#4 – Patience and Excitement in the NFL, Solo Vacations, Dividends, and Bull Markets

Jeff Lloyd [00:01:41]:
No, thanks for having me back. Good to be back here.

Wes Moss [00:01:44]:
The question here that we’ve been contemplating, and I’ve gotten lots of questions over this past week about is that in the headlines this were at all time high, new record territory. And it’s great if you’re invested and it feels good if you’re watching your 401k balance and if you’ve got stocks at all, you’re likely having another pretty good start to the year. Last year was probably pretty good because markets went up. But you keep seeing the markets forge new ground. At the same time, you get this feeling of, wait a minute, the market is already high. And if you’ve got money market, and the statistics are that there is a tremendous trillions of dollars in money market funds right now because rates went up a lot last year. Money markets went from paying essentially zero to paying two and then three and then four and then 5%. So trillions of dollars flowed into money market funds and it’s still there.

Wes Moss [00:02:40]:
The question will be, does that money from the sidelines move over to the market? Question is, if I’m a human, wait a minute, the market is high. I’m not supposed to buy high. And that’s the question. And I think the conundrum a lot of investors are in right now. What do we do when the market has done so well? Maybe you have money sitting on the sidelines. Last year you thought it was a good bet. You made 5% in money market. Great.

Wes Moss [00:03:08]:
But the s and P 500 was up over 20%. So there’s a lot of opportunity costs there as well. So there’s a couple of things to really think about and contemplate here. Jeff Lloyd, the first question is, what happens to markets once you get to an all time high? The question is, what happens next? So, of course, we don’t know. We don’t know what’s going to happen in the next three months, six months or even one year. But we can go back and look at how markets have done when they’ve reached a peak. And you can go back to, and there’s a couple of different studies we did here, and we found. So we have a combination of different ways of looking at this.

Wes Moss [00:03:49]:
But think of this first one where we go back to 1958, and this is one that, this is data from Bloomberg, the CIA, or capital investment advisor. The investment committee team and the research team went back and pulled every single time we hit a high, starting in 1958. And then if it went for more than a year before retaking that high, what happened, if you think about it, here’s the data here. Once markets reach a new all time high, again after going a year or more without doing so, what’s happened? What’s happened over the following year or two year time periods? Well, first of all, we’re counting here, that’s 13 different periods of time. And technically, here we are again. But it just started because we just hit the all time high. Let’s call it a week ago or so. But if you look at what the data shows us a year later, first of all, 92% of the time, we’re positive.

Wes Moss [00:04:54]:
So twelve out of 13 periods of time, we’re positive a year later after hitting an all time high. Wait a minute. Wait. I thought we weren’t supposed to invest when we get to an all time high. Well, the history does not show that. It shows that markets are higher a year later, 92% of the time on average, up 15.3% on average. So this natural reaction of I don’t want to get into markets when they’ve already done. Well, the reality here is that if we go back over the course of history, it is actually, interestingly enough, it’s been a really good time to be invested.

Wes Moss [00:05:35]:
If you go out two years, it’s a similar story. So it’s eleven out of 13 are positive. A year later, average rate of return over two years is 23%. So the thought around, oh, because the market is at a high, maybe it’s time to sell and get out. History does not show that at all. And then another way to look at this, these are consecutive trading days without a new all time closing high. We’ve gone really long periods of time. If you go back from 1972 to 1980, we went over 1800 days without getting to a high.

Wes Moss [00:06:14]:
January of 2000 through 2007, we went another 1800 days without getting to a closing high. But most of the time, if you go back to the early 1950s, it usually is only two to 400 days before we ultimately make a new high. And this one was over 500. So we went a really long time over the course of history, relative minus a couple of really long stretches.

Jeff Lloyd [00:06:41]:
Isn’t it kind of funny how you’re seeing the headlines that say, hey, markets are hitting all time highs, yet some people want to think about that in a negative connotation of, wow, the markets have run up too much. We’re at all time highs again. Is the market too expensive? Do I need to sell? Do I need to trim some, take some gains? Well, it’s interesting how those headlines kind of fuel that conversation.

Wes Moss [00:07:07]:
Well, the other thing, too, is that now we’re in bull market territory. So now we’re officially a bull market one. We’re up over 20% from the low in October of 22, and we’ve climbed back to the previous all time high, which was really the first day or two of January of 2022. So 2022 spent the entire year going down for the most part. 2023 spent most of the year recovering from that. And it wasn’t until the second or third week in January where we just cracked through where we were. So think about two years of just declining and making up for the decline. But when you get into a bull market.

