#35 – Labor Pride, Nvidia Buyback Parties, Sausage Demand, And Time-Honored Investment Strategies

Jeff Lloyd [00:01:03]:
Labor Day? Well, first off, thanks for having me back. Good to be back in the studio. It’s September 1, day of September. The Labor Day holiday goes back to 1894, when President Grover Cleveland declared it a national holiday.

Wes Moss [00:01:18]:
Just for what?

Jeff Lloyd [00:01:20]:
Just to celebrate the american worker.

Wes Moss [00:01:22]:
I love that.

Jeff Lloyd [00:01:23]:
To give them the first Monday in September, the day off.

Wes Moss [00:01:26]:
Sounds like the first time the army of american productivity was recognized and given their own holiday. And that’s what we all have, most of us have to look forward to. Of course, stock market is closed tomorrow here on this Sunday. We all have a break for tomorrow. So that means, I don’t know, as if there hasn’t been enough football this weekend that I’m sure there’s going to. Look, we’ve got NFL. No, we’ve got NFL.

Jeff Lloyd [00:01:50]:
We have NFL today starting this week. It starts Thursday. On Thursday, September 5. That’s right.

Wes Moss [00:01:57]:
Well, with that, it’s good to be into the fall. There are some hints of some cooler weather. If you look at the 100 day forecast, at least at night, maybe it’ll drop below 90 at some point. That would be nice. But here we are. We’re decidedly getting close to the fourth quarter. Not there just yet. Football is back.

Wes Moss [00:02:19]:
Bulldog brunch is back. That’s why we’re here for an hour. What we wanted to talk about today is we want to get right to it. There’s several different economic updates. We’ll share those quickly. Maybe a 1 minute overview of the Jerome Powell speech from last year. I don’t think there’s anything all that new here. We’ve been talking about rates coming down and signaled emphatically.

Wes Moss [00:02:41]:
As emphatic as the Fed gets record air travel. I wanted to talk about that for a second. And then really every so often I’m delivered an envelope of gold. And when I say gold, I don’t mean the shiny metal, I mean golden content, important content that’s both interesting and infuriating and wonderful all at the same time. And once in a while, the Wall street journal does that. I love them. I think they’re still probably one of the very best mediums, trustworthy, balanced, relatively neutral, informative. But once in a while, they throw up just the biggest, most ridiculous slap in the face to some of the most important things that we talk about here on money matters and trying to get folks to a point where they have financial freedom, retire early as possible.

Wes Moss [00:03:34]:
That’s what we’re trying to do here, and educate along the way. And the article titled a time honored strategy. This Wall Street Journal, a time honored strategy. So first of all, it takes a while to get to be a time honored strategy. Puts your retirement at risk, okay? Everything’s always at risk of financial ruin, the risk of financial ruin, the time honored strategies. If a time honored strategy puts you at ruin, imagine what some new unproven gimmick would do. We take big issue with a couple of these. I love that they question it.

Wes Moss [00:04:13]:
First of all, I’m not mad that Wall street journalizes. I think it’s good to always question, hey, rule of thumb, is that really going to be the same rule of thumb? Are you going to rely on that? Okay, great to question it. But they’re questioning on the financial planning Mount Rushmore, where you’ve got maybe five really important financial planning principles that really can work for a lot of Americans. Two of these are just blown off the face of Mount Rush. Four, when it comes to this article, and I take some issue with that, because when you start questioning some of these fundamentals that in themselves are hard enough to do that, I think it’s so discouraging that folks just throw their hands up in the air and just say, what’s the point? Because they’re taking issue with, one, the balanced portfolio, the balanced portfolio, the 60.

Jeff Lloyd [00:05:03]:
40 portfolio, taking issue with that percent equities, 40% in income bonds.

Wes Moss [00:05:11]:
It’s worked for 50 to 100 years. Why would it work again? And the 4% rule, of course, yet there’s always 4% rule bashing. But they bash that rule, which is a rule that is, again, looked at, or we’ve looked at this over 100 years, every single month, from this month to the next month, throughout retirement, over the course of 100 different years, with twelve different starting points at every single. And to throw cold water on that it’s almost too contrived. We see it year after year after year. So we’re going to get into that first. Jeff FLOYd and why we think that’s ridiculous, that they’re bashing these fundamentals of retirement planning. But what happened this week, so one US GDP, remember, we’ve got this worry that we are in a hard landing, soft landing, quicksand landing or even not worried, but I think we’ve been more like a Goldilocks landing.

