Planning Ahead for 2023

Planning Ahead for 2023

The following is a transcript of Episode #58 of the Retire Happy podcast with Roger Gainer.

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Roger: I wanna get through to our listeners how urgent it is for them to sit down with their advisors and really take stock of what they own, what they’re invested in. Stuff that was great, you might have made a ton of money on over the last 2, 3, 5, even 10 years is not gonna be the leadership going forward. And you have a window to reposition yourself into a much more defensive posture.

Clark: You’re listening to “Retire Happy,” with Roger Gainer, president of Gainer Financial and Insurance Services, Inc. Thanks for joining us. I’m your host, Clark Buckner. With so much uncertainty in the world today, it’s more difficult than ever to make decisions that can help you progress toward your financial goals. In this episode, Roger talks about what may be ahead of us in 2023. Everywhere you look, there are changes unfolding, and language, like “overvalued stocks,” and “an impending pop of a bubble.” What do you do? And most importantly, how should your attention stay focused on securing a smart and safe retirement? There’s a lot to cover, so let’s dive in. And don’t forget to head on over to for more content like this. Enjoy the show.

Roger, it’s great to be back. How are you doing today?

Roger: I am doing well.

Clark: I love it.

Roger: I’m doing well. We had quite a bit of rain here, and we set all kinds of records, but the sun is shining, and we’ve had a little, a week’s break in the weather, letting things drain out, and soil drying out and all that stuff before the next Pineapple Express shows up.

Clark: Yeah. Well, there you go. Well, I’m glad you’re doing well. We have a good conversation planned out. Now, previously, we had a conversation about looking back, of the year we came from. And now I was hoping we could spend a few minutes thinking about the year ahead. And, you know, we’re always anticipating the possibilities. What I like hearing from you are the patterns that you’ve seen in the past, and trying to draw from that, to think about, okay, what does this mean for now? What does this mean for the future? So, as it relates, I wanna start by really identifying who you’re talking to here, and then let’s think about what are the things I need to be thinking around?

Roger: Well, I’m speaking to our listeners, but particularly those listeners who can see retirement in their future. So, this would be somebody, you know, over the age of 50, who is in or entering their peak earning years, is saving like crazy for retirement, building a nice nest egg, and they’re, you know, mostly invested in things like stocks and real estate and REITs and that sort of thing. And bonds, but not as much bonds as when, and we were concerned last year with bonds. These people are at risk, okay? As we spoke in our last episode about how I believe we’re gonna be looking backwards in the future and looking at 2022 as a watershed year, because that was the year that interest rates went back to more normal levels. Now, people don’t remember it as being normal, because we have something that is referred to by economists as immediacy bias. We think whatever’s going on right now is what’s always going on, and what will continue to go on.

And that’s why we always say a couple of things. Past performance is no guarantee of future results, and those that ignore history are doomed to repeat it. So, if you ignore the history of things being overvalued, you know, and how bubbles are created and how bubbles are popped, and the resulting damage from a bubble being popped, and you don’t learn from that lesson, learn from what happened in 2000, learn from what happened in 2008, learn from what happened in the 1930s, you know, starting in the crash of ’29, learn from what happened in the early ’70s, stuff that we’ve talked about over the years, Clark, then you may be doomed to repeat those types of results. And those results could be very ugly. You know, I was reading an article by Jerry Grantham. And Jeremy Grantham, for those, a lot of people will know who the heck that is, but Jeremy Grantham’s one of the most respected long-term investors that we’ve had. He’s still active today. He still is the investment advisor and strategist for a very, very large private equity fund. He’s 84 years old. He’s been there, done it, for 60 years of investment.

Clark: I’m looking at him now online. Looks like managed, under assets, $118 billion, with a B. Wow. Okay.

Roger: Yeah. He’s no tiny little thing.

Clark: Not a tiny thing, no.

Roger: I know. And he’s written some of the best books on investing anywhere. And he recently came out and he said that he believes that, you know, even though we lost quite a bit last year, and we’ve had this little bounce from December to now, and a decent start to this year, he believes that we will see, you know, the S&P 500 down in the 3000 range at some point this year, later on. Now, as we’re recording this, the S&P 500 is right around 4,000. It’s actually 4,000 and change with today’s little rally.

And I will quote Jeremy. He says, “The range of problems is greater than it usually is, maybe as great as I’ve ever seen,” he said, an interview from Boston. “There are more things that can go wrong than there are things that can go right.” And that’s what I want to get across to people. You know, do I know that the market is gonna go down, and possibly substantially? No. But if there was that possibility, and it was stronger than normal, wouldn’t you wanna know about it? And wouldn’t you wanna take action to protect yourself, right?

