Southwest Investment Advisors Videos

Many have heard the news that laid off workers are not doing their part in returning to work. How is this affecting the economy and is it really a problem?

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The NASDAQ has been performing amazingly, but can it last. We are hearing the term bubble on many fronts. Should you be concerned?

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August has typically been rough for the markets. What is 2020 going to have for us this August.

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LPL Research Chief Market Strategist Ryan Detrick and Equity Strategist Jeffrey Buchbinder review the current environment and provide commentary on the trail to recovery and how to invest for the 2020 presidential election

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In the news you hear a lot about how military strength changes over time in different regions of the world. There is an obvious military aspect to this, but what about the economic impact. Let’s find out.

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When investing you want the most for your money, but really can only make the choice of two of the three basics.  After watching, tell us what do you prefer?

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The federal government seems to be doing ok because they can print money, but how are states doing? We visit that in this episode

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Bart and Rick give you an idea of what they think about how money is flowing from one investment type to another.

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We had quite the bull market ending in March. Now it appears like the bull has returned?

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Bart goes through some of the highlights of our broker dealer ideas for the mid year 2020

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Bart and Rick give you an idea of what they think the market is doing for the past 6 months and what to look forward to.

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Wine tasting and restaurants is what we are covering today. Make sure to listen in on how comfortable other are feeling in the economy right now.

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We rarely stray into politics and we continue that here, but we do talk about how the markets affect the elections. Yep, not the other way around. That happens too, but we will talk when to start watching.

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Aunt Jemima, Uncle Bens and others have been under attack for years, but only now are things changing. What will be the outcome of these changes?

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Today we cover something that I found very interesting the first time I dug into the financial markets. Growth vs Value stocks.  In high school when I learned about investing or looked at the Wall Street Journal, I just saw prices. Here we go into what growth and value stocks are defined as.

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In this episode we talk about digital money.  Not bitcoins like what you might think, but instead, what the fed does to increase the money supply.

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Hedge Fund Billionaires are in the news all the time and sometimes you may wonder if you should be invested in them as well. Bart and Rick dig into what they are and if you should be in them or not.

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A lot of talk has been around companies that don’t pay their fair share of taxes and the explanation sometimes comes around the large companies profits being in other countries. As of late, those profits are now coming back to the US. We explain what that all means here.

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In this episode we talk about schema.  Actually, “Flawed Schema” and how it affects the financial markets.

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The market volatility is markedly more than expected. What could be driving this. We go into some unexpected answers.

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Most people get things wrong when it comes to the market. When a lot of people do it, that is when we get a Contrarian Indicator. Let us explain.

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Announced today was the official start date of a recession. What does that mean and what will be done. Come find out.

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Can you catchup to retirement loss you have had in the past? We will talk about it here.

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Let’s look at the last few bear markets and how soon after were we right back to where we started.

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What has the market done since the mid March lows? Quite a bit.

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We are going to talk about something that is a bit different than what we normally do, a Key Reversal.  

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Episode 034 – Key Reversal

Episode 034 – Key Reversal


Rick:                 Welcome to Market Insights from Southwest Investments. I’m your host, Rick Zich. Joining me today is going to be Bart Schannep. He’s going to be talking about something maybe a little esoteric from what we normally talk about because this is maybe a little bit more technical.

We’re going to talk about a key reversal. You can see that I don’t always put the date on our webcast here, but I put it today because this marks a point that might be interesting for us to all keep in mind, May 18th 2020. We’re going to be talking about a key reversal. Here we go. Bart, why don’t you dig into some of the insights here and tell us about a key reversal.


Bart:                 Thank you, Rick. Yes, this is a little esoteric, but hang with me here. What I’m talking about today is, on Thursday May 14th, it appears that we had a nice key reversal. A key reversal is a reverse of a short-term trend. This is almost a little bit what a trader might use, but it gives hope to people who are watching the market on a day-to-day basis to see when a short-term trend might be coming to an end.

In this case, a bullish key reversal is when the price of the market or any index has been going down for a few days. On a key reversal day, the index goes down farther than the most recent lows, but during the day turns around and comes back up and closes at a higher level.

Now, you can certainly have that on the bearish side where a trend is on the rise. Each day the market seems to be going higher and higher. Then on a bearish key reversal day, you can see that the market goes up higher during the day, turns around and closes at a lower level. A lot of times, especially if these days have good volume, it is an indication that the short-term trend is reversing itself.

Well, last week we had a few down days in a row. Some of them were pretty good days driving the index, whether it’s the S&P or the Dow or the broader U.S. stock market index, down more than three percent, which has a lot of different people who watch the market nervous. Seeing on Thursday that we had a key reversal, it was hopeful Friday was going to be an up day. Well, it was a ho-hum day, but it did end up being up.

Now here it is today, May 18th, and we had the stronger day that’s following through. Key reversals are something to watch for. Again, it’s a short-term. We are not traders. I’m not recommending it as a trading strategy, but for those people who are watching the market on a day-to-day basis, whether it’s getting optimistic by the day or pessimistic by the day, when you see a key reversal, it generally means things are turning around.


Rick:                 Thanks, Bart. I think that’s important for many of our clients to know. Sometimes when we talk about things, we don’t necessarily talk about the specifics of us watching the markets in that sort of way. We have our set portfolios that we create for certain individuals, and we just let those portfolios run.

We are not in this as short-term traders, but it is important for us to watch these things and keep them in mind when we’re making decisions on portfolios. We’re, like I said, watching the market. Sometimes we can get discouraged when things are not going as we expect, but this is a very important point, this key reversal. Hopefully it’s an indication that can give us hope going into the future. Hopefully next week we’re going to see continued ups. That will probably take us into a different trading range.

Thanks so much for giving us that insight, Bart. I appreciate you showing up and enlightening us with a little bit of information about key reversals. Thank you for joining us on our webcast this week. We look forward to seeing you each and every week.

If you do have comments or anything else that you would like to say about the webcast, please feel free to fill out a ‘contact us’ form and send it in. We’ll be sure to read it and take a look to see if we can answer these questions right online. Thanks again for joining us. We look forward to seeing you next week. Thanks so much.

How can one be so rich, but not have any money. This is the case of many entrepreneurs that have all their money tied up in businesses they own. We look at Elon Musk and how he deals with things.

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Episode 033 – Cash Poor

Episode 033 – Cash Poor


Rick:                 Welcome to Market Insights from Southwest Investments. Today we’re going to be talking about something that I know many of you would be interested in because quite a few people want to be rich, but what is rich? One of the things that I have found very difficult to explain, I have an accounting background in addition to finance, and there is a very distinct difference between being cash rich and paper rich.

What we’re going to be talking about today is Elon Musk. Elon recently in the news has been talking about selling off all of his physical possessions and what that’s going to do. We’re going to dig into what that actually means because there are many people that are stock rich that they own a lot of companies, but in the end, that really doesn’t mean anything unless they can turn that company into something and make a sale to someone.

I think we’ll talk about that in maybe a future webcast because, not to get into too many details, but basically sometimes those companies that are sold by the owner are purchased by, let’s just say some sort of a financing company. I don’t want to dig into and name anybody, but basically what happens sometimes is they take on a lot of debt.

We hear this in the news of companies being burdened with debt. It’s because of some sort of buyout of the existing ownership. Well, that’s what’s happening. That owner is moving from being stock rich to cash rich.

That’s the dream of every American that is in business, to be able to sell their company. Everyone wanted to be bought by Google at some point because Google had all the money to do things. We’re going to be talking about those things. Bart Schannep is going to join me to explain what this ‘cash poor’ means and why Elon Musk is in this predicament.


Bart:                 Thank you, Rick. It’s good to be on again and good to see you. Yes. Elon Musk is a unique fellow, but the situation he’s in is not unique, especially to entrepreneurs. It’s called being cash poor. What does that mean? Okay, Elon Musk owns Tesla, the car company, SpaceX and a number of other assets. His net worth is estimated to be around $39 billion with a B.

The problem is that’s what he owns. That’s what it’s worth, but he spends all the money he has, and he has no cash. It’s been in the news and confirmed by various media that he is selling all of his assets that he can. He is selling his houses. He has multiple houses. He’s selling all of his belongings, trying to raise cash so he can simply live.

He owns stock, absolutely, but much, if not all of it is restricted, meaning because he’s the owner or restricted meaning that because he’s the owner he can’t sell it, or the shares that he can sell, he’s afraid to let go because he may lose controlling interest of his companies. He is retaining ownership of his companies and is probably moving into a rental.

Unbelievably, a 39 billionaire is selling houses so that he can move into a rental that he can afford to live in. Now, we’ll see how long this lasts. As I say, he’s a unique fellow. He’s currently suing California, his city in California because of the COVID-19 stay-at-home orders that his factories can’t work if everyone’s required to not be at work. He’s suing the city that he’s in, Alameda, and he is seriously looking at moving out of California. Now, we’ll see how that goes.

I am surprised that Tesla that survives to a great extent to federal tax rebates on buying these battery cars has now established a factory in China, which means U.S. taxpayers are supporting his factory in China. Now as he looks to other states, California may be upset that they gave him a lot of tax breaks to be there in the first place, so a little trauma and drama. We’ll see where it goes.


Rick:                 Thanks a lot, Bart. Interesting perspective and evidently not an uncommon situation for entrepreneurs, like you had said and as I explained a little bit earlier in the broadcast here. I find it always very interesting explaining the difference on cashflow because that’s really what it is. For you accountants out there, that’s what we’re talking about, cashflow versus the income statement. Very, very different things and essentially very difficult to really conceptualize.

Thanks Bart for your insight on that. I appreciate you joining us this morning. Thank you for joining us as well. We appreciate you coming, watching the show, giving us your comments and interesting takes on what we have to say. Keep those comments coming. I appreciate it, and we’ll see you next week.

Black swan event is something that is very unexpected and can critically effect situations around use. We are going to talk how this Covid-19 is being considered just such of an event.

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Hong Kong Flu. Do you recall?  Let us enlighten you on the details and you may be surprised.

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Today we explain the concept of rebalancing your portfolio. Why it is important and what it does.

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Episode 028 – Rebalance

Episode 028 – Rebalance.mp4

This is Market Insights from Southwest Investments, where we dig into current events and how they affect the markets but also how they might impact your financial future.


Rick:                 Welcome to Southwest Investments Market Insights webcast. I’m your host, Rick Zich. With me today is going to be Bart Schannep. Bart’s going to dig into some things that we talk about every time you come in for an annual rebalance or an annual review of your account.

Basically what we’re doing is we’re identifying which funds, which mutual funds, which ETFs have performed really well and might have brought your account out of balance. We want to bring it back into balance. Bart is going to dig into what that really means and what’s behind that. Bart, I appreciate you joining us today. Why don’t you dig into some of those things?


Bart:                 I certainly can, Rick. Thank you for having me on. The easiest way for me to explain rebalancing is think in terms of, well, here’s a good example. Say you’re dropped on an island and there are only two companies you can invest in. You can invest in an umbrella company or a golf course company. The only other piece of information you have is that it literally rains every other day.

Okay. You get there. You land, and you invest equally into each company. First day, rains like crazy. The umbrella company goes up. Second day, dry, no rain. The umbrella company goes down, but the golf course company goes up. Next day and vice versa. What you can see is your money would eventually or essentially just move up and down with what’s happening.

With rebalancing, let’s say it rains like crazy. The umbrella stock goes up. The golf course stock goes down. At the end of the day, take your profits from the umbrella company and buy more cheaper golf course stock. The next day, dry as a bone. Everyone’s out playing golf. The umbrella stock goes down. The golf course stock goes up, but you now have more shares because yesterday you were able to buy cheaper shares.

Well, now that the weather’s nice and everyone’s playing golf, you can sell some of your profits, take some of your profits out, sell some of your expensive golf course stock and buy cheaper umbrella stock. Instead of day by day your portfolio going like this, because you keep taking profits from the winners and adding to the losers, you can make your portfolio climb like that. That’s the best way for me to describe rebalancing.

Now, after that it gets a little more difficult. Do you rebalance? In the real world, we’re not using just two stocks, golf course and umbrella. We’re using broader based asset classes, large cap US, small cap US, international bonds. Maybe commodities are mixed in there, even money market.

When you get the proper mix of assets for you, for your risk tolerance, then do you rebalance annually, semi-annually, monthly, weekly, even daily if you’re a day trader? Well, we have found that from a historic standpoint, statistically the best is annually. Now, we certainly cheat when people add money or need to take money out. We’ll rebalance at that time. Otherwise, in a static world, the best bet is probably for us, we believe, annually.

