Ask the Magic 8 Ball of Finance
by SGL Financial
Our 2 Cents – Episode #191
Ask the Magic 8 Ball of Finance
Welcome to back to Our 2 Cents with Steve and Gabriel Lewit! On today’s episode, the hosts give Magic 8 Ball responses to top financial questions a chance. Then, they discuss Goldman Sachs’s stocks prediction for the decade. Listen in now using a link below!
- Magic 8 Ball Financial Guidance:
- In the spirit of Halloween, we’re seeking financial advice from a Magic 8 Ball because sometimes, a little mystery leads us to smart decisions.
- Are You Afraid of Sachs’s Stocks Prediction?:
- Discover whether stocks are heading toward a “lost decade” and learn what actions you can take to protect your investments.
Request Your Free Consultation Today
847.499.3330
Podcast Transcript
Announcer: You’re listening to Our 2 Cents with the team from SGL Financial, building wealth for life. Steve Lewit is the President of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.
Gabriel Lewit: Well, welcome back to Our 2 Cents. You’ve got your hosts, Gabriel Lewit, Steven Lewit here, and the great amazing support team behind the scenes. We actually talked once about, we should do more where we video ourselves doing the podcast.
Steve Lewit: Yeah, you know I-
Gabriel Lewit: Maybe we’ll bring that back from time to time just for fun.
Steve Lewit: It would be fun, yes.
Gabriel Lewit: But then you can see the team in action here.
Steve Lewit: Yeah, but then-
Gabriel Lewit: Although they’d probably high behind the camera too. Yeah, they’re not a…
Steve Lewit: Let’s make sure we do that. Yeah.
Gabriel Lewit: Oh well we’re-
Steve Lewit: It’s Halloween.
Gabriel Lewit: … yeah, we’re wishing you a spooktacular day-
Steve Lewit: Yeah. Yeah.
Gabriel Lewit: … of course and actually Halloween is tomorrow. We’re recording this today, a day before, and you’ll probably receive this a day or two after, depending on if you’re subscribed to when we post this, you get a little sooner than the email.
Steve Lewit: So are your kids, my grandkids trick or treating?
Gabriel Lewit: They certainly are.
Steve Lewit: Yeah?
Gabriel Lewit: You think a kid’s going to give up a couple bags full of candy?
Steve Lewit: Not a chance.
Gabriel Lewit: No. Definitely not.
Steve Lewit: Now does your neighborhood have specific routes for trick or treating? Or is it you go anywhere you want?
Gabriel Lewit: Anywhere you want.
Steve Lewit: Yeah, some neighborhood-
Gabriel Lewit: Where the winds take you.
Steve Lewit: … yeah, some neighborhoods have specific routes and specific houses that opt in and it’s the whole thing.
Gabriel Lewit: Mm-hmm.
Steve Lewit: For safety reasons.
Gabriel Lewit: Yeah. No, ours is, we go with the kids for safety reasons, at least mine are too young to go on their own.
Steve Lewit: Sure.
Gabriel Lewit: We’ve seen occasional packs of teenagers raiding candy dishes that are left unattended.
Steve Lewit: They tend to do that.
Gabriel Lewit: Those hooligans.
Steve Lewit: Those hooligans.
Gabriel Lewit: I know. How dare they? I’m like an old man on my porch shaking my fist.
Steve Lewit: What are you doing? What are you doing?
Gabriel Lewit: Oh, man. Yeah. So, yeah, it should be good. My son’s going to dress up as a soccer player, which is pretty much what he dresses as every day.
Steve Lewit: He’ll put a number on.
Gabriel Lewit: Yeah. Well, the difference is his Halloween jersey is an official jersey and his regular day-to-day jerseys are not necessarily official jerseys, but they look the same to me.
Steve Lewit: And what are you going to be?
Gabriel Lewit: Well, he wanted me to go as a soccer player also. I think I’m just going to go as a overly overworked dad.
Steve Lewit: That’s it?
Gabriel Lewit: Yeah.
Steve Lewit: Oh, come on. I usually get, do you know I used to wear lion’s clothes and gorillas and I decked out.
Gabriel Lewit: You had a big enough beard in the past that you looked like a lion. I think even without the costume.
Steve Lewit: Yeah. Well maybe.
