#34 – The Fed, Bulldog Inflation, Housing and Jobs, Market Participation, and the Happy Retiree Planner

Connor Miller [00:00:42]:
Always great to be on with you. Just, I love this time of year. It’s, it’s so great.

Wes Moss [00:00:47]:
So nice to have your brain here to sift through what’s been happening around the world this week. Of course, it’s another week. It’s all about the Fed, which means it’s still all about inflation. But not just about inflation, about unemployment or the labor market. We’ve got Jackson Holt. We had the Jackson hole speech from Jerome Powell. There’s been a bunch of different Fed officials, obviously, speaking all throughout the week because of Jackson Hole symposium, where the Fed gets together and talks about monetary policy. So exciting.

Wes Moss [00:01:17]:
You have to go to the most beautiful place in the world, the mountains of Wyoming. Just tremendously beautiful here in the. When it’s still hot and muggy here in the southeast. And then they get to talk about monetary policy. It’s so exciting.

Connor Miller [00:01:33]:
I keep waiting for my invite. I mean, maybe next year we can take money matters on the road and do it in Jackson Hole.

Wes Moss [00:01:39]:
Live money matters from Jackson Hole. They’d put us on the. We would be in Jackson Hole, but we’d be nowhere near the conference. We’re just like out on the roadside near a. We’re near a beef jerky stand doing money matters on the side of a beautiful view in Jackson, somewhere in Wyoming. I guess a quick semi. I don’t know if this is a programming note or maybe I’m just more excited about this Conor Miller, because this is technically, well, not technically college football started this weekend. But if you’re looking for what, here we are in the state of Georgia.

Wes Moss [00:02:15]:
We’re sec country for a lot of our listeners, not all our listeners, but we are the home of the dogs. The college football really starts next weekend when Georgia plays. So that means one thing on a program, you know, that means Bulldog brunch starts next Sunday. So the Bulldogs have a game. We end up going to. We are slightly truncated. We go from 2 hours down to 1 hour because of the bulldog brunch. So I’m sure that there are plenty of listeners.

Wes Moss [00:02:48]:
Now, some people, I get feedback. I wish they wouldn’t play bull, bull drugs. I would hear 2 hours of money matters. But I bet you for every one of those emails I get, there’s about 100 listeners that are saying it’s nice to get bulldog brunch on a Sunday morning. So there’s, I’m sure people are excited to hear more about dogs, the dogs and maybe a little less about dividends, more about past protection than participation versus perfection, which, by the way, we’ll cover today more about touchdowns than total return and maybe just more about Kirby Smart, more than smart retirement tips. I think that we have a mix of both, but it’s probably the best of both worlds here in the fall where you get it, we get an hour of money matter starting next week from what, nine to ten and then Bulldog brunch at ten after that. Connor Miller, I don’t know what’s your, are you, are you a bulldog faithful?

Connor Miller [00:03:41]:
Yeah. Big bulldog fan. I didn’t, I didn’t go to Georgia. So I’m one of those fans that you probably grew up, grew up loving the dogs. Yeah. Loved the Falcons, braves, anything, you know, Atlanta, Georgia related. But I’m excited for this year.

Wes Moss [00:03:54]:
I guess that makes sense if you think about it. Even if you don’t go to UgA, but you grow up in Georgia, you still probably root. Well, you really only root for Georgia or Georgia Tech for the most part.

Connor Miller [00:04:06]:
Yeah. And, you know, it’s hard to, nothing.

Wes Moss [00:04:08]:
Against Georgia State, which has a great football team. Nothing against Kennesaw, which has a football.

Connor Miller [00:04:12]:
Team, which we didn’t have when I went there. They came the year after I left, which was very unfortunate. But that’s probably part of the reason why I kept my allegiance to the dogs.

Wes Moss [00:04:23]:
The producer, Jeff Lloyd, who’s not here today in studio, did come up with, and we did this last year, but it’s kind of an interesting reminder he’s looking at inflation and Bulldog national championships. So when did Georgia win a football national championship? 4280-2122 those are the years. And what did they have in common? I don’t know. Great football teams, great coaches, great players. Memories, sure. But also let’s look at inflation during those same years. 1942, inflation hit 9%. 1980, inflation hit twelve and a half percent.

Wes Moss [00:05:02]:
2021, it was seven. And then the year after that, six and a half. And that’s because of increased war spending. So defense spending back in 1942, of course, for World War two.

Connor Miller [00:05:14]:
Two.

Wes Moss [00:05:15]:
That’s why we had a big inflation surge, 1980. We still had this huge period of inflation through the seventies that then carried over into the early eighties. That’s when we had this ultra peak interest rates and mortgages were, I remember when mortgage rates were 18%. Well, that’s what happened in the early eighties. And then, of course, 21 and 22. That was all about the extra, extra stimulus supply chain cuts. We ended up having this massive inflation. That’s just kind of the chronology and the history.

Wes Moss [00:05:47]:
Here’s what’s interesting, is that now we’re back down to a much more moderate level. CPI is back to sub three. So 2.9 on CPI and then PCE, which is a personal consumption expenditures. That’s the inflation number that the fed really likes. That’s down to two and a half. So we. And since December, it’s at about 2.7 on an annualized basis. If you look though, the question is, we’ve got college football for 150 years or 155 years back from what? 1869.

Wes Moss [00:06:17]:
But the question is, if inflation means the Bulldogs win, which one are you going to take?

Connor Miller [00:06:26]:
So my takeaway here is Kirby may be better off in Jackson Hole right now than in training camp telling the Fed, look, you got to cut. You’ve been too restrictive. Inflation’s coming down too much. We got to get rates lower.

Wes Moss [00:06:41]:
We got to get inflation, stimulate the economy. Let’s get lower interest rates. For all of those wanting homebuyers in Georgia, of course, that mean maybe a little bit more inflation favoring another national championship. Now, this is one of these ridiculous, non correlative, yet coincidental market comparisons or ties that we could make. I’ve seen crazier ones, like the whole who wins the Super Bowl? AFC versus NFC, that means stock market up or down. I mean, if they talk about that, we can talk about inflation and the Georgia Bulldogs. Now, speaking of housing, Conor Miller and people moving or not moving, we got a bunch of data this week. Well, first of all, we got housing data.

Wes Moss [00:07:27]:
It was very interesting to see that the supply of homes, which we’ve been waiting for, that’s been, I think, the biggest problem because of lower mortgage rates, people in the United States refinance, and we’ll look at some of those numbers. But we had a really big jump of housing supply, almost 20% supply boost in the United States since year over year since this time last year. So that’s, I think, really good news. What’s also confounding to some extent is that we haven’t seen prices go down at all. It’s as if right now, the supply demand curve, they’re just somewhat suspended animation. And it’s because this is a very complex situation where we have people still not wanting to move. Interest rates are still high, so housing affordability is still high, but we’ve seen a little bit of progress.

Connor Miller [00:08:20]:
Yeah, for sure. We’ve talked about this a lot on here is the thing that’s been holding homeowners to their current homes has really been the mortgage rate that they’re locked into. If you’re locked in at two and a half, three, 4%, it’s going to take a big hurdle for you to move and lock in a six and a half or 7% interest rate.

