Ep 028 – Coronavirus and Investing During a Bear Market

Suburban Folk 0:00
Please listen to the disclaimer at the end of this episode, health, travel finance, parenting and home improvement. This is the Suburban Folk podcast

Unknown Speaker 0:09
$250 a month into my child’s 529. From the month that they start kindergarten, I should be able to pay for 80% of my child’s college.

Suburban Folk 0:18
I don’t trust that most people will eat their

Unknown Speaker 0:20
vegetables. So our kind of standard

Suburban Folk 0:22
is three servings of vegetables per meal,

Unknown Speaker 0:25
you take something like a two by six and you cut it

Suburban Folk 0:29
with a circular saw. That’s like a superpower. Those middle school years are not as fun but at that age, they’re still willing to talk to you. Welcome to the Suburban Folk podcast. I’m your host Greg. Today is a very timely topic around the corona virus or Cova 19. We’re not going to talk about the health aspects which of course everybody should be watching what the CDC has to say, or the World Health Organization. Today we’re going to focus on the financial aspect of what’s going on and What you should be doing with this apparent downturn? JC Corrigan, who has been my guest for all of my financial episodes, was gracious enough to spend some time with us today to make sure that we’re not panicking. And we have a plan with this kind of downturn and also, what we should be doing in the months to come. Jc thanks for taking some time today. No problem, Greg. Great. Glad to be here. Thanks for having me again. Maybe to set the stage. Let’s just talk about terms. What is the definition of correction? What is the definition of recession or bear market? So we know when we read these things in Wall Street Journal or otherwise, what we’re saying

Unknown Speaker 1:44
right, so a correction is when the market goes down 10% from its peak value. So we’ve already had that experience. And as we speak today, when the World Health Organization officially declare the corona virus a pandemic, we had a sharp sell off, and we are now what’s called a bear market with a with a value drops 20% from the peak. Now it’s going to close there at the end of the day, which is the only value that matters, I don’t know. However, as the news flow continues, it seems to get people in a bad place. A bull market would be when the market recovers 20% from whatever its flow position is from any particular peak to trough drop.

Suburban Folk 2:34
Is there any notable difference when somebody uses the word recession versus bear market?

Unknown Speaker 2:39
No, they’re usually tied together. The one thing I would tell people to look at a recession is more about the GDP and if we have consecutive quarters of negative, gross domestic product, that is when their definition of a recession is I tend to look at the employment numbers because that tends to be a concern. incident or leading indicator, depending on what you look at to a recession. But those seemed given the power of the consumer in the United States, that tends to be a good indicator of when a recession is coming. As of right now that is not showing up.

Suburban Folk 3:16
So now that we have a grounding on those terms, and for somebody my age, the only experience that I’ve had with a recession or bear market would have been back in 2008. So I am an old millennial. And I would say speaking for millennials, the experience you had then was the beginning of student debt, ie, it was harder to get a job because the job market wasn’t so good. And you might have those mounting bills, but the amount of money that you have to be able to put into your retirement and where you’re going for that wasn’t as much of a consideration as it would be for Gen Xers into baby boomers and that particular scenario and What we found from that particular period is that those that panicked and took money out or did other things with their money may have missed the giant wave of what we found to be the longest bull market in the history of the stock market, if I’m not mistaken. So what lessons are there to be learned? And in particular, the phrase timing the market? What does that mean? Is there ever a time that you should be engaging in that function?

Unknown Speaker 4:27
I think if you are involved in timing the market at all, one of the questions you have to ask yourself before you get into playing that game, is have a process. So if I sell one thing, what am I going to buy in place of it? What is going to be my mechanism for actually getting back in? And if you don’t have those answers, or if there are emotionally driven answers, then you need to just stay in the game. That’s the way that you handle that kind of stuff. Now you’re talking about yourself as a millennial, not having that much Money last however, you probably had parents that were very close to retiring at that time. So you actually probably experienced it in your own way, shape or form, how that recession has impacted you either directly or indirectly.

Suburban Folk 5:14
It’s a quick sidebar for those parents out there. How much should they try to teach their kids or in this case, adult kids so that they aren’t panicking or making decisions that are overly emotional, or is that not the job of parenting?

