#25 – Roger Federer And The Economy

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Capital Investment Advisors’ Chief Investment Officer Connor Miller joins Wes in the studio for today’s episode. They delve into the latest information on the Tesla rental car situation. They contrast the state of the economy with public sentiment. They also share a strategy that often helps combat inflation. They cite the Copenhagen City Heart Study’s findings about the sport of tennis and how it’s been shown to increase human lifespan. Finally, Wes breaks down the wisdom of tennis champion Roger Federer’s recent words and compares his winning rate to that of the stock market.

Read The Full Transcript From This Episode

(click ‘Details’ below to expand and read the full interview)

Wes Moss [00:00:01]:
The Q ratio, average convergence, divergence, basis points and b’s. Financial shows love to sound smart, but on money matters, we want to make you smart. That’s why the goal is to keep you informed and empowered. Our focus providing clear, actionable information without the financial jargon to help 1 million families retire sooner and happier. Based on the long running WSB radio show, this Money Matters podcast is tailor made for both modern retirees and those still in the planning stages. Join us in this exciting new chapter, and let’s journey toward a financially secure and joyful retirement together. Welcome to Money Matters. Connor Miller in studio.Wes Moss [00:00:50]:
Connor Miller, chief investment Officer, Capital investment advisors here to weigh in on everything from global inflation, interest rates, heat across the country, there’s a dome up north we all have heard about, and tennis, and one of the most remarkable stock market sporting correlative analogies that I think we’ve ever come up with. Here on money matters, they teach us an awful lot about investing for retirement. Conor Miller, good morning.

Connor Miller [00:01:24]:
Good morning, Wes. Always great to be on here with you on Sunday mornings.

Wes Moss [00:01:29]:
How are those, the Tesla sales going? We were talking about Hertz this week. I don’t know if you were on the money matters. It was maybe two weeks ago. We were talking about all the EV sales with Hertz, and I was thinking about buying one of these used Tesla model three s. Went on to the Hertz used car sale. It was exactly as advertised. They were all right at 25 grand for a slightly used Tesla. We don’t know exactly how used because they’re rented, but it seems like we saw the company raise a ton of debt.

Wes Moss [00:02:01]:
And we dug into some of the numbers around how many cars these big rental companies have. Pretty, yeah.

Connor Miller [00:02:07]:
What was it? In 2021, they purchased 100,000 EV’s.

Wes Moss [00:02:12]:
Well, they said they were going. We don’t know for sure. But then you look at the, if you look on their balance sheet, we were able to kind of see at least the value of how many cars, of all of their inventory was approximately.

Connor Miller [00:02:24]:
What I think it was, what, 16 billion? Around something along those lines, which makes sense.

Wes Moss [00:02:29]:
I mean, they’ve got around 400,000 cars. I don’t know what they’re worth at this point, 20 to 40 grand, which those numbers kind of add up. So.

Connor Miller [00:02:39]:
But clearly, as a company trying to raise some cash with this most recent debt offering, selling off some of their teslas, we don’t know if they’re going to replace those with maybe some traditional internal combustion engine vehicles. But we’ll have to see there.

Wes Moss [00:02:52]:
We’ll have to see over buying of electric vehicles. So that’s what we’ve been seeing. We’ve also been seeing to some extent, I don’t know what the economic implications are, but we always are thinking this is the year where Americans are starting again to think about power. So we’re thinking about AI is ten x the power it takes for a search. So we’ve talked about how that is replacing Google searches. And I noticed because we’re in, we’ll share an office a bunch as we’re looking things up. I noticed you will go, sometimes you’ll use Google, which is just a small fraction of energy, and then sometimes for searches you’ll go to artificial intelligence. And we know that that search is ten x, the energy, the output, the power needed here, which has huge implications for the grid layer.

Wes Moss [00:03:45]:
On top of that, you’re seeing because of the heat dome in the northeast, companies in the northeast, power companies in the northeast asking people to not use their big appliances during peak air conditioning hours. It’s another reminder of the stress on the grid and how much power we think we’re going to continue to need really because of artificial intelligence. You can debate whether the world’s getting hotter. I know we’ve just had the hottest, we’ve had the hottest every year seems to be the, quote, hottest year. But again, I don’t think we go back very far on that.

Connor Miller [00:04:20]:
That’s right. You think about artificial intelligence just requiring more energy. You think about just more electrification across the grid, whether it be with EV’s or anything else that really is electrified. And yeah, we’re going to need more from, from utility companies even though it’s.

Wes Moss [00:04:37]:
Super hot in the southeast. And of course it always is in June and certainly in July and August. But we’re technic. I don’t think we’re really in the actual heat dome. We’re more like we’re right outside the dome. So we’re kind of tailgating at the heat dome.

Connor Miller [00:04:53]:
Tailgating at the dome.

Wes Moss [00:04:55]:
So my wife is actually traveling with some of the kids in the northeast for La Crosse and they are playing in this. And it’s, it’s hot. It’s as hot as it is here. It is over 100. And I, I think 01:05 I was looking the heat index for Maryland and Baltimore. And so I, I did, I actually had to google how much water do you need to drink if you are outside in the 100 degree heat for 10 hours? So, and it’s a lot. You basically have to just continue.

Connor Miller [00:05:27]:
We were looking at the weather, it’s actually cooler in Florida, in the south than it is in Baltimore.

Wes Moss [00:05:34]:
I was talking to a longtime client and friend of mine who was a football player back in the day, college football, a little bit of NFL. And he was remarking that again when he played water was for sissies. So you’re in the mid, in July. That water was for sissies. You know what they gave them? You know what they did? They took two salt tabs and a sip of water. Can you imagine? 100 degrees outside? You get Gatorade. Hadn’t been invented yet. It wasn’t a thing.

Wes Moss [00:06:06]:
You get a sip of water and a salt tap.