Wes Moss [00:07:47]:
So, historically, bull markets have had obviously significant performance, averaging 156% since 1947, the median gain of 101%. So those are rates of return. Once bull markets have really gotten going, typically they’ve lasted more than 1700 days. So the bear markets are much shorter than bull markets. They tend to run and they run. So that’s over four years. The current bull market, obviously brand new, just starting. So the question will be how much is in the tank when it comes to where we are? Here’s another study.

Wes Moss [00:08:32]:
This is interesting. I found this from RBC Global Asset Management that shows if you go back into the 1950s, this was a study from 1950 through 2019. And you invested at an all time high only versus the average of investing in all dates. So this is similar to participation versus imperfection average over a year. If you only nailed the all time high, you would have averaged 11.6% average of all the other dates, 12.5. So interesting that even getting in when markets have already done well, we’ve seen that over the course of history, there’s been momentum and it’s really continued. More money matters straight ahead. Thinking about retirement in 2024? Well, you’re not alone, and I’ve got just the thing to help guide you on your journey.

Wes Moss [00:09:28]:
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Wes Moss [00:10:03]:
We’re starting to see earnings really roll in. And probably the most interesting announcement this week was, I would say probably Netflix. Kind of amazing how many subscribers they picked up. Their subs are really just through the roof, 13 million subscribers in the quarter. It’s hard to fathom that now. Part of that, they’ll have these deals with carriers, with cell phone carriers, and they’ll automatically get a Netflix subscription. So I think that’s part of it. But it’s a lot of people, a lot of new people.

Jeff Lloyd [00:10:37]:
I mean, I wonder how many of those 13 million were the ones that got kicked off their parents account and then had to open their own.

Wes Moss [00:10:44]:
I think it could be.

Jeff Lloyd [00:10:45]:
They’ve been cracking down on that lately.

Wes Moss [00:10:47]:
And then they announced a $5 billion partnership with WWE. I remember as a kid, WWE, it was WWF when I was a kid, world Wrestling Federation. And it’s interesting that that is, call it sports entertainment. It’s not obviously fully a sport because there’s a ton of entertainment around it, but it’s still obviously extremely popular. It’s a $5 billion partnership between Netflix and WWE to stream those events. Now, they would stream them live, correct?

Jeff Lloyd [00:11:22]:
Yes, that’s right.

Wes Moss [00:11:24]:
And that’s TKO group, that’s the parent of WWE. That stock was up a bunch this week. So again, we’re not saying buy or sell any of these companies, but it is fascinating that as the streaming wars continue, Netflix continues to just dominate the landscape. And I guess they just have so much more content than the other streamers.

Jeff Lloyd [00:11:47]:
They do. And do your boys watch wrestling or did they ever watch wrestling growing up? Neither.

Wes Moss [00:11:55]:
I just don’t ever see it on tv. And maybe that’s why evidently there is a giant fan base and not a whole lot of distribution is, I think, part of it. I see more UFC. The cage matches are on tv all the time, but you don’t usually see. I don’t typically see wrestling one of.

Jeff Lloyd [00:12:13]:
The coolest sporting events, and I’ll call it a sporting event that I’ve ever been to.

Wes Moss [00:12:16]:
Sports entertainment.

Jeff Lloyd [00:12:17]:
Sports entertainment event was when WrestleMania came to the Georgia dome and me and a buddy went and it was fascinating. Do you remember Snookie from.

Wes Moss [00:12:29]:
Yeah, yeah.

Jeff Lloyd [00:12:30]:
She was one of the wrestling events. She was in it.

Wes Moss [00:12:33]:
Oh, she wrestled.

Jeff Lloyd [00:12:34]:
She wrestled in it in the WrestleMania in Atlanta.

Wes Moss [00:12:37]:
Wow. Maybe it’s going to be third place for the third most fascinating reality show on television, which is WWE. We’ll see. But clearly they’re seeing a market that’s underserved and maybe that’s why this partnership is going. Speaking of the big macro news that I think is super important from this week, and it’s similar to the story we’ve heard over the last year and a half, we’re not supposed to have good gdp yet. We have good gdp. On Thursday of this past week, we got a 3.3% GDP number, 3.3% for Q four relative to the prior quarter, and two and a half percent for last year. That’s the estimate now, two and a half percent gross domestic product.