Wes Moss [00:08:43]:
Yeah. What are some of these numbers here? I know we’ve cited how low mortgage rates are for a lot of people or most people in the United States, but where do, what does it look like in America when it comes to who has what kind of interest rate?

Connor Miller [00:08:57]:
Yeah. So right now we’re at today about 90% of all homeowners have a mortgage rate that is locked in at less than 6%. So if you think about where 30 year mortgage rates are today, I believe they’re around 6.5%. So still above that mark, they got all the way up to 8%, I believe. And so just most of those people that were locked in in order to move the cost of their mortgage was going to go up significantly. So they just said, you know what, I’m going to stay put and see if I can wait till rates come down.

Wes Moss [00:09:28]:
And then if I keep looking at some of these other statistics, over 50% of Americans have a mortgage at 4% or less, 75% below 5%. So essentially the US refinanced and locked in really low rates. And then we had this massive spike. If I’m looking at a chart here, we’ve been talking about housing the last couple of weeks, and again, this is, I think, a positive movement. Home sales ticked up, I guess, month over month, just a little bit, I think, nothing to write home about. But the real number in the National association of Realtors, their data release that came this week, I think, is the number of homes on the market rose to 1.33 million in July, up 19.8% over the past year. Little bit of sales gain, up 1.3% from June to July. Overall, though, sales are still down two and a half percent compared to the previous year.

Wes Moss [00:10:30]:
Now I’m going to pull out my chart and remember, over the last couple of weeks, I think it’s important to note that mortgage rates follow the ten year treasury. So if rates in general go down, that means that mortgage rates in general should come down. The peak of what I see, and this is going back a decade, was November. November of 23 was the peak. The ten year treasury hit five, right at 5%. And the mortgage rate, the average 30 year fixed, hit 7.8%. We got to the point where we’re almost at 8%. And then, since then, and it hasn’t been a straight line down.

Wes Moss [00:11:14]:
But we, here we are in late August, and we’re at, call it, if I can read with my glass, about 3.8. So the ten year treasury is yielding about 3.8, which means, again, down from five mortgage rates. The average 30 year fixed is right around 6.5. So it’s come down over a percent. And we could see that continue to go lower, the average of the average spread. So we look at, hey, the ten year treasury yields this on average, since 1980, mortgage rates are about one and three quarters of percent above that. Imagine if the ten year treasury goes down to three and a half. We get mortgage rates of 1.75.

Wes Moss [00:11:58]:
You do the math and you’re looking at five and three quarters, approximately anything with a five handle. Conor Miller, I think, gets this market really. I think activity really picks up.

Connor Miller [00:12:09]:
I agree. And ultimately probably comes down to the Fed here. And we can talk more about this coming up. But if banks are having to pay out five, five and a half percent on deposits, they’re still going to be less likely to lend that out. So I think the Fed cutting would even give more Runway for mortgage rates to fall from here.

Wes Moss [00:12:28]:
Yeah, I’m just checking my math here. So it could be, I think I said five and a quarter, but let’s just say it looks as though that spread above the ten years running a little higher than the average of 175, even if it’s at two above the ten year and the ten years at three and a half. Now you’re talking about five and a half. That’s a, that’s a big difference. I think it picks up activity. If that happens. The other big economic news of the week, big housing revision. I keep saying housing.

Wes Moss [00:12:57]:
I have housing on the brain, big revision in employment data this week, that this is one of these things where every year we get a revision in the summer that then goes back to the year from April of the year before to March of this year. So I will say my couching of the importance of this is that it is old, old, old data. It is data from last year getting revised. That went up to the end of the first quarter of this year. And we do it every year. We hear it every other Bureau of Labor Statistics, which gives us jobs numbers, obviously employment numbers, they come out with something called the quarterly census of employment and wages. It’s supposed to be a much more accurate barometer of how many jobs were created. And Conor Miller, they reduced the number of jobs that had been reported by over 800,000.

Wes Moss [00:13:58]:
We’re talking about almost a million less new jobs created than they have been reporting over the course of this long stretch of time. We’re talking about 818,000, to be exact, less jobs than previously reported.

Connor Miller [00:14:11]:
Right. So if you, if you tallied up, you know, every month we get the, the monthly jobs report that comes out and, you know, it’s been anywhere from 100,000 jobs to 500,000 jobs over the twelve month period from April of 2023 to March of 2024, I believe was somewhere around two to two and a half million jobs that were created. And so when we got this revision, 818,000 jobs that we thought existed, but that didn’t exist, actually a 30% decline from what we thought we had experienced over the last twelve months. So pretty significant statistic, biggest revision since going back to 2009. So something that’s, that’s pretty substantial.

Wes Moss [00:14:52]:
Well, and I guess another way to put it in context is that instead of averaging 242,000 jobs per month that have been created, it’s really only something like 174,000 still. Okay. And I think that’s maybe the takeaway here, is that 170 plus thousand jobs in a given month still not anything to sneeze at. That’s still a pretty healthy labor employment or labor market. It’s not nearly as good as over 200, almost a quarter of a million per month on average. So there’s a little bit of, a little bit of a wet blanket on these employment numbers. But that’s in itself all not that surprising, because that’s exactly what the Fed has been saying over the last couple of months as they’ve shifted their focus to not just be on inflation and lowering and getting inflation under control, but very much noticing and admitting that, hey, look, the labor market has been weaker, unemployment rate has gone up. But by the way, these numbers are different.

Wes Moss [00:15:52]:
Not to confuse, but it is confusing. The unemployment numbers are still up to 4.3%. They didn’t change because of this number. It just is another additional data point that just shows the labor market, it’s softening. Yeah.

Connor Miller [00:16:05]:
And if you look at the market’s reaction to this last Wednesday. Completely different than what we saw when that last unemployment number came out, where it caused some volatility in the markets that day. And then a couple of days ago.

Wes Moss [00:16:16]:
Wednesday, the markets are actually higher. So it didn’t really, it kind of yawned at the number every year. And this is a really, this doesn’t make the headlines all that often because a lot of times you get a little bit of a revision and it’s for an entire year, and it comes in the late summer for a period of time that is from the year before spring to the past spring. So it’s really old data. So it doesn’t usually ever move the market. And it’s usually 50,000, 100,000, and nobody ever cares. This one was kind of a whopper, 818,000 jobs, to be more accurate, lower than what we have been, what we, what we saw. The market didn’t seem to care because I think we’re in that phase where the Fed is now starting to focus on employment, because employment’s getting soft.

Wes Moss [00:17:06]:
We went from 3.4% unemployment to 4.3% unemployment rate. Clearly, there’s been some softening in the labor market. This was just another log on the fire. That confirms that it also makes it an easier job for the Fed or an easier path for them to say, hey, we’re going to start cutting rates in September. We don’t know exactly what they’ll do. But of course, the market seems to think, and I actually don’t quite know how this works, maybe you can explain it to me. You look at the CME watch tool or you look at Fed fund futures. In some cases, it’s giving a more than 100% chance of lower rates out into the future.

