moss [00:31:10]:
Was supposed to have run out of money at the end of last year. Yes. Do we know why that did not come to fruition? I was nervous about that. That was one of my, I would say bigger economic pain points for 2023, thinking that cushion would run out. And we had one of our research firms that modeled it out and showed the drain of savings and it was supposed to run out in October, November. That didn’t happen at all.

Connor Miller [00:31:39]:
No. It still seems like there’s some left in the system. And I think the simple answer is people are getting raises now that is above the rate of inflation. And so as long as people are employed, it’s going to keep the ball moving.

Wes Moss [00:31:53]:
And it’s the employment rate, it’s over 96%. I know we talk, the BLS looks at the unemployment rate. It’s only at three point. The unemployment rate is at 3.7. So it’s historically very low. It’s almost been two full years, sub 4%. That’s a long stretch of really high and strong employment, which has led to higher wages.

Connor Miller [00:32:15]:
The other thing there too is higher interest rates. Right now you’re actually earning something on those savings accounts, which is padding pockets even more.

Wes Moss [00:32:23]:
That’s another really important point. The american public went a decade having money sit fallow at the bank. They got used to. It’s almost, they were hypnotized into thinking that we don’t get interest anymore. Well, that’s not a thing anymore. We also didn’t have a whole lot of inflation. Remember the beast of inflation was frozen in an ice glacier somewhere around the Arctic Circle. That’s thawed out.

Wes Moss [00:32:48]:
The inflation monster roams again. So we have higher inflation, but we also have higher interest rates. So take the trillions of dollars sitting around in cash now, earning three, four, five versus almost zero. Did that not make it into the forecast? Maybe that didn’t. That could be part of it. So we have an economy that we continue to see that is resilient. And every time I read, I’ve read ten articles this week because Davos, the World Economic Forum, every bank CEO has another opinion. I think we’re in for a soft landing.

Wes Moss [00:33:28]:
We’re in for a soft landing. What does that mean? My visual is a plane is going from the sky down to the earth. So if I were to chart that, it’d be a line going down. I don’t love the thought around saying, I think we’re going to go in for a soft landing. We could have a hard landing. I did this as we were coming into break. What is another way we could say this? You could say progressive economic growth, gradual economic uptick sustained. Maybe this is why it’s hard to figure out a way to say the economy is going to be pretty good next year and it’s not going to be a recession.

Wes Moss [00:34:09]:
Stabilized economic upturn. You came with a great one.

Connor Miller [00:34:13]:
Cruising altitude, right. Sticking with the airplane theme, you’re getting past your takeoff, getting through the weather, and now you’ve reached a cruising altitude where you’re free to move about the.

Wes Moss [00:34:25]:
Cabin with all of our doors intact altogether. That makes me start to feel good about that.

Connor Miller [00:34:33]:
Yeah, you might want to keep your seatbelt on.

Wes Moss [00:34:36]:
Even better, keep your seatbelt on, because that’s exactly right. There are guaranteed air pockets ahead. But we have seen some pretty solid earnings so far. We’re still early in earnings season. About 10% of companies have reported bank earnings have been strong to the very point that individuals are getting cash, they’re getting interest on their investments that are just sitting in money markets that are paying a healthy amount now. So are banks. And that’s that net interest margin number. I’m just a big believer the banking system has to be on solid ground for the US economy to be solid.

Wes Moss [00:35:16]:
It’s kind of the foundation. You’ve got to have a healthy financial system that can provide capital to businesses that want to grow, that have available capital when they’re ready. And even though the banking sector has still been under pressure and part of this is regulatory, there’s so many rules they have to follow. And because of the great financial crisis and then because of Silicon Valley bank, the banking system is always under this pressure. But even though we’ve seen the banks not necessarily be great from a business perspective, they, to me, seem like they’re in okay shape.

Connor Miller [00:36:00]:
Yeah. And really they’ve almost played it extremely cautious after what we saw after the global financial crisis and Covid-19 and Silicon Valley bank. And I think because they’ve had to play it so cautious and there’s been more regulation, the market is just not giving them the same valuation that they had in the past.

Wes Moss [00:36:25]:
Here’s from a couple different companies that had earnings this past week. Morgan Stanley was one. Here’s one of the quotes from their earnings. This is CEO Ted pick on their earnings report. He acknowledged the headwinds of geopolitical tensions in the state of the US economy. Okay. All right, some headwinds. But if the economy weakens dramatically in the quarters to come and in, the Fed has to move rapidly to avoid a hard landing.

