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Redfish Healthy, Wealthy, and Wise Podcast April 411

Updated: Aug 16, 2022

Welcome to the Redfish, Healthy, Wealthy, and Wise podcast. Our focus is to deliver information that helps you become healthy, wealthy, and wise. This podcast is sponsored by Redfish Capital Management, the views and opinions expressed here and do not necessarily represent the views and opinions of SCF securities, Inc, or any SCF related entity. This material is for general information only and is not intended [00:00:30] to provide specific advice or recommendations for any individual securities offer through SCF securities, Inc. Member FINRA, S I P C investment advisory services offered through SCF investment advisories Inc office at 1 55 east Shaw in Fresno, California, SCF securities, Inc, and Redfish Capital Management are independently owned and operated. SCF is not associated with other podcasts. And the messages contained within. Brad [00:01:00] Murrill and Redfish Capital does not offer legal or tax advice. This material is not intended to replace the advice of a qualified tax advisor or attorney please consult legal or tax professionals for specific information regarding your individual situation now for your host, Brad Murrill.


Everybody. And welcome back to another edition of the Redfish Healthy, Wealthy and Wise. This is the four 11 podcast. Today is the 4th of April. Of course, April means tax time. And so tax time means, of course, we've been really busy around here, but that's not all that's been keeping us busy here at Redfish Capital. These markets have been bananas. And so that's what I'm gonna talk about today is a little bit about what's going on in the markets, what I'm seeing and what I'm hoping we can expect to see in the future. However, my crystal ball, I told you a long time ago has got a big old crack in it. Um, so I've never been able to predict the future. If I could, I wouldn't be here today talking to you. Uh, we have just finished the first quarter. And so the, the, as of I'm talking right now, you know, the S and P five hundreds at about 45 70, which means we're down for the year 4.6%.

But the, the big story has been over on the NASDAQ, which holds a lot of the tech stocks. The NASDAQ's at 14,489. So that's now down 8.4%. But remember just on March the 14th, the NASDAQ was at 12 5 81 or down 20.5%. So why is that all going on? Obviously the Russia situation's going on. We have some inflation here, which has come on the back of, uh, commodity, uh, price increases, uh, crude oils up to 1 0 2. We started at the year at what, a little over $76 natural gas is at 5 76. We started out at 3 71. That's a major, major move to the upside. And the yield curve has also jumped, um, which we expected to do. When I say the yield curve. I'm referring to the prices of the treasury yields. The two year treasury yield right now is at 2 43 guys. We started at the year at 0.8, 3%.

That's what you were getting for a two year treasury note 0.83. Now the yields at 2 43, the 10 years at two 40 or 2 44, is it somewhere right in there? So just basically flat with the two year we started that started out the year at 1.6, 5%, the 30 years at 2 46, where we started at 2 0 8. So if the two years at 2 43, the 30 years at two forty six, that's what we call a flat yield curve. So let's look at, from normally you would expect the short, the shorter term maturities to be the lowest, the longest term maturity to be the highest that's called a, the yield curve. And so if you looked at it on a chart, it would start out low, it would start working its way up, and then it would flatten out as you got the 30 years. Now, what we have is a flat yield curve, which basically means that it's, you're getting the same amount of yield as you are a two year bond as you would a 30 year bond.

So obviously people are not buying 30 year bonds that are trying to say on the front end of that yield curve. What we also refer to this as is the dreaded inverted yield curve. When people start talking about the inverted yield curve, they often say, well, these are times, um, of inflation and an inverted me yield curve means the stock. Market's gonna go into a bear market. Uh, that's not always true. We'll talk about that also in just a little bit, but so we've got a lot of the things going on with interest rates. And one of the things that I continue to point out that I continue to hold strong to is that one of the reasons why we're having this yield curve is because we're having chins in the supply chain. And so, and this is not caused by anything other than COVID.

Now, granted you had some, uh, tailwinds pushing those yields up with commodity prices going up that came on the heels of what's going on in Russia. But if you also look at the supply chain, that's, what's causing a tremendous amount of the inflation. So you have the commodity side, which is oil and, uh, fertilizer, okay. For the chemicals that go into fertilizer, that's up almost double. So therefore food prices sh should and are following that curve up. So, but the supply chain, I think, is something that can be healed quicker than the Russian situation. The, the supply chain situation. We, we got into this because of the shutdown at COVID. And it's funny, you go on the TV and you listen to the politicians and you listen to the talking points that, uh, the Democrats have put out and the Republicans have put out. And, um, the, the political game, you know, is all one of deflection.