Gabriel Lewit: Steve’s growling.
Steve Lewit: Yeah, you folks don’t know that I had a beard at one time.
Gabriel Lewit: Yeah.
Steve Lewit: Yeah.
Gabriel Lewit: Sure did.
Steve Lewit: Right? But it wasn’t red. It a little red.
Gabriel Lewit: Why would it be red?
Steve Lewit: Well, my kids, I was a redhead when I was a young ‘un one.
Gabriel Lewit: Oh, yeah, your …
Steve Lewit: And both your sister and brother have red hair.
Gabriel Lewit: Yes.
Steve Lewit: Still have it red.
Gabriel Lewit: Well, yes. And we’re going to probably not talk about that for much longer and move on.
Steve Lewit: Okay.
Gabriel Lewit: Yeah, off-beard topics.
Steve Lewit: I’ll talk about anything that you want to. You lead, I will follow.
Gabriel Lewit: Well, yes, we’re going to talk today about, do you all remember the Magic 8 Ball?
Steve Lewit: You know, I used to give seminars, and I used to give a Magic 8 Ball seminar. This must have been 20 years ago.
Gabriel Lewit: It definitely was a little less than that, because I think I remember them.
Steve Lewit: Oh, okay then. Well, it could be, you’re here what, 21 years?
Gabriel Lewit: Yeah, yeah.
Steve Lewit: Yeah. Probably maybe 15 years ago.
Gabriel Lewit: Well, so yeah, so there’s an old kid’s toy. It’s still around today. You can buy them, I think at Target and other places. Magic 8 Ball where you know, you shake the thing and it gives you some pre-canned answers and we thought we would see what the Magic 8 Ball says about certain key retirement planning and investment topics. And before I give you the questions and what the Magic 8 Ball says, we’re going to give you all the possible answers that the Magic 8 Ball would say. All right, so the positive answers the Magic 8 Ball, you shake it up. It might say it is certain, it is decidedly so, without a doubt, yes, definitely, you may rely on it, as I see it, yes, most likely, outlook good, yes, and signs point to yes.
So whenever time you ask a question, you might get some of those positive answers. Now you also might get some negative answers such as don’t count on it, my reply is no, my sources say no, outlook not so good, or very doubtful.
Steve Lewit: Mm.
Gabriel Lewit: And then of course you get some of those wishy-washy in-betweeners like reply hazy, try again, ask again later, better not tell you now, cannot predict now or concentrate and ask again.
Steve Lewit: Mm.
Gabriel Lewit: Okay.
Steve Lewit: This is a pretty sophisticated 8 Ball that we have here.
Gabriel Lewit: Well, what most people see is just the single answer on the 8 Ball. They don’t know all the hidden answers …
Steve Lewit: Behind it.
Gabriel Lewit: Behind or inside the 8 Ball, so I just probably taught you something new you never knew before.
Steve Lewit: This is exciting.
Gabriel Lewit: Good. I’m glad.
Steve Lewit: This is so exciting.
Gabriel Lewit: Well, the real exciting thing is what is the Magic 8 Ball going to say about the questions we’re going to ask here?
Steve Lewit: Okay.
Gabriel Lewit: Okay?
Steve Lewit: All right.
Gabriel Lewit: So, the first one is, is a million dollars enough to retire?
Steve Lewit: All right.
Gabriel Lewit: Okay? Now, if you shook the Magic 8 Ball.
Steve Lewit: I’m shaking it.
Gabriel Lewit: Well, we don’t actually have a Magic 8 Ball. We preselected answers from our …
Steve Lewit: I was making belief. I was acting the part.
Gabriel Lewit: Okay, there you go.
Steve Lewit: To make it seem-
Gabriel Lewit: I was just making it clear to our listeners, we actually have pre-selected answers from our Magic 8 Ball answer bank here. So what would we select for is a million dollars enough to retire? Mr. Lewit says.
Steve Lewit: It selected.
Gabriel Lewit: No, I’m asking you.
Steve Lewit: Oh, you asking what I would say? No, I would say …
Gabriel Lewit: Not what you would say. I’m asking you to read the answers.
Steve Lewit: Oh, I would say that is one of, most … not, where’s my maybe answers?
