Rearview Mirror Investing – Episode 135

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler, and No BS Money Guy, Todd Strobel. Hey everybody, welcome to another edition of the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, we’ve got my co-host and bestselling financial author, Kim Butler, with us today. And today we’re going to be talking about rear view mirror investing. And Kim, I’m just going to let you take it from there and you can kind of tell us whether that’s a good thing or a bad thing. Well, when you brought up that term, I just had to laugh because rear view mirror,

[00:46] even though it’s hard to say, is exactly what we do when we are looking in the past, trying to make decisions about the future. There’s a well-known speaker that I enjoy listening to. His name’s Joel Weldon and he’s actually a longtime friend as well as a very, very well-known National Speaker Association-style speaker. And one of his funny lines is, pilots don’t use rear view mirrors. And obviously, if you think about the absolute comic-ness of an airplane pilot trying to fly his plane using a rear view mirror, he wouldn’t get very much progress, I don’t think. Plus, you know, when you think about what you’re doing when you’re looking in a rear view mirror, I mean, car driving aside, OK, we have to use them.

[01:38] But gosh, pretty soon we won’t be driving cars. So we won’t have that as an analogy much longer, right? I also think about the stock market and investing in general. You know, we are now moving at the speed of a plane. We’re no longer moving at the speed of a car where you, you know, literally have a trader standing on the floor executing a trade. I mean, these things are going down in millions of a second. So it’s more like a plane than it ever has been before. That’s right. I didn’t even think about the connection of that analogy. You drew it perfectly because when we look at historical performance, when we look back at what the stock market did or this particular mutual fund did, we are trying to make

[02:30] future decisions based on past information. And to a certain degree, there’s nothing wrong with that necessarily. It’s certainly how a lot of decisions are made. But there’s so much information coming at us today. Our economy is so different than it has been in the future that really we must start to find different ways to look at investing. And one of the biggest challenges is if you look at why the stock market did so well the last 20 years, it was, or 30, 40, whatever time frame you want to pick, it was essentially because of the invention of the 401k and of course the 403b that is so closely associated with it that caused so much new money to get put into the stock market. And yet we want to sit here today and use the 80s and the 90s as an example of how

[03:38] the stock market is going to perform in the future. And that’s not a good way. That’s like investing with a rear view mirror. That’s like, I mean, even if you do go back to our car analogy, trying to drive only using your rear view mirror, it’s just not going to work. It’s not effective from an investing standpoint at all. So I got a question back for you. Why do you think we’re so hung up on history as it relates to our investments? Well, I think we’re desperate to find some type of information that makes us feel that we have control, even if that control is an illusion. Yes. And as you know, we love the word control. We like to help our clients focus on what they can control. And the stock market is the most uncontrollable place that I can possibly think of.

[04:36] So not only do we have this issue of we’re trying to make future decisions with past information, we have absolutely no control. I believe it was Donald Trump, and this is not a political statement at all. And regardless of what you think about him from a political standpoint, I believe he made the saying, which is so apropos, that is, if you cannot control a particular marketplace, then you have no business investing in that company in the stock market that has a place in that particular market. In other words, if you’re going to invest in the stock market, it better be in a company where you control the industry or you control that company. And that’s really where we see the large invest stores succeeding.

[05:30] If you take a look at Warren Buffett or we go back to Trump, they succeed investing in the stock market because they’re truly able to control an entire company or possibly even an entire industry. And for us little guys, because we cannot do that, we don’t have the dollars to control a company or an industry via stock market, we would be wise to pick investments where we do have some control, something where we don’t have to use only the history to make decisions. Now, of course, we’re still going to ask about the history because that gives us some measuring stick. It gives us a yardstick, if you will, to go with. But if all we have is the history and we’re expecting the history to repeat itself,

[06:21] so if all we have is the stock market history as an example, and we’re expecting history to repeat itself when, as you said, now we’re flying at the speed of an airplane in the stock market instead of driving at the speed of a car, and now the worldwide economy is affecting companies on a daily basis because of the internet and the way that things are so connected, and then add to that because of that speed and the computers and the high-speed trading, and now, of course, we’re going to get artificial intelligence brought into the picture. It literally is a completely different business. It’s a completely different ball game than the stock market used to be so many years ago. Right, and you had mentioned the 401k, and I think the other factor that we have to add in,

