Ep 42: This Is Not 2008

Ep 42: This Is Not 2008

Listen Now:

The Smart Take:

We’re in a crisis … different from 2008. The pandemic and prudent, social-distancing response is causing fear, uncertainty, and now panic in financial markets.

Listen to Kevin explain the current state of the markets and how this crisis is currently materially different from 2008. Be sure to pay attention to why — from a financial perspective — our country is better positioned to navigate through these troubled times by dusting off 2008’s playbook, and what you need to do to keep your plan on track.

Have questions? Need help making sure your investments and retirement plan are on track? Use this link to schedule a free 15-minute call with one of our Certified Financial PlannerTM Professionals.

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Timestamps:

0:57 – Update: The Podcast Is Moving To Weekly Installments

3:41 – How Kevin & His Team Have Adapted To The Situation

8:21 – Where We Stand Now

21:20 – How The Bond Market Has Been Affected

34:11 – Keeping A Level Head With All Of The Changes

 

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TRANSCRIPT:

Kevin Kroskey:

Yes, it’s scary. Yes, it’s serious. I’m not saying that it’s not, but there’s a lot of panic out there and usually, when you’re in a situation like this it’s when you get to the other side, you’re probably going to feel like, yes, it was a serious situation that was bad, but thank goodness it turned out not to be as bad as what it felt like going through it. And I think we’re all going to feel that when we get on the other side as well.

Walter Storholt:

Welcome to Retire Smarter with Kevin Kroskey. Find answers to your toughest questions and get educated about the financial world. It’s time to retire smarter. It’s the Retire Smarter podcast, Walter Storholt, with Kevin Kroskey once again here. Kevin’s the president and wealth advisor at True Wealth Design. Just in case, you’re new to the show this week, serving you throughout Northeast Ohio with offices in Akron and Canfield. You can find past episodes of the show and more information online at truewealthdesign.com.

Walter Storholt:

Well, a fun little update for folks. The reason behind the fun update isn’t that great, Kevin. But we are taking the show weekly from here on out while we go through this coronavirus pandemic and situation. And we want to try and bring people the most up to date information as possible and weekly analysis of what’s going on and how to look forward. So I’m excited to get to talk with you, Kevin a little bit more often, but I do wish it was under better circumstances and for a different reason than what we’re all going through right now.

Kevin Kroskey:

Oh, sure. My sentiments exactly, Walter. Obviously we’re going through a very serious situation, both nationally as well globally as a people I suppose. And as it relates to us on a financial front, there’s just a lot of things that are going on right now that we need to make sure that we make smart decisions, not react but that we have a plan in place and execute that plan. So I want to try to be a voice of reason. I want to try to be a voice of clarity and seeing it like we see it and communicating that pro, con, good, bad, whatever it may be. But then even more importantly, just really kind of taking it down to the retirement planning level and connecting the dots between what’s going on with everybody’s investments and what we need to be doing on the planning front.

Kevin Kroskey:

This is, we’ve been through 2008 we’ve done that. I certainly didn’t think we were going to be going through another crisis like this so soon. But here we are and here we find ourselves and certainly, we’re dusting off the 2008 playbook. And the key is we really need to get active and help some people. We need to help our clients. We need to make sure that they’re making smart decisions, staying on track. If we do need to take preventative action in any way that we’re doing that. There’s certainly a lot of things we’ll talk about where we need to do on the portfolio front, maybe on the spending front for retirement. We’re going to talk about all that. But the key is that we really need to be reasonable people here, think with our heads not just run with our feet and execute the plan.

Kevin Kroskey:

And if you’re listening and you’re tuning in, you don’t have a plan. Well, you’re going to get a lot of examples of what a plan looks like and really how to execute it through a time of distress like this. So that’s why I thought it was prudent to go weekly. Think we’ve eclipsed about 1500 downloads of the podcast per month. We’ve got a lot of good feedback from it. We’ve seen a big uptick in listenership over the last couple of weeks as the market has sold off and the world has gone into a bit of a panic. And again, for all the reasons I described, I thought it was prudent to go weekly. And so here we are.

Walter Storholt:

Well, before we dive into the meat and potatoes and kind of a current standpoint recap of where we are right now. Kevin, just from a business standpoint what do operations look like for you right now? So if current clients or maybe it’s somebody that’s new to the show, wants to get in touch with you and talk about their plan or their situation, how are things shaping up for you guys as a business right now? Are you all working remotely? I know that you’ve spent time in between Florida and Ohio. Where’s your home base during this whole ordeal and how are you guys responding as a business to keep things rolling and giving that advice from kind of that technical standpoint?