Unknown Speaker 5:31
I think part of it’s the job of parenting. But I also think part of that is there’s a cognitive side and there’s an emotional side. I have some clients that just need the context and need the analysis and know that I’m on top of it. I have other clients that just need a hug. It just really depends on your personality with with with the money. One way that I have found that I am navigating this and it’s been very helpful for me and I just happen to have this very unique situation. The market bottomed on March 9 2009. My son was born on March 10 2008. My daughter was born March 10 2000. Martin sorry, March 9 2010. So they were born one year on either side of the bottom of the market. So when I look at that, and I look at how that happened, like my, from the time my son was born until the bottom hit, market was down 45%. from the bottom to the time my daughter was hit, the market went up 73%. If I look at how it did from birth to birth, the market was down 5%. That’s really not that unreasonable. And what I’ve also found is that when I deal with clients that are getting kind of antsy, and I share that I said, Tell me when your wedding anniversary was or tell me when your kids were born, and let’s look at how the market has done since that event, because then you can tie it to a memory as opposed to an a personal event as opposed to a market meeting. A sensationalized event, it seems to take a lot of the edge off and they feel it. Okay. This will pass. And that’s true, it will pass. It’s just a matter of I think what makes it different this time is one, the speed at which the markets gone down is unprecedented. As we have more digital and we have more algorithms, and we have more quantitative funds that are trading, this stuff happens very quickly.

Suburban Folk 7:24
Well, let’s talk about that a little bit, comparing this to other downturns. So you just clarified one comparison that it seems to be quicker than any other that we’ve had. It is currently tied to coronavirus. I know we’re going to talk about the oil dispute that came right afterwards. And then there is the political environment that we’ve been dealing with. I’ll leave it at that all seeming to be things that you read, is it just the all of those things coming together as a perfect storm from what you can tell or Is it the fact that people have so much information available to them that then they can also make snap judgments about their investments? And we’re seeing this whiplash back and forth.

Unknown Speaker 8:11
I think a big thing is it’s the uncertainty. Look at the flu. Everyone talks about how the flu kills more people per year than what the corona virus will do. thing is we have those numbers and we have a baseline and we don’t have as much uncertainty. Here with the corona virus. We have a heck of a lot of uncertainty. How many people are going to get it? How does it affect the supply chain? When you look at the steel inventories in China right now? They are super high. You look at the supply chain numbers and how much it’s just been disrupted. That’s creating uncertainty. How many events are being canceled? How’s that going to affect caterers? How’s it going to affect the person making $15 an hour, that’s what’s causing all the flu is a baseline and everybody understands that’s going to hit every year. They know how many beds that’ll take Helping hospitals with the coronavirus. Nobody knows that you look at Italy, which is a much older population, how many people are affected there compared to South Korea, which is a younger population? It’s it all we’re reacting to is the uncertainty of the impact economically.

Suburban Folk 9:19
You mentioning the different areas globally that have been in the news as being the most impacted, at least at this point. Is that something else that’s made this downturn unique that never before in history? Is there such a global market that like you mentioned, China and the supply chains? I think today I was even hearing reports about certain drugs may be in short supply because they are manufactured in China and there may not be as much of those to go around not even for treating this particular illness but other illnesses that people might have that they need a regular regimen of drugs for might be in shorter supply. So how does the global economy and what that is today, compared to other downturns? I think

Unknown Speaker 10:10
the global economy has some impact from a couple of different perspectives. Number one, I learned that Italy gets 16% of its GDP from tourism. That’s been shut down. Lots of people on spring break there, they aren’t going anymore. I think that is just one of the various many things we need to think about. There’s been, there are now 20 free trade agreements that are around for this particular market, as opposed to the.com bubble. That’s how many free trade agreements have been signed. So therefore, when you have those free trade agreements, and you have people being able to travel so much easier, and the impact on tourism, yes, it’s definitely global. I mean, if you look at the s&p 500 I believe that 50 percent of all revenue comes from international countries. So that’s, you know, it’s definitely much more correlated than it’s probably ever has been.

