Is This Rally For Real? | Q&A With Lance Roberts & New Harbor Financial

ladder with a slightly longer duration profile and our bonus structures. Good. I'm going to ask

this

question about bonds. to uh to you Mike um, what do you think of bond funds like the Dodge Cox income fund? um, I'm not very familiar with that one, um, but I'm into the second or short-term bond ETFs like Bill, uh,

this

person is approaching retirement in the next few years, they're currently allocated 60 40. Well, you know, bil, the etfbil has two and three month US treasury bills, if I remember correctly, it's not a bad option, you know, for people who just want to buy. that since they can't or don't want to buy the individual treasury bills, we buy the individual treasury bills for the clients, but the note is not a bad option, you will basically get the return on the treasury bills minus what the ETF charges, so bills.

I'm not sure how the SEC is performing. I'm not very familiar with it and I didn't look it up, but it's probably around four percent, so buying notes isn't a bad option if you don't have access to a money market phone that's all in US Treasuries. In the short term, go ahead and just buy tickets. I think the other question was about a particular Dodge and Cox mutual fund. I have to say that I'm not very familiar with it, so I don't know what the composition of that fund is. I don't know what the credit quality or average maturity or duration is and frankly I would use some type of bar strategy. often called where you are, you are leaning heavily towards the short end of the curve.

I know there will soon come a point where yields will probably stop rising. We're probably already there and you'll want to nail it down. Some long-term interest rates go down, you know, we suggest a higher weighting towards the short end, but maybe we go down about 15 or more on the long end of our portfolio. We happen to own a couple different ETFs. An example is TLT, which owns US treasury bonds that have over 20 years of maturity duration and I believe owns something like 30 different bonds. I think it's a good way to get in on some potential appreciation and long-term bonds if yields have

real

ly stopped rising.

Longer term we think they are likely to go down from here and in funds like TLT they will probably go up so I can't give advice on the specific phone but again I would bet a lot on short term treasury bills or bil and Dabble over the long term, we may have different opinions on how much, but 15, maybe even 20 percent over the long term, and if you're investing in individual treasuries, you might just want to start dollar-cost averaging. to 10 years. bond instead of TLT you can do that for 10, 15 or 20 percent so that's my best answer thanks okay thanks hey John the question that came up recently in the YouTube comments was that people He said: Hey, you know it's you.

Meet corporate debt um I think I think the message that we heard from a lot of people during 2022 was, "Ah, it's a little bit risky right now that the risk return is not there, especially compared to the risk return of the Treasury bond". but now you have some

real

ly big companies that are like almost risk-free entities, like Apple and Micro Microsoft, sitting on huge cash boards, um, and they're paying a little bit more, you know what the treasuries are. At this point, does it make sense in the current market environment to buy those bonds? Or is it the return on risk?

The advantage is still on the treasury side. Yes, the corporate bond market is one that deserves a deep inspection. I know at the time you talked about high-quality companies like Apple. I guess I'd first like to caution about some of the lower quality corporate bonds. You know, some of the bonds are always priced as what's called a spread. risk-free treasuries and the spread on, for example, junk bonds, high-yield bonds, right now corporate bonds are as low as they've been at any time and, you know, I think in the last few years, the spread is not compensating in our view nearly enough to justify taking on that risky debt right now, even at the lower end of investment grade, Spectrum triple B, um, it's very, very low, the spread between the bonds Treasury, uh, for quite some time now, um, frankly, I don't have My fingers right now are the extent to which we are in the premium sector, but I think we're going to start to see some opportunities in the corporate space of higher quality.

I would like to see those they do. make sure the spreads are appropriate, you know, something that offsets the risk, because we have a pretty murky economic picture here, you know, the companies are Apple and some of the big companies are laying off, which tells me that they have pressures of margin um, you know, I certainly could, uh, I don't expect to see big markdowns with some of those larger, good quality companies, but, um, first I want to take advantage of the comments from my com Mike, I think it still makes sense to have a Kind of a bar strategy, but in no way betting on a performance environment.

We think there will likely be better opportunities to move into fixed income, whether corporate or Treasuries, at some point in the future. and having some quantity at the longer end of the curve makes sense, at the very least, it's a hedge for the vagaries of where they go, but you know, it comes full circle. I think it will probably be timely. Within this, in the next few months we will start to look at some higher quality corporate credits, especially if we have a performance event here where those type of performance spikes in the short term, okay, great, and there are so many questions for come, boys.

I'm jumping from one question to another. Lance comes towards you. I have two questions for you, because I think the first one is super quick. This person specifically asks if they should set a year or 18 months. CD and I think they are going to invest a quarter of a million dollars. It's hard to answer that question without knowing the personal

financial

situation of the person you know, but my question is: how can you help someone differentiate between putting money in a CD? instead of saying like a treasury, they are the same when you are talking about a one year CD or an 18 month CD, they are the same.

