The Market Call Show

The Market Call Show
  • 5.0 (2)
  • INVESTING
  • UPDATED WEEKLY

Timely and actionable investment insights for executives, business owners, and family offices, with Louis Llanes, CFA CMT.

  1. Winning Strategy for Investors Who Want Rising Income | Ep 97

    11/29/2024

    Winning Strategy for Investors Who Want Rising Income | Ep 97

    In this episode of The Market Call Show, I discuss a practical strategy for investors seeking a rising income stream, particularly in the face of inflation and increasing retirement expenses. I outline a dividend growth approach that combines consistent income with long-term capital appreciation, making it a core strategy for retirement portfolios. I explain how to identify and select a "winning universe" of stocks, emphasizing the importance of companies with strong fundamentals, reliable earnings, and a history of steadily increasing dividends. The process includes filtering stocks based on criteria like liquidity, a 10-year track record, and consistent dividend growth. This narrows the focus to high-quality companies that can provide stable and growing returns. Portfolio construction is another key element. I share how to build and manage a diversified portfolio by limiting sector and industry concentrations, maintaining balanced position sizes, and setting guidelines for rebalancing. I also discuss how to evaluate stocks continuously, using both fundamental and quantitative rankings to guide investment decisions. This approach is designed for long-term investors aiming for reliability rather than speculative gains. I highlight the benefits of blending this core strategy with other satellite investments, such as bonds or private real estate, to enhance returns and reduce risks. Whether you're retired or planning for the future, this strategy can serve as a foundation for a resilient and income-generating portfolio. Listen in for actionable insights and tips to build your financial future.   SHOW HIGHLIGHTS I discuss the need for a rising income strategy in response to inflation and retirement expenses, emphasizing the importance of long-term capital appreciation alongside growing income. I explain the value of dividend growth investing, focusing on selecting companies with a consistent track record of increasing dividends and strong earnings. I outline criteria for selecting stocks, such as filtering for liquidity, excluding companies with less than 10 years of performance history, and prioritizing sustainable dividends. Portfolio construction is discussed, including limiting sector concentration, balancing position sizes, and maintaining diversification to reduce risk. Stock analysis involves both qualitative and quantitative methods, focusing on profitability, analyst coverage, and adaptability to ensure steady growth. I highlight the importance of ongoing portfolio management, including regular reconstitution and rebalancing to maintain alignment with investment goals. Criteria for selling stocks include dividend cuts, declining fundamentals, and insufficient liquidity, ensuring the portfolio remains strong. Strategies for blending dividend-focused portfolios with other investments, like bonds or real estate, are explored to enhance returns and mitigate risks. This approach is positioned as suitable for long-term investors, offering stability and income generation, particularly for retirees. The episode concludes with a discussion on integrating this strategy with faster-growing investments for a well-rounded portfolio.   PLUS: Whenever you're ready... here are three ways I can help you prepare for retirement:  1.  Listen to the Market Call Show Podcast or Watch on Youtube One of my favorite things to do is to talk with smart people about investing, financial planning, and how to live a full life.  I share this on my podcast the Market Call Show.  To watch on Youtube  – Click here   2.  Read the Financial Freedom Blueprint:  7 Steps to Accelerate Your Path to Prosperity If you’re ready to accelerate your path to prosperity, the Financial Freedom Blueprint lays out a proven system for planning and investing to secure your financial independence. You can get a personalized signed hardcover copy – Click here 3.  Work with me one-on-one If you would like to talk with me about planning and investing for your future. – Click here       TRANSCRIPT (AI transcript provided as supporting material and may contain errors) Louis:Okay, today we're going to be talking about a winning strategy for people who are looking for rising income. What spurred me to want to talk about this was that, frankly, there's a lot of people that are needing rising income. They need rising income because inflation continues to go up. And many people are retiring and they need an income stream that's going to keep up with inflation. So I wanted to talk about a strategy that is very effective, really as a core strategy for people who are needing rising income. Because one of the most common challenges that investors face Is that over the long term, especially, you know, when you're trying to fight inflation, your expenses continually rise and you need a combination of long term capital appreciation and a growing income. So a dividend growth approach is one of the best strategies to achieve dividend growth. Now, I want to share today a method to accomplish this goal, and I'm going to be very specific because I find that people really feel more comfortable when they understand what's behind the curtain in generating a portfolio that you can really rely on, especially when you're dealing with your core strategies.So, this method can give you some ideas to form a core strategy, and Within a retirement income plan, and it's designed to be, really the bedrock of the portfolio, but it's also a good idea to have satellite strategies to enhance the returns over time for the portfolio. But let's just start off with the first thing that you need to do in order to have a good, rising income approach with stocks. The first is you need to choose winning a winning group of stocks. You need to choose a winning group of stocks that have a successful dividends track record. So you got to get that universe, right? And that's crucial. So what I like to do is I like to start off with the S&P1500. The S&P1500 includes large companies, mid cap companies, as well as small cap companies, and they're all in the United States. And I like to filter out from that group companies that have excessively high yields because companies that have really high yields, it's generally unsustainable. I want to make sure that the dividends that are there are well supported by earnings as well as the company fundamentals and that they have the ability to provide a competitive advantage. So the numbers are basically showing us that these companies have a strong business and a competitive advantage. So I want to explain a little bit more about, like, establishing the universe, if you will.the other thing I like to look at is, I want to look at the daily dollar volume and eliminate those stocks that are really illiquid. So the dollar, daily dollar volume just says, Okay, what is the average volume of the stock in the market? And multiply that times its price, and that gives you kind of the dollar value that is traded in a given day. So typically, So I rank order those companies and I want to make sure that they have a that they're generally usually in the top 90%. So like the bottom 10 percent of illiquid stocks I generally want to ignore them. And then I also have a cutoff, a dollar cutoff to say it needs to be at least x. And that number does change depending on the purpose. So basically get rid of those stocks that are too illiquid. You don't want to have them in your. In your strategy, because you're really looking for those solid companies. So I also want companies that have a long term track record. So I exclude stocks that have a track record that is less than 10 years. Now, some people say, well, wow, there's a lot of great companies that you're missing out on. Well, that is true, but I like to look at those younger companies for different types of strategies. For this strategy, this is a strategy that's designed for steady growing income stream. And, long term capital appreciation. So we're not really trying to hit the cover off the ball. We're trying to get steady growth of rising income and also getting rising capital appreciation. So we want to get rid of those companies that have a 10 year, less than a 10 year record. And now it's for the best part of the universe selection.I want to exclude stocks that are not raising their dividends. So I'm looking for companies that are raising their dividends every year and they haven't cut their dividend in the most recent four quarters. So in the last year, they haven't cut their dividend. They may have kept them the same, not necessarily raised them. But we're looking for annually, successively, higher dividends. And then we're looking at the quarters and saying, you're not cutting the dividend. This really narrows the universe down. And like, for example, as of right now, that universe is 341 companies. That I just outlined. So you want to start off with those winning stocks. So now we've got this group, this universe of companies that, you know, you've really shut off a lot of dead weight. You're only including those companies that have a long term track record of rising income, and they have the characteristics that can get you headed in the right direction. But you don't want to leave right there. You also want to actually move from there and actually look at these companies fundamentally. So, you know, you want to demand from these companies that they have steady rising dividends and strong earnings. So, a critical aspect of this strategy is to focus on companies that have adequate analyst coverage. So, analyst coverage would be, Is good to have. You want to make sure that you don't want to make it too stringent because there are some smaller companies that you want to have investment in and they may have less analysts following them. So I have found in today's marketplace that the sweet spots right around five analysts. So five analysts are cover

