12/11/24 Stock Market Rarity, Robotaxis, and the Road Ahead for EVs

The Moneywise Radio Show and Podcast Wednesday, December 11th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Guys" podcast call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com facebook: Moneywise_Wealth_Management instagram: MoneywiseWealthManagement

• 0:00Speaker 00

  From the padded radio room off Stockdale Highway, here is Money Wise. Call or text in at 661-396-1000.

• 0:09Speaker 01

  I need a dollar, dollar, dollar, that's what I need. Hey, hey. Well, I need a dollar, dollar, dollar, that's what I need. Hey, hey. Said I need a dollar, dollar, dollar, that's what I need. And if I share with you my story, would you share your dollar with me?

• 0:29Speaker 02

  Securities offered through SEF Securities, Inc., member FINRA/SIPC. Investment advisory services offered through SEF Investment Advisors, Inc. SEF Securities, Inc. and Money Wise Wealth Management are independently owned and operated.

• 0:40Speaker 00

  Now, let's start the Money Wise Show.

• 0:42Speaker 03

  Welcome to the Money Wise Show. We are live from the padded radio room off Stockdale Highway on ESPN Bakersfield, 1230 a.m., 101.1 FM, and always streaming at MoneyWiseGuys.com. You can call or text into the show 24 hours a day at 661-396-1000. I'm Sharad Waite, and sitting here with me is?

• 1:03Speaker 04

  Dustin Weaver.

• 1:03Speaker 03

  Dustin Weaver, D-Dub, welcome.

• 1:05Speaker 04

  I can't help but smile every time you call me that.

• 1:07Speaker 03

  Good, good, that means it's a good one.

• 1:11Speaker 04

  We'll go with it.

• 1:12Speaker 03

  Listen, we've gotten some great messages and comments over time. One came in while we were not on the air, and which we love, and I'm going to read this message. I want to start the show today right with this. It says, "Good afternoon, Money Wise guys. Enjoyed Tuesday's show, had me cracking up. My question is, how can Tesla adjust its strategy to stay profitable and competitive as the EV market grows? Have a great show." So, I want to start the show out with this topic here, Dustin, and this is, the electronic vehicle market is really starting to...

• 1:53Speaker 03

  Evolve and change in a way that I think is throwing a lot of people off. They kind of don't know what to make sense of. And I think part of it has to do with, there is a lot of market manipulation that happens in really any new industry. And especially when it's in the tech world and especially in the last 10, 20 years, if it had anything to do with green or green energy, you've had government subsidies, for example, and government tax credits that have come into play.

• 2:26Speaker 04

  Right.

• 2:27Speaker 03

  And this has been going on for decades.

• 2:29Speaker 04

  I think that helped drive a lot of the sales, didn't it?

• 2:31Speaker 03

  100% has helped drive a lot of the sales. But if we go back just 10 years ago, who were the electronic vehicle manufacturers at the time? I mean, we had kind of basically one. It was Tesla, which has been the only really, I mean, the oldest, one of the older, certainly the largest established all-electric vehicle manufacturer. We've had other auto manufacturers that have decided to get into the EV world. But this was an all-electric vehicle company that, you know, from the ground up, that was basically a tech company that became a car company that was making electric vehicles. But certainly was helping Tesla, having these tax credits at that time.

• 3:12Speaker 03

  You have a starving company that's really trying to, you know, get going in an extremely expensive market like manufacturing. And so, things have changed, though. And since then, companies that have auto manufacturers that have been in the game of manufacturing for a long time have now gotten into electric vehicle manufacturing. So they're going, hey, we want a piece of this pie too and get some of these credits. And of course, they do.

• 3:42Speaker 04

  You're seeing the Hondas and Toyotas of the world come out with the fully EV. They did hybrids for a long time, but they're getting into the fully electric game now, too.

• 3:50Speaker 03

  Which are nice federal and sometimes state tax credits of up to $7,500. You know, that's a big chunk of money that comes off of it. But you've got something interesting because now you have Elon Musk, who is heads up Tesla, who was really pushing for President Trump's plan to get rid of the electronic vehicle federal tax credit. And why would Elon Musk be excited for that? Can you imagine? Like, do you know? I'm asking.

• 4:21Speaker 04

  No, I really don't.

• 4:21Speaker 03

  So, one of the reasons is because Tesla has already invested their in so much money into their manufacturing process that they and into their research and development that they're ahead of the game in terms of that aspect, especially compared to the other manufacturers.

• 4:40Speaker 04

  So, get rid of the competition.

• 4:41Speaker 03

  Yes, even though it hurts their clients, it hurts their their prospect prospective purchasers of their cars, they it hurts all prospective purchasers of electric vehicles. And so therefore, it would hurt the newer guys more than Tesla as they say, hey, you know, we've we've got our, our, you know, sort of system going down here. Now, what you're seeing is sort of an extreme example of this is in China with BYD, which is

• 5:13Speaker 04

  I've been following that one.

• 5:14Speaker 03

  It's the it's the Chinese electric vehicle manufacturer that is now manufacturing all over the world, not here in the United States yet, but certainly in Australia, other parts of Latin America, Africa, Europe, and it's extremely discounted price, these electric vehicles that are essentially competing with the Teslas of the world where you can get

• 5:37Speaker 04

  Are they getting some market share?

• 5:39Speaker 03

  Yes, they're they're gaining market share and at because they're being largely subsidized by the Chinese government and the way that they can manufacture and the way that they can go forward with their technologies is is much more streamlined than other parts of the world. So they've they're they're doing the same thing that Tesla has been doing. In fact, almost any electric vehicle manufacturer right now is selling a car at a loss. Like, they're losing every time they sell that car because they're waiting for that economies of scale to kick in where it's now they have enough production going that they can start getting a profit from each one of their each one of their vehicles.

• 6:19Speaker 03

  And so, you know, this is just one of the, you know, coming back to our listener question, you know, the Tesla's strategy and how they can adjust their profitability and Stay prop, you know, stay competitive for so long without making a profit.