In my previous life I used to match deposits to CDs to know when someone buys a CD, what you give up is, if the Treasury rate is only, say, four percent, as an example, the CD is going to pay a amount less than that, then you give up part of that fee because the bank has to make a profit on this. so you give up something to have this CD that the bank says okay, here it is and you can redeem it at maturity. This also goes back to the other question about the gentleman who was close to retiring 60 40 allowances evading the Cox income funds. great fund Pimco is a great fund that has been around for decades, uh, Doug blind from Jeff gun is missing.

The total return fund is an amazing bond fund, you pay a small expense ratio for them to manage your bond portfolio, but those are great options. is having a great bond manager managing the fixed income portion of your portfolio so I highly recommend them and they are also looking at the credit markets and allocating accordingly in relation to that so if you don't know how to manage a portfolio of bonds, leave it. they do it for you, you will be happy with them long term now they are underperforming close charges like everyone else, the mistake everyone is making right now is chasing short term performance, everyone is jumping around buying invoices or we have a we.

We have a lot of people buying notes right now and you know they're buying one-year CDs and they're missing the big picture, which is great, are you going to lock in this four percent rate for a year or are they just hoarding funds? money market at four percent, that's incredible, here's the mistake you're going to make when rates go down and down sharply and at some point your CD or whatever you have will mature in 12 or 18 months and everything is great. I made four per cent over the last 12 months. Now what are you going to do because now all returns will go back to zero on the short end?

The holding treasury returns will be one. percent, uh, if we go into a recession and you've missed out on all the capital appreciation that you would have gotten on the long end of the bond curve, then everyone's looking at these short-term yields right now. Come on, I'm getting four percent. You're missing the bigger picture, which is what happens after this very short-term period, so this is where it becomes really important to manage your bond portfolio and match that duration to your needs, especially over the long term. term, if necessary. generate income, I would lock in much longer durations in my bond portfolio here because this is probably as good as Treasury bond rates in particular over the next 10 years.

Well, great, that's where I was headed with this. Well, then, you know the risk of getting into, you know, locking yourself into a short-term, short-duration, soon-to-roll-over product or like a floating rate that gets whatever current short-term rate is going to go. goes down as rates start to go down, not only do you give up, if rates go down substantially you give up the current return you're getting, but you also miss out on all that capital appreciation, yeah, everyone was racking up ETF tips on last year. Remember that yes, and it has performed terribly since then, tip prices have gone down, so I did it.

CTF has been under enormous pricing pressure, so again, it's always important to make sure and match what you're trying to create in terms of return or capital appreciation how that all works with your portfolio what your goals are and make sure you're doing the right thing too many people are focused on the short term and missing the long term yeah Um, great point and again, that really underlines why we love that you guys come to the channel so often that people can actually hear what you're saying. It happens inside the mind of a

financial

advisor because most people don't know how to build a link port. a bond portfolio like the one you're talking about Lance that gives them the ability to take advantage of things in the short term, but also has positions to lock in the duration that they need in the long term for their goals.

Okay, I want to I want to ask my question again about the CD very quickly, so if a bank is offering a CD that basically sits in treasuries and you have to withdraw some of that yield to give it to the bank. Why not just buy Treasury bonds directly from an instrument like Treasury Direct? Because most people just don't know and really what it boils down to is that it's easy to buy a CD, but yeah, you also have to go back and ask the question: Why are you buying a CD for 12 or 18 months? ? Do you need that capital?

In other words, you know, just as an example, you and I have been talking, you know, by the way, I'm looking for a house. I've been outbid on three houses in the last month, so I don't know where this housing correction nonsense is coming from, but it's not just, but the point is, if I know, you know we're trying to buy a house, So I could put some money away for six months in a CD and get three percent of my money, but I need that money for a specific purpose in six months, 12 months, 18 months, whatever, so a CD is fine for that, but don't buy a CD. just because it's giving you a short-term return that you like because, again, this goes back to what the purpose of that money is: does that money need four percent for the next 10 years or does it need three percent for the next six. months, as with all investments, you need to make sure that the investment matches the duration of whatever option is used for that money.

I have another question that I know Lance will have a strong opinion on, but I'm going to ask you guys in New Harbor first, um, yeah, okay. I've been drowning in questions here, which is a big high-quality problem, but I'll try to find the question while they're at it. answering, but the question was basically about annuities um and guys, I know annuities have kind of a bad reputation, um here they are, here's the question, they have kind of a bad reputation. I think we could probably say that at times they have been abused by financial advisors who were not using them correctly in the interests of their clientele, but I think there are ways that annuities can be used intelligently, for people, because You know, retirement planning, this is a specific question about cashing out an annuity plan, um.