Connor Miller [00:06:10]:
Those were, yeah, those were tougher people.

Wes Moss [00:06:13]:
They were tougher back then. I think they were a little tougher. So it’s officially summer. This past week, of course, we had the Wednesday markets are closed for juneteenth. What do we have less or what do we have left? We’ve got Labor Day, Thanksgiving, Christmas for market holidays. So we already.

Connor Miller [00:06:30]:
July 4 coming up July 4 in.

Wes Moss [00:06:32]:
Two weeks, we’ve got Independence Day, July 4. Then we’ve got Labor Day, Thanksgiving and Christmas. So we’re more than halfway through market holidays. It’s officially summer. Remember the, do you remember, sell in May and go away.

Connor Miller [00:06:48]:
It’s just, it sounds so good, right?

Wes Moss [00:06:51]:
It sounds so good.

Connor Miller [00:06:52]:
We’re suckers for anything that has a slight rhyme to it.

Wes Moss [00:06:55]:
You love naming it. You’re actually joking. That everything, I don’t know. 20 years ago you’d say, gosh, it’s hot. Now there’s a name for why it’s hot. It’s the heat dome.

Connor Miller [00:07:04]:
That’s right. It used to be. It’s just unusually warm outside today. And now we got a name. It’s the heat dome. No different from what we find in the financial world of selling may go away, which may have once upon a time been true, but as we’ve found out for the last several years, and even this year included, it’s not something that you should base your financial decisions off of anymore.

Wes Moss [00:07:31]:
Well, essentially, for those who are saying, what are you guys talking about? Sell in May and go away means that the market after May through really October, doesn’t do much, supposedly. So the summer months, the stock market isn’t supposed to go up all that much. And then from October or November to the rest of May, then that’s when you start to get, that’s really when you get the bulk of your market returns. It doesn’t make sense because if you were to sit out those summer months, even though historically the returns are better, if you sit out may, it’s still not nothing. So if you’re losing out on a couple of a percentage, on a long term average of ten or 11%, your compounding is terrible. It doesn’t come close to the market. So sell the main, go away. Doesn’t really make, never really made sense to me.

Wes Moss [00:08:20]:
But so far this year, it’s not working. If you look at a chart. So let’s say we sold in April 30 of this year. Well, what’s happened so far? Well, s and P 500 up about 9% since then. So that’s wrong direction. That page of the all man act did not work. Stock traders. All right, Almanac.

Wes Moss [00:08:38]:
Dow’s up three, three and a half. Dividend related companies up three to four to 5%. So the sell in May has really not worked this year. That would have been a big mistake. So bottom line, these, I guess they’re interesting. It’s like the Santa Claus rally. It’s interesting, and it seems to, that is one that seems to have really worked over the course of the last 25 years or so. As I’ve been in the investment business, that one feels like it’s working, maybe because it’s a shorter window.

Wes Moss [00:09:07]:
You know, it’s around the holidays and you can kind of correlate. Well, the market’s up. Oh, it’s Santa Claus reality. The sell in May and go away is such a long stretch. It’s so many months. It’s hard to kind of feel that that’s working or not. You’ve almost got to look back in retrospect. So I look at this as the sell domain and go away is one of those cute market sayings that it may rhyme, but really has no reason.

Connor Miller [00:09:32]:
Exactly. And look, I don’t want to spoil one of our segments down the road, but we know that on average, the market is up more days than not.

Wes Moss [00:09:41]:
Don’t give away the exact number. Don’t give the exact numbers here.

Connor Miller [00:09:44]:
But we know that in investing, time is on your side. You want to let the compounding do its work. And so you got to be in it. You got to be in it. You want to stay invested.

Wes Moss [00:09:53]:
We’ve got to be in it. Now, speaking of May, even though we’re now almost headed into July, it reminds me of the commencement speeches. And, you know, I love, if you listen to money matters for some reason. I love commencement speeches. I think it’s because we had a fairly unremarkable commencement speech when I graduated. I don’t want to go back, and I don’t even remember who it was, but I just don’t remember it being amazing. So, over time, as YouTube has allowed us to watch other commencement speeches in May and June and July, after they happen, the cool ones, the interesting ones, or the motivating ones kind of bubble up to the top. And one bubbled up this week, and it was one Roger Federer who was speaking at commencement at Dartmouth.

Wes Moss [00:10:38]:
And it had really nothing to do with the stock market. It had to be about life and success and winning. But our crack producer, often co host two of the show, Jeff Lloyd, made a. A beautiful mind connection. The way he figured this out, it was literally his synapses going from tennis graduation, commencement speech, to the activity of how the stock market works in any given day versus over time. It’s a remarkable lesson that we want to discuss here today.

Connor Miller [00:11:12]:
Yeah, he calls our team up, the investment team, myself and our analysts.

Wes Moss [00:11:17]:
He gets the idea and you have to do all the work.

Connor Miller [00:11:18]:
He goes, hey, can you pull some data for us? And I’m like, yeah, sure. He didn’t really give us a lot of backstory. He just, I need you to pull this data.

Wes Moss [00:11:27]:
He was keeping it close to the vest.

Connor Miller [00:11:28]:
Keeping it close to the vest. He wanted to make sure that it all lined up to fit this perfect story, which we’ll talk about here in a second.

Wes Moss [00:11:33]:
We will. But first, here’s a not so perfect story, and that’s about inflation. Because when you hear Connor Miller that we’ve had over the last three years, we know why Americans feel like we’re in recession. We’ve talked about this for the last year or so, is that even though we’ve started to see some real wage gains, I’d say they’re good, not great. We just got numbers this week, real wages, which means your wage increase minus inflation. So if you get a 5% wage increase, but inflation, six, it’s a negative. You’re actually still taking them less than it costs. We’re at the point now where real wages are positive, meaning that now they’re up 4.1 over the past year.