    22 min
  2. AI Driven Investment Breakthroughs | EP 96

    11/18/2024

    AI Driven Investment Breakthroughs | EP 96

    In this episode of the Market Call Show, I dive into the transformative role of artificial intelligence in wealth management. Together, we’ll explore how AI is reshaping portfolio management, moving beyond a mere tool to become a revolutionary force in investment strategies. Drawing on groundbreaking insights from Brooklyn Investment Group’s latest white paper, we’ll uncover how AI enables wealth managers to scale their operations, cut time commitments, and reduce costs, all while enhancing the quality of client service. AI's ability to automate complex tasks like portfolio rebalancing allows managers to oversee hundreds of accounts more accurately and efficiently. AI can cut a portfolio manager’s time spent on routine tasks by up to 82% and reduce computational costs by as much as 85%. Join me as we discuss why adopting AI-driven strategies isn’t just beneficial—it’s essential for staying competitive in today’s fast-paced investment world. Whether you're a wealth manager or someone interested in the future of investing, this episode offers practical insights into how AI is setting new standards in wealth management, making it possible to serve clients with precision and speed.   SHOW HIGHLIGHTS I explore how artificial intelligence is revolutionizing wealth management, offering significant improvements in efficiency and personalization. The episode discusses insights from the Brooklyn Investment Group's research, highlighting AI's potential to scale operations and reduce time and computational costs. AI technology allows wealth managers to oversee numerous unique accounts with precision and speed, enhancing client service without increasing workload. According to research, integrating AI into portfolio monitoring can reduce a portfolio manager's time commitment by up to 82% and computational costs by up to 85%. AI-driven strategies are becoming essential in delivering exceptional client service, making personalized investment management more accessible to a wider range of clients. AI models predict when accounts need attention, optimizing tasks such as cash management, risk assessment, and tax loss harvesting. Advanced AI techniques, like zero-shot and multi-shot learning, enhance the adaptability and accuracy of investment strategies. The importance of human judgment in AI-supported systems is emphasized, ensuring decisions are reviewed and validated for consistency and accuracy. Challenges in AI implementation, such as handling complex conditions, are addressed by simplifying calculations and ensuring human oversight. Continuous improvement and evaluation of AI models are crucial, as AI is set to become an integral part of the finance world, enhancing efficiency and decision-making.   PLUS: Whenever you're ready... here are three ways I can help you prepare for retirement:  1.  Listen to the Market Call Show Podcast or Watch on Youtube One of my favorite things to do is to talk with smart people about investing, financial planning, and how to live a full life.  I share this on my podcast the Market Call Show.  To watch on Youtube  – Click here   2.  Read the Financial Freedom Blueprint:  7 Steps to Accelerate Your Path to Prosperity If you’re ready to accelerate your path to prosperity, the Financial Freedom Blueprint lays out a proven system for planning and investing to secure your financial independence. You can get a personalized signed hardcover copy – Click here 3.  Work with me one-on-one If you would like to talk with me about planning and investing for your future. – Click here       TRANSCRIPT (AI transcript provided as supporting material and may contain errors) Louis: Hi, I'm Louis Llanes, and this is the Market Call Show. Today, I'm going to be diving into a topic that's really reshaping the way wealth managers work. I'm going to be talking about how artificial intelligence can not only help wealth managers manage large numbers of investment portfolios more effectively, but also improve the results for investors, which is very, very important. Our discussion really was inspired by a white paper that I read. It was put out by Brooklyn Investment Group and it's titled AI and Portfolio Management Portfolio Monitoring. It was put out the third quarter of 2024. This research provides what I consider eye-opening data on how generative artificial intelligence is really able to help wealth managers scale operations, save time and reduce costs and also produce better results for clients. So I wanted to kind of break this down, because this is not an area that is optional anymore. This is something that is actually mandatory now in order to do a very good job for clients. So the first part I want to talk about is just the concept of offering personalized investments, very personalized investment management, more so than could have been done in the past, and being able to do it at scale, doing a lot of it. So one of the biggest takeaways that I've been reading in a lot of different research is that making personalized investments more accessible is really important. Making personalized investments more accessible is really important. So, people you know, historically, separate account management or direct indexing with tax loss harvesting, it was really only reserved for high net worth clients because it was so resource intensive. It took a lot of resources to get the job done, both with technology and with people. But now with AI, wealth managers can really scale personalization to a wider range of clients without there being like a proportional increase in the workload. This is really good news for a lot of investors. So imagine if you're a wealth manager that you can handle hundreds of separate accounts, each with a unique profile. The artificial intelligence can step into that automation and make many of those operational tasks a lot easier to do and much more accurate, freeing up a lot of time for portfolio managers. And this means that, instead of being restricted to a smaller group of clients, wealth managers can actually have more time and they can broaden their significant reach to more people and give you more individual attention. That's a big important takeaway here. The other thing I took away from my research recently is that the time and the cost efficiency is really going to be improved. So I want to talk a little bit about numbers. According to that research report that Brooklyn Investment Group put out, integrating artificial intelligence into portfolio monitoring and specifically can cut down on the portfolio manager's time by up to 82%. That's not just a little gain in efficiency, it's literally a game changer. And it's not just the time saving, it's also that there's potentially 63 to 85% reduction in the computational costs. You know, I've been in this business for a long time close to 30 years and actually over 30 years now and you know when we first started rebalancing portfolios, it was very intense and it's just gotten better and better. But now we've really had some breakthroughs on reducing the computational costs, so we're able to get much more precision and speed. So this is achieved by using that artificial intelligence and looking at accounts that need to be rebalancing. So a big part of our job is to make sure that all of our clients have their portfolios rebalanced and we need to know if something needs to be changed. So we're spending our time more on what we should be investing in and why we should be investing in a certain way, but the actual execution of making sure that we're aligned with that strategy is really a portfolio monitoring task, so we can allocate more resources truly on what's more important, which is understanding what we want to be investing and why we want to be investing in certain investments, and more time discussing with clients issues and customizing portfolios, and less time computating. So the other thing that I have taken away is that we've got a smarter portfolio monitoring, really algorithm. So the human brain can do a lot of things and we can really capture exceptions, but we can only do a certain number of things at a time, whereas in the technology world, we can give it guidelines and guardrails and rules to help us make sure that we are being consistent, which is really important in delivering consistent results. So how does artificial intelligent monitoring work? Well, basically, we have models that can predict when an account needs attention, whether it's deploying access to cash, if it needs more cash or less cash, or if the management of risk is an important element, what's happening with risk and is there some change in the risk relative to how we want it to be to be, whether or not there's an ability and an opportunity to harvest tax losses, to lower the tax bills. The system achieves nearly a perfect recall, meaning that there's almost no important rebalancing opportunity that is missed because these screens are looking at everything. So this predictive accuracy it really ensures that we, as wealth managers, investment managers we can trust our systems and identify the right moments for action without having to sift through every portfolio one by one. That's crucial when you're managing a large number of accounts. So I want to talk about another takeaway that's really important. Advanced AI techniques now are allowing us to do even more, so the technology is really fascinating. If you use large language models, these abilities really give you a performance that is much more extensive when we train the data, and so we can train the data based on how we trade and what certain things that we really want to be prioritized, and this can help identify even more effectively things that need to be done. And there's different, I guess, methodologies. One is zero-shot or multi-shot learning approaches and, in simple terms, zero shot learning allows artifi