And so when you listen to, let's say the Democrats, you listen to president Biden, they're all gonna say, well, the Putin's gas prices and Putin's gas prices. They're all gonna put it on that. Republicans are gonna say, no, these are Biden's gas prices. These are Bidens because of this, that, and the other. And because he, uh, the drilling situation, okay, it doesn't matter. I don't care whose fault it is. I care about moral where we are and what's gonna come of it. So I think what you're gonna see is as we continue to make our way out of the COVID shutdowns, um, and as the economy goes forward, which it still is going forward, you will see some of the inflation slow, especially towards the back half of the year and the front half of the year, which is when it's the scariest, which is when it's, cuz it's happening right now, we're seeing a tremendous amount of inflation and that scares people to death, especially when it comes to investments, especially when it comes to stock markets and when it comes to the daily budgets.

However, I do think that will be rectified. I had said that if you remember the podcast at the end of the year or the beginning of the year or the end of the year, when we were, um, talking about what I felt was gonna happen this particular year. And I was quoting a lot of Tom Lee at Fs insight, uh, fundra, and how he was stating that he felt like the first six months of this year are going to be crazy, crazy volatile. And so far he's been spot on, uh, in fact, it, he it's been a lot more volatile than he thought it would be. And what many of us thought it would be. Um, but we're still sticking and I'm still sticking to the forecast that the second half of the year is gonna be good. And you've heard me say that time and time again, it's gonna be all in the second half right now, we're in the middle of this storm, if you will, which is causing an extraordinary amount of volatility.

So one of the things that you have noticed, if you invest with us here at Redfish capital, you've been getting a lot of confirmations in the mail and on your email as we've been very active in the stock portfolio. One of the things that we've been doing here at the stock portfolio is we are widening out the number of positions that we hold right now. The stock portfolio is holding around 31 holding. So some of you have a little less, depending on, uh, what industry you're related in, for instance, if, if you work for an oil company and all not buying you a bunch of oil stocks, you're probably getting that in your 401k. Um, and, and so that does vary, uh, from person to person, but on the average, it's 31 holdings, which for me is much broader than I typically have our clients at Redfish, capital management.

Again, I'm only talking about the growth part of the portfolio. I'm not talking about the alternative investments, the preferred stocks, the bonds, things of that nature. I'm strictly talking about the growth portion when everything is really, I think when the skies are clear and when things look good, you'll see that we kind of narrow down, uh, the stock holdings. We're not as broad, but we tend to go a little bit more narrow. And at one point I think we had 20, uh, which was one of the lowest, um, that we've been. But right now we've, we've spread out to having 31 holdings. Just so you'll know a little bit where some of the changes have come. When you look at the S and P 500, normally the waiting and the S and P 500 to materials. Stocks is about 2.3. And in our portfolio right now, we're, we're over 12.

So we have a big, overweighting a very large overweighting to materials and materials related stocks. And it's done very well for us because when you get these inflation, those that's where you're seeing also the, the price hikes is in a lot of these materials. Um, so you wanna own the companies that are in charge of getting the materials outta the ground and selling them to the end user, because they're obviously they're just making more money as the price of these materials go up. So we wanna make sure we hold those. So we have a nice overweighted position in materials. Our tech position is a little overweighted we're about even with the S and P has, has such a large position in the S and P 500. I believe it's around 27% of the S and P 500 is, uh, tech related. But when you add in other stocks that trade like a tech stock, um, for instance, Amazon is actually not in the technology sector of the S and P 500, uh, it's consumer goods.

Um, then you'd look at, um, uh, communication services. Uh, there's gonna be your Google, um, things of that nature, those companies trade like tech stocks. And so if you lump them in on the Redfish portfolio and said, okay, is this really a tech stock? You'd see that we're overweighted tech. So why do you want to be overweighted tech? Well, remember how I started out by saying that, um, that NASDAQ was down 20%, at one point where money will go to during difficult times or volatile times, is there gonna go to companies where the earnings is more predictable than unpredictable? And so with a lot of these large companies, we have a much better idea of their earnings and where they're gonna come. So you want to have, uh, a positive earnings. What we have been seeing is that companies, um, here have just reported earnings.