Wes Moss [00:12:20]:
Inflation’s quote, 3.3. So there’s a little less than 1% real gain. Wages have gone up faster than prices, at least over the past year. And we look over the past three years, we know that we’ve seen about 17% inflation in the United States, which on the surface, doesn’t sound that crazy. It’s still tremendous, and it’s much faster than we have gotten used to in the prior decade. And a half or more than that, but it still doesn’t sound all that bad. What does sound bad to me, and this is the real struggle of households in the United States, is that, on average, in 2020, the average family in America spent, is that correct, Connor? These are just spending numbers.

Connor Miller [00:13:05]:
Yes, exactly. So we went and looked at a bank rate survey that measured spending over the last three years. 20. 202-021-2022. So in 2020, the average household expense was about $61,000.

Wes Moss [00:13:19]:
That was the total outlay.

Connor Miller [00:13:21]:
That’s right. Fast forward two years to 2022. $72,000. That’s about an extra thousand dollars a month that households are having to spend.

Wes Moss [00:13:31]:
See, I think that puts up Morton’s perspective. 61,000 on average, spending all the way up to $72,000. That’s an extra thousand bucks a month in a pretty compressed period of time. No wonder the majority of Americans over 50%, 56%. This is according to a Harris pool from the Guardian. Say we’re in recession and say the stock market’s down, and say that the unemployment rate is the highest it’s been in 50 years. Now, we know that the inverse of all that is true when it comes to the actual numbers, but we also know that the way people feel is dictated by that outlay going up so fast relative to earnings, which have gone up, quite frankly, less fast until just very recently. That is the plight of the investor, that is the plight of the american family here in the United States.

Wes Moss [00:14:25]:
And there’s very few antidotes to that. One of them, we know one antidote to inflation is to own assets that inflate. That could be real estate, private businesses, and, of course, the us equity markets over time. And we know that there have been very few things that have outpaced inflation so significantly than us stocks and the stock market, et cetera. Which brings us to Federer. Roger Federer is the stock market. The market is Roger Federer. Which is what, I guess we like talking about tennis.

Wes Moss [00:15:01]:
Connor Biller started to play tennis. We know tennis extends life, according to the Copenhagen City heart study. And by the way, what is the. There was a couple of the statistics around that that show how. How much cardiac, how cardiac issues went down. Remember, this is a 25 year longitudinal study that looked at those almost 10,000 people in Copenhagen that were activity based relative to the general population that were not. And of course, the folks that were activity based, soccer, cycling, swimming, lived a lot longer on average. And the cardio rates were interesting as well.

Connor Miller [00:15:45]:
Yeah. So we’ve talked about this on the show before that, tennis players live, on average almost ten years longer than the average group. That’s crazy stat. And really better than any other sport. Most other sports. I think badminton was up there, too, right?

Wes Moss [00:16:00]:
Badminton’s number two on the list, but.

Connor Miller [00:16:02]:
Even better than soccer and swimming and cycling. But what’s, what’s really wild is when you look at the decrease in one risk of all cause mortality, reduces your risk of all cause mortality by nearly 50%, 47%, and then cardiovascular related disease and related death by 56.

Wes Moss [00:16:23]:
Was this tennis alone?

Connor Miller [00:16:25]:
Tennis alone.

Wes Moss [00:16:25]:
Tennis alone. All right, so speaking of tennis, let’s go back to Roger Federer. Now. We, first of all, if you don’t remember Federer, it’s not been that long since he’s been off the court. He won 20 majors. Those are the big ones. That’s Wimbledon. That’s where Taylor Swift is today.

Wes Moss [00:16:45]:
He won 20 of these, eight of them. Wimbledon, six Australian opens, five US opens and a French open. He was the number one world ranked tennis player for 310 weeks, 237 consecutive weeks. That’s, that’s four and a half years straight. Four and a half years straight at number one. He won 103 ATP Tours, second of most all time. I looked it up. Jimmy Connor’s interesting was number one on that list, one oh nine.

Wes Moss [00:17:17]:
So Federer’s 103 at number two lifetime. But again, I think the consensus is that he’s the greatest of all time. Even above Yvonne Lendl, Rafael Nadal, Novak Djokovic. He’s still. He is. He’s the goat. He’s the tennis goat. He’s the Michael Jordan, the Tom Brady of the sport.

Wes Moss [00:17:36]:
All right, got it. Now what’s the point? So during his speech, he made this perspective. So, first of all, he talked about effortlessness. And the commentators always commented on how he was just. It was effortless, almost like he wasn’t trying. And he takes issue with that. He’s like, I don’t even like that. You have no idea how much work has gone into that.

Wes Moss [00:17:56]:
He’s like, for the best shape of my life, 2 hours in, still feeling good. Then hour three. So during his speech, here’s the perspective. He said that, and this is about one point, let me explain. First of all, he has that perfection is impossible when you’re playing a sport. He played over 1500 singles matches. That’s 1526, to be exact. And do you know what his percentage of matches he won? He won 80%.

Wes Moss [00:18:33]:
He won 80% of his matches. Then he looked at the crowd and he had a question. He goes, what’s the percentage of points. Do you think I won? He won 80% of the time for what mattered, but he only won 54% of the points. Roger Federer, one of the greatest tennis players of all time, won 54% of the points he played. What’s that? He also, you could say he lost 56 or 46% of all points. A little more than a coin flip. A little better than a coin flip.

Wes Moss [00:19:07]:
I was pretty surprised by that. You think about all the success, 20 majors, 103 single titles, $130 million of career prize money. He won 80% of the matches, but he only won 54% of the points. Here’s why I’m telling you this as Roger Federer has. He said, when you’re playing a point, it is the most important thing in the world, but when it’s behind you, it’s behind you. The mindset is this is crucial because it frees you to fully commit to the next point and the next one after that. And the intensity with clarity and focus even he said, when I had my best point, and it’s on ESPN highlight reel, top ten plays of the week, it’s just a point. So he never got all that excited about a great point, let alone a loss point.