Other people disagree. It should have nothing to do with time, should have to do with if one of the asset classes gets more than one percent out of whack, three percent, five percent, 10 percent. There’s no magic number, just a number, a percentage out of whack, then you should rebalance.

There is a flaw in that that if one of your investments, one of your asset classes tears off on a run, you maybe haven’t given it enough movement to really make a difference. That’s what we find with rebalancing. It isn’t necessarily about trying to improve performance, although with my golf course and umbrella example, you can see it does help with performance, but the other main thing is reduction of risk.

In reducing risk, what you’re doing is you’re protecting. You’re keeping yourself from having too much assets in the wrong category at the timing that maybe such a category takes a real beating. You control risk by not letting any asset class get too large. What it does is it also gives you something to do. Yes, that’s what I said, something to do. We are hardwired to do the wrong thing at the wrong time. When the markets go down so steeply, people feel like they have to do something.

I’m going to borrow this. Warren Buffet’s mentor, Benjamin Graham, once said that the active rebalancing simply gives investors something to do. It lets them blow off some of the energy, bleed off some of the energy that when people feel like things are going bad and I’ve got to do something, okay, then let’s rebalance.

Let’s move out of whatever asset class maybe did the best and add more to the asset class that did the worst because we’re at least buying something cheaper so that when the normal state resumes, that which we bought at a cheaper price will give us the reward. That’s rebalancing in a nutshell. I hope this helps.


Rick:                 Well, it certainly did, Bart. That, I think, broke it down really, really simple for those that come into the office and maybe just want a little bit more information about what a rebalance actually does. I appreciate that insight on there.

One of the things that I would also like to talk about is that as you watch these videos, don’t be afraid to go into our contact page and send us any questions that you have about this. I’d be happy to bring it up on the next webcast or just send you the answer directly so that we can make sure that you’re being taken care of. Please, feel free to go ahead and send us that information. I appreciate you being here and look forward to seeing you again next week. Thank you so much.

We have seen some really big drops in some financial areas. In this video we talk about the GDP drop and the increase in unemployment.

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Today we explain the concept of Modern Monetary Policy. Something that many people do not know about, but could become very important in the near future.

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Episode 027 – Modern Monetary Policy

Rick Zich:          This is Market Insights from Southwest Investments, where we dig into current events and how they affect the markets, but also how they might impact your financial future.


Welcome to Southwest Investments. I’m your host, Rick Zich. I’m an advisor here, and joining me is Bart Schannep. Bart, welcome to the show.


Bart Schannep:  Thank you, glad to be here.


Rick:                 You know, we kind of rely a lot of your information that you’ve provided here at the company, and one of the most interesting things that we’ve talked about recently is this thing called modern monetary policy, is that.


Bart:                 Modern monetary policy, yes.


Rick:                 Let’s dig into that.


Bart:                 OK. First of all, number one, it’s not modern. It is Keynesian. This is the economic philosophy of debt, or spending more than the government has to keep the economy afloat during recession or tough times.


Rick:                 Keynesian kind of lost favor, is that why we’ve changed the name?


Bart:                 Yes. Keynesian definitely has lost favor. Now, that doesn’t mean we haven’t stopped borrowing money. We just borrow money in good times and bad times. Even though our economy, up until recently, has been very strong and very profitable, the government still borrows way more than they, you know, we spend way more than we bring in, and so the government continues to borrow.


Well, with the stimulus packages having to do with offsetting the economic impact of the coronavirus, two trillion, which may morph into six trillion, was the first stimulus. I don’t know how much the second stimulus was supposed to be. When you just put trillions of dollars, you tend to lose the number value quickly.


Rick:                 Yeah.


Bart:                     But instead of going out and borrow all that money, the thought now is to implement modern monetary theory, or policy, which would be, simply, printing the money.


Rick:                 This is not new.


Bart:                 No.


Rick:                 Number one, because, obviously, Keynesian brought this out.


Bart:                 Yeah.


Rick:                 Most recently, this is something that has happened with Japan.


Bart:                 Correct, correct. The Bank of Japan is, acts essentially, as the Federal Reserve of Japan.


Rick:                 Here like.


Bart:                 Yeah. There equivalent. What they’ve done is, when they ran into a problem of their upper limits borrowing too much money, and, in effect, risking the creditworthiness of the country, they have been quietly printing more money. What did that do? Nothing. It worked in their favor. Why is that? Because their economy was growing, and in a growing economy, even though you think, OK, more currency, more cash, in the same economy leads to inflation. That’s the definition of inflation, too much money chasing too few of goods, but if the economy is growing, you might not notice it.


Rick:                 A good example of something that is totally opposite of that, I can recall when my wife went to Zimbabwe, she got, like, a quarter-trillion note. It was a crazy number.


Bart:                 Right.


Rick:                 That was because their economy was failing.


Bart:                 Correct.


Rick:                 They were printing money, and printing money, and printing money.


Bart:                 But not expanding their economy.


Rick:                 But not expanding.


Bart:                 And not growing, and so because of that, yes, that’s right. In a closed-circuit, in a closed box, more paper currency drives up inflation. If the economy is faltering or shrinking, it really drives up inflation.


Rick:                 Right, so here we are.


Bart:                 So here we are. Granted, we’re still in the coronavirus situation, but as we move on and move beyond and get back onto a growth pattern, we may be able to print our way out of this problem. Now, the feds have a target. They’re looking for two, two-and-a-half percent inflation. That’s what they consider a healthy level of inflation. You get more than three percent, starts getting a little more problematic.


Rick:                 That’s right.


Bart:                 But that two, two-and-a-half percent’s a sweet spot. That’s where the feds are aiming. They have not been able to get that inflation.


Rick:                 They’ve been saying this for years.


Bart:                 Yes. Well, the problem is, the two drivers of inflation in the U.S. economy are labor prices and energy. Both of those have not been a problem. Labor prices have been fairly steady. Only up until about the last year has it started to rise, and energy has been going down. So.


Rick:                 Yeah, as of late, oil prices.


Bart:                 Well.


Rick:                 Are negative.


Bart:                 Yeah, that’s right.


Rick:                 For many, but.


Bart:                 Negative, yeah, never mind real recent.


Rick:                 Right.


Bart:                 But, so, how are we going to get out of this problem? How are we going to borrow all of this money? We’re not. We’re just going to start printing it.


Rick:                 Very good. Well, thanks so much Bart for sharing that insight. It’s definitely an interesting way of looking at it, and we’ll see if it comes true. Thank you for joining us this week. We look forward to seeing you next week.

Good intentions are always top of mind, but what happens when we don’t see what could happen. We get unintended consequences. Our first episode that covered this was widely appreciated so we are bringing you another one.

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Episode 026 – Unintended Consequences Pt2

This is Market Insights from Southwest Investments, where we dig into current events and how they affect the markets but also how they might impact your financial future.


Rick:                 Welcome to Southwest Investments. I’m Rick Zich, your host. I’m a manager and financial advisor here at Southwest Investments. Joining me is Bart Schannep. How are you doing Bart?


Bart:                 I’m doing terrific. Thanks for having me on.


Rick:                 Excellent. I’ve been going back to some of the videos that we’ve been doing. One of the most popular and things that we’ve received the most feedback from is the one that we had about unintended consequences. Remember that?


Bart:                 Yes.


Rick:                 That was a lot of fun. Let’s do another one because I’ve got a really interesting one.


Bart:                 Part two?


Rick:                 Part two.


Bart:                 Okay.


Rick:                 Unintended consequences part two.


Bart:                 Bring it.


Rick:                 Alright. Here are the two things that have been happening. Number one, the government increased unemployment benefits to the people that have been furloughed because of the whole COVID-19. The amount that they increased it by, this isn’t what they increased it to. What they increased it by was $600 a week, which is about $15 an hour, which is what the Democrats think the minimum wage should be. That’s what it’s been increased by, so it’s pretty good for people.


Bart:                 Well, that’s pretty good. However, as we learned from not just the most recent recession but how we relearn about every recession is the more lucrative you make unemployment benefits, the longer people remain unemployed.


Rick:                 That leads us to this next thing. That was part one of this thing. The Republicans in this relief package wanted to make sure that businesses also got support. We got the employees getting the support through the unemployment, increased unemployment. Now the businesses are getting this paycheck protection program, PPP. A lot of people are hearing about it, heard about it, how it ran out of money in two weeks.


Bart:                 Right.


Rick:                 This is where a company can get a loan from the government through the SBA, Small Business Administration and that it’s a portion. There are some calculations.


Bart:                 It’s a ratio.


Rick:                 Exactly. The really good thing about this is that if you use it to pay wages to employees that have been either furloughed, laid off, whatever the case might be, you bring them back, and you can then ask the government to basically give that money for free.


Bart:                 Right.


Rick:                 You don’t have to pay it back.


Bart:                 Right.


Rick:                 That’s fantastic. Businesses are loving this. Tell me the problem.


Bart:                 Well, if you don’t bring them back, it’s a loan you do have to repay, but it’s only at one percent interest.


Rick:                 That’s right.


Bart:                 What you’ve got is you’ve got companies that can take that cash and either use it as a super low loan or it can work out that if you’re getting free labor from employees, that increases your profits.


Rick:                 That’s right. Now, the one other thing about that is if you’re increasing profits, you’re increasing taxes. The government is really getting a lot of that money. I shouldn’t say a lot of the money back. They are getting some of the money back.


Bart:                 Yes they are.


Rick:                 There are quite a few unintended consequences in this whole thing that wasn’t necessarily thought of all the way through because all of this legislation got done in roughly three weeks.


Bart:                 Right, during the scariest times when the virus was the scariest.


Rick:                 Absolutely.


Bart:                 Yes.


Rick:                 Very interesting things. Thank you for joining us today. If you have any comments about this, I’d love to hear them again. Go ahead and send us an email. Visit us on the website. We look forward to seeing you next week.

We talk about the winners and losers in this current market.

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We talk about how the market is forward seeing. That the price or value that the market is at is what people are predicting is going to happen in the future.  Let’s dig in.

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Episode 025 – April 29 2020

Rick Zich:          This is Market Insights from Southwest Investments, where we dig into current events and how they affect the markets, but also how they might impact your financial future.


                        Welcome to Market Insights from Southwest Investments. I’m your host, Rich Zich. I’m an advisor here, and joining me is the president of Southwest Investments Bart Schannep. Bart, welcome to the show.


Bart Schannep:  Thank you. Glad to be here.


Rick:                     We have been getting calls for the past six weeks about what is happening to the market, what is it going to do? Obviously, that’s always a question from advisor, from clients to advisors, but we have been seeing some market strength. Why is that the case? Let’s dig into some of those details.


Bart:                     First of all, let’s look at the cause. The market obviously went down because of the virus, or more specifically, the government ordering the shutdown of business across the board. What that has done is, its, we had a lot of fear with the virus when it first came out, right? We didn’t know what it was, how come it’s killing people, there’s no vaccine, there’s no protection, there’s no treatment. TI mean, this all sounds really bad.


Rick:                 Yeah.


Bart:                 The market cratered on not knowing how bad this was going to be.


Rick:                 That’s right.


Bart:                 Well, the news has not gotten any better, but what it’s doing is it’s getting less bad all the time. The stock market, which is a forward-seeing eye, realizes that this problem it’s a permanent situation. The virus will pass.


Rick:                 Yeah, and just to go back, I mean, we had market highs, the highest points in February.


Bart:                 Early, yeah, early to mid-February the markets were at record highs, and in such a short period of time, by March 23rd, the Dow was down 37 percent, and the S & P 500 was down 34 percent. Well, since then, even though news is still bad, it’s getting less bad all the time, and the market has been rising because it sees that not only is the news less bad, it’s going to be getting good at some point, and that’s what the market knows. Sure enough, we are currently, on the Dow, up 33 percent from that low point. On the S & P 500, up 32 percent. OK, essentially the same. Now, we’re still down from the highs. You know, if you go down 37 percent, you’ve got to go up more than 37 to get back to even, but the market is slowly. Well, actually, I shouldn’t say that. The market is pretty quickly getting back there. I mean, here we are, April 23rd, it’s moving along quite nicely.


Rick:                 Absolutely, absolutely. Well, thank you so much Bart for that insight, and thank you joining us this week .We would look forward to seeing you next week. Thank you so much.

We talk about how the entire economy is being effected by the coronavirus.

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Episode 024 – Ripple Effects

Rick Zich:                  Welcome to market insights. I’m your host, Rick Zich, and with me today, Bart Schannep.


Bart:                           Good morning, Rick.


Rick Zich:                  Good morning. How you doing this morning doing this morning?