Kevin Kroskey:

No, that’s a great question, Walter. So our main office is in Akron, Ohio. We own the building that we’re in. We’ve been there since 2012. And Ohio is now, as we record this on this day March 23rd Monday, the governor Mike DeWine over the weekend issued a shelter in place order. So all nonessential businesses basically are closed down. We, however, as a financial institution, as advisors, we do fall under the designation of an essential service. So at the same time, we’re kind of working through that today. Actually, we’re looking at the different workloads for everybody and everybody does have a laptop. There were a few people that didn’t, we took care of that last week. We’re well prepared now. So while the majority of our team is in Northeast Ohio, I am down in Southwest Florida at this time.

Kevin Kroskey:

Yes, the place where you saw all those not so smart spring breakers frolicking on the beach in the light of-

Walter Storholt:

Well, were you out there shooing them away?

Kevin Kroskey:

No. We weren’t on the beach. But yeah, we’re down here. So we’re kind of, I guess, diverse in our location and I do work out of the house when we are in Florida. So frankly, it really isn’t all that different for me personally, just yet. Just because it’s more of my natural state when I’m down here. So for years, we’ve been personally doing the Florida thing for about five years now. So we’ve been running virtual meetings through Zoom, through GoToMeeting through applications such as that for several years. And as we have had clients that have moved out of the state we’ve done that and accommodate them that way as well.

Kevin Kroskey:

So from an operational standpoint, frankly, it’s not too different for us. What we’re debating right now and what I will decide by the end of the day is maybe if we’re going to kind of cycle our staff where there’s, it’s not like we have a huge staff. We have a team of six people currently. However, we may just go ahead and have maybe like two per day in the office, one up front, one in the back, and just to maintain a little bit more distance, but still have some people there. We’re reaching out to all of our clients to go ahead and anybody wants to reschedule their in-person meeting to be virtual. We’re doing that. And frankly, we may Institute that across the board. So kind of end of the day decision here today. With that being said, for anybody that doesn’t need to reach us, everybody’s up on mobile.

Kevin Kroskey:

All of our phones are VoIP phones, voice over Internet protocol. I can go ahead and unplug my phone and plug it into any Internet connection or using an app on my mobile phone and plugged into our system. So we have that all of our since our inception, we’ve been paperless. So all of our files are in the cloud backed up. So I guess you could say we’re that kind of business where it’s fairly easy to adapt for us. Certainly, I wish it was under better circumstances, but this is something that we actually have to go through every year as part of our business continuity plan. Now generally things don’t happen at Ohio, you don’t have a hurricane coming through or something like that, but nonetheless this is something that we have to do per the SEC and that we do have in place. So is a little bit different. But in effect, it’s not really going to disrupt our operations. Everybody’s going to be able to work and continue on as they have.

Walter Storholt:

Great to hear, Kevin, and glad that you’ve been proactive and adapting to the situation before it became as real and expansive as it is now and then continued to for some unforeseen things being able to react appropriately as well.

Walter Storholt:

If you do want to get in touch with Kevin and the team at True Wealth Design, it’s easy to do so, 855-TWD-PLAN is the number. That’s 855-893-7526, and of course online truewealthdesign.com. Look for the, are we right for you button and you can schedule a 15-minute call with an experienced financial advisor on the team. Again, just click on the, are we right for you button on TrueWealthDesign.com. So, Kevin, let’s start with where we are now. Your read on the situation, maybe that high-level view of realizing that this could change two hours after we record today’s show. But in general where we stand in the economy and the stock market, your feelings on lessons we can learn so far.

Kevin Kroskey:

Sure. Yeah. We’ll start there and then we’ll go to I guess what’s next at least as I’ve read from health experts and in some of the things that are going on in the economy and the markets. So certainly stocks have sold off quite a bit. As we stand of last week’s close, the S&P 500 was down about 28%. Unbeknownst to probably a lot of people when you actually look at bonds, generally speaking, people think bonds are going to hold up pretty well when stocks sell-off. And that was really the case until a couple of weeks ago. And bonds actually didn’t provide the shelter that a lot of people, even high-quality bonds. So we’re actually going to dive into that a little bit more here and talk about that, but obviously things are sold off quite a bit. International developed is sold off a little bit more, maybe somewhat surprising to some people.

Kevin Kroskey:

Emerging markets have held up a tad bit better than stocks here domestically. Even though there are emerging markets, China, Hong Kong, Singapore are the places where the virus originated. So everything is whenever the risk is there and wherever there’s uncertainty, everything sells off and just like it did in 2008. And it’s really, it’s happening now again.