Um, they actually came in pretty good, um, earnings per share grew in the first quarter around 5.1% over a year, year basis. So everybody complained about, oh, it's a slow down in recession. You know, we're, we're still, they still grew at 5%. Now that's lower than we saw a year ago. So there was a slow down which was expected to happen because the comp going back a year are, are awfully tough because business was so good, um, a year ago, but it's still growing and it's still moving forward. And so I'm actually still bullish about the second half of this year and what I think we could see going forward. I do wanna take a minute and talk to a little bit about, um, Tom Lee. Again, I had mentioned to him as head of research over at SRET and, um, I subscribe, uh, to his service.

So I'm reading a lot of his I daily, I'm reading a lot of his, um, analysis, and he had a great one this morning that I thought was really kind of hysterical. That was a movie on Netflix. And I don't know if any of y'all have seen it. Um, and, and it came out, it was called don't look up and don't look up, had, uh, be stars in it. Leonardo de Caprio and Jennifer Lawrence were the two leads, um, Meryl Streep and Jonah hill, uh, were also in it, Jonah Hill's character. Absolutely crack me up if you, if you wanna watch a funny movie, um, with some political commentary on it, that's a good one to tune into. And Jonah Hill's character is by far my favorite in that movie, basically what's happening in, in don't look up is there is, uh, the two, two scientists that are played by Leonardo Deka and Jennifer Lawrence.

They discover a comment that is going to hit planet earth, and it's gonna completely destroy planet earth. And so they come and they're telling people about it and they're telling the president, and it's how everyone wants to ignore the facts that a meteor is coming to earth to destroy it. And it's okay. Everything's gonna be okay. And so Tom Lee was making the analogy saying that there's a lot of people out there right now that are looking at the Russia Ukraine war. They're looking at oil prices. They're looking at natural gas prices, the fertilizer prices they're looking at labor, uh, prices increasing. In other words, the there's inflation. That's taking place in the jobs market. Um, they're looking at the federal reserve being more and more hawkish. In other words, they want to raise rates. They're looking at all of these and the group of receptionists as he calls 'em.

If you compare to the movie, they'd be like the scientist in the movie. So the receptionist are all going. There's a, there's a meteor coming. There's a giant meteor coming. And we, and the stock market. Yeah, it was down a little bit, but the stock market kind of said, uh, don't worry about it. Don't look up, don't look up, look down, look where we are right now. And so I thought it was a genius way to kind of compare what's going on out there. Now, the receptionist as Tom Lee calls, 'em, they do have a really strong argument as to why there could be trouble on the horizon. The number one thing that they're screaming about is the Inver I was talking about yields earlier is how the two year yield got higher. It click clipped above the 10 year yield just briefly. Um, last week, there are some other inversions as well.

Uh, the commodity price spikes can cause economic problems. It can cause social problems. It causes budget problems, but not all market signals are that bad out there. Now, granted everybody's got their own opinion, but there's not all that bad. The, the questions that we have to be asking ourselves is how much damage will this do? How mu how, I mean, how is it gonna be catastrophic? Is it gonna be world ending to have the inversion of the yield curves is gonna be world ending to have some inflation or world ending to have the fed raising rates a few times, maybe it's 50 basis points. Two more times, maybe it's a full percentage, oh, a full percentage coming off of historic lows, how much damage is gonna be done and how much has the markets already discounted in the fact that, um, that these difficult times are coming?

I, I just tend to, I tend to think that the sky is not falling, but it is dark. And, uh, you know, all, you know, that I love fishing and I love, I spend a lot of time in boats. And when you you're out there and a storm comes up, uh, my buddy Mark Sloan, and I have been in more storms offshore, uh, than I care to talk about. And, and sometimes it's so easy to get caught up into looking straight down and looking at the size of the waves instead of trying to look out towards the horizon. And I'm trying to get everybody right now to look out towards the horizon because it's not gonna stay stormy forever. There are some fantastic companies that are doing fantastic things. And for a client here at Redfish capital, one of the things that we preach over and over again is if you are properly allocated and your expectations are properly set on what it is that you're trying to achieve in the markets, you're gonna be fine.