Wes Moss [00:36:52]:
Here we go back to the bad airplane analogy. That would likely result in lower asset prices and activity levels, which would not necessarily be great for them, and that the inflation could also continue to challenge the consumer and the supply chain, which could result in a stickier fed and higher interest rates for longer. We’ve been in the camp, Connor Miller, that inflation, even though it’s gotten a lot better, it’s not going back into the iceberg, it’s staying at this elevated level relative to what it’s been for the last decade. So we have to be able to continue to invest around that. And the good news is, because of higher interest rates. This is a chart that you pulled this week, is the blended yield of a balanced portfolio of stocks and bonds. Remember, we’re all after the same thing. Total return.

Wes Moss [00:37:48]:
Total return equals growth plus income. We don’t control growth. That is at the whim of the market. And the emotion around how people feel about earnings. They’ll place a value if they feel good. They’ll have a high multiple without, if they’re feeling pessimistic, multiples are a little lower. That affects whether the price of the S and P 500 or the stock market is up or down in any given year. What is much more predictable, like just a steady stream out of a faucet, is income and dividends.

Wes Moss [00:38:18]:
So if you have total return, we can’t control in any given year growth, but we have a lot of control over the eye, which is made up of dividends, interest and distributions. That’s a cash flow. And if you look at that in the context of a balanced portfolio, Connor Miller, what does that look like today? Just the cash flow part, the yield part, relative to what it’s been, call it over the last 30 years or so. Yeah.

Connor Miller [00:38:46]:
So today on a balanced portfolio, you’re getting a little over 3%, 3.1%, which really is great news because the piece of the portfolio, like you said, that you can control now is significantly higher from what we’ve been accustomed to over the last 15 years, when the average was about 2%. Two to three might not sound like a huge increase, but that’s a 50% increase in your constant income that you should be receiving.

Wes Moss [00:39:13]:
So half of that’s, a little more than half is coming from the bond side because rates are higher. The remaining is coming from the stock dividend side. Put it together. A yield on a blended half stock, half bond portfolio today looks pretty attractive, particularly relative to where it’s been. Now that it’s over 3%, we’re going right straight to the Saban process and how that relates back to retirement and saving for retirement and preparing for retirement. Number one. First of all, I like this because it’s a process. Saban has always talked about how he has a process.

Wes Moss [00:39:48]:
It’s not just the outcome. So that’s, number one, focus on that process, the importance of the daily processes, the daily tasks, the habits, rather than fixating, let’s say, on an end result, if you’re concentrating on doing things right every day, the outcome you want, such as winning games, should naturally follow. Same thing. Connor Miller, when it comes to retirement, let’s say, you know you want a million dollars. Well, that’s easy to visualize and say, well, of course that’s the goal, but it’s really about all the steps throughout every year over a 30 year period. If we’re fortunate enough to get there, because again, most Americans don’t ever get to that point where they’ve saved a million dollars. We’ve got to think about how are we investing, how are we contributing to 401K, how are we doing an IRA or a brokerage account? Beyond that, are we setting things up on automatic pilot in order to be able to get to that end estimation to win. It’s an enormous amount of steps through the process.

Wes Moss [00:40:55]:
Number two, attention to detail. Saban is meticulous, known for being meticulous around this practice drills, game planning, film watching, getting the plays right. If you get the small things right, then that approach contributes to consistency of making things work. Excellence, same thing with retirement, just like coach would have to plan for a game, retirees have to plan for retirement. And there’s a lot of different things that we can do. I remember over the years, folks that have really saved and invested their way to enough cushion that will last them for a lifetime. They’ll write down their budget on a piece of paper, on a grid paper, with a pencil or a pen. They’ll do some sort of their own excel spreadsheet.

Wes Moss [00:41:46]:
But they’re making sure that those little things that really do matter, particularly over the course of time, are taken care of. Understanding some of the really core rules around retirement planning. Understanding that eventually we should be able to spend four and a half percent, somewhere in that range rule. And then what does that mean for how much we need to save? The other thought around what saving does that we can relate right back to retirement planning is this team culture of having everyone working together. Everyone. Mutual respect, hard work, commitment to a common goal. If we’re talking about retirement planning, then we need a team that is talking to each other. We need an investment person, a tax person, an estate planning person, and they’re talking together and they’re cohesive all towards that same goal.