Wes Moss [00:13:31]:
Now we’re talking about a 27 trillion plus dollar economy growing it. Call it two and a half to 3%. That’s robust. And inflation has come down. And there’s CPI that we’ll frequently talk about, which is consumer price index. And then there’s PCE, the producer or personal consumption expenditures is another way to measure inflation, and that has looked relatively benign. One of their headline numbers, sub 3%. It’s funny, I think it was us bank or I can’t remember what bank this was, but their chief economist said something to the effect that it was a supersonic, it was a supersonic Goldilocks economic report, which I remember in our 2024 outlook.

Wes Moss [00:14:25]:
We wrote all about Goldilocks in 2024. So we thought, well, we don’t think the economy is going to be terrible because the labor market is so strong. Consumers are still in pretty good shape, and then that gets reinforced by a strong labor market. We also can see longer term higher inflation relative to what we’ve had over the last 15 years. But noting that inflation can continue to come down from the really high levels we saw now, we’ve seen now for the last two years, continue to moderate, and then that PCE number shows that it continues to moderate. So we see strong economic growth and lower inflation, which they’re not. That’s a supersonic Goldilocks.

Jeff Lloyd [00:15:08]:
I think that’s the first time I’ve heard that phrase, supersonic Goldilocks. And it’s almost like turning Goldilocks into a superhero. Right.

Wes Moss [00:15:17]:
Which I think you can absolutely do. I think Goldilocks could be a superhero all day long. She would have the magical ability to moderate everything. So her superpower would be, if something looks too hot and bubbly and out of hand, she cools it down. If something’s too cool and not good enough, she brings up the temp. Her superpower is moderation, and we love that in economics. Supersonic Goldilocks. Now, I don’t know what that would look like, but as you know, I’m not going to say I’m a foremost thought leader around superheroes, but I do spend a lot of time watching Marvel movies.

Jeff Lloyd [00:16:03]:
Who’s your favorite?

Wes Moss [00:16:05]:
Favorite what?

Jeff Lloyd [00:16:06]:
Who’s your favorite superhero?

Wes Moss [00:16:08]:
Marvel or DC or just the whole.

Jeff Lloyd [00:16:10]:
Just in general.

Wes Moss [00:16:14]:
Superman. Okay, easy. May I say man of Steel?

Jeff Lloyd [00:16:21]:
Okay, well, that’s funny. I was about to say I haven’t seen a really good Superman movie lately. Is man of Steel.

Wes Moss [00:16:27]:
What do you mean you haven’t seen it, man?

Jeff Lloyd [00:16:28]:
I hadn’t seen man of Steel.

Wes Moss [00:16:29]:
What do you mean you haven’t seen man of Steel?

Jeff Lloyd [00:16:32]:
I’m a Batman guy.

Wes Moss [00:16:33]:
Are you an american?

Jeff Lloyd [00:16:34]:
I’m a Batman guy.

Wes Moss [00:16:35]:
You an american? Jeff Lloyd, when was the last Superman movie watch?

Jeff Lloyd [00:16:40]:
Probably one with Christopher Reeves from, like, the 1980s. I think that might have been my last Superman.

Wes Moss [00:16:46]:
Yeah. Wow.

Jeff Lloyd [00:16:47]:
Yeah. Confession time.

Wes Moss [00:16:48]:
I know. Welcome to 2024. Man of Steel. It’s actually been around for a long time.

Jeff Lloyd [00:16:54]:
Well, I’m writing it down. Here’s what I’m going to do tonight.

Wes Moss [00:16:57]:
Man of Steel is perhaps the best superhero movie of all time. Okay. Of all time. I’ve watched it probably a dozen times. It is so good now. It’s a little dark, and it’s filmed, and it’s got a little bit of that Gothamy, even though it’s not about Batman, but Batman’s. Is he in that one? I don’t think he’s in this one.

Jeff Lloyd [00:17:23]:
But there are multiple Superman movies.

Wes Moss [00:17:25]:
Yeah. There’s a Batman will come into some of these. I don’t know if he’s in the man of steel. I think it’s just him against Zod. It’s a really good movie. It’s very good. It’s heartwarming. It’s America.

Wes Moss [00:17:37]:
Clark Kent. It’s kind of right before. He doesn’t want everybody to know he’s Superman, but he is Superman. Guy tries to mess with him in a bar. He’s a waiter in Alaska somewhere. Instead of beating the guy up, he goes out to his tractor trailer truck full of giant timber. These are trees with the branches taken off and skewers his truck with these 200 foot trees as if they were toothpicks in a shrimp. Guy walks out, his truck is hanging and dangling on 200 foot locked.

Wes Moss [00:18:12]:
It’s a solid movie.

Jeff Lloyd [00:18:13]:
Okay, well, I’m going to watch it soon.