Connor Miller [00:17:44]:
Yeah. And really the transition has been from, you know, if the fed is going to cut, it’s a matter of are they going to do it or not to when are they going to how.

Wes Moss [00:17:53]:
Much and when, when and how, when?

Connor Miller [00:17:55]:
And now it seems like September is going to be that first cut date. And then now really, the question is how much? It seems like one quarter point cut, which is kind of the standard cut size, is priced in today, but we may get as much as half a point cut at September.

Wes Moss [00:18:12]:
Well, the other reason that I get a little confused when you hear just cuts, because is a cut of 25 or is it 50? What is it?

Connor Miller [00:18:20]:
I think the standard pricing is in terms of quarter point cuts. Right. And so you could get a quarter point, you could get half a point.

Wes Moss [00:18:29]:
Well, so is it a half a. .1. Cut or two cuts?

Connor Miller [00:18:31]:
It’s one cut, but it’s two quarter point cuts.

Wes Moss [00:18:34]:
So we’re going to have six sets, eight cuts, nine cuts, twelve cuts. Here’s the way I like to look at this, to maybe make it a little less confusing, is that if you look out into the future and these change every day, sometimes very little, and sometimes they change kind of a lot. But if you look out into the future and look to see where rates supposedly could be out into January of 2025, it looks to me that the implied probability is very high that we end up about one or one and a quarter percent lower than where we are today. That’s material. And that goes back to our conversation about the ten year treasury and mortgage rates. And we all want mortgage rates to soften a little bit. We’ve had a big jump of supply. I think that you will see kind of this log jam that’s been in the housing market for now, the last couple of years.

Wes Moss [00:19:26]:
I think a lot of pieces fall in place to start moving the log jam. Lower rates meand. I, I go back to this other chart that shows how most people in the United States over 50% have a 4% mortgage or less. Well, that group, over half of homeowners, says, I’m not going to sell my house and then take on a 7% mortgage. You’re just not going to do it. But if you have a four and a half percent mortgage and now call it next year, new mortgage rates are more like five and a half percent. I don’t think it stops the dinner table conversation anymore. Hey, wait, we’re not moving.

Wes Moss [00:20:01]:
I’m not going to take on a 7.5% rate. Now imagine we don’t know exactly what’s going to happen here. Imagine rates are five and a half. Well, hey, our rates only four and a half. We could probably move if we have to get a mortgage for our next house. Five and a half, it’s not that different. So that then would put more houses on the market. You could see the supply increase even more and then draw new buyers in because there’s moves inventory in and you could see some real housing activity.

Connor Miller [00:20:29]:
Yeah. And in the last segment, you hit on this dynamic where mortgage rates are a little bit higher above the ten year treasury, the benchmark ten year treasury, than they normally are.

Wes Moss [00:20:40]:
And why is that? We haven’t talked about that here on the show. Usually mortgage rates are only one and a half to 2% higher than the tenure. Why are they that much higher today.

Connor Miller [00:20:49]:
So do you think this is where this dynamic comes in of when you talk about the market pricing in Fed cuts? And so if you look at a five year treasury or a ten year treasury or even a two year treasury, they’re all well below the rate of the Fed funds rate, which is that set benchmark rate that the Fed sets. And so when you think about.

Wes Moss [00:21:09]:
Right, as a reminder, the Fed sets that ultra short term rate, the market, the bond market dictates the ten year rate, but keep going.

Connor Miller [00:21:17]:
So, and that is, you know, an analog for what banks are paying on deposits. Not all banks. Some are trying to hold on to paying only two, three or 4% out. But standard across the board would be that banks are going to pay out five to five and a half percent on deposits. And so I think because they’re having to pay that much out, they’re less likely to lend out at anything below that or anything even close to that. And so that’s why mortgage rates are higher than where they normally are.

Wes Moss [00:21:47]:
What you’re really saying is that because short term rates are sticky high five and a half banks feel like they have to pay that much out in some sort of money market or cds, which makes it so that they can’t have mortgage rates come down below that, then they wouldn’t be making any money.

Connor Miller [00:22:02]:
Exactly.

Wes Moss [00:22:03]:
Makes sense.

Connor Miller [00:22:03]:
Exactly.

Wes Moss [00:22:04]:
Net interest margin would go upside down. Conor just answered a really tough question that I threw. We have not talked about that. So appreciate that answer. I think it’s smart. Now, speaking of the labor market, there has been a dramatic shift in the way America works and it really has all been, it’s all happened since the pandemic. So we really, there’s a post pandemic labor market and there is a pre pandemic labor market and it’s been a massive shift in how we’re living in the world of work. So we’ve got, we’ve data coming in every, almost every, well, every week and every month on what the labor market looks like as far as the percentage of people employed, unemployed, how many new jobs we’re getting, how many people are claiming, job list claims, tons of different data.

Wes Moss [00:22:55]:
What I think is maybe a bigger story that hasn’t gotten talked about because it’s almost this gravitational pull. It’s a bigger seismic shift in the entire labor market is the way we are working. And of course, the shift, and I think that this is credit to the army of american productivity because I think we’ve gotten a lot better at working and working and balancing life over the last really couple of years. So of course we know what happened during COVID We got locked down. Massive shift to remote work. We went from something like seven massive shift to remote work. We went something from something like only 7% of people that were able to work remotely to over 60% of people working remotely. Now that was at the heart of the COVID shutdowns.

Wes Moss [00:23:47]:
Work from home spiked, obviously. And since then, as we’ve kind of gone back to quote, normal, I think it’s really a post pandemic new world normal when it comes to the labor market. Now we have approximately 35% of us employees now working from home full time. Full time. So that doesn’t even include all the people that are working a day, two days, three days a week from the house. So it’s been a really big shift. Yes, we’ve seen some evidence of increased, well, we’ve seen a lot of evidence of increased job satisfaction. I think that is a really big deal because it just changes this entire system that’s at the core of our economy.

Wes Moss [00:24:33]:
If everybody likes their job a little bit better, isn’t that an enormous uplift for the us economy? Maybe one of the things you could explain why the economy has been so resilient.

Connor Miller [00:24:45]:
I think it’s interesting when you look at the biggest reasons cited for why people working from home. We have a hybrid work schedule here at capital investment advisors and I would agree with some of these. Right. The top cited benefit of working from home. 60% of people said, no commute, no commute, no commute. All for that. Save, you know, 45 minutes in the car both ways. That’s a lot of time that can add up.

Wes Moss [00:25:11]:
All right, what are the top three? So, of course no commute. That’s the number one perk of, according to the US Career Institute, that’s the number one perk according to Americans, of why they like working from home. That one makes sense. What else?

Connor Miller [00:25:25]:
Number two on the list to save on gas and lunch costs, which as we know in this inflationary world that we bait, that we live in. That can be a big deal. Third on the list, flexibility over when I work. So not just working your standard nine to five, you know, maybe you want to get up early, put in some hours from six to eight, hang with the kids a little bit. About 42% of people said that was, that was their top benefit of working.

Wes Moss [00:25:49]:
From home, being able to piece your day together around a busy life schedule. I can see that completely. Having a bunch of kids, three of three of the four playing football this fall. That, that’s quite a challenge. It’s quite a challenge to figure that that one out on any given day. The next one. Connor. I had not thought about this one, but it makes total sense.