Kevin Kroskey:

It’s not a failure of diversification. It’s just a complete discounting of risk across the board. And there’s also some liquidity concerns that we’ll get into as well. The point I want to make though, if we go back to 2008, which certainly in the recent past and memories for most of the people that are tuning in here, 2008 was inherently different, at least to this point in time. And I think it’s going to remain different.

Kevin Kroskey:

So 2008 was really a financial crisis. It was fueled by real estate euphoria that had built up over a period of years coming out of the tech bubble. It was exacerbated by cheap money and some reckless firms with the subprime mortgage crisis and what have you. And then when the bubble finally burst, real estate values fell by about 30% nationally. The finance and construction sectors were most impacted back in 2008. Certainly, the slowdown was quite significant and quite protracted as well. History generally shows us that these financial crises tend to be longer and deeper than a health shock like we’re going through right now. We’ll see how that plays out. But that’s at least what history has shown us so far. And where we’re at right now, obviously the pandemic has caused this crisis, not the bad actors, not the kind of sugar high that people had on real estate going through the 2000s until the bubble burst.

Kevin Kroskey:

So it’s completely different. Certainly, there’s been cheap money. Certain sectors of the economy, particularly in corporate credit, corporate credit has really expanded over the last several years. It has been an asset class in general that we have not been too fond of because of that. But going into this recession, US consumers frankly had been in the best position that they had been in for about 40 years. When you looked at their debt to income ratios had been very strong, their savings rates have been very strong. Their level of home equity had been very strong.

Kevin Kroskey:

So that gives me some satisfaction and some positivity coming into this, certainly, some of them are going to be able to weather it better than others. But I don’t think you’re going to see the sort of home equity decline that we saw in 2008 and after. Down here in Southwest Florida, frankly, there are still some parts where the home values you were talking 12, maybe 15 years later have not even got back to what they were at the peak which was eclipse around 2005, 2006 down here in Southwest Florida.

Kevin Kroskey:

So that’s a long time for a house to be underwater. And people feel that people know that, people feel that they see their home equity going away. For the average American, home equity is the biggest asset that they have on their balance sheet. And so there’s not only a very real financial impact from that but also a very real psychological impact from seeing that vanish. I don’t think that’s going to happen here. See how this plays out and if anything, I would argue at this point the home has certainly become more important. Walter, where are you working out of today?

Walter Storholt:

I’m in the dining room today.

Kevin Kroskey:

You’re at your home, right?

Walter Storholt:

I’m at my home and the home office is under construction a little bit. So I’m in the dining room of all places with my recording equipment. I kind of like the spot though, Kevin we’re going to talk about silver linings before we wrap up this whole podcast. A quick early one. I’ve got a great view of the fish tank and so I get to watch Sunkist swim around his tank while listening to you and learning all sorts of great financial information. So it’s kind of a neat spot. Maybe I make this my office. I don’t know.

Kevin Kroskey:

There you go. There you go. My point exactly. You’re at your home as are many Americans right now. And if anything, this pandemic I think is going to put a resurgence on homes. I mean, I wouldn’t be surprised if you actually see a trend over the last several years at least stated by the millennials, which I know you’re a part of Walter, but they didn’t need a house, they didn’t need a big house, they just wanted small space packed in with a lot of people. And unfortunately, when you have a pandemic like this when you’re packed in with a lot of other people in small spaces, like in New York City, I mean those are the places that were becoming most disproportionately affected. So we’ll see. That’s a little bit of a longer-term trend.

Kevin Kroskey:

I’d be curious to see how it plays out, but I think at least is where we are here now. Certainly, the real estate market is going to freeze up for a while, but that doesn’t mean that people are going to lose all their home equity. The prices hadn’t escalated to a ridiculous level as they had through the 2000s until the bubble burst. So I think there’s going to be some shock there. But in general, I think it’s going to be okay. Now certainly some people are going to lose their homes, but we’ll see when Congress finally gets their act together and passes something, there’s probably going to be some sort of mortgage forbearance or there’s going to be some help that’s going to them. There’s probably going to be a couple of iterations of these packages as well. I wouldn’t be surprised, similar to what there was in 2008 and afterward.

Kevin Kroskey:

So with where we’re at now and the social distancing is really disproportionately affecting as far as the sectors of the economy and of the investment markets. It’s going towards leisure, hospitality, retail, and transportation. That sector employs twice the amount of people than finance and construction, which blew up in 2008 employees. However, it’s less than half the earnings of finance and construction. So again, right now everything is risk-off. Everything is selling off, all stocks virtually all companies except for kind of a few that are really with the work from home sort of environment or what have you and catering to that sort of consumer. But everything is generally risk-off right now. So the good thing is once there is some sort of state of normalcy back in the markets, not saying that things have to completely be solved.