Wes Moss [00:18:15]:
Okay. All right. So we have really good gdp news and we have pretty good or cooling inflation. You put it all together, you get this super Goldilocks effect, at least for now. So we don’t know if this will continue. I’m in the camp and we’ve written a lot about this going into the new year. Jeff Lloyd, that there’s no reason the economy can’t grow at least a little bit in 2024, despite all the forecasts that we’re going to go into recession and saw that last year didn’t happen. Saw it.

Wes Moss [00:18:45]:
We see it this year. We don’t necessarily buy it. Now, before we got into current topics of the day, we have this thought around. What do you do now that the market’s at an all time high? Isn’t it time to sell? What does the new bull market mean for your 401K? What should retirees do in a new bull market? What do you do? And it’s a scary proposition to invest or put new money to work. When you see the market bumping up on these brand new historical highs, the voice in our human investor brain naturally says, don’t touch hot stove. But history shows us that the stove is rarely all that hot. Following one of these all time highs. So you look at the data over the past 70 plus years, investing at or near an all time high, perhaps surprisingly, works very well.

Wes Moss [00:19:47]:
Again, the data we’ve gone through today, once we hit an all time high, less than 10% of the time, markets are down 10% or more a year later. So again, once you hit an all time high, less than 10% of the time, a year later, it’s down again. Looking at the data once the market’s gone up, gone more than a year without making an all time high like it did between 2022, falling most of 22, rebounding most of 2023. That was over two years before we hit a new all time high, which was just a couple of weeks ago. Markets are up a year later, 92% of the time, up on average over 15% and up 23% on average two years later. Why is this? I don’t know if there’s no perfect answer here. Perhaps there’s this consolidation effect. Markets get hit, takes a while for them to stop going down, and then they get stuck in this quagmire for a long period of time and then they finally, when they finally break back out, which is taking, it takes something relatively strong to be able to do that, make a bottom, come back, put in a brand new high.

Wes Moss [00:21:03]:
Usually that doesn’t happen just for a trivial reason. Usually something has got to be going on. Maybe it’s earnings that has done that. Earnings are always, almost always important. Maybe it’s the fact the US economy has just refused to go into recession. The economic numbers are defying all of the dower predictions. Again, GDP numbers just grew at 3.3%. It’s a big number.

Wes Moss [00:21:28]:
Two and a half percent for the full year. PCE personal consumption expenditures the Fed watches very closely, eased to 2.7% annually without food and energy, up only 3.2%. So you put all this together, and even though we’ve got trillions of dollars sitting in money market because we’ve had some nice rates of return on money markets, that’s the upside of the Fed raising rates. Hey, interest rates are higher. It’s bad news. Good news is interest rates are higher. So we’ve got better money market rates, we’ve got better rates on treasuries. And we do think, and here we are talking about equity markets.

Wes Moss [00:22:11]:
But I think it’s also a pretty good time for fixed income investors too, at least for the safety side of the portfolio that can generate real interest. We know yield is destiny, meaning that we’re starting yields which are higher today than they’ve been in arguably ten years, and on short term rates are higher than they’ve been in 22 years. That bodes well for what fixed income or bond investors can make over the next few years. It’s hard for investors to want to invest. When you hear, oh, markets are at a new high, well, I don’t want to invest at a new high. I don’t buy a house. Oh, that house just sold for the most it’s ever sold. I don’t want to buy that house.

Wes Moss [00:22:53]:
I’m going to buy it when it’s 20% off. And if we were to always do that as investors, it is a good strategy. But if you go back over the course of history, it’s almost counterintuitive that once markets make an all time high, it’s very rare that they’re down a year later and they average. And this is going all the way back to the 1950s. We’ve had 13 of these periods where we set all time highs. A year later, they’re 92% of the time it’s positive, up 15% or so on average. So it’s a little bit counterintuitive. But if you think about what a market has to do to get back to an all time high, a lot has to start going right.

Wes Moss [00:23:33]:
And I think that may be the case here is that a lot of predictions that the economy was going to be terrible, the Fed’s raising rates, trying to kill inflation. It’s going to crush the economy, earnings are going to be bad. And that took the market down in 2022. It rebounded in 2023 for the better part of the year. And then early this year in 2024, it finally got back to where it was over two years ago. And a lot has to go right. And think about what we just saw, another growing economy. We just got a GDP number this week.