Wes Moss [00:06:07]:
And some of these numbers confirm that US GDP for last quarter just got revised up to 3%. That’s pretty darn healthy, growing at 3% in the United States, giant economy that we are. But that was revised up. It was 2.8. Now it’s a 3%. We saw the Super bowl of earnings. I had not ever seen this before. There were parties, there were happy hours in Manhattan all around Nvidia earnings.

Jeff Lloyd [00:06:33]:
They were watching the earnings announcement that came after the market closed on Wednesday. I saw some pictures on, on Twitter or x, I guess it’s x now circulating. And it was watch parties at pubs and bars up in, yeah. New York for the earnings call. So we’re not waiting for that earnings announcement.

Wes Moss [00:06:50]:
We’re not recommending buy or sell here with, of course, with Nvidia. But the numbers are just interesting. Quarterly revenue recorderly revenue of $30 billion, net income of 16.6 and they announced a $50 billion buyback. Jeff Lloyd, that’s bigger than a fair amount of companies in the S and P, right? Just that 50 billion.

Jeff Lloyd [00:07:12]:
It’s bigger, yeah. That $50 billion alone, that share buyback. That 50 billion is bigger than the market cap of over three hundred fifteen s and P. Five hundred companies. And it’s companies that you’ve probably heard of Kroger, bigger.

Wes Moss [00:07:28]:
The $50 billion, bigger than Kroger, bigger than the, just their buyback is bigger than the entire market cap of Kroger.

Jeff Lloyd [00:07:33]:
Kroger, Hershey, Kraft, Heinz, Ford, Ford Motors. That buy back, bigger than the market cap of Ford.

Wes Moss [00:07:40]:
How about Warren Buffett? Now a trillion dollar company. Berkshire Hathaway trillion dollar market cap and the first company to hit the trillion dollar club. That’s not one of the mega cap techs. I think that’s fascinating. So an old world economy conglomerate, again, a big portion of Berkshire Hathaway is investments in publicly traded companies. We know what they own. But there’s also a lot of private companies as well. Put it all together now.

Wes Moss [00:08:08]:
It’s combined market value now hit the trillion dollar mark this past week. Yeah.

Jeff Lloyd [00:08:12]:
So other members of that trillionaire club, you got Apple, you got Nvidia, Microsoft, Alphabet, Slash, Google, Amazon and Meta. So seven in total. And if you combine the market cap of those seven companies, including Berkshire, including Berkshire, so those 7 trillion plus market cap companies, that represents over 30% of the entire market cap of the s and P 500. That’s how big those companies are.

Wes Moss [00:08:42]:
Home prices. This is kind of interesting, and we’ve seen almost a tale of two housing markets where we have existing home sales are in really about as weak as we’ve seen them ever, or going back 25, 30 years. Existing home sales, we have seen a spike in new home sales. So we have seen that tick higher because again, we have a housing shortage. Our thesis here we’ve talked about for a couple of weeks is that, look, if rates start to go down, we’re going to get more activity. It shouldn’t hamper new home sales, but I think it would lift existing because now you unlock the folks that have low mortgages, they feel like maybe we can move because now rates are back lower. But we don’t know if that’s going to happen or not. So far it has been happening, though, even though.

Wes Moss [00:09:28]:
Not even though. But we’ve heard the Fed say we’re not focusing just on inflation anymore. We need to focus on the unemployment rate or the labor market. And that’s why the market is for signaling the Fed funds futures of the CME Futures watch tool, which looks at what the Fed fund rate could be, go out to January. It’s essentially saying there’s a three quarter percent chance, or 75% chance that we’ll see rates about a full percent lower than where we are today. I think the mortgage market is clearly taking that in. And mortgage rates this past week just fell to a fresh 15 month low. That’s a big deal.

Wes Moss [00:10:08]:
Remember the seven point, almost 8% average 30 year fix? Where were we today now to down.

Jeff Lloyd [00:10:13]:
To 6.356.35 sounds a lot better than close to 8%. And we’ve talked about it the last couple of weeks. With that 30 year mortgage rate ticking and trending lower, I think once we get into the 5% level, I think you’re going to see some movement in the housing market.