• 6:32Speaker 04

  Get rid of the competition.

• 6:33Speaker 03

  Yeah, this is one way. This is one way that they're trying to get rid of the competition and also increase market shares as much as possible. Get people to buy our product. They get hooked on that lease payment or that, that, you know, what, what Elon hopes to have are recurring monthly expenses for the, you know, the extra software services like self-driving and yeah.

• 6:55Speaker 04

  And obviously they get to split all the power you're buying when you're stopping at these superchargers, right?

• 7:00Speaker 03

  Yeah.

• 7:00Speaker 04

  Did you see they're, they're building a giant supercharger station in Lebec?

• 7:06Speaker 03

  Oh.

• 7:06Speaker 04

  Off of Lebec, Fraser Park area. It's gonna be over a hundred. It was, I think it was a hundred and ten or a hundred and twelve at a, what they called a, um, a newer age 7-Eleven style, which is gonna have a lounge, like a hangout lounge.

• 7:20Speaker 03

  But it's a 7-Eleven.

• 7:21Speaker 04

  It's a 7-Eleven. It's gonna have over a hundred superchargers for, for Tesla.

• 7:25Speaker 03

  It's at there. It seems like there's already a, a big supercharger there at that Flying J.

• 7:30Speaker 04

  Big, but I think there was under 20 stations or so. So they're gonna, you know, more than five times as much now.

• 7:35Speaker 03

  Well, look at Lebec, up and coming. There's another big Tesla one, uh, that was kind of unofficially announced on Stockdale Highway out by Enos Lane, Stockdale and I-5. And it's like massive. And I think it's also where it can be Tesla trucks, semis, which, you know, they're getting closer and closer to having more of those autonomous semis going up and down the five. And in autonomous news also is Cruise, which is an autonomous robotaxi company that we've been following for years. I've seen them up in San Francisco.

• 8:07Speaker 04

  Right.

• 8:08Speaker 03

  Announced that they're, they're closing up shop.

• 8:10Speaker 04

  So is that the one that had all Jaguars or is that another brand? There was one that I've seen some pictures online, people posting.

• 8:16Speaker 03

  Are they with Jaguars?

• 8:17Speaker 04

  It was a hundred percent Jaguars that they had.

• 8:19Speaker 03

  Oh, my gosh. I haven't heard that. I haven't heard that about that, but there are a few out there that are still, still functioning.

• 8:28Speaker 04

  But Cruise is shutting down?

• 8:29Speaker 03

  Cruise is shutting down, but 90% is owned by GM. So GM invested into this company, this autonomous vehicle company. And it's just. Not working out. They've been bleeding money. And now GM says, look, we're just going to buy out this company and we're going to wrap it up into our GM. Sort of research and development division that goes into the autonomous. Vehicles for our own vehicles that we're selling, you know, for our consumers, not so not like the robot. They're getting out of the robot taxi business, basically.

• 9:00Speaker 04

  Right.

• 9:01Speaker 03

  Which, you know, again, coming down to sort of market share. Who were the players that are going to be left around and are going to that are going to be able to provide this Tesla's making a move in that direction as well with that. Their recent announcement of their robot taxi, which is almost like a model three, but there's no steering wheel. It's a it's a two seater.

• 9:19Speaker 04

  Has it launched already?

• 9:20Speaker 03

  It's they they had they'd launched like a was like, it's like a media day. It was just a month or so ago.

• 9:27Speaker 04

  It's not like they're a current direct competitor to this cruise company yet.

• 9:31Speaker 03

  No, not yet. No, because I don't think Tesla has had their robot taxis out there. But you know what they're trying to do is essentially turn your you could take your model. Their goal is that you could buy your Tesla and your Tesla model. And while you're not using it, it's being used out.

• 9:48Speaker 04

  I see.

• 9:49Speaker 03

  In the robot in their robot taxi network.

• 9:51Speaker 04

  Right.

• 9:52Speaker 03

  And autonomously going around. And then when it's done, it just comes back and plugged itself in and.

• 9:56Speaker 04

  Well, we saw and we've seen right between Airbnb and the Ubers and lifts of the world, you know, you can get people to use their property.

• 10:03Speaker 03

  Yes.

• 10:04Speaker 04

  Turn it into a company.

• 10:05Speaker 03

  That's right.

• 10:06Speaker 04

  To a profit center.

• 10:07Speaker 03

  Yeah.

• 10:08Speaker 04

  You know.

• 10:08Speaker 03

  So why not? Yeah. I mean, if you I mean, not everybody's going to want their. Primary vehicle to also be used by all these strangers, but people do it with their homes.

• 10:18Speaker 04

  Yep.

• 10:18Speaker 03

  All the time.

• 10:19Speaker 04

  And then Turo, have you seen that one?

• 10:20Speaker 03

  Yes.

• 10:21Speaker 04

  T U R O. We've used that a couple of times. It's great.

• 10:23Speaker 03

  Is it somebody else's car?

• 10:25Speaker 04

  You're renting somebody else's car. It's like an Airbnb, but for vehicles.

• 10:28Speaker 03

  Yeah.

• 10:29Speaker 04

  Yeah.

• 10:29Speaker 03

  And and does it? Nope. You don't see any people and the car is just parked somewhere.

• 10:34Speaker 04

  Well, in in our case, we did a little handoffs. We did get to meet them.

• 10:38Speaker 03

  Oh, I see.

• 10:38Speaker 04

  Hey, here's the key. See you later kind of thing.

• 10:41Speaker 03

  I see. Everything else is done in the app.

• 10:43Speaker 04

  We went to Tahoe and rented it in Reno and just drove around and had a Lexus for the week for like 120 bucks or something cheap like that.

• 10:50Speaker 03

  Oh, that's awesome. Oh, that's awesome.

• 10:53Speaker 04

  Yeah, it was good.