Gabriel Lewit: It’s right is right.
Steve Lewit: No, I know the answer it’s giving, but I’m looking what I would answer. In other words, if you asked me that question, I would say no, probably not but the 8 Ball answered yes, definitely.
Gabriel Lewit: Folks, have you ever had a plan for something and then the plan goes awry? I try to type this all out for you.
Steve Lewit: It is so hard to be me with you.
Gabriel Lewit: If you could do me a favor and read the pre-selected answer.
Steve Lewit: The pre-selected answer is yes.
Gabriel Lewit: No, it’s not.
Steve Lewit: Should I have …?
Gabriel Lewit: Is a million dollars enough to retire?
Steve Lewit: Oh, reply hazy. Try.
Steve Lewit: Try again. Hey, I was an actor. I used to do great on scripts. I could read it. Write-
Gabriel Lewit: Are you sure you did great?
Steve Lewit: Yeah, yeah, yeah. Reply is hazy, try again.
Gabriel Lewit: There we go. Okay. Yeah, that would be, if a million dollars, is it enough to retire? The Magic 8 Ball answer would be reply hazy, try again. Now why might that be the case? Is it or is it not? It’s going to depend on a lot of different pieces there, right?
Steve Lewit: Yes.
Gabriel Lewit: Yeah. So it would be unfair to say that it is certain, because for some people it is not certain. Also you could say don’t count on it, but that wouldn’t be true either on the negative side because we do have clients depending on their budget and their spending that have less than a million and they can retire.
Steve Lewit: And they do fine.
Gabriel Lewit: Very successfully.
Steve Lewit: They do fine.
Gabriel Lewit: So yeah, so again, the answer to that would be reply hazy, try again. The best-fitting Magic 8 Ball answer.
Steve Lewit: Okay. So I thought I have to go back and defend myself because I thought you said what would you answer, Steve, dad?
Gabriel Lewit: Well, I was…
Steve Lewit: And then comparing it to the 8 Ball answer, which was a very logical train of thought, and you all need to apologize for laughing at me.
Gabriel Lewit: Well, would you have chosen a different 8 Ball answer for that question?
Steve Lewit: No, that is the correct answer.
Gabriel Lewit: Okay.
Steve Lewit: The 8 Ball was correct actually.
Gabriel Lewit: Yes, it was.
Steve Lewit: Yeah.
Gabriel Lewit: Well, we’ve selected the correct answers from the 8 Ball.
Steve Lewit: Oh, we did? Okay. I thought we actually did the 8 Ball.
Gabriel Lewit: No, no. This is a metaphorical-
Steve Lewit: Oh-
Gabriel Lewit: … this is like fun. It’s not we’re not actually shaking the 8 Ball ’cause it’s going to give us incorrect answers.
Steve Lewit: But now everybody is disappointed that we’re not shaking the 8 Ball. Okay.
Gabriel Lewit: Oh my goodness.
Steve Lewit: Yeah.
Gabriel Lewit: My goodness.
Steve Lewit: You can tell folks we don’t freely rehearse these podcasts.
Gabriel Lewit: Yeah. Yes. Okay. Well I’m going to give another one here. Is it wise, sorry, I’m going to save that for later. Can I expect to have fewer expenses in retirement compared to now? The Magic 8 Ball answer would say Mr. Lewit?
Steve Lewit: Don’t count on it.
Gabriel Lewit: Yes.
Steve Lewit: Yes.
Gabriel Lewit: Correct.
Steve Lewit: I got it right.
Gabriel Lewit: Don’t count on it. Do you want to elaborate on that 8 Ball answer, sir?
Steve Lewit: Yeah, because many people don’t think their expenses in retirement are going to go down. And in actuality, because they’re out having fun and traveling and buying gifts for their kids and their grandkids and celebrating, their expense, and you have, as you get older you know, you have medical issues, their expenses actually go up.
Gabriel Lewit: Well, you and I were at a workshop together maybe a month ago? And I was distinctly remember we were talking about budgeting retirement expenses, and somebody raised their hand and said, “Well Steve, aren’t your expenses going to go down in retirement?” So a lot of people really think that, and it’s an old rule of thumb that people used to say, take whatever your budget is now and take 80% of it. And this all came from, I think times far ago where there was maybe less to do or less interest or less awareness of what was out there and before social media and computers and websites and all this stuff. Now that a lot of people now, they just find lots of things to do and-
Steve Lewit: Absolutely.
