Welcome to Pension Attention, the best show for first responders who want to take control of their finances.
After advising Los Angeles city firefighters for over 12 years, financial advisor, Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett.
(00:21): Welcome to pension attention. The show for you first responders who want more outta their deferred compensation and pension plan. My goal with this podcast each week is to reach you where you are at whatever stage in your career you are in, in order to provide my nearly 15 years of experience, working with both active and retired service members on their investment and retirement planning. My team of fiduciary advisors here at one capital management are dedicated to ensuring you take control of your finances and build the life you deserve to find out more about me. Before we get started on this week's episode or my team here, here at one capital management, you can go to our website@pensionattention.com or give us a call. You can call us at (805) 409-8150 on February 21st, 2022. Russia officially recognized two breakaway regions in Eastern Ukraine, dons and Lou hunt on February 24th.
(01:24): Russia announced a quote unquote special military operation and launched a full scale invasion of Ukraine. We all have been watching it for the past few weeks and I wanted to continue a perspective as we see it here at one capital management for those listening, it's really important to take perspective as we look at the world around us sometimes, and sometimes things are economic events and sometimes things are just moral events. And this, I think everyone can agree is a war of choice, a war out of ego and pride. Now that may be speculative. Maybe it's an opinion. I know I share it with a lot of people out there watching this and just feeling so sad for what's going on, especially for the people of Ukraine. And with that said, we actually wrote here at the firm a perspective as it relates to the greater situation, if you will, that's going on and really how it relates to how a portfolio manager or a financial advisor would look at it, both from a moral perspective, a worldview, if you will.
(02:31): And also on the granular level as to what we need to look at when it comes to what we are seeing on the news. And as you heard me say, it's not the lack of access to information anymore. We all have an every information we possibly would want at our fingertips, but context is everything and perspective matters. So as we've been watching this over the past few weeks, and those of you who have listened each week have heard me discuss the Russia, Ukraine or Ukraine, Russia crises. And I wanna continue with that today with a little bit of a perspective. Now Russia's incursion from the east, south and north of Ukraine really appears to be aimed at destabilizing the democratically elected government of Ukraine and replacing it with a Russian friendly regime, similar to the one governing Bella Russ, or Bella Russia to the north.
(03:29): Now, many of you listening can probably draw some parallels to what we saw in the eighties with Afghanistan. Now, the going into the political realm as Reagan gets in all the crises that was happening in the eighties. We're seeing again now at the time that was SSR the Soviet union, but at the time we're seeing the same motherland type of mentality happening from that country. And it's just sad for all of the neighboring countries, as we see. And many of those as we've also seen the news, our native, which is one of the main things that we talk about around the us involvement. Now I wanna shift gears for a second. As what I've just stated for the past few minutes is probably not anything you don't already know, but I wanna talk a little more granular as we're talking on this show about what we do as a profession and what we wanna help advise and help guide our clients.
(04:22): And many of you listening out there with investor concerns. And I wanna say one thing very clearly what we are seeing firsthand via the news and all the technology at our fingertips nowadays is nothing short of sad. I can speak for myself only. I have such a heart for what's going on and what we see with these people that are bordering an egotistical nation in my opinion. But I also think it's important that we understand that it's okay for us to have a concern about what that means to us. I think I've talked to a lot of clients in the past few weeks who really have a heart for what's going on and many have donated to the cause I myself have as well. And just trying to support the best way to we can not getting political around it just truly being a human on this earth.
(05:07): And with that said, sometimes we can get into the concept of feeling a little selfish or down that we're trying to understand what that means for us. And I wanna be really clear about something that it's okay, everyone's thinking it. And it's important to talk about it. The real is you're trying to be a good steward of the blessings. You have to be able to help others in need. Maybe it's the people in Ukraine, whatever that might be, but it's okay to talk about. And that's why I wanna shift and talk about investor concerns as it relates to what we're seeing. So again, as you hear me say, often context is helpful here. Remember we're gonna call this perspective. So context is helpful to, again, lend perspective to concern investors, Russia, and Ukraine as a whole represent 1.7% and 0.2% of world GDP respectfully. The two countries represent less than 0.8%, 0.8% of the world stock market capitalization, and only 2% of world population.
