The inverted yield curve is basically there's a seventy five basis points difference between say
a two year and a ten year treasury And the only reason why someone would
lock their money up for ten years at three quarters of four percent lower than
they can get for two years is because they believe that in two years they
won't even be able to get what they can get for ten years. Today,
thanks for listening to Carry Lutz's Financial Survival Network, your solution to today's
trying times. For the latest, go to Financial Survival Network dot com.
Financial Survival Network now more than ever, and welcome. You are listening to
watching the Financial Survival Network. I'm your host, Carry Lutz. Well,
Anthony Sakura is with us. We're going to be talking about higher dividend yields,
how you make money even when the economy is going to hell in a
handbasket. Well one of these things. So hey, we're going to get
onto it. If you've got a question or comment, or if something you
want me to cover, I guess you want me to have on send an
email to khl at kryloves dot com. Make sure you whatever platform you're on,
you like, share and subscribe. The show. It really helps the
show out a lot. Anthony, it's great to have you back. So
where's the economy? Inverted yield curve? Feds not raising rates inflation looks like
it's taking a breather. But is it just a temporary breather or is are
we going to see rices and therefore rates go up in the not too distant
future. What's your take on all of it? Gary, Yeah, great
to be here. Thanks for having me back. Love the show, Love
being on your show. I think that the Federal Reserve not raising rates was
the right move. Inflation, as you know, as a lagging indicator that
oftentimes takes six months to react to whatever the Federal Reserve does on you know,
inflation, and may have twenty twenty two at high I believe it was
nine point one percent if I'm correct. Now inflation is down in the mid
threes. Their target is two percent, So we've made a lot of progress
at this point, but we haven't made as much progress as they would have
hold. I think that really hinges around the labor market at this point.
The labor market is starting to soften. If we were having this conversation in
December twenty two, if my memory serves me right carry I think we were
almost at two jobs for every worker available. I think it was one point
nine if I remember correctly. Now I think own to like one point seven.
So the fact is that there's a lot that there it's come down,
there are less jobs per worker. That number is going to need to come
down. A lot of people think that the unemployment rate, which is still
at record lows, that that needs to get up into six or seven percent
in order for inflation to come down. I don't know that that's necessarily the
case, although I believe probably six percent. But this is the recession that's
never happened at this point. And you know, it used to be six
eight months ago. A year ago, we were talking about a recession,
whether it's going to be a soft landing or hard landing. Now they're talking
about no landing. You know, is it possible that we get no recession
at all? And I think that that is possible for the first time,
but I don't think it's likely. I think there is going to be a
recession around the corner. I think the inverted yield curve is telling us that
probably sometime in twenty twenty four. I think we do have to still be
careful, all right. Imagine if they threw a recession and nobody came right.
Yeah, And it's interesting that you know that's the possibility as well too.
But the inverted yild curve is telling us a different story. The inverted
yield curve is basically there's a seventy five basis points different between say a two
year and a ten year treasury. And the only reason why someone would lock
their money up for ten years at three quarters of a percent lower than what
they can get for two years is because they believe that in two years they
won't even be able to get what they can get for ten years today.
And when you look at the economists across the country, you look at the
experts across the country, you look at the economical data that's going on that's
out there, everything points to the fact that the Federal Reserve is going to
lower interest rates in twenty twenty four. The only reason they would do that
is if we have a recession, if inflation does come down and we now
need to start stimulating the economies. I do think that, you know,
odds of a recession in twenty four are still pretty high, and I think
you need to treat that as such when you're trying to figure out what to
do with your own portfolio. All right, so what are you telling your
clients to do now at this point? Anthony? Yeah, interestingly enough,
you know, I want my clients to be in a position to win no
matter what. And that's a phrase that's kind of caught on. It's a
phrase that I've been using recently because Yahoo Finances. When I was interviewed on
their live TV recently, they asked me the same question. In this economical
environment, with all this uncertainty and things going on with China and Russia becoming
friends, and wars and inflation and interest rates and so, how do we
invest in this environment? And my answer to them is, if you are
invested right, you should be able to win no matter what. And I
think that the way to do that is to really focus on dividend paying stocks
because if things go well, then those stocks are still going to grow in
value, and your dividends are just going to be the icing on the cake.