Wes Moss [00:19:56]:
So those are the stats. Now let’s think of this in market terms. Let’s think of a day in the stock market as a point. Tennis an update in the market. That’s a tennis point. One down day in the market. That’s a tennis point loss. Let’s look at market data going back to 1950.

Wes Moss [00:20:14]:
So we’re going back over 70 years, 1950 through 2023. What percentage of days was the stock market? Up? 54%. The exact same winning percentage. Just slightly better than 50 50 than Roger Federer. So that’s just investing days. What about investing years? To borrow another tennis term, let’s look at full year returns. What percentage of the time do we have positive returns for a whole year going back to 1950. Again, positive year, that’s a match won, not a point.

Wes Moss [00:20:48]:
A year with negative terms, that’s a match lost from 1950 to this past year. What percentage of years was the stock market? Up? 74%. Almost exactly to Roger Federer’s winning percentage of matches. Not quite the he’s now, he says almost 80%.

Connor Miller [00:21:09]:
And this is why producer Jeff Lloyd was, was so giddy when he found this really just astonishing parallel between these two, that the margin of error really is just so small. It’s not. But it’s not like there’s an overwhelming majority of days that are going to be higher and that’s going to lead to significant returns, it’s just a little bit at a time. And staying invested over the course ultimately leads to really strong returns over time.

Wes Moss [00:21:39]:
So Federer, for the world of tennis, was one of the greatest productivity machines of all time. He built an incredible legacy that will carry on forever. Despite only winning 54% of the time, he completely dominated overtime. And for what really counts, full matches, he won almost 80% of the time. That’s enough for absolute greatness. A massive legacy. Well, with the us stock market, the market is just like Roger Federer. It too only wins 54% of its points.

Wes Moss [00:22:13]:
In this case, it’s days. But zooming out, it’s just like Federer. Because when it counts years, not days, it wins almost 75% of the time as well. And if you take that over a career, ten years, 20 years, 30 years, the good news is for us as investors, we get to pick our career timeline and invest in it and can build a legacy of lasting wealth for you and your entire family. Something elite, something amazing, can still only win 54% of the time and be great. Actually exceptional. The stock market is Roger Federer. Roger Federer is the stock market.

Wes Moss [00:22:53]:
More money matters straight ahead. If you’ve ever done a Jane Fonda workout, or if you remember as a kid rocky running the steps, and if Michael Keaton is still mister mom to you, then guess what? It’s officially time to do some retirement planning. It’s Wes Moss from money matters. Weren’t those the good old days? Well, with a little bit of retirement planning, there are plenty of good days ahead. Schedule an appointment with our team today@yourwealth.com. dot that’s your yourwealth.com dot. Conor Miller don’t quit your day job. Social media influencers are barely getting by.

Wes Moss [00:23:35]:
Platforms pay less for popular posts, brands get Pickier. I was kind of surprised by this. This was actually a cover story, Wall Street Journal, where you have some of these what seem on the surface really big influencers. They’re barely scraping by to make a living.

Connor Miller [00:23:53]:
So yeah, I was kind of blown away by some of this. One of the guys that the article featured has 400,000 followers on social media, has posts that average more than 100,000 views. You would think someone like that would be making a lot of money relative to the rest of us. But only $58,000 made in 2023.

Wes Moss [00:24:18]:
Here’s one. Denisha Carter frustrated that TikTok and other platforms sold the idea of content creation as a job. And my kids have said this to me, I’d love to be a social media influencer and on the surface, it really looks like, I mean, think about that job. You fire a bunch of nerf guns or unwrap some toys, the kitchen to the backyard, and make real money. So my kids see this, they see the numbers. That seems like a good job. Can I just do that?

Connor Miller [00:24:43]:
Isn’t it the most desirable job for people?

Wes Moss [00:24:46]:
It’s like the number one most desired job. But later, here’s what Denisha found out. She’s 26, she has 1.8 million TikTok followers. 1.8 million. Her posts are about beauty and exercise, and I guess there’s some opinions on online bullying. Hundreds of thousands of views. She got paid last year from TikTok. Twelve grand.

Wes Moss [00:25:17]:
She sells merchandise, it gets additional income that she got five grand. So think about that. $17,000 for somebody who’s constantly creating content and has, and has 1.8 million followers. So now you can also look at the follow the numbers. YouTube has supposedly paid out $70 billion to creators over the last three years. So call that 25 million or so per year. And that in itself seems like a lot of money that’s getting, but the question is how much is getting spread out? And there’s no barrier to entry. To be a social media influencer, if you have an iPhone, you can hit record and you can post.

Wes Moss [00:25:59]:
So it’s zero barriers to entry. So you have so much competition. You hear these stories of. I guess it’s what Jake Paul or Logan Paul. You had a couple of people in the very beginning, but I’m looking at this math as the ultimate pin needle at the very, very, very top. Kind of like professional golf, where you’ve got millions of people playing and you’ve got a few dozen people really making any real money.

Connor Miller [00:26:26]:
Yeah. A group called Neoreach compiled all of the data. What they found was 48% of creator earners made $15,000 or less. Only 13% made more than $100,000.

Wes Moss [00:26:40]:
That’s still pretty good, though. 13%, I don’t know, seems pretty decent. That’s a lot, actually. Well, but on the other side of the equation, don’t let your babies grow up to be social media influencers. I certainly will not. I don’t want my kids to do that for a living. With that Connor Miller. There’s a couple of different things that hit me this week.

Wes Moss [00:27:02]:
I think it was, we were talking about tennis. In this crazy relationship between how the most successful tennis player essentially ever, Roger Federer, only won 54% of his points, yet he won 80% of his matches. And that just maybe it’s a Kennedy, Lincoln, Lincoln, Kennedy. It’s just like the equity markets are almost identical. They, in any given day, are point up or down 54% of the time. Up. Roger Federer only won 54% of the time, yet he’s the greatest of all time. If you look at the track record for the stock market, almost 75% of the time the stock market wins when it really matters, which is a full year, not a day.