Wes Moss [00:24:03]:
We just got another inflation number this week that shows that inflation continues to cool. We’re getting this Goldilocks super Goldilocks effect happening right now. Strong economy, but not too strong. Decent inflation numbers. Cooling but not too cool and not too hot. So right now, at least, we’re in this zone where we’re liking the data. And in large part the market has taken to that. And that’s part of the reason we’ve made new ground for markets.

Wes Moss [00:24:39]:
We have seen over 1100 new all time highs since 1950. So, yes, even though you hear, oh, the market hit a new all time high today. We’ve had over 1000 of these. So it’s not as though it’s a rare event. The market does well and then all of a sudden has to stop doing well. And that’s the history lesson that we think is important to take away from today here on money matters. Solo vacationing. Where are we going here? We’ve got all time high market.

Wes Moss [00:25:09]:
We talked a lot about that. Very interestingly, if you go back over the course of history, started in 1950 until now, the last 13 times, the market has forged new ground and the market has so many days over 1100 days that it’s made new highs over the course of the last. Call it 70 years. So it’s not that rare. It’s not that rare that this happens. But almost ironically or interestingly, even though if you were to pick those starting dates when the market does reach a new high, it keeps going. Historically, 92% of the time. A year later, the s and P 500 is positive, up about 15% a year out, up 23% out two years, still a highly positive hit rate.

Wes Moss [00:25:57]:
So it’s interesting that over the course of history, you as an investor may think, wait a minute, stove is hot, do not touch. But the stove is not nearly as warm as we may think it is, at least according to history. The second piece of the equation is not that it’s taken 32 years for the Detroit Lions to get back into a NFC championship game, but 32 years ago, if you look at where the market was, here we are 32 years later, markets up over 2000%. It takes time, it takes a ton of time, and it takes patience in order to find results and bear fruit from your investments. But a big part of that that does not get talked about is almost hidden or unsung power of dividends. Because dividends themselves just grow over time, year after year, and they go almost unnoticed. But they’re the really powerful fundamental force that then adds to. In fact, you pulled this from Bloomberg.

Wes Moss [00:27:08]:
Here’s a great example. The price change since the Lions were in the NFC championship game or conference championship game back 1992, January twelveth. You look at this, you see SP 500 index price change is 1067%. Wait, didn’t I say 2000? Well, guess what? Total return is 2092%. Wait a minute, 1000% from price appreciation and another thousand percent from what? Jeff Lloyd dividends half, maybe a little more than half. So it’s a very powerful force. If I look at the Dow Jones, same thing, price change up 1081% in price up 2402% in total return because of the reinvestment of dividends. Now, if you’re in retirement, you may be taking those dividends because you may be living on them, but either way, they’re coming into your account.

Wes Moss [00:28:07]:
They’re cash flow, and we’re going to talk about the growth of dividends over time. Powerful, unsung hero. The other surprise, not a surprise to me necessarily this week, but it somewhat surprising to the market, is just how strong fourth quarter GDP was. So here we are in January getting last quarter’s GDP numbers. These are in economics. You’ve got lagging and leading indicators and you’ve got coincidence. So the kind of leading indicator is something that should be telling you something about what’s going to happen. Coincidence, of course, is just, hey, what’s happening in real time? And then lagging.

Wes Moss [00:28:49]:
This is the ultimate laggy number. It doesn’t matter what GDP did last quarter. It’s a long time ago. Lots happened since then. So it’s not really constructive or all that helpful for where we’re headed today. However, there was so much talk last year, but there was going to be a bad year for the economy and it wasn’t. And we just got the numbers to prove that up for the year over, up about two and a half percent GDP growth, which may not sound like a lot, but for a 27 plus trillion dollar economy, that’s a serious growth rate.

Jeff Lloyd [00:29:23]:
And just think about at the end of 2022, beginning of 2023, how many forecasters do you think were calling for GDP growth of two and a half percent for the full year 2023?

Wes Moss [00:29:37]:
I didn’t know many. I didn’t know many or any. I found a really interesting. This was something to do with markets, important market visuals to understand. And it was a chart of forecasts. It was economic forecasts of where interest rates were headed over the course of the last 15 years. And the solid line was where interest rates went. And they essentially went straight down for 15 years, that entire period of time.

Wes Moss [00:30:10]:
Then the dotted lines were all the predictions from the consensus of economists. They were all going up. So you had this line essentially going straight down for 15 years. And every single year there was this tail that was headed up. So it was totally wrong. Totally wrong. Totally wrong. Year after year after year after year after year.

Wes Moss [00:30:29]:
Didn’t even get the direction right, let alone the magnitude when it comes to forecasting interest rates. Pretty interesting reasons to sell. There’s always reasons to sell.