    14 min
  3. Fishing in Less Crowded Technology Stocks | Ep 95

    11/03/2024

    Fishing in Less Crowded Technology Stocks | Ep 95

    Today, on the Market Call Show, we dive into smarter tech investing, I paint a vivid picture of the current tech sector, likening it to overfished rivers where investors crowd around large-cap stocks, inflating prices and squeezing out value. We come up with a fresh approach: focusing on smaller tech companies and early-stage private equity to achieve better diversification and risk reduction. We explore the valuation landscape as of October 22, 2024, shedding light on the significance of return on invested capital for predicting returns. We reveal that only a small fraction of U.S. tech companies achieve over 10% in return on invested capital, while high cash flow ratios make even profitable companies seem overvalued. Tune in to hear why I believe looking beyond the usual tech giants can open doors to sustainable growth in this crowded market.   SHOW HIGHLIGHTS I explore hidden investment opportunities in the tech sector with Luis Llanes, emphasizing the value of looking beyond large-cap stocks. Louis uses the metaphor of overfished rivers to describe the crowded and overvalued large-cap tech market, suggesting a shift towards small tech companies and early-stage private equity. We discuss the current valuation landscape of the U.S. tech sector, highlighting that only a small percentage of companies achieve a return on invested capital above 10%. Louis notes the median price to cash flow ratio for profitable tech companies is 25, indicating high valuations even among successful firms. We analyze the tech sector's high median price to book ratio of 5.11 and its implications for investors. The conversation touches on the challenges of navigating the crowded index world and the benefits of a bottom-up investment approach. Louis discusses the impact of artificial intelligence on the tech sector, drawing parallels to the dot-com bubble and the need for risk management. We consider the advantages of targeting small tech companies with strong fundamentals, profitability, and growth potential. The episode emphasizes the importance of a diversified investment strategy, combining both indexing and active equity management. Throughout the discussion, we encourage listeners to assess investments based on fundamentals and to be prepared for potential market volatility.   PLUS: Whenever you're ready... here are three ways I can help you prepare for retirement:  1.  Listen to the Market Call Show Podcast or Watch on Youtube One of my favorite things to do is to talk with smart people about investing, financial planning, and how to live a full life.  I share this on my podcast the Market Call Show.  To watch on Youtube  – Click here   2.  Read the Financial Freedom Blueprint:  7 Steps to Accelerate Your Path to Prosperity If you’re ready to accelerate your path to prosperity, the Financial Freedom Blueprint lays out a proven system for planning and investing to secure your financial independence. You can get a personalized signed hardcover copy – Click here 3.  Work with me one-on-one If you would like to talk with me about planning and investing for your future. – Click here       TRANSCRIPT (AI transcript provided as supporting material and may contain errors) Louis:Hi, this is Louis Llanes for the Market Call Show. Today I'm going to be talking about fishing for less crowded technology stocks and it's really a suggestion to help you reduce risk and diversify your portfolio. So I live in the beautiful state of Colorado, which offers excellent fly fishing for trout, and when I first moved here I learned that the fish on the Blue River in Silverthorne. You had to be a really good fisherman. The fish was. There was a lot of fish there. The rivers were full of trout, but it was located behind a popular outlet mall and it drew a lot of tourists to that mall. So there was a lot of men out there who would leave their wives to go shopping and they'd head down to the river and it to that mall. So there was a lot of men out there who would leave their wives to go shopping and they'd head down to the river and it made the river really crowded and you could see the trout everywhere. They were all over the place. The water was very clear and you could perfectly present your fly because we were fly fishing, you could perfectly present that fly and you could even be bumping them on the nose with the perfect fly and they would still not bite. They would just leave it alone, and that's what happens when an area is overfished. That's what I'm feeling the tech sector feels like. The tech sector feels real similar, because there's tons of money that has been chasing these tech stocks and in the market where the large cap tech stocks dominate and the IPO market has dried up, it makes more sense to seek opportunities in less obvious places, in my opinion, like select small tech companies and early stage private equity. Instead of putting all your money into well known names that dominate the large portion of the S&P 500 that everybody's talking about, it's more logical to look for less crowded areas. In my opinion, there's way too much money chasing the same indexes and that's also pushing up those tech stocks, because the tech stocks represent almost a third or, depending on how you categorize tech stocks, it represents over a third even of the S&P 500. So here's the valuation picture today, and today is October 22nd 2024. To put things in perspective, I ran some numbers on the US technology sector using the GIX standards. The GIX is a it's basically it's a standard for categorizing tech stocks, or really all the stocks. Now there's 638 companies that are in the technology sector in the United States, but only 21.2% have a return on invested capital above 10%. So I like to buy companies that are profitable, that have good returns on capital, because that is a big determinant of expected returns. So most companies in the tech sector right now have a negative return on invested capital. For those with a reasonably good return on invested capital, the median price to cash flow ratio is 25.26 and the median return on invested capital is 19 in just in the tech sector. So these companies trade at a median price to book ratio of 5.11. So, based on using a multi-stage fair value calculation, which a lot of analysts would do for companies that are growing fast and then they start slowing their growth and then go into more of a steady state, if you just use reasonable expectations for companies in the tech sector, you find out that you generally rarely would be in a situation where your price to cash flow ratio is above 20. Yet the median right now is 25. So for even the most profitable tech companies they're very expensive. So, if you know, take a look at them in terms of percentile. You'll see that. You know the vast majority of the tech companies are really below the line and a lot of them are significantly below the line, like at the 10th percentile in return on invested capital. The average return on capital invested capital is like negative 27% negative 27% and even when you go to the most profitable, if you look at the decile, the top 10% of return on invested capital in the tech sector, the average return on capital is 21%. So you know, I mean we're in a situation. My main point, I guess, is that we're expensive right now. So finding opportunity and better rivers is really what we want to do. We want to look at areas where there's a bigger return potential and maybe smaller companies are a better place to look, companies that have higher returns on capital and strong business models with smaller allocations to maybe early stage private equity, things like that, because in the index world today it's overcrowded, like we talked about. And, to make matters worse, a lot of the brokerage firms and a lot of advisors are indexing right now and a lot of people are offering a lot of like. Investment advisors are offering direct indexing, where you're able to buy the stocks directly in an index, and many RIAs or registered investment advisors they're adopting this. Registered investment advisors, they're adopting this. I see a lot of advisors who are, you know, maybe not quite as experienced, out there looking at how well indexing has done recently and kind of extrapolating that's how indexes are gonna do in the future and they're making that assumption. So they're choosing to go this way and this is really in their minds makes them feel like, hey, indexing is a no brainer and I'm not anti-indexing and I think a proportion of portfolios could be indexed. In fact, we have strategies that are a core plus, where there's some indexing and then some active. But if I look at things kind of more the investment landscape, more from a rational standpoint in terms of expected return based on fundamentals, I think you have to kind of be prepared for either a melt-up or a melt-down situation, and you hear this a lot. There's certain research firms that will talk about this melt-up concept where you have stocks running up really rapidly because we're printing money and there's money is trying to find a place to go and that's probably gonna go into stocks, and then other people say, hey, this is just the opposite. Inflation's going to get high, interest rates are going to go up and then we can have like a meltdown. So the truth of the matter is we don't know exactly which direction this is going to go, and that the best way to invest really is to have more of a bottom-up approach, where you're looking at individual businesses based on fundamentals and, like I, always talk about the quality, et cetera, et cetera. So I want to be prepared for either scenario and that means just going bottom up. Now this type of environment is kind of more ripe for volatility spikes. In fact, I've heard some analysts are expecting volatility to increase after the election. So, but volatility spik