Gabriel Lewit: … it costs them more.
Steve Lewit: You know, retirement is the kicking back and playing shuffleboard and-
Gabriel Lewit: Right.
Steve Lewit: … drinking a beer.
Gabriel Lewit: Yeah.
Steve Lewit: Did you say times far ago?
Gabriel Lewit: Times far ago, yes.
Steve Lewit: Is that the poet in you coming out?
Gabriel Lewit: You know-
Steve Lewit: Folks, times far ago we had a different world.
Gabriel Lewit: Once upon a time.
Steve Lewit: Once upon a time.
Gabriel Lewit: In a land far ago.
Steve Lewit: Yeah.
Gabriel Lewit: Yes.
Steve Lewit: So, this whole idea is being, it’s a big thought thing in our culture, in the business culture. That’s why all the big companies, everyone says, put money in your 401(k), don’t pay the taxes now and pay it in the future when you’re retiring, your tax bracket goes down.
Gabriel Lewit: Actually, they don’t all say that. I’m going to argue with you on that a little bit.
Steve Lewit: Ooh.
Gabriel Lewit: Most companies don’t tell anything to their employees. They let them figure it out on their own.
Steve Lewit: Well, that is true too.
Gabriel Lewit: Yes, so your wise Our 2 Cents podcast host would say probably plan for higher expenses in the future, yes.
Steve Lewit: Yes.
Gabriel Lewit: Mm-hmm.
Steve Lewit: Our wise listeners absolutely would agree.
Gabriel Lewit: All right. Okay. Next one up here would be, this is an easy one. Should I start saving for retirement now? 8 Ball says?
Steve Lewit: Most definitely.
Gabriel Lewit: It is certain.
Steve Lewit: It is certain.
Gabriel Lewit: It is decidedly so. It could be any of those.
Steve Lewit: Yes.
Gabriel Lewit: Yes.
Steve Lewit: All of them.
Gabriel Lewit: It could even just be yes.
Steve Lewit: Yes.
Gabriel Lewit: All right.
Steve Lewit: Yeah.
Gabriel Lewit: Now, I don’t think we need to elaborate much on that, but if you haven’t started saving or you are currently saving, continue to do so. That’s a great option there. Let’s see. Magic 8 Ball question here says, can I rely on social security for my retirement? Magic 8 Ball answer says, cannot predict now.
Steve Lewit: Well, I say you can.
Gabriel Lewit: Yeah.
Steve Lewit: I don’t agree with that answer.
Gabriel Lewit: Signs point to yes?
Steve Lewit: Signs point to yes.
Gabriel Lewit: Okay. That’s a little less certain but still somewhat certain.
Steve Lewit: Signs point to yes, or …
Gabriel Lewit: Reply hazy, try again.
Steve Lewit: Cannot predict now, but I don’t think we’re losing social security.
Gabriel Lewit: Not all of it. The whole phrase out there is the trust fund will deplete in the year 2033 or four or something like that. And then social security, if it’s not fixed, would only pay 75% of current estimated benefits.
Steve Lewit: Yeah. You know 60% of the people in our country live on social security.
Gabriel Lewit: Yeah.
Steve Lewit: That’s all they have.
Gabriel Lewit: So, you and I tend to believe they’re going to fix that.
Steve Lewit: They’ll fix it.
Gabriel Lewit: They’ll figure it out.
Steve Lewit: I do believe that.
Gabriel Lewit: Some people would say the reply is hazy and try again later. Okay? So we could maybe ask again later.
Steve Lewit: Okay.
Gabriel Lewit: Let’s see how they fix that, right?
Steve Lewit: Yes.
Gabriel Lewit: Magic 8 Ball is the wise one. Okay. How about this one? Will my retirement plan be affected by future changes in tax laws? 8 Ball says?
Steve Lewit: 8 Ball says, where am I? 8 Ball says, wow, you see, it says signs point to yes. And I would say most likely, yes, definitely. You may rely on it. You know who I’m thinking of right now?
Gabriel Lewit: Who’s that?