Wes Moss [00:27:42]:
And the correlation of those two, I think is just fascinating that you can create this massive legacy, be the greatest of all time. Tennis, just like what we’ve seen in the us stock market, created an enormous legacy, and again, arguably the greatest of all markets and economies in the entire planet, all by winning only 54% of days or points, however you wanna look at it. So the math is very interesting around that, and it’s a very nice correlation and a nice lesson to investors to stay patient. As long as we’re winning a little bit more than we’re losing, over time, the trajectory can build enormous wealth. So, speaking of, that’s tennis when it comes to golf. We were off Wednesday, kind of just this crazy. You’re off middle of the week. I heard somebody in the office this, I guess, Friday, talking about how, how great it was having that one middle day off in the week for juneteenth holiday.

Wes Moss [00:28:41]:
But imagine if you have every Wednesday off and you only had two work days in a row.

Connor Miller [00:28:45]:
Yeah, I mean, you hear a lot of talk about shifting to a four day work week. And I think it begs the question, yeah, would you rather have it in the middle of the week or would you want it to be attached to the weekend? It was interesting having it in the middle of the week. It almost felt like there was more work that needed to be done. But at the same time, the stock market was closed and it was just kind of a nice day to refresh.

Wes Moss [00:29:10]:
It was interesting. Well, speaking of work from home, we know is the trend had been creeping north of people working flexibly, people working via Zoom, or not that many people before COVID but people working via some sort of video chat. And then it got accelerated into hyperspeed warp speed because of COVID But it hasn’t changed. Meaning that we had this grand acceleration of work from home, and unlike many of the trends that kind of resettled. So think about inflation through the roof back down to getting close to normal, the job market, massive vacancies through the roof, now getting back down to normal. So we’ve had a lot of these explosions of data that were way out of the ordinary. Remember, the unemployment rate went from normal to 14%, then back down to normal. So we’ve had all of these economic disturbances and disruptions essentially get back to normal.

Wes Moss [00:30:11]:
One of the areas that is not going back to normal is how we work in America. So it’s one of the persistent trends, the enduring structural changes. And you can measure that by looking at cell phone data. And this is cell phone activity in all the major metro downtown areas in the United States, 2019, relative to where we are today. And again, this is still apples to bapples, because even though you might say Atlanta is a good example, well, not a ton of people are downtown working. It’s not necessarily a hub. Why aren’t they looking at Buckhead? Or why aren’t they looking at Midtown, but they’re looking at the downtown area then and now for all of these metro cities. So we’re talking about Minneapolis, Jacksonville, Baltimore, Atlanta, Cleveland, Memphis, San Diego.

Wes Moss [00:31:00]:
And there’s a list of about 40 major metros. And the takeaway here is that if you compare the cell phone activity, meaning how many people are roaming around, you can almost measure how many people are there in any given day by measuring cell phone activity is down still to this day. Dramatically from 2019, over 40 downtown areas in the United States are still 30% lower than where they were pre Covid. 21 downtown areas are still 40% lower than what we saw prior to the pandemic. So imagine that many people less are now in these downtown areas. Now, a couple of takeaways. One, of course, commercial real estate prices. No surprise that we’ve seen lots of commercial real estate down 2030, 40% in value.

Wes Moss [00:31:52]:
We have 2030, 40% of less people, particularly in downtown. Now, I’d say a place, again like Atlanta is a little more confusing because we have kind of three downtown areas, Buckhead, midtown, downtown. But not all cities are like that. A lot of these cities are, are a little bit more concentrated. But the number one, back to normal city, Las Vegas, back to 97% of normal cell phone activity. It means essentially about the same amount of people are roaming around. And an average day in 2019, still doing it now to this day, or have grown back to doing it to this day. Number two, I think this is where our formidable producer Ryan Doolittle is from Bakersfield.

Wes Moss [00:32:35]:
I believe that’s California. Ryan and all his cohorts and his brethren from Bakersfield, they’re back to 93% of activity. They’re back and hopping. But a place like St. Louis, they’re down more than 50% still a place like Seattle. Down 47. Only 47% back to the normal level. And the least amount of activity relative to 2019.

Wes Moss [00:32:59]:
What metro area? Minneapolis. Minneapolis, Minnesota. Just only 44% of pre pandemic roaming around. Activity in the downtown metro. And the takeaway there, of course, is that this is not going away. This is structural. It’s not a flash in the pan. Doesn’t look like we’re going back to a, quote, normal anytime soon because we’ve changed the work week.

Connor Miller [00:33:24]:
And even Atlanta, which feels like a city that if any more people have gone back to the office to work, at least gauging by my commute in the morning, still only at about 80% of the level it was at in.

Wes Moss [00:33:38]:
2019, we’re still down 20%. 20% less activity, at least downtown. What’s interesting to me is it doesn’t feel like, it feels like traffic is worse than ever, though. Connor, so how do you explain that?

Connor Miller [00:33:51]:
I get, well, look, 80%. If you think about a five day work week, if people are working from home one or two days a week, I guess everyone’s going in the office Tuesday, Wednesday, Thursday, and that really feels like when traffic is the worst, and that’s true.

Wes Moss [00:34:05]:
And this is, and I guess there’s another nuance to this. We’re only looking at downtowns. We’re only looking at downtowns. When you could make the case that people have spread out maybe a little bit more ever since COVID we, we know that more rural areas had a huge surge. So we know that there’s been a little more spreading out of just humanity, demographically, geographically in the United States. So that could also, I think, be part of this. It would be interesting to see the same study when it come, I guess I don’t know if you could do this with metro areas. I don’t know if you could do that.