    13 min
  4. Are You Leaving Money On the Table? | Ep 94

    10/11/2024

    Are You Leaving Money On the Table? | Ep 94

    Today, on the Market Call Show, we're uncovering three powerful yet underutilized strategies that could revolutionize your retirement savings approach. We dive deep into the world of the mega backdoor Roth IRA, revealing how high-income earners can bypass traditional contribution limits and potentially save thousands in taxes over time. Next, we explore the often-overlooked realm of self-directed investment options within 401(k) plans. Using examples from industry giants like Fidelity and Charles Schwab, we illustrate how these tools can dramatically expand your investment choices and potentially boost returns. Drawing from years of experience in wealth management, I share insights on the critical importance of asset location. We discuss how strategic placement of investments across various account types can significantly reduce your tax burden and enhance overall portfolio performance. As we navigate through these complex strategies, we emphasize the value of holistic financial planning. Whether you're a seasoned investor or just starting to take control of your retirement savings, these techniques offer a roadmap that focuses on wealth accumulation.   SHOW HIGHLIGHTS I discussed the concept of a "mega backdoor Roth IRA," which allows for substantial after-tax contributions to a Roth IRA, even for high-income earners. Explained the different types of 401k contributions: pre-tax or traditional, Roth, and after-tax, emphasizing the importance of checking if your plan supports after-tax contributions. Detailed the steps required to maximize contributions using the mega backdoor Roth IRA strategy, including the need to max out regular 401k contributions and then contribute additional after-tax dollars. Highlighted the overall 401k contribution limits for 2024, which are $66,000 for those under 50 and $73,500 for those over 50, including all sources of contributions. Outlined the advantages of the mega backdoor Roth IRA strategy, such as high Roth contributions, tax-free growth, bypassing income restrictions, and avoiding required minimum distributions (RMDs). Discussed the potential disadvantages of the mega backdoor Roth IRA strategy, including plan limitations, tax complexity, contribution limits, and immediate taxes on gains if not converted promptly. Introduced the concept of a self-directed 401k investment strategy, which allows for greater investment flexibility and the potential for higher returns through options like Fidelity Brokerage Link or Charles Schwab PCRA. Emphasized the importance of checking plan eligibility for self-directed investment options and the benefits of utilizing investment advisors for managing these accounts. Explained the concept of asset location, stressing the importance of placing tax-inefficient investments in tax-deferred or tax-free accounts to optimize tax management and overall returns. Highlighted the use of technology and advisory expertise to integrate retirement accounts into a comprehensive financial plan, improve tax efficiency, and optimize rebalancing strategies.   PLUS: Whenever you're ready... here are three ways I can help you prepare for retirement:  1.  Listen to the Market Call Show Podcast or Watch on Youtube One of my favorite things to do is to talk with smart people about investing, financial planning, and how to live a full life.  I share this on my podcast the Market Call Show.  To watch on Youtube  – Click here   2.  Read the Financial Freedom Blueprint:  7 Steps to Accelerate Your Path to Prosperity If you’re ready to accelerate your path to prosperity, the Financial Freedom Blueprint lays out a proven system for planning and investing to secure your financial independence. You can get a personalized signed hardcover copy – Click here 3.  Work with me one-on-one If you would like to talk with me about planning and investing for your future. – Click here       TRANSCRIPT (AI transcript provided as supporting material and may contain errors) Louis: Welcome to the Market Call Show, where we discuss investing wisely and living well. Tune in every Thursday to Apple Podcasts, Spotify, Google Play or subscribe on YouTube. Hi there and welcome to the Market Call Show. This is Louis Llanes. Today, I'm going to ask you a question: Are you leaving money on the table? Are you leaving money on the table when it comes to your retirement accounts? This is one of the things that I've found to be very common. A lot of people don't understand some of the strategies they could be doing that could increase their wealth, lower their tax bill and, overall, make their financial plans much better, in particular, for those people who have high income and are really in a situation where they're trying to maximize their retirement accounts. So let me just kind of set the stage about what I'm talking about here. There's really three less known strategies with your retirement accounts that can significantly help you build more wealth, create more income for longer and save on taxes. And basically what's happening is most people who have built capital in their 401k and now it's grown to a significant amount of their net worth, they really become to rely and will need to rely on these funds for future income. So typically these people are high income earners and they have high income taxes, and one of the things that's concerning now is many people are concerned that taxes could increase, especially since the sunset rules may be ending, you know, so that we may see that the tax rates will be bumped up automatically. And also inflation has been raising income brackets for a lot of people. So this is not talked a lot about, but it's really happening and I see it every day when we're working with clients where their incomes are going higher because of inflation. Just to stay even, incomes have to go up, but the tax rate brackets stay the same, so the cutoffs, the amount of income that you need for each tax bracket, doesn't really change. So in essence, everybody's tax rates go up because as you make more income, the tax rates go up, so that that creep in an income tax rate increase is also affecting many people. We have a lot of uncertainty in capital gains tax and income taxes. Next year there's a lot of election uncertainty and that's also leading me to want to get this out there and hopefully this can help you. You know, when you have money in your retirement account, one of the basic things that I'm sure you understand. Most people do understand that all of the money that you take out from your retirement accounts when you retire is taxable as income. It's taxed to your income tax bracket. That bracket may be higher than the capital gains tax rate, depending on how things turn out. So I want to talk about these three strategies. You may have heard of them, you may not have, but I want to make sure that we cover them because they can mean a lot of money in your pocket. The first one some people call it the mega backdoor Roth IRA. This is an advanced retirement strategy. It allows you, as an income earner, to contribute substantial amount of after-tax dollars into a Roth IRA, even if you exceed the typical income limits for a Roth contribution. So here's a breakdown of how this concept works and its pros and cons. The first thing is a 401k contribution has different types. You can contribute into a 401k into three different ways. First is pre-tax or traditional contributions. The second is going to be a Roth or after-tax contribution. And then there's after-tax. It's different from Roth. It's not common in all plans, so you have to check to see if in your plan you can do an after-tax contribution as well. Most big plans that we see, or sizable plans, do allow for this, so you'll have to check to see if that is available to you. So the second thing is the mega backdoor. Roth has a few steps that you have to take in order to maximize your contributions and get the most tax benefit. The first step is you max out your regular 401k contributions. So, for example, in 2024, this is $23,000 per year if you're under 50. If you're over 50, it's $30,000. And your employee contributions, whether pre-tax or Roth, that is your maximum contribution you can put in. But the second step is really important. You can contribute additional after-tax dollars in your plan. So some employers allow for after-tax contributions above that standard $23,000 or $30,000 limit. The overall 401k contribution limit in 2024 is $66,000. That's if you sum them up and that's if you're under 50. If you're over 50, it's $73,500 in 2024. So this includes all sources your employee contribution, your employer match and any after-tax contributions. So a lot of people think that limit is only $23,000 to $30,000. For many plans, if you add it up to the total contribution limit, including after-tax contributions, you could get that number to be significantly more. In fact it's over double the amount. So that's important to understand and over time you can significantly increase your tax savings. So now here's the other thing. The third step here that I want to talk about really is the kicker. If you perform an in-plan Roth conversion or roll the after-tax contributions into your Roth IRA, this allows these contributions and their earnings to grow tax-free. So let's just use an example: Assume in 2024, you contributed the maximum $23,000 in pre-tax contributions to your 401k and then your employer contributed another, let's say, $10,000 in a match. That leaves you with room to contribute another $33,000 in after-tax dollars and that would give you that total of $66,000. You can then convert these after-tax contribution to a Roth or a Roth 401k and if you do that immediately, you will not have a gain problem. It's very important to understand that. So let's talk about who can do this. First of all, the employer plan must be compatible. Not all 401k plans allow after-t