Bart:                           Doing great.


Rick Zich:                  Fantastic. Fantastic, you know, today we’re doing one of those unique things that we do that is not necessarily tied to a specific moment in time. But I think it’s pretty relevant. And that has to do with ripple effects.


Bart:                           Yes.


Rick Zich:                  So different decisions that are made. And so right now, we just happen to be in a very specific type of space and time that we’ve had lots of things that have been canceled.


Bart:                           Disruptions.


Rick Zich:                  Disruptions, things like that.


Bart:                           Yes. And one of the worst parts of this disruption, it’s invisible. Right?


Rick Zich:                  That’s right.


Bart:                           Okay. So we’re not talking about a – we’re not talking about a war. We’re not talking about, like the airborne oil embargo where there literally was no gasoline. We’re not talking about that. We’re talking about an enemy that’s invisible, the Coronavirus and the ripple effect that it has had on our economy which ties into our business, but our lives, our very lives.


Rick Zich:                  Absolutely.


Bart:                           And so a prime example of that is weddings.


Rick Zich:                  Weddings happen all the time.


Bart:                           Think of all the weddings that have been hopefully just postponed, or truncated to video only, which some have, or are truncated just to just the parents are the smallest possible group of people possible versus the effect on people’s lives in the economy had it gone through full-blown.


Rick Zich:                  That’s right. So if we think about what is all included in the wedding, you’ve got where they’re having the wedding and that’s two spots.


Bart:                           The venue.


Rick Zich:                  The venue, so, so they might have a church. They’ll go to maybe a church first, depending upon you know, your particular situation. Then you have the venue.


Bart:                           Where you have the reception, right.


Rick Zich:                  You are paying a pastor even though it might be at a church so there’s money. They’re the venue, how many people are in the venue that are being paid? Employees.


Bart:                           How much food? How much booze, the stamps that go out on the invite?


Rick Zich:                  The stationery.


Bart:                           The stationery, for the invites, the – everything across the board. I mean, even the honeymoon, the cruise ships, the airlines to get to the cruise ship or whatever you’re doing.


Rick Zich:                  The Uber driver.


Bart:                           Right? And so even people who are postponing it, are they going to still do the same big today? Or are most people going to do a small private wedding now? And do a reception later?


Rick Zich:                  That’s right.


Bart:                           So it’ll be a less to do. So this rippled through the effect of the economy. And unfortunately, the people who get hurt the most are the lowest paid, the low pay wage earners, the people who are the servers, the people who are helping to present the food, the drinks, the event, they’re the ones that get short shifted. So this is – this has been a real double whammy of the Coronavirus, socially imposed isolation and when you think of, even if things get back or when things get back to normal, the airlines have still been paying finance fees on their airplanes that nobody’s flying on. The cruise ships are still paying finance charges on the cruise ships that nobody’s on.


Rick Zich:                  Absolutely.


Bart:                           The people who sell diamonds [crosstalk][00:04:20] have held – they’ve held all that inventory during this quiet time. So the good news is things will get back to normal. And we all hope that it gets back to normal as soon as possible and comes back roaring strong.


Rick Zich:                  And the contrary to that also Bart just to continue just for a second is that we have also had some changes happen because of these kind of disruptions. I think that the online videos and those kind of things like what you said they might do an online video on there. Those businesses are doing good except it was really unexpected.


Bart:                           And how many employees does that really run?


Rick Zich:                  Very, very small. Those businesses were already running. So they might have been increased their business. But it’s not helping like you said. The lowest rung of the people are still greatly impacted. They’re not doing additional hiring or things like that. So for someone to say that, yes, it’s shifted only to a certain extent.


Bart:                           Right.


Rick Zich:                  Only, yeah, for only a small amount. So I think it’s fantastic information. Thanks so much for bringing that up. I appreciate you sharing that insight. And I’m sure that we will have many more to come. So please check back with us again. Visit the website for new and interesting articles. And I hope to see you again. Thanks so much.  

The price of oil has hit historic lows today. Negative infact showing that the storage of the oil is the real problem for some people. We dig into some of these details here.


Download the transcription here:

Episode 023 – Oil Impact

This is Market Insights from Southwest Investments, where we dig into current events and how they affect the markets but also how they might impact your financial future.


Rick:                 Thank you for joining us. Today is April 20th 2020. Joining me today is Bart Schannep. Bart, welcome.


Bart:                 Thank you Rick. Good to be here.


Rick:                 Fantastic. One of the things that has happened today, it’s the end of the day today. Normally we do these in the morning, but today is interesting. We’ve been able to take it in the afternoon, and we notice some really interesting things on oil.


Bart:                 Right.


Rick:                 It has made a dramatic impact on the market today. Let’s dig into some of those details.


Bart:                 Absolutely. On Friday I saw in the paper that oil hit an 18-year low in price. Then I saw on Saturday we hit a 22-year low on oil in price.


Rick:                 Today it was really interesting as well. Now, granted today was very unique because it was the last day of the month, so the contracts today really are maybe overemphasizing price, but it got really low, down to $5 at one point a barrel.


Bart:                 A barrel. That’s unbelievable. It didn’t seem like it was all that long ago it was $100 or more a barrel. Time flies when you’re having fun or paying for gas at the pump. I will tell you what’s going on is just before the coronavirus hit, there was a push-me-pull-you argument between Saudi Arabia and Russia over oil.

It’s the supply and demand of normal general economics. You want supply and demand to be somewhat on par with each other, but if supply increases, demand prices fall. That’s what’s been happening. Well, Saudi Arabia asked Russia to reduce their output of oil, and Russia said no and insisted that Saudi Arabia reduce their output of oil. Saudi Arabia said no, and then it just became a pushing match.

Well, it didn’t end well. It ended with Saudi Arabia throwing up its arms and saying that they have decided they are going to pump as much oil as they can. Now, the big elephant in the room is the United States. We’re the largest consumer of oil, but we are now also one of the largest producers of oil.


Rick:                 That’s only relatively recently as the shale…


Bart:                 Fracking.


Rick:                 Fracking has come up.


Bart:                 Whether you like in favor of fracking or not makes no difference. It’s a big mover in the world’s economy.


Rick:                 It has a price point.


Bart:                 It does have a price point. There’s a breakeven point.


Rick:                 Right.


Bart:                 Saudi Arabia has the lowest. Well, with Saudi Arabia pumping oil like crazy, they filled eight tankers with 40 million barrels of oil that are just about to hit the U.S. Louisiana or Texas coast. When those 40 million barrels come onboard in the United States, we don’t really have any place to put it.


Rick:                 That’s the real key right now. The demand for the oil…


Bart:                 Has dropped dramatically where if we’re all staying at home, then we’re not on airplanes. We’re not driving cars. We’re not driving trucks. Okay. Transportation is the main use of oil in our country. We’re not using it as much, nearly as much. Demand is down dramatically.

Local producers are still producing oil, and now we’ve got all this other oil that’s been paid for coming over from Saudi Arabia. It is going to flood the U.S. market with oil. We are awash in oil, no place to put it and at the moment, no demand for it. Quite a conundrum.


Rick:                 To finalize, the demand has dropped so dramatically. We had Saudi and Russia oversupplying.


Bart:                 On top of our own.


Rick:                 On top of our existing amount.


Bart:                 Supply.


Rick:                 That is where the prices are being driven, supply and demand.


Bart:                 Supply and demand.


Rick:                 Thank you so much, Bart, for that information. We hope that you enjoyed it. Please like us on Facebook and come to our video page to check out the latest that we’ve got. Thank you so much.

Market Insights – April 20th, 2020

What you can be doing with the stimulus money. Let us count the ways!


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Episode 022 – Use of stimulus


This is Market Insights from Southwest Investments, where we dig into current events and how they affect the markets but also how they might impact your financial future.


Rick:                 Welcome to Market Insights from Southwest Investments. I’m your host, Rick Zich. I’m a manager and financial advisor here at Southwest Investments. Joining me today is Bart Schannep. Bart, welcome.


Bart:                 Thank you.


Rick:                 I was very surprised this weekend when my son came to me and said, “Dad, I got my stimulus money from the government,” and he asked me for advice.


Bart:                 Nice.


Rick:                 Amazing.


Bart:                 Good kid.


Rick:                 Exactly. We have some guidelines of what we want to go by. Those include finding out some questions about the person. Why don’t you start us out with maybe a few things that we want to know first before we can give you good advice.


Bart:                 Okay. Well, right off the bat we start with “Do you need the money?” Did he lose his job?


Rick:                 In his case, he still has a job that he’s fortunate enough to be able to still have something. He’s doing good, but for those that are needing it…


Bart:                 Right. Is his job secure? He has a job for now at the moment. The coronavirus self isolation has not ended, and so a lot of businesses are severely affected. Because he’s got a job now, will he still have a job in a few weeks?


Rick:                 That’s important because things are happening so fast right now with this virus. That’s what the stimulus money is for, to not just keep the economy going now but also to help stimulate it to get a kick start, I think.


Bart:                 Right. Assuming his job is still secure and assuming that any part of his normal living has not been greatly impacted by this from a financial standpoint, then we go to the next question. Spend on specific needs. Assuming there’s nothing that is needed right now, then we can look forward to say, “Alright. Financially where is he?” Does he have an emergency fund?

This is huge because what we want to do is look. I’ve seen the statistics that nearly half of all Americans do not have $400, as much as $400 in an account, checking or savings, that they can get to right now for an emergency. Without that, then presumably every emergency, they have to go into debt for.


Rick:                 Actually, I think there are a lot of people that once they get to that point, they really just don’t even know. They have their job. They don’t need the money right now to cover those immediate needs. They maybe may have a lot of progress on paying off their debts, and so now they’re at a point where they’ve developed this emergency fund and they’re moving to that $400, $500 $1,000.


Bart:                 Right.


Rick:                 Now they’re like, “Now what can I do?”


Bart:                 If they’ve got $500 to $1,000 in an account that they can get to very quickly for an emergency, then we need to look at debts. Now we’re talking specifically consumer debts, credit card debts, car loan, anything that is a depreciating asset. If you bought something and it’s going down in value, and trust me, almost everything you buy goes down in value after you purchase it. Those debts need to be covered.

If he doesn’t have any consumer debt, then we need to look at a serious emergency fund. Does he have three to six months of living expenses saved up? Three months if you’re salaried and you have good job security. Six months if you’re a commission person where you could have big fluctuations in your income or your job is not that secure.

Now, when I talk about this, I’m talking about your actual core expenses to live. This is with no savings, not adding to the Christmas fund, not adding to vacations, but what does it cost to live?


Rick:                 Just food, gasoline to get to your job, those kinds of things which are going to…


Bart:                 Insurance, absolutely. Food, shelter, insurance, transportation. Assuming those are all covered and he’s got a built up emergency fund, then we need to look up how to invest for the future.


Rick:                 This is where we really come in and have lots of different options, but this whole group of things, even though we might have it numbered one through five, they can go in any order, in a sense.


Bart:                 They can.


Rick:                 As far as the investing for the future, the one that really sticks out for me is if you’re getting a stimulus check, you are already qualified for a Roth IRA.


Bart:                 Absolutely. If he has a job that has a 401(k) or any retirement plan that might have a match, maybe he could sign up for that plan and live off the stimulus check because if he can add money to a 401(k) where the company also does a match, that’s the best.


Rick:                 That’s the best.


Bart:                 If he doesn’t have a retirement plan at work, then obviously the next step is a Roth IRA. The beauty of the Roth IRA is, number one, money grows tax free.


Rick:                 Tax free is always good.


Bart:                 Tax free. He’s young, so he has time. The other is that he can pull out his contribution at any time without any tax consequence or penalty at any time.


Rick:                 That sometimes is a… A lot of people don’t get that as far as what that means. “Oh, I can take out all my money with it.” No, no, no. It’s only the amount of money that you have put in. It’s also even trickier when you talk about doing Roth conversions. That’s…


Bart:                 Right.


Rick:                 We just want to be very, very clear. It’s only the amount of money that you’ve put in year after year after year.


Bart:                 It is a good way to save for retirement but have the ability to pull it out for a big ticket item, say his first house.


Rick:                 That’s fantastic.


Bart:                 If he’s got all those bases covered, then he has the opportunity where he could actually give the money away where it’s really needed, somebody who’s been to a charity or to somebody he knows that has been greatly affected, or if he has children, time to start funding retirement. A 529 plan is the ideal way.


Rick:                 Going for their education, making sure that they’re being taken care of. The 529s have changed so much in the past few years as well that it covers a lot of things.


Bart:                 All the way down to the youngest ages.