If you have a specific answer to this question, John will direct it to you. Great, but more comprehensively, can you just give your guys current opinion on annuities andWhen, if ever, does it make sense to consider them? Yes, we know a lot. about annuities, we rarely sell them, so take it for what it is, but I also wouldn't take that to mean that they are inherently bad and inherently always wrong, we just think there are often better solutions, um. Honestly, the question here is a good one, but we would need to know a lot more information about this annuity to give you specific advice.

It sounds like the reference to the annuity company taking 14 seems like it's probably a variable or even a fixed one. or indexed annuity that has what's called a contingent deferred sales charge basically if that's what it is and it's pretty high so I'm a little surprised by that it's basically to compensate for the fact that most annuities are sold by brokers who are paid commissions up front, quite large commissions, so this may be the insurance company's way of recouping the commission they may have paid to the broker. In this case again, we don't know enough information.

To speak with authority, that is indeed the case, but the bottom line is that it is not always easy, often there are things like living benefits in an annuity, death benefits, and other income guarantees that even if the cash value is of a certain level, those other benefits. that you've probably paid dearly in the form of high expense ratios can make it more valuable to maintain than to close it and every time you're told that closing something will require a 14 hit that deserves pause because that effectively sets up an incremental hurdle. that you have to jump. about if I had to put the money somewhere else, so I would like to be able to answer more concretely.

We certainly have the ability to evaluate people's annuities and give them objective feedback, but there are too many unknowns in this question to talk directly about this person's annuities. chips I think it's chip Chips ask a question here okay Atlanta I'll come to you because I know you have some opinions on annuities too if you have anything else to add but Mike very quick anything from the new port. annuity side, yes, no, just that, I think that surrender charge would make us look very carefully at the details of that annuity, we talk to new people, new clients and prospects all the time who have annuities that they bought somewhere else and very often we give them advice on how to make a stylish exit.

That's probably the best way to put it: make a graceful exit over time, which might include moving the annuity subaccount to a more conservative allocation if that makes sense. penalty-free amounts each year, usually around 10 percent or annuitize them into a pension, the bottom line is that most of the time it makes sense not to immediately give up that annuity and think of a more elegant way out, okay, great, Lance isn't even. biting your tongue, go ahead, no, that's exactly fine, um, look, there's only three reasons why you need an annuity in most cases, one, you're in a, you know, a lawsuit, happy, you know, kind of work, you know, uh, some profession where you have a lot of legal liability annuities are judgment proof, so a big reason is that you really have a high income and you really know that you max out your 401K and your IRA and you barely dense Your income savings is a great way to protect yourself. some assets that grow tax deferred over time and then three is that you really need an income stream replacement, in other words, when you retire you'll have a lot of money coming in for Social Security and in order.

We call it the Alpo diet, which is simply making sure you get a payment every month for the rest of your life that ensures the lights stay on, the food on the table pays the mortgage on the house, whatever the annuities are. be excellent and right now the returns you are getting from annuities are the best they have been in the last 20 years, so you can lock in a very decent rate of return with annuities for the first time in a long time because the interest rates have gone up, so this recent increase in interest rates makes annuities very attractive to someone who needs a fixed income replacement that has the ability to take advantage of them and use them appropriately.

But you know Mike and John were right. The big problem and the reason noise gets such a bad rap is because you know advisors have been selling them for the last 20 years. Well, I mean, they're just advisors, that's all they sell, you know all the solutions, you know everything, it's the only one. You know, when you have a hammer, everything's a nail, it goes with annuities because of that big commission, so they've really lost missiles, you know, mismanaged annuities like a mutual fund, an ETF, a stock portfolio. or a bonus, these are all tools. In the toolbox, everyone has very special needs and purposes and, if allocated correctly and used appropriately in a portfolio allocation, can greatly reduce portfolio volatility.

The risk of having no income in retirement outweighs the life benefits and medical costs. hospitalization, there are a lot of things that can be very beneficial for you, and one of the best stories, of course, is about Ken Lay, who was the CEO of Enron, had like $400 million in annuities, and died of a heart attack, so Know that money was never at risk during the Enron debacle in 2000 because everything was protected within an annuity, so if you are the CEO of a company and a business owner, That kind of thing, annuities are great for protecting assets in what we call money called starting over, so if everything goes wrong in your business, you have money that no one can touch to start over at some point. in the future so it's definitely something to consider, excellent good points and probably just the encoder on.

That's hey, if you think, for any of the reasons Lance just mentioned, you might want to explore what an annuity could do for you, obviously sit down with a financial advisor who's familiar with them, like all these guys, yeah, um. Okay, a question here about the dollar and the interesting thing is that that was all we could talk about live in 2022, but the dollar is really weakened. You just spent steadily. You know I'm going to use it. It's been deflating and I don't want to get caught up in the definitions of deflation, but the dxy index has been falling, you know, since November, basically, whether this person is right or not, we're seeing kind of a bottom here. on You know, level 102 103, um, but I'm just curious, guys, um, what's your general Outlook expectation for the role the dollar will play in 2023? um, Joe, why don't we start with you?