Wes Moss [00:26:11]:
38% of respondents say one of the reasons they, they love working from home is less time getting ready for work.

Connor Miller [00:26:20]:
So does this mean people are just rolling out of bed and not showering, just going straight to the computer, getting on?

Wes Moss [00:26:25]:
The reason why Sunday mornings are kind of fun because you’re not, you don’t see anybody, nobody’s on the road really. Shave studio. You don’t have to shave. That saves, I don’t know, two, three minutes. It all adds up. Connor, it’s less time to get prepped. Connor always looks prepped though, even if you’re not trying.

Connor Miller [00:26:45]:
Just the top half up to make sure I got the.

Wes Moss [00:26:48]:
You’ve got your hawaiian shorts on today.

Connor Miller [00:26:49]:
Look, I really think though, I think we’re starting to figure this out. We went from no work from home to everyone working from home during COVID My personal preference here is this hybrid approach where you can work a couple days from home, you can work a couple of days in the office, you still get to keep maintain that culture, but also you have the flexibility of time.

Wes Moss [00:27:10]:
Here are some other top perks. We’ve got a lot of work from home statistics today that I just find fascinating because it’s reshaped the entire ecosystem. The skeleton. Maybe it’s more than just the skeleton. The entire foundation of the american economy has been reshaped. People like working more. They love the flexibility more supposedly. And again, I think this is from the us center, the US Career Institute.

Wes Moss [00:27:42]:
So they clearly are biased towards work from home. So we’ll take it with a little bit of grain of salt. But 72% of remote employees value the ability to napkin during the day or exercise during the day. That I get it. Businesses can save supposedly up to almost $11,000 per remote employee annually. And then the employee savings, fully remote workers save up to twelve grand a year, or $1,000 a month, which again, commuting lunch. Peanut butter and jelly in the kitchen is a lot better than the one place you have near work. That’s like $15 to get a mediocre lunch.

Wes Moss [00:28:21]:
But I love these statistics. There’s a lot more that we’re going to go over. Why work from home seems to be working for the us economy and I think change now forever more. Money matters. Straight ahead. We keep hearing that inflation is coming down by the past three years. The common man inflation gauge is still up over 20%. That’s necessities like food, gas, utilities and shelter.

Wes Moss [00:28:45]:
How can you possibly keep up? Well, one option is income investing. That’s using a combination of growing stock, dividends, bonds for more cash flow, and other areas that can be a hedge against inflation. Look, inflation is tough. Let us help you overcome it. Schedule a time directly with our team@yourwealth.com. dot. That’s your wealth.com. we are living in an entirely new working world.

Wes Moss [00:29:12]:
But it’s not just for those who are working full time, mid career. It’s also a big deal for transitioning or smoothing the transition to retirement. Connor Miller joins us here in studio. You brought up, I think, the most important point. There is almost this giant tug of war of only 7% of people worked remotely, fully, fully remote, and that went to 60, and then the world was up in arms. We can’t just all work from home. And that conversation has kind of gone away because guess what? We’ve settled into what I think works for the long term.

Connor Miller [00:29:45]:
Yeah. It seems like this hybrid approach that most are operating in today seems to be working for everyone. It’s working for the employee and the employer, giving both flexibility. Companies are still able to maintain culture and, as you mentioned, helps with transition into retirement.

Wes Moss [00:30:03]:
There was a period of time, I remember back a year and a half or two years ago, where you’d get a headline, XYZ CEO says, come back to the office. There was about a six month period of time where I think that the corporate world was trying to really fight against, hey, not everybody’s gonna work from home every day. And they did that. I think it worked. And now we’ve settled into. I haven’t heard any headlines around that because I think most employees or most employers have adopted their policy. Sure. Summer, five days a week in the office, and a lot have just said, okay, let’s do summer work.

Wes Moss [00:30:38]:
A day, a week, maybe it’s two days a week. Some real flexibility. We did a podcast we actually just released on the retire sooner podcast. I interviewed Carrie Hannon. I think it was the retire sooner pajama party. And she talked about being able to work from home as such an important tool to transition smoothly into retirement. Call it semi retirement. We call the retirement gray zone.

Wes Moss [00:31:04]:
But it’s a really nice transition, both mentally, I think, physically, and then financially. And the options are now greater than ever to be able to do something flexible at home for a couple of years after you stop full, full time working. What else do we love on this list? I mean, we’ve got so many different statistics around work from home. 93% of professionals agree that remote work positively impacts mental health. 90% say it’s better for physical health 48%. Remote workers experience less stress, less burnout, healthier food choices, improved sleep. I mean, this is like the fountain of youth. Connor Miller.

Connor Miller [00:31:46]:
I can attest to all these things, right. If you’re saving 45 minutes on a commute or even 30 minutes both ways, you can maybe sleep in a little bit more, go to bed a little bit later.

Wes Moss [00:31:57]:
If you don’t do a ton of remote, though, you’re mostly one to two days a week. Do you really?

Connor Miller [00:32:02]:
Yeah.

Wes Moss [00:32:02]:
Okay, let’s see here. Top state for. Here are the top five states. Number five. Top states where. And this is the percentage of remote workers. And I guess this is fully remote. Washington state, number five.

Wes Moss [00:32:19]:
Utah, number four. Massachusetts, number three at 36%. Maryland. Interesting. 37%. And then number one, which doesn’t shock me, Colorado. 37% of folks work remotely because they love being outdoors. It’s the outdoor state, or one of the best outdoor states.

Wes Moss [00:32:41]:
All right, I’m gonna, I’ve promised to try to remember to bring up politics every week before now in the election, because it’s a sensitive topic. It touches, of course, on the economy. It matters to the stock market, it matters to Americans. It creates a ton of emotion. And the theme, of course, has been that, and we’ll reiterate this, that you really don’t want to just try to pick a political party to invest through. You’ve got to be able to invest through both. Most political combinations kind of, they work, whether you want to believe it or not. Most political combinations, Republican, Democrat, Democrat, Republican.

Wes Moss [00:33:19]:
Whether you look at House, White House, Senate, the House, it somewhat doesn’t matter, but there is, and Connor, you’ve been giving a lot of presentations about this, so you’re bringing an interesting perspective here. But one of the topics that doesn’t get covered, we haven’t covered it here, and I think it’s important at least to touch on, and you might find this boring, Connor Miller, is that we all talk about the Fed. The Fed can do, they can move the economic meter, and we all know that. And there’s this great debate. Is the Fed political or not? Of course, the Fed says they’re not political, but then lots of people say it is political and that they can move the meter at any given time. There’s, of course, talk that the Fed doesn’t want to lower rates too much and have an impact on the economy, which could have an impact on the election. The domino effect of that. But what’s interesting is that there is another body that probably has a lot more short term power, kind of a nitrous boost to the short term of the economy that nobody talks about and nobody gives credit to.

Wes Moss [00:34:31]:
And it’s the US treasury that is.

Connor Miller [00:34:34]:
Somewhat politically incentivized too, because they’re appointed position by the president.