Kevin Kroskey:

But when the panic and panic selling is over and we’re really kind of dealing with well how do we deal with the problem now. Fewer earnings are going to be impacted at least from the most disproportionately affected sectors. Kind of a corollary to this is the energy markets are certainly sold off a lot. They’re down about 50%. That sector of the economy going into this is only about 3%. So when you add up all of those sectors, we’re still roughly about less than half or about half of what finance and construction were in 2008. So certainly it’s affecting more people. Certainly, that’s going to have some spillover effects. But at least is when you look at earnings from the S&P 500. That’s what we’re seeing right now. So that is some relatively good news I suppose for an investor once kind of the dust settles here.

Kevin Kroskey:

When you look at where we’re at right now, nobody really knows. We’re in a state where obviously there’s a ton of uncertainty. We’re going to see how things are going to play out here. It seems like the US is finally catching up in terms of its response. I think you look at certain governors like DeWine in Ohio and New York and you have some really great leadership there. The federal response I think is pretty well known to be quite apathetic. But finally, it’s catching up. So as that is coming online, we’ll see how things play out. But you’re seeing at least some of the large Wall Street banks come out with their forecast. And again, you got to take a forecast even in good times with a heavy grain of salt. But for discussion purposes at least like Goldman Sachs came out with one, they said they see the GDP declining by 24% in the second quarter. Sounds scary? Sounds significant? It is.

Kevin Kroskey:

However, then they say, well, but we see it bouncing back up 12% in the third quarter and 10% in the fourth quarter. So, there’s a big valley there, but then you kind of shoot back in terms of a resumption of the economy. That’s really been a stop, a large degree for many, many sectors of the economy. And so, it could very well be flat or negative for the year. It could be significantly negative. We don’t know yet. But when you look at like Goldman, they have what I just shared, JP Morgan had something similar and not down as much, but a similar bounce back in the third quarter and fourth quarter. We’ll see. It’s a developing situation. Nobody really knows. But the key is we are going to get better. We’re going to get through this right now we just have to make sure that hospitals don’t get overrun for capacity and for the ICU units and what have you and more people die than what is really, don’t have to, plain and simple.

Kevin Kroskey:

Another positive thing I think is good to keep in mind. We’re not individual stock pickers. The science certainly does not support that. However, if there’s a group of people that have any ability if you will, to go ahead and pick stocks. Typically it’s the corporate insiders, it’s the CEOs, it’s the CFOs of the company that has this insider knowledge, that know what their opportunities look like, that know the business probably better than anybody else. And Walter I’m happy to say very happy to say, as a matter of fact, that last week was the first week in about 10 years that the buys from these insiders, from the CEOs and the CFOs, was greater than the sells.

Kevin Kroskey:

And it was somewhere on the magnitude of about a billion dollars that these CEOs reached into their own pockets. And granted they have deep pockets, but reached into their own pockets and said, our company stock is cheap. I’m going to go ahead and put my money on the table and buy my own company stock because why would they do that, Walter? Because they think they’re going to make money disproportionally going forward. So they’re putting their money where their mouth is.

Walter Storholt:

They believe they’re going to recover. Yeah.

Kevin Kroskey:

Not only recover but recover… They already have a lot of risk working for these companies. They have a lot of risks. Their compensation is tied to it. I’m sure they have a lot of stock options already that are theoretically aligning their interests to growing the enterprise value of the company and aligning those interests. But now they’re saying I’m going to double down on that. I’m going to take more money out of my own pocket, my liquid money going through everything that we’re going through in the rest of America that’s going through. And I’m going to put my own money where my mouth is. I’m going to go and buy it.

Kevin Kroskey:

And so when you look at it academically, when you look at the research, really the corporate insiders, if they’re buying, they can sell for many, many reasons. Again, they all have grants of stock and stock options and what have you. So they all own stock, but at times when they actually go in and buy stock like this, it tends to portend pretty well moving forward that the future returns are going to be pretty darn good. You saw the same sort of thing happen in December 2008, 2008 it peaked the market than the bottom in March 2009 just a few months later. You saw a very high spike of buying in 2011 when the Greek debt crisis was going on and you had a technical default on American debt.

Kevin Kroskey:

Basically Congress was doing what they do and fighting and couldn’t agree on the deficit. And we had a technical default on the debt and America lost its AAA credit rating. Stocks sold off about 20% that year or so. And corporate insiders said, “Hey, this looks like a good buying time.” And guess what? They were right. And they were right in December 2018 as well.