Steve Lewit: Johnny Carson, when he used to do the, when he held the envelope up to his, they gave the answer and then in the envelope was the question. And I forgot what he … he had this whole thing. It was the funniest thing in the world.
Gabriel Lewit: Yeah.
Steve Lewit: And he put his little fortune teller hat on. Did you ever see that? You never saw that?
Gabriel Lewit: I’ve never seen it, seen it, but I think I know what you’re talking about.
Steve Lewit: Yeah.
Gabriel Lewit: Yeah.
Steve Lewit: So let me see. I see the future.
Gabriel Lewit: Yeah, let’s say, how about the two last quick ones here. Should I review my retirement plan annually?
Steve Lewit: Most-
Gabriel Lewit: Magic 8 Ball says?
Steve Lewit: … most definitely.
Gabriel Lewit: Without a doubt. Yes. Should I consider working with a financial professional named Steve and Gabriel Lewit?
Steve Lewit: What is this? What is this? Maybe?
Gabriel Lewit: The financial says yeah, I guess definitely.
Steve Lewit: Yes, definitely. Without a doubt.
Gabriel Lewit: I have to put that one in there. Yes. Okay.
Steve Lewit: I like it. I like it.
Gabriel Lewit: Well, if you have any questions for the Magic 8 Ball provided by SGL Financial here, send us your questions via email and we shall respond with an actual answer, not a Magic 8 Ball answer. You can email us info@sglfinancial.com or go to our website and click the Contact Us form, or you can call us, of course, at (847) 499-3330.
Steve Lewit: Yes.
Gabriel Lewit: So just wanted to have a little bit of fun there. Again, we weren’t actually shaking the 8 Ball, that would’ve given us unpredictable results, but just having some, giving you some 8 Ball guidance for retirement.
Steve Lewit: Yes.
Gabriel Lewit: Yes.
Steve Lewit: And if you’re using a Magic 8 Ball fall to run your retirement finances, give us a call.
Gabriel Lewit: Should you do that? The 8 Ball says-
Steve Lewit: Says definitely-
Gabriel Lewit: No.
Steve Lewit: … not.
Gabriel Lewit: Definitely not. All right. So little sidebar here, a couple tidbits for you before we move on to what I was going to talk about here next. But there’s a little article, I just thought it was interesting that said, millions of Americans are dodging taxes on their early retirement withdrawals. Did you know that, Mr. Lewit?
Steve Lewit: Well, I did not know that, but that’s very bold on their part.
Gabriel Lewit: It is. It says about, geez, here it is, three million taxpayers received over $12.9 billion based on a study done for 2021 taxes, and they failed to pay the extra 10%-
Steve Lewit: Penalty.
Gabriel Lewit: Pre- yeah.
Steve Lewit: This is before 59 and a half folks.
Gabriel Lewit: Pre 59 and a half penalty.
Steve Lewit: Yeah.
Gabriel Lewit: Okay? And that could generate for the IRS an estimated $322 million in additional penalties over and above the extra 10% penalty that people fail to pay.
Steve Lewit: Yeah, I don’t understand. People think the IRS is just going to let it go. It might be five years from now, but you’re going to get that letter in the mail.
Gabriel Lewit: Well, I have a feeling these people from 2021 are getting the letter saying-
Steve Lewit: Letter in the mail saying you owe us.
Gabriel Lewit: Yes. You probably, you know, it’s one of those things where, okay, three years went by. I guess I got away with it, right?
Steve Lewit: Yeah. No. No you didn’t.
Gabriel Lewit: Now interestingly enough, they only cap the penalty of not paying the penalty at 25%, a 5% a month for the first five months. But could you imagine if they just extended it beyond that? So people would have to pay a lot of money. But yeah, we’re not big fans of tax dodging illegally. If you can come up with a legal tax strategy, which of course is the whole name of the game of tax planning, that’s great. But yeah, if you take money out before 59 and a half folks.
Steve Lewit: Pay the penalty.
Gabriel Lewit: Remember to file your Form 5329.
Steve Lewit: Pay the Piper.
Gabriel Lewit: Pay your penalties, so you avoid paying even more penalties.
Steve Lewit: Yes.
Gabriel Lewit: Yes. All right.
Steve Lewit: Yep.