Suburban Folk 11:11
And it might be a good time for us to emphasize you mentioned travel. And like I said at the intro, we are focusing on the economics and the financial impact. I want to reiterate for folks listening again, that we’re not making any recommendations about your travel plans or whatever else you do to protect yourself. in that arena. We’re talking specifically of what may come to pass with the financial aspect. So I think that’s probably worth mentioning a couple of times as we continue our discussion. So you mentioned a couple of sectors there as far as travel. How important does diversification become when we hit a potential bear market and also from the standpoint of you have presumably more investment options today as a regular investor than you would before. So what should you be looking at as far as your overall diversification?

Unknown Speaker 12:10
I think diversification is probably best highlighted with the oil war that started last weekend. Right? So if you look at, so for those that don’t know, Saudi Arabia, and Russia, got into a little fuel fight, if you will, and they’re both increasing production, and when they did oil prices, the price per barrel of oil went down 30%, just like that. So that creates opportunities. It also creates threats. So if you have to have the oil price change that dramatically, it’s going to affect a lot of people. A lot of people believe that the fracking industry in the United States, I mean, us is the biggest exporter of oil right now, because of all the new technologies that we’ve created in that space. At $30 a barrel, it may not be profitable for them to even try and get it. So therefore they may have to shut down or consolidate. If the if the Saudi Arabia and Russia are going to pump oil, they’re gonna need a place to store it. So tankers are going to be in high demand. Did I know that was going to happen? No. But one thing if I’m diversified, I’m not playing placing any big bets on tankers or on oil producers, or on for the coronavirus on Delta or cruise lines. Because if I, if I was concentrated, I’d be in deep yogurt right now. It’s this is probably a great reason why you’re diversified. And part of being diversified is always having to say you’re sorry about something, whether it’s the bond side of your portfolio in some aspects or the stocks out of your portfolio. Look at rates rates or real estate investment trust, if everyone starts working from home, and companies say hey, we didn’t lose a lot of productive tivity I see a lot of corporate office buildings are going to be vacant in the future. I don’t think I want to be owning those corporate companies that that actually run out that real estate, that can be a real problem for them down the road. Do I know that’s going to happen? No. But that’s one reason I want to stay diversified.

Suburban Folk 14:16
And that also probably ties back into timing the market as well. Picking a certain industry or sector has that same potential high risk, high reward, of course, so do individual stocks, like some of the companies that you named as well. So you may pick a winner? You may not. But history has shown that very few people air quotes know for sure what a sure thing is because there’s not such a thing as a sure thing in the stock market. No, not even close. Let’s talk about bonds a little bit and you mentioned Yeah, having to say you’re sorry, if you have a certain investment that doesn’t perform the way other ones do at any time. And something else that’s been in the news is the interest rates. One thing I will say that feels like a bit of deja vu is calling upon the central banks to lower interest rates. I don’t know if I’ve heard the quantitative easing phrase come up again or not, but certainly they are very much in the news and very much in the conversation again, and the Treasury yields are also very much so can you tell us about the relationship between bond prices, like in particular, if you’re dealing in ETFs, mutual funds, and then ultimately, those interest rates? When you do purchase those? Are they an inverse relationship? Are they sort of working together? What does that look like?

Unknown Speaker 15:45
So when you hear that Treasury yields are going down, that means the price is going up. And a lot of ways it’s no different from a dividend stock. So if say Capital One goes from 100 to 200, in price and the dividend yield goes in half, that’s because the yield is a function of the price. So for interest rates and for Treasury yields, if the price goes up, the yield goes down. So if you hear that the yields going down for your refinancing purposes or what have you, and you hear that the, that means the price of the bond is going up, because so many people are running into bonds, because they need to find a place to either park their money, or they’re trying to make a quick buck.