Rick:                 Fantastic. Well, thanks so much Bart. I appreciate that information. Thank you for joining us. We hope this was helpful. Please check us on Facebook. Like us there, and also take a look at our videos that we’ve got on the website. There’s lots of other interesting information. Thanks so much for joining us.

When something bad is happening you want to stop that process by doing less of it.  Eventually less and less will turn and become positive. This is one of those things that you hear of flattening of the curve. The curve will turn at some point. We dig into that process and how the markets are effected.

Download the transcription here:

Episode 021 – Stop Digging

Rick:                 Thank you for joining us in Market Insights from Southwest Investments. I’m Rick Zich, your host. Joining me today is Bart Schannep. Bart, welcome to the show.


Bart:                 Glad to be here, thank you.


Rick:                 Awesome. We have… It’s one of those things where when we got bad things happening, the first thing that you do is you stop doing those things that are creating the bad thing, like the analogy of “When you’re in a hole, stop digging.”


Bart:                     Right.


Rick:                     Let’s dig into some of the things that are happening now and what we think is going to help stop them and where we’re at. Let’s dig into it.


Bart:                 Right. This is the situation. We are in really unprecedented times. You figure we have an unprecedented global crisis, which led to a global market meltdown, which has led the central banks and fiscal stimulus around the world to really amp up, which has now led to a rally as investors are starting to perceive that there’s a light at the end of the tunnel.

Now, we didn’t dig this hole. This happened to us, right? This pandemic, this virus. When it first hit, it led to the fastest decline, 35 percent decline, fastest decline in the stock market since 1933.


Rick:                 It was like three weeks. It was very fast.


Bart:                 Boom, very fast.


Rick:                 When we talk fast, traditionally in stock terms, the stock market, fast is maybe a few months, but when we’re talking fast, this is fast.


Bart:                 It was followed by the fastest 25 percent gain measured in days right after that. We do believe that we are in a short-term bear market inside of a much longer secular bull market. We believe that the economy, which was very strong before, had this massive stumble, this complete shutdown across the world. It is our hope that the recovery will be, if not U-shaped, maybe even closer to V-shaped quicker in coming back. Well, how does that happen?


Rick:                 Real quickly before you get into that as far as U shape and V shape because that’s one of those jargon terms that sometimes we might think of. When you think of the V shape itself, that’s how quickly it went down. It didn’t go down in a slope like a really wide V. It went down fast, and we’re expecting it to go faster.


Bart:                 So far we’re about halfway up and about just as steep in up as the decline was.


Rick:                 Right.


Bart:                 We’ll see what happens moving forward from here, but this is what we can see. In the world of investing, one of the things that investors focus on is rate of change. When we had the pandemic, and we all know the facts. It was coming out roughly at 100 percent more contagious than the standard flu. We had no immunization for healthcare workers to be able to do anything about it. One of the first places it hit was both China and Italy, and they had a bunch of deaths very quickly.


Rick:                 It scared a lot of people.


Bart:                 That scared the wits out of everybody. Okay. Now what we’re seeing is we’re seeing that rate of change slow down. Normally investors look for rate of change, the rate of change to be modified, whether it comes to earnings growth, sales growth, money supply, you name it.

Well, now it’s, “Okay, how many infections? How many deaths?” Okay. Well, Italy declining in both those. How many infections, how many deaths in Spain, the other country that seemed to be so seriously hit? Down. Now we’re seeing the same in New York City and in Seattle. Now, we still have a lot of people getting the infection, and deaths are following, but our projections. You figure the modeling that they’ve been using had projected 90,000 people dying in the U.S.


Rick:                 Significantly higher amount than we’re seeing now.


Bart:                 That was last week’s.


Rick:                 These things are happening fast.


Bart:                 This week, now it’s only 60,000. What is next week and what is the following week? We don’t know, but we do see the curve is flattening. Not everywhere, okay, but Louisiana, Colorado, Delaware, Iowa, Kansas, Mississippi, Missouri, Montana, North Dakota, Ohio, Oregon, Vermont, Washington and Washington DC.

Okay. Well, that’s how things start to get better because they have to get better somewhere. If they’re starting to get better there, I know that New York has been the hardest hit. They have not flattened yet. They’ve not flattened their curve yet, but it’s perceived that as news starts getting less bad, that’s what helping defeat the market.

Now, we’re going to get a lot of bad news coming. All the backward looking indicators, we’re going to start seeing reports on how lousy car sales were, housing starts, sales of durable goods, retail sales, you name it. Those are all going to come out bad, but those are all the things that have happened.


Rick:                 That’s right. That’s right. Stock prices are not necessarily what happened.


Bart:                 Right.


Rick:                 The terminology is they get priced in.


Bart:                 Right. The market knows all these bad things happened.


Rick:                 That’s right. It’s already in the past.


Bart:                 It’s already in the past. One of the reasons the market’s been moving forward or up direction is because although the GDP is expected to take a significant hit, it’s not expected to be a permanent hit. That’s what we’re there looking forward to. The market has been pummeled. The market has recovered halfway. Getting back to the other half will be following news getting less bad, less worse. That’s what we’re looking forward to.


Rick:  Thank you so much for joining us. We look forward to seeing you next time around. Thanks.

Market Insights -April 7th, 2020

The market has dropped a lot over the past couple weeks. Is it time to really get into the markets?


Download the transcription here:

Episode 019 – Taking Advantage of the Markets


Welcome to Market Insights from Southwest Investments. Episode 19, Taking Advantage of the Current Markets. Thank you so much for joining us. Today with me I have Bart Schannep. Bart, welcome to the show.


Bart:                 Good morning Rick.


Rick:                 Today we’re going to talk about taking advantage of the current market that we’re in right now. Just as a brief background, we’re talking about the coronavirus situation that we have here in the world. It’s not the United States, not anything like that. We’ve got two things going for us, stimulus package that was just recently announced and passed by the house and senate, $2 trillion, the largest ever. Then we also have, on top of that, a very accommodating Federal Reserve. Where does that put us?


Bart:                 Okay. These are some big, big movements. When you have a $2 trillion stimulus package that actually has a back door for expansion that could, if this continues to be a big deal, could end up being double that.


Rick:                 That’s right. That’s just the beginning amounts.


Bart:                 That’s correct. Just as big of an impact is the Federal Reserve that says they will do anything to accommodate. Okay, anything is huge. What does that mean? Well, what we’re talking about here is enormous liquidity, direct money from the government, the stimulus package and unlimited ability, seemingly, that the Federal Reserve is willing to go to make sure that borrowing capacity is untethered.

Okay. How does one take advantage of that? Well, there are a couple of different ideas in general. Now, these are historic averages, but in general, there are three areas that investors might want to focus. The first is high-yield bonds, also known as junk bonds. We all know that bonds can be investment grade, which would be triple-A, single-A or triple-A, double-A, single-A and triple-B rated, all known as bank quality.

Then below that you can get double-B, single-B, medium grade at best. Then we go down into the C’s. C’s means these are generally smaller companies or more stretched companies where they borrowed a lot of money. A weak economy could sink them, but in an accommodating environment, weaker companies may survive.

If they survive, that means their bonds have been discounted because of the stock market, because of the recession, because of the fear that they may go under. The value of the bonds may have dropped dramatically. If you can buy high-yield bonds of companies that survive, you could end up with stock market returns historically.


Rick:                 Again, just to reiterate what you said, those bonds drop in value, but they’re still providing the yield, right? The yield, or maybe some people might recognize that as interest is what that is for that. In our terminology—


Bart:                 The total return should be pretty close or better than the general stock market return. Now, of the equities, the next area to focus on, small-cap growth. Think in terms of companies that have a promising product. They’re able. It’s easier for them to borrow money.


Rick:                 I think that’s important to just point that out. You just said a promising product for up and coming companies. We have to remember just because we are in a recession or approaching recession, the stock market where it’s at doesn’t mean that companies have stopped working.


Bart:                 Correct.


Rick:                 New companies are being started all the time, and so that’s why we want to keep those things apart.


Bart:                 We are in a wonderful economic environment when you have high liquidity, low interest rates, slow growth and little to no inflation.


Rick:                 All of those are great things for a small company who needs money typically, and they need it over a long period of time to get their product going in the marketplace.


Bart:                 Traditionally this is the best time to be a small cap growth company. The third is emerging markets. Emerging markets are heavily affected by energy costs. Well, we’ve seen what oil’s doing. I am not an expert on natural gas. I have to think natural gas isn’t all that far apart, but certainly oil is down dramatically. When you have the price of oil down and high liquidity, emerging market stocks tend to do very well.


Rick:                 Excellent.


Bart:                 Those are three areas that investors might want to focus on.


Rick:  Thank you so much, Bart, for that insight. I think that was extremely informational for you [music plays] to understand how you can take advantage of the current market. You can talk with us. We talked about high yield and  Thanks so much for joining us. We’ll see you next time.

Market Insights -March 31st, 2020

The market has dropped and when can we expect things to come back?


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Episode 018 – Bounce Back


Welcome to Market Insights from Southwest Investments. I’m your host, Rick Zich. Today, episode 18, Bounce Back. Joining me this morning is Bart Schannep. Bart, welcome to the show.


Bart:                 Good morning Rick, thank you.


Rick:                 How are you doing today?


Bart:                 I’m doing very good.


Rick:                 Excellent. Today, bounce back, we’re talking about just the overall market right now is tough. Most recently, three-million-plus unemployment claims that were filed in the past week. Unheard of, unprecedented, all those other kinds of things that we hear in the marketplace. We’re going to talk a little bit about bounce back regarding that. Alright. Why don’t you start us off?


Bart:                 Excellent. The coronavirus obviously has been a very big deal and has affected everybody. In our country, we saw our markets head down. At moment, the lowest point on the S&P 500 was down 34 percent from the all-time high. Now, we know we’ve talked about before market weaknesses and that a market drop or decline of around 20 percent or better happens about once every three and a half years. We’ve talked about that before, and it’s been a while since we’ve had anything like this.

What about the bounce back? Okay. Let’s talk about that. Now, not every bear market is accompanied by a recession, but every recession has a bear market. Now, with the unemployment claims of three million just recently, that no doubt will lead to a recession. We don’t know. Not enough time has gone by, but we’re sensing general economic slowdown that should imply a recession.


Rick:                 That’s right. There are lots of things out there, whether it’s the internet you’re reading, newspapers, just individual advice that you might be getting from another financial advisor. Recession is one of those terms that is commonly being thrown out there.


Bart:                 Right. Now, the problem is, frequently we don’t know when a recession starts. We don’t necessarily know when a recession ends until it’s been over for a while. As you can see on the accompanying chart, from the lowest point of the market, and again, we don’t know when that is, but at the moment it was March 23rd 2020, we had been down 34 percent.

On the accompanying chart, you can see how the markets have bounced up from the low point of the bear market to when the recession is declared over. My point of showing this is it’s not okay to simply wait until you feel better and when the recession is declared over to then start thinking about investing.


Rick:                 Looking at that last chart where it shows the March 2009, 94, is that a percent?


Bart:                 Yes. The market went up 94 and a half percent from the bottom. It almost doubled [Crosstalk] [03:29] before the recession was declared officially over.


Rick:                 Doubled. That just goes to show you that this is just one of those things that if you don’t get in early enough, or if you get out, you’re going to be missing out. Those are the real two things that we deal with on a regular basis,. Fear, we’ve talked about fear and grief in the past. That fear is if you get out of the market, it’s really difficult to get back in. That 94.5 percent is what you’re going to miss. That was the large one, but look at August 1982 was a huge.


Bart:                 Went up 123.8 percent before the recession was declared over. It goes back to the adage, “Buy low, sell high.” What that necessitates is buy when it’s scary.


Rick:                 Excellent. Well, thanks so much, Bart. I appreciate that information. Again, the market bounces back. It’s been that way in the [music plays] past, and history has shown. Thanks so much for joining us. We’ll see you next time around.

There was never a bull market quite like the past ten years. We talk a little about returns and what we have to look forward to now.

Download the transcription here:

Episode 035 – End of A Bull Market

Episode 035 – End of a Bull Market.mp4

Rick:                 Welcome to Market Insights from Southwest Investments. I’m your host, Rick Zich. Joining me today is going to be Bart Schannep. What we’re going to be talking about today is recapping this spectacular bull run that ended with the COVID-19 pandemic.

People tend to follow either the Dow Jones or the S&P, Standard and Poor’s index. We’re going to be discussing specifically the returns of the S&P 500 and recapping this most recent bull market and its dramatic run that it’s had. Bart, why don’t you get us into some of those details?


