Planstrong Financial Forum 01-14-17
Jan 14, 2017|
"Smart investing, simplified"
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
Remote play and stroller and broadcast studios kids could play in strong financial forum will be your host. Can we are very humbled president Roh plans strong investment minimum. Full portions there's still I'm Bruce Morton investing. Symbian phone. NIN Canterbury at the anchor desk full force loses with beer supply strong financial forum and there would be a lot of stuff to cover. The once again this week Paul welcome back the program thanks great to bigger and a you don't read last week we had our first program of putting seventeen so we're just still giving going in 2017 the program and this is just we we need to start the program reminding folks. He Umar at the beginning of the year which also means the end of the last year or so chances are you're getting ground already gotten you were year end statements and it's going to tell you how you did in all your investments and for many of us these are cup fairly complicated things to look at. Especially because they Buddhist at least one that I see. Lots of different benchmarks which. Being very little to me why do I have I don't know thirty different benchmarks which ones that I look at. This from my guess for a lot of folks were they get their year end statement and they're not sure what to do it. Absolutely right in fact if you look at your statement I know many broker dealers people actually create the statement more you know. Are required to give you all are a litany of of different indexes not to compare your performed scans that's Richard talk Maloney taught how to benchmarks. And what's unfortunate is so few people actually really understand what those benchmarks are. Oh and by the way one of my favorites has to do would differ on benchmarks because. Well whether it's the EUS aggregate bond index or a bunch of others frankly a lot of people don't know what's in there and what's not an error and so for example the US. Mom bond arid and index that's. Actually made by Barkley is. Dare on that index is only high quality bonds and in fact it's only. High quality corporates and government US only on its okay but sometimes people compare that. Return to say how a junk bond fund did it or how an international bond fund Detmer that's completely inappropriate. OK so I guess what's what's really important is that a lot of people don't know what. Benchmark what index or combination of indexes. They should use. To measure Revere or overall performance against as well as the is a performance of their individual investments. And you know were very good at that that's something that we do it's it's it's a basic blocking and tackling for a smooth and my guesses on SI sent a lot of people may think they're using the right benchmark but what I can do is I can tell you we will actually create a custom benchmark just for you based on. You were waiting us. All of you were up portfolio positions. And I imagine how much risk of moon to today please major room as well it does and and frankly that's a reflection of the underlying securities that you own in your portfolio and their characteristics. But. In the end. You know Hitler at its simplest level if you're 60% stocks 40% bonds. Then you should have a weighted average benchmark or weighted average return. That represents 60%. Of the general stock market whether it's US or worldwide depending on what you more overall allocation has and then 40% in bonds or what kind of bonds due -- are they high quality bonds are they entirely high quality bonds will may be an aggregate bond indexes okay for that are they all treasuries or maybe treasury index is appropriate for that are they a combination of all those. An eight including also say junk and global wall maybe a world bond index is appropriate for that. So until you know the answer to that. I'm EU can't really generate the right. A benchmark against which to compare your actual results we can do that for you wouldn't do for you easily and we'll explain the TO. Well listen football doesn't he doesn't well to sit with Paul and his team to look over your year end statement in the caught a cold so free EDD 97275268. KB 972 plan. Or if you wanna just says send an email go to planned strong dot com and you can shoot me Mela and then we'll get right back Q and polls you mention before use it will with a every person who calls. Personally. I do ON and you know I should say that we have had our you know our our healthy share our of people contact us about this and the good news is it's it's simple it's easy for us to do for you once we take a look at portfolio we can actually. Calculate this for you having said that it's easy for us because we're used to doing it if you don't know how to approach it REU minus will say hey can you. Paint the Mona Lisa lefty. On it's it's going to be difficult for you do or at least to do properly once again balls to Oprah number eight DD 9727526. That's EDD 972 plants and just to give you an idea by the way Kent of the Durham near the disparity of returns this past year let me just give you an idea. US stocks in 2016. And make 12%. International stocks anything outside the US. Made 4%. 12% vs 4% and so should you compare your stock portfolio only to the US should you compare to some wading in other words. You know a third is international and two thirds as domestics are you should use. You know 13 times the international return a 4% and two thirds times the US domestic stock index rose 12%. And come up with a weighted average. Or what's appropriate for your circumstances of small and mid cap they're yoga are you know emerging market are typed our information in their and so forth. All those things go into what should your benchmark actually be. 888 9727526. His poll numbers and you Merkel. And employment this week to see with him and his team a polished slick it's a what's happening two of the last week it's. We're the same over the last week here it has been an. All I can Sadie who is it's good to be an infrastructure there that it is really good to be an investor sometimes it's hard to be an ambassador especially when you're watching things go the wrong way. But I have to tell you I'm seeing more positive news. You know