Yes, the dollar has uh. Really oversold in the short term here and it has bounced brutally, I will say in the last few days and in no small way, I think in response to the FED meeting, the Fed, I'm trying to share a chart here. just to put it in context, let's see here, can everyone see that graph? They still can't, but now they can, okay, this is a daily chart, each of these candles is a day within the dxy dollar index. We can see the peak of the dollar in September of last year, a very steady decline, a downward trend, a downward trend in the dollar and just in the last three days we have had this violent rebound of essentially this purple line here it is what is called the 50 Bollinger band. 2 day Bollinger band which is essentially two standard deviations away from the moving average statistically it is a measure of oversold, very vicious ba

lance

here, we are approaching the 50 days which can present some short-term resistance as well as the 200 day, which is that previous high, you know, I think the path of least resistance right now is probably higher, all bets are off, although based on what Powell may Whether you say it or not, that certainly has a huge influence on the dollar and the monetary policies of other countries. central banks in relation to what our Federal Reserve is doing, but yes, the expectation that we had is that the dollar was really oversold and that a fairly pronounced ba

lance

was likely and that is what we have seen here.

I think the question was to link it. Going back to precious metals, all things being equal in a vacuum, an absolutely stronger dollar can be a headwind for precious metals in the short term, and that's actually what you know, last year was emblematic because we had a dollar very strong most of last year. As you can see, precious metals, that and the rising real interest rate were pretty strong headwinds for precious metals, so we know we wanted to have hedges for some of the precious metals mining companies that we own for clients. So in a vacuum, a stronger dollar can be a significant headwind for four precious metals.

We continue to cover our positions there, but a very, very big move here and one that we didn't think was going to be unexpected. It became very oversold and is doing what we thought would be good and very fast, can you link that to the stock as well? You know, a rapidly rising dollar gene

rally

tends to swing stock prices too much, well it certainly does for multinationals. companies companies that export many of their products abroad to people who buy and local currencies that are devalued relative to the US dollar. um you know, I think the real story is what a stronger dollar means for cash and other things as an alternative to stocks right now um.

You can make a very strong case that the stock is very overvalued. US stocks are highly overvalued on a risk-adjusted basis compared to 10-year Treasuries. If you wanted to just say, "I have to secure something." over the next 10 years and I have the option to do 10 years, 10 years fixed on a US treasury bond or 10 years fixed on the S P 500 right now on a risk adjusted basis, we think it is better to bet again by buying and holding passively. From here we believe that the best bet is probably 10-year treasury bonds. That's not what we recommend, of course, because we are more tactical in our approach and have no intention of suggesting that people buy things and passively hold them for the rest of it.

The next 10 years, but I think the interest rate and the strength of the dollar really influence some of the alternatives to stocks that may be more compelling. Well, Mike, I want to ask you this question and I want both companies to respond. answers to I think it's a good question, um, when the market goes against your plan, to what extent do you apply dollar cost averaging to lower prices instead of saying hey, wait a minute? I think my thesis is wrong. I need to shift right, so let's get started. With that, Mike, how much pain do you usually have to experience before you say oh, you know, maybe I have the wrong plan?

It depends on the type of investor you are. One thing that I think is really important for everyone is to understand who they are more than anything what type of investor you are if you are a purely values ​​based investor you are based on value you are looking for bargains you do your research you read the financials of a company you look at your cash flow your price to book and you are convinced that a company or industry is a good buy, it might make sense to hold a losing position and, in fact, the dollar cost averaging of that position, some large investors have done in the past.

Warren Buffett is a great example, but there are many other value investors who have done the same thing and it's not easy. You have to really fight your own psychology. You have to be able to be kind of Alone in the crowd when everyone else calls you crazy. but if you're that type of person, then yes, it might make a lot of sense to dollar cost average a position, even if you're losing, all of that should really be taken in context with your overall financial ability to handle that loss if it's wrong, your position size should be such that you can handle it no matter what, but it is not always bad to do so to maintain a losing position and increase it if you are more tactical if you are more of a money manager like We are New Harbour, we take into account a A number of different things when we take a position in both technical analysis and fundamental analysis, some positions that we have are more fundamental at their core, fundamentally, such as our outlook on precious metals mining stocks. technically we are very optimistic about them, the argument for gold seems very good, but the miners are a little less armored, so something has to be done, you have to have a plan, you can't just keep the cost at average dollars in a narrow sector like that without any plan, first of all, we keep thesize of our position within limits, we really don't want to be above 10 or 15 percent in that sector, secondly, there are many different ways that you can protect yourself that we tend to use.