• 10:53Speaker 03

  I've seen it advertised for, you know, car rentals. I've never done it, but yeah, that's kind of a fun way also to be able to rent, just like with Airbnb.

• 11:01Speaker 04

  Right.

• 11:02Speaker 03

  We've Airbnb'd some pretty nice

• 11:07Speaker 03

  homes, you know, that's been fun for, you know, get togethers and stuff.

• 11:10Speaker 04

  Well, all these examples just drive us back to, I mean, you think of the S and P 500, which we can talk about what that did again today.

• 11:19Speaker 04

  There's a lot of technology wrapped up in that, right? All these companies are tech related.

• 11:23Speaker 03

  Yes.

• 11:24Speaker 04

  Tech just seems to keep driving a lot of sales throughout our entire world.

• 11:28Speaker 03

  Well, the tech especially driving the S and P 500, we've mentioned, I believe it's 80, roughly 80% of the gains of the S and P 500 this year have come from 10% of the companies.

• 11:41Speaker 04

  Mostly, right?

• 11:42Speaker 03

  Yeah, mostly tech, mostly tech. And then if you just narrow it down to those, those big tech companies, it becomes even, even more interesting. Why don't we do this, Dustin? Why don't we take a first break? And when we come back, let's talk about what's going on in the markets because the stock market is doing something that it hasn't done, oh, in a really long time. In fact, it's only happened three times since 1871.

• 12:08Speaker 04

  I can't wait to hear more.

• 12:09Speaker 03

  We'll talk about this when we come back. We're Money Wise.

• 12:11Speaker 00

  Are you nearing retirement and currently working with a financial advisor? Are you not sure if you're invested appropriately? Call our offices at 661-847-1000 to sit down with a Money Wise financial advisor for a no obligation assessment of your investments.

• 12:41Speaker 03

  Welcome back.

• 12:43Speaker 03

  We're Money Wise. Are you laughing? Are you laughing? Do you guys watch Silicon Valley?

• 12:47Speaker 04

  My wife does.

• 12:51Speaker 00

  I was thinking about chips and salsa.

• 12:54Speaker 03

  I'm Jared. I'm here with Dustin Weaver. We're Money Wise.

• 12:57Speaker 00

  Welcome back.

• 12:58Speaker 03

  Welcome back. I just started watching this series a few months ago. I don't know what season I'm in, three or four, but the soundtrack is so good.

• 13:06Speaker 00

  Is this is where that?

• 13:07Speaker 03

  This is one. This is song. This song is on the, from the show. There's a bunch of, you know, lots of great, great music. So good job.

• 13:15Speaker 00

  It's funny because these new, these new series, I catch myself doing the same thing. Me and Debbie down the hall will text each other when you hear a song just so, you know, because I'm not going to remember tomorrow when I'm talking to her. So I'm like, hey, check this out. Check this out. So I have a library for almost each host that will randomly text me these songs. It's,

• 13:35Speaker 03

  I had another, I added another one this morning.

• 13:37Speaker 00

  I tried to find this one.

• 13:39Speaker 03

  Oh, yeah. The other one I added is a Nas.

• 13:43Speaker 00

  Yeah, I tried to find a clean version.

• 13:45Speaker 03

  This one was clean. The one I had was clean.

• 13:47Speaker 00

  Until about 32 seconds.

• 13:49Speaker 03

  It was stopped before then.

• 13:50Speaker 00

  That's what I was hoping. My luck, I'll play it and then be like, oh, I forgot my, we're coming back. And then I'll be, oh.

• 13:56Speaker 03

  A great bass line drops in probably after that 32 second mark, but it's still, that song is so, so good.

• 14:05Speaker 00

  And thank you, Frank. I just started watching The Black Mirror.

• 14:10Speaker 03

  Oh, yeah.

• 14:10Speaker 00

  Oh, yeah. That's a trippy show.

• 14:12Speaker 03

  You watch it, Dustin?

• 14:13Speaker 00

  I saw some of the first season a couple of years ago. Yeah, it was good.

• 14:17Speaker 03

  It's, we were talking about yesterday on the show, like the future, like, are we in the future now? And like what robots are doing. And now yesterday, Google's announcement of their quantum chip, computer chip. Did you hear about this? I'll repeat it because it's worth repeating. There's, there's, you know, it's a pretty, you know, step forward in the advancement of quantum computing, which one of the problems is that you have essentially the particles that make up the, the quantum computing chip have to be very, very cold, like in a vacuum, like 400 degrees below zero, like super cold to be able to, you know, be able to track. How it moves.

• 15:02Speaker 03

  It's, it's, uh, and you know, and it's very, very complicated and complex issue that has the problems with quantum computing is there's these errors that occur because of the, you know, this.

• 15:15Speaker 04

  The rate of speed or?

• 15:17Speaker 03

  It's because of being able to have that many tiny little particles that are all being controlled in their own cold vacuum, essentially. I'm really dumbing down. Anybody who's listening right now has anything about quantum computing is going, you idiot. Don't know what you're talking about. I don't know what I'm talking about, but I do know is that it is a septillion times faster than our current supercomputers. So you take the, you know, the most, the fastest computer that we have on the planet right now. And it can solve, the quantum computer can solve a problem in five minutes that would take

• 15:58Speaker 03

  any other computer on today's planet, the entire time that the known universe has existed.

• 16:06Speaker 04

  Okay. Yeah.

• 16:07Speaker 03

  It can do it in five minutes compared to forever, basically. So.

• 16:13Speaker 04

  What kind of applications that's going to have or what you're going to be able to do?

• 16:16Speaker 03

  All kinds of applications if they can get there. So there's still other challenges that are, you know, scientists are saying at least 10 years, maybe 20 years before we actually have some commercial use, but we're talking about, you know, innovation in medicine and chemistry, biochemistry. You can, there's already concern about cryptology and it being able to break through encrypted services. And so Apple just this year came out with their, you know, message to message encryption.