Kevin Kroskey:

Not saying things can’t get worse. Nobody has a crystal ball. Certainly, I would say there’s probably a bias there. It’s their company, they’re head of it and they say, “Well, hey I have influence over this, so I’m going to go ahead and do this.” All that’s true. But the evidence would say that that tends to be a darn good sign when these corporate insiders are buying and they’ve done it in spades last week, more than a billion dollars out of their own pockets. So that makes me feel really, really good.

Walter Storholt:

We’re getting some early peaks at some silver lining, so that’s good to feel. I know that in times like these Kevin, I always hear the mantra as we’ve heard for many, many, many years to limit risks, get out of stocks and into bonds. And I know that’s a very simple way of saying that phrase. But we talked a lot about stocks here on the front end. What about the bond market and the bond situation through all of this?

Kevin Kroskey:

So in the bond market, it’s been a… One of my favorite sayings on Wall Street is, the bond investors are a lot smarter than the stock investors and frankly I pretty well believe that to be true. It just seems like it’s a more rational market in a lot of regards and tends to lead the thinking of the stock market and in many ways and many times.

Kevin Kroskey:

What’s interesting is over the last couple of weeks, really from about March 6th or March 7th at the same time that you saw stocks selling off a lot and some of those days were down four or five maybe even North of 10% one day and you saw some bonds, high-quality bonds, high-quality bonds, not junk bonds, not really high-yield bonds, not really illiquid bonds, but AAA municipal bonds, AA municipal bonds. You saw investment high end, investment-grade corporate bonds selling off.

Kevin Kroskey:

You even saw in the last week, you even saw treasury bonds selling off on days that the market was down 5%. Treasury bonds, I mean, you could have anywhere from a 30-year US treasury bond or you could get all the way down to really short-term say like 13-week treasury bills.

Kevin Kroskey:

And you saw treasury bonds in an aggregate sell-off at the same time that stocks were selling off. And that just, I can’t remember that even happening during 2008 maybe it did. But I can’t recall it. In fact when you look at what returns are, so again, kind of the economic perspective on the markets 2008 versus now. The thing that we had going for us going into 2008 where interest rates were a lot higher. So when bonds rallied they were going from, like I remember we had a lot of clients with like 5%, five-year CDs that they took out in 2007 and carried for those five years.

Kevin Kroskey:

They were quite happy with them because rates went to zero over the successful period. And then when the CD mature they had to renew basically near zero. But the fact that the interest rates started a lot higher when the rates fell, the bond returns that we received as investors were a lot higher than what they have been recently. So stocks go down a similar amount to what they went down in 2008. Unfortunately, the bond portion of our portfolio just can’t hold up as well because we’re starting at a level of interest rates that are appreciably lower than where we were in 2007 when the great financial crisis started. So I think it’s something that people don’t understand. In the last couple of weeks you just saw people, I mean, people were freaking out. The panic is palpable. I’m not a gun person, but I’ve heard from some of my gun owner friends that you can’t buy ammunition anywhere. Pretty much a good sign that people are freaking out.

Walter Storholt:

On the same boat, the same boat. I’ve got friends who do the guns.

Kevin Kroskey:

And then over the last couple of weeks, I mean people who have been selling their high-quality bonds at a discount, just seeking liquidity and not being kind of price indiscriminate and just going to cash. And whenever you’re in something like that, so you’re just kind of in this like tidal wave effect in away. Rationality is like out the door and you just see this happening. And now the Fed has certainly stepped in. I think one of the things that we can definitely take solace is the Fed knows what to do and the fed has acted aggressively. And just this morning they came out and they had a $700 billion bond-buying program that they previously announced.

Kevin Kroskey:

And now they basically said, “Hey, it’s unlimited. We’re going to do whatever the heck we have to do to maintain stability and liquidity in these markets.” We’re not going to let this pandemic become a financial crisis. We’re going to step in and restore this. And they’re doing exactly what they should be doing. So if there’s one thing that I think people can take solace is, they know the playbook to play here and they’re playing it very, very well. Now, Congress is finally may be against their own will, they’re going to come together on something. And I’m sure people, in general, aren’t going to be happy with it, but they’re going to get something that’s going to be out, they’re going to start helping, the businesses start helping consumers. And there may even be a few iterations on this. So people are doing what they need to be doing to go ahead and address the issue.