Normally we use options positions, we have collars placed on at least part of our position and that means we sell calls to set a top on that position and then use that money to buy puts, which puts a floor on that position, for What If the worst happens, as you just asked about the stronger dollar, a stronger dollar could sink gold and precious metals, not always, but it could, and if it happens particularly in conjunction with last week, we could Watch gold mining stocks plummet to the floor, we don't. I really want to get stuck in the position of having to keep thinking about dollar cost averaging or take a stop loss on that, so we choose to use options so we can sit and wait for that process, so my best answer is that no one has the option. exact correct answer because if they had it they would soon have all the money in the world, but understand who you are and think about what your plan will be if you get there, but at that moment you don't know, decide if this stock falls. at 50 percent, then I have enough room to add something to it or say, you know, if it drops 15, I'm out, I have a stop loss there, it's better to decide those things now before entering the position and still have a clear head over all good, good answer Mike and you really made me think of a really interesting question that I'm going to ask you after we finish the next rounds here um and just to be super clear um I can tell you exactly when the precious metal mining companies are going to collapse a lot, Mike, because I'm already past my wash sale window, because of my tax loss, so as soon as I implement that again in the mining sector, that's when it's going to collapse, so I'll let you all know that that will be my service public to the precious metals investment community.

Hey guys, if you like this format, this monthly format of answering these questions live, do me a favor and let us know live. Chat and obviously if you have some constructive ideas too, please put them there, we read them all, but if you like it, let us know because then we'll get on with this, John, real quick. um, before we get Lance's answer from Ria's side, something about this question that you would like to add to Mikes or Mike summed it up pretty well for you guys. I'll just add a little bit, um, so all that goes into my next point about knowing what type of investor you are, there are some investors, we're not one.

Certainly, many of us don't take this approach with our clients that would have a kind of binary strategy, all in, all out, when different technical levels are met. You know they are very short-term traders. They don't care so much about valuations, they care about breakouts, technical breakdowns, technical breakdowns, and you know some people who follow that strategy will invest from zero to 100, based on those signals, our Pro, we pay mine a lot to the technical people . but not without considering the fundamentals and recognizing where we are likely to be in the cycle, so you know the technical break is strong, since, like the one we just saw, it is based on a textbook, there are many others things that influence our temperament. willingness to respect that signal so we are not seen, for example, recommending someone dramatically increase their exposure to the stock based on this technical breakout alone.

Is there any argument to say that yes, there is a slight bullish improvement in the short term? This is and that may justify a tactical change of a certain amount, but we don't think it's going to be something that forces a very dramatic change again: knowing the type of investor you are, the type of philosophy and approach. that you take it well, thank you John um Lance, anything else about this from your business side, how do you handle this well, no, there is, you know, when you talk about, you know, investing for something long term and, again, the question is when. something goes against your plan so when you make that decision and you know that's why we talked you know when we escalate when we buy a position it all starts as a trade so it doesn't matter how much you believe. in a company fundamentally everything starts as a trade, so I buy the fundamentally strong company, whatever it is, if it starts to perform in that position, I will ask on the scale up how to lower the bar, you should never average down on a stock We are simply destroying more capital trying to figure out where the bottom line is that is not investing, so you will not be a larger scale buyer as things start to prove themselves, so start small, have a clearly defined level that tell if this happens to this. position I have made a wrong assumption about my thesis and a good example of this is emerging markets. um, you know, if we go back to 2009 and there were a lot of arguments in 2009, the emerging market markets are going to outperform the markets. national actions, etc., have been lagging behind, they are very lagging behind.

The whole thesis that emerging markets outperform domestic markets has been wrong for 13 years, so if you bet that farm on a fundamental bet on emerging markets outperforming domestic markets, you have lost massive capital. opportunity in the last 13 years, so again you can adhere to a thesis that is fine, but the markets are going to dictate when that thesis is right or wrong and that is what you have to pay attention to and again Warren Buffett is a terrible example to use as a fundamental value investor because yes, you can buy a stock that is fundamentally valued.

The big difference is that when he buys a company, he takes the seeds in front of the board of directors and tells the company what to do, but he doesn't have time to do it. The Berkshire Hathaway front, when you pass away, Berkshire Hathaway will continue to own those shares for decades in the millennia into the future, however, for as long as that company continues to hold those shares it will continue to grow and do whatever it is going to do , investors don't have that time for that kind of time horizon, our time horizon is exactly what we have between now and when we need that capital to come back to us, so we can't necessarily make a 30-year bet if we have a duration of 10 years in our portfolio. because that's when we need the money, so having a very strong thesis and understanding what that thesis is and what the outcome is supposed to be is dramatically important to the performance of your portfolio over time and you need to keep that in mind At the time of You are managing your risk of loss well in that portfolio, very interesting and just to make sure I heard you correctly, you know that you said that you had to make each new position demonstrate its value before you were willing to invest more money in it, Yes, Paul.