once in awhile you'll see some negative news China had. A little bit of unsettling news this past week but. We Europe on the other hand had a pretty good and week of production noose for example and GDP type news I know you're and also their outlook and for what their growth was going to be like for the coming year actually has side experience a revision upward so there's a lot of good stuff they are in addition to what's going on in the United States which we all. Kind of no one feel right now looks and feels pretty good right so having said that you know the markets this week and don't forget markets were already up one and a half percent since the beginning of the earnest. For those of you who and you know that struggle with counting that's two weeks or OK yeah so one and a half percent in two weeks if you multiply that by 26 that would give you an annualized number so one and a half percent in the first two weeks is very good power. All right. So on it. We are up one and a half percent for the S&P 500 year to date which is an index as you know of the 500 largest op publicly trade stocks in nine states. I'm international stocks are actually up a little bit more now which is nice all cell. And by the way many of the indexes in the US are at or near all time highs we you know the Dow Jones Industrial Average which. As an average of thirty of some of the really best known blue chip stocks in the United States. Armed has come precariously. Close to 20000. Who have armed but not quite the air on the other hand the NASDAQ this past week. Up clips are 545502. All time high. Which I know a lot of people never thought he'd see again for a long time after the dotcom bubble of 992000. Right. So overall. On the bond side the US treasury ten year is paying about 2.3 5%. It didn't move much this week. Yields on the ten year German bunds around point 3%. And the Japanese ten year around zero OK so they US treasury continues to be. On a very attractive investment for international bond buyers compared to what they are owned. Circumstances are because frankly Gary economies aren't expected to grow as fast as arts know what are the dollar we had seen the dollar strengthen over the last few weeks we have what this really well actually weakened a little bit against the Euro and that was because the Euro actually got some good. Economic knows. And weaken from about a dollar for 12100 dollar sex per Euro. At. And it is strengthened against the act. The yen is now 121. Yen per US dollar that is see that as a significant devaluation of the yen. When you consider that just a couple years ago it was at 8082121. You know that's re you know that's a 50%. Change. It's really quite something at what it represents is the yen has devalued by Federer during a three time that's really quite something. And at the same time if you look at oil prices oil prices dropped a little bit this week. On you know the around fifty to 53 dollars a barrel for west Texas and around 56 dollars a barrel. For Brent the reason for their prices went down a little bit. I was because crude oil inventories actually increased in the United States a little bit about four million barrels. They represented now. I'm about a 7% increase compared to where we were last year. So we still have an excess inventory problem of oil and add to that point actually we're very interesting article in the journal on I think it was Friday. Talked about how. On the saudis and all park are really having a hard time. Manipulating the price of oil as much as they would like to get it up to the 55 to sixty dollar range because there is so much excess supplied. An excess inventory out there coach that there having the world's having a hard time working its wage through. To be able to allow OPEC to drive the price up higher. Now all we can give a lot of government did release this week the caboose couple it was like sewers are really but you know what overall wasn't bad producer prices came out. Why we care about that we care product for inflation. And producer prices were up about point 3% month old Vermont which is a good number. But only one point 6% Euro over a year they are still a little bit shy of the inflation target that the Fed is is going after. And at the same time retail sales came out and the headline retail sales number was actually quite strong. Was up point 6% from the month of December so annualized that's at 7% rate but that's not the real story. The real story. Includes autos and gasoline. And as you know at the end of the year there often a lot of auto sales so you if you back out those. And you back out gasoline design and all whole Lotta people go retailing for gasoline burn on. Frankly the growth was perfectly flat zeroes in there wasn't any growth between December Burris is November. Though bright spot report of course was e-commerce. E-commerce continued to show significant growth it was up one point 3% in a month. In December vs November that's certainly says to us. That on e-commerce is the place that continues to expand and and placed it certainly look at and investing and and otherwise so I would say it was okay report not great certainly and I finally initial jobless claims came out. They came under 247000. Still very very blow up a little bit from the record low last week. But still incredibly low strong employment market the point. When we come back to our bugged Donald Trump's first press conference when we return its implants from the national form this is tall Parsons president of planned strong investment management. And you're listening to them plans strong financial forum on WRKO. Boston's talk stations. If you like what you hear on our show and what you need to take a look at your investments and retirement plan called my office of 8897275260. That's 888972. Plan. Securities and investment advisory services offered through metro metro group member to go as I can see clincher investment management is an affiliate of mismanagement grouping is located in Washington street domestically and six. Hi this is Avi Nelson. People use different strategies to acquire enough money for retirement some try to do it themselves. Others buy insurance for investment products though sometimes will benefit the seller more than the buyer what makes sense is to hire an