If things don't go well, then the dividends could be the answer to
cancer. If you will, the dividends are going to be the one thing
that you can continue to dollar cost average in and essentially you're getting paid to
wait. And so I think dividends no matter what phase of life you're in,
whether you're in the accumulation phase of life or the principal protection phase of
life, or the distribution phase of life. I think this next decade,
you know, you need to focus on dividends in case things are flat,
like a lot of experts are predicting. Okay, so dividends are important.
I think we agree on that. But if we get like a major recession,
presumably the market's going to get hit as well. Right, do we
think the stock market's going to go down? What do you think it's going
to go down? If the recession magically appears. Yeah, So if we
have a recession, I mean, certainly the market's going to get hit.
And that's the time that you are really going to value dividend stock more than
anything else, because now you have the ability to get those dividends and the
dollar cost average and then back in and to reinvest. And you know,
interestingly enough, if you have growth stocks and you know, we have a
ten year time period of you know, crashes and recoveries and crashes and recoveries
very much like the first ten years of this decade. Well, if you
have a growth stock that doesn't pay dividends, you just have a big blah.
You know, ten years from now, your growth stocks are going to
be worth the same as they are now. Whereas if you're getting dividends,
you can dollar cost average those dividends back in, and if the market goes
down and your dollar cost averaging your dividends back in, that actually helps you.
It doesn't hurt you because you get to buy more of the stage stocks
at a lower price. So it's a very interesting dynamic. But you're not
going to get dividends through growth stock. You're gonna get dividends through value stock.
So the dividends are what's going to help you be able to write out
a time period if we do have a lot of crashes and recoveries, and
yet at the same time, if you're in dividend stocks now and the market
does crash by twenty or thirty or forty, you know, and I think
that's possible, then it might be time to reallocate at some point down the
road into something that's going to be more growth oriented. But that's going to
depend on your phase of life that you're in. If you're twenty, thirty,
forty, twenty or thirty years of retirement, reallocating some more to growth
may make sense. If you have ten or less years of retirement and you're
retired, you probably want to stick with the value stocks or even sharp your
portfolio in such a way to where you have maybe a smaller percentage of your
portfolio and are living out the income from other things that are not stock market
related. All right, So then question becomes what else should you be holding?
What else should be in your portfolio besides besides stocks? How do you
really really protect against a multitude of threats. Yeah, so there's all universe
of options that are are not stock related that are classified as fixed income.
And interestingly enough, if you have twenty or thirty years to retirement, I
would normally be very fine with you having eighty or ninety percent of your portfolio
in equities. I think over a thirty year time period, the fact is
you're going to average eight or ten percent. I'm not sure that there's ever
been a thirty or forty year time period in the market where it's ever averaged
anything less than eight or ten percent. But you have to have a long,
long, long time to do that, and so a high percentage of
stocks makes sense. But we're at a point in time carry where the fixed
income market has just been hit over the last couple of years. It's the
worst fixed income market over the last two years. I think in forty two
years, first time you can actually buy fixed income as a capital appreciation play.
So if you, even if you're younger, even if you have thirty
or forty years, where normally I would suggest that you you have the bulk
of your money in stocks, I think a sixty forty plan right now works,
not for the reasons that they say sixty forty is gonna work, you
know for these last decades where that's kind of in the standard mantra. I
think a sixty forty plan works now for you because if the Federal Reserve lowers
interest rates, that's gonna cause that forty percent of your fixed income port boil
to bound. Not because it's gonna because fixed income reacts opposite of interest rates.
Interest rates down, fixed income grows, So you can use it as
a capital appreciation play. And then and then potentially when the market is down
and your fixed income is up, reallocate out of your fixed income into the
market, and then you use that going forward. You know, stay fully
invested going forward. I don't want you to trade in and out of the
market trying to make money that way. But entering the market is totally different
than trading. I think you're gonna have a much much better entry point into
the market than now, and until then you can use anything in the fixed
income category to be getting paid while you wait. On today's environment, you
should be able to get five or six percent after fee is pretty easy from
fixed income investments, and there's a good likelihood that in the next one to
two years they will also shoot up in value. So great double double whammy
if it works the way that we think. Okay, so how yield is
your friend, but you don't want to take too much risk on yield.
You don't want to but yield ahead of everything, right, You got to
look for some kind of margin of safety percent. And the biggest mistake that
I see retirees make, especially when it comes to chasing hwo yielding socks,
is they do just that. They're they're chasing yield, and if all you
do is look at the yield, then you might miss the entire underlying story.