Kevin Kroskey:

So I think that’s important. We’re actually going to talk about the bonds a lot more probably next week. That’s so critical to understand. But the key is you need to have some runway here. You need to have some runway for your stocks and sold off. You don’t want to sell stocks when they’re down. You want to be able to rely on the more conservative parts of your portfolio to go ahead and provide the retirement income that you need. And so over the last couple of weeks when you’ve seen high-quality bonds sell-off like that, it’s tough. I mean we’ve been working around and I’ve been selling the highest quality, most liquid bond fund that we have in the portfolio. And so we’re executing the playbook. We’re having to kind of think differently, but frankly, I didn’t expect that having to do this within the bond portion of the portfolio.

Kevin Kroskey:

I expected to have to do this in the riskier parts of the portfolio. But now we’re having to do it in even the safer parts of the portfolio. So it’s really important. We’ll dive into this more next week. But if you’re looking at your statements, frankly, this may be one of those times you just don’t want to look at the statements. Just worry about it later. But if you’re looking at it, you’re probably more apt to make another emotional decision which you don’t want to be doing.

Kevin Kroskey:

So we’ll talk about bonds, we’ll talk about liquidity, we’ll talk about the runway. This will all get into the retirement income planning discussion that we’ll have and a good episode to go back and listen to as well as episode 19, where we did retirement income planning. I called it a dynamic strategy. When the market expectations are changing, your investment allocations are the recipe that you’re using for your investment mix, needs to change. And maybe even having some dynamic spending, maybe going ahead and cutting back from your more discretionary goals that you have in your retirement plan.

Kevin Kroskey:

Well, guys and gals, it’s a dynamic environment. And then some is changing minute by minute and we’ll see the market could be completely different than when I got onto the podcast recording here a short time ago. But I would encourage everybody to go back and listen to that. And then what we’re going to be doing over some of the coming episodes is really kind of diving into that. Because I want to bring this clarity. It’s like you don’t know what’s going to happen. We have a very uncertain future, but we have a playbook.

Kevin Kroskey:

We know what to do. So I want to connect those dots as much as possible. We’re doing that for all of our clients. We’ve been very, very proactive in communicating with them. We’re going to continue to be, that’s another reason why we’re doing this podcast on a weekly basis. But I need to show them, hey, here’s how we’re going to get through this. I don’t know exactly how bad it’s going to be. I think we can all have a little bit of solace in knowing that generally, something like this is going to be dealt with in a vaccine.

Kevin Kroskey:

Maybe a year to year and a half and worst case. Certainly, the markets are going to respond more favorably, more quickly. They’re going to lead the economy because that’s how markets are they’re forward-looking. But we’re at least time-bound I think. And if the Fed and the global central banks are successful, which I think they will be and not letting this be contaminant into a financial crisis, it’s something that we can deal with in the playbook we’ll certainly work with.

Kevin Kroskey:

So that’s what we’re going to get into. I guess the other thing that I think is kind of positive and I guess falls under the what’s next as well I’m not a health expert, I’m not going to pretend to be one. Certainly been reading a ton and listening to a ton of health experts over the last several days.

Kevin Kroskey:

But what the data shows coming out of Singapore, coming out of South Korea coming out of China is that social distancing works. In Ohio for example, again, DeWine he’s taking a very, very strong leadership role in making some aggressive measures to go ahead and social distance and keep people in place and slow the rate of the increase in new cases. After the social distancing measures are implemented. What the evidence shows from those other countries that I just mentioned is that you will see us, not that you will stop seeing cases, but the growth, the growth rate of the cases is going to slow. And as granted the total number of cases is going to continue to get larger, but the growth rate is going to slow.

Kevin Kroskey:

And so, as that growth rate is controlled, that’s going to allow basically the capacity for the hospitals not to be overwhelmed. The personal protective equipment will continue to be restocked and brought back online. So our very valiant health care workers can go ahead and fight this and do it in a safe manner.

Kevin Kroskey:

And then you’re already starting to see this last part, but you’re starting to see people start talking. I’m seeing it on Twitter and other articles talking about hey, what’s next after this growth rate slows? What are we going to do? And some very well-informed people are even asking about, hey, how aggressive do we really need to be in terms of shutting down the economy? Because it’s certainly going to have a lot of additional effects. Certainly, it’s better to be cautious.

Kevin Kroskey:

I completely agree with that in a situation. But some of the things that you’re seeing from some of the healthcare experts are after the capacity issue is really dealt with and the growth rate has slowed a little bit. Well, maybe we don’t need to go ahead and shelter in place everybody, but maybe the high-risk groups and then we can start getting back to some normalcy.

Kevin Kroskey:

But it sounds like from the experts that I’m reading and listening to that we can probably expect this to be with us for some time and probably in waves. But if we have testing kits, if we can go ahead and do the tracing, when somebody tests positive and we can identify these people and people can go ahead and quarantine and we have the capacity to treat them, well, I mean we’ll be able to control it. We’ll be able to get through.