Gabriel Lewit: Well, that was it. Just wanted to get a little-
Steve Lewit: Yeah, no, that’s interesting.
Gabriel Lewit: … a little tidbit here.
Steve Lewit: Kind of interesting, I think.
Gabriel Lewit: Yeah. And here’s another one that we talk a little bit about this periodically over the last six months. The market right now is a little overvalued based on historical standards.
Steve Lewit: Well, explain what that means.
Gabriel Lewit: Yeah, what I mean by overvalued is you can track the historical price-to-earnings ratio for stocks, okay? And stocks generally, before there are market crashes, have these peaks where they are more pricey or expensive than they are based on historical averages or historical values.
Steve Lewit: So, the price in relationship to the earnings-
Gabriel Lewit: Mm-hmm.
Steve Lewit: … is very high.
Gabriel Lewit: Correct, yeah. And obviously it’s not a guarantee of any specific bear market or pullback that’s imminent, but the higher and higher those go, you can’t just keep paying more and more for a stock indefinitely that’s not growing. Okay? It’s your earnings aren’t growing.
Steve Lewit: What happens is the earnings don’t justify the price.
Gabriel Lewit: Mm-hmm.
Steve Lewit: The price gets inflated, and it’s not based on earnings, it’s just based on people demanding the stock.
Gabriel Lewit: Yeah, now, as a result of this, there is a very recent report. Now y’all know this. Yeah, there is millions of articles published every year from thousands and thousands of content creators and investment firms and banks and research analysts and most of it just is so much data, a lot of people miss a lot of it.
Steve Lewit: Well, we do it early in the next year we’ll do our predictions analysis and rating for 2024.
Gabriel Lewit: Yeah.
Steve Lewit: And we’ll find that every prediction, there are predictions for everything.
Gabriel Lewit: Yeah. Now, short-term predictions are a little different than long-term, data-based assessments. Goldman Sachs has recently come out, and they’re not the first to say this, but they have said they think the S&P is going to average a return of just 3% a year for the next decade.
Steve Lewit: Mm-hmm. Well, Vanguard was pretty close. They were at four and a half I believe.
Gabriel Lewit: Vanguard was 3.1 to 4.9% for US stocks over the next 10 years.
Steve Lewit: Yep, yep.
Gabriel Lewit: There are others. And why are they predicting this? Well, again, it goes back to valuations. It goes back to what’s driving the current returns in the S&P. A lot of it’s still big tech stocks, AI stocks. AI is still unproven, but the biggest driver is usually going to be your price-to-earnings ratio, and are they overvalued or expensive or very expensive based on historical standards. And then you and I have also talked about this occasionally on market recap webinars and other topics called mean reversion, right? The long-term average of the S&P is say eight to 10% depending on the timeframe you pick and choose from, but over the last 15 years, Mr. Lewit, the S&P has compounded almost at 15% a year for the last 15 years.
Steve Lewit: Yeah. Exactly. And there’s this thing called the Joseph effect.
Gabriel Lewit: Mm-hmm.
Steve Lewit: And the Joseph effect was a database financially proven that if the market is going at a high, it will stickle to go down back to a low to get back to the reversion to the mean.
Gabriel Lewit: Yeah. So if you have a long-term average of 10, and you’ve seen 15 years of 15%, 50% above the long-term average return.
Steve Lewit: It can’t stay there.
Gabriel Lewit: Unless you think the new average return of the S&P is going to be 15% for the next 10 years, meaning 15% for 25 years straight, you have to believe somewhere that those prices are going to see a pullback. And I bring this up because I still see a lot of investors displaying irrational exuberance.
Steve Lewit: Well, I don’t know if it’s a rational, I mean it is exuberating that we’ve had 10 years of …
Gabriel Lewit: Is that our word of the day? We sometimes do a word of the day on the podcast.
Steve Lewit: Exuberance, irrational, or exuberance.
Gabriel Lewit: Gabby was saying we should do a word of the day.
Steve Lewit: Which word is this?
Gabriel Lewit: It’s exuberance.
Steve Lewit: Exuberance.
Gabriel Lewit: We don’t often use that in day-to-day speech.
Steve Lewit: Yeah. I mean, look at all the money people have made in the past 10 years, it’s fantastic. They should be exuberant. I think the artificial part is thinking that it’s going to continue in the future.