Wes Moss [00:34:40]:
And you would say that they have a quicker button to impact the economy and the stock market than the Fed.

Connor Miller [00:34:48]:
Correct. And you may remember months and months ago, we’ve talked about it really all year, but we talked about the difference between reelection years and open election years for the stock market.

Wes Moss [00:35:00]:
Oh boy. What do we count this as well? Yeah, a reelection, open, open every election year.

Connor Miller [00:35:05]:
It’s hard to tell. Now, I’d still lean on the side of it being a reelection year because a lot of the tools that were put in motion are in motion. But we talked about the market doing much better under reelection years to the tune of about 13% better historically than just in open election years. And I think this may be one.

Wes Moss [00:35:25]:
Of the, the reasons why.

Connor Miller [00:35:27]:
Exactly.

Wes Moss [00:35:28]:
And so because the current administration could potentially, they’ve got this lever of the treasury that might actually be more useful in the, in the short term then the Fed, which supposedly there’s no say.

Connor Miller [00:35:42]:
So towards admittedly a little bit nuanced, kind of hard to walk through at times. So give us some grace here. But essentially what the treasury has been doing instead of going out to the open market. We all know that the us government operates at a deficit right to the tune of one to one and a half trillion dollars.

Wes Moss [00:36:04]:
Maybe back up for 2 seconds. Let’s just. Quick delineation between what the Fed is and they do versus the treasury, what they can do. The US treasury.

Connor Miller [00:36:15]:
So the Fed sets their monetary policy by essentially setting what the interest rates are.

Wes Moss [00:36:22]:
Now that’s the main, main tool in.

Connor Miller [00:36:24]:
The toolbox since, since 2009, they’ve shown the ability where they can go out to the open market and actually invest in securities. And then largely the job of the treasury is to issue those securities, issue.

Wes Moss [00:36:38]:
All the debt that we’re so well known for here in the United States.

Connor Miller [00:36:41]:
Right.

Wes Moss [00:36:41]:
Lots of treasury debt.

Connor Miller [00:36:43]:
So they have the ability to issue debt that is short term, meaning less than a year or two. Those are called t bills. Or they can issue it longer term, ten years, ten plus years or somewhere in the middle. Well, what they’ve been doing over the last couple years now is relying much more on those shorter terminal debt issuances, not putting as much issuance out in the long term. Yeah, they really haven’t tested out the market as much to see what the appetite is, because that’s much more of a supply demand driven market.

Wes Moss [00:37:21]:
So then essentially what you’re saying is that all of this, they make some of the, they make these decisions, they could issue a bunch of long term debt. There seems to be more market appetite for short term debt. That’s probably what, I don’t know if they’re saying that or not, but that’s what they’ve been doing. They’ve been issuing lots and lots and lots of this short term debt, meaning that it comes due 30 days, 60 days, et cetera.

Connor Miller [00:37:44]:
And I think how this shows up to us is where we’re very familiar with short term rates being high today. Five, five and a half percent. You see cd rates, money market rates, those are all north of 5%. As you hit on earlier in the show, the ten year treasury is much lower at 3.8%. And so you have this phenomenon that’s occurred called an inverted yield curve, which is just a fancy way upside down yield curve, fancy way of saying that rates on the long end, ten years out are lower than the short end. And that’s really the byproduct of what we’ve seen with the treasury not really testing out the longer dated markets and really relying on short term funding, because there’s more liquidity there.

Wes Moss [00:38:23]:
Well, and then, so what does it do? Okay, so they issue all this shorter term debt. Okay, big deal. What’s that mean? Well, it means there’s a bunch of available capital in the system. So if you think of a system that’s tied up in long term bonds, they’re a lot less liquid. If you have a system that’s heavily weighted towards short term bonds, that means, to some extent, it means there’s just more liquidity in the system. And then when there’s more liquidity, it flows through and kind of washes through the banking system and makes borrowing that much easier. And to some extent, whenever we have more liquidity in the system, you can make the case that it stimulates the economy, it stimulates the stock market, it is acting as a little bit of extra boost in the engine. And it’s something that really, and I don’t want to be political here, but it’s just a really interesting economic treatment here.

Wes Moss [00:39:18]:
Nouriel Roubini. And this is a team. It was Steven Step and Moran. Is it Steven or Stephen I think Stephen Moran, Steven Morin and Noel Roubini from the Manhattan Institute, they’ve argued that even though the Fed has kept rates where they are because what the Treasury’s done with all the short term debt, it’s really acted as a full 1% rate cut. That’s kind of an interesting. That’s fascinating to me. It’s almost as though the treasury has been working against the Fed a little bit. The Fed’s been trying to slow down the economy, inflation.

Wes Moss [00:39:57]:
The treasury has been issuing all the short term debt that, again, according to these economists, it’s provided stimulus and acted as if a full one percentage point rate cut, which has been around now for a while.

Connor Miller [00:40:11]:
And I don’t want to speculate too much here this morning, but look, that could be one of the reasons why historically, when the Fed cuts, usually there’s some things that break in the economy. And so far, yes, unemployment has risen slightly from here, but we haven’t seen any major catastrophe so far. And the economy has held up pretty resilient.

Wes Moss [00:40:33]:
So you feel like the US treasury has been a little bit like an insurance guardrails for the Fed. The Fed, wait a minute, they’ve raised rates so many times, you go back to the course of history, that usually leads to recession. Well, it has not done that, but maybe because the treasury has provided a little bit of guardrails for that. So this is really not to talk about the political side of the equation, which we’ll get to that. It’s really just to bring up the importance. The US treasury may be the real powerhouse in the room, particularly in this election cycle. It’s not known to be a completely independent body. It’s part of the federal government.

Wes Moss [00:41:10]:
And of course, you can make a case that it can be influenced. And a reelection year, the numbers don’t lie, have been pretty darn good for the market. What was your statistic around that?

Connor Miller [00:41:23]:
Yeah, reelection years on average, up 15% throughout the twelve months in a reelection year, open election year is much less at 2%. So 13% difference. And again, not necessarily.

Wes Moss [00:41:34]:
No cameras rolling. When the treasury is making these decisions, there’s a camera roll. And every time Jerome Powell opens his.

Connor Miller [00:41:40]:
Mouth, I would just say, look, it is a political issue, but it’s not a one sided political issue. I think any party put in that position is, look, we know that the economy and how people perceive their personal finances matters, matters in terms of how they vote. And so ultimately you want the economy to be in the best shape that it can be.

Wes Moss [00:42:00]:
If you’re running for re election because this is re election on open election. Is that right?

Connor Miller [00:42:05]:
I’m still sticking with re election. Yeah. Since Harris was on the ticket.

Wes Moss [00:42:10]:
What else do you’ve talked a lot about politics in the market over the last couple of months. I know you give presentations about this. What else stands out to you?

Connor Miller [00:42:21]:
Like, the biggest takeaway in all this is always, there’s always individual industry implication, whether it’s energy or financials or taxes. Presidents and Congress certainly influence that. But the market as a whole really is pretty much a politically neutral system that it’s going to go up and down under republicans, going to go up and down under democrats over the long run. We know the stock market does really well and compounds over long periods of time regardless of who controls Washington, because.