Bart:                 Thank you, Rick. Yes, I don’t think we need to play the dirge just yet, but we certainly did see the end of a spectacular bull market, the bull market that began on March 10th 2009. Now, as a formal definition, a bull market starts at the lowest point of the previous bear market. That’s the beginning of the up.

In other words, if the market is digging itself in a hole, that’s when the market stops digging the hole. From then, since March 10th 2009 until this COVID-19 virus hit, and in this case the market topped out on February 19th 2020, so just shy of 11 years. The S&P 500 as the broadest base U.S. market index had a total gain of 529 percent or 18.3 percent annual compounded rate of return, which is a terrific bull market.

We are now in a bear market. We’ll see how long this lasts. We hope we’ve already seen the bottom, but we’ll see. If we have, that’s the start of the next bull market. What’s important is being in the market. Had you joined or had you invested six months after the bottom when maybe you felt better about things, your average annualized rate of return will have dropped to 14.4 percent.

Had you been early by six months, your return would have been reduced to 11.6 percent average annualized rate of return. These calculations are all based on a company called BTN the Research. Nobody has perfect vision. Nobody knows when the bottom is, but it’s a good lesson on being in the market, making sure you’re in the market.

Unfortunately, what that frequently means is going against our better interest and buying when things are scary, or more specifically, when things are the most scary. That’s my tidbit for today, my statistics for today. Thank you.


Rick:                 Well, thanks so much, Bart. It is very interesting. Number one, certainly that was a very good run for us all. Many investors really ask about the long-term average, and for some reason 12 percent is kind of stuck in their head for that number.

While it’s stuck in their head for that number, over the past few years, we had almost 11 years providing 18 percent interest. I mean, not interest but 18 percent returns per year as an average annualized rate of return. That’s just very, very hard to come by. That’s why this bull market is rather extraordinary.

Let’s obviously hope for more like it. We don’t know what this is going to be taking us into with the COVID-19. This is an interesting time, and I really look forward to seeing what’s going to be happening. Thank you Bart for sharing that insight.

Thank you all for coming and watching our show again, joining us on the webcast. If you do have any questions, again, please feel free to fill out our ‘contact us’ form. Hopefully I will be able to read some of those on our webcast  in the future. We just look forward to that input. Thanks so much for joining us again. We look forward to seeing you next time.v

The CARES act is now passed so let’s go over some of the details.

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Episode 020 – CARES act

Thank you for joining us at Southwest Investments for Market Insights. Joining me today is Bart Schannep. Bart, welcome to the show.


Bart:                 Thank you, glad to be here.


Rick:                 Today, or I should say in the past, we’ve talked a little bit about how the CARES act has affected companies and the overall economy. Let’s dig into individuals.


Bart:                 Yes. Let’s focus on individuals. There are a lot of moving parts in a lot of the legislation talking about loans, both forgivable, non-forgivable, different taxes that may be forgivable, what industries might be focused on, that sort of thing. Let’s dig into what does it mean to the average person.


Rick:                 Awesome.


Bart:                 There are a lot of numbers. Let me just read over what we’re looking at. Obviously people know about the recovery checks for U.S. individuals with adjusted gross income of under 75,000 each or 150,000 in joint returns. They’re going to get money. They’re going to get money per person. They’re going to get including money for kids, covering kids.

There is a phase out where if you make too much money you start to get less of it. Sure enough, if you’re over 99,000 per person or 198 filing joint, it fades out completely, and nothing’s coming.


Rick:                 Typical with all taxes that we deal with, there are rules upon rules that are going with this, how many kids you have, how much income you make. I don’t think that’s terribly difficult to understand, but you just need to be watchful.


Bart:                 It’s also approximated. What you’ve got is the government’s doing the best guess they can. Adjusted gross income based on what they think your 2019, whether you filed or not, your 2019 taxes. If they don’t have that, they’ll look at your 2018 tax return.


Rick:                 That’s been a really prominent question that I have heard from a few people calling in.


Bart:                 How do they know?


Rick:                 How do I know? I lost my job.


Bart:                 Right.


Rick:                 What do we do? Our response has been, “File as quickly as you can for your taxes.”


Bart:                 Right, right. The other thing has to do with required minimum distributions. Now, we’ve talked before about how required minimum distributions got pushed back to age 72, but now regardless, everyone is free to not have to take a distribution in this year, 2020.

What really affects more people is the waiving of the 10 percent penalty for early withdrawals, assuming, and this is a broad base, assuming you need the money either because you contracted the virus, your spouse or a dependent contracted the virus or you experienced financial consequences because of the virus. This—


Rick:                 That could be maybe a hospital bill. Is that what we’re thinking?


Bart:                 It could have been your income went down because you were quarantined, that you were furloughed, that you were laid off, that you’ve had reduced hours, that your business closed. It starts getting pretty broad based there, that’s right.

Any money you do take out, you can spread the tax payments on it over a three-year period. That’s going to be another confusing thing that people are going to have to keep track of. What is nice is over that three-year period, if you’re able to put money back in, you can redeposit it back in.


Rick:                 Kind of like a rollover. Is that what we would consider it?


Bart:                 It’s almost like it’s against the law to have a loan against an IRA, but it’s pretty much if you can put it back over a three-year period, it’s like borrowing the money.


Rick:                 Got it, got it.


Bart:                 From businesses, defined benefit plans are able to push back into next year. These are all changes that affect the average person, that are worth noting. It is the government trying to help. My guess is it’s going to help a lot of people.


Rick:                 Well, I think that’s going to be, like you said, helpful for a vast majority of the people that are out there. For us, at least we now have this information to relay to not just our existing clients, but also I think it’s important for this to get out to as many people as possible because it is a lot of different rules that have come about in a very quick time period. They changed it quite a few times as it went through.


Bart:                 These are unprecedented times. Everyone’s trying to do the best they can.


Rick:                 You got it. Well, thank you so much, Bart, [music plays] for joining us and explaining some of these things. If you do have more questions, feel free to go onto our website. Our email address is on and [Inaudible] [05:25]. Give us a call. Let us help you. Thanks so much for joining us.

You may be enticed to look at a zero commission plan. We look into some of the leaders and give you some things to concern yourself with.

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Episode 017 – Zero Commissions

Welcome to Market Insights from Southwest Investments. Joining me today, Bart Schannep. Bart, welcome to the show.


Bart:                 Thank you. Good morning.


Rick:                 I was going to take you out to lunch and buy you lunch.


Bart:                 Wow. That’s going to be rare, okay.


Rick:                 It’s free to you, right?


Bart:                 No. That probably means you want something.


Rick:                 There you go. There’s no such thing as a free lunch, right?


Bart:                 No. There is no such thing as a free lunch.


Rick:                 However, in the news we’ve got Morgan Stanley. We’ve got these bigger behemoths, if we want to call it that, are buying up free online trading companies.


Bart:                 Right.


Rick:                 What’s going on with that? Like we said, there’s no free lunch.


Bart:                 That’s right.


Rick:                 Where are they getting the money?


Bart:                 Alright. I’m referencing an article. The E-Trade deal reveals the new rules of the investing game. This was in the Wall Street Journal, the Saturday/Sunday edition, February 22nd. What we saw recently was that E-Trade was recently purchased by Morgan Stanley. Now, E-Trade is one of the firms that highlights free online trading. Okay. If there’s no such thing as free, then how is it they’re offering that?

Well, it’s all about trying to gather your assets. E-Trade does offer free online trading. There are some restrictions, but basically it’s free to anybody. How do they afford that? How is that possible? Well, they hide their income. Their income is soaring. By what means? Well, primarily one is money market. Any time you leave excess cash in the account, it sweeps into their money market. Well, their money market only pays between one hundredth of one percent.


Rick:                 That’s 0.00.


Bart:                 Well, it’s 0.01 percent.


Rick:                 Percent, right.


Bart:                 Right. Up to a quarter of one percent depending on how much you have in it.


Rick:                 That’s less than a bank.


Bart:                 Yes.


Rick:                 Right now a bank, and we’ve always told clients that we’ve spoken to that usually you only want to put very, very short-term money into your bank. Let’s invest in maybe a little bit higher performing.


Bart:                 Right. You have standard money markets currently paying around one and a quarter percent. You have high-yield money markets paying two percent. Okay. Well, E-Trade is putting their money at two percent and giving you a quarter of one percent. They’re keeping the difference.


Rick:                 That would make up a little bit of the money that they’re…


Bart:                 Wait, there’s more.


Rick:                 Alright.


Bart:                 The other thing they’re doing, and it’s not just them. Schwab does the same. Other firms are doing the same. That is that they are making their investment recommendations in their own proprietary funds, mutual funds that they own and run. Think in terms of Vanguard. ETFs that they own and run and other investments that they’re in fact creating where they are able to collect the fees that normally would go to an outside provider.


Rick:                 The trading fees and their management fees.


Bart:                 The trading fees and the management fees, exactly. That doesn’t mean all house brands are bad. No, some could be perfectly good performers, but the reality is are you getting the house brand because it’s the best or because that’s how they get paid? The worst offender, and this is somewhat new on the market, structured notes. Let’s talk about structured notes.


Rick:                 Are we going to get into my favorite thing, annuities, as well? Is that…


Bart:                 A lot of annuities use the same philosophy. It’s all based on what’s termed structured notes, meaning you’re not really investing in a stock or a bond.


Rick:                 Okay.


Bart:                 You’re investing in a derivative thereof.


Rick:                 Derivative.


Bart:                 That’s what you own, a derivative thereof.


Rick:                 Which means you don’t have it.


Bart:                 You don’t really have it.


Rick:                 Okay.


Bart:                 You just have the promise of what it will/will not do. That promise is only backed by the issuer of that, but the issuer, generally it’s a bank. The issuer gets to collect upfront fees of anywhere from one to four and a half percent. Plus, because it’s a complicated…


Rick:                 Four percent? That’s a good return just right there.


Bart:                 They collect, not you.


Rick:                 Oh, they are getting it. They’re getting it.


Bart:                 Your dollar just went to 96 cents.


Rick:                 Alright.


Bart:                 On top of that…


Rick:                 You mean if I put in $1,000 I’m not getting $1,000 from my investment?


Bart:                 On paper it looks like 1,000, but no. They’re collecting anywhere from one to four and a half percent.


Rick:                 Got it, okay.


Bart:                 On top of that, because it’s so complicated, they then also in their fees charge you to price it. The pricing, the promise.


Rick:                 I already know what the price is. I just paid it—


Bart:                 No, you know what you invested in. Yes, but it goes up and down, but only they know that because it doesn’t trade on the market. They get a fee for calculating that. Now, if you want out early, well, now that is going to cost you.


Rick:                 You need to be in for a certain amount of time.


Bart:                 Certain amount of time.


Rick:                 That’s given upfront and you know how much.


Bart:                 Right.


Rick:                 Okay.


Bart:                 Then at the… It’s a fee to get out early. Then when it’s time to get out, nothing actually really matured. They then create the market of what the get-out price is.


Rick:                 What is it based on?


Bart:                 Their promise to pay. Their promise to pay. When you hear the term ‘structured notes’ and the general theme is you participate in the market up to a certain level. If the market goes down, you’re protected to a certain level, but really, how is that possible?

Only by people using, companies using derivatives, putting it together and possibly selling or leveraging some of those same underlying investments in other products. The same investment might be utilized in multiple products at the same time, betting up or betting down. Who’s collecting the fee on that? Not you.


Rick:                 Got it. It is similar to what I was talking about my other favorite product being annuities that it’s very complicated. There are a lot of things going on at once. It’s difficult to explain to the actual end client what they’re actually getting.


Bart:                 Exactly.


Rick:                 There are a lot of promises being made as far as what they’re going to get, but it is only a promise.


Bart:                 The big fear is if things go bad, if things go really bad, how good is the promise?


Rick:  I guess that’s the risk that they’re taking. Well, thank you so much, Bart. I appreciate you explaining to us a little bit about those zero-commission trades that we’re all hearing about in the news all the time. Thank you for joining us.

Market Insights – February 24th, 2020

We talk about market volatility and how the markets deal with it.


Tracking: 1-955909


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Episode 016 – February 24 2020


Rick:                 Welcome to Market Insights from Southwest Investments. Today is February 25th 2020. Joining me today is Bart Schannep. Bart, welcome to the show.


Bart:                 Thank you Rick. Glad to be here.


Rick:                 Thank you very much for being here. Yesterday, the 24th, we saw a huge drop, not really. A huge drop is not like it used to be. 1,000 points is what happened. It’s a much smaller percentage, right?


Bart:                 Right, a little over three percent.