Tudor Jones is one of the best traders of all time, he says losers never only losers add to losers and the reason is once a stock goes down something is wrong you have made a wrong assumption about that position now. I'm not talking about two, you know, I buy a stock, it goes down two or three percent, that's all I'm saying, but when you buy a stock and it goes down 15 20 30 40, your assumption about whatever it was is clearly wrong. . Don't add to that position, you are just destroying Capital, sell it, get away from it, reevaluate your thesis, do something else because remember for every investment we have an opportunity cost.

I have to take a decision. I can put dead money to work and I can quit. dead for a long period of time or can I take dead money and put it into something that's working now, make money now while I wait for that opportunity to get back to wherever it is okay, okay, well, here's the question I wanted to ask. and I'll let you answer first and then I'll get back to the new guys at Harbor, what's your job, guys, is to help as many people as possible, build wealth over time by sailing. What I consider to be an increasingly challenging market, so I think, in fact, when we spoke this weekend, you said that this was really one of the most challenging times to manage a portfolio that you've seen in your career, but to as we move forward.

I've tried to emphasize in many recent conversations on this channel that you know it's a partnership, right? I mean really you as a wealth creator are building a team of advisors to help you, we talked about that, you know, we had Tom Wheel right on top. I'm talking about having a good tax advisor, but you want to bring in professionals that you know are working together with you to create the best plan to build your wealth over time, so that's my question to you and that's what I'll start with. you're what makes a great customer no matter what, it's always interesting, so you know, a channel sends us an email and says or sends an email with new hardware and says, I want you to manage some of money for me, so when we contact them it's In a two-way interview, we interview them and they interview us because we have to make sure the client is a good fit for the way we manage money, the worst thing you would like them to do.

If it happens to a The client has a thought process or vision that does not align with ours because that is guaranteed to result in a very poor relationship and looks bad on us, it seems like you know that it is not good for the client, and that? making a good client is three things: one is understanding that the markets have risks and that not everything goes up all the time and that there will be years when the markets will underperform, so understanding how the markets work is very important to have a good relationship. If you have unrealistic expectations, if your expectation is that I'm going to give money to New Harbor or RA consultants and they're going to make 10 a year on my money, you're not going to be a good fit because the expectation is not realistic, uh, and in the end you end up you will be disappointed with the result, um, the other thing is also understanding that communication is extremely important, um, and what I mean by this is that not only the communication between us and the client or between New Harbor and its clients is important that communication comes back the other way, you know, the worst clients I've ever had are the ones that say here's my money, I'll know, I'll see you later, right, just do whatever. what you want to do, just do it, however you do it and you know I'll talk to you later, that's terrible because I have to make all these assumptions about who I think you are and what I think your goals are and then what ultimately happens. is that the client calls and is upset because we bought, you know a company that they just hate, right, they just hate this company, I can't understand why you would buy that company, having very good and clear communication so that the advisor gets to know the client which are your likes what are your dislikes what are your goals what are your objections that's why we spend so much time with the client Communication phone calls regular meetings understand what their needs are inviting clients to special events that Do you know from time to time take candied coffees and once you learn to interact with people?

Because the more we know, the more the advisor will know who you are personally, the much better you will understand how the portfolio will work and how I need to implement the portfolio, uh, to make it profitable over time, it will work for the client, so communication is extremely key, okay, great answer, okay, Mike, why don't we contact you for the new Harbor Side. Anything else besides, uh. Tell them what Lance said or do you have a different opinion, no, I think you know how to answer the question what makes a good client and basically someone you know is looking for, you know a trusted person, a consultant, someone who is willing to delegate You know that's important, if someone is purely a do-it-yourself hobbyist and really doesn't want to give it up.

Reinas is probably not a good client, obviously, someone who has some assets to manage and someone who is looking for a coordinated effort. I know with a team that you really want to focus on other things in life besides sitting and studying the markets for hours a day, so this is pretty simple in my opinion, okay John, anything else, uh, not really , I think I just want to. to key in Lance's comment that this is, you know, us, us and I'm sure Ra and Lance and their team would feel the same. We're not meant to serve all people, all people, you know, we have our style, our philosophy. and it is very important that both the client and we affirm that a relationship is a good fit from the beginning, ideally because no one wants to enter into a relationship that is not the right fit and we are perfectly at peace when we are not. the perfect match with someone, we just want to know that from the beginning, uh, but I think you guys are covering all the really important points, okay, great, and the point I really want to make here is that thisIt's a partnership like this.