Gabriel Lewit: Well, that’s the irrational part, right?
Steve Lewit: And doing planning based on an inflated great growth. And just discounting the fact that the year between the years 2000 and 2013, if you put a million dollars in the S&P in year 2000, in 2013, guess what you had?
Gabriel Lewit: Yeah.
Steve Lewit: A million dollars. You didn’t make any money for 13 years.
Gabriel Lewit: Well, now Goldman here is calling the next decade a lost decade, even though they’re saying 3% compounded return over 10 years. That’s not exactly a lost decade. It’s a slow decade.
Steve Lewit: It’s pretty … It’s almost lost.
Gabriel Lewit: Okay. Yeah, but a true lost decade of which there have been multiple, are 10 plus year periods where the S&P or the US stock market has been flat.
Steve Lewit: Yeah.
Gabriel Lewit: Now, is that as big of a problem, Mr. Lewit? I know you know the answer to this rhetorically, if you are dollar cost averaging and putting money into your 401(k) account.
Steve Lewit: If you’re working and you’re getting a paycheck and every month you’re putting money in your 401(k), it’s fantastic because during those years, you’re buying stocks at a declining, lower value.
Gabriel Lewit: Yeah.
Steve Lewit: So, when the market turns around, you have more stocks.
Gabriel Lewit: And it’s still not as great as it going up, but in general, of course, but it’s not as bad for you. Now what if you’re pulling money out of the market while it’s going down and or staying flat over 10 years? We’ve got a big problem.
Steve Lewit: I had a client in yesterday that is not our client, a potential client that is pulling six grand a month out of their savings, right? Just selling stuff, every time they need money, and that’s great when the market’s going up but if they’re going to sell stuff while the market’s going down, they’re compounding a loss. And then when the market tries to recover, there’s less money in there to recover with. So that’s a great way of accelerating the depletion of assets.
Gabriel Lewit: And I like to simplify this to the rule.
Steve Lewit: I thought that was simple.
Gabriel Lewit: Well, even simpler, I should say. That was simple. But the rule of course is, buy low, sell high. So if you’re putting money in when the market’s down during a dip, you’re buying lower. When you’re selling while the market’s going through a dip or a downturn, you’re selling low, not buying low. And generally you don’t want to sell low and buy high.
Steve Lewit: Exactly. Yeah. But if you’re in retirement, you’re not buying, you’re just selling to get money out.
Gabriel Lewit: You’re selling low.
Steve Lewit: You’re just selling low.
Gabriel Lewit: There is no buying, yeah, correct, mm-hmm.
Steve Lewit: You’re just selling low. It’s like, why am I doing that? Well, because that’s what most people do.
Gabriel Lewit: Yeah. Now, there are people of course that disagree with Goldman Sachs projection. If you’re interested in this article, of course we are happy to send that to you. Some people say, “Well, yeah, this, everyone’s got their answers.” But I do believe that things do tend to revert to their long-term average. We have a lot of historical data on the S&P. I don’t think there’s anything at least showing me that this should be a new 15% long-term average. So I would say be more cautious going over the next couple of years into the next 10 years.
Steve Lewit: Yeah, so when you put that out there, be more cautious. Some people may say, “Well, this is the time, then I should go to cash.” Or “This is the time I should do something about my portfolio.” What do you mean by that?
Gabriel Lewit: Be more cautious means maybe take a look at your plan. If you need income in the short term, maybe you pull back on your risk levers on those dollars a little bit. A lot of people keep saying, “Well, market’s been going up. It’s going to keep going up.” Perhaps explore things that provide some downside protection for the various parts of your plan where you might need income. So you’re not going to be selling when the market’s down. Look at buffered strategies. We’ve talked a little bit about those. So that’s a way to take advantage of both up and down markets, particularly well suited in a unknown or unsure environment where it may go up, but it might go down. So the higher and higher that price-to-earnings ratios go, and the higher the market shows that it’s potentially overvalued, I would continue to just exhibit a little bit more caution.
And I’ll give you an example. I had a potential client as well the other day say that we were talking about a buffered strategy, which limits your growth a little bit, but gives you a lot of downside protection.