Wes Moss [00:10:34]:
And this is happening even a little quicker than I might have thought. I know we’ve been talking about this for about a month, but I. The low sixes today, not that far from a five handle. I would love to see that. And I think it would really spur some housing activity, particularly in the existing home market, which I think brings people in on both sides. More supply and then more buyers have been on the sideline. Jeff Lloyd, what’s just one thing we love to talk about here on money matters? Just one thing we’d like to talk about dividends. Dividends.

Jeff Lloyd [00:11:08]:
We like to talk about income investing.

Wes Moss [00:11:10]:
Income investing.

Jeff Lloyd [00:11:11]:
We like core pursuits.

Wes Moss [00:11:13]:
We do.

Jeff Lloyd [00:11:13]:
We love talking about corporate suits and.

Wes Moss [00:11:15]:
Pickleball tennis because that means we like to talk about the happy retiree.

Jeff Lloyd [00:11:21]:
We like happy retirement. Sometimes we talk about how to retire sooner or if you can retire sooner. We like to talk about participation versus perfection. And in general, time in the market is more important than timing the market. Those are some common topics that we discuss.

Wes Moss [00:11:38]:
But here on a Labor Day weekend, Sunday, wouldn’t it be good if we at least touched briefly on the very thing that the world is celebrating, or at least America is celebrating this weekend and tomorrow? Labor. The army of us. American productivity. The army of american productivity. There’s a couple things here is that, and this is a concept we came up with several years ago. I think it’s tangential to Warren Buffet says, never bet against America.

Jeff Lloyd [00:12:08]:
Never bet against America.

Wes Moss [00:12:09]:
I look at it as we’ve got this just collective workforce of 160 million plus people that get up and go to work and push the envelope, push the ball down the field little by little by little, every single day, because they sit for only three reasons. One, they have no choice. Fear, I got to pay the mortgage. Got to go to work. Fear of running out of money. Got to go to work. Okay. So that motivates and makes this an enormous swath of the labor force.

Wes Moss [00:12:41]:
Get up and try to do the best job they can because they have to, too. Optimism. There’s another group that says, wait a minute, I think that we can do better here at this company. We can do more at this company, and then that’s good for my career. And that puts food on the table. So we’re going to innovate and we’re going to work hard in order to do that. And then there’s the third camp. Jeff Lloyd, I’d put you in this third camp is there’s a big group of Americans, and I wish it was more, but it’s not.

Wes Moss [00:13:08]:
Everybody has this luxury, just the way that all the chips align and you figured out what you wanted to do when you were a kid, and you got to do what you wanted to do when you’re a kid and it provided you an income. And that’s purpose. That is purpose at work. That’s the noblest of this trio, being able to get up and go to work and do better incrementally, little by little, every day, that gives us meaning. And it calls people not to just enhance their own life, but it enhance the lives of all of those around us and all the other members of the army of american productivity. And when you’re in that camp, you’re doing an awful lot, not just for you and your family, but you’re providing innovation and progress and prosperity for the entire nation. So I celebrate all of those. I celebrate every single reason why we get up and try to do a little bit better at our jobs every day.

Wes Moss [00:14:02]:
I hope more of us can get into the purpose camp because it makes work a whole lot more fun. Kind of like when Jeff, Lloyd and I are here on a Sunday morning, doesn’t feel like work. It feels like we’ve got a purpose. You know what? In the end, it’s pretty fun.

Jeff Lloyd [00:14:14]:
Wes, I love it. And I’m not just saying this, but this past week, I had to travel for work, and I had to hit the road pretty early.

Wes Moss [00:14:22]:
You’re always traveling.

Jeff Lloyd [00:14:23]:
I was driving at 515 in the morning, and both sides of the interstate were packed. And I was thinking in my mind, those are the everyday Americans getting up, going to work, trying to make their lives better, trying to make their families better, and just kind of had a sense of pride of coming into work that day.