Jeff Lloyd [00:30:42]:
Hey, we’re at a new all time high, Wes. Do I need to sell?

Wes Moss [00:30:46]:
All right, so if I go back to, let’s go back to March of nine and that’s kind of the bottom of the financial crisis, this number is going to sound good because it was after a long period of decline. So just full disclosure on that. The market is up around 780% total return sp 500. I can’t even read this because I just printed this last night and it’s too small for me to read. Maybe it’s 760, it’s over 750%. Right. At the same time, during all of that climb, that markets going up, climbing that wall of worry, you have time and time again, of reasons that you thought you might need to sell. You go back to 2012.

Wes Moss [00:31:36]:
Dow Jones only had one five positive days in an entire month for the first time since 1968. Wait a minute, something’s wrong. Fiscal cliff talks, remember the fiscal cliffs sent stocks lower. We had the taper tantrum. We had the US government shutdown. We had the ebola virus contagion fears. We had the election futures. This was 2016.

Wes Moss [00:31:58]:
This must have been the night. I remember this, the night that Trump got elected. Us election futures were down 5% overnight in overnight trading. You continue on here, another government shutdown. You’ve got emergency fed injection, the repo market. This is coming off. And by the way, this is before we even got to Covid. And then, of course, Covid, which talk about a reason to sell, which turned out to be not a reason to sell, at least for investors.

Wes Moss [00:32:28]:
But these are the things that we’re just always faced with, and it makes investing really tough. And that’s why it’s nice to have some grounding and some perspective around how markets have behaved over time, because your gut probably says, and rightly so. Well, though the stove is hot, don’t touch it. The market’s up, don’t go near it. However, you open up a history book and you start to get some perspective around that. And the perspective here to me was actually a little eye opening. And I thought to myself, I’m surprised that the numbers are so good going back to the 50s. So we’re talking 70 some years now of getting to a point where markets did really well and then they continued to do well historically.

Wes Moss [00:33:16]:
So that’s a lesson what we’re going to talk about as we. Well, let’s go right to dividends. It’s time. It’s one of my favorite topics of all time. We’re big believers here on money matters of what we call multi asset class income investing, or just simply put, income investing. We want to get a cash flow from, we want dividends from stocks, we want interest from bonds, we want distributions from some of the other areas that don’t perfectly fit into those categories. All three, though, come in the form of cash. You get that money into your investment account if it’s paying a dividend.

Wes Moss [00:33:50]:
Now, they’re often ignored because they’re usually smaller numbers. Stock XYZ pays fifty cents a share. Well, great. Nobody seems to care about $0.50, but that goes up by XYZ. Company raised their dividend by seven cents. Okay, big deal. Well, that’s $0.07 on 50, that’s 14%. That is a big deal.

Wes Moss [00:34:15]:
Increasing cash flow by 14%, just as an example. So they get some short shrift. Dividend increases. Don’t take the headlines because they’re usually headlines about cents and nobody picks up a penny off the ground anymore because cents really, because of inflation, aren’t really worth a whole lot. But they are when it comes to dividends, and they really add up. More money matters. Straight ahead. I’m excited to go over this, which is what we need to know about the markets.

Wes Moss [00:34:51]:
Jeff Lloyd, hidden strength of course, we’re talking about dividends, and we just updated our dividend growth study that we’ve done year after year after year. Now we’ve just updated as, of course, of the end of 2023. So this is the latest we’ve talked about how anything in the form of pennies gets short shrift. I’ve told the story of my son walking by, picking up the. There was a soon B. Anthony Dollar, Saqua Jewia Dollar, and I think a nickel. And he picked up the silver dollar and didn’t pick up the nickel. Why didn’t you do that? Well, it does not worth anything.

Wes Moss [00:35:34]:
Even a kid knows that. So that’s how dividends work. Though it’s not uncommon for a company to pay a dividend as a small, seemingly small amount. And plus, they’re broken into quarters. So even if a company is paying a dollar a share per year, that sounds pretty good. But they speak of them in quarterly numbers, so they only pay $0.25 this quarter. So it immediately gets off the radar. Well, it’s only 25 pennies.

Wes Moss [00:36:01]:
No big deal. Who cares? So, unfortunately, the public, just like my son, who did this story, comes from neglect and appreciate that this is decimal point of a distribution. Doesn’t seem like it could add up all that much. What’s the big deal? Few cents. So think about this. If you had a 50 cent dividend, so $0.04 on $0.57, let’s say, is only a 7% dividend increase. What’s the big deal? Well, it adds up, and here’s what we mean by that. So we’ve tracked over the worst of time.