(06:13): Given this background, the two countries in general term have minimal direct impact on world capital markets. I think that's important to, again, put into context. Now let's shift over to energy because I can say that all day long, but we all know what the news is telling us. And I think it's important for us to talk through it about energy now, despite the small economic impact overall Russia is one of the world's largest exporters of oil and gas. If you didn't know that three weeks ago, I'm sure you know it now, but Europe imports 30% of its crude oil and 39% of its natural gas from Russia, which represents half by the way of Russia's oil and 70% of their Russia gas export. So European countries in particular that are heavily reliant on Russian imports and worldwide consumers of energy, more broadly, I would say may suffer.
(07:07): And we're seeing that right now, a drag on economic growth because of higher energy prices due to again, supply disruptions from this crisis. Now in this way, energy is Russia's wild card to negotiate with NATO and all of us Western countries, perhaps. And I wanna bring this up even more important to global markets. Overall, Russia has a large, powerful military with nuclear capabilities. We started seeing that in the news. I don't think it's too shocking to many people. So I bring this up because the threat of war escalation and a wider reaching conflict looms over the regional dispute, as of now, as Russia attempts to again, unilaterally impose its authority on, on Ukraine.
(08:01): Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options, looking at entering or about to exit the drop program, go to www dot pension, attention.com to find out how we can help now our view for a second. Now this is important to understand from context and perspective and why we wanted to write about this and talk about it. We've been talking with our clients and many of you on our radio program, as well as our podcasts. Our view is that even though there is a lot of talk about what the conflict means, the reality is that it will not have a major impact on the global economy. Now the west, all of us in the west will continue to impose sanctions on Russia, as we are seeing and discuss ways to address, I'll call it the situation with VLA prudent, who is clearly showing his hand as a dictator. This is a guy, an X KGB guy here, but in the end, the sanctions will not cut off energy, which is too important to Europe. So Russia and Ukraine really might be hobbled by the sanctions, but the rest of the world, in our opinion in will move forward.
(09:16): Now the us and NATO countries will not likely go to war over the Ukraine. As the NATO Alliance has made it very clear. Ukraine is not a NATO country. Now this is a political situation in that regard. And one, I think we need to abide by. I know many of us listening. It's really hard for us to see what we are seeing with Ukrainian people, but that's our opinion that us and NATO countries, they will not likely go to war over this Ukraine. Now oil prices and most commodities will be volatile as we have seen. And really ultimately, as we digest, what possible impacts will occur in the future. So prices should moderate within a few weeks as the situation unfolds. And the fear of the unknown really is what's driving capital markets. The fear, if you will, is driving these huge green days in the market and these huge red days, anyone who's watched the market, obviously we do.
(10:13): We see what's going on. We're very aware, but as time passes markets will likely adjust and recover from the recent sell off the crisis will likely keep the spotlight on inflation and major world. Central banks will likely move ahead with expected rate Heights. In fact, as we're talking, we fully expect to see a rate hike in the next coming week or two and global economies are in the early stages of recovering from the pandemic still. And this will be the real focus in our opinion, in the coming months, conflict with Ukraine withstanding. So context and perspective is what I really wanna focus on this week. What we have going on is really ultimately to had events that we're seeing play out on the global stage, but there are also a lot of headwinds that I've spoken about in the past couple weeks, inflation, supply chain issues, still interest rate conversations to curtail inflation.
(11:11): We're gonna see a lot of those things, and we're gonna see how all of that will come around in the next few months. And that really is gonna be the real focus from a monetary perspective, the humanitarian perspective. We need to keep a close eye on what's going on, which I am grateful that we have the technology to do nowadays. Again, this is all with the conflict in Ukraine, that's happening. So as we look out into the world of investing the world of the stock market, if you will, and the world of plan, as I mentioned in the previous episode around why staying invested is so important, really isn't to disregard what's going on. And it's definitely not one of those things where it's just like, Hey, let's just set it and forget it, active management rebalancing. But remember, as I always say, there's two DS.