Wes Moss [00:42:45]:
We’re going to finish the sabanretirement process, then find out if he’s a happy retiree, will be a happy retiree or not. More money matters. Straight ahead. It’s particularly fun if you’re a Bama fan. Roll tide again. That’s what they say. Evidently in Alabama. I’m not a big Alabama fan.

Wes Moss [00:43:07]:
I don’t dislike Alabama. We got lucky this year as a Michigan fan, which is kind of in my top three teams. I spent a ton of time in Michigan and my wife’s from there. So U of M is somewhat in my heart. Got a couple blue colors. Carolina blue. Go blue unit from Michigan. National champs.

Wes Moss [00:43:26]:
He is great. But this is really about the goat of coaches retiring early. And we’re walking through right now his habits as he check the happy retiree or unhappy retiree box for ten habits. Five financial, five lifestyle. We’ve talked about his six, so let’s go right to that. We know that we started this with saying that Nick Saban has this process. And as I was thinking about his process, it really did remind me of just. There’s so many parallels to the things we need to be doing right on a consistent basis as we are planning for our early retirement or any retirement now.

Wes Moss [00:44:04]:
Not many of us stop and have eight years left on our contract worth $72 million. So clearly he saved plenty of money, which will lead us to number one on our list, which is the first financial habit. Does Nick Saban check this box as a happy retiree habit or not? And the first one, as we know, and this is where we have a giant update here, habit. One of the happy retiree. Is that from a liquid retirement savings point? We wrote this back in 2013 from the research study that we did, was there was two numbers. The average number was 800, and call it $75,000 to be round number, but the median number, which you line the data up and you take the middle point. So it takes out really high balances and really low, and you get the middle point. The inflection point to go from the unhappy to the happy camp was $500,000, back at a time where people were saying you needed 2 million, or Susie Orman says you need 5 million in order to be able to retire.

Wes Moss [00:45:13]:
That number got a lot of play because it was controversially high for some people. That’s so much. You’re only talking to wealthy people and low to some people. How could you say you only need $500,000? And remember that none of these rules stand alone. They are pieces of the overall puzzle. They are ingredients in the overall stew that we are now coupling with some of the next financial habits. But because we have had, as we all know, and it’s been topic number one, and it’s target number one, Colin Miller, this year, inflation we have had since I published. You can retire sooner than you think.

Wes Moss [00:45:56]:
And the number of $500,000 is the median number for the happy retiree. March. Go back to March of 2013. Look at CPI data. We had a seven year stretch where inflation only went up 12% total in seven years. Then the pandemic hit, and we had almost 20% inflation in less than three years. Cumulatively, we’re staring at a 30 31% inflation since that 500 number was conceived. So it’s time to update that.

Wes Moss [00:46:31]:
So this is simple. We’ve got to update this for the inflation that we’ve experienced over not just the last three years, but the last. Call it ten or so and that number jumps to $700,000 still, I think, very attainable. It’s not 7 million, but 700,000. Still a lot to get to. It takes a lot of years for the vast majority of Americans who will not even get to that point. But this is a key update in our happy retiree formula. When it comes to liquid retirement savings, we’re upping that number to $700,000 on a median perspective and one and a quarter million on an average, or a mean perspective, that is taking the inflation that we’ve already seen, giving a little bit of cushion.

Wes Moss [00:47:20]:
So we’re updating those numbers essentially 40% because of the inflation. Connor Miller. We just had to do it. As much as I would have loved to keep those numbers more attainable, the data changes, the world changes, time evolves, and we have a brand new number for the happy retiree. All right, speaking of, if you looked at what if you had $500,000 back in 2013, you used the 4% rule, you had a balanced portfolio. Did we run, was it half stock, half bond, or was it 60% stock.

Connor Miller [00:47:55]:
40% bonds, 60% stocks, 40% bonds taken, 4% out. Adjusted for inflation, you actually end up with more than that.

Wes Moss [00:48:03]:
More than the 700. You ended up around 800 or so.

Connor Miller [00:48:07]:
That’s right.

Wes Moss [00:48:07]:
And we just used the two indices. This was just for educational purposes only. We didn’t put this in an exact fund, but it was essentially the SP 500 and the agri bond index. And you ended up, even after taking money out, using the 4% rule, your 500 would today be around 800. Again, more horsepower to combat more inflation. That’s the whole reason we invest to begin with. Would Nick Saban meet this happy retiree checkpoint connor Miller, just by the tiniest of margin. Of course he would.