It's not like Lance said, they just know, basically, they come and throw your capital on your desk and then they leave and say see you in 10 years, this is where you guys are. Do they know how to keep them? They are keeping their advisor informed. about your life expectations, your goals, what you are trying to do and you are meeting, you know with some type of frequency having a plan and acting against the plan and modifying the plan as new data appears, so now they know. I don't remember which of you said, but communication is absolutely key, right, very fast, by the way, you know, yeah, I said, we get it, you know, we get tons of emails and I myself get tons of emails from The Wealthy. site just because we say no, we are not the right company for you, don't be mad.

I have told people. I have told numerous people. Hey, we're not a good fit, maybe you should go talk to Mike and John in New Harbor, that happens probably twice a day you know, and I get really angry emails about why you know I'm being so rude I won't think We're not being rude, we're just not going. A good fit will not make for a good marriage and we don't want you to feel disappointed. We want him to have the best advisor possible that will give him the type of results he wants and if we feel that we are not going to be able to meet what your objectives are.

We don't want to disappoint you, so we're not being mean or anything and we're not trying. We don't want to make you angry. We are alone. trying to make sure I have the right advisor is great and of course that's what you want, an advisor is one who really has a fiduciary responsibility to say, look at my work, do what I think is best for you, even If that means I'm your business. is not the right choice for me, right, okay, so we're getting to the unfair part of the hour here where I have to ask you important questions and I barely give you time to answer them, so we have I have a question here about uh from Jaina.

Would you recommend selling single-family residential real estate right now? Obviously I think the answer is usually specific to someone's personal situation, but at a high level, you know what they think? What is your outlook for residential real estate for 2023? Why don't we leave it like this? And if you can answer your question about what the capital gains tax is when selling a single-family home, great, but yeah, really quick capital gains, there's another one. capital gains tax from 250 to 500, depending on whether you're single or joint, okay, just to add and clarify, that's correct and we're not exactly offering tax advice, we're not tax accounts, but there's kind of uh uh. primary residence requirement, you have to be in that house.

I think two of the previous five years as your primary residence to qualify for that exemption, that same exemption doesn't apply to investment properties. right, that's not your primary residence and um, yeah, yeah, okay, and if It's an investment property, and again, you guys are not tax advisors, but if you sell an investment property, you have a window to be able to transfer those funds. and make another property, right? Yes, 1031 exchanges allow that kind of thing. It has to be a similar property and that's another conversation. You can't, you can't take a residential house and move it to farmland, for example. or an office building, right, there has to be a similar property, yeah, again, you know, I mean, that's another real estate question, while we're at it, we'll go into detail in a future video, but Um, the People can own real estate in their retirement accounts, right, yes, but I wouldn't do it for a couple of reasons, one is that there are several things that you don't put in a retirement account and I personally wouldn't do it.

Um, I would put real estate on you, you know, if it's an investment of that future, it's your primary residence, that's kind of right, so if you want to buy your primary residence with your IRA money, you can work around that, but yeah , I do not do it. I don't think you can do it if you live in it, but yeah, I know, but you did it, but it's okay to just have it, yeah, you know, but anything you know has risks, so in other words, you know a lot of people. Like For example, they buy their most aggressive stocks inside their IRA and say if I make a lot of money, they will tax me to promote the tax-free Roth IRA.

Well, the problem is that all the tax benefits are lost. of a piece of real estate or a stock portfolio or whatever is within a tax deferral or a tax-free account because if I own a portion of if I have multiple investment properties, right? um, I can cancel, you know, all my expenses. all those kinds of things, if there's a property loss or a property gain, I can offset that, you know, I get all those tax benefits that I lose as soon as I take that side of an IRA, I lose all those benefits. prosecutors, so you I know it's very, it's crucial to make sure that you know it sounds good.

I'm going to put up this property that will grow to be billions of dollars. It sounds great, but in reality you miss out on a lot of benefits. the way to do it is okay, great, so John gets back to you real quick, and again we're in the rapid fire section here, residential housing outlook for 2023. Such a local, local phenomenon, you know, let me give you an example. I talked to a client of ours who is a residential home builder here in New England, their pipeline is Jam, the overall demand is off the charts, they're in a desirable rural type of area where maybe people are trying to get away from the cities , but we saw some statistics last year about record cancellations of new home projects in the US, so there is a local factor to talk about timeliness and ideal timing for the sale.

I would like to ask Janna. I hope I pronounced your name correctly. If you were to ask us this one on one, we would want to understand what your plans are. Everyone needs a place to live. I think you already know, so a question about whether I should sell, we want to know well where you are going. Live, you know what your options are. There is an opportunity cost to selling if you have to go and do something else that may be a bad time purchase or a poor decision, so it's very difficult to do it without knowing the details.

Be the first to say that we are not local real estate experts and you need to speak with a local market expert. Gene

rally

speaking, we believe real estate is still very overvalued. We do not believe that is the true dynamic of higher prices. Interest rates and the impending slowdowns in labor markets, which we believe are going to be largely, have resonated or reverberated through real estate prices, but just look at rent, even compared to median wages, still they are crazy. The charts speak to a really fundamental imbalance in the residential market, uh, that we think will probably take many months, if not years, to develop.