advisor with first rate credentials and why do investment management experience. Should have a fiduciary obligation to act in your best interest. And be paid the same amount no matter watcher invested in if these things matter to you. Call Paul Parsons at planned strong investment management to learn more. Call 8889727526. Hiring the right advisor could be your best investment. That's 888972. Plan or vision plan strong dot com. Securities and investment advisory services offered through next financial group pink member tumor SIPC plans to investment management is not an affiliate of next mentioned grouping and is located at 980 Washington street Dedham mass. Okay. We'll come. OK okay. OK okay. It's. OK okay. The. Crumbled and strong broadcast studios of the epicenter of definitions. This is the plan's strong financial forum with a whole portions president of planned stronger investment management. And I can guard courier the anchor desk along with all its class right financial form and we've been no talking him bode well what's going on in the business world news news and news stories of the week. And the record of the markets our first segment Paul. We just remind folks by the fact that you re are at the beginning of a new year wrapping up the old you're wrapping up a quarter. As well which means function giving statements and quarterly since year end statements. To see how they did. And the and the big question vote should be asking is out and I do how should I haven't done. And that this is a kind of thing that you were very good at to look at those numbers and say. Here's how he should have done because as we mentioned before it's fairly confusing when those reports commit. I think it's incredibly confusing for most people and and there's been incredible disparity of returns when you look at different kinds of investments for example. US stocks 12%. Total return last year that's unbelievably good compared to what people thought was gonna happen right. International stocks four and a half percent bonds two and a half percent tomorrow so okay you made a 9% return your portfolio. How'd you do. Well I made 9% how should to have gotten. I don't know somewhere between 21 half and 12% I guess right where what should it have been. Actually that meant that may not even be accurate if you were invested in other things for example if you were invested in. On materials for gold for example honey gold do this last year and so forth. So you have to look at sure portfolio. And you have to say how much risk that I take. And then what would have been an appropriate return act that level of risk and that's the corporate a look at your portfolio it's something we can help postal free number. He'd he'd he'd 9727526. That's ADB 972 plan. So you Merkel also a time letting go went and have Paul and his team look in your portfolio. And tell you curry did not you should have done eighty Dade 972 planned or go online to planned strong dot com. An even if you have just a bond portfolio by the way and even something as you know seemingly simplest act. What bond index do you compare to what combination. Of bond indexes do you compare to let me just give you an example. You know. Ike I I bet if you walked into an investing workshop and said the people hey what's the composition of the aggregate bond index the US aggregate bond index they would have. No cloth. Okay Jerry I'll let alone on the we'd X of the securities and act did you know that the US aggregate bond index has no junk bonds and it. Did you know what has its own anything below investment grade it doesn't half OK did you know that it doesn't have any international bonds. Did you know that it is government bonds US government bonds treasurys and high quality investment grade. Corporates and what's the waiting an air and so forth how does that compare to your portfolio if your portfolio is just surely corporate spots. Should you compare our corporate bond portfolio do the aggregate bond index no. You should look at it compared to eight corporate bond index a in investment grade. Corporate bond index that's the correct way to look at it. So you know there are all kinds of intricacies with us but what I fear is that. You know especially in a Goodyear. When you don't lose money people say well I did go to my driver but what you don't know is did you leave money on the table. Did the person who works for you including you by the way if you manage your own money did the person who works for you. Do as well as they shouldn't have done given the amount of risk that you talk and that's the important thing because by the Greek government bonds. Are less risky then corporate bonds are why does the US government the treasury can print money. Corporates can't mine okay at least the ones and I know he's okay so that's why it's important to know the underlying composition and your portfolio and compare to their correct. Benchmark to correct index or combination of an axis to sit with Paul. And his team to go over your portfolio once again the toll free number eighty 8972. 7526. No cost or obligation to this this is just an opportunity effusive with somebody who really knows was talking about to look at your portfolio. And say yeah this are you did and this are you should have done questions you really need to answer. And by the way when we do that you and you may find what we found several years ago we're looking at just talking about bond portfolios. We had several people come and visit us who just about this time as you're and they took us up on this op opportunity frosted just look at their performance and say. Here's how you do here's how you should've dot. And when we did that several of them had bond portfolios and you know or those bond portfolios and Puerto Rican box who OK and they said hey didn't I do great. I know these bonds yields shot moderator 9%. I do great with doubts I sit. Well you know what my my suggestion at that time was a you know I I and if you're full of the economic circumstances of Puerto Rico. And I'm fearful that but the Kennedys had issued these bonds will be able to. Live up to the terms of the bonds and in fact. And be you know essentially so many of those bonds are in receivership at this point and so an awful it's been several clients who we currently have. We met. True this dot exercise of helping them just understand what their actual performance was and in so doing looked and said oh wait a minute you've got a couple things here that frankly are really raising a red flag with a us let's talk about. They hired us. And I think you if you talk to most people today they tell you they're pretty happy they are such as you've said before a seven or 8% is really good and until it's not yes now and then you're in the new QB starts that's right and by the way Puerto Rico perform fine until that until when he fourteen right farms won't do it doesn't exactly right and all of a sudden the market wakes up smells the coffee and says where are grown and out and I was at. Yeah once again postal remember EDD eight. 