Wes Moss [00:48:44]:
Let’s see, what did he. I don’t know. Let’s see, what did he make over the last several years? Well, we know he left 72 million just on the table because he clearly has plenty. So, of course, he is well beyond that financial checkpoint. Yeah.

Connor Miller [00:49:03]:
I want to say his lifetime earnings at Alabama were $120,000,000. So we don’t know exactly how much he has, but that’s fair to say.

Wes Moss [00:49:10]:
Here we go. He made over 120,000,000 at Bama alone. Habit number two, get a mortgage paid off or have the mortgage payoff within sight. We know happy retirees are within five years of the mortgage payoff. If they are, they’re four times more likely to be atrops. Happy retirees. This one. Look, we know that Saban just bought a house for twelve and a half million.

Wes Moss [00:49:36]:
Or was it $17,000,000.17 and a half million dollars? 17 and a half million dollars.

Connor Miller [00:49:44]:
Jupiter island.

Wes Moss [00:49:47]:
Do you think he plunked down that just. Did they wire the money?

Connor Miller [00:49:52]:
Probably.

Wes Moss [00:49:53]:
You think he.

Connor Miller [00:49:54]:
Yeah, he probably didn’t take out an 8% mortgage for that one.

Wes Moss [00:49:58]:
I can see him saying, I don’t stand for debt. That’s not the Saban process way. Now, this one, I would say just for asset protection. Again, I’m not an asset protection attorney, but there are some potential benefits to having a mortgage when it comes to asset protection. And again, we know that there’s some rules, too in Florida that could be friendly around home ownership. So I actually would bet there is some mortgage, little bit of debt there. But again, I don’t think it’s keeping him up at night, so we’re going to not give him that one. So he’s one out of two so far.

Wes Moss [00:50:37]:
All right, next one, does he have multiple streams of income? We know happy retirees have three to four different streams of income relative to two to three streams of income. We have to believe Nick Saban clearly has this one checked off because we know that in addition to what he saved and the investment dividends, interest distributions he will have from his investments, he can have a big pension from state Alabama. He’s a part owner in multiple car dealerships. He’s got endorsement deals, probably get speaking fees. So I would say that multiple, multiple.

Connor Miller [00:51:17]:
Check the box there tomorrow investor.

Wes Moss [00:51:21]:
Do we think coach Saban is a tomorrow investor? And why that’s important is that happy retirees rarely are able to just save their way to these financial checkpoints. It’s so hard just to save your way there. You’ve got to invest your way there. And in order to do that and be successful, we have to be thinking about a year, two years, three, five years down the line in order to not get shaken out of the market. Average inner year decline for stocks 14.2%. Shakes people out all the time. Well, you look at how Sabin is. You can’t win national championships figuring out what I’m doing this year.

Wes Moss [00:51:59]:
You have to pre plan that 3456 years ahead. You’re looking at juniors in high school that could potentially be starters as seniors for you to win an national championship. So he’s thinking in terms of probably half decade periods. I got to think he’s a tomorrow investor.

Connor Miller [00:52:14]:
I would agree with you on that one.

Wes Moss [00:52:16]:
We’ll check that box, then the number five, will he use the spend wisely using the 4% plus rule? We’ve been over this rule many, many times. We’ve updated the William Bangin research in 14, 21, 23 year 2023. So we just did it last year. 4% using the 4% rule with inflation money lasted 40 years, 90% of the time. As long as we have a balanced portfolio, will save him be able to utilize the 4% rule and probably have plenty to live on. Absolutely.

Connor Miller [00:52:53]:
I think with his diversified streams of income, he probably won’t even. Maybe not even have to use all 4% of that.

Wes Moss [00:53:00]:
Now, this is what Jeff Lloyd was thinking, that in the fourth quarter of any given Alabama game, all the players and the coaches raised up the four fingers. Fourth quarter, I think they all raised their four fingers to show their appreciation for Nick Saban utilizing the 4% rule. I don’t know. That’s Jeff Lloyd talking there. He’s an Alabama guy. He’s really an Auburn guy. All right, what about the lifestyle habits? We know that number one on the lifestyle habit list for the happy retiree, they have 3.6 core pursuits. Those are hobbies on steroids.

Wes Moss [00:53:38]:
It’s got a great letter from a money matters listener who he and his group of buddies, 20 years on their boys ski trip out to Colorado. Like, that’s one of their core pursuits. They love doing it. Question is Saban doing that? And this is the hardest person to find a bunch of core pursuits because he’s just, like, an entrepreneur or a CEO that’s built a company for, let’s call it 20 years. They can very often, that’s it. That can be everything. And then they don’t play golf. They don’t have other hobbies.