• 16:52Speaker 03

  What do they call it? AI proof encryption. So they're, they're already anticipating some central government somewhere around the world having a supercomputer strong enough to be able to pierce through. All of our encryption programs that we have.

• 17:05Speaker 04

  In five minutes or less.

• 17:06Speaker 03

  Yeah, exactly. And like instantly. So, you know, it's just, you know, these are innovations that are happening on a incremental, incremental scale. Robots now that, you know, the Tesla bot that's being released that is now doing all kinds of weird human things, you know? It's just, I don't know, the future's here.

• 17:27Speaker 04

  Yes. And this Black Mirror show, Stephen, talks a little bit about, or they kind of project out some things that could happen in the future, right?

• 17:35Speaker 03

  Yeah, that's a perfect segue, Dustin, into what I wanted to mention, which is the stock market's doing something that has only happened three times in the last 150 years.

• 17:45Speaker 04

  Okay, you have my attention.

• 17:46Speaker 03

  So, yeah, and now I have to say, any, any indicator or any sort of observation that we make from past events in the stock or the bond market or in the economy is no indication that it's going to ever happen again. It may never, ever happen again in the future. And so we can't, we can't promise that this would be the case. But the last two times that this indicator has happened with the S and P 500, the first time it happened was when we had in December of 1999 during the dot com bubble, when this indicator peaked

• 18:27Speaker 03

  at 44. And it happened again here just a few years ago in January of 2022, just before the bear market took hold, leading to a peak to trough loss of about 20% in our major indices.

• 18:40Speaker 04

  And you mentioned this indicator a couple of times. Which one are they looking at?

• 18:43Speaker 03

  So this is the price Schiller, the Schiller price earnings ratio.

• 18:49Speaker 04

  Oh, the CAPE.

• 18:49Speaker 03

  The CAPE ratio.

• 18:50Speaker 04

  CAPE ratio.

• 18:51Speaker 03

  Yes.

• 18:51Speaker 04

  Yes. Yeah.

• 18:52Speaker 03

  The cyclically adjusted PE ratio, or CAPE ratio.

• 18:58Speaker 04

  And PE, that's the price to earnings ratio.

• 19:01Speaker 03

  Yeah.

• 19:01Speaker 04

  But the CAPE is a little different. That one adjusts for inflation, right?

• 19:05Speaker 03

  That's right. That's, I think, the only difference between your, your normal PE ratio and your.

• 19:13Speaker 03

  Your cyclically adjusted PE ratio is it's trying to iron out some of the volatility that happens in the short run that can happen because of whatever, you know, short-term issue might be happening in that business cycle or economically. And so it's supposed to give you a little bit of a different perspective on what price earnings are currently at. So how would you explain price earnings?

• 19:43Speaker 04

  Yeah, so you're looking at the price of a company's stock and comparing it to the earnings. And that's why they call it a PE ratio. And they're looking at just historically, what have the averages been, right? When a market is looking expensive, there's going to be high PE ratios.

• 20:00Speaker 03

  Right.

• 20:00Speaker 04

  I mean, higher than normal averages, right?

• 20:02Speaker 03

  Right.

• 20:03Speaker 04

  And then when it looks to have some value or look lower, that's usually a time when there's lower PE ratios. That's one of the main things that a lot of these technical analysts are looking at is, you know, what's the value as compared, you know, comparing the price to the earnings? Because really, when you're buying a stock, that's what you're buying is the future earnings of that business.

• 20:23Speaker 03

  Right.

• 20:24Speaker 04

  We're saying, hey, I think their earnings are going to go up.

• 20:26Speaker 03

  Right, right.

• 20:28Speaker 04

  And so I want to participate in that because as they earn more, they have a higher perceived value.

• 20:33Speaker 03

  Yeah, and then you say, okay, you want those kinds of earnings. Let's say you make a hundred dollars. Okay, well, how much is your share price? Well, it's one dollar. Okay, so you've got one over a hundred. You have a, well, that's a bad example. Let's say it's $10. So then you have a 10% price earnings ratio, right? If you're earning a hundred dollars and you have a $10 share price, then you have a price to earnings of 10.

• 21:02Speaker 04

  So, you know, I said it a little bit wrong. So they're looking at the, they divide the stock price by the earnings per share.

• 21:09Speaker 03

  Earnings per share.

• 21:10Speaker 04

  Yeah, it's the EPS, the earnings per share that they're dividing it by.

• 21:13Speaker 03

  Right.

• 21:13Speaker 04

  So. How much are you earning for each, uh, each share?

• 21:17Speaker 03

  Each share that you own, but it's, it's the same thing. It's the same concept, which you said is yeah, you're, you're buying into a company either because it's, you know, it's, it's, it's selling or doing some service for a profit, or it's expecting that it's going to, because it has a business model that is expecting that it's going to be making a profit from what it's, what it's making or what its service is providing. And so it has to give back those profits to the shareholders and maximize the value of the shareholders. So you, it's really important to, you know, you want to know, it's easy for an investor to just look at a share price and go, wow, it's trading for a hundred dollars. It must be a great company. When it could be trading for $10 and it could be a far better company.

• 22:00Speaker 04

  Right.

• 22:01Speaker 03

  Because it's of the way that the earnings are.

• 22:04Speaker 04

  Mm hmm. And the per share matters too. That's why.

• 22:06Speaker 03

  Yeah.

• 22:07Speaker 04

  I feel like I get a question a lot, oh, the stock split, it must be doing this or that, you know? Or it had a reverse split. Things must be good or bad. Like they make a determination. Really that's, um, it doesn't change the value of a, of the company when there's a stock split. I'm sure you guys have talked about that before.

• 22:23Speaker 03

  We've talked about it a lot, but it's, it's the same vein. It's, it's along the same vein, and which is why a P E ratio was really helpful. And it's also really helpful to take into account inflation, which is why the, the Cape ratio takes into account, uh, the, the, the trailing, uh, inflation. So you, you, uh, you know, you're sort of following the, the, the overall economy, which you, you hope that inflation is following that economy or the inflation number. And there it gives you that ratio number. So right now we're looking at, at least as of December 4th, the P E, the Cape ratio of the S and P 500 is at 38.