    27 min
  5. Preparing Your Portfolio for Retirement | Ep93

    09/12/2024

    Preparing Your Portfolio for Retirement | Ep93

    Today, on the Market Call Show, we're discussing the importance of authenticity in financial planning. Using a great Rush analogy, we look at how sequencing returns impacts the longevity of your portfolio , and we talk about strategies to navigate varied markets. Most of us are concerned with peace of mind in retirement, and having enough to do everything we want to do, so taking a personalized approach to planning that considers both flexibility and fixed income is key to achieving the retirement we want.   SHOW HIGHLIGHTS In this episode, we explore how to craft a lasting retirement plan, with insights from Louis Llanes, Senior Vice President at Farther Wealth Management. We discuss the impact of the sequence of returns on the longevity of retirement funds and share strategies to manage varying market conditions effectively. Understanding one's financial personality is emphasized, with references to Carl Jung and Tom Basso, to help make more informed and personalized investment decisions. We examine the trade-offs between probability-based investing and a safety-first approach, as well as the balance between flexibility and a fixed income. Essential retirement strategies, including optimizing withdrawal rates, portfolio diversification, and long-term care planning, are covered in detail. The episode introduces the concept of bucketing strategies, alternative investments, and the importance of tax management in securing one's financial future. We delve into the importance of asset allocation and how different asset classes perform under various economic conditions, emphasizing the need for diversification. Strategies for managing healthcare costs and avoiding common financial surprises are discussed to help ensure peace of mind in retirement. Listeners are encouraged to join upcoming monthly webinars for more in-depth discussions on retirement planning topics. The episode concludes with gratitude to Tom Basso for his valuable insights and mentorship, and an invitation to tune in to future episodes for expert advice on retirement planning.   PLUS: Whenever you're ready... here are three ways I can help you prepare for retirement:  1.  Listen to the Market Call Show Podcast or Watch on Youtube One of my favorite things to do is to talk with smart people about investing, financial planning, and how to live a full life.  I share this on my podcast the Market Call Show.  To watch on Youtube  – Click here   2.  Read the Financial Freedom Blueprint:  7 Steps to Accelerate Your Path to Prosperity If you’re ready to accelerate your path to prosperity, the Financial Freedom Blueprint lays out a proven system for planning and investing to secure your financial independence. You can get a personalized signed hardcover copy – Click here 3.  Work with me one-on-one If you would like to talk with me about planning and investing for your future. – Click here       TRANSCRIPT (AI transcript provided as supporting material and may contain errors) Louis: So good, I'm glad we're here. Thank you for coming. Really, the webinar thing was really brought to my attention by really request, because I get a lot of questions about preparing your portfolio for retirement and I wanted to make available what the most common problems that I've been running across with individual investors and some of the pitfalls that they've run into and, some ways, provide some resources for you for ways for you to kind of overcome some of those challenges and not have those roadblocks initially at all as you're preparing for retirement. So that's really the purpose of this webinar. For those of you who may not know much about me, I'm Luis Llanos. I'm a Senior Vice President, wealth Management for Farther Wealth Management, so my company, wealth and Investments, recently merged with Farther, and so I'm now a shareholder of Farther and I'm the investment management committee. We managed just under $3 billion right now, and we have a wide variety of different types of clients. I'm a charter financial analyst charter smart market condition been managing money for over 25 years Gosh, it's actually close to 30 years now and so that's really a little bit about me. So I really want to dive in. Since we're running late on time, so let me share my screen and we can go from there. Sure, let's see. All right, you should be able to see my presentation. Can you see my presentation? Anybody Not hearing from anybody? Yes, you can see my presentation. Okay, perfect, all right. So let me just start off with a little bit of a kind of a question for you or a little story. So I was thinking about what is the biggest thing that I guess determines people's success when they are preparing for retirement and they actually do retire and they start living off their portfolio. And it got me thinking about just a common success factor that most people have, and I thought about some people that I have followed. On the right there that's a band called Rush, one of my favorite bands. They started out, you know, trying to do what all the producers told them they should do. They, you know, the producers said they should try to sound like Led Zeppelin or they should do certain things and be make your song short. And they just decided that you know, that wasn't us. And they did their own thing and they had a. They had an initial flop, trying to do what everybody else told them to do, and then they just said look, we're just going to be who we are. They made an album called 2112 and they exploded because they knew who they were and they, they were authentic as to who they are, and, of course, you know some of these other people and since we don't have a lot of time. I won't go into all the stories, but each one of these famous people. One of the things that they determined was I'm going to be myself, I'm going to understand myself and I'm going to. I know I'm going to be making trade offs, like there's no perfect answer, but if I'm true to myself, I can live with the trade-offs and I can have a successful outcome, and that's really the you know what I wanted to talk about, because that is about the same situation that people have with retirement planning or investing in general. There's always a trade-off, trade-off between one ideal objective that you may have off, between one ideal objective that you may have and then something else may, you know, be affected because of that. You know, carl Jung said that he who looks outside dreams, but he who looks inside awakens, and that's very, very true. So I know Tom Basso is on this call and I've learned from him as a successful investor that he talks a lot about. Hey, I need to be understanding what my situation is and I need to do what's right for me. What is right for me may not necessarily be what's right for somebody else, and every time you do that, there's going to be a trade-off, and the biggest trade-off when it comes to preparing your portfolio for retirement tends to be this desire for certainty. In other words, I want to know exactly what my income is going to be, what my return is going to be versus what my lifetime total retirement income could be and my terminating estate wealth. So the more certainty you have you know what you're going to get the less return you're going to make and therefore you're probably going to have less lifetime income and you'll probably pass on less wealth to your heirs. So that's just one example of the types of trade-offs that you have. So I want to talk first about understanding yourself, because everything goes from goes from there. It starts with that, and I'm going to just talk about some a series of trade-offs that everybody faces when they're doing their portfolio for retirement. And then I'm going to stop for questions, and you can, you can answer. You know I can hopefully answer some of your questions, and then we'll move on to the next topic. Okay, the first one is probability-based versus safety first. So probability-based means that I'm investing in a way and taking my income from a portfolio that's diversified across a lot of different investments stocks, bonds, real estate, alternatives knowing that I'm going to have some ups and downs in that portfolio, but I'm okay doing that and my I know my return is more variable, but I'm likely to have a higher rate of return over the long run. On the other end of the spectrum is the safety first, which is I want to know contractually what I'm going to have as an income level. That would be like pensions, annuities, lifetime income protection, holding government bonds to maturity. Basically, you are not affected by capital gains fluctuations. So those are the extremes. Most people fall somewhere in between there. So that would be your first trade off. And then the next trade off has to do with your desire for optionality or having the ability to be flexible. Like, if you really value being flexible, you want to have the ability to make changes for favorable economic conditions or any change in your situation. Then that would be one type of mindset and I tend to be more of an optionality mindset person. Other people are not that way. They like more of a commitment, a desire for some dedicated source of income. There you're really looking for some kind of a specified long-term solution and a lot of people feel more satisfaction with that because there's less decision-making, there's more you know, maybe their family members would have less burden as well, and you tend to kind of set it and forget it. Those are two extremes. So those two trade-offs that I mentioned, those tend to be the biggest, most important trade-offs. Now I'm going to talk about a couple more trade-offs that I want you to think about that may affect you. One would have to do with accumulation versus distribution, and I'm not talking about, I'm talking about during retirement. So some people they would opt out to