972 plan would go online to plans trying dot com it's we talked about some of the the news was going on in the markets in the last segment but. One of the biggest news stories of the week. Had to do with Donald Trump and his first press conference. And it was unlike any other pres armor or murmurs I Indiana remember presidential press conference like that right so let's learn a little bit about that and its effect on the business. World gas so. Can I just tell you I'm so glad that Donald Trump is going to be the president simply for entertainment value there's nothing else actually worth we will have they won any to talk about for the next four years this guy -- is he he tells us the way he sees and you know sometimes she'd hoped pulls his punches and sometimes she doesn't this past week I would I think he was CNN reporter rang right or we let that guy have between the eyes solace. Boy that was I have to tell you it was hard to listen to or to watch a really was it was. You know overall very unseemly on all party sparked by the Ryan. It as part of that our job. Is for investors. To advise investors as to what to do with their money. And one thing about this president elect is he is gonna have some surprises up this. And when you think you know which direction he's going and but we hear them because he may not be as predictable as you may have thought he was and this week was a perfect example because he came out this week. And he attacked the pharmaceutical industry and he attacked and what he spat was. They were quote on quote getting away with murder you know and quote when their pricing. Right OK I mean that's those are pretty strong word ever rather give it dame may influence markets a little a little bit okay. That's not that's not that's subtle right okay. And so his comments immediately. Impacted. The prices of drug empire Biotech stocks. By the big drop you could literally tell when he uttered the sentence if you looked at the tape and you could tell the minute that he said that. Because some of them dropped to one and 5%. On that sat X okay. It's unclear. How important a priority drug prices are gonna be to this administration. And by the way whether or not congress would even support such a model it. But it added enough uncertainty into the circumstance. That. It's certainly put traders on notice that maybe this isn't gonna be as predictable as they thought it was going to be. And and by the way he also criticized the drug industry the farm industry for manufacturing to whom much of their products outside the west's. Now in the past he has supported. Allowing Medicare to directly negotiate with drug makers by the way that's what Hillary Clinton wanted to meet him okay. On but that's something that as you read into this more I think that's going to be difficult for him to get through congress. But it's still on the radar screen and I think this will adversely impact the upside of some drug stocks for a period of time. And and by the way guess what the industry is against the notion of him having Medicare. Negotiate directly we did those drug companies whine because essentially there sang at that point caller to call price controls because. How do you negotiate with a buyer that buys 30% of all the men's that are that are produced aren't OK there there isn't to negotiation. Huge you're telling us the answer and we will Biden I so that's essentially. Price controls. It's going to be interesting to see how this whole thing plays out I don't know how it's gonna play out what I can tell you. Is. Maybe a couple of weeks ago I was more bullish. On health care stocks and pharma and Biotech yeah and I am less bullish on it today. Recognizing that an added risk has come into the marketplace. And so please don't just focus on. Operas are going trump. And a CNN reporter going added over you know stories about Russian hacking and what you eat what I care and what you should care about is an investor. Is other stories that he's talking about. As it relates to your investment portfolio and sense health care. And farmer represents fifteen or 16%. Of the S&P 500. That's a big chunk of any portfolio. And you should care about what president elect trumps position is going to be on that and the potential for it. Congress to either act don't want it or to not on. Well welcome back we're going to talk some more bugged Donald Trump and how his presidency may affect the Mexican peso and how it's affecting you even now when return disciplined strong financial form. This is all Parsons president of planned strong investment management. And you're listening to them plans strong financial forum on WRKO. Boston's talk station. If you like what you hear on our show and what media take a look at your investments and retirement plan called my office at 80889727526. That's 888972. Plan. Securities and investment advisory services offered through metro metro group member and as I can see classroom investment management is an affiliate business financial group thinks is located in Washington street domestically and six. Hi this is on he Nelson if you're fifty or older here's a suggestion. Commit to getting your financial house in order over the years you worked hard took chances made sacrifices. And built up as much wealth as possible so you'd never run out of money in retirement. Well. Now it's time to get organized and to make sure you have a financial plan. Who protect your retirement. Rich your financial act together. Call Paul Parsons a plan strong investment management. A schedule