Wes Moss [00:36:40]:
So we go back to 1980, and we take a look at the S and P 500, and we look at if we were to put $10,000 in the S and P 500, what did it pay us back then? Let’s say we were an income investor, and we had to choose between bonds or ious issued by governments or companies. Investors buy loans and then the issuer promises to pay them back in full, plus he gets some interest along the way. Back then, in 1980, interest rates are pretty high. They were like 11%. So if you were wanting to get some income and you had to choose and you had $10,000 to get going, the S and P 500, which, by the way, had a big dividend back then, it was a little over 5%. So you could have gotten $529 a year in dividends. Well, if you had put it in the, in the overall bond index, you would have gotten $1,100 in income. So call that closer a little more than 11%.

Wes Moss [00:37:35]:
So let’s just say you chose well. I’m going to stick with bonds because they paid me more and ignore stocks. Well, we’re going to run to news, weather, traffic, and we’re going to come back with the results over time. What changed over that period of time? And then how did dividends grow relative to, how did interest go? How much money in income got paid out for that investor over the course of time? And I think the results are pretty staggering. We’re going to also look at that relative to inflation. What did dividends do? Just a good old fashioned CPI, which we pulled from the St. Louis Federal Reserve from 1980 until the end of this past year or end of last year. The numbers tell a serious story, an important story about the power of dividends and the raising or the increase of dividends over time.

Wes Moss [00:38:29]:
So let’s say you’re an investor and you want to go get income and you get to start with $10,000, and that’s your goal. And you think, well, over time, how am I going to get the most income from an investment? You only have two to choose from. You can choose the bond index or the stock index, real simple, S and p 500 and the aggregate bond index. So you start back in 1980 because interest rates are really high back then. You chose fixed income bonds, ious, and you would have been right, and you would have made more money relative to bonds, at least in an income perspective, or 1234-5678, 910 years before stocks started to outpace. From an income perspective, what you have been getting, you would have gotten from bonds. So $10,000 back then, 1980, your cash flow, your dividend interest, would have been a little over one, $100. That’s a little over 11%.

Wes Moss [00:39:31]:
No wonder that the investor chose that s and p 500. Had a pretty good dividend back then, too. It was a little over 5%. You got $529 in cash flow but here’s where it gets fascinating, is that if you let that go over the course of time and again my chart here shows from 1980 I’ve got in the blue line bond interest and the red line is stock dividend. Stock dividends. Both are cash flow that you receive if you own either of these indices or investments. In these indices, the blue line, which starts out higher than the red line. So bond interest wins for a while and then it steadily goes down.

Wes Moss [00:40:13]:
Now part of that is that interest rates went down. They went from a high back in 1980 down and down and down until only recently they’ve come back up. But what is so interesting is that the red line, which is stock dividends for the most part, it just slowly goes up year after year after year. So the $10,000 investment in the SP 500 started out with dividend of $529.44. Years later this was updated as the end of last year the dividend income had climbed to $6,420. That’s a 64% yield on your original investment. On your original investment. Now don’t forget the original investment grew as well.

Wes Moss [00:41:01]:
Again, for example, ten thousand dollars s and p five hundred. It would have grown into almost $441,000 over that period of time. Of course the income now so much higher. On the other hand, aggregate bond index only grew from 10,000 to 14,000, a little over 14,000, and now would only pay about $657 per year, or six, call it six and a half percent. On your original investment. It’s clear who wins. The red line loses for a little while and then just takes off. That’s the dividend line.

Wes Moss [00:41:40]:
Annual stock dividends increased over that period of time. Twelve x they went up twelve x. Looking at annual payout from a little over $500 to over $6,000. Again, the price only index for the SP 500 group 44 times as well. So you had more engine to produce more income into the future. On the other hand, bonds rose less than one and a half times the price and now have 41% less income than they did when started. Now another way to look at this is just looking at dividends relative to inflation. So I go back to 1980 through two thousand and twenty three s and p five hundred dividend index inflation rose by forex.

Wes Moss [00:42:26]:
So I went back to Fred, which is the US Bureau of Labor Statistics on the St. Louis Federal Reserve site. Looked at inflation CPI, all urban consumers. The level back in Jan of 1980 was 78. It grew to about 308. That is a 295% increase in inflation, 295% in inflation, call it four x. Inflation went up four times. Well, if you look at just the dividend payout for the SP 500, it went up twelve x, went from $529 to $6,400.