[07:14] and I’ll get your opinion on this, is the 401k plus the fact that you had the baby boomer generation contributing to that 401k, and we’re now in a situation where 10,000 baby boomers a day retire. Yes, it is amazing what that kind of impact can have on any type of arena, and we’re seeing it all over the place. I have to bring up an ad that I saw just the other day. It was either Dish Network or Comcast or one of the big cable companies, and they were talking about their NFL series of programming that is available. Of course, football season, here we go. How many NFL games can you get on your device? They were talking about how you can get it at your home and on your smartphone, et cetera, et cetera.

[08:09] And in the middle of this ad for this NFL program is a younger guy that’s got his smartphone and an older guy that said, well, I’m retired. All I do is sit around and stare at the TV. Now they happen to be sitting at a park, and the older guy gets up at the end of the ad. Now remember, this is an ad that has nothing to do with retirement and says, if I were you, I would work as long as you can and don’t retire. And he walks off the scene, and that’s the end of the ad for this big NFL program. Very interesting that this message of don’t retire is starting to come out in all kinds of places. Of course, it’s one we’ve been preaching for a long, long time, but here you are with massive numbers, as you just stated, of people that are, quote, retiring, and yet we know in our practice

[09:04] these people are retiring to other work. And yet many, many of them may be turning to withdraws from 401Ks and 403Bs to supplement that work because they may not be able to earn as much. And they think, oh, gosh, I want to take this money now because I’m healthy now. I want to travel now. And there’s a lot of good that can be made around that kind of thinking. But nevertheless, it is going to have a very large impact on the stock market and on mutual funds. Oh, yes, definitely. And bonds, yes, because already we’re starting to see no income and no income from bonds. And then you want people, the government right now wants people to turn to stocks and mutual funds for income. And those are not easy places to create income. So not only do we have the challenge of maybe

[10:02] there’s no growth, we have the challenge of no good way to create income. And it’s why Partners for Prosperity has, for so many years, talked very distinctly about the difference between an asset or an investment that is growth-oriented and an asset or an investment that is income-oriented because they are two different animals. And your typical financial planner wants to lump them together. I guess the question that I have to say is that we’ve kind of painted a depressing picture here of rear view mirror investing. I guess our encouragement would be to just kind of start at zero with your knowledge. And what would be a good place to start building new knowledge for the new economy and the future

[10:54] economy? Well, we have a booklet that can be helpful in that arena. And you said it well, you want to have new knowledge. We want to be learning every day. I’ve always subscribed to the grow or die theory. And now I have a new one, and it’s move or die. And so not only do you want to keep your body moving, it’s just so evident to me what happens when they start or when they stop moving their body. Our mind is the same way. We need to keep our mind moving. And so there’s a great little booklet that we’ve written called Financial Planning Has Failed. And it is available to our podcast listeners at partners4prosperity.com ebook. And there’s an audio version there as well. And it educates on these alternative

[11:44] investments that we like to work with that are specifically for creating income, and that can also be for growth. So if you are still in that seeking of growth stage, which is very different than a seeking of income stage, you want to have an investment that you don’t have to use a rear view mirror to figure out. You want to have an investment where you can absolutely buy low and sell high every single time, where you don’t have to try to figure out the artificial intelligence or the gaming that the computers are bringing to the stock market. You just know by being involved in this investment that you’re going to buy low and sell high every single time. So grab the ebook or the audio version of Financial

[12:39] Planning Has Failed and have a listen for some great ideas in that area, as well as alternatives for income and alternatives for a place to store cash. Also, if you have a personal question or if you’d like to see one of your questions on a podcast, how would someone do that? There is a special email set up for our podcast listeners. It is hello at partners, number four, prosperity.com. That’s hello at partners, number four, prosperity.com. We’re happy to answer questions. Super. And we’d be glad to talk to you about the future, just not the past. So that’s going to wrap up rear view investing for today. This is Nobius Bunny Guy Todd Strobel. Once again, special thanks to Kim Butler and we’ll talk to

[13:28] y’all again soon. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.