• 23:01Speaker 03

  Uh, so it, we're really right at that 39, which has only happened twice in history, December of 1999, January 2022. And, you know, I, I guess that the, the point of all of this is that it, this doesn't mean that there's going to be a big crash. But you have to recognize that the markets don't always continue to go up at this rate. And what are we seeing? We've had just the last analyst has just announced, I think Oppenheimer the other day, which was kind of the last major Wall Street analyst giving their prediction of the S and P 500 of where it's going to be. What are analysts roughly saying?

• 23:42Speaker 04

  We looked at a series of what about 20 of them? And the, the average was between 6 and 10%.

• 23:48Speaker 03

  Yeah.

• 23:48Speaker 04

  Was their expected.

• 23:49Speaker 03

  Their expected growth rate for next year. And like, okay, well, just this year, it's let's say, let's call it 20% growth rate this year. Last year it was about 20, 20% the previous year before then. So, you know, we can't have a 20% growth year after year after year after year. Otherwise we get into numbers that become unrealistic. So you want to, you don't necessarily want, but you know that there will be pullbacks. And this is one of many of those indicators that tell us, oh yeah, this isn't, markets don't always go up and up and up every year. That's why most people don't have their investment and their life savings put in one stock. Right? Or even just all stock.

• 24:33Speaker 03

  Oftentimes they spread it out among country stock.

• 24:37Speaker 04

  Exactly.

• 24:37Speaker 03

  Different countries and they fixed income. They throw fixed income in there because that's also important.

• 24:42Speaker 04

  Oh yeah. Different sectors of the economy, different size companies, you know, different types. It's a good reminder that having a well-balanced and diversified portfolio is, you know, there's reasons that's widely recommended by most advisors, right?

• 24:57Speaker 03

  Yes, because you don't want, you don't want to delay your retirement because you, the, the, the next business cycle didn't happen to, you know, time up with your age. You should be able to construct your retirement portfolio in a way that has already accounted for the, the, the regular occurrences of recessions. And the ebbs and flows of the business cycle because there's always.

• 25:30Speaker 03

  There's always a bull market somewhere, even when we're in a bear market, there's always opportunity. And so, you know, you want to stay invested, but you just want to make sure that your portfolio and your investment portfolio is like, I guess what I'm saying is that I recently have run into some portfolios or some, I guess, management philosophy of people, investors, that are thinking that their, their, um, their account won't ever experience any volatility.

• 26:06Speaker 04

  Oh, yeah. Yeah, I've seen those claims.

• 26:08Speaker 03

  Yeah. And we hear it on the, you know, advertised on the radio sometimes, too. And that's not the reality of life, that the reality of life is if you want to get a high reward, it requires a high amount of risk.

• 26:21Speaker 04

  Well, and that's one of the things, just bringing it back around to that caper issue that they're looking at. If you think of maybe some of the downsides of it, because there, it has been a predictor of long-term results and averages, but there is some limitations. There's some criticisms out there with the fact that it doesn't adjust for interest rates. Because when we're looking at a return, like if I'm going to invest in a stock portfolio, I'm looking at, you know, a risk-adjusted return that accounts for the market risk premium that I'm taking above that risk-free rate. And right now, we've got interest rates that, you know, are still paying a decent clip. You know, these bonds and cash are actually still paying us a decent amount of money. So, you know, there was this idiom

• 27:06Speaker 04

  they threw around a few years ago, you might remember TINA, right? TINA, this acronym was, there is no alternative. The reason everybody stayed in stocks was, well, I'm not making anything in cash and bonds. There is no alternative to the stock. Well, there are alternatives today, not just cash and bonds, but other alternatives as well. But, um, yeah, it's just that good perspective and reminder of we've got to stay diversified because there are potential risks in any one category at any one time.

• 27:36Speaker 03

  Yeah, absolutely. That's a great, great, great point, Dustin. All right. We're going to take our break right now. I'm Sharad Waite. We're Money Wise and we'll be right back.

• 27:42Speaker 00

  Have you been putting off your finances? Seize the day. Call the Money Wise office at 661-847-1000, or email [email protected] for more information on how our financial advisors can help your financial situation.

• 28:07Speaker 03

  Thanks for tuning in. We're the Money Wise Show.

• 28:10Speaker 04

  Who's that song?

• 28:13Speaker 04

  Is that that one that you?

• 28:14Speaker 03

  No, no, it's a different one. Calamasa? Calabasa? Calamasa. Calamasa. That's Stephen Nicholas.

• 28:21Speaker 04

  Sounds like a type of olive.

• 28:23Speaker 03

  No, that's calamado. That's Justin Weaver.

• 28:28Speaker 03

  Thanks so much for tuning in. Here's a message from a listener. Says, "Are robotaxis the same as self-driven Ubers in Vegas? And what is the company or app called that Airbnb cars? LOL." So, robotaxis, yeah, there are some, I believe, in Vegas. I don't know if the ones that we're talking about Cruise are there, but there are... And I don't know that Uber has any self-driving cars. I haven't heard of that. That would be cool. But you call the robotaxis like you would an Uber. Justin Leland took one when he was in San Francisco.

• 29:06Speaker 04

  That was the Jaguar one I was talking about.

• 29:08Speaker 03

  Oh, was it?

• 29:09Speaker 04

  Yeah.

• 29:09Speaker 03

  Yeah, that was, it's called, is it called, not Waze, but it'll come to me what the name of that one is.

• 29:18Speaker 04

  I can look it up.

• 29:19Speaker 03

  Yeah, look it up. And so, that is the attraction to these robotaxis, that they work just like Uber, but you don't have a person that's in there.

• 29:30Speaker 04

  Waymo?