financial checkup call 8889727526. That's 888972. Plan commit to getting your financial house in order. Call 888972. Plan or vision plan strong dot com. Securities and investment advisory services offered through next financial group linked member and SIPC plans to investment management is not an affiliate of mismatches grouping and is looking at ninety beat Washington speak to him. Says financial login to your signing and being informative. At least it's informative its plans to own financial forum where gold portions president's bold plans stronger investment management. Yeah. Yeah. And I can cover you the anchor desk along with the ball Parsons disciplined strong financial reform and movement tell you about some of the business and news stories of the week and Donald Trump who plays a major role in these stories we talked about his. Is interest in press conference earlier in the week and how it. Affected didn't pharma pharmaceutical stocks. Great two way and Biotech Biotech got right to calm but there was also he's also got some do of the peso because you know every time he talks about Mexico or a wall or whose fame board. It affects a peso and. Our since our Carol Sowers a good one too now right. I I it is fascinating how quickly on the market does react and in some cases the markets given back some of the the at the anticipated gains that we're gonna happen under president CE of of tropic argument example that. Health care was one defense was another where it was viewed that hey would trump becoming president it's going to be a different story that had Clinton become president and so there was a nice run up in those securities in the first you know the several weeks following his election but in the market is given not. A number are a decent amount of those gains (%expletive) are following that as some of his own policies have become more clear and it has become clear that he's not going to be. As a robustly bullish as he might have been for those sectors otherwise okay where that has occurred one place where the market has not given up. Any of the gains or losses associated with him becoming the president elect. Has to do with the Mexican peso the Mexican peso this last week he hit another. Record low against the US dollar has devalued yet again. And it's down now about 16%. Since the election but oh well it's not just amazing. And the reason it does is because. Arm there're real concerns that trumps trade policy could end the country's Mexico's. Privileged status. Among. Developing countries in other words. Bureau there are a lot of developing countries out there Brazil China and so forth. But Mexico had a very special relationship by end NAFTA. That allowed them to get if you will preferred. Trading status with the United States and Canada. That what that really did was allow an immense amount of business. I to a current within Mexico and for them to export those goods and services to the United States out with the Al. Tariffs or other armed. Economic on blocks that other countries have to win to war that was a huge competitive advantage for Mexico. And by the way Mexico exports 80% of its goods to the United States. And exports represented 30%. Of Mexico's GDP so this is a very very important thing to the Max can people and the Mexican economy. But here's what's happened on the air growth rate all of a sudden looks like it's gonna change quite dramatically to the downside with the trump presidency. And what that means is the newest forecast for Mexican GDP growth is minus 3%. For 2017. That's a far cry from the plus 2% GDP growth. We saw it in 2016. Before if you will the decimation. Of NAFTA. What does this mean for investors. Well it probably means you wanna be careful with a investing in anything in Mexico. A lot and it also means that unlike other circumstances remind people so eventually will help Mexico because Mexico's peso gets devalued. If their peso gets devalued it makes the products and services cheaper. And so Americans by the mill just be cheaper. Not true. Because what's gonna happen with the United States and Mexico. Is the United States is gonna slapped tariffs. On to those Mexican goods and so while their value will go down in dollars when you add on the new tariff gas swat it'll be the same prices right now are so cheap anymore it's not going to help them it's very different from other circumstances when countries devalue there currencies and that earn a competitive advantage position. When they want to export goods and services to do these stronger currency that's not gonna happen here I have to tell you are. I think things are are not looking real good for Macs a call for you know up a decent amount of time going for a more this city. When trump actually comes and office but you know he's talking a hard game here and it really could I'd change. Really at 22 who year success story in Mexico there's a reason. I'm that the president Max goes really angry and with trump and and the reason is because trump really could materially adversely impact. The Mexican our economy. In Mexican politics. And you'll overall stability of the region. Down there's a story about bonds to eat wheat we thought coming into this trump presidency and we we re so you've interest rates to a we felt good bonds would be slowly dying exactly that's not happened no it's it's it's really funny there was and another very important piece in the Wall Street Journal this week about new investment grade bonds that are being issued now and being issued in a flurry. And act to what extent that has never been seen before so the through the first ten or twelve days of of 2017. On the are cool US corporates have issued an immense amount a record amount. Of corporate debt high quality corporate debt and some of the biggest issuers for example arc toy Yoder Deutsche Telecom and Daimler which is the parent company of Mercedes pants and so the good thing that's interesting about this story is when trump became president. It look like it was going to be a risk on situation peoples' and oh my god this can be great there's going to be tax cut the economy's gonna grow a lot. He's gonna get rid of regulations. Also other good stuff and so immediately. People sat up time to sell bonds and in fact you saw a US treasury to tenure US