Welcome to Keen on Retirement, a show dedicated to helping you thrive before and during your retirement years. If you are looking to grow and protect your wealth and want to make the second half of your life the best half, then listen in as well as advisor Bill Keen and his host sort through the key issues that you need to know in a lively and candid way. Hey everybody, Bill here. I wanted to take a moment to wish you a Happy and Prosperous 2018 and to introduce our podcast today.
We have a special treat in that we have excerpts from our recent 20th annual Holiday Breakfast that was held in December. These breakfasts have become a real tradition around Keen wealth in that we get together on a Saturday morning in December each year and have a nice breakfast, some fellowship, some holiday entertainment, and our economic outlook for the year ahead. There's several ways to take this information in. You can listen to this podcast or you can go to KeenOnRetirement.com for a high-quality full video of both my presentation and Matt Wilson's presentation.
So the preferred method would probably be the videos in that you can see the slides as we were walking through the slides. It really helps to follow along in that manner. Either way, I hope that you enjoy these presentations and they give you some good information for your thinking and planning as we move forward to the remainder of 2018. Thanks and we'll talk to you soon.
Well, welcome everyone to our 20th anniversary Holiday Breakfast. I want to thank, yeah, thank you. I want to thank Lindsay for all the diligence and dedication that she's given to our firm over 11 years now. It's amazing this day and age that someone could stay put somewhere that long.
Although many of you have been at companies for 30 or 40 years. I also want to thank my operations staff who helped me make all this happen. Someone told me this morning, Bill, you did really good with the setup, the food, the three lines, the way things flowed, the new room. And I said, I had nothing to do with any of it.
So thank you to my operations team for allowing me to have the confidence to be able to delegate these things as my mentors have told me over the years, get good people on your team and get out of their way and let them do their thing. So I appreciate deeply that team. And I also wanted to mention my two financial advisors, Eric, Sabio, and Ray Ariano. They've been, many of you have met them over the years, but without having the depth of credentialed financial advisors and certified financial planners and both those gentlemen have master's degrees in finance, have them supporting us in our research and diligence.
It makes Matt's and I's job much easier. So I'm very grateful to that and to them. I also want to mention and honor it just acknowledged briefly my family here at the table. Got my wife, Karissa here with me, my mother in law, my mother, my uncle Jim.
And I've also got Matt's wife, Amy, Tyler and Clara made it to the front table this year. It was nice to see them at the front table this year. Usually you all are in the back table. What happened this year?
They got upgraded. Okay, very nice. And that's fine. That's excellent.
And the two, they're doing very well here, Tyler and Clara. I had a nice surprise when I walked in this morning. My many of you know, and I've seen my kids over the year, have been on the piano literally over this 20 years. I think probably 16 of the years, my kids have been playing piano all the way up.
They all play piano all the way through all the way to seniors in high school. And this year, I had to hire it out. Because they're all in college. I think we're here to come.
But I walked in this morning and I looked up and I saw my oldest daughter walking down the hallway who's in med school right now, first semester and she made a surprise trip to Kansas City to see this for this event. So that's very meaningful to me. Thank you, Taylor, for doing that. Now, on a side note, on a side note, she picked up a boyfriend recently.
No, I mean recently, like a year ago, okay, so it's not too recently. So I've had a little time to vet him. And he's here today. We've had some of those conversations dads are supposed to have with boyfriends, right?
Now she has 23 though. So I guess at some point I have to just kind of go okay. But Derek's here in the room too. And I found out that he was an engineer from Rala.
So my blood pressure came down nicely. All right, that's good. A good head on his shoulders. So, well, I want to kick off our program today.
And I just think about going back 20 years and I think, wow, time flew. Time is a pretty elusive thing. And I look back and I think when I was standing on this first stage 20 years ago, where, what we've been through and what we've come through and how quickly the last 20 years have gone. Now, I have a birthday tomorrow.
And every time I tell you all, when you're in my office in private meetings and otherwise, that I'm having a birthday and I'm starting to realize the importance of time, you don't feel sorry for me. I turn 49 tomorrow. Okay, so you say, most of you say, oh, you're young, come on, get out of here. But I do, you know, you do start to realize that time is the precious commodity.
You know, we're intimately aware that you work with us so that you can have more time to go do things. You don't want to take the time and you want to delegate things to us so that your financial affairs, so that you can go do the things like work on your health. It's been time with your family. And we really, really appreciate that and acknowledge that here.
You might be wondering what this slide is up here on the screen. Matt and I recently attended the Charles Schwab Conference in Chicago. And we recorded one of our podcasts from the CNBC set. And that is our podcast host, Mr.