Steve Lewit: Like a cushion.
Gabriel Lewit: A cushion, yep. And he said to me, “Well, why would I want to limit my growth? I could do much better than that over the next 10 years than that cap amount on that buffer strategy.” And it was like, no matter what data I presented to this person, they refused to admit that there’s a likelihood that the market’s going to see a downturn or a pullback and just kept focusing on the fact that he would earn less if the market’s up. But keep in mind too, you can come out further ahead by earning less, assuming you don’t lose any or as much, because a lot of times people are recovering from losses and that takes a lot of time and a lot of money to recover from losses.
Steve Lewit: Absolutely. And the other question is, is I had this discussion too the other day with a client, why do you have to make 15% a year and take all that risk? What is the motivation? They’re in retirement? Are you going to spend that money? No. So in other words, you’re taking all that risk for what? To pass more money onto your children. Whereas you could take less of a risk, not worry about it, and not spend all these hours analyzing and trying to figure it out. And whatever’s left for the kids is left for the kids.
Gabriel Lewit: True. Yeah. I mean, everyone’s got to make up their own decisions and this all comes back to your plan, but just something to be aware of. Again, we’ve talked about this before, but new articles come out again, new opinions. That’s, I think, worth considering and listening to. You bet.
Steve Lewit: Yeah, you bet.
Gabriel Lewit: All right. Well I think since I will say producer Katie, forgot to click the start button on our timer, I don’t have any clue how long we’ve really been going.
Steve Lewit: It feels just like-
Gabriel Lewit: I think we’re on …
Steve Lewit: It feels like a couple of minutes.
Gabriel Lewit: 28? Oh yeah. So we’re right at our end point here. So-
Steve Lewit: I want to point out though, this is very important. This is the first time.
Gabriel Lewit: In what? 150 episodes or something like that?
Steve Lewit: That …
Gabriel Lewit: How many?
Speaker 4:
190.
Gabriel Lewit: 190. Oh wow.
Steve Lewit: First time in 190 attempts, she has missed a free throw.
Gabriel Lewit: So, we’re approaching our 200th episode. Huh? We’re going to have to come up with something special for that.
Steve Lewit: Yeah, yeah. So you’re an exceptional button pusher, Katie. You can miss one free throw and that’s okay.
Gabriel Lewit: One out of 190. That’s pretty good ratio.
Steve Lewit: Pretty good. Pretty good.
Gabriel Lewit: Yes, yes. So with that in mind, we’re out of time here for today. We were going to give some spooktacular Halloween stories for you. Ghost stories. Steve was going to speak in his mysterious voice.
Steve Lewit: I was. Call me Freddy.
Gabriel Lewit: And well we ran out of time.
Steve Lewit: Yeah.
Gabriel Lewit: But more importantly-
Steve Lewit: Thankfully. We ran out of time.
Gabriel Lewit: I think maybe that was on purpose.
Steve Lewit: Right?
Gabriel Lewit: We are wishing you and yours a wonderful Halloween. Get out there with the kids or grandkids and do a little trick or treating.
Steve Lewit: Keep your feet on the ground. Election’s coming up.
Gabriel Lewit: Yeah. When is the …? It’s 11/5?
Steve Lewit: Yeah, 11/5.
Gabriel Lewit: And what’s next week?
Steve Lewit: 11/5.
Gabriel Lewit: I think by the, yeah, by the time we do our next podcast, will we know the election results? Let’s see.
Steve Lewit: What day, what day?
Gabriel Lewit: I was trying to look at the calendar there.
Steve Lewit: The fifth is a Tuesday and we-
Gabriel Lewit: Oh, oh, fifth is Tuesday?
Steve Lewit: Yeah. See, we will know.
Gabriel Lewit: So, we record usually on a Wednesday. So yeah, we will be coming to you live on next Wednesday with the election results and who knows what that’ll be.
Steve Lewit: Yeah, I just want to throw my Zoloft pill out there to not worry about this stuff. Yeah, we’ll all be fine folks.
Gabriel Lewit: All right. Well, have a wonderful weekend. Enjoy some of this great fall weather we’re having and we will talk to you next week on the show.
Steve Lewit: Stay well everybody.
Gabriel Lewit: Bye now.
Steve Lewit: Bye.
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