• 29:31Speaker 03

  Waymo, that's it. Yeah, Waymo. Waymo is the one that is sort of, I think, ahead of the curve in lots of ways. The way that Waymo has developed their autonomous taxis, I think they are the leader, if not the leader.

• 29:46Speaker 04

  Oh, they're Waymo ahead.

• 29:49Speaker 03

  Look at this guy. He's got jokes. And then the app we were talking about, that's like Airbnb for rental cars. It's called, what, Turo?

• 29:58Speaker 04

  Turo. Like you're touring.

• 30:00Speaker 03

  Yeah.

• 30:01Speaker 04

  T U R O. Turo.

• 30:02Speaker 03

  T U R O.

• 30:04Speaker 00

  And then the self-driven cars in Vegas, those are the Zooks? Zoo? Something like that?

• 30:09Speaker 03

  I don't know what the brand is that they have there. Zooks? Is that the ones with no, no people there?

• 30:14Speaker 00

  Yeah.

• 30:15Speaker 03

  Yeah, I mean, I think there's a half a dozen or so of these companies, RoboTaxi companies that are out there actually doing it or beta testing their services, but nobody like Waymo that I've seen.

• 30:28Speaker 00

  The people in Vegas, when I was there, they were staying away from those. People were really scared about it. I'm like, really? Maybe take a couple of drinks and then they'll probably do it, but.

• 30:38Speaker 03

  Ah, yeah.

• 30:40Speaker 00

  They were nervous.

• 30:41Speaker 03

  Yeah.

• 30:42Speaker 04

  There's some early adopters, but for some others, it might take a while to build trust.

• 30:46Speaker 00

  I'd like to check it out.

• 30:47Speaker 03

  Justin's criticism of taking a RoboTaxi was that the other drivers in San Francisco knew that he was in a RoboTaxi and so they had no problem cutting him off to get over when they really should. They wouldn't have done that with a human driver.

• 31:02Speaker 00

  Okay.

• 31:02Speaker 03

  Because they know the car will stop. They know the car will slow down and let them move in and merge because they know it's a robot that's driving it.

• 31:10Speaker 00

  And I told you a couple of weeks ago, I was down in LA and we were walking down Hollywood Boulevard area and this little mini little robot was doing food drop-offs. And it was the trippiest thing I've seen in person.

• 31:26Speaker 03

  Yeah, I've seen that in LA.

• 31:27Speaker 00

  Just a little mini cart looking thing.

• 31:29Speaker 04

  Yeah. Believe it or not, there's a local spot. I had lunch with Frank actually the other day at Maui Pha. They had one of those.

• 31:35Speaker 00

  Really?

• 31:36Speaker 04

  Yep.

• 31:36Speaker 03

  Like delivering the food in, within the restaurant?

• 31:38Speaker 04

  Oh yeah. They brought out.

• 31:39Speaker 03

  Yeah, that's cool.

• 31:40Speaker 00

  I've seen the, the, um, the ones at like Food Max, or not Food Max, at Winco. That will drive around in each aisle and mop and clean.

• 31:51Speaker 03

  Oh, wow.

• 31:51Speaker 00

  And it'll stop in front of you.

• 31:54Speaker 03

  Oh, yeah.

• 31:55Speaker 00

  You know, like, I didn't need more people in this small aisle to get in my way and stop.

• 32:00Speaker 03

  Yeah.

• 32:00Speaker 00

  But now it's a robot that's doing it and mopping while it's doing it.

• 32:04Speaker 03

  KC Steakhouse used to have a robot that was that had that was a server robot. This is several years ago. I think it was even pre-COVID that they had this. I don't know if it's still there, but I'm all for the robots.

• 32:18Speaker 00

  Me, too. I was talking to one of the workers and they had a name for it already. And, oh, you you mean, you met Frank? And I'm like, OK, Frank, tell Frank to get out of my way during aisle seven and eight. I'm trying to fill up my food and get out of here.

• 32:31Speaker 03

  We were talking just now about indicators, stock market indicators that would that in the past have have have shown when crashes or recessions are going to happen. Dustin, you and I were just talking about one of the other stronger indicators, which is the inverted yield curve.

• 32:52Speaker 00

  Yes.

• 32:53Speaker 03

  So just for our listeners, essentially, when short-term interest rates are higher than long-term interest rates, that's unusual because, for example,

• 33:07Speaker 03

  the more time that you're lending out money, the more risk that you're taking as a lender.

• 33:11Speaker 00

  Right.

• 33:12Speaker 03

  And so you would want a higher interest rate. Think of if you're loaning money to your weird cousin, it's unreliable.

• 33:22Speaker 03

  Because he doesn't pay you always pay you back.

• 33:24Speaker 00

  Unreliable and weird are way different.

• 33:26Speaker 03

  Yeah. Well, I think it.

• 33:28Speaker 00

  You've never met my cousins then.

• 33:32Speaker 00

  They're not both weird and unreliable. They're a couple.

• 33:35Speaker 03

  Well, this is, I mean, you would charge that cousin more money because it's just tying it up for longer.

• 33:41Speaker 04

  Yeah, no, what, yeah, what you're saying is true. So normally, right in a normal yield curve, if you go out longer, you're getting paid more for that. Right? If you buy a six-month bond compared to like a two-year bond or a five-year bond, right, you're normally not earning more.

• 34:00Speaker 04

  On the the short end.

• 34:01Speaker 03

  Yes.

• 34:02Speaker 04

  But but that's been the case lately in recent years, right? It's inverted, so that's kind of like the word implies, it's upside down.

• 34:09Speaker 03

  Right. And and what has happened after the yield curve has been inverted?

• 34:15Speaker 04

  Yeah, if you look at the last several times that that has happened in history, that that's typically a predictor of recessions, but don't just run out and sell everything and and freak out because there's not an exact science to it, nor is there an exact timeframe.

• 34:33Speaker 03

  Right, right.

• 34:35Speaker 04

  Historically, it hasn't, you know, you were looking at the timeframe historically. What what'd you find?