Remember our clients here, we are not all in the markets. We're not just S and P 500. If the market goes up, our clients made money. If it goes down, we didn't, that's not how we operate here. We have diversified portfolios for every client that are tailor made for their unique needs. I've got some clients that were, I'm talking to, um, a woman tomorrow. Who's coming in, she's in the latter, uh, season of her life. And I looked at her portfolio and it was, um, allocated like 60% to stocks, 65% to equities. And the rest were in bond funds. And that was quite alarming to me. And she was wondering why she was seeing so much volatility. And I, it took me one quick glance to go, well, I can tell you exactly why. So here, it was a woman who was, um, almost 80 years of age, who was living off of the dividends and income that her portfolio produced.

She had enough money. She had a about two and a half million dollars. Um, that was allocated though, mostly to stocks and mutual funds. And she doesn't spend a lot of money. And she said, what makes me nervous is the volatility. And so I had to ask her, I said, you're having your needs met. Why would you have this much? She had no idea why she had that much. She just, this is the, the firm that took over her, uh, finances. This is just how they had her invested. And I just think it was, I don't wanna say financial malpractice, but it was, that's not how she should be allocated. At least according to the conversations that I have, if she wants and only needs a couple percent return or better said, she is more concerned about the return of her money than she is the return on her money.

Then why would she be invested that particular way? It made no sense to me. And so when we sit down, we'll be sitting down later this week, I'm gonna show and say, look, you don't need a whole lot of growth. So why do you have it this way? The other thing I think it's important to discuss are bond funds versus straight vanilla bonds. You can go buy bonds and CDs, treasury bonds, if you want. And we would just kept talking about how the yields are fluctuating and how they're changing. Guys. If you actually own a five year treasury bond, you're locking in that yield now true. The price of the bond of what you paid for. It will go up and down a little bit. But if you own a bond fund, which owns hundreds of different bonds, that can actually move with an extraordinary amount of volatility.

That is what we've been seeing. That is what she owns. So it doesn't make a lot of sense. In my opinion, to own a plethora of bond funds in a rate rising environment, I would rather, if you're going to be owning some bonds, build out a nice ladder, a ladder simply means we're gonna have some that are coming due in six months. We're gonna have some bonds come due in a year. Some come due in 18 months, two years, three years, four out the way to let's say five or six. So then when interest rates start to go up, the risk that you have is that you do have some bonds coming due that you have to do something with, but if rates are going up, when you reinvest that money, you're gonna reinvest out at six years or five years, a little further out the curve, and you're gonna get a higher yield.

If the yield curve is flat, congrats to you, we'll just stay really, really short, cuz you're getting a higher yield on the really, really short bonds. And as they come due, you put 'em at the end of the ladder. Theoretically, what that does is it takes the interest rate risk out. Therefore, if rates were coming down and you're constantly getting lower rates, every time you reinvest, you're not gonna wind up with lower income if you're living off of that particular money. So we're gonna take the majority of this woman's, uh, money that I was just talking to you about and just buy straight, plain vanilla, plain Jane bonds. Then I don't care how much interest rates are going up or down because she actually owns the bond. I care more about the credit quality of the bond. In other words, I care more about the quality of the company that's underneath it.

If it's a treasury bond, it's backed by the United States government. If it's a CD, it's backed by F D I C you can find safer bonds than others. If I'm gonna go out and buy Bob's pencil shop, I'm probably not gonna have a lot of credit worthiness behind the bonds of Bob's pencil shop. So we're gonna avoid the low credit worthy and buy high credit worthy when I'm building out this bond portfolio for her. So that's the way that we're able. So the, the, what I'm trying to say, when I say don't look at the waves, but look out towards the horizon. It doesn't have to be that bad. I am really do expect us to see a grand year by the end of this year by grand. I mean, I am really expecting the markets to be up seven, eight, 9%, which is lower than some years, but that's a dog on good return.