Clark: Wow.

Roger: That’s what we do.

Clark: I mean, that makes senses. Yeah. If you know what’s coming up, you know to prepare.

Roger: You know, in Florida, when they know a big storm is coming, they board up the windows, right? They don’t just say, “Oh, well, okay.” You know, here in California, people put out sandbags. You know, you prepare. The storm is coming. Now, if you prepare, and you don’t get hit by that hurricane or those tornadoes or those floods, are you upset? Well, you wasted a little time and maybe a little money preparing, but you didn’t get hurt. It’s not horrible. But what if you didn’t prepare, and all those warnings came true? You’re wiped out. That’s how I want people to look at this. Don’t get wiped out, especially if you don’t have time to recover. I can’t emphasize this enough. This is a time for caution looking forward. I can give you many more highly-respected people who’ve been doing this for decades. They’re not Johnny-come-latelies that only started in the investment business since the dotcom boom, or in the aftermath of the recession of 2008, and they say, “Oh, look how much money we’ve made.”

Well, of course. You know, it’s the longest peacetime expansion in markets in our history, since 2008, the longest period of time of up markets without a significant sell-off, you know. And so, as we talked several years ago, the longer you wind that spring, the harder it’s gonna break when it breaks. Do I know when it’s gonna break? No. But I know the odds are higher right now today than they’ve been in a very, very long time of a significant break. So please, call your advisors. If you’re a do-it-yourselfer, dig back in. Ask yourself, would I buy this today? Is it still as good a buy as it was when I bought it 5 years ago, 10 years ago? And make that without worrying about the taxes. Okay?

Clark: Yeah. Tell me more about the taxes. Yeah, [crosstalk 00:09:21]

Roger: Well, I have clients that have bought Apple stock for five bucks, before it split two times since then. And they’re like, “Well, if I sell this, I’m gonna pay a ton of taxes.”

Clark: And what do you tell ’em?

Roger: I tell ’em, would you buy it today at this price? And why?

Clark: Wow.

Roger: Right? We’ve talked about how, you know, 400-plus of the companies that were in the original S&P 500 aren’t there anymore. And 350-plus of the companies that were listed in the original S&P 500, in 1957, they don’t exist anymore. So if you’re owning these individual stocks, or individual pieces of property, you have to ask yourself, “Is it still the great buy it was?” You might have owned something for 20, 30, 40 years. I have clients here, you know, that have bought investment real estate and watch it do nothing but appreciate. But what goes up tends to come down eventually. Okay? Nothing goes up forever, you know. Isaac Newton noticed that quite a while ago. There’s gravity in everything.

Clark: So, someone’s at the point where, but you can work with someone, at any point in their life and in their journey. But if someone’s at that point, maybe really trying to be smart about getting close to, you know, retiring happy, as we say, do you have one or two suggestions of just the kinds of things you would start asking them?

Roger: Well, you know, I probably sound like a broken records, but I’d ask them what the money’s for, how long till you’re gonna use it?

Clark: I don’t think that’s a broken record. I think that makes a lot of sense.

Roger: How do you feel about losses? You know, some people get very, very emotional about losing money. You know, I mean, they lose sleep. They watch the news and it just gets more and more upsetting. You know, health is way more important, as far as I’m concerned, than wealth. And we have an old saying that people spend their health to gain wealth, and then they wanna spend that wealth to get their health back, and it almost never works out as an even trade.

So, it’s the same sort of thing. You have to sit down. You can’t be married to anything. Investments come and go. Now, there is something, you know, that will be much more steady. They’re not gonna produce incredible, “Oh my god, I’m gonna make 50% on my money” kind of returns. But they’re gonna make 6%, 8%, 10%, 12% consistently over time. You know, we’ve spent a good part of the last several months looking for these niches, in all kinds of markets, real estate, commodities. There are still some great outlooks, but that’s why we have to look forward, and we can’t look back. You know, residential properties have gone up like crazy in a lot of markets around the country. You have Phoenix, Florida. Heck, right around here. You know, Tennessee.

Clark: Yeah, Nashville’s gone way up.

Roger: Nashville has gone way up. Exactly. And now we’re starting to see softness. Texas. In many of these markets. You know, I’ve shared with our listeners that in the last 15 months, according to Zillow, I’m not selling, but the value of my house has gone down 20%. Okay? Now, why is that? Higher interest rates. People can’t afford to buy at those levels. You know, markets are always looking for that balance between buyers and sellers. That’s what causes price stability. Why do prices go up? More buyers than sellers. All you heard about two years ago was there’s no inventory, right? People getting shut out, multiple bids. Oh my god. You know, people would call me, “[inaudible 00:13:31]. You know, I missed out on four properties. I don’t care what I have to bid. The next one, I’m just going, you know, all in, and I’m not gonna lose out again on the next one I bid on.” You know, “I gotta make that money.” You know, “I’ve gotta find that house.”