treasury dropping meal artists are increasing Il's. Prices dropped. Bar from you know call at one point 7% herself and it's gone all the way up to 2.4 2.5 percent to 35 today but. You get the idea OK so bonds were seen as Ole boy you know wanting to do though is because it's risk on time. Well now what we're seeing is a little bit. Of a change in that philosophy and part of that is because the the our economic environment is just good enough. For corporates to issue. New bonds and to get relatively good rates and someone argued these are they're locking in. As low or read as they can lock in right now before economic growth. Really takes off with trop before inflation. Really takes off because what it does interest rates will go up further and when they go further will be even more expensive for these companies. To go wild and issue debt either way it's getting to be a little more trapped about the error in the bond market for buyers investors took while. And find corporates but may be more attractive than what they'd seen in the past. And we do have the first a treasury note auction of the year now and that what actually quite well I'm kind of interesting again I think people were a little nervous about it. When they saw the price of US treasuries had dropped significantly. Went trump became depressed and lacked. I'll but actually beyond the reception was relatively strong a price stayed relatively stable cap Wall Street Journal and are an article about junk bonds foreign we wanted to address that. Yeah you know this is really good for those abused that own junk bonds and many of you don't even know that you're on the right the way you own a mutual fond. There that is a bond market fond or you know something like that you have no idea that you won't junk in there and by the way John is a derogatory term that was created by Drexel back in the eighties and I'm but what it means is sub investment grade below triple B on kind of bought of rating bonds. So the point of the story in the journal was that investors need to be wary of junk bonds right now and he's suggesting that because he thinks that people are not necessarily looking at the rate networks when date. Evaluate a junk bond at this point and all I thought it was actually pretty compelling story that's why one of the talk about it here. So historically how people judge a junk bond while overall we look at the spread the difference in interest rate paid. Of what a jump on pace vs what are US treasury pace why. Because US treasuries kind of the King of the Hill the gold standard it's gonna be the lowest should be the lowest. Interest rate that is charged by any bar or why because they can print money there's no chance they're not going. To make meet their obligation it's called in many you know in economists call not risk free rate they call it risk free because it's risk free. They can print the money to meet that test you or satisfy any of her obligation Ross. The difference in bond yield between eight junk bond. And the risk free rate or the treasury rate historically. Has been about 6%. OK so in other words if a treasury was paying 3%. A similar term junk bond was paying 9% or the spread the difference is 6%. And well that's spread is now down to 3.3. Percent okay. And you might say wow that's that's not enough risk premium for me to buy junk bonds well it is enough for spring him for some people because. That's the current price for a but what this author also assess is that. You should not just take into account the risk premium. But you should also take into account I historical default for. Because here's the story. Junk bonds historically have defaulted. At an average annual rate of about 4%. A year and since that's greater than the current spread that alone should scary I'm okay but what do junk bond defaults. You don't lose all your money necessarily typically you were cover about 40% of the par value. So if you duel little math what it means is the loss Sri on junk bonds is about two and a half percent a year okay. And so if you think about it this way. Instead of getting a 3% spread today. You could actually see that decline to about a point five point 8% spread over US treasuries. If you also saw default rates just hitting the average rate. Now I can Italian. Gaining 4%. For junk bond vs 3% for treasury doesn't feel really good to make their out. And what he's arguing is that should look at more than just the spread look at the spread. Plus the default rate to really get an idea. Of how much risk premium you should be demanding. For your junk bond. The always come back we've got stories are the tech industry and apple were also going to cover a little bit more of our outlook for truly seventeen discipline strong financial form. This is tall Parsons president of planned strong investment management and you're listening to them plans strong financial forum on WRKO. Boston's talk station. If you like what you hear on our show and what they need to take a look at your investments and retirement plan called my office of EDD 89727526. That's 888972. Plan. Securities and investment advisory services offered through metro metro group member to go SIPC classroom investment management is an affiliate business financial group Lincoln is located in Washington street domestically and six. Hi this is loving Nelson. People use different strategies to acquire enough money for retirement. Some try to do it themselves. Others buy insurance for investment products though sometimes those benefit the seller more than the buyer what makes sense is to hire an advisor with first rate credentials and why do investment management experience. Should have a fiduciary obligation to act in your best interest. And be paid the same amount no matter watcher invested in it these things matter to you. Call Paul Parsons at planned strong investment management to learn more. Call 8889727526. Hiring the right advisor could be your best investment. That's 888972. Plan or vision plan strong dot com. Securities and investment advisory services offered through next financial group in member farmer SIPC plans to investment management is not an affiliate of residential real big and is located at tiny to Washington street Dedham mass. Ground zero for your financial news and economic