Wes Moss [00:54:16]:
They don’t have time to volunteer, so they don’t have these other core pursuits. Of course, we all can develop these, but does he have these now? I don’t know. I don’t know if I’m going to check the box on that. I’m thinking certainly he’ll start playing golf and he’ll still watch college football. We know he collects cars. He has car dealerships, and, yes, I think he does a ton of philanthropy and his own foundation. So I bet you he’s already at the four core pursuit level. Connor, Mel.

Wes Moss [00:54:46]:
But we will give him that one.

Connor Miller [00:54:47]:
Okay.

Wes Moss [00:54:49]:
We have four left, and we’ll do these quickly because we don’t have a ton of time. But faith retirees are one and a half more times likely to be in the happy retiree camp if they go to church regularly. I think that we know that Saban is a devout Catholic. He prays before games or when he was coaching. So I think Connor Miller, we give him that one. Of course, he belongs to a church. Roll tide. Right?

Connor Miller [00:55:16]:
Roll tide again.

Wes Moss [00:55:17]:
That’s. I’m saying. That’s what they would say in Alabama. That’s not what I’m saying. Number three on our list, love life, marriage. It’s not a requirement to be a happy retiree. But retirees who are married are four and a half times more likely to end up in the happy retiree camp. Coach Saban has been married to his wife Terry for over 50 years.

Wes Moss [00:55:40]:
They met in preschool. It’s amazing actually. They met in 7th grade, but either way that’s kind of amazing. So we’re going to say yes to that one happy retiree all day long. Family habits. Retirees who live near 50% or more of their adult children are between two and five times more likely to end up being happy retirees. So if you’re not close to them geographically, consider moving closer to the kids. Or maybe the kids move closer to you.

Wes Moss [00:56:10]:
We don’t know much about their. I know he has two children. I know one has lived in Tuscaloosa. So let’s say he gets that. He checks that box, too. That’s one out of two. That’s 50%. Good to go.

Wes Moss [00:56:22]:
Finally, social. We know the happy retirees have at least three really closer to four close connections in the world. These are people that are caring, wonderful friends. And do you think he will have this same practice? Connor Miller.

Connor Miller [00:56:41]:
I think now that he’s retired, there’s a much better chance that some of his former staff will be closer friends with him. So he stops beating them.

Wes Moss [00:56:53]:
Right. The thought around him winning a national championship and scheduling a meeting for 730 in the morning, talk about what they did wrong that season. He must have been pretty tough to work for.

Connor Miller [00:57:03]:
I mean, looking at this list, Kirby Smart, Lane Kiffin, Billy Napier, Mario Cristobal. Their job gets a little easier not having to compete with Saban every year.

Wes Moss [00:57:11]:
And those are all head coach, current head coaches that were all assistants just in that one year. In 2015.

Connor Miller [00:57:20]:
Just in 2015. And if I had to guess, and there’s a longer list, too, that’s just.

Wes Moss [00:57:24]:
Four names I would contend. Did they win in 2015? Do we know?

Connor Miller [00:57:29]:
I believe they did.

Wes Moss [00:57:30]:
Yeah, it’s a pretty good bet that they did. Felt like there were a lot of years in a row, but evidently he has what, 39 people that he’s coached with that eventually became. Were at one point are currently are head coaches, which is. That includes 18 who were head coaches. Yeah, 18 of them start of the last season. That’s incredible. Talk about it’s easy to say, at least from a college perspective. Obviously, he’s only did one year in the NFL.

Wes Moss [00:58:03]:
Greatest of all time goat. Pretty easy. And from what we can tell here, Connor Miller, he’s probably at least a nine out of ten.

Connor Miller [00:58:12]:
I think he’s going to be just fine in retirement when it comes to.

Wes Moss [00:58:16]:
The habits of a happy retiree. All right, that’s fun. That’s fun. And there’s still plenty of NFL football over the next couple of weeks, so we still have the greatest reality show of all time still on television. Of course, that is football. All right, with that, we’re going to run. You can find Connor Miller and me easy to do so and you can reach out to us right through yourwealth.com. That’s Y-O-U ryourwealth.com.

Wes Moss [00:58:52]:
Have a wonderful rest of your day.

Mallory Boggs [00:58:59]:
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Mallory Boggs [00:59:47]:
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