Steve Sandeski. So if any of you have listened to the podcast that we have talked about over the last two years now, 52 episodes out, we cover a myriad of topics. Our most recent podcast was recorded from here at Live on the CNBC Post. And I mentioned to Steve that I would give him a shout out because this is being recorded that will be put out online live or the recording and also in a podcast form.
So I wanted to thank Steve too for his work. But Steve helped me write the blog on time. And I say this, the great equalizer. It cannot be bought.
It cannot be saved. It can only be wisely invested. And I talk about this. I had to throw in the bottom quote as well because it really resonated with me.
Time flies is the bad news. But the good news is you're the pilot. So again, for us understanding that there's a lot of reasons people engage with our firm. But one of the main reasons is to be able to focus on that thing that is priceless and that's your time and making sure that you're maximizing your time over the years.
So I'm grateful for that opportunity. It's a privilege for us. Now, I want to take a little walk down memory lane with you. Some of this is going to be things that I've walked through with each of you, some of you over the last 25 years, for real.
And then we might go back a little bit farther because I'm big on perspective. I'm big on perspective because it always comes down to what's our strategy. What are we going to do today on the ground in the trenches, in our investment accounts and our plans to make it work. But you can't operate unless you have perspective.
So let's go back to 2002. I remember standing on the stage December of 2002. So you see this year when we hold these events, years and where the markets have done very nicely, you're all in pretty good mood. It's nice.
Years like December 2002, when Worldcom had failed, Enron had failed, Arthur Anderson had gotten caught helping them cook their books. So everything we thought we could trust financial numbers back in 2002. And then we found out that one of the top county firms was helping them falsify their records and their documents. Not to mention the towers coming down.
Imagine. Well, you all probably can't imagine. I know exactly where I was when I heard the news. That the towers had come down.
And I thought life as we know it will never be the same again after that period of time. And the Dow investment markets were up 50% at the bottom. So from Pete to Troft, that would be like the Dow going from 24,000 down to 12 over a pretty short amount of time. And it looked like things would never re-normalize.
But they did re-normalize. Fast forward six years. Now we have this. And this is reasonably fresh in the minds of many of you probably.
Bernie Madoff. You know, it's always the times where the markets get stressed, that the frauds and scams get exposed. Lehman Brothers failed. Everyone in the country, I say everyone.
I shouldn't say everyone. A good portion of the folks in the country were using their homes as an ATM machine. We had a massive amount of debt against our real estate. And the algorithms that calculated what real estate is worth continued to just say real estate always is worth more.
There was a fundamental flaw in the way things were being calculated. Now as always, the markets act very psychotic daily in the trenches. They always overreact. So how many mortgages actually ended up going to zero, 10 to 15 percent?
Maybe that's a huge number though, believe me, based on what history says. But not all of them. Not all mortgages went to zero. But the market was acting like everything real estate was worthless.
And it created a massive down-drowned. On this stage in 2008, the Dow hit about 8,000 at that point. Only to hit a low of 6,500 in March of 2009. So that was an interesting holiday breakfast that year.
I remember because I believe in the equity markets and I believe in the capitalistic environment where we all work together. And we better ourselves because we specialize. And the more participants in economy, the stronger it is. And that's why we have nationwide and globally.
We're working together now because of technology. But believe me, I was at meetings in 2008 with some of the CEOs, the Wells Fargo CEO, the Lehman, the JP Morgan. These people were having meetings, some of them who had ultimate faith in the financial system or meeting in hotels where the press wouldn't see them asking themselves. Did we get this wrong?
Can this thing go all to zero? That was a thought for just a minute. It can't. It can't go to zero.
There's too much real assets underneath all of this. But those are trying times. And these are the times, these are the times that can jolt an individual off their financial plan. Decisions get made emotionally if you're not pre-committed to what you're doing during times like this.
And I'm not suggesting these are happening again or something to these, this nature. But I did want to take the time this morning to just say with this last run in the market and how good everything has been, there will be a time again that the accounts are down, that the equity portion of the accounts are down temporarily. The key to this though is that the declines have always been temporary. The advance is permanent and the declines are temporary.
If we can ingrain that in our minds, it helps us get through things. But hey, I know it's great for my daughter who's just started saving. But how about me? I'm retired.
Or you all, you're retired and you're living on your asset. I might not have all this time to wait for it to come back. That's why we are so insistent at events like this. And on our podcast, to bring perspective on why you've got to have a certain amount of money outside the stock market, outside the equity investments to get through those down times.
With dividends and interest coming in and your asset you have set aside, you've got to be able to get through the down times. We're not denying the down times are coming. We're just saying we've got to be pre-committed to a strategy to get through it. And if we get through it, wealth can be created and maintained at any portion at any time of your life.