commentary. This is the plan strong financial forum where all portions president of home plan stronger investment management business. I had an urgent concrete here producer along with the fall randomly talking about what's doing on. In the business and investment world and Paula always has a lot. Information that he brings suicides were remind you postal free number 8889727526. If you need 97 to plan and this the time of the of year when you're receiving your year end statements. The into the quarterly into the year. And so you should be asking yourself how did I do last year and more importantly how should you have done. All is equipped to let you know you should have done because. As you know by looking at those statements they can be kind of confusing so Poland's two men would be happy to sit with the you don't obligation no cost. To let you know how you did and more importantly how are you should have done. Eighty Dade 9727526. Or go online to play stronger and common send an email is ball. And you know one thing you should think about Cho. Is when you're working with somebody. Whether yourself and your own investment manager or you've hired an investor energy do work for you. It's Smart to look at their performance over a period of time it's not just. You know a quarter or or even a year I would suggest a couple of years at a minimum and typically three years is kind of the ideal so when we do a benchmark for you we're just gonna do a benchmark for you for your car portfolio. We can also if you provide us the information. We can do a benchmark for you for the last couple years as well so we can essentially say. Here's the right way for you to evaluate investment performance of the people what you decide the hired her to take care of your money for Leo and it's gonna be you're risk tolerance may have been different over the last three years. On so will need to see statements for the last the year ram so the last three years. And based on that alone we can give you a very good idea of what your investment performer should've been overall. As well as for the last year. What we get a lot of the times is we corroborate what a lot of people sometimes sense from their gut which is. Geez I feel like come under performing but I don't know how how can I tell and by the way there have been instances when people said that and to us and we say no actually done quite well given the amount of risk you're taking. You actually performed well but also we've had many experiences with people where we said hey let's look at it over a few years don't just look at this past year look over the last two or three Ers. What's your performance and and now and let's take a look at the composition of your portfolio snapshot a few well at each of those three different periods and say OK based on that risk tolerance at that time here's how you should've gone and that we do as we say well overall then. Cumulative leaked for the three years here's what you should have made vs yours what you did make that is really to me a comprehensive. Fair way. To evaluate whether to own performance or the performance of summer that you outsourced. Arm your. Money management title and this is something Balkan do it simply impose very good at once again is still for number 889727526. That eighty Dade 972. Plan that's about to some of the stories Paul there was an interesting story Bennett about the tech industry and we we follow this quite close news program because well it's interesting. And it's fun of the end it's you know been an area of growth. Recently a little what's going on now. Well it's a bit of a Tizzy because its biggest product category the Smartphones and is seems slowing sales you know at some point everybody's got a Smartphone. And everybody's got a nice Smartphone with a lot of features and and some of the features really truly become incremental I mean. At eight at some point house and really matters you know at at some point how cool looks doesn't really matter. I mean the all pretty much lookalike at this point they've been monetize to a great degree right. So what they've decided it was an industry is. You know they're looking for the next march on what is going to be the answer the auto industry and what they're gonna do was try to make cars smarter. And they think that could be a very good market for them we've talked about this in the past. But I wanted to talk about specifically as it related. To chip makers because the chip makers is that during Cape Cod I am not Tariq Majid cod potato chips I know you are hungry I am health now. No but this is these are the chips that go inside. On a lot of our Smartphones and they can be used for a variety of reasons. But don't the big chip suppliers for Smartphones are and XP semiconductors which by the way is currently being acquired. By Qualcomm and on and also Nvidia. And Nvidia is a company I should for full disclosure mentioned we are invested in Nvidia would our client portfolios to greet degree. Nvidia are also makes chips that go into a mobile devices and what an end and XP chips still. They could dose chips control the cameras and the radar that go into cars but ultimately will be autonomous driving type cars. Now Nvidia. Is developing really intelligent chips. But may be more expensive and will be able to read and interpret human input for example he can read your lips. It can literally read your facial expression. And based on that. Make a decision as to what the car should do at that time. OK okay but somewhere between the two is mobilized mobile bias that is us a smaller competitor. But they have chips that combine various sensor deed in a car. And then what they do is they create a map of the road that the vehicle then uses to navigate it. Okay all three of these chip makers make chips that play a very important role that will play a very important role. In a Thomas driving cars the question is. Who's gonna do the vast who's gonna get the most value add out of the thing. It's unclear at this point but they certainly are three companies that you wanna look at and certainly three chip makers that are trying to do a transition. To include not just mobile phones but also if you will mobile people buy their cars okay autonomous driving carts. We talked about apple a lot on this program