• 34:39Speaker 03

  So I found that historically, you you can technically say that there has been a recession following an inverted yield curve, but there's no pattern as to how long after the the the yield curve goes back to normal, flattens or goes back to normal before you have a recession. Sometimes it's six months, sometimes it's almost 18 months. So therefore, it's not necessarily, you can't always say there's a correlation.

• 35:10Speaker 04

  Yeah, correlation is not causation.

• 35:12Speaker 03

  Exactly, maybe there's not, maybe there's not a correlation, maybe there's not even a causation, because you have you have too much of a gap there. So it's not, it's not, as you said, as we just, it's one of many indicators, just like the Cape Ratio. It's one of many indicators that just, for me, is just a reminder of, well, of of course, you're going to have indicators that show that things are overvalued, because things do become overvalued, and then they become undervalued, and then overvalued and undervalued. Like, it may be like its actual true value for very short moments in time, but you're looking at over the long run, the fundamentals of whatever companies you're invested in have a fundamental.

• 35:54Speaker 03

  Product and service that they're getting some profit from over time.

• 35:58Speaker 04

  Yeah.

• 35:58Speaker 03

  That's what you're, that's what you're banking on.

• 36:00Speaker 04

  Exactly.

• 36:01Speaker 03

  And, you know, the, the bonds get a lot, have not gotten as much of attention as they should have. Especially because we have such low interest rates for so long. That it's important to know that you also aren't just looking at the stock market, but you have other ways too, that you can sort of protect yourself and, and um, kind of offer some of the insurance to your investment portfolio. And that's through bonds. And the oldest bond in the world just celebrated a birthday. I believe it was just, I think today is its birthday, which was 400 years ago.

• 36:42Speaker 03

  And 1624, the, actually, I'm talking about the current existing bond that's still paying out.

• 36:51Speaker 04

  As in it was a 400 year bond?

• 36:53Speaker 03

  A 400 year old bond.

• 36:54Speaker 04

  My goodness.

• 36:54Speaker 03

  It just turned 400 years.

• 36:56Speaker 04

  Wow.

• 36:56Speaker 03

  It's a Dutch bond that was created in the Netherlands to, to get money to build up a dike that had been flooded. And they needed, you know, most of Amsterdam, for example, is below sea level. So in the region, even in Amsterdam, the locals needed to raise money to, to build up the, the dike system there. And they had to, you know, raise money and that's how they did it. And including, these bonds were paying out a income or a dividend forever, essentially. Had a, in perpetuity.

• 37:39Speaker 03

  And so there are um, uh, some of these bonds are actually still, uh, at least one of these bonds is still in existence. And it's pays out about $300 a year still to this day.

• 37:55Speaker 04

  400 years later.

• 37:56Speaker 03

  400 years later.

• 37:58Speaker 04

  When you were describing that, it, it reminded me, I actually had a question not too long ago about um, the different types of municipal bonds.

• 38:04Speaker 03

  Yeah.

• 38:05Speaker 04

  Because really, there's two major types.

• 38:06Speaker 03

  Right.

• 38:07Speaker 04

  In that category, you've got general obligation, which is paid back through the tax money that a municipality gets.

• 38:14Speaker 03

  Right.

• 38:15Speaker 04

  And then the other is what they call a revenue bond. Which is paid back through revenue generating activity like picture a toll bridge or like even the Bay Bridge, right? You have to pay to go over that.

• 38:28Speaker 03

  Yep.

• 38:28Speaker 04

  So that's revenue that is generated that pays back the loans that they took out to construct and maintain that that bridge.

• 38:38Speaker 03

  Yep. Yeah. And so you have sort of a a way that you can fund major infrastructure projects and just pay out. It's unusual. Revenue bonds would be maybe different than general obligation bonds where you'd have a you know, maturity, even nowadays, you have a maturity date on those bonds so that it, you know, the bondholders essentially are released from that obligation. And but you had, and especially 400 years ago, really made it attractive for the local investors. They only sold 50 of these bonds to raise the money for the for the dam in the Netherlands. But there's only one, I guess, that is still in existence.

• 39:22Speaker 03

  Yeah, it was December 10th, 1624 is the date on this bond.

• 39:29Speaker 04

  That's incredible.

• 39:30Speaker 03

  Yeah, it's so cool. It's just the power of, you know, the power and the benefit of having a dividend or, you know, an income producing asset is sometimes not viewed as attractive as what we usually talk about, which are the high flying stocks, tech stocks, you know, and these these things that are, you know, they're gonna, you know, go into the future and gonna be this big new thing. Well, there's always, there's other really nice shiny objects too that are in the bond world that you can be overlooked and forgotten.

• 40:04Speaker 04

  You know, we help a lot of retirees here and I'm sure you could attest to this too. A lot of folks are looking for a lot more than just that long-term growth, right? Especially as you enter retirement, you're looking for income and some level of protection on on your money, right? That nest egg that you worked so hard to build up. It's like, well, maybe I'm not so focused on that high flying, fast moving. And growth, it's like, I need some protection and some income for the next 10, 15, 20, 25 years, maybe.

• 40:33Speaker 03

  Yes.

• 40:34Speaker 04

  And so, yeah, there's a spot for all of those different things, right?

• 40:38Speaker 03

  And get this, Dustin, half of the global debt is in the form of bonds rather than loans. So, you know, usually think of the finance market being owned by banks. When it turns out that America's largest lender is not a bank, it's a bond issuer. And that's BlackRock. BlackRock has more fixed income than JP Morgan, Bank of America. It's because, like I said, half of the global debt isn't in the form of people going to the bank and getting a loan or going to investors and getting a loan.

• 41:17Speaker 03

  It's the, the, the project being funded or the company being funded by the issuance of a bond.

• 41:24Speaker 04

  Which in a way is a loan, right?

• 41:26Speaker 03

  Yeah, that's it.