I hope you're right because I'm still trying to buy a house and I need the prices to come down, yeah, yeah, well, you know, and just to show my hand here, folks, when I have a bias, I'll let you know that you don't have to agree with that, but you know, I talked to a lot of experts, esp. Housing experts, we will soon have Nick Jurly on the channel again. They know it's very clear from looking at the real estate charts for major metropolitan areas that home prices have skyrocketed. I mean, we've seen how peak they are. on their way down, um, I think the question for this year, my perspective is how far will they go and there are many factors to that, I don't have time to go through them all right now, but the most important one in my mind is simply that the Mortgage rates are still more than double what they were a year and a half ago, right, and a big question is whether it's completely mathematical, it's just that the math alone rippled through house prices.

I would pause it, no, no, I'm not trying to influence you. trying to put material here for discussion, um Mike, anything to add to John's comment, oh, I mean, if I were pressed for a prediction, I think maybe the housing market could drop by 20 from here across the board in the next 18 months or so. It makes sense, in my opinion, we have the biggest bubble in everything, everything financial, in our lives, in my opinion, over the last few years and usually what happens is you hit back at that late-stage hit pretty quickly. The top was about 20 percent in 2021, so I know if you put that back, it's not exactly 20 percent down, it's a little bit, you know, but it's close to that, so I would say between the 20 and 30 percent in the next year. or two is very likely.

I know we're not seeing it yet, it's wild speculation. If I were in the market to buy a house, I would be very patient, especially with cash T-bills that earn over four percent, so that's the way I see it, okay Lance, I'll let you have the last one. word here because we're going to make this the last question because it's already past time. I know you have a meeting to attend, so yeah, don't look. It's always a location, like I said, you know before you know if you're in a landlocked area and you know there's no more properties and the only thing you can do is buy a house and tear it down, those prices aren't going to go down much. now if you're in an area where you have land, the Wazoo to build on, you keep building more and more, those prices have been a lot higher, so you know it has a lot to do with the mortgage.

You also know that a lot of people are predicting big 20 to 30 drops in housing, not saying they're wrong, but if there is a very sharp drop in mortgage rates, that will put a floor on housing prices pretty quickly because they still there are a lot of people who want to buy houses and as soon as prices as soon as mortgage rates start to fall, for whatever reason, if the FED starts cutting aggressively, some type of economic recession will occur that will lower rates sharply. The market will put a floor. On the housing side, the only thing to pay attention to is that I know there are a lot of negative comments about housing right now, but pay attention to the home builders.

Home builders are killing it this year, in fact many of them are commercial and they are almost back. at all-time highs, so the home building market is telling you maybe a little different story than many of your housing professionals, right, or you know something the rest of us don't or you're missing a century and I guess we'll find out sometime this year. Okay, guys, we'll look at the question that I was going to try to include that I'm not going to ask right now since it was about precious metals because we've had a ton of questions in the live chat about them, but we're not going to get there. nowhere giving just a minute to that discussion so I'm going to make sure that's a priority for next month's live session like this okay look I want to thank you all real quick just for the housing thing, Guys, you just nod or shake your head, but I imagine that as a financial advisor is, if people are trying to make decisions about whether to buy and sell a house, that's exactly the kind of question they should be having a conversation with. your financial advisor to find out how much you can afford, where you should take the capital from, you know, I'm sure what type of mortgage. in case they go well, everyone will nod here and there, okay, okay, look, again, experts here, guys, thanks to three of you for giving us so much time again today.

I know you are very busy. I know. I've moved several of you away from other meetings, that is, everyone else, if you continue to enjoy this format in this conversation, it looks like you have the live chat, but if you haven't provided feedback yet, please let us know in the live chat We read all the comments, but if you want to see this format continue, do me a favor and support this channel by hitting the like button and then clicking the red subscribe button below as well as the little bell icon right next to it. and obviously we're all big fans of encouraging people to work with a professional financial advisor, if you already have a great one to have these conversations with and they understand the macroeconomic issues that we've talked about, great, stick with them, but If not or if you want a second opinion from someone who does, maybe one of the people you see here on this screen here with me, then just go to richyon.com, fill out the short form there and you can.

Schedule a free consultation with these guys, it costs you nothing, there is no commitment to work with them, it's just a public service that they offer and very fast, just to mention one more thing. I want to remind people that the rich are coming to the conference. uh, we're atJust under a month and a half away, early bird pricing is still available, so you can lock in the lowest price. uh to do that, just go to the richyon.com conference and we'll be done with that. It's here uh John Mike Lance thanks so much guys I'll see you later this week thanks Adam thanks for all the questions guys thanks everyone thanks and everyone else thanks so much for watching.