a fur for good reason but the news story neared the now has to do with apple and Hollywood or even a bigger player there this this is fascinating it. Is are so apple intends to build significantly new content ownership business. Arm in a regional TV shows and movies and this is gonna make it a bigger player in Hollywood okay because they're going out there are gonna compete. With the Amazon's of the world to. Up reduce or body. Our contact you don't think house of cart's there and right. Now with a reason they're doing this they're trying to offset slowing sales and write no surprise here of gas what mobile device and but the programming. Would be available to subscribers. To Apple's streaming music service this is really. This is sent an all hands on deck effort for the company they're not gonna go out and try to compete. Head to head with the Amazon and by Hun is. A programming and tons of Middle East what they're gonna do is buy targeted ace a small number of targeted show host. And what they're gonna do is make them free or part of the bundled music offering. On apple music. And they're doing Mac to compete directly with Spotify cause all the Spotify offers on a service is streaming music right so what Apple's doing is trying to do a little bit of an end run around Spotify and say well we've got music but we also have some. You know really cool targeted. I T video type shows where their TV or movies as well. Don't forget apple music is only half the size today of Spotify. So this is really an attempt by apple music. To make a significant inroads in two Spotify try to hurt them a bit more up well I didn't apple talking about getting into the entertainment business before they absolutely right on and we've talked about this over the years but. I'm David flirting with the idea and actually even held talks with TV companies about our free as skinny bundle to remember there are a few of networks over the Internet. But they never were able to reach terms with those networks. And they also approached Time Warner about a possible merger before. Time Warner ultimately agreed to be merged in with AT&T branding her cell this is another angle the they're playing they're gonna do on the smaller scale and they're gonna do it for apple music to be able to compete directly with spot. No this last week poll he Republican true controlled senate did vote to get rid of the Affordable Care Act obamacare that's right at least a first step in that process was exactly right when we're we're going from here and what are the chances of that actually disappearing. Well I here's the deal. They they took the first step by eight instructing committees to write measures ending a large parts of the affordable care care act and okay. Now on the president elect has said that he wants to repeal and simultaneously. Replace the law. Now that's gonna be tough to do it's gonna be ambitious it's gonna be tough. And by the way it's gonna have to occur quite quickly 'cause he's bound and determined to it to repeal obamacare and it's gonna happen quickly. But here's what's gonna happen the replacement. Pass to be carefully analyzed. By investors to attempt to determine the potential impact on a aren't a group of different sub industries including hospitals. Farm and bio attack. And insurance companies. But here is that my take on us either way. I think it's likely that employers will play less of a role in offering health care plans to employees I think individuals. Are gonna beat the much like their 401K is individuals are gonna be much more responsible. For taking control of their health insurance and selecting their coverage and I also believe that individuals in short. Via the ACA including pre existing conditions. Will continue to have insurance under the new plan trump I don't believe would make take this step. To cut those people lost I think that's been viewed as a positive side of this it's not whether or not you wanna ensure these people it's. How do you ensure the speed colonel and he is looking for a way to do that with less government. Infrastructure. And a lower cost. Or. Another really interesting story Paul that I hit a brief we have to talk about this is Amazon's flying warehouse what the heck is Corey on the filed for patent right. They did they were actually recently awarded a patent for eight giant flying fulfillment sent a check this out. And Amazon's plan. They describe a blimp late flying warehouse that continuously flies at around 45000. Feet. And is a moving hub for drone deliveries and would actually be refueled. Constantly up in the air so it doesn't landed it stays up in the air as this. Floating hub. Now these would be stocked with certain inventory and positioned near locations. That Amazon predicts demand for the products that might be demand it we will keep an eye out for that fascinating stuff all thanks so much for coming in. Offering all of your opinions and information we'll see you next week sounds terrific it's the plan's strong financial form. This is tall Parsons president of planned strong investment management. And you're listening to them plans strong financial forum on WRKO. Boston's talk stations. If you like what you hear on our show and what they need to take a look at your investments and retirement plan called my office it. 80889727526. That's 888972. Plan. Securities and investment advisory services offered through metro metro group member and as I can -- -- investment management and filling them a special group thinks is located at any Russian diplomats and sit and strong investment management is located 980 Washington street Dedham mass 0226. And can be reached at eighty to 89727526. Political views may not reflect the views or opinions of next financial group the securities and investment advisory services offered through next financial group ranked number fender SIPC classroom investment management is not affiliate next financial grouping this radio show is for informational purposes only and is not a solicitation recommendation that any particular investor should purchase or sell any particular security information contained herein is obtained from sources believed to be reliable but its accuracy and completeness or not guaranteed neater next financial groupings nor represented -- -- -- -- --