Wes Moss [00:43:05]:
That’s a twelve x increase. Now look at those two together. The dividend growth beats inflation because they both grew. One grew a heck of a lot faster. Dividends grew at three x, the rate of inflation over the course of 1980 through last year. That’s a powerful way to look at this. Again, we don’t hear a lot about dividends, but wait a minute. The dividend alone from stocks beat inflation by three x.

Wes Moss [00:43:37]:
That’s the way I look at this. So the verdict is the dividends are a really powerful wealth building source. You just don’t want to ignore them.

Jeff Lloyd [00:43:45]:
Jeff it’s funny, over the last couple of years, we’ve obviously made a joke here on money matters that we need to rename it. Inflation matters because we talk about it just about every week. But inflation has really taken off since really after Covid, so 2021.

Wes Moss [00:44:06]:
Through what.

Jeff Lloyd [00:44:07]:
We’Re seeing this week. And this is just a good reminder and a good illustration of how you protect that purchasing power, how you protect your wallet, how you protect your spending power. And that’s by dividends.

Wes Moss [00:44:22]:
Again, let’s remember the power of dividends. It can be frustrating if you’re unaware of it, but this is what we’re trying to do here. Money matters is educate some of these really powerful historical trends that we can learn from, that we can harness. And if we give it enough time, we have a good shot that this works for us as well. I think it’s tough, though, when you’re a newer investor and you hear people like me talk about these 30, 40, 50 year studies say, well, that’s great that happened over that period of time. Of course it worked over 30 years. I don’t want to wait 30 years. And that’s just the reality is that we do need to really give it a ton of time to make it work.

Wes Moss [00:45:04]:
Speaking of time, let’s do something a little lighter. This has been investment heavy. Jeff Lloyd, probably article of the week that’s non financial, but very much about living a happy or unhappy retirement had to do with travel. The trick to a great marriage this is a Wall Street Journal story, was recommended on my app. The trick to a great marriage, vacation without a partner. What? So I was a little shocked at the title. So naturally, you clicked on it, of course, clickbait. So I read it and I thought, wait a minute, maybe they’re talking about, okay, maybe not with your spouse, but you’re going to go on a trip and you’re going to go on a girls trip.

Wes Moss [00:45:47]:
Of course you’re going to go girl. In fact, when we talked about it, that’s what I said. I was like, well, no, I think they’re just talking about girls trip. That’s fine. Group group trips are great. You go on a guy’s ski trip, great. What’s wrong with that? But that’s not what this was about. This is about solo travel.

Wes Moss [00:46:06]:
There is a 46% uptick this year over last year, I guess 2023 over 2022, a 46% increase in solo travel according to the US Consumer Travel report for market research and focus. Right. Women motivated by the desire to explore the world independently and enjoy a sense of freedom. This is from Wall Street Journal. Often undertake these journeys even if their spouses are not interested. Is that what this comes down to? Guys just don’t want to go on trips?

Jeff Lloyd [00:46:43]:
I think it’s both guys want to go by themselves, according to Wall Street Journal, and girls want to go by themselves.

Wes Moss [00:46:50]:
Yeah. But most of the higher propensity for female travelers. Interesting. Well, okay. I guess I can see that. I’m usually interested in trips I like going on with. If Lynn brings up a trip, I’m usually all in. Yeah.

Jeff Lloyd [00:47:08]:
And I want to go on record that the trick to a great marriage for me would be vacationing with my partner.

Wes Moss [00:47:15]:
Not without every time. Shouldn’t you go on?

Jeff Lloyd [00:47:20]:
Are we good?

Wes Moss [00:47:23]:
Every time. So give yourself permission to go on a trip. And I guess I’m still sticking with my research here. Our research. I think that you want to do group trips. One of the folks interviewing the Wall Street Journal said it was her eat, pray, love travel trip, going all over the world, solo, meeting people. And she was married and she had kids and she was going for a month, I think maybe twelve weeks now. I think that she had just had a rough couple of years and she was kind of celebrating a little bit of fun and a little bit more freedom.

Wes Moss [00:48:00]:
But I don’t know, I just think that it seemed like a clickbait headline to me. The numbers though, I guess, don’t lie. The numbers for solo travelers are up. I still contend trip with friends, heck of a lot better. And with that you can find both of us and ask questions throughout the week. Easy to do. So right on our website, yourwealth.com. That’s Y-O-U rwealth.com.

Wes Moss [00:48:26]:
Have a wonderful rest of your day.

Mallory Boggs [00:48:33]:
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 [00:49:21]:
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 investment decisions should not be made solely based on information contained herein.