Wes Moss [00:34:41]:
It’s because of downtown is people walking around. You can’t really do that to an entire metro area because it’s not like our population is any less here. So you can’t, I don’t know if. I don’t know if that works. But I think the takeaway is that so much activity, economic activity that was distorted is now getting really close back to normal. This is one of the few that’s just not changing. And it’s kind of ingrained and embedded.

Connor Miller [00:35:09]:
Pre Covid and relaying it to the economy as good as the economy has seemingly been. The one thing, the buzzword that has been over the last couple of years is commercial real estate. Because that is the one area that has struggled in value, and I think this is part of it. With cell phone activity being down, really just a symptom of overall people going into the office less.

Wes Moss [00:35:34]:
I knew where I wanted to go with this, and I lost. I jumped to cell phone activity again, thinking of these disturbances of these big economic shifts, big supply changes, big demand changes. One of the areas in the economy that blew up in a good way, that had massive demand was when we were in the throes of COVID As soon as we got out of the lockups, what was kind of the number one thing the world wanted to do?

Connor Miller [00:36:02]:
Got to eat.

Wes Moss [00:36:03]:
Well, that was one of them. Golf. Golf was huge. Yes. Producer Mallory was strumming. Yes. Guitars are still a little bit of an imbalance. They still can’t quite make enough of them.

Wes Moss [00:36:14]:
But golf was kind of the easiest way to go outside, be spread out, still be social. And I was at. I was actually at a great golf place this past week because of the holiday. Wednesday the market office was closed. I was at the golf warehouse up in Smyrna, which was an awesome place. Had to get some golf clubs. The owners had it for 20 some years. So I had a great experience there.

Wes Moss [00:36:36]:
But he was telling me that the number one, he’s owned it for over 20 years. The number one month he’s ever had was June of 2020. Coming out of the lockdowns. Right. We kind of got started. The lockdown stopped around late August, April, May, and then, boom. People are buying golf clubs in June. This June is the first time since COVID that it will surpass again.

Wes Moss [00:37:01]:
Economic imbalances kind of healing themselves after these ripples. And maybe there’s a little structural. What’s the answer to that? Maybe a few percentage more people stuck with that golf. They started it. These are new people four years ago, and now they’re really into it. Maybe they’re going to get new golf clubs.

Connor Miller [00:37:18]:
Yeah. And more people have migrated to Atlanta, and it’s just become a popular destination for a lot of people.

Wes Moss [00:37:24]:
It’s a great golfing city. There’s so many wonderful public golf courses around. There’s obviously a lot of great private courses to hear about. Some of these private courses, though, and the waiting list to get on there. Some of these courses are five year waiting lists. I’ve heard of a. Who’s joining a waitlist at seven years? Connor Miller.

Connor Miller [00:37:44]:
Well, you have.

Wes Moss [00:37:45]:
Who’s gonna be. I don’t know if I’m gonna be alive in seven years.

Connor Miller [00:37:48]:
The problem is, if you wanna go play on a public course, you’re gonna spend $100 or more, and then it’s gonna take you 6 hours to play around a golf because there’s so many people on.

Wes Moss [00:37:57]:
It’s true. It’s true. Well, we’re an undersupply of golf courses.

Connor Miller [00:38:02]:
This is why I’m a tennis player now.

Wes Moss [00:38:03]:
Yeah, it’s a little easier to do that. I hope you stick with that. I’ve gotta do the same thing. I’ve got to get back to, to the tennis court because I want my longevity to increase. And again, I don’t know if it’s correlation causation, but there’s something magical about the sport of tennis, on your longevity. And I think, I’m glad that you’ve taken note here on money matters. You’re listening to money matters. Connor Miller.

Wes Moss [00:38:30]:
I want to know the cost of trying to time the market. That’s what I’m looking at. Because we, for some reason, we cover this a couple times a year. It’s one of the great, it’s one of the great perennial reminders to all of us, investors, me included. Right. Again. A lot of times, money matters is an education for us as we continue to study behavioral psychology, behavioral finance, markets, market history, put it all together in one big bowl of soup, and we’re constantly trying to stir that and stay on top of it and understand it. And part of that is behavioral finance.

Wes Moss [00:39:06]:
One of the great reminders is, and we go back to where we’ve talked about our tennis analogy today, even though you might only win 54% of your points, you can still be one of the greatest tennis player of all time. Even though the stock market’s only up 54% of Davis, it can still create some of the most tremendous wealth of all time as long as you stick with it. But it’s also a reminder that we can’t be timing the market. And we typically look at this in terms of percentages. And if we miss a couple of really good days, good old fashioned 1011 percent rate of return drops to seven, you miss a few more days, drops to five, missed ten or more, you dropped to zero. This is more of a dollar perspective. And Conor Miller, I like this version of it. So walk us through.

Connor Miller [00:39:50]:
Well, yeah, to stick with the tennis analogy, just as every point matters in investing, every day matters. We went back and we looked at what would happen to the value of $10,000 invested in the S and P 500 over the course of about 20 years, from January of 2003 all the way through to the end of 2022, if you missed out on the ten best days, the 20 best days. The 30 best days.

Wes Moss [00:40:17]:
So we started with 10,000. And that grew to what? Being fully invested?

Connor Miller [00:40:23]:
Fully invested, $10,000 grew to about $65,000. Okay, then if you missed out on just the ten best days. And so that’s in the grand scheme of things, over 20 years, ten days is not a lot. The ten best days, your return was less than half. So instead of growing to $65,000, you only grew to less than $30,000. Then we looked at. We kept looking at it. And if you missed out on the 20 best days, only $17,000.30 best days, $11,000.

Connor Miller [00:40:58]:
And then if you missed out on the 40 best days, you actually had a negative return. So you started with 10,000, ended up with only $8,000.