(11:58): When it comes to investing discipline and discernment, you focus on those. You'll win out, keeping discipline to an approach and having discerning atmosphere about who you're choosing to work with as an advisor. But that advisor keep been discernment on what they're investing in, how they're investing in it, and really ultimately how they're managing the overall portfolio. And for many listening, I wanna put a bow on this for a second. It's a little bit of a dovetail from our previous two episodes around why staying invested and why looking at the long term matters. I think we all can. This has been a pretty Rocky start to the year, especially for the stock market. And I've definitely heard from clients and friends and colleagues that this drop, this volatility feels different, whether it's because of starting the year with inflation and issues around interest rates and just those kind of items to now this Ukraine in Russia conflict.
(12:55): And I get it, but in context and in history, as I mentioned last week, is it, I mean, according to analysis of market trends, and again, we're not, I'm not dying on the V of ignorance here around historical performance reflects future gain. We all know it doesn't, but it is interesting when you look back in history around intra year drops. Now we did a focus on this, which is interesting, but the average drop for the last 40 years is around 12% intra year, the 2022 drop so far 10%. And by the way, it's interesting when you look in context that way, now that doesn't mean the market end of the year down 12% over the past 40 years, for example, in 2020, we experience a 34% intra year drop at one point, remember March of 2020, but the market recovered ended up over 16, almost 20%.
(13:48): So despite the average intra year drops being around, let's call it 12% over the last 40 years. The annualized return over that time period is up almost 11, 12%. Anyone in investing in portfolios understands that when it comes to the market, there's volatility and variability, it's a normal thing. And if you want zero volatility, you can put your money in a savings account, getting 0.1% rate of return and inflation is gonna eat it up. But for those of us who understand that building wealth takes discipline and time, and we're gonna have what I mentioned a week or two ago on the episode around what's called black Swan events. These unforeseen events around the world that happened that affect the market. And there's studies show there's 150 to 200 random ones. Everything from very small items of someone said something on a certain day to a pandemic or a war and everywhere in between.
(14:50): So they're gonna, we're gonna see that. But if you want high returns and low risk, it doesn't exist. We understand that risk and reward, as we all know in life is out there. But understanding what volatility means to you is where an advisor comes in again, putting in context and putting it in perspective. So sometimes you got to think, is, is this what we're currently at around down 10% right now is the 10% drop we experience over this last couple weeks gonna be the worst we see this year, or are we gonna see another big one? Like maybe back in 1987 or 2008 or 2020, we don't know no one has a crystal ball, but we understand what we're looking at. I use this analogy a lot. I'm not saying it's the best, but go with me here. It's like looking at a car which got a paint job.
(15:37): That's you can see visibly rusting and fading, and now it has a crack in the windshield. But for guys like us, we're looking under the hood and saying, Hey, that car may not look that great right now, based on those items, the engine's still good. The windshield can be fixed. The paint can be restored. The engine's still strong. So as we're looking into what we call fundamental investing, we're able to look under the hood. They may need a few oil changes here and there some tuneups, but it's still a solid car. And we look at that with regards to price, to earnings, multiples, and fundamental investing. As we look, look out, we don't get paid as advisors. I'm speaking for ourselves here across the board to be bullish or bearish. Our job is to be logical and really strategically align our client's portfolios with their goals and interests and discuss and communicate any of the tolerances around risks.
(16:32): So as they make mentioned earlier, some of those stats, you can look them up around intra year throughout a calendar year's stock market portfolios around drops versus the actual hole of the year. It's interesting to look. So what I'm trying to get at is make sure we look up and ahead and not look down at the current moment, not to say what's going on. Isn't fearful and not to say what's going on. Isn't gut wrenching. I get it. And that's where for those clients listening, reach out, we make sure we stay in communication each week through our podcasts, but it's also really important that we see in communication that we don't let our fears and anxieties fester. We wanna make sure that we bring them to the surface, add context, clarity, and ultimately add perspective. I wanna thank you for listening to pension attention. Remember before acting on anything discussed today, remember to speak with a financial advisor near you about your specific situation, or if you'd like our help, you can visit us@pensionattention.com or give us a call. You calls it 8 0 5 4 0 9 8 1 5 0. And until next week stay safe.
(17:42): The information in this podcast is educational and general in nature and does not take into consideration the listener's personal circumstances. Therefore it is not intended to be a substitute for specific individualized, financial, legal, or tax advice to determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision.
The information in this podcast is educational and general in nature and does not take into consideration the listeners personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.
To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision.