When you look at investments right now and where do people and where people are investing their money. So I'm really trying hard to beat that seven or, uh, six or seven, whatever percent return it's gonna come in on the growth portfolio. But I can wrap up some really nice fixed income for clients. Now that we're starting to see rates go high for people that are getting ready, they're retiring right now. I'm gonna be calling someone this week. Who's retiring this week. And he is like, what am I gonna do with my money? I don't know. I'm so nervous. I'm like, this is, it's not a problem. This is not a big deal. You can buy some fixed income. You can lock in that return and you can have that money coming through that you need to live. And then if interest rates continue to go up, yes, there will be inflation.

But guess what? The yield on your investments as they come do, and you reinvest into that ladder will also go up as well. So I'm, I'm actually positive and it's, it's a tough time to be positive because right now everyone's looking saying there's a meteor and they're looking at me and saying, you're one of the, don't look up guys. Eh, I'm maybe I am. Maybe I am one of the, don't look up guys, but I am trying to look out. And when I look out, I don't see the world ending anytime soon. I don't see the Russia Ukraine as sad and as bad as it is. I don't see it turning into world war three and the globe going nuclear. I don't see it. I do think that the businesses are gonna continue to do well. Uh, we're continuing to do here, here. Well, uh, we're doing well here at Redfish.

We have a tremendous amount of business. We thank you for that. We're growing. When I talk to business owners, their businesses are growing. These are just the business owners that come in and sit across from me. And I say, how's your business had a gentleman in here with me before I started this podcast and we're going through his stuff. And I, you know, so tell me about your business, how it's going. It's like, Brad, this is the second best year I've ever had. Uh, business is going well for many, many people. So I to have this angst, doesn't make a whole lot of sense to me. Um, I just want to strictly kind of look, talk to people and see what's going on in their individual life. Uh, then you compare that with the data and you come out somewhere in between. So I'm feeling really, really good.

I've got a couple of podcasts lined up that I'm very excited about. Um, after I finish working on this one, uh, will be calling my friend Craig Bunin, and I'm gonna get Craig in here. And, um, Craig happens to own a, a fairly large business here in the Houston area where they do commercial painting, um, for, uh, large builds, not homes, but large builds schools, things of that nature, large new builds, airports, big, big jobs, but also Craig, very smart man. Um, he's been doing a lot of, uh, house flipping and I've got a lot of clients who ask me about that all the time. Craig's been doing it for years. Let me rephrase. Craig's been doing it successfully for years. So I wanna have somebody come in here and talk to me a, a little bit about, uh, how he buys houses, how he avoids paying, you know, commissions when he is buying the houses.

Uh, and if that was something you wanted to kind of look at doing, cause I've got a lot of clients say I'd like to give that a shot and do on their handy. Great. So I'm gonna have Craig in here and do that. Um, I'm also happen to ha um, hoping to have to line up a, a young woman who has a business out in the Brian college station area. Her name is Katie Shafer and Katie is in the health insurance business. As we look, health insurance ends up being a big, big cost for many of us, especially those of us who retire prior to Medicare coming around. And so, um, we're gonna talk about health insurance and the trends and different things that, uh, the health insurance experts can do to help reduce your health insurance costs overall. So I'm really excited to get Katie in here.

I'm having conversations with three or four other people. I really, um, am excited. I wanna have a, a conversation about real estate and certain sectors of the real estate market where, uh, we can invest our money and have recessionary, uh, resilience, uh, resilient investments in real estate, cuz not all real estate is, uh, recession resistant. Mu much of it is some of it is, but some are better than others. So we're gonna get into that and talk about that a little bit later on the healthy, wealthy and wise podcast. What else I got? I've already been rambling on here for almost 30 minutes. I always try to keep the four 11 nice and easy at, uh, maybe 15 minutes. So you can listen to it quickly on a, on a drive home or doing something in the house. And so I wanna just give you an update on the markets.

I want to always ended the same way. I thank you so much for all the business that, um, you've given us. I mean, we have grown already. Our revenues are expected to outpace last year significantly, and that is all because of people like you who have continued to call in and ask us to help you develop a financial plan, uh, that'll help you to meet, uh, your goals in financially speaking. So we thank you for all of that. I look forward to speaking to y'all soon. I look forward to getting Mr. Craig bun in, in here and having a, a discussion on flipping houses. Y'all have a great day.

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