Wes Moss [00:14:43]:
You know, I know you’re not at the age just yet, but, you know, when you hit 50, you get the AARP card. I’d love to give you the AAP card, the army of american productivity card. Cause you’re one of the 160 million plus strong. More money matters straight ahead. If you’ve ever done a Jane Fonda workout or if you remember as a kid, Rocky running the steps. And if Michael Keaton is still mister mom to you, and guess what? It’s officially time to do some retirement planning. It’s Wes Moss from money matters. Weren’t those the good old days? Well, with a little bit of retirement planning, there are plenty of good days ahead.

Wes Moss [00:15:23]:
Schedule an appointment with our team today@yourwealth.com. dot. That’s your, yourwealth.com dot. By the way, in this segment, I want to address this Wall Street Journal article that’s, here’s the title. The headline was, a time honored strategy puts your retirement at risk of financial ruin.

Jeff Lloyd [00:15:43]:
Ruin. That’s a strong word right there.

Wes Moss [00:15:46]:
And they’re taking direct aim at the balanced portfolio and the 4% rule. And I’m not going to sit here and not talk about it, because I think there’s some, I think there’s some love that we can question all of these rules of thumb, and I think it’s good to do that. But for questioning some of the fundamentals of just that have been beneficial for decades, and I’ll call it almost a century for investors, I think can work the other direction and have people just quit before they even get started because it’s so out of reach. And that’s why I want to address that. So we’ll get there. But, Jeff, you pulled some of these TSA numbers. Really, the numbers are just staggering. I’ve done some travel lately, and, yeah, it feels about as crowded as it’s ever been.

Wes Moss [00:16:35]:
If you look back since May of this year, we have had ten days since May so far, just since May, that are absolute world records for travel in the history of planet Earth.

Jeff Lloyd [00:16:48]:
We’re talking world records here, not just USA travel.

Wes Moss [00:16:52]:
In July. So July 7, over 3 million people passed through TSA in a single day. 3 million people. Last year, it looked like, let’s say TSA screened 247 million people since Memorial Day, averaging about 2.7 million passengers a day. That’s about an eight and a half percent increase in air travel compared to last year. So travel, really, the amount of people traveling, I’d say that’s dramatically higher. But just to put this into some context, though, and just think about how dramatically different the world was only about a little over four years ago. In April of 2020, right after we had gotten the economic shutdowns, it was, it was actually April 14 of 2020, we’re seeing almost 3 million people a day go through TSA screening at the airports around the world.

Wes Moss [00:17:44]:
Feels like about half of them are right here in Archfield Jackson. But that’s, that’s, that’s in the United States in 20, April 14 of 2020, there were, there were only 87,000 people that traveled that day. Today we’re looking at close to 3 million a day. And that’s since they’ve been keeping track since I think back in 2001. Post 911, they started tracking TSA. So today that’s 34 x. So the airports feel a little more crowded. It’s because there’s 34 times the amount of people traveling on any given day today.

Wes Moss [00:18:20]:
Then back at that very quiet period and scary period back in April of 2024 of 2020, I had a family.

Jeff Lloyd [00:18:27]:
Friend that just left for a european cruise that had been delayed since COVID Oh, wow.

Wes Moss [00:18:34]:
So you think some of this is still Covid makeup travel.

Jeff Lloyd [00:18:38]:
I still think it is because I think the deadline was about to run out and they’re like, if they don’t go in the next couple months, they’re going to lose that. But yes, there is still some pent up travel demand from four years ago.

Wes Moss [00:18:50]:
You know, where there’s also some pent up demand in sausage. We were seeing a sausage sales spike and this came, this was an article from CNBC this past week. Increased sausage demand could be a worrying signal for the US economy.

Jeff Lloyd [00:19:08]:
Now if I see that headline.

Wes Moss [00:19:10]:
Wait a minute.

Jeff Lloyd [00:19:10]:
If I see that headline, I’m clicking and I’m reading to get a little more meat out of that.

Wes Moss [00:19:15]:
And there’s, there is, there is meat in this one and there’s a producer. There was, and I don’t know, they’re cherry picking here, but supposedly there was a, quote, modest, there was modest growth in the dinner sausage category, as noted by a producer in the Dallas Federal Reserve Texas Manufacturing outlook survey. But it made a headline, and really obviously here, the thesis on why this could spell economic doom is that people are trading down sausage is a cheaper meat. It maybe goes a little further. You’re not buying, they’re not buying filet.