There are companies out there that the price has dropped, and if you
know how yield work, when the price dropt, the yield goes up.
And if you're an unsophisticated investor and you're just looking for yield, because you
know, here Anthony is sicaro on, you know, as saying that you
got to go find yield, and you get off for this interviewing. You'll
find a yield. You're like, oh, well, that one's paying you
know, five percent, six percent, seven percent, I'll get on on
that. Well, the reality is it might be paying a high yield because
the price just dropped in value. And the question is did the price drop
in value because of just some systemic drop of what's going on in the markets,
or did the price drop in value because the underlying fundamentals of that company
are not good and you may not know that. So whereas you know,
the professionals are trying to make this determination whether a high yield, there's a
good value play where you can buy something with the high yield and get and
get a company that is under valued. As an un sophisticated investor, you
might not be getting a value play. You might be getting on board the
sinking ship, which we often refer to as a value trap, where all
of a sudden you buy it for the high yield and then they cut the
yield. Then then the price goes down more, and then now now you're
on a sinking boat. So you have to be really careful. You can't
just chase yields. You have to look at the fundamentals under the hood too,
to make sure getting something that's that's really true value, not something that's
falling apart very true. Yeah, you just don't become a yield tour as
they call them, right. You need to look past past the yield and
really look under the hood because a lot of these cyclicals they pay these huge
dividends, but it could be right at the end of the cycle and then
they're going to take a hitt and then they'll be cutting their dividends. So
who needs that? Hey, So besides dividends and besides looking for yield,
is there anything else you can do to help defend your portfolio and your will
against the potential volatility that seems all but inevitable. Yeah, I mean leaving
some in cash right now, it's probably not a bad idea as well.
Right, this is the first time in many years that you can actually earn
something out cash. But you've got to be careful if you put your money
in cash too. We we've talked to a lot of people that have said
something like, you know this, why I put all my money in CDs
that are earning five percent And they're excited about the fact that they got a
one year CD that's earning five percent or so, and they come to be
almost thrilled. The challenge, though, is that a lot of people are
using that short term CD for long term strategy, and I think that's a
mistake. The fact is that we do have an inverted yield curve, and
if you get five percent now for one year, you're gonna feel good for
one year. But what if we do have that procession. What if the
Federal Reserve lowers interest rates to where they were just a couple of years ago
pre COVID, and all of a sudden, you're CD matures at five percent
for that one year, and all of a sudden, you can you can
only get less than one We go back to the tide period where or maybe
you can only even get too. Well, that's what I often refer to
shooting yourself in the foot. If you have this money set aside, you're
getting needed in a year for a large purchase, to put it down on
real estate, or you know, college planning for your kids or wedding,
or if you're gonna need this stuff and this money and one or two years,
absolutely short term CDs, give what you can out, and then when
the CD of a church you have access to the money. A great strategy.
But if this is your long term retirement plan and you're not going to
need this money for ten or twenty or thirty years, regardless of what age
you are, I wouldn't recommend locking it up all executing a short term strategy
for a long term plan. You can get long term. You can get
five and six percent today NETA fees by using fixed income for the long run
and not just for the short run. So it doesn't mean don't have anything
for the short run. It doesn't mean said at all aside having some for
the short having some for the mid term, having some for the long run.
It's probably the best way to do it in order to maximize your yield.
But your yield is the only thing you can count on. For the
next decade. Yeah, I totally agree with you. Well, Anthony,
appreciate you coming on. Tell us where we find you, how we connect
with you on the whim Yeah, absolutely so why company has Providence Financial?
You could search for a Providence Financial in Woodland Hills, California, and we
come up everywhere on the first couple of pages. Our website is Providence Financial,
Inc. Dot com. And if anyone watches your show and they are
interested in getting a blog, I have a new book, More Life than
Money, that talks about ten different mistakes that retires can make in retirement that
they don't even know they're making. And if they let me know that they're
calling in from having watch this show, I'll send them a copy of the
book apps a little all right, great, well, we'll put that in
the show notes along with a link to your site. If you've got a
question for Anthony myself, it's kl at carry Lutz dot com and make sure
you go to the site Financial Survival Network dot com and get your free newsletter.
Anthony, always a pleasure. We'll talk to you a getting real soon.
Dark. Thank you so much for having me, God blessed, thanks
for listening to Carry lets's Financial Survival Network your solution to today's trying times.
For the latest, go to Financial Survival Network dot com. Financial Survival Network
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