    45 min
  6. Current Market Turbulence | Ep92

    08/15/2024

    Current Market Turbulence | Ep92

    Today, on the Market Call Show, we examine strategies for navigating volatile market conditions. Recent turbulence, driven by factors like the global sell-off, tech declines, and yen carry trade unwinding, has intensified volatility. We dissect the economic and geopolitical influences intensifying volatility. We illustrate the multifaceted challenges facing investors through examples such as NVIDIA's production issues and looming stagflation fears. Additionally, we consider election-year uncertainties and their impacts on sentiment. Yet amidst shifting seas, opportunity remains—with prudent planning. Given overvaluation concerns, we stress diversifying beyond tech and maintaining awareness of indicators and policy shifts. For those nearing retirement, tailored strategies emphasize balancing risk through diversified equity allocation over heavy bonds. Well-informed risk management and acknowledging market cycles also feature prominently.   SHOW HIGHLIGHTS We discuss recent market headlines including the global market sell-off, tech sector decline, and the unwinding of the yen carry trade, with examples such as NVIDIA's production issues and fears of stagflation. The show highlights the impact of rising interest rates in Japan and the political and economic uncertainties leading up to the upcoming election on market sentiment and investor behavior. We emphasized the importance of diversification, especially in the tech sector, to mitigate the risk associated with sector-specific downturns. Stressing the necessity of staying informed about market developments, we discuss the economic indicators, and the impacts of monetary and fiscal policies on investment portfolios. I Explain the significance of risk management and being prepared for market cycles, likening it to a sailor adjusting to changing winds. We offer ideas for tailored strategies for those nearing retirement, cautioning against heavy reliance on bonds and advocating for a balanced equity allocation to sustain long-term withdrawals. I discussed the role of political and economic policies in affecting market volatility and the importance of understanding their impact on investment portfolios. We discuss having an emergency fund and a diversified portfolio to manage withdrawals during market downturns without negatively impacting growth assets. I encourage investors to remain calm and consult with trusted financial advisors or level-headed colleagues during periods of market uncertainty to maintain a long-term perspective.   PLUS: Whenever you're ready... here are three ways I can help you prepare for retirement:  1.  Listen to the Market Call Show Podcast or Watch on Youtube One of my favorite things to do is to talk with smart people about investing, financial planning, and how to live a full life.  I share this on my podcast the Market Call Show.  To watch on Youtube  – Click here   2.  Read the Financial Freedom Blueprint:  7 Steps to Accelerate Your Path to Prosperity If you’re ready to accelerate your path to prosperity, the Financial Freedom Blueprint lays out a proven system for planning and investing to secure your financial independence. You can get a personalized signed hardcover copy – Click here 3.  Work with me one-on-one If you would like to talk with me about planning and investing for your future. – Click here       TRANSCRIPT (AI transcript provided as supporting material and may contain errors) Louis: Hello, this is Louis Llanes for the Market Call Show. I want to talk a little bit about the headlines recently. A lot of people are asking me questions about what do you think about all this craziness in the market? In fact, I've had several people email me or text me or even as I'm walking down the hallway at the office, saying, how are you holding up with this market? And I had a conversation with a client who once was a stockbroker back in the day, a very sophisticated client and we were talking about the markets and we were talking about ups and downs and the difference between certain investors and how they deal with ups and downs. So I wanted to spend a little bit of time just talking about the major headlines that we've seen recently, that's affecting the stock market. And once I kind of get through that, I want to kind of give you my take on it and then just talk about what I think are kind of the lessons to get from the recent headlines and then also, in particular for people who are nearing retirement which is a lot of people who are watching this podcast or are already retired what this means. And it's just some reminders of some basic things to think about. When these headlines come about, they really bring certain aspects of fundamental investing to light. So first of all, let's talk a little bit about the recent headlines. So we had a global market sell-off. So, like on August 5th, the S&P 500 experienced a big drop. It was down like 3% and it was marking like the worst day we saw since December 2022. And that was part of a broader global market sell-off and the Japanese market had suffered the biggest one-day drop that it saw since 1987. The biggest one-day drop that it saw since 1987. In fact, it brings back. I remember the day that the market crash happened. Actually, I went into a small brokerage firm that day. I was in college at that time and I was studying finance and I walked in and I remember the branch manager of this brokerage firm was kind of in a panic and he grabbed all the brokers and they had a big open floor and he said do you realize what happened in the Japanese market? It had a massive sell-off. Today is going to be an ugly day and I just remember how everybody was running around. But what's interesting is our stock market did not follow through on the downside to the same extent as 1987. So a lot of people are making kind of a correlation between 1987 and today and really they're very different scenarios. So anyway, so there was a lot of concerns about economic growth and overvaluation of tech stocks, which I have been talking about for a long time. In fact, my last podcast that just was released last week I was talking about navigating in emotional markets. I actually recorded that podcast three weeks ago, so it was meant to go out sooner but we had a little bit of delay in launching getting it out. But I've been mourning about these problems for quite a while. So anyway, so that was the first thing. That's kind of the major headline the global market sell-off. And we also had a lot of headlines related to the unwinding of the yen carry trade. The yen carry trade is when investors borrow in the yen at low interest rates and they invest that money at higher yield, yielding assets, mostly stocks and other assets as well. But stocks were also a big part of the allocation that came from borrowing money. Like hedge funds and certain types of asset managers were doing more speculative leverage trades, where they're borrowing money in yen and buying stocks. Well, that unwound because we saw that there was a rise in interest rates in Japan and that caused a lot of margin calls in interest rates in Japan and that caused a lot of margin calls and that forced some selling in stocks globally and added to the market volatility that we saw. So that was more of what I would consider to be kind of a structural thing, and this is something that happens at market extremes. You tend to have those investors or traders that were over levered have to unwind leverage and it creates stress in the market. So I think that was a that was part of the headline. The other thing was the tech sector sell off. We talked a little bit about this, but the tech sector, particularly the so-called magnificent seven stocks, have been hit hard. You know, nvidia, tesla and other major tech companies have had significant declines recently. That contributed to the overall broad market sell-off. So NVIDIA, for instance, it faced a production issue with its next generation AI chips and that further exacerbated and caused investor sentiment to go sour. You saw the headlines in Financial Times, in Market, business Insider and other Wall Street Journal and that was kind of part of the concerns there. And to make things a little bit more concerning, we had a lot of talk about stagflation. There was particular analysts that were talking about maybe there could be potential stagflation where high inflation and the sluggish economy could prevent the Federal Reserve from cutting interest rates as much as they need to, because the market had been anticipating interest rates to be going down. And if there's stagflation then maybe the Fed will not be able to drop rates as much as the market is anticipating. So that scenario led to forecast of a possible 10% decline in the S&P 500 over the next quarter. Take that for what it's worth, but you kind of put those things together. It caused more angst. And then there's also the political and economic uncertainty Politicians have been. As you know, the election is coming up and it's playing a role. It's definitely playing a role. The recent market turmoil has been described by some people as the Kamala crash, or Kamala crash by critics. That's highlighting the political risks really that are associated with the election and potential economic instability. On this phone call that I had earlier today with a particular client, one of the things we talked about was how, really, for the most part, if you look at it historically, politics generally or I should say the election of the president generally affects certain sectors and industries more than it affects the overall economy. There is some effect there. But if you look at it statistically and you just kind of graph out the market and then you kind of overlay whether it was a Democrat or a Republican, there's really statistically not that much difference in the capital market outcomes. But there is definitely big