Kevin Kroskey:

And I fully expect that and I think all the experts are already saying this, but what you’re seeing as far as the mortality rates and what have you, they tend to be very overstated just because there’s a lack of good data coming out of a lot of countries, and there’s a lack of testing. And there’s a lot of people that are asymptomatic. So yes, it’s scary. Yes, it’s serious. I’m not saying that it’s not, but there’s a lot of panic out there and usually, when you’re in a situation like this when you get to the other side you’re probably going to feel like, yes, it was a serious situation. It was bad, but thank goodness it turned out not to be as bad as what it felt like going through it. And I think we’re all going to feel that when we get on the other side as well.

Walter Storholt:

There’s a lot of positivity that we can take from it even though it doesn’t seem like it at the moment. I mean, I think it’s always wise to look for silver linings and things that we can kind of grasp in times of doubt and uncertainty. And that’s certainly where we are right now.

Walter Storholt:

And things as quickly as they changed going down, Kevin, they can change just that fast going back up. I mean if all of a sudden some of these experimental drugs start taking off again, we’re not medical experts and not going to go down that rabbit hole. But let’s just say there’s a drug that works really well, like the malaria things that they’re testing and those kinds of things, and all of a sudden it starts really turning this whole thing around. I mean the markets are going to react, if not, as you said, it’s kind of already baked in sometimes, they’re forward-looking. If that starts to get some traction, then you’ve got to then be careful on the other side of things that we don’t miss the ride back up and not have your portfolio and your plan positioned properly to take advantage of the upswing and the return to normalcy. So you kind of have to guard it on multiple fronts it seems.

Kevin Kroskey:

Completely and that’s why you’re going to see this when the market’s kind of bounced back, and we talking about this in the last episode about the perils of market timing and it just doesn’t work. A much more reliable way is to do what I’ve already alluded to and have this dynamic approach. The key is in the execution, you have the plan, we have the dynamic expectations, we have the dynamic investment mix. We may have to have dynamic spending if your plan isn’t as well funded and we just want to play it a little closer to the vest. But now we have to go ahead and buy some time for stocks to rebound and use the safer assets in our allocation and spend those down first before we would go and have to touch the stocks. So it’s a way more reliable approach.

Kevin Kroskey:

That’s what you need to do. You don’t want to go ahead and just certainly if you sold it and went to cash two weeks ago, you’re feeling pretty darn good about yourself right now. But ask yourself, when are you going to get it back in? How are you going to know when to get back in? Guess what? You’re going to feel scared and bad for quite some time. And by the time that actually feels better, you’re going to see a lot of the outsize returns have already been realized. We had a lot of clients that we picked up over the years that cashed out in their 401(k)s in 2008.

Kevin Kroskey:

And we started working with them in 2013, 2014, 2015, they sent in stable value for all those years. And the market sold off started selling off in October 2007 went all the way down to March 9th, 2009 and then back up again.

Kevin Kroskey:

It took that complete cycle tippity top, very bottom back up to even again in about three years. And so you don’t know when to get out. You don’t know when to get back in. Certainly, you may get lucky and I commend you if you do, but in my mind, luck is no way to go ahead and invest your hard-earned money. You need to have a good plan and then you now need to have the discipline and prudence and the playbook to go ahead and execute the plan. And that’s what we’re going to continue talking about.

Walter Storholt:

So with all of this going on, Kevin, I mean, what is, I know you live, eat and breathe anything financial and markets you can hear the passion in your voice over the last half hour just talking about this stuff, but I know it’s got to wear you down a little bit. So what do you do to kind of keep your sanity as you’re keeping up with all the changes and talking to clients and leading your team through this whole ordeal?

Kevin Kroskey:

What do I do to keep up my sanity? Huh? Well, how much time do we have Walter? Yeah, I’m good. Let me just share a bit of gratitude for our clients and we will work with about 200 families and we do our best to take great care of them. And frankly, this point in time is really when we have the opportunity to earn our stripes and where we really need to be good leaders and good financial advisors for them, and just be there for them at the same time too.

Kevin Kroskey:

And we reached out to mostly everybody last week and we just got a lot of positive and frankly it’s almost like they were more worried about us in some way. Like, are you guys got to be busy. Obviously a lot of my income is directly tied to the markets and certainly, that has gone down and it’s the same time you got to work twice as hard and then, hey, that’s what I signed up for.

Kevin Kroskey:

I’m happy to do it and I know we’re going to get through this, but I just appreciate it and we as a team really appreciated it. Just all the care and the concern that our clients had for us, and just put a real big smile on everybody’s face. So, for everybody that’s listening, I know we said this one-to-one when we were speaking or via email when we shared that communication, but just really appreciate all the sentiment, but everybody’s pulling together as a family.