Suburban Folk 16:29
Okay, so what would that potentially mean for what types of bonds to get in the current environment or doesn’t mean anything other than staying the course

Unknown Speaker 16:43
I think if you’re in an aggregate bond fund, you’re not gonna you avoid making mistakes and you have regret minimization to avoid any sort of emotional catastrophe that may exist. That said, bonds are divided into very different categories. One is high yield high yield bonds to tend to be linked to the energy sector because of the debt that they have to take on to actually extract the oil. So therefore, if energy’s getting hit high yield bonds are going to get hit corporate bonds, if companies are going to make less money, the probability that they default on their loans and their debt and their bonds goes up. So people may run out of those. And they run into US Treasuries, which, so you can have corporate bonds, you have government bonds and high yield bonds, you can have high quality bonds. Regardless, you always have to be on your guard if you’re trying to play that game. And right now, if, if the stock market keeps going down, some people may have to borrow money from their bond allocation to pay off any sort of margin or debt that they have on their loans to buy stocks, and therefore they’re going to get punished as well. Also, bond yields right now are at record lows, and they’re not nearly as attractive, and I have no idea if they’re going to be able to provide the same level of diversification that they have in the past,

Suburban Folk 18:07
the relationship makes sense. As far as if it’s in demand, of course, then the prices are going up and may indeed be in demand because that’s where people are naturally fleeing to especially in times like this is like kind of

Unknown Speaker 18:20
your main theme to make sure people get their going for safety and, and the highest form of safety is US government bonds because corporate bonds are, are suspicious right now because nobody knows what their future cash flows are based on how business may be disrupted by the corona virus.

Suburban Folk 18:36
Okay, makes sense. Stepping back into main street a little bit with the interest levels being low. Something that I know I wanted to make sure I locked in with the last downturn was mortgage when I could and I think well, I’m in my house five years now and I thought that was a once in a lifetime event. Here we are. have years later and it turns out maybe it wasn’t a once in a lifetime event, is that something that people should be looking at at this point, as we keep hearing the calls for interest rates to go down and go down,

Unknown Speaker 19:10
I think people should look at it and they should look at it quickly in case it rebounds and it’s no longer a an attractive alternative. My credit union has a 15 year at two and three eights as a 30, year at two and seven eighths right now, that’s pretty attractive. They also have a notice on their website saying due to the number of refinancings, our backlog is higher than normal, and we will get back to you as quickly as we can but won’t be as quick as as, as our expectations are. So that just shows you that everybody is running there right now. That increases cash flow. If you use that cash flow appropriately there to reinvest or to or do anything like that, that is something to that’s, I’m sure is an attractive alternative for people.

Suburban Folk 20:00
And would you be willing to offer a benchmark? So you just mentioned for your local credit union? Is there some other type of standard I should look at?

Unknown Speaker 20:11
I think credit unions offer probably the best deal. I also think that if you deal with an independent mortgage broker, he will be able to help you very well. I have found that going to banks tend to be one, it’s a little too easy. And too, it’s a little too pricey. And after all, the debacle that that Wells Fargo has gone through, I’m not sure if I want to actually go through a bank myself. So if you need to, and that’s what you’re comfortable with and you trust your guide. Banks are great, but please shop around because there’s too many good options out there.

Suburban Folk 20:45
And is there any rule of thumb to say my current mortgage rate is this and therefore I should be looking for this amount of points lower to pull the trigger to actually do it or Hey, the closing costs of refinancing isn’t going to be worth it. And I should just stick with what I have.

Unknown Speaker 21:04
There are several rules of thumb out there. And it depends on who you ask, but your total cost of closing, whether it’s points, getting your appraisal done all the settlement cost. If you can break even on cash flow within 18 months, then I would probably do it. Now there’s lots of things to also consider there. What’s the probability you’re going to be in that house two years from now, five years from now? That has to be part of the equation as well.

Suburban Folk 21:34
This is certainly something people need to be aware of. We might have even mentioned on one of our other episodes, the average amount of time somebody spends in their house, is it seven years Does that sound right? I think that’s right. Yeah. So you think that you’re gonna be in a certain place for a really long time, but the averages are not really in your favor. Even if you had a 15 year that’s only half the amount of time for the loans. You have to make sure that those numbers work. Yeah,

Unknown Speaker 21:55
yeah. And probably the thing that makes this most attractive to me, right? Now is that if bonds in your portfolio are no longer going to offer, like three net 3% real return or or yield, then do I want that certainty having a lower interest rate in my housing payments. Part of that might be because you have to take more risk in your portfolio in order to get the returns that you need to retire. So I think that I would be very curious to see how this all pans out for people, but this is a cash flow issue. It’s also a certainty issue as well, right?

Suburban Folk 22:35