    18 min
  7. Staying Rational in Emotional Markets | Ep 91

    08/01/2024

    Staying Rational in Emotional Markets | Ep 91

    In this episode of the Market Call Show, we're discussing mastering long-term investing and balancing risk and return through strategies like adjusting asset allocation over time. With large-cap sell offs recently, we highlight opportunities in small-cap stocks and look at the fundamental analysis of these businesses.  Drawing my experience as a portfolio manager, I'll share some of the tools I've used, like quantitative analysis that can help safeguard your hard-earned capital before uncovering economic sectors with untapped potential, such as property and casualty insurance.  Wrapping up, we dive into way you can optimize outcomes by staying grounded in market turbulence, making increment adjustments, and embracing diversification across sectors and investment styles for stability.    SHOW HIGHLIGHTS I discuss the importance of long-term compounding and protecting investments during market volatility, advocating for a balance between steadier and more volatile investments in portfolios. We talk about recent market trends indicate an overvaluation of large-cap companies, suggesting that small caps may offer promising opportunities for investors. Emphasizing the significance of risk management, I draw on insights from my book, The Financial Freedom Blueprint, to highlight the necessity of sound economic principles and fundamental analysis. Investment expert Jim Rogers is cited, stressing that no single asset class is perfect and that a thorough risk assessment is essential for aligning investment goals with risk tolerance. I explore the strategic investment approach within the property and casualty insurance sector, recommending a blend of active and passive strategies for a diversified, all-weather portfolio. The importance of probabilistic thinking and incremental strategy adjustments is highlighted as a means to navigate the financial landscape successfully. Small-cap companies are identified as having rising potential, with quantitative analysis being a useful tool for building well-balanced portfolios. Fundamental metrics and scoring methodologies are recommended for better investment decision-making, rather than relying solely on indexing. I stress the need for a steady pace in investing, focusing on long-term fundamentals rather than reacting to market volatility.   PLUS: Whenever you're ready... here are three ways I can help you prepare for retirement:  1.  Listen to the Market Call Show Podcast or Watch on Youtube One of my favorite things to do is to talk with smart people about investing, financial planning, and how to live a full life.  I share this on my podcast the Market Call Show.  To watch on Youtube  – Click here   2.  Read the Financial Freedom Blueprint:  7 Steps to Accelerate Your Path to Prosperity If you’re ready to accelerate your path to prosperity, the Financial Freedom Blueprint lays out a proven system for planning and investing to secure your financial independence. You can get a personalized signed hardcover copy – Click here 3.  Work with me one-on-one If you would like to talk with me about planning and investing for your future. – Click here       TRANSCRIPT (AI transcript provided as supporting material and may contain errors) So part of the idea of long-term compounding is having investments that have more steadiness to them over the long term. Or, if you have investments that are more volatile, to have them sized in a way to their impact, so their impact is smaller to the portfolio. Intro Sequence Welcome to the Market Call Show where we discuss investing wisely and living well. Tune in every Thursday to Apple Podcasts, spotify, google Play or subscribe on YouTube. Louis Louis Llanes. Here I am going to be discussing and riffing on something that I haven't talked about in a while, and that's protecting your money. Today I was looking at the market and we saw a pretty good sell-off one of the worst sell-offs we've seen in quite a while and actually what's happening is to be expected. It's something that I've been talking about. I've been talking about how the valuation of the larger cap companies many of the companies that have been the darlings have really gotten out of whack, really, and we're starting to see a correction. I was talking to a friend of mine and I was telling him about how I saw small caps being a relatively good opportunity. I think there's a lot of skepticism out there sometimes when you have these big locations in the market, and it's understandable, because it's easier to follow the crowd. Following the crowd is something that we naturally have an instinct to do, especially when it comes to investing. One of the worst things that we ever want to do is to be in a situation where we feel like we're missing out or kind of the phone feelings that we can have that really create a feeling of angst when we see certain investments going up One of the things that's interesting about the investment world, at least in the public markets, is that you see marking up and increases in values happening slowly, and then, whenever you have a correction, it tends to be quicker and some people feel surprised by that. So, as a long-term investor who is focused on the economics of investments for the long run, based on cash flows, we can have periods of time where there's a dislocation or there's a disconnect between what we're seeing in the markets and what sound fundamental analysis would indicate you should be doing, and during those times it can be very challenging for investors because it's very easy to make decisions that are not based upon the long term. And in fact, many times, as a professional investment manager, we feel pressure, and I feel pressure from clients who are saying wow, maybe you're out of touch or maybe you don't understand what's happening. Maybe you're out of touch or maybe you don't understand what's happening, and you have to explain that these things are not one to one, but over time. Good, sound investing requires for you to compound over time and to think rational, long term, and I think we're in a position right now where many investors have just been indexing, which is something I've been talking about, kind of ad nauseum indexing, which is something I've been talking about, kind of ad nauseum, and whenever you have a situation where indexing seems to be the best and only thing to do, inevitably it is not the best thing to do in my opinion. Now, I have nothing against indexing. I think indexing has its place and should be part of a strategy. But, on the other hand, if you want to have above average rate of returns or if you want to have returns that on a risk adjusted basis that can weather a lot of different environments, it's better to have a fundamental approach where you're really looking at the economics and the cash flow to the economics and the cash flow. So I wanted to talk a little bit about stuff that's been on my desk and how it relates to, I think, what many high net worth investors are dealing with right now in terms of just making decisions for capital that are coming in from various sources and being in a position to protect your money. So in my book, the Financial Freedom Blueprint, in chapter four, I wrote a chapter called Protecting your Money and one of the things I say on there and I just kind of quoted Benjamin Graham who says Wall Street has a few prudent principles. The trouble is that they are always forgotten when they are most needed. That is probably one of the reminders I think that we need right now is what's most needed right now in terms of a principle is that the value of an investment is the present value of its future cash flows over time, and if you get too far away from that, then you will tend to have problems, and we've lost sight of that, I think, as investors you know because of for many different reasons. So, in the world of finance, risk management separates the winners from the losers, and it's more important to really, now more than ever, that you select your investments based on the fundamentals, and risk management requires you to have rules to size your investments. So I'm going to talk a little bit about sizing investments for high net worth investors and what that means to you, and thinking about your positioning. The most important thing is that your exits when you exit an investment or reduce your positions, your exits when you exit investment or reduce your positions and when you actually are attempted to break rules how to get your mind in a position where you can really work for the long run and be focused on the long run and redirecting your attention, and you know, we all want to say that we're rational, we all want to believe that we are rational creatures, but we really are emotional creatures, no matter who you are. So the biggest challenge is to stay rational. One of the ways that you can look at risk is volatility, which is just basically how much movement up and down various investments have. That is a it's a useful way of thinking about risk when you're coming from a fundamental standpoint. It's really not the risk that is the most important. The most important risk would be the chance of losing money based on the difference between where the market is pricing an investment now versus where its intrinsic value is its underlying value based on cash flows. The problem with the concept of intrinsic value is it's not a science, it's not something that you know with 100% certainty, so it's really something that you have to estimate within range and within reasonableness. So it's really more about reasoning, and when you have something that is obvious, or more obvious, that there's a difference between price and value, that's when you should be concerned, and so that's one of the things that I wanted to talk out. So the question is does buy and hold make sense? Well, I think buy and hold does make sense as long as you're owning