Jeff Lloyd [00:19:55]:
Or leather or steaks. They’re going with sausage.

Wes Moss [00:19:58]:
So you could say, we’ve also said there are other economic indicators that when you see a spike in laundry detergent is an example. A well known economist has told me that’s one of his most interesting indicators. Wherever people will start buying more laundry detergent because it’s a cheaper way to then just use that for everything so that you can use it for washing your hands, shampoo. It goes a very long way. But it’s also a sign that people are having to stretch a dollar in an extreme way. But if you look at inflation, if I go look at food inflation, it’s been actually very steady over the past couple call of economic history going back to the 1950s. But then of course there’s a big spike almost like everything else. So food inflation has been about 25% since COVID It’s about 27% if you’re looking at just the meat category.

Wes Moss [00:20:49]:
Of course I bring this up because I don’t think it spells economic doom and gloom. It’s food inflation that we’ve seen kind of across the board. And I think sausage sales and the increase, it’s less about being scared and more just a conscious consumer that’s had to deal with its food inflation for so long. So I just. Jeff Lloyd, I just don’t see the linkage to recession.

Jeff Lloyd [00:21:13]:
I see what you did there. I see what you did there, Wes. I love it.

Wes Moss [00:21:17]:
I don’t see the linkage. And who doesn’t like Johnsonville sausage? If I’m at one of these high priced grocery stores, like fresh Market, the sausage is just as good as anything else. Anyway, let’s get to this Wall Street Journal article that just blasts the side of the financial route, Mount Rushmore, and just blows two of the most giant important categories right off the face of the mountain. And imagine this. You’ve been planning for retirement for 20 years and 30 years and 40 years, and you’re looking at balanced portfolio’s been working for you. And all of a sudden you read this Wall Street Journal article, and the author just says that the death of the balance portfolio and death of the 4% rule and accompanied by a graveyard scene. When you open up this article, there’s a picture of. This is one of the Wall Street Journal cartoons.

Wes Moss [00:22:14]:
There’s a tombstone, and it’s got the 60 40 balance portfolios on the tombstone, reaching out of the ground with his skeleton hand, holding an envelope that says, your retirement. All right. It’s pretty scary.

Jeff Lloyd [00:22:28]:
It’s a scary image.

Wes Moss [00:22:29]:
It’s a scary image.

Jeff Lloyd [00:22:30]:
It’s got the 60 40 on the tombstone and, yeah, it’s like the. I don’t even know what you would call that hand coming out of the ground. It’s like a zombie hand.

Wes Moss [00:22:39]:
Yeah, it’s like Michael Jackson thriller video. But it’s in your retirement, it’s all going. It’s gonna be attacked by zombies. But the problem. So it’s a pessimistic outlook. It’s saying, this has worked. Balanced investing has worked, and the 4% rule has worked. But you know what? Maybe it just won’t work moving forward.

Wes Moss [00:22:57]:
So it’s time honored. Time tested, and it’s time honored. It’s worked. But what if it just doesn’t work anymore? And I’m fine with questioning this because we should always check up on these fundamental rules of thumb and relying on these for our retirement. So they’re important. So I like that they question it. The only worry I have is that, first of all, there’s not a whole lot of evidence of why these things might not work in the future, except for, hey, you know what? They just might not work. And that’s possible.

Wes Moss [00:23:28]:
It’s possible that 50 years and 100 years of economic history just stops working and the army of american productivity just goes on strike, stops working. That’s possible. It’s just not probable. It’s not probable. And the worry I have about injecting fear into these fundamentally important things that we need to do habitually, over and over and over again to make a retirement plan work, say balance doesn’t work anymore and 4% rule doesn’t work anymore, then what message does that send to people that are already embarking and enduring a really long journey? That’s already tough? So now it doesn’t work. Well, so what are we supposed to do? Some new gimmick? Is there some new savior out there? That, to me, is why I think that these articles can, they can do a little more damage than we might think. I take it very seriously.

Jeff Lloyd [00:24:24]:
Well, you read through this article and they’ll say, you know, we don’t think the 4% rule is gonna work all the time. And what they’re basically relaying is all that hard work that you’ve put in over decades of time, all that money that you’ve saved for retirement, once you get in retirement, well, hey, you can’t pull any of it out. You can’t pull, you can only pull out.