Wes Moss [00:42:55]:
Washington is the card that we are dealt and that we just, companies have to figure out what to, what to do best. Regardless of what card that is dealt, whether it’s a red card or a blue card or a red and blue card, the mandate for a company still remains the same. Grow earnings, get better. Be innovative. Push the football down the field ever so slightly every single day. Army of american productivity increase earnings. That’s what every company is trying to do and they’re not going to let politics stand in their way. Have we gotten a data check on the misery index indexes?

Connor Miller [00:43:30]:
We’re right there. So the misery, remind our listeners what.

Wes Moss [00:43:33]:
The misery index is again, why? What is that political economic indicator?

Connor Miller [00:43:37]:
The misery index. Really a bleak way to compare personal finances. So it’s very simply take the unemployment rate plus the rate of inflation. So whether you have a job or not, how much you’re having to pay more at the grocery store, at the pump, if it’s higher in November than what it was twelve months ago, taking a three month moving average to smooth it out a little bit. If it’s higher, typically the incumbent party loses. If it’s lower, meaning personal finances are improving, people are more, less misery, less misery, more employed paying less.

Wes Moss [00:44:12]:
If there’s less pain and misery, that means it’s a good chance for the incumbents to win.

Connor Miller [00:44:17]:
Yeah.

Wes Moss [00:44:17]:
And if misery’s higher, we want somebody new.

Connor Miller [00:44:20]:
And why do we track it? It’s been right 15 out of the last 16 elections. It’s predicted the outcome.

Wes Moss [00:44:26]:
Now I know that our listeners that are, if they’re understanding what you’re saying or saying, where do we stand? What’s interesting is it’s right on the line. It’s very neutral. It’s about the same as it was a year ago. So it’s not telling us anything. I’ve been wanting to get to this and really because you haven’t been here for a couple of weeks, Connor, I wanted to ask you this. I wrote a blog note around something to the effect, why are hobbies on steroids or core pursuits? Why are they so good for you? So now we’re going from heavy topics to a lighter topic. We know happy retirees have 3.6, almost four core pursuits. Unhappy retirees have two or less on average, and it’s almost obvious why they’re good for you.

Wes Moss [00:45:13]:
But I want to know what yours are, number one. Number two, the reason they’re so good for you. I think, particularly for retirees, to have many of these core pursuits. So more is better? More is better. I think structure is one, giving your week structure, your year of structure, your month of structure, and then anticipation. So it gives you something to be looking forward to and getting better at. And then it’s got this long list of stress reduction, keeps you cognitively active, gives you community and connection, and supposedly puts you in a better mood. We’ll see.

Wes Moss [00:45:50]:
I don’t know if that is confirmed or nothing, but my question to you is, and what counts? Anything. This is my definition. Anything that brings you joy and you think about all the time. That’s what really counts. It does not necessarily that you have to do this core pursuit all the time. Robert Sanders, one of our colleagues who I was going through this exercise with, him, what are your top five core pursuits? One of them was fly fishing, but he said, I only did it twice last year, but I think it’s a core pursuit. And I said it is because you think about it all the time.

Connor Miller [00:46:24]:
Yeah. And for me recently, what are your top five? Number one recently has definitely been tennis. I didn’t get into it till three, four months ago, something like that.

Wes Moss [00:46:35]:
Anything to do with money matters? Talking about it all the time?

Connor Miller [00:46:37]:
A little bit, yeah. More so getting my daughter into it. We live right across the street from the tennis courts. It’s been so fun for me and my wife to go out and play at night. It’s just been great exercise.

Wes Moss [00:46:48]:
Your oldest is what, she’s what, four?

Connor Miller [00:46:50]:
Four and a half? Yeah.

Wes Moss [00:46:51]:
She can swing.

Connor Miller [00:46:52]:
Just drills and stuff, but it’s been, yeah, tons of fun.

Wes Moss [00:46:56]:
Serve it again.

Connor Miller [00:46:57]:
Just some drills, you know, I play.

Wes Moss [00:46:59]:
Hundred of these off the wall.

Connor Miller [00:47:01]:
Luckily I’m not her coach played. I played cornhole in the spring. I’m playing in a soccer league, so I’d say playing in some kind of league again, gives you that, that exercise, the camaraderie community. And then for me, I love cooking. Like cooking is. Yeah. Whether it’s grilling or cooking, finding the time, I really get a lot of enjoyment out of that. So I’d have to think about the next two.

Wes Moss [00:47:23]:
Hold on. Tennis, cornhole cooking. Any you would consider on the bench, percolating. Oh, we’ve got to run. Hey, we’ll get back to this. Think about this over the break on the bench, meaning that they might be court pursuits, but not quite yet. They’re kind of, they’re in the bullpen. You’re listening to money matters.

Wes Moss [00:47:44]:
I’m your host Wes Moss today along with Conor Miller. More money matters straight ahead. I think right now we’ve got to get to, we have an update for this concept we call participation versus perfection. And the concept around we want to have good market timing, but it’s also difficult to have it over and over and over again. So it’s really interesting to look back and say, well, what if I did have almost perfect timing, meaning I got into the bottom of a correction versus the worst timing of when I put my money to work right before a correction and then the market fell versus leaving money in something we would consider risk free or just the short term treasuries and then what those results are. And it’s a really, really informative analog to why investing is so much about patience and time and not so much about timing. And Connor Miller. Before break, though, we were talking about hobbies on steroids, aka core pursuits.

Wes Moss [00:48:47]:
This is what happy retirees know to have. There’s a million great reasons why we need to have core pursuits. Sometimes it’s just about finding core pursuits. Having a long list of corporate suits. We want four of them. We want five of them. More is better. But if I were to write about them again, one thing I haven’t really written about but I truly believe in is this concept of having some bench warmers, meaning that you got a couple core pursuits that are, hey, I think this could be a core pursuit in the future, but it’s not yet today.

Wes Moss [00:49:22]:
But it’s on the bench. Could get into the game. We talked. We. I was asking what yours were.

Connor Miller [00:49:28]:
Yeah.

Wes Moss [00:49:29]:
And you. And you. Well, as a reminder, let me see if I have Jeff Lloyd’s from last week. I don’t know if I do it. Yeah, I do. Here’s Jeff. Here’s Jeff Lloyd’s top five. Coaching, running, golf, grilling, hibachi and sport tourism.

Connor Miller [00:49:48]:
Oh, so going to different games, baseball stadiums for stadiums.

Wes Moss [00:49:52]:
Different sporting events around at different stadiums.

Connor Miller [00:49:55]:
That’s a good one.

Wes Moss [00:49:56]:
That’s a really good one.

Connor Miller [00:49:56]:
Yeah.

Wes Moss [00:49:57]:
It’s not just grilling for him, it’s grilling. Hibachi.

Connor Miller [00:50:00]:
He. Well, he’s got one of those fancy blackstone grills.

Wes Moss [00:50:02]:
Grills.

Connor Miller [00:50:03]:
Flat tops.

Wes Moss [00:50:04]:
So, on the bench, though, for him, what he would like, what might be a core pursuit in the future, music, tourism, boating and volunteering slash boards, because he’s already on a bunch of these, so. So you said out of the gate. Tennis. So your top five. I don’t know if you have five. You have at least three.