    28 min
  8. The Fear and Greed Index - Discussion with Jason Meshnick | Ep 90

    07/25/2024

    The Fear and Greed Index - Discussion with Jason Meshnick | Ep 90

    In this episode of the Market Call show, I sit down with Jason Meshnick, a market maker turned fintech pioneer whose intriguing career journey has taken him from the bustling trading floors of the early 2000s to the cutting edge of AI in finance. Jason recounts his winding path from a philosophy major in small-town Poughkeepsie, New York, to becoming a Wall Street trader and, later, a leader in tech for trading. We explore his transition to automated trading as floors shifted online trader jobs contracted and his move into roles in finance education and media. Jason offers a captivating look into the evolution of markets and trading strategies, from the dynamics of floor versus electronic exchanges to analyzing sentiment shifts through media platforms and tools like CNN’s iconic Fear and Greed Index, which he helped develop. Across various sectors of finance, Jason’s experiences highlight the human element alongside technical progress.   SHOW HIGHLIGHTS Jason Meshnick talks about his transition from being a market maker on Wall Street to becoming a fintech expert. We discuss the changes in trading desks from the early 2000s to the present, emphasizing the shift towards automation and a reduced number of traders. Jason describes his unconventional career path, moving from a philosophy major to a Wall Street trader, and his eventual move into fintech. Jason shares insights into the development of CNN's Fear and Greed Index, including the collaborative efforts and practical constraints faced during its creation. We explore the shift from floor trading to electronic markets and how enduring principles of market trading continue to influence career paths in finance. Jason recounts his personal and professional journey, including his move to Boulder, Colorado, and his involvement with the CFA Society. We dive into the intricacies of building decision trees for financial data analysis, comparing their transparency and reliability to large language models. Jason reflects on his editorial role at TheStreet.com and the importance of market sentiment analysis in shaping financial media platforms. We discuss the role of experience and a deep understanding of market nuances in successful investment strategies. Jason explains the seven indicators used in CNN's Fear and Greed Index and how this tool helps both sophisticated and retail investors make informed decisions.   PLUS: Whenever you're ready... here are three ways I can help you prepare for retirement:  1.  Listen to the Market Call Show Podcast or Watch on Youtube One of my favorite things to do is to talk with smart people about investing, financial planning, and how to live a full life.  I share this on my podcast the Market Call Show.  To watch on Youtube  – Click here   2.  Read the Financial Freedom Blueprint:  7 Steps to Accelerate Your Path to Prosperity If you’re ready to accelerate your path to prosperity, the Financial Freedom Blueprint lays out a proven system for planning and investing to secure your financial independence. You can get a personalized signed hardcover copy – Click here 3.  Work with me one-on-one If you would like to talk with me about planning and investing for your future. – Click here TRANSCRIPT (AI transcript provided as supporting material and may contain errors) Louis: Jason Meshnik how are you? Jason: I'm doing great, Lewis. It's so great to see you. Louis: I know I'm so glad to finally have you on the podcast. You know, just knowing you for so many years and you know, knowing that you have so much knowledge out there with regard to investing and just your overall creativity, I had to have you on and I'm so glad that you came on. Jason: Well, and one thing as you know from from our relationship, I've always gotten so much out of talking to you and I always learn something just through our conversations, and I feel like by the time this podcast is over, I will have five new ideas to to go after and try to figure out what to do, how to make them all reality oh god, I hope so, I hope so. Louis: it's all about the ideas you know exactly. It was funny. I asked you to send me a send me your bio and I've known you for a long time and we met years and years ago at a CFA meeting I think we were both on a board for the CFA Colorado or Denver chapter and and since then we've worked together in many capacities. But I didn't know a lot of things about you that I should have known just reading your bio. I knew that you spent 20 years in the fintech world and I didn't know that you were also working on some AI investment analysis, which I'd like to learn more about, and that you really have a lot of passion for educating. And I guess your coworkers asked you to write a newsletter. I had no idea about that and you know now what is this about. Vampires are rich. Why are vampires so rich? Jason: That was one of my favorite things that I wrote. Yeah, if you want to cover that now, we can, or we can talk later. Louis: I think we'll circle back to that, but I was a little what's that about. But yeah, and now you're doing some teaching at CU Boulder, teaching finance. We've done a little bit of lecturing together at the university level DU and things like that and I've always enjoyed watching you teach because you seem to captivate the kids. Well, they're not kids, they're young adults with your style. So I'd like to learn a little bit more about what you're doing there. And you are a Wall Street trader and market maker and there's a lot of things that you know about microstructure and investor psychology that I want to kind of touch on too. So, but the big thing is understanding that you were involved with the CNN, that popular feed and fear and greed index back in 2012, I guess that was put together. So I don't know. Maybe what we could do is talk a little bit about your background. I mean, I kind of covered it a little bit, but just maybe you can tell me a little bit about you know, share with the audience, your you know how you got in this business and kind of what's been your progression in this business. Jason: Yeah, so my guess is that everybody says this, but I came to it from a slightly different path, not that not that, you know, I didn't get out of college and immediately go to Wall Street, that's. That's a pretty normal path, right? But I was a philosophy major and I'm far from a philosopher. But I think what I took away from my undergrad as a philosophy major was just sort of a way of thinking, right, as opposed to being sort of a business person thinking only about money, it's more about thinking about other kinds of things and things that drive people and being able to draw from communication and trying to understand what people think and how they think and why they think, and I think it was one of the things that really fascinated me. Also, being a child of the 80s, you know Wall Street was so important. There's so many movies about it, right from from the Wall Street movie to I don't know. It seemed like every other movie that came out was about how to make millions of dollars on Wall Street, and so, of course, I wanted to be part of that. Having grown up in sort of a backwater, poughkeepsie, new York, I always wanted to go live in the big city, yeah, so that was sort of my start, was coming at it from kind of a weird direction and I ended up immediately going to work for well, a firm that no longer exists for a couple of reasons, but it was the trading arm of a New York specialist firm. So the specialists were downstairs on the floor of the New York Stock Exchange and my boss was one of their customers and he just worked upstairs in their clearing division and he was trading his own money. He had been a floor broker for 20 years, owned two seats, sold his seats, did pretty well on them, and then decided that he was just going to live the rest of his life as a trader. He brought his son in and then eventually I was working as a runner so you know fourteen thousand dollars a year and just wanted exposure, just wanted to be part of the action. Right, I love the action. I was so excited about just being there, the history I love the history of things. Um, I probably should have been a history major and so, just being in that environment, I ended up getting picked up because I was. I was pretty cheap, right, so they didn't have to pay me much and I ended up working and really falling in love with being a trader and learning about how the market worked and how floor brokers could help make these trades. We had a network of 20 floor brokers across the New York Stock Exchange and what was then called the Amex, and some of the regional exchanges too, so that we could trade and we'd strategize every morning and then make our buy and sell decisions and then, throughout the day, update them as needed. I'd like to say that we were the high frequency traders of the time, even though our frequency wasn't that fast, but we were sitting on both sides of the bid and the offer. Louis: Boy. Jason: times have changed, huh offer Boy times have changed huh yeah, I mean that's yeah, I like to say. When I, when I started in the business, there were people there who'd been on the floor in 1929. And so much of the floor of the New York Stock Exchange looked the same as it did in 19,. You know, if you, if you were to go, take Jesse Livermore and drop him, you know from 1929 and just drop him on the floor in 1992 when I started, he'd have been like I don't know what these TV things are that are all around. He wouldn't have even had that word, but otherwise he'd have been able to run into a crowd and know exactly what to do. And by the time I left in 2002, well, there wasn't even a crowd, right? I mean, everything was different about the floor of the exchange. I was a market maker on a fully electronic stock exchange, so the principles were all the same, but everything else had changed. It was so differen

    1h 37m
See All (92)

Ratings & Reviews

5
out of 5
2 Ratings

About

Timely and actionable investment insights for executives, business owners, and family offices, with Louis Llanes, CFA CMT.

Information

  • Creator
    The Market Call Show
  • Years Active
    2K
  • Episodes
    92
  • Rating
    Clean
  • Copyright
    © 2025 The Market Call Show
  • Show Website
    The Market Call Show