Rick:                 It’s not as big as what a lot of people are concerned about when you see a huge number like 1,000. Is that what we’re going to see going forward? Is this volatility something that we’re going to see ongoing?


Bart:                 Well, we always have volatility, right? Yesterday’s volatility was blamed on the coronavirus. Now, is that a valid concern? Well, the coronavirus obviously is affecting a lot of Asia. That can affect the flow of goods across the ocean.


Rick:                 We’ve seen it locally here. We’ve seen some aspects.


Bart:                 Yes. Bottleneck on the supply chain. The other thing that we’ve had, which is very interesting, is on the chart next to me you can see the three-month treasury now exceeds in yield the 10-year treasury bond. What does that signal? What that signals is…


Rick:                 That’s the inversion that everyone talks about all the time.


Bart:                 Correct. That’s the inversion. How is it possible? How does it make sense that a longer bond has this lower yield than a shorter bond? What that has to do with is the perception that things are going to get scarier in the stock market, fear, people running to U.S. bonds, buying bonds and driving down the yield.


Rick:                 Bonds aren’t the only thing that people go to.


Bart:                 No. We see gold doing the same thing.


Rick:                 Right.


Bart:                 What we see is, if you will, a fear index where people are investing in defensive bonds, gold. Some other things are also moving that signal a real defensiveness.

At the same time, on the other end of the field, up until the stock market dropped 1,000 points yesterday, we were within one and a half percent of the all-time high, which was only set just a few days ago. What you have is you have a real strong feeling that things are going to get better and a real strong feeling that things are going to get worse. Now, time will tell.


Rick:                 Right, right.


Bart:                 One of them’s going to be right. One of them’s going to be wrong. There is a saying on Wall Street that bond traders are the smart ones. We’ll see if that pans out. Now, I hate the phrase, “But this time it’s different,” but I do need to point out that of government bonds, and that’s federal government but also municipalities and our corporate bonds still have higher yields than many of the bonds available worldwide.

What does that mean? What that means is U.S. investors are not the only ones buying our bonds, but more and more foreigners are buying our bonds to get that higher yield.


Rick:                 That’s been going for some time now too, right?


Bart:                 True. It’s been ongoing for some time, but if the world is getting scarier because of the coronavirus, worldwide people looking for safety, look to our bonds.


Rick:                 Well, very good. Thank you so much, Bart for that insight. [Music plays] I appreciate you coming here this morning. Thank you for joining us. We look forward to seeing you next time. Thanks so much.

Market Insights – February 3rd, 2020

We talk about earnings on stocks and how the markets price it into those stocks price.


Tracking 1-947971



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Episode 015 – February 3 2020

Rick:                 Good morning. Welcome to Market Insights from Southwest Investments. I’m your host, Rick Zich. Joining me this morning is Bart Schannep. Bart, good morning to you.


Bart:                 Good morning.


Rick:                 It’s February already in 2020. I’ve had numerous client meetings, and it seems like the same thing over and over. People want to know. We had a fantastic year last year in the market in general. Many portfolios performed very well, but they have concerns over what’s going to happen this year. The first—


Bart:                 Which is not unlike any other year, by the way.


Rick:                 Exactly, exactly, but it just comes down to they had great years, and so they’re expecting, “Okay. Can we continue to expect this sort of thing going forward?” In the fourth quarter, we had a little bit of hesitation from some companies on their earnings. There was a little bit of a scare on some companies. Retail has just been tough for the past few years, but then we had Apple come in with record earnings.


Bart:                 In this year.


Rick:                 In the first quarter of 2020. Then Amazon just last week, they had an expectation of 4.11 for their earnings per share, and they knocked it out of the park with 6.47. That is a huge, huge amount for them to come up with on their latest quarter. That really sent the markets up. What do you feel like that’s going to do for us? Does that project what the future is going to be like for this year?


Bart:                 Well, clearly that revises the fourth quarter estimates, but what is does is it validates a little bit the consolidated consensus of earnings estimates for 2020 are expected to be around 10 percent. According to Bloomberg, that’s where the analysts are pegging it at, between 9.9 and 10 percent earnings growth for 2020, which is terrific, especially following last year. Then the next question is, “Well, what does that mean for the stock market?”


Rick:                 That’s right because earnings are important, but in the end, our portfolios and things like that, what does that mean for the market in general?


Bart:                 Correct. What we see is the stock market is currently trading at 19.6 times trailing 12 earnings. As we look at upcoming estimate for next year, the market is currently sitting at about a 17.8 times. Okay. What does that mean? What do those numbers mean?

Well, the best way to put it in context is Peter Lynch, the former manager of one of the most successful mutual fund countries in the history of the U.S., the Fidelity Magellan fund, came up with the rule of 20. In this case, the rule of 20 was you take the number 20, subtract inflation, which was about two percent. That would imply the market is fair valued at 18 times earnings.


Rick:                 Okay, 18 times. That’s a just really simple calculation.


Bart:                 Simple calculation, rule of thumb. If forward PE is 17.8 times, that would imply that at current levels, with earnings coming in at 10 percent increase, we are currently fairly priced.


Rick:                 Okay.


Bart:                 Now, if earnings get better than that or if we have any PE multiple expansion, the market will drive higher.


Rick:                 One of the things that I’d like to point out is I picked out two very big companies, two big tech companies. The scare also is “Are we going to have another tech bubble?” and things like that. Everything that I’ve read is that they don’t have high expectations for tech companies as well. This tech bubble that happened 2000, their earnings are matching their PE ratio.


Bart:                 That is the big difference. This time we actually have the earnings to support it.


Rick:                 Exactly. Well, thank you Bart for that insight on that. I appreciate that. Thank you for joining us. Make sure you come back next week, and we’ll have some great insights for you. See you next time.

Market Insights – January 27th, 2020

We talk about economy uncertainty and how the markets deal with it.


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Episode 014 – January 27 2020

Rick:                 Good morning. Welcome to Market Insights from Southwest Investments. Today is January 27th 2020. Thank you for joining us. Today I’ve got with me Bart Schannep. Good morning Bart.


Bart:                 Good morning Rick.


Rick:                 Good morning. Bart is the president and cofounder here at Southwest Investments. Last week we noticed market weakness.


Bart:                 We did.


Rick:                 We had some losses on Thursday, Friday. What’s happening?


Bart:                 Well, couple things I think we should keep in mind. Number one, the market hates uncertainty, right? Everyone can deal with good news, and everyone can deal with bad news. It’s uncertainty that’s the issue. What we have is we have this new virus coming out of China that is scaring people because we don’t know how to cure it, how to stop it, how to prevent it, but we do know it is killing people.

It has come out of China. It is spreading. We’ve had a couple of deaths in the U.S. Maybe that’s why the market’s down. Maybe there’s more uncertainty. We have seen China’s growth rate. What was that percentage?


Rick:                 6.1 percent to end 2019.


Bart:                 Yes, which is the lowest since when?


Rick:                 1990.


Bart:                 Okay, that’s huge.


Rick:                 That’s a big difference.


Bart:                 Now I know that we’ve had China trade wars with the U.S. We know what we’ve heard, that it has been hurting China far more than it’s been hurting the U.S. I guess this is some evidence. That begs the question then, is China going to be okay? Is this going to be a drag into 2020? We’ve got to see on that.


Rick:                 That’s right.


Bart:                 I do have the shining light.


Rick:                 Okay.


Bart:                 Are you ready?


Rick:                 We need something good for this today.


Bart:                 This is the good part, okay. History shows that if the market is up in the first five trading days of the year and it’s a presidential year, there’s an 82 percent chance the market’s going to go up.


Rick:                 82 is pretty good.


Bart:                 82’s better than normal. If you think in terms of the market generally goes up 70 percent of the time. That means 30 percent of the time it either goes down or sideways. This is 82 percent. That’s a little more, but it gets even better. According to BNI Research, the average performance of the S&P during the last 23 presidential election years has been a gain of 9.9 percent.


Rick:                 This year we might expect 9.9 if the future matches up to what it’s been in the past.


Bart:                 Correct. The odds are favorable for a couple of reasons. One, it is the presidential election year, which generally is a good year. It is also… We’ve had such a strong beginning of the year, and that is a very good indicator of how the rest of the year should end. We’ve got some noise in the market. End of last week was down. So far this week is not looking pretty, but I think it’s short blips and a longer up trend.


Rick:                 Thank you so much Bart. I appreciate that insight into the market, especially with the weakness that we saw last week and into today, but we’ve got a bright future looking forward. At least that’s what we hope. Thank you so much for joining us. We appreciate you coming by this morning. Make sure to check out our Facebook page as well so you’ll have some interesting information that we post periodically. Thanks so much. See you next time

Market Insights – January 13th, 2020

Growth and Value stocks are different. Let us show you how


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Episode 013 – January 13 2020

Episode 013 – Market Insights – January 13th 2020


Rick:                 Good morning. Welcome to Market Insights for January 13th 2020. I am Rick Zich from Southwest Investments. Joining me is co-host Bart Schannep. Bart, welcome.


Bart:                 Thank you.


Rick:                 How are you doing this morning?


Bart:                 I’m doing terrific.


Rick:                 Excellent, excellent. What do we have on deck today to learn about?


Bart:                 Well, we’re going to talk about an interesting subject, but first I do want to point out how well the stock market has been doing.


Rick:                 Of course. It’s been stellar this year so far.


Bart:                 Absolutely. If you look at Investor’s Almanac, it will point out the historic tie to however the market performs in the first five trading days has a very high correlation to how the market ends for the year.


Rick:                 Interesting.


Bart:                 Since we had such a terrific start, one could say from a historical standpoint, odds are very strong this is going to be a good year.


Rick:                 Very good. Well, let’s dig into what else we got.


Bart:                 Okay. The subject of today is the difference between growth and value stocks. We all know about growth stocks, the famous ones being the FANGS, the Facebook, Apple, Google, you can throw in Netflix. There are a number of others that have been widely recognized and widely held as very profitable trades in the growth arena.

However, growth stocks have now been leading the way for about 10 years. As you can see on the chart, and this chart came from the Wall Street Journal, originally from research affiliates. What it points out is, and this chart really only goes back to the ’70s, but if you look even farther back, growth and value tend to perform roughly the same over time.

However, there are occasional times when growth will get ahead. We had it in the 1930s. We had in the 1990s. Now we’ve had it for about 10 years. Historically, what happens is after the shine of growth wears off, value stocks tend to come roaring back. When they do, they come roaring all the way back.


Rick:                 It seems to be indicative as far as the growth shoots up just after the value. Is that the way that it works, value first and then growth? Is that…?


Bart:                 Growth stocks tend to do very well at the beginning of bull markets. Growth stocks tend to do very well when optimism is very high. Value stocks tend to come back when people are more interested in stable and predictable.


Rick:                 Wow, very good, okay.


Bart:                 Because as humans we go back and forth between high levels of optimism and levels of fear, that explains the growth versus value. Not entirely because value stocks can be very profitable over time. I think what we’re looking at, and I don’t know when the tipping point will come, but watch for value. It’ll come roaring back.


Rick:                 Very good. Thank you so much for that, Bart, this morning. That was a valuable piece of insight. Thank you for joining us. We appreciate you coming in and listening to us each week. We look forward to seeing you next week. Thank you so much.

Market Insights – December 30th, 2019

Let’s talk about the SECURE act that was just put into law by President Trump. Part 2


Tracking: 1-931964


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Episode 012 – December 30 2019

Episode 012 – Market Insights – December 30th 2019


Rick:                 Good morning. Welcome to Market Insights from Southwest Investments. Today is December 30th 2019. It’s the last Monday of 2019. Today with me I have Bart Schannep. He’s the president and cofounder of Southwest Investments. Good morning Bart.


Bart:                 Good morning Rick. I am glad to be here on the last Monday of the year.


Rick:                 It’s fantastic. Last week we spent time talking about the SECURE act and the benefits that it has for retirees and people that are saving for their retirement, but we’re missing out on a group that’s had a lot of news for this particular year, and those are the Millennials.


Bart:                 Right. The SECURE act should be a benefit to Millennials because the SECURE act does include people who work 500 hours. That actually starts in a few years, but it brings more part-time people into the ability to participate in a 401(k). It also helps lay out how much you’re saving and what annual income that might provide in retirement.

A group that really needs to hear that are the Millennials. In fact, a recent report from the Federal Reserve of Saint Louis pointed out that the average Millennial today has a net worth 41 percent less than the average adult of similar age just as short as 30 years ago. This is significant. This is a large swath of people who are not saving as much and need to be.


Rick:                 This year, it appears like Americans in general have been saving more.