And a lot of those people are underwater now, frankly. And maybe they used financing that took advantage of those low interest rates, but that financing’s gonna reset in two, three, four years. You know, we’re seeing this in countries like New Zealand. New Zealand’s real estate market was off to, you know, insane. I’ve got a client who’s a New Zealand dual citizen. And they were looking to buy property a year and a half ago in New Zealand. And I’m like, “I don’t know.” And it’s, there, traditionally, people use floating-rate financing, so you lock in, like, three years, and then you refinance after three years. The same thing in parts of Europe. And now that that financing is running out and people have to refinance, and their rate is double what it was three years ago, and they can’t afford the payments anymore.

Clark: Wow.

Roger: So these things are resetting. Or they can’t refinance, to get into another fixed-rate situation, because the value of the security, the collateral, has gone down, and the bank says, no, no, we’re not gonna lend you that, that amount of money. And people are, you know, getting stuck in between a rock and a hard place. You’re gonna see this with a lot of corporate bond issues that were borrowing by companies to buy their shares back because it was so cheap. You could borrow money under 3%. But they were borrowing short-term. We may see this with the Federal Reserve. The deficits that were created during the previous administration were largely financed with short-term financing of 5 to 10 years, because that was lower than 30-year rates. So, instead of locking in this massive expansion of the national debt that occurred, you know, we had a 30-plus percent expansion of the national debt during the previous administration, from 2016 to 2020.

But a lot of that financing is going to have to be refinanced now in the next two, three, four years. And they’re gonna be refinancing it at much higher rates. Okay. That’s gonna expand the deficit, you know. And this is stuff that’s already happened. I mean, you can’t change that. You know, I don’t wanna get political and talk about the debt ceiling and all of that stuff, but this is all gonna enter into it. You know, if they do mess around and let the debt ceiling expire, and have to shut down the government, we’re gonna see millions of people thrown onto unemployment. But guess what’s gonna happen to your unemployment checks? They’re not gonna show up. Your social security checks, they’re not gonna show up. Your disability payments through the VA are not gonna show up.

Clark: And that really might happen. Wow.

Roger: Oh, yeah. That’s what they’re talking about doing.

Clark: Right now. Yeah.

Roger: Okay. That’s gonna happen by April, May, June. We ran outta money. There’s no debt ceiling anymore. They’re just deferring payments on certain things. And eventually, it’ll get to deferring payments on government benefits and government contracts, and it’s gonna cause government employees to be laid off. You know, the government is the biggest employer in the country. Like it or not, that’s the reality. You throw millions of people into unemployment virtually overnight, by, you know, reducing the treasury’s ability to pay bills and wages, and that’s what’s gonna happen. It’ll be the mother of all debacles, economic debacles, because the fallout from that, if, you know, people aren’t getting paid, and, you know… Think of who owns our treasuries. Other sovereign wealth funds around the world are the biggest holders, in many instances. Well, if they’re not collecting their coupons, they’re not gonna have any faith. They’re gonna stop buying our stuff, which means interest rates will go up for all of us permanently, even higher than they are today. That’ll be inflationary and recessionary at the same time. Stagflation. It’s a nasty thing.

Clark: Wow. I don’t wanna end on a bad note.

Roger: No, I don’t wanna end on a bad note either.

Clark: So, knowing that… So knowing that…

Roger: We have some great things that are gonna make money over the next year, two years, three years. You know, and we’re getting reasonable returns, in the 5%, 6%, 7%, 8% range. You know, so there are real opportunities. Sit down with your advisors and have them explain it, and explain why the outlook is for that, not why it might have done that in the past. Because I don’t care about what happened in the past. It is a guideline. It tells me at what kinds of financial environments, economic environments does this thing do well. So it’s worthwhile studying. Don’t get me wrong. But you wanna be efficient. You wanna take advantage of tax rates. Today, I was in a long workshop, early, early this morning with Ed Slott. I don’t know if you know who Ed Slott is.

Clark: No, I don’t know who that is. Who’s that?