And these are seven figure decisions and seven figure mistakes over a lifetime. And they don't teach this stuff in school. And headlines like this will jolt most of the public off of their game. So let me go a little bit further here.
Now this was 2016. We stood on this stage, literally this stage, this one, downstairs though. December 15th and Matt had a positive outlook for 2016. And what happened?
Does anybody remember that we opened the year? I'll bet you don't. I bet you don't remember this. 2016 opened.
Worst market opened ever in history. We started in December about the time Matt made his positive prediction. For 2016 the market started straight down 16%. Some of you even called and said, hey Matt said it was going up.
We had the worst start to the year. What gives? Well, 2016 the market rallied that year. We then had Brexit.
The market was down 1000 points or more within a day or two. Rallyed and was up 14% January to December for the year. So I always say if you were a rip van Winkle, this investing thing would be easy. You would go to sleep, wake up 30 years later and you would have done very, very well.
If you're emotional and you're in the trenches and you're paying attention to this, it can be very distracting. So hopefully we've helped and trained you all not to get too worried and obsessed about the headlines. We are obsessed about the headlines. We're really obsessed about the underlying fundamentals of the economy, not the headlines.
We're paying attention to it so you don't have to. I thought I would end my piece here with a discussion about North Korea. Because North Korea we talk a lot about. But let's go back to 1950 now.
June of 1950 the North Koreans decide to invade South Korea and across the 38th parallel. Now this was 67 years ago. The market immediately sold off 14%. MacArthur's troops came in, he was heading to UN forces, made his march to the North and within two months the market had rebounded by the end of the year.
It was up 17% for that year of 1950. 1951 it was up 14% yet again. So what's my point? I'm saying wealth can be created long term in these equity markets but it is not a straight line.
Does anyone have, I'm going to do audience participation here. Does anybody know where the market was? The Dow Jones and I speak about the Dow because most people still speak about the Dow. Even though it's just 30 stocks.
Anybody know where it was in 1950? 500, Lynn has 500. Anybody else? Higher or lower?
Say, 2500. The Dow was at 200 in 1950. It sold off down to about 170 and ended up coming back through 200 there in 1951. So think about this for a moment.
We're at 24,000 on the Dow today. It's up 120 times in 167 year old person's lifetime. The market has built 120 times. Not 120 percent, 120 times.
Now there's this other thing that's also gone up 120 times and that is the earnings of the companies that underlie those securities. This isn't a shell game. In the 20s it was a shell game. It was fraudulent.
Today it's about earnings and they are there. That's the key to this. So wealth can be made and many of you are sitting here today as retired people because of your investment in the capital markets. It's what's created the wealth for you to be able to sit here today as retired people.
We're looking at headlines like this and some of the others we've shown. I wanted to take the time this morning to say when that happens and it's happened for me several times in my 25 year career we are all over it and we have you set up appropriately to go through anything that might happen tomorrow. I think it's important that we just had that chat this morning. I'll close with this.
This is yet another audience participation. I need your help. Anybody want to throw out where they think that that will be in 20 years? Come on, Uncle Jim.
Come on, man. Help me. Oh, he didn't hear the question. Okay.
What do you think the Dow Jones will be in 20 years? Yes. Okay. I don't have that one up here but it's not a bad answer.
Mr. Cox, what is it? 40,000. Anybody else?
50,000. Thank you for your participation this morning. 100,000. Okay.
We have 100,000. Do we have an auctioneer? I feel like. I'm just, I feel like.
So how about this? Who wants to throw out a rate of return that they think will happen in the next 20 years? Just a rate of return on the market now. Do I have a 3%?
Do I have a 4%? 6? Okay. 6?
9. Okay. Closer to the long-term average. Here's the data.
Here's the numbers. And my compliance staff made me put on here for illustrative purposes only past performance. There's no indicator of future results. At 4, at 7, at 10, at 4% in 20 years, the Dow is at 50,000.
At 7% in 20 years, the Dow is at 100,000. And at the long-term average that we've seen over the last 100 years, the Dow would be at 157,000. So the reason I brought you back to North Korea in 1950 is to just simply give perspective. I had a coach tell me once, look back in your life and see where you've come from.
It'll give you perspective on where you can go. It just provides the brain to see what's possible. These are the things I believe where we're headed, but it won't be a straight line. That's what we know for sure.
It will not be a straight line. So that's why we preach financial planning. That's why we say update it regularly. That's why we say get committed to this and work with a fiduciary advisor and roll up your sleeves and have a plan that you believe in and can trust through the most difficult times.
The opinions expressed in this podcast are for general informational purposes only and are not intended to provide specific advice for recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results.
Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always, please remember, investing involves risk and possible loss of principal capital. Please seek advice from a licensed professional. Keen Wealth Advisors is a registered investment advisor.
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