Wes Moss [00:41:06]:
Pardon me, to do a little bit of math here. What you’ve. I think you’ve said, put this in perspective. You get this 20 year period. There’s about 252 trading days in a given year, right? So over 20 years, that’s 5040 days. Your return, by missing ten of the best days, over 20 years. So you have over 5000 days, you missed the ten best, which we don’t know when they’re coming. That’s.

Wes Moss [00:41:32]:
That’s the other really important point of this. Your rate of return gets. Well, your return drops more than in half. So you go from 65 down to 30. And I believe ten divided by 5000, that’s just 0.2 of a percent we’re missing. So, meaning that 90, you were there for 99.8% of the time and just missed 0.2 of a percent, that’s what happens. Your investment return gets cut in more than half.

Connor Miller [00:42:00]:
And maybe even most astonishing is the fact that seven of the ten worst days came in bear markets. So when you’re most likely to sell or when you have the biggest urge to sell, that’s when you needed to hang on.

Wes Moss [00:42:11]:
Seven out of ten best days.

Connor Miller [00:42:13]:
Seven out of the ten best days in bear markets.

Wes Moss [00:42:15]:
What have we learned here today? Connor Miller.

Connor Miller [00:42:18]:
We’ve done a lot of tennis analogies. Yeah. Talked about Roger Federer, some just really astonishing statements about how successful he was as a player, and the analogs to the stock market, which we’ll talk more about here in a second.

Wes Moss [00:42:36]:
Well, not only is it one of our favorite sports for happy retirees, because happy retirees, well, humans, evidently, from the Copenhagen City Heart study survey, live almost ten years longer if they play tennis, but Federer gave this great commencement speech at Dartmouth a couple weeks ago, producer Jeff Lloyd and co host Jeff Lloyd listened to it, and something clicked in his brain as Federer said that he’s making the point to graduates that tennis is obviously this really difficult game. He’s essentially the best in the world. He’s won 80% of his matches, but he lost 54. But he only won 54% of his points. The point is of that to move on in life. So just because you lost a point, that’s, even though it’s so important, it’s totally fine. You move on to the next, and you give that point your best. Even if you win the point, you can.

Wes Moss [00:43:34]:
You don’t rest on that. It’s always about the next point. And if you can win a little more than losing, in this case, the greatest tennis player in the world won 54%, then you can create just a massive legacy, essentially the greatest of all time over a multi decade career. Yes, Federer made $131 million. Yes, he won, what, over 100 tournaments, 20 majors or grand slams, made $131 million in prize money. We were looking at his other net worth. He’s made about a billion dollars in endorsements, and he’s a big investor and I guess owner, evidently, of the on running company, which is a swiss company, and he owns 3% of that. It’s a $13 billion or so company.

Wes Moss [00:44:22]:
So that stake, hypothetically, is worth another $400 million. But the corollary here is that this path to greatness was only winning 54% of the time, just a little bit more than half. What’s interesting is that it’s the exact same number of how the stock market’s done in any given day. So any given point is a day for Federer, and any given day is a point for the stock market. And about, well, almost exactly 54% of days are positive, the other 46% are negative. But over time, Federer won almost 80% of his matches. And guess what? Almost 80% of years, which matter. Those are the periods it didn’t really matter for investors, just like the match matters, not the point, up about 75% of the time for annual gains in any given calendar year.

Wes Moss [00:45:22]:
It’s just a really nice lesson to remember that we can have this path to absolute greatness and create a massive legacy with the math of being a little bit better than half, a little bit better than 50%, which is exactly what the equity markets have done, at least historically. That can end up with a wonderful result, as long as you give it time and you stay good. The reason I think it’s an interesting analogy here is that us companies are essentially not always on the top of their game, but they’re constantly training, they’re constantly trying to get better, and they evolve. They’re not human because they don’t get old. They can continue to evolve even if they’re 50 years old, 100 years old, 150 years old.

Connor Miller [00:46:07]:
Yeah. And one of the things that Roger Federer said in that graduation commencement speech, which he takes offense to, is his ability to make the game look effortless.

Wes Moss [00:46:21]:
Effortless. He didn’t like that.

Connor Miller [00:46:22]:
And I think there’s another parallel there to, you know, when you’re in saving for retirement, socking away a lot of money and using the effect of compound returns can almost look effortless to an extent, but there’s a lot of hard work that goes into that.

Wes Moss [00:46:40]:
That’s such a good point. I mean, you think one of the most useful finance books of all time was the David, is the David Bach book, the Automatic Millionaire. It’s a short book, it’s got big print, the pages are small, you can get through it in 15 minutes. And essentially it says what we all know to do. It’s not that we all do this, but we turn our 401K contributions on autopilot and we automatically allow money to come out of our paycheck into a savings account. Then it gets invested. And the being able to do that automatically is a very much a path to wealth for so many Americans. I can tell you that nearly every, not every family, but the vast majority of families I work with over these years got to their net worth figure in that same vein.

Wes Moss [00:47:32]:
They were just habitual savers, and most of them just did it automatically. It’s a decision. It’s a tough decision to make one time. But then just the essence of technology and payroll can some extent be very powerful because it continues on. Now, the hard part is that when times are tight and things get expensive, you got to leave it on and you have to allow that extra money come out of your paycheck. And that’s where the sacrifice is. And that’s when it gets really. I think that’s when it gets really hard.

Wes Moss [00:48:05]:
So, to his point, it’s never really effortless. Effortless. It may look effortless. Oh, I turned on my 400k automatic contribution, but you still have to be able to pay for everything with a big chunk of your paycheck going into a place that you’re saving for a much, much later date.

Connor Miller [00:48:23]:
Yeah. And it’s just that discipline year in and year out, just continuing to put money away in his case, continuing to put in the work really does, over time, make it look a little bit more effortless.