Roger: He’s America’s foremost expert in retirement accounts and IRAs, and taxation. And he’s a retirement specialist. The very complex area that most people really don’t understand rules. I can tell by the questions my clients ask me. So I’m always studying, and we just had a major change to rules under SECURE Act 2.0, which was in part of the Inflation Reduction Act that was passed last fall. That was a big, big piece of legislation, and there’s so much impact for individuals, in all kinds of areas. I mean, this is the time that good advisors really earn their money, because these are the things that can save you millions, thousands, depending on your situation, in taxes. Thousands in potential losses, being strategic. So, I’ll say it before you ask me. It’s a great time, it’s the start of the year. Download the Thought Organizer. See where you’re at, you know. Clarify your thinking, then apply what you’ve learned.

And if you have a partner or spouse, have them fill it out separately, so you see how each of you is reacting to what’s going on. You know, we all react a little different. And so, being on the same page with everybody that’s involved in decision-making, or affected by your decisions, important for them all to be on board. And then, apply it to where, the strategies that you’re using today. Are you deferring money to a point in time where you’re gonna be paying more taxes? Okay, we know tax rates are going up in 2025. Should you be doing a Roth conversion, now? Or a partial Roth conversion now? Important question.

You know, there’s ways to make money by avoiding losses, by reducing tax exposures, those kinds of things. This is the time for that kind of efficiency. Will there be good times again? Sometime. Sometime in the future, I’m sure there will be. You know, certainly, with last year’s sell-off, the outlook for returns in the stock market is better. Because it’s been doing so poorly, you know, when and if it finds a bottom, it should have some pretty good years coming off that bottom. But that doesn’t change the long-term outlook that we discussed two years ago, that the long-term analysis was indicating, you know, we were gonna see 3%, 4%, at best, from the stock market over the next 10 years. Well, you know, now that it’s a lower level, that’s gone up maybe 6%, 7% because of how much money we’ve lost. Right? And that may go up back up to 8% or 9% if we lose even more. The question is, do you wanna ride it down, or do you wanna step aside? You can always get back in.

You know, a lot of our clients that we’ve been investing for, we’ve been primarily in cash, if we don’t have secondary guarantees or we’re not in little niches. But in our stock portfolios, we’re either in a very conservative profile, or we are in a very high cash position right now. Looking for that reentry point. It’s just, you can see that the trend, by any measurement, has been down. And eventually, people are gonna stop saying, “Oh, well, the Fed’s gonna cut rates.” And so, that’s my optimism. You know, the bond market almost never fails to predict a recession. And when the yield curve inverts…we’re not gonna talk about this today. We can talk about it in the future. You bring it up. But we’ve had an inverted yield curve now for months and months and months and months. And that is one of the great predictors of recessions. And we’re clearly not in recession yet, but I’d say that the odds every day get higher that we will be in one in the not-too-distant future.

Clark: Well, you know, there being so many challenges out there, I always feel a sense of encouragement talking with you. You do a great job removing the emotion from it, understanding the options, and, in lockstep with who you’re working with, choosing the right path forward.

Roger: Well, one that you’re comfortable with. I think that’s part of making it the right path. If this kind of volatility starts to grind on you… I mean, you know, I’m not gonna read emails I’m getting from clients, but there’s a lot of very nervous clients out there, you know, that are reading, listening to the news. They pay attention to what’s going on in Washington and in Sacramento and in, you know, their neighborhoods, wherever they are. And they’re feeling pretty pessimistic about, you know, what’s going on with legislators, what’s going on politically, what’s going on economically, etc., etc. And, you know, as that permeates the overall thinking more and more, you know, when it starts to happen, you’ll only know in hindsight. It sneaks up on you. So, take the time now. Protect yourself. You will not regret it. And if you don’t, and it starts to happen in 6 months, 12 months, 2 months, remember you heard it here, folks.

Clark: Yeah. Yeah. Roger, thank you. I think that’s a great way to wrap it up. Really appreciate your time, as always. Really grateful for your perspective. And we’re looking forward to talking again soon.

Roger: Excellent. You have a great month.

Clark: Roger L. Gainer, RICP, ChFC, California Insurance License number 0754849 is licensed to sell insurance and annuity products in California, Arizona, Oregon, Washington State, Tennessee, and Georgia. Roger L. Gainer is an investment advisor representative, providing advisory services through HFIS Inc., a registered investment advisor. Gainer Financial and Insurance Services, Inc. is not owned by or affiliated with HFIS Inc., and operates independently. The contents herein are the opinion of the speaker, and should not be considered as tax or legal advice. This podcast should not be considered a solicitation for investing or advisory services. Strategies mentioned are not a recommendation to implement or purchase those products or strategies. You should contact your own advisors as to the appropriateness for your specific situation.