Wes Moss [00:24:45]:
You can only pull 2.25%.

Jeff Lloyd [00:24:47]:
You can pull 2.2 out.

Wes Moss [00:24:49]:
So there’s a couple thoughts here, is that, and you made the point of that they don’t work all the time perfectly. So these are rules of thumb that work over time or have worked over time, but they don’t work perfectly in any given year. The 60 40 balance portfolio didn’t have a great year in 2022. In fact, Vanguard wrote about this. Here’s a quote from their chief economist and head of portfolio construction. He’s Roger Ali, Agu Diaz. Periodically, this is, quote, pundits declare the death, and this is a couple of years ago, and he’s right. Periodically, we just saw another one.

Wes Moss [00:25:25]:
There’s literally the gravestone scene of the 640. Periodically, pundits declare the death of the 60 40 stock bond portfolio. Their voices have grown louder lately amid declines in stock and bond prices. But we’ve been here before. Based on history, balanced portfolios are apt to prove the naysayers wrong again and again. And guess what? He was right. He was very much correct. February of this year, that traditional balance portfolio had largely recovered the losses it had in 2022.

Wes Moss [00:25:59]:
If you look over economic history and you go back to 1926, that balance of 60% stock, 40% bond is averaged about 8.8%. That’s very constructive for retirement, even with lower bond rates today, and they’re a lot higher than they were a couple of years ago. The way that vanguard at least puts that is, they’re looking for a long term average of a 7% return. Again. All of this can change. All of it can change. And it could be not work again moving forward. It’s possible.

Wes Moss [00:26:33]:
I just don’t think it’s all that probable. They also say this is my favorite. A recent academic paper says that if you want a 95% chance of avoiding financial ruin, okay, you can withdraw just 2.26% per year from your portfolio. That means 22k for every million dollars you have saved. That means 44k for every $2 million. Imagine, essentially, it chops the 4% rule in half. We’ve gone back and tested the 4% rule over and over and over again. We looked at it every which way you can possibly look at it.

Wes Moss [00:27:13]:
And from what we’ve looked at, this goes back to the 1920s through this past year, using a balanced portfolio, 60% stock and 40% bond points, to a 99% level of success, of not running out of money for at least 30 years. And the five worst outcomes. And the by the way, the worst outcome was money still lasted 30 years, and we still were able to adjust for inflation. The next worst outcomes were 31 years, 37, 38, and 30. Almost four years as a top five worst outcome. So to say that, that economic history just gets flushed down the drain because we have high national debt and Social Security might not last, and the case Shiller Pe multiple is a little bit high. It just, they’re looking at today, as opposed to looking out over the next 10, 20, 30 years. What I don’t love about this is if you take a rule that’s this important and fundamental to people’s retirement, and you say you can only use 2% of your money, I think a lot of people just say, what’s the point of saving to begin with? And that, to me, is counterproductive in a country where we need all the help we can get for people to get to a place where retirement is fulfilling and it’s fully paid for, and there’s peace of mind, it gets to the point where it’s enough to continue your lifestyle and outpace inflation.

Wes Moss [00:28:45]:
And if you say you can only use 2% of your money, I say, I don’t know, what’s the point?

Jeff Lloyd [00:28:50]:
Yeah, and some people are going to say, what’s the point? You’ve done all that work, you’ve saved all that money, you’ve made all that sacrifice for what, 2.2%? I’m not buying that.

Wes Moss [00:29:00]:
I think the balance portfolio still can work for a lot of people. I think it has a lot of merits. I think the 4% rule can still work as a guidepost. Remember, it’s a financial rule of thumb. It’s not an absolute. So financial rule of thumb. You know what also really helps? A little bit of planning goes a very long way. We’ve had a lot of people use our brand new happy retirement planner.

Wes Moss [00:29:24]:
It’s a calculator. You can go find it@yourwealth.com. dot go to the resources tab or just the bottom of the homepage. Click on the happy retirement planner. It’ll take you through some of the core lifestyle principles of happy retirees and then show you the calculations and a roadmap on how to pay for it. Jeff Lloyd thank you for being in studio, my friend. You have a wonderful rest of your labor day weekend and for those of you tuning in listening, thank you so much for tuning in and have a wonderful rest of your day.