Bart:                 It’s been a very good year. Obviously the stock market was a good year. Real estate, especially in Tucson, was quite strong. We have some clouds coming up or some unknowns. That of course has to do with politics. Let me lead right into that.

There’s a lot of uncertainty about the upcoming election. There’s a lot of hand wringing over what happens if the wrong person gets elected. Well, I’d like to point something out. Since 1928, there have been seven Republican presidents and seven Democratic presidents. What that really means is whatever mess we think we’re in, the blame is pretty equally shared.


Rick:                 We can’t pick sides on this one.


Bart:                 No, no, no. Each party has been equally represented in creating this mess. Of course, there’s the question of will there be a reelection or not. That comes down to a statistical average that, well, I don’t know if it’s really an average. There have been only two presidents who have not been reelected in the second term in the last 75 years, Jimmy Carter and George H.W. Bush.


Rick:                 Read my lips.


Bart:                 Read my lips, that’s right. Jimmy Carter got stuck with stagflation. That was decimating to our country. Now might be a good time to remind people that Paul Volcker passed away a couple of weeks ago. He was the one who, I don’t know if singlehandedly, but certainly was very instrumental in getting the U.S. through stagflation. He will be missed, brilliant guy.

The last thing I thought I’d bring up when it comes to the upcoming new year is the trade disputes that are going on with China. We seem to be in a bit of a détente right now with China. Things seem to be smoothing out a little bit, but U.S. corporations have been diligent in making sure that they spread out the supply chain to America of imports.

In fact, according to the commerce department, Taiwan exports to the U.S. are up 22 percent. Both India and South Korea exports to the U.S. are up 12 percent each, all at the expense of China.


Rick:  That makes a lot of sense because in my manufacturing experience, we always want to have a secondary provider of your goods so that you don’t have a large impact in your ability to provide goods. That is going to be beneficial for the U.S. in the long run. Alright, very good. Thank you, Bart, for that insight for this last Monday of 2019. We appreciate you joining us this year, and we look forward to doing this for you again in 2020. Thanks again.

Market Insights – December 23rd, 2019

Let’s talk about the SECURE act that was just put into law by President Trump.

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Episode 011 – December 23 2019

Episode 011 – Market Insights – December 23rd 2019


Rick:                 Welcome to Market thoughts for December 23rd 2019. My name is Rick Zich, and I’m here at Southwest Investment Advisors. Joining me is Bart Schannep, cofounder and president of Southwest Investments. Good morning Bart.


Bart:                 Good morning and Merry Christmas.


Rick:                 Thank you very much. Merry Christmas to you as well.


Bart:                 Only two days left for shopping.


Rick:                     I’ll start my shopping tomorrow. Alright. On this penultimate Monday of 2019, let’s talk about the Secure Every Community up for Retirement Enhancement Act, otherwise known as the SECURE Act, that was just signed into law by President Trump last week. Originally there were 26 sections that were introduced, brought up by the Ways and Means Committee. Bart, I was thinking that maybe you could dig into three, four of the most important things that people are wanting to think about.


Bart:                 Sure. One of the things to consider or to keep in mind is how popular this act is. This act was passed 417-3. Clearly, both sides of the aisle were excited to get this done.


Rick:                 I bet those three people are probably hanging out for something super, super important like everything is free.


Bart:                 Probably. I have no idea. What I can tell you is the biggest change has to do with what we refer to as stretch IRAs. In an IRA, whether it’s traditional or Roth, it can be passed on to a spouse, any dollar amount, and it becomes the spouse’s as if it was theirs from day one. All other beneficiaries, though, are considered beneficiary IRAs or stretch IRAs, in which case the distribution of that IRA, again, whether traditional or Roth, would be spread over the lifetime of that beneficiary.

You can understand an older person with a large IRA leaving it to a much younger person, a grandchild, say. That money could continue to grow for decades, whether tax-free in a Roth or tax-deferred in a traditional IRA. Well, that changes to a flat 10-year distribution rate. Now, it doesn’t have to be distributed over 10 years. It just has to be all distributed by the end of the 10th year.


Rick:                 They could take it all.


Bart:                 Take it all upfront. Take it all at the end. Take it all whenever. Obviously tax planning of how your years are going, if you have a weak year, that would be the year to take maximum distributions.


Rick:                 Got it.


Bart:                 The other thing that’s changed in the act is the effect on 401(k)s. Right now a company with a 401(k) can discriminate against part-timers. Going forward, starting in 2024, if you’re working 500 hours or more for three consecutive years, you have to be included in the 401(k).


Rick:                 That might get a little bit more expensive for employers, but it’s great for the employee.


Bart:                 Right. It’s great for the employee, for part-timer, for semi retirees, people like that. I think the other thing to keep in mind is annuities are being incorporated or being encouraged to be incorporated into 401(k)s for people who are not really up to date on investing, people who don’t want to spend any time thinking about investing, don’t want to be thinking about returns. What they want to focus on is lifetime income, basically personal pension plans.


Rick:                 I find that so interesting because we talk about the demise of pensions by the big companies that no longer offer them. This is really bringing it back. When we had that conversation, I was just really thinking that’s an important aspect for people that don’t want to be concerned about the immediacy of watching your own retirement money.


Bart:                 Right. The other thing is the act calls for calculations, annual calculations of 401(k) balances to be calculated in such a way to give the participant an idea of what that annual income might be, even if they don’t own an annuity. Even if they’re keeping the money in mutual funds or company stock, when they retire, what kind of annual income might they expect that would last their lifetime?


Rick:                 That’s interesting. We’ve talked about there are some additional costs of some of these things. The government is also getting a whole bunch of money earlier because they’re minimizing the amount through the stretch IRAs. They’re getting their taxes within 10 years. What are they doing with all that money?


Bart:                 What is the government doing with all that money?


Rick:                 That’s right.


Bart:                 Well, I think you’re driving on it. They spend money like crazy.


Rick:                 Absolutely, but as part of the act to be revenue neutral, are they going…


Bart:                 Well, one of the things that they’ve done to make it revenue neutral is they’ve pushed back the minimum age needed for required minimum distributions. It has been 70 and a half. They’re moving it to 72.


Rick:                 Got it.


Bart:                 Why?


Rick:                 There are a lot of people working, right?


Bart:                 20 percent of all people aged 70 to 74 are still working.


Rick:                 Wow. That’s a lot of people. Alright. Well, very good. Thank you for setting us straight on that information, Bart. I appreciate the time today that you’ve taken with us. Thank you for joining us. We look forward to seeing you next week.

Market Insights – December 16th, 2019

Retail sales and the effect of the trade war with China possibly behind us.

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Episode 010 – December 16 2019

Episode 010 – Market Insights – December 16th 2019


Rick:                 Welcome to Market Thoughts for December 16th 2019. I’m Rick Zich, an advisor here at Southwest Investment Advisors. Joining me is Bart Schannep, cofounder and president of Southwest Investments. Good morning Bart.


Bart:                 Good morning.


Rick:                 There is lots of talk about this morning.


Bart:                 Yes there is.


Rick:                 Things in the rearview, things happening right now and lots of things ahead. Why don’t you get us started?


Bart:                 If you’ve been watching the market, you’ll see that the stock market took a nice, big surge this last week. What’s going on? A lot. In the rearview mirror, this is based on the National Retail Federation spending survey. Americans spend or plan to spend on average $1,047 each on the holiday this year. That’s up four percent from the same time last year.

This covers obviously both the November and December holidays, but the point is more people are spending more money, and that helps a lot. That’s rearview mirror. Let’s talk about what’s happening right now. This last week with the U.S. and China trade wars seemingly coming to resolution, there are always going to be details that need to be worked through. There’s always going to be something else that’ll pop up about it, but it seems to have been seriously come to some major resolution.

It looks like the really high tariffs across the board that we were expecting have certainly been delayed, if not postponed indefinitely. We also had the election in England. That was huge.


Rick:                 That was unexpected for the landslide victory that they’re considering it.


Bart:                 I think it was unexpected in our media, but I think outside of the media, it was more expected.


Rick:                 Got it, okay.


Bart:                 The big things, the big takeaways on that were if the Labor Party took over, the Labor Party was expecting to level some very hefty taxes on the wealthy. With the Conservatives in, that’s not going to happen. On top of that, the Conservatives really got their push on enforcing Brexit, getting England out of the European Union. That plays right well to the U.S. because that implies the U.S. and England are going to be getting much closer in the amount of business that we do.


Rick:                 That’s the European area. What about North America? What’s going on here?


Bart:                 Well, right now in the stock market, I think we’re looking at a bit of a Santa Claus rally. We generally get that at the end of the year, but also as we look forward, we have to look at, I’m not sure how to pronounce it. USM, United States/Mexico/Canada Agreement.


Rick:                 The new NAFTA?


Bart:                 That’s the new NAFTA. That’s a much better deal for the United States that should drive trade up hugely for the United States, bringing still more jobs, more earnings. As we’ve talked before, we are at a 50-year low with unemployment. We have wages going up and wages going up the strongest in the lower paid areas.


Rick:                 That was just announced last week with the employment numbers that the lower level employees and the minimum wage and just slightly above that, it’s growing at a faster rate, right?


Bart:                 That’s right. I don’t think it really has anything to do with minimum wage. Minimum wage is an artificial thing set by governments, but what you do see is strong demand for more workers and willing to pay more for them.


Rick:                 Well, thank you Bart for that insight. We had a lot to talk about, so I hope you were able to take it all in. We appreciate you joining us, and we look forward to seeing you next week.

Market Insights – December 9th, 2019

Job numbers and what they mean.

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Episode 009 – December 9 2019

Episode 009 – Market Insight – December 9th 2019


Rick:                 Welcome to Market thoughts for December 9th 2019. I am Rick Zich, an advisor here at Southwest Investments. Joining me is Bart Schannep, cofounder and president of Southwest Investments. Good morning Bart.


Bart:                 Good morning Rick.


Rick:                 How are you doing this morning?


Bart:                 I’m doing terrific.


Rick:                 Excellent. Last week we had these great job numbers that were reported, but we have bad news. How can good news be followed with bad news?


Bart:                 Well, let’s start with the good news. The November employment figures came out. We showed a net job gain of 266,000 new jobs, which is terrific. That lowered our unemployment rate back to three and a half percent, which is the lowest rate since 1969. We’ve had that a couple of times throughout this year of three and a half percent. We’re back down again at three and a half percent, which is terrific.

Now, what’s hidden in there is as we look at the chart, you can see any time we have unemployment numbers go below four percent, it’s almost always quickly followed by a recession. Now, it doesn’t have to be four percent. That’s not the number you can see on the chart, but any time unemployment stops falling and turns, that’s usually a recession shortly thereafter.

Obviously we’ve now had. This is an amazing number. We’ve had 110 months of net job growth, consecutive, 110 consecutive. What’s also hidden in those numbers are wages. Wages have increased 3.1 percent year over year, but if you dig in deeper, Rick, you’ll see lower earners actually had a four and a quarter percent increase year over year, and higher earners only two and three quarters.

An average of 3.1 sounds terrific, but what’s best is lower wage earners, which obviously there’s more of than higher wage, have had a higher growth rate. That hopefully will push back a recession as consumers spend.


Rick:  Alright. That’s very interesting, Bart. Thanks so much for your insight on that. Thank you for joining us today. We look forward to seeing you again next week. Thanks so much.

Market Insights – December 3rd, 2019


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Episode 008 – December 2 2019

Episode 008 – Market Insights – December 3rd 2019


Rick:                 Good morning. Welcome to Market Thoughts. I am Rick Zich, an advisor here at Southwest Investment Advisors. Joining me is Bart Schannep. Bart, good morning.


Bart:                 Good morning Rick.


Rick:                 How are you?


Bart:                 Terrific. How are you?


Rick:                 Excellent. Bart is the cofounder and president of Southwest Investments. Last week we spoke about holiday parties.


Bart:                 Yes.


Rick:                 We’re all starting to get the invites and attending and things like that. Undoubtedly, whenever I say I’m an advisor, people start to say, “What’s your stock pick?” Do you get that?


Bart:                 All the time. All the time.


Rick:                 Elaborate why we don’t have a stock pick.


Bart:                 It’s difficult because in a great market, just be a part of that market. Be a part in a broader index. If you look at the S&P 500, it’s up 27.6 percent year to date, which is terrific, but if you dig deeper, there are some interesting numbers. One example is 56 stocks, a little over 10 percent of the index, which is made up of the 500 roughly largest publicly traded companies in the U.S. 56 of those companies are up over 50 percent. 11 are actually up 75 percent. Obviously you want to own those.


Rick:                 Right.