Connor Miller [00:50:21]:
I think I came up with five. I think I had enough time to.

Wes Moss [00:50:23]:
Tennis. Cornhole and that. Cornhole.

Connor Miller [00:50:26]:
Cornhole. I’m trading for soccer in the fall. I actually have a game today. Today at three.

Wes Moss [00:50:31]:
Going to play a cornhole game.

Connor Miller [00:50:33]:
No. Soccer match.

Wes Moss [00:50:36]:
Explain this. It’s not just that you’re playing cornhole in the parking lot for a tailgate. It’s like you were in a league.

Connor Miller [00:50:42]:
Yeah.

Wes Moss [00:50:42]:
It’s like you were an Olympic cornhole, hopefully.

Connor Miller [00:50:45]:
Parking lot adjacent. It’s. We play on a green, but it’s. No, it’s. It’s organized. There was a champion. We unfortunately lost in the semifinals, but.

Wes Moss [00:50:53]:
Made it pretty far.

Connor Miller [00:50:54]:
Yeah, we had a pretty good team.

Wes Moss [00:50:56]:
Tennis.

Connor Miller [00:50:57]:
Tennis, yep.

Wes Moss [00:50:58]:
Cooking. Anything specific or just grilling or just both?

Connor Miller [00:51:01]:
A combination. Just depends on the time of year. Summer’s more grilling, winter is more cooking.

Wes Moss [00:51:06]:
And did we have two more? We’re going right to the bench.

Connor Miller [00:51:09]:
So I was the one on the bench, I’d say, is music. Playing guitar actually played in a church band a number of years ago, which was a lot of fun. I don’t get to play as much anymore. And then the one that.

Wes Moss [00:51:20]:
On the bench.

Connor Miller [00:51:21]:
On the bench.

Wes Moss [00:51:22]:
How many times you play guitar? Picked up the guitar over the last 30 days.

Connor Miller [00:51:25]:
Once.

Wes Moss [00:51:25]:
Okay. That’s not zero.

Connor Miller [00:51:27]:
Yep.

Wes Moss [00:51:27]:
But you think about it.

Connor Miller [00:51:28]:
I do think about it. I see them all the time. It’s constant reminder.

Wes Moss [00:51:32]:
But I’m at a guitar stand on the floor. Do you have the hooks on the wall?

Connor Miller [00:51:35]:
They’re in cases.

Wes Moss [00:51:36]:
It’s better for even worse.

Connor Miller [00:51:37]:
Yeah, it’s better for them. Better. Better. Humidity.

Wes Moss [00:51:40]:
Humidifier in there. Yeah.

Connor Miller [00:51:42]:
The one, though, that’s coming. It’s a new one. It’s coming up through the minor leagues very quickly. Wake surfing.

Wes Moss [00:51:49]:
Wake. Oh, yeah.

Connor Miller [00:51:50]:
Yeah. So that’s been a ton of fun this summer to take the boat out, do some wake surfing.

Wes Moss [00:51:55]:
Do you have to have a particular. Well, most. Well, you have to have an inboard motor. That’s the main thing.

Connor Miller [00:52:00]:
We’ve got a boat with an inboard motor. Creates a nice little wave because you’re.

Wes Moss [00:52:03]:
Right there next to the boat. If you’re wake surfing usually, or you.

Connor Miller [00:52:07]:
Yeah. You’re. No.

Wes Moss [00:52:08]:
Pretty close.

Connor Miller [00:52:08]:
You’re within a few feet of the boat.

Wes Moss [00:52:11]:
Okay. Okay. Be careful. Be careful. It seems like. Is that. Can you get hurt easily doing that?

Connor Miller [00:52:20]:
No. As long as you know how to fall. Okay. You just falling in water?

Wes Moss [00:52:24]:
Yeah. Okay. I gotcha. Box dangerous. Connor.

Connor Miller [00:52:27]:
I got my daughter out there with me. We were on the board together. It was awesome. Making memories.

Wes Moss [00:52:32]:
Over the last week or so, I’ve played pickleball three separate times. I hadn’t done it for a couple of years. It’s been a while, and. And now I’m playing pickleball again this weekend. I kind of remembered how, why it was so much fun. So I. That might start to go up onto a top five. It’s been on the bench.

Wes Moss [00:52:49]:
It’s percolating higher. It’s pitching well in the minors. It may be make it called up. Only problem, and I. We won’t go too far into this, but it does. It shouldn’t be hurting my shoulder, but I’ve had a bad shoulder for a long time, so we’ll see.

Connor Miller [00:53:04]:
Just gotta keep playing. Powering through it. Yeah, hopefully.

Wes Moss [00:53:07]:
Or go to probably get shoulder surgery one of these days. Just power through it and then get a total shoulder rehab. Okay. Let’s talk markets here for a second. Since we’ve got our core pursuits covered, that part of the happy retirees gonna be fine. Happy retirement. Now we gotta take care of the financial side. And the financial side has to do with planning, patience, and also investing.

Wes Moss [00:53:32]:
And the biggest part of investing, as we all know, is the patience involved and the persistence involved, and then not getting scared out of the market. Best way to make money in stocks is to not get scared out of stocks. We often, or we frequently go back to economic history and market history so that we can remind ourselves that we need to power through. And it’s not so much about putting money to work at the exact perfect time. It’s really more about just being invested in participating. Overtime doesn’t need to be perfect, just needs to be. You need to participate. So we went back and we updated what we call participation versus perfection, and essentially the way this works.

Wes Moss [00:54:17]:
And Connor, I’ll let you go through some of these numbers, but imagine you’ve got two investors. One investor has this magical ability to only get invested right at the very bottom, meaning the market might be collapsing for six months, a year, two years, and this investor knows exactly the last day it goes down before it goes back in the other direction. That’s perfect timing. And then you’ve got the opposite. Maybe his cousin, investor B, who does the opposite, he gets invested right before the market goes into a bear market or some sort of big correction. And the question is, how do they do? Of course, the perfect timing does ultimately win over time. Yes, the returns are better, but they aren’t perhaps as divergent as you might think. And I think what’s even more important is that relative to putting money over that same period of time in treasuries, cash, let’s say, not really being, quote, invested in markets, both the perfect timing wins and the terrible timing also wins in pretty dramatic form.

Connor Miller [00:55:30]:
And this all stems from the client emails, the calls, the questions that we get. Seems like once a week is now the right time to invest, or the market seems a little hot right now, or surely we’re due for another pullback.

Wes Moss [00:55:44]:
Or the market’s too low, now it’s going lower. I don’t want to get in.

Connor Miller [00:55:48]:
Market’s selling off, sell out.

Wes Moss [00:55:50]:
What about a recession? Probabilities have gone up. Oh, we’ve gone down. They’ve gone up. They’ve gone down.

Connor Miller [00:55:56]:
And so this really is a nice exercise just to speak to the power of staying invested. Like you mentioned, the perfect timing, investing in March of 2020 or in March of 2009 during those recessions, versus bad timing or investing at the peak. What you find, though, and we’ll talk about some specific scenarios, is overwhelmingly even the bad timing. So even investing in the peak for that cycle, historically, over the long run, has always outperformed cash or treasuries or money markets.