Wes Moss [00:48:35]:
Which leads us back to, if you think about just being in the game, we talk about perfection and participation. It’s much more important as an investor to participate as opposed to be perfect. First of all, we know we can’t be perfect. That’s essentially a fact. There is no way to be perfect and perfectly. Time. The market. The market is so unpredictable in any given short period of time, we don’t know what points are going to be won or lost in any given day.

Wes Moss [00:49:02]:
You can wake up, futures are up 300 points in a given morning because of earnings last night, or it could be the opposite, and you can end up with down 300 points and wake up, oh, it’s going to be a terrible day in the market. So we don’t know in any given narrow moment where things are headed. Which leads us back to the cost of timing. The market that, Connor, you went through that showed the value of being fully invested over 20 years, $10,000 grows to 65,000, essentially being fully invested in the S and P 500 over that zero three to 2022 timeframe. You missed just ten days, Conor. And what happens? You’re not at 65 anymore?

Connor Miller [00:49:43]:
Not at 65, no. You’re left with less than half that at just under $30,000. And so we did the math earlier, missing out on just the ten best days.

Wes Moss [00:49:54]:
Ten days out of a little over 5000. So there’s over 5000 trading days in.

Connor Miller [00:50:00]:
A 20 year period, 0.2% of days. And so you’re staying invested for 99.8% of days and you end up with less than half the return.

Wes Moss [00:50:10]:
And those days where things go well are important and you don’t know when they’re going to be there. So you’ve got to be invested the night before something great happens the next day or overnight so that you capture that gain as markets start. So I think that’s a really important takeaway here today. The other thing that we’ve talked about, how is that most of the world has returned, to quote, normal around Covid, with this major supply chain disruption. So we had then we had a major demand shift where we had no demand for a little while. We were locked in our homes and we had this massive pent up demand, and it coincided with massive supply chain shortages because we couldn’t get container ships in. And the next thing you know, you have this double whammy of lots of demand, lack of supply, inflation through the roof, plus all this extra money that get dumped into the system during that Covid period of time, and it created massive inflation. We went from very little to no inflation, up to over 9% inflation.

Wes Moss [00:51:09]:
Now we’re back down to 3.3, so we’re getting back to more normal. Interestingly, we parallel very closely with what the UK is doing. UK very low inflation very quickly spiked to 11.1% around the same time we did in 2022. Now they’re back. They just printed this week their latest inflation for the United Kingdom back down to 2%. That’s exactly where the Fed’s trying to get as well. Now, what’s interesting is they have not cut rates yet, but as long as Taylor Swift only does a few concerts in Wimbledon, it looks like inflation may be back to the point where the bank of England, the BoA, can start to cut rates, because we’ve already seen the ECB, the European Central bank, start to make some moves lower.

Connor Miller [00:51:59]:
That’s right, yeah. On this topic of normalization, the one thing that really had taken a while to normalize, and is still in the process, is the labor market. I remember months ago we talked about former Fed chair Ben Bernanke. The one thing he was looking at was the balance of how many job openings there are versus how many unemployed people there were. Even that has started to normalize, where at one point there were two job openings for every person that was looking for a job. Now, today, we’re in a lot more, what we would call equilibrium, more like.

Wes Moss [00:52:32]:
1.2 openings for everyone, which isn’t looking.

Connor Miller [00:52:35]:
Which is basically where we were prior to the pandemic.

Wes Moss [00:52:38]:
What was it? I remember this. Bernanke thought it was he published this, or someone published this about him in Barron’s a couple of years ago. Was he making a prediction, or was he just making the point that you couldn’t get the labor market back to normal until the vacancies got more in line. Do you remember what the.

Connor Miller [00:52:54]:
He was just saying in order to get inflation back to the Fed’s target, that we needed to get back to equilibrium in terms of how many job openings there were. So the demand for labor and the actual supply of labor, which, if we’re.

Wes Moss [00:53:10]:
Looking to the UK as a possible corollary, and by the way, they have the almost exact same central bank rate of five and a quarter percent, just like we do here in the United States. Looking at them as a corollary, they spiked. They’ve come back down on inflation, and they’re getting ready to cut. Where we may be there we may be close to it as well, because exactly what Bernanke wanted, which is destroy job openings, not jobs. Destroy the job openings. Get us back to equilibrium. That would be the perfect way for the Fed to thread the needle. Let’s not reduce jobs and reduce the unemployment, or let’s not raise the unemployment rate.

Wes Moss [00:53:51]:
Let’s get rid of the demand for two job openings for every one worker. That in itself, Bernanke said, should calm down inflation. And he might be right. It’s a lot easier to be a Fed governor who’s retired than a current Fed governor. If he were the actual fed governor, nobody would like him. He’s doing a terrible job, but it’s always until after you’re out. Well, he was pretty good. He was pretty good at that job.

Connor Miller [00:54:16]:
Just like another office in the us government we can think of.

Wes Moss [00:54:20]:
That’s so true. That’s so true. When you’re in office, I don’t think you can. It’s hard to do anything right. Connor Miller, thank you for being here on a Sunday morning.

Connor Miller [00:54:29]:
Thank you as always, Wes.

Wes Moss [00:54:31]:
With that, if you’d like to find Connor Miller, me and our money matters team, it’s easy to do so throughout the week. We’re available right@yourwealth.com? that’s y o u rwealth.com. it’s super easy to schedule a time to speak with someone. We’re happy to help enjoy the rest of this wonderful day.

Mallory Boggs [00:54:58]:
This is provided as a resource for informational purposes and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. The mention of any company is provided to you for informational purposes and as an example only, and is not to be considered investment advice or recommendation or an endorsement of any particular company. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. There is no guarantee offered that investment return, yield or performance will be achieved. The information provided is strictly an opinion and for informational purposes only, and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing.

Mallory Boggs [00:55:46]:
This information is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment tax, estate or financial planning considerations or decisions. Investment decisions should not be made solely based on information contained herein.

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This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security.  Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved.  There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid.  Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals.  Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio.  A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors.  It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio.  This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

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