Tom’s Week in Review Oct. 4-8, 2021

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.

Transcript:

Tom Vaughan: I do always like to start off the show with a summary, for what I saw in the market this week, that I think is important. So obviously, the big story this week, really, at the beginning of the week, especially was about the “debt ceiling.” So, you know, the US government is required to basically go and ask Congress to increase the “debt ceiling,” so they can continue to pay the bills. It’s become a little bit of a political football, and it’s a really big deal. For all of the things that might happen in politics that affect the stock market, really the debt ceiling to me is probably the number one piece. So, when they’re starting to get close to the edge of not been able to pay their bills, because they haven’t raised the “debt ceiling”, that’s the time to get pretty cautious. And we did over the last three weeks, we’ve been pulling money out of the stock market and just kind of parking it and waiting to see what would happen. You know, the projections are that the market could drop 30 to 40%, if they didn’t raise the “debt ceiling,” and we did default. And that’s not something we really want to be involved in. But come on Wednesday, finally there was a resolution that started, and eventually was approved on Thursday, to allow for a short term increase in the “debt ceiling” to get us through to the beginning of December.


So again, this is still something we’re going to be dealing with, that’s not that far away. But hopefully there’s enough time in there for things to get organized and some more negotiations to happen, so that they can raise it really probably past the midterms, like December of 2022 would be the ideal situation. So that’s what’s happening right now, in that area. Because they did this resolution, we moved back in to the market on Thursday, with the assets that we pulled out. That worked out great, for the most part. The market was down lower when we got back in then when we got out. So I like that portion. I don’t normally do that, but it is one of these things that is very important to pay attention to and make sure that that works out right.


Today, we had a very interesting report that came out. And it had to do with the number of jobs that were created for last month, for the month of September. So the expectation was that we’d have 500,000 new jobs created. It was only 194,000 new jobs. And so that’s two months in a row that we’ve had low job growth. The month before, that was 235,000 new jobs. And so this is a very fascinating and very, very different scenario. Usually, when we are looking at lower jobs opened than expected, it’s because the economy is starting to erode and fall apart. And so that’s what we’re looking at. This is not what’s happening here. The economy actually, on a demand side in terms of sales and revenue, is growing quite rapidly.


But people aren’t taking the jobs. There’s 11 million roughly open jobs, which is the most in history, and roughly 8 million people are unemployed. And so that theoretically, that should match up, and we should have probably a million jobs created every month. But they’re not taking the jobs. And so at one point, the thought was, well, they’re not taking the jobs because of the extra unemployment insurance. Well, that ended. They’re still not taking the jobs. And then there was another thought that maybe they’re not taking the jobs because of school. Somebody has to stay home until school starts well, school started still not taking the jobs. And so at least a couple of different areas, which are very fascinating. Number one, is Via surveyed, the number one reason that people aren’t taking jobs is because their fear of catching the virus, which is somewhat legitimate, obviously. We had a spike coming up with the Delta Variant. And a lot of the jobs that are open are jobs that were closed because of the exposure to the virus. So, that’s something. We’ll have to see how that plays out. The Delta Variant is trending downward now. So maybe that improves as that gets better, and people get more confident and start taking those jobs. But the other area is that really interesting, I’m reading more and more articles about how there are some potential systemic changes that are happening in the labor market. So essentially, what happens when schools closed, all of a sudden one parent started staying home. And the households have restructured around that. Some of them even moved to cheaper places. And there’s a thought process there that that might continue. Maybe there will just be one wage earner in a lot of these homes going forward. And one will stay home and take care of the kids after school and what have you too. That’s kind of fascinating to see what happens there.


Then you’ve seen a whole lot of early retirement. So somebody who’s going to retire in a year or two years or three years, they’re retiring now. And so that’s kind of pulling back in terms of the jobs. And then the other thing is just kind of people going after alternative types of employment. So instead of working at Starbucks, they’re getting on YouTube and opening up YouTube channels or doing things on Fiverr or all thesedifferent, what we call kind of a “gig economy jobs” and really starting their own businesses instead of trying to rely upon these other businesses. So very, very fascinating.


But here’s what that means to companies and ultimately to the stock market. If you have a company that relies upon people to generate your revenue, which most do, and your revenues are going up, so people are coming in more and more, but you can’t hire new people, you can’t sell those revenues. So in other words, if you had an order for 1000 widgets, and you can’t hire enough people, and you can only sell 100, that’s going to reduce your revenues, especially what you could have made. So for example, if I have a restaurant, fast food restaurant, and I can’t get new employees, I might only be able to open up my drive thru window, and not obviously the people that are inside.


The other portion that’s kind of slowing things down has to do with the supply chain. So we’ve talked about this. I have a friend in Southern California, you know, sells trucks and cars, at a dealership. Very successful dealership. Usually has 600 to 700 cars. Right now, they only have five cars on the lot, because they can’t get semiconductors to build these cars. So this is a very fascinating thing. This is not a normal scenario. Usually when we see reducing revenues, or revenues coming in under expectation, is because there is a demand that’s dropping off. While the demand is still there, it’s still coming in. But we can’t get the supply. We can’t get the people into the restaurants, for example, we can’t get the cars into the lot to sell them. And so that’s one of the very fascinating things to watch and see how that plays out as far as that goes.


Now, those are the things that are going to be kind of weighing on the market here, because what we’ve got is a scenario where the expectations for growth in the third and fourth quarter were really high. And rightfully so, things are reopening going really well. But if we can’t deliver the products to sell, we’re going to have some adjustments. And so a lot of these earnings calls that are coming out. Now, they’re talking about not being able to get enough supply to do this or that. And they’re going to come in with some smaller numbers than were expected. And so the market is going to adjust for that. And that’s what we’ve been seeing all together, the market looks forward, and it says okay, “they’re not going to be making as much as we thought.” Now, they’re still phenomenal earnings; they’re just not going to be as great as expected. And so that has to be an adjustment in the market.


But here’s my key takeaway, and the thing that I find very fascinating. In the light of all of these things: the “debt ceiling,” the supply chain issue, the shortage of labor, the Federal Reserve moves that they’re doing to kind of tighten things up. China’s situation with the big property companies having trouble et cetera, etc, etc. The market from a high at the beginning of September to a low as of Wednesday, this week, it dropped a total intraday total of by my calculation: about 5.9%, on the S&P 500. That’s nothing, honestly.


That type of action happens all the time. In the past, in my experience, when you have that kind of news coming out, and especially a “debt ceiling,” that’s getting closer and closer to the edge, you’d be looking at 10%, 15%, maybe even 20% downturn. So this is one of my points this year that I think it’s very important. If you watch the price of the market, you get a lot of information about what’s happening. And the market is really, really strong. And that overcomes a lot of these other negative pieces.


So if you look, certainly the market is up tremendously, so far this year. The positives overcome the negative, yet the negative is what’s out there the most is what everybody’s talking about: the market’s still up. And so even though the market came down here in September, and a little bit in October, we’re still up over June and what have you, I mean, the market is up. And the power of the market is one of the things to focus on. And that could change, right? Things can change. The market could erode and what have you. But again, it didn’t fall that much in the face of all of this bad news. That’s something to think about, because I think that shows very heavy strength, and possibly some more emotion to the upside before everything’s over here. So I still think that zero interest rates, are driving money into the market because again, where else are you going to put the market? We’re starting to see that really become one of the places where money is going. And that’s that’s what we really want.


So anyway, that’s the summary for the week. I actually think this week was very positive in the end, especially with this debt ceiling, you know, behind us, at least temporarily, and I really look forward to see what might happen next week.

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.