Kevin Kroskey:

We’re certainly spending a lot of time together as we generally do. But in our neighborhood, again, we’re down in Florida, so it’s warmer out and people are still walking the neighborhood. I mean, you can certainly maintain social distancing and walk the neighborhood by just using your brain a little bit, but you’re seeing all kinds of positive messages.

Kevin Kroskey:

Kids are writing on the sidewalk like we’re all in this together. Every storm brings a rainbow, things like that. And so just the positivity that I’m seeing, particularly in younger people is just putting a big smile on my face. And it’s just reassuring. My six-year-old was a little bit scared. I mean we’re watching the news and she was worried about what’s going on and she’s not in school so she had questions. But messages like that and seeing the community pull together frankly has just been a phenomenal thing to see and a phenomenal lesson to share with our daughter. And we couldn’t be happier to do that.

Walter Storholt:

That’s good to hear. Yeah. Take the opportunity to no matter how cliché it gets, I hope it gets reiterated so much that we get tired of hearing it, but look out for your neighbor. Look out for the people that are around you and closest to you. Look for ways to help people out. For sure, my wife and I are making a pharmacy run this evening after the workday is over. And for everybody that’s on our street, we live in a very older street where the youngest folks are probably by a good 30 years on our streets.

Walter Storholt:

So we basically just been taking orders from everybody across the street and said, “All right, we’re making our run this afternoon. Who needs what from the pharmacy.” And picking up everybody’s meds and refills and all those kinds of things and we’ll drop it off on the doorsteps. And I’ve heard so many stories of people doing those kinds of things. So yeah, look for the silver linings, look for the opportunities to help people. And hopefully, this can be one of those events that although it’s unfortunate and sad and has some terrible elements to it, can also serve as a rallying point for us to get a little closer with one another and help each other out. That would be certainly a good outcome.

Kevin Kroskey:

Yes. Walter, I completely agree. One other thing I will say is, I want to say turn off the news. You certainly may want to, but I think there’s a lot of good reporters with good intentions, with inaccurate information that was just completely wrong in how they convey, I just saw something this morning about how this has already affected more people than the 1918 pandemic. Like, okay, I think there are a few more people on this earth and in this country today than there were in 1918. Okay?

Walter Storholt:

Yeah.

Kevin Kroskey:

But just a lot of ridiculousness like that. And I see a constantly, even from supposedly well-informed people, so on one hand just tune it out as much as possible. Focus on the things you can control and we’ll get through this.

Walter Storholt:

Yeah, stay informed enough so that you know of the official changes coming down the pike. But try and stay away from some of the more dire prognostications. You go to any news site right now in the first 34 headlines are all dire negativity and that it doesn’t have to always be that negative. The world is not going to completely meltdown here and we need to keep that perspective for sure. It’s a great example, Kevin to share.

Walter Storholt:

Again, if you’ve got any questions for Kevin, you want to talk through your own plan, your own portfolio, how things are designed, how you’re appropriated, what needs to change going forward from here. If you haven’t ever taken a really deep look at the best way to plan for this or if you’re going through this crash and saying, “Boy, I really was not prepared for this kind of moment, feel free to reach out to Kevin.” Again, you can call 855-TWD-PLAN. They are staying in business. The trains will keep running on time. You’re going to be able to reach somebody and have a conversation and get some help here.

Walter Storholt:

We just might have to use technology to do it a little bit differently than normal, but 855-TWD-PLAN is the number or you can go to truewealthdesign.com and click on the are we right for you button to schedule a 15-minute introductory call with an experienced financial advisor on the True Wealth team. Just go to truewealthdesign.com and click on the are we right for you button. And you can find all that information as well in the show notes of today’s episode in whatever app you’re listening on. You can go, just check the description of the show notes and we’ll put all the relevant information that you need there.

Walter Storholt:

Kevin, thanks for the help and the insight. We’ll be looking forward to talking to you each week as we go from here.

Kevin Kroskey:

All right. Thanks, Walter. Take care. Be safe.

Walter Storholt:

You do as well. That’s Kevin Kroskey. I’m Walter Storholt. Thanks for being with us. We’ll talk to you soon. Right-back here on Retire Smarter.

Disclaimer:

Information provided is for informational purposes only and does not constitute investment, tax or legal advice. Information is obtained from sources that are deemed to be reliable, but their accurateness and completeness cannot be guaranteed. All performance reference is historical and not an indication of future results. Benchmark indices are hypothetical and do not include any investment fees.