Bart:                 However, the flip side of the coin is, of the 500 companies, there are 13 stocks that are actually down 30 percent for the year. Again, index up 27. Here you’ve got 13 that are down 30 percent. In fact, four of the stocks of the S&P 500 are down over 50 percent. That’s the risk of trying to make your wealth in concentration. It’s easier to preserve your wealth in diversification.


Rick:                 I certainly wouldn’t want to be in those bottom four stocks.


Bart:                 No.


Rick:                 That would not be good for anybody. Well, thank you, Bart, for that insight this morning. We appreciate that. Thank you for joining us. Remember to like us on Facebook and watch out for some of our tweets that we have throughout the week. We look forward to seeing you next week.

Market Insights – November 25th, 2019


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Episode 007 – Novermber 25 2019

Rick:                 Good morning. Welcome to the week in review for November 25th 2019. I am Rick Zich. I’m an advisor here at Southwest Investments. Joining me is Bart Schannep, cofounder and president of Southwest Investments. Good morning Bart.


Bart:                 Good morning. How are you Rick?


Rick:                 Doing excellent, excellent. Now I hear you’re in the business of making predictions.


Bart:                 Well, yes. Let’s talk about predictions. The problem with trying to make predictions about the future is that we bring the present with us. What I mean by that is all of our reference points are what’s happening now. We’re trying to project that into the future, and it doesn’t work.

Case in point, Wall Street Journal on Saturday November 23rd had an article called ‘How Boomers Could Cause Housing Glut’. What that’s all about is 1.7 million baby boomers are going to be selling their homes due to either death or moving into assisted-living-type places between 2017 and 2037. The concern there is that’s going to create a lot of housing glut in retirement communities where Millennials or younger people don’t want to live.

Okay. If you look at the map, you can see that where these sun-city-type places, these retirement communities are in some serious cities that have housing shortage for blue-collar workers. Okay. What I’m suggesting is if all these homes are going to be going up for sale, you cannot make the argument that there’s not enough housing in these popular cities.

The homes that baby boomers will be vacating will either come down in price where blue-collar workers can afford them, or more realistically, the whole community will be repurposed. Where these communities were originally developed around pickleball and going out on the golf course or hanging out on the lakeside, if Millennials or the next generations want something else, these communities will simply change to that.

To see a prediction that old folks are going to die and no one’s going to buy their homes, the author of this article clearly hasn’t been around enough.


Rick:                 Things change. They don’t stay the same. Is that right? Alright. Well, very good. Thank you Bart. I appreciate you taking the time this morning. Thank you for joining us. Remember to like us on Facebook and Twitter. We’ll have lots of miscellaneous posts that you can enjoy throughout the week. We look forward to seeing you next week.


In today’s video we explore how starting early in your savings career will make a HUGE impact on your total amount. Bart and Rick go through who is going to be better off and I think you will be surprised!

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Episode 002 – Cost of Waiting

Rick:                 Welcome to Market Thoughts. I am Rick Zich, an advisor here at Southwest Investment Advisors. Joining me is Bart Schannep, cofounder and president of Southwest Investments. How are you doing Bart?


Bart:                 I’m doing terrific.


Rick:                 Time is money.


Bart:                 Yes it is.


Rick:                 Prove it.


Bart:                 I can easily prove it.


Rick:                 Alright, very good.


Bart:                 Alright. When we’re talking with younger clients, the main thing we keep beating into them is time is money. They have an asset that I don’t have. They have an asset that no one can buy more of, and that is time. When we talk about how do you end up being financially independent, how do you end up being financially comfortable, it all comes down to investing early and often. Early is all about time. It allows money to grow.

I’ve got a really good example to show. Here you can see if I started for 10 years and saved $1,200 a year for 10 years straight, but my friend Rick here didn’t, he procrastinated, he would have to invest not 1,200 a year but $1,550 a year for the next 30 years if I did nothing more for us to end up pretty much even., for us to end up at the end of 40 years, assuming that the money was able to grow at a decent rate.

Here we only used eight percent. We did not calculate in taxes nor the cost of transaction, but simply a simple eight percent compounding. You can see we both end up at around 189,000.


Rick:                 Time is money. Actually, I had to spend a lot more money, $46,000 compared to 12. I invested almost four times the amount of money just because I started 10 years later. That’s all.


Bart:                 The earliest people can start saving, the younger they are, the more time it has for that money to compound.


Rick:                 Thank you very much, Bart, for that insight. That was really, really helpful. Thank you for joining us. [Music plays] We hope that you come and look at a few more of our videos to give you just great information to help you on your investment path.

Market Insights – November 18th, 2019

When will the next down happen in the stock market? 


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Episode 006 – November 18th 2019

Rick:                 Good morning. Welcome to the week in review for November 18th 2019. Joining me is Bart Schannep, the cofounder and president of Southwest investments. Good morning Bart.


Bart:                 Good morning Rick. How are you?


Rick:                 Excellent, excellent. The holiday season has begun. You’re starting to attend parties. Is that right?


Bart:                 Yes, I am. I will tell you that frequently at cocktail parties, conversation does wrap around what each of us do for a living. Once I let out that I’m in investments, then people frequently ask me about the economy, or more specifically, “When is the next recession coming?”

I’ve got to be honest. I don’t know when. The stock market is so strong. We recently this last week hit all new record highs on the three major indexes. To predict when the market’s going to go down is a very tough game. What do people consider down?

Just a couple of statistics from Capital Research and Management. The stock market goes down, on average, at least five percent a year, three times a year. The stock market goes down 10 percent about once a year. The stock market goes down 15 percent about once every two years and down 20 percent about once every three and a half years.

So many people are talking about this bull market is now 10 years old. Well, maybe. We did a year ago, the fourth quarter of 2018, we saw the markets go down 18 to 20 percent. That could have counted as a reset of the bull market. Specifically though, when it comes to the recession, the couple things I need to point out.

Now, we talked last week about how employment is now at record highs. Well, in the U.S., consumer spending makes up 70 percent of our economy. If we have a record number of people working, they’re going to be spending money on things.

The other thing, Rick, that really points out is there’s always a lag time on recessions. I mean, the most recent recessions, the one 10 years ago, the one we refer to as the great recession, it wasn’t declared until the recession had already been rolling for 11 months. They were 11 months late announcing when it began. Then they were 15 months late telling us when it had finished.


Rick:                 What you’re saying is that it may have already begun, but it may already be over before we knew it begun. Is that right?


Bart:                 That’s about right.


Rick:                 Alright. Well, thank you Bart. I appreciate your time today. Thank you for joining us. Remember to like us on Facebook and Twitter where we have miscellaneous posts throughout the week. We look forward to seeing you next week.

We explore the concept of bond laddering.  Both the reason and how to do it. 


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Episode 001 – Bond Ladders

Rick:                 Hi. Welcome to Market Thoughts. I am Rick Zich, an advisor here at Southwest Investment Advisors. Joining me is Bart Schannep, cofounder and president of Southwest Investments. How are you doing Bart?


Bart:                 I’m good Rick.


Rick:                 Excellent, excellent. I was speaking to a client the other day. I was going to be recommending a bond ladder, and the lights went out. Not a clear understanding about bond ladders. Why don’t you dig into bond ladders for us?


Bart:                 Well, it’s been a long time since people have been buying bond ladders. In an interest rate environment like we’ve had for quite a few years now of interest rates falling, it’s always made sense to simply buy the longer bond maturities to lock in the rates as rates kept falling. Well, now we’re at the point where interest rates are very, very low. Now, we’ve said this before. How low can they go? It’s amazing how low they can go.


Rick:                 That’s right. We weren’t expecting two cuts this year but there’s…


Bart:                 No, but here they are.


Rick:                 Yes.


Bart:                 Now, where are interest rates going to go from here? Well, really only one of two directions, either stay the same or go up. How does one position oneself with a fixed income portfolio in a rising interest rate environment? A timeless strategy is to use a bond ladder.

As an example, you can see on the screen. If we were to take a $50,000 portfolio and divide into five $10,000 bonds maturing in one year, two year, three year, four year and five year, as you can see on the left of your screen, interest rates, and I know the interest rates that are being shown are not available in today’s world. It’s simply for demonstration. What you can see is the longer you go out, the higher the rate of return.

Then as the first bond matures, as the one-year bond matures, we then buy a new five-year bond. The next year, when that 10,000 matures, we then buy a new five-year bond. Well, what happens? Well, over time, we end up with the five-year bond yield and yet we have a bond maturing in one year, two year, three year, four year and five year.

In other words or in simple terms, at the two-and-a-half-year mark is our average maturity and yet getting the five-year yield. The advantage of doing a bond ladder in a rising interest rate environment is every time you buy a new bond, you’re buying it at hopefully after rates have risen. You keep buying better and better returns.


Rick:                 Well, thank you for that insight, Bart. I really appreciate it, and I’m sure our clients do as well. Thank you for joining us. We hope you enjoyed this explanation of bond ladders. We look forward to seeing you next time.

Market Insights – November 11th, 2019

Emotions can run rampant in financial decisions. We talk a little about both fear and greed and how those two emotions can grab a hold of you and drive poor decisions in your investment decisions.


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Episode 005 – November 11 2019


Rick:                 Good morning. Welcome to the week in review for November 11th 2019. Joining me this morning is the cofounder and president of Southwest Investments, Bart Schannep. Bart, why don’t you get us started?


Bart:                 Sure. When it comes to emotions, people have a rainbow of emotions, right? We have love. We have jealousy. We have fear. We have respect. We have all kinds of emotions, but when it comes to money, it quickly boils down to just two, fear and greed. People don’t like to say fear and greed, so we have new terms, kind of a politically correct way of saying it now. We say risk-on, risk-off.

You may have read those terms in publications such as the Wall Street Journal or heard talking heads on TV talking about it. What it essentially means is at times, either fear leads the pack or greed leads the pack. We saw last week a very fundamental rotation to greed or risk-on.

My evidence for that is we saw the indexes hit all-time new highs, which of course means more buyers and sellers. We also saw rotation out of bonds. You may have noticed interest rates rose last week. Interest rates rose not because the government had any influence on it. It’s because investors in general sold more bonds than bought them.

Investors also rotated out of high-dividend-paying stocks like publicly traded REITs, real estate investment trusts or utility stocks and towards non-dividend or low-paying dividend stocks that are more growth oriented. Investors clearly see that there’s a lot more growth opportunity out there. That’s leading the risk-on.


Rick:                 In other words, Bart, this bull market still has legs.


Bart:                 Yes.


Rick:                 Thanks again Bart. I appreciate you taking the time this morning. Thank you all for joining us. Remember to like us on Facebook and Twitter where we have miscellaneous posts throughout the week. We look forward to seeing you next week.

Market Insights – October 14th, 2019

Taking a look at historical perspective. We are in the longest period of expansion in history, but what does that mean in respect to what the past has shown us. Let’s take a look.


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Episode 003 – Market Insights Oct 14

Rick:                 Good morning. Welcome to the Monday morning recap for October 14th 2019. Joining me this morning is the cofounder and president of Southwest Investments, Bart Schannep. Bart, why don’t you get us started.


Bart:                 Thank you Rick. I had a couple of things I wanted to point out today that have to do with historical perspective. The first one is talking about the current economic expansion. After every recession, which is a period where the economy actually contracts or shrinks, we have a period of expansion.

The average period time length of an expansion since 1927 has been 60 months. 60.1 months of a period of where the economy is either staying the same size or growing. Well, since the most recent recession, which has now been 10 years ago, ending in ’09, we have now passed a little over 10 years, which is actually 123 months of expansion. That makes this expansion the longest in U.S. history.

I know for many it was a very anemic expansion after the recession. In fact, most Americans did not recognize when the recession ended because the economic expansion was so anemic. Apparently, if it’s not a strong start, it ends up with long legs. That’s what we’ve been enjoying.

Another thing I thought I’d point out was, being October and a lot of people are afraid of October, October is nothing to be afraid of, but it is one of the more volatile months. At least in this advisor’s personal life, I can remember very clearly October 19th 1987, 32 years ago, was Black Monday.

On that day, in a single day, the stock market as measured by both the Dow and the S&P but specifically the S&P dropped 20 and a half percent in one day. Just to put it in perspective based on today’s average price, here we are on October 14th. That would equate to a drop of 5,360 points in one day. Now that’s something to think about.


Rick:                 Thanks so much Bart. I appreciate you taking the time this morning. Thank you all for joining us this morning. Remember to like us on Facebook and Twitter where we’ve got miscellaneous posts throughout the week. We look forward to meeting you again next week for the Monday morning recap. Thanks again.

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