Wes Moss [00:56:31]:
So that’s the takeaway, which is, hey, being invested even in bad timing is still better than leaving money under the mattress.

Connor Miller [00:56:39]:
Let’s dig in just to a few of these results. Let’s go to the most immediate one. Back in 2020, you know, if you would have invested at the very peak in February of 2020, right, when everyone was, when the economy was locking down, when everyone was being sent home, $10,000 at that time would have turned into about $17,000 if you would have.

Wes Moss [00:57:01]:
So being you invested right before COVID.

Connor Miller [00:57:04]:
Became the scary February 19 of 2020, which was the market peak.

Wes Moss [00:57:08]:
Now, if the ten turned into today, would be a little over 17 today.

Connor Miller [00:57:13]:
Yeah. So, so almost a double if you would invest it at the perfect time. So March 23 of 2020, that $10,000, again, like you said, this, this is going to be better because you’re timing it perfect. $26,000. So a little bit better there. But the, the starkest contrast there would be the investor that in at the time timed it perfectly right. They got out of the market at the right time, February 19, which was the peak, but they stayed in cash at that point. That investor of $10,000 only turned into $11,000.

Wes Moss [00:57:46]:
So ten goes to eleven in cash. Ten goes to 17 in the worst possible timing. And we’re looking at the S and p 500, by the way.

Connor Miller [00:57:53]:
Yeah. So 60% less return than what you got even if you invested in a market at the bad timing.

Wes Moss [00:58:00]:
How about the great recession? That was a long period of time where the market went down. So you had a long time to wait for the bottom. That’s really like the zero seven to zero nine recession and market collapse. And that was terrible.

Connor Miller [00:58:15]:
We’ve had a little bit of time since then. So about 15 years off the bottom there. So let’s start with the cash investor for reference. Right. Put it in risk free treasuries, money markets. $10,000, because rates were so low for so long, only turned into just under $12,000. So really you just, even though you, you missed the 55% drawdown in stocks, didn’t get much. The perfect timing turned in from ten thousand dollars to one hundred eight thousand dollars.

Wes Moss [00:58:46]:
Wow.

Connor Miller [00:58:46]:
So ten extra money there. That would have been great if you could time it perfect. But as we know, nobody’s perfect. So even investing in on October 9 of 2000, 710 thousand dollars going all in. All in, you got a 55% pullback after that. Still turned into $48,000 for almost $5,000. Yeah. 380% return.

Connor Miller [00:59:09]:
Significantly better than just investing in cash and money markets.

Wes Moss [00:59:15]:
Just cash. Completely risk free. Ten has grown now to twelve. We did this up till June 30 of 2024, is where these numbers are. We’re starting in zero seven to now, to the end of June 30, 2024, ten in cash turns into twelve. But investing at the worst possible time, that was October of zero seven, all in, still beat cash by over 300%. That’s the, that’s the reality here. And it just, I like re upping this a couple times a year just to remind us all, because we’re all in this together, we’re all trying to battle and fight against the same human behavioral instincts that make investing so tough.

Wes Moss [01:00:02]:
History, understanding history. I think that is something that can really be on our side to help guide us on this course over time. Patience, investing. And I think participation is the key, not perfection. Connor Miller, awful lot of. What’d you learn today?

Connor Miller [01:00:23]:
Anything, man, we’ve gone through a lot. We did the work from home stats, mortgage rates, new houses for sale, so many more.

Wes Moss [01:00:33]:
We didn’t really cover nearly as many work from home statistics as I would have liked to have.

Connor Miller [01:00:37]:
State why participation is way more important than perfection and timing. The markets got deep and talked about the treasury and liquidity versus the fund.

Wes Moss [01:00:46]:
I learned that from you today. I think that. But there was something that we were discussing that I hadn’t thought of. Was it the treasury or. Where did you enlighten me on something.

Connor Miller [01:00:58]:
With mortgages and the Fed funds rate. Why mortgage rates higher?

Wes Moss [01:01:04]:
Why are they above the average, usually a little less than 2% above the ten year treasury? I think that was a really. That’s insightful and it makes a lot of sense. Part of the consequence of the upside down yield curve. And again, the world’s waiting for the Fed to start lowering rates. The marketplace is saying that their rates will be relatively dramatic. Maybe dramatic is the wrong word, but 1% or even more lower than where they are today, at least this is a fed funds rate over the course of the next six months or so. So there’s a pretty high probability that we could see that happening. And I think that that obviously has huge implications, particularly for the housing market.

Connor Miller [01:01:46]:
Yeah, and I think too important when we’re talking about that, the Fed never intended to keep rates as high as they are today. So just because they’re cutting rates, that doesn’t necessarily mean that something bad has happened. They’re just trying to get rates back to a neutral rate that the economies.

Wes Moss [01:02:03]:
Can sustain, whereas today they consider this a restrictive policy rate. We’re driving through wet sand in the economy with rates. The wind is at our face.

Connor Miller [01:02:15]:
Yep. Goal. The goal was to get inflation down. They’ve largely done that. Now they can focus on employment and price stability and keeping inflation.

Wes Moss [01:02:23]:
I’ll keep the alliteration going. Participation, perfection, and planning. As a reminder, we just launched. I’m just such a believer that a little bit of planning goes a long way. I don’t think everybody needs a 400 page financial plan. I think that financial plans can almost get overly cumbersome and overly complicated and work against you. And then on the other end of the spectrum, no planning is not going to work either. So some semblance of a roadmap is really important.

Wes Moss [01:02:54]:
At least I think it’s critical when it comes to financial planning for most families, and I think it should be accessible and somewhat easy to do. And that’s why we developed the happy retiree planner. And it’s a way to look at both sides of the equation, financial and lifestyle habits of happy retirees. And then how do you pay for it? And you put in your expected retirement age, how much you think you’re going to need per month in retirement, how much your savings is today, and then put in some assumed rates of return increase for inflation, and voila, you’ve got at least some semblance of a roadmap. But I think it’s a really important, useful tool that you can do quickly. And that’s just called the happy retiree planner right on the homepage@yourwealth.com. dot. Scroll to the bottom and you’ll find the happy retiree planner.

Wes Moss [01:03:45]:
We’ve got to run. Conor Miller, thanks for being here, man.

Connor Miller [01:03:48]:
Thank you as always.

Wes Moss [01:03:49]:
And you can find the happy retiree planner homepage is yourwealth.com dot? That’s y o u. Ryourwealth.com. have a wonderful rest of your Sunday. Hey, y’all.

Connor Miller [01:04:02]:
This is Mallory with the retire sooner team.

Wes Moss [01:04:04]:
Please be sure to rate and subscribe to this podcast and share it with a friend.

Connor Miller [01:04:08]:
If you have any questions, you can.

Wes Moss [01:04:09]:
Find us@westmoss.com that’s w dash e dash s dash m dash s dash s.com. you can also follow us on Instagram and YouTube. You’ll find us under the handle retiresoonerpodcast. And now for our show’s disclosure.