• 41:27Speaker 04

  That's what it is.

• 41:27Speaker 03

  That's why it's called debt.

• 41:29Speaker 04

  Right.

• 41:29Speaker 03

  Yeah, you're, you're lending money to them and then in return, you're getting, you know, your coupon rate or you're getting your, your, your agreed upon payments or no payments. We have some really other interesting bonds like zero coupon bonds where it's like, what do you mean? There's no coupon rate. Well, that's because you're getting it. You can get these bonds at discounts. That eventually will pay out where you get, you know, you get your money back. There's even government issued bonds that track specifically the inflation rate. And these were very popular, you remember tips for getting like 9%?

• 42:07Speaker 04

  Right.

• 42:07Speaker 03

  You know, for an inflation protected bond. So, you know, I just wanted to give a little shout out to bonds and happy birthday to our oldest bond on the planet.

• 42:16Speaker 04

  400 years.

• 42:16Speaker 03

  400 year old bond still paying out a dividend. All right, we're gonna take our final break of the day. We'll be right back.

• 42:22Speaker 00

  If you're a business owner who provides a retirement plan for your employees, contact Money Wise Wealth Management to see if you're maximizing your options and minimizing your liabilities. Money Wise 401k plans are customized to you and your company's needs. 661-847-1000. That's 661-847-1000.

• 42:51Speaker 03

  We're Money Wise. Thank you for tuning in and participating. Remember 24/7, you can send in a message or comment at 661-396-1000. That's Dustin Weaver and I'm Sharad. Wait, we're your hosts today. One of our heroes, I say one of my heroes, is John Bogle. Passed away a few years ago. And John Bogle, if you don't know, there's a, there's a whole community out there, I think they call him Bogleheads.

• 43:16Speaker 04

  Bogleheads, yep.

• 43:17Speaker 03

  Bogleheads. I don't, I wouldn't call myself a Boglehead, but I really, really like, really, really like John Bogle and what he stood for. He was in his 90s, I think. He lived to be almost 90 years old. But John Bogle, Warren Buffett once said that if there was anybody in the, if, I'll give the direct code, he says, "If a statue was ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle." And, you know, the reason why was because Jack Bogle was the founder of Vanguard Group,

• 43:56Speaker 03

  which essentially created index investing, which is a way, up until then, that investors could invest into a broad market, rather than investing through a money manager, which was there to theoretically beat the markets.

• 44:15Speaker 04

  That's the, that's the hope of an active manager, right?

• 44:16Speaker 03

  That was the hope of an active manager, is you're, you're essentially, you know, beating what somebody could get if they were just investing directly into the market.

• 44:26Speaker 04

  Yeah, he, he brought a lot more passive opportunities for folks that wanted to invest and be diversified, but maybe didn't want to pay a mutual fund manager, right?

• 44:36Speaker 03

  That's right. And, you know, I want to, you know, mention some of the, some of my favorite quotes from, from John Bogle, but one of them, and one of the great lessons from John Bogle, that, that, about this is, quote, "The greatest enemy of a good plan is the dream of a perfect plan. Stick to the good plan." And, you know, the, there's so much,

• 45:06Speaker 03

  You know, problems with investing in our world where people feel as though they essentially they're trying to get to, it's easy for people to get sold something and something that looks sophisticated or looks like it's, for example, maybe gonna beat the markets. And that's not really what you want. You know, what you want is a good plan. You're not gonna have what you might think as an investor, which would be a perfect plan, which somebody would think a perfect investment plan would be an investment that never loses. And never has any down in it. That might be perfect for some people, but...

• 45:49Speaker 04

  So are you saying there's potentially some smoke and mirrors or some sizzle out there?

• 45:54Speaker 03

  Yeah.

• 45:55Speaker 04

  Might not be able to bring home what they claim?

• 45:59Speaker 03

  Yes, that's exactly. Another one of John Bogle's quotes is, "The greatest enemy of equity investor, of the equity investor are expenses and emotions." Because what do, what does a money manager get for telling you that they're going to outperform the S and P 500? Well, they're gonna get some fees for that. You're gonna be paying them some fees for that. Why wouldn't you just invest into the S and P 500? You know, if you could do that and not pay a manager, okay, you know, there's an expense there that maybe isn't necessary for some people. And yet, you know, emotions get involved because, you know, there's a sense of fear

• 46:43Speaker 03

  and greed and wanting to do better and, or not wanting to lose. And so I think that's just a brilliant, you know, concept or quote from Bogle. The fact that the greatest enemies of the equity investor are expenses and emotions.

• 46:59Speaker 04

  Yeah, I think certainly within...

• 47:03Speaker 04

  You know, we don't want to make any broad recommendations or anything, so don't, don't take it as that. But definitely in the, in the large company US space, I mean, the verdict is out. It's, it's very tough for a manager to overcome year after year, the cost of their management.

• 47:21Speaker 03

  Right.

• 47:22Speaker 04

  And then produce a, a return above and beyond that.

• 47:25Speaker 03

  Yeah, yeah, it's very difficult. It can happen long enough to, to fool investors, which is why, you know, there's some warnings in using just like your Morningstar report, because you're, you know, what your mutual fund or is rated this year or next year is likely 80% of the time going to be in the bottom quartile.

• 47:45Speaker 04

  Not going to be the same next year, right?

• 47:46Speaker 03

  Exactly. So you can, investors can fall into, into these easy traps, which is, again, we recommend using a good financial advisor. That always helps. Somebody that you know and you trust and has experience, maybe like a MoneyWise guy.

• 47:59Speaker 04

  Sounds good.

• 48:00Speaker 03

  All right, Dustin, thanks so much. Thanks, our listeners. Be smart, be safe, and always be money wise.

• 48:05Speaker 02

  Securities offered through SCF Securities, Inc., member FINRA/SIPC. Investment advisory services offered through SCF Investment Advisors, Inc. SCF Securities, Inc. and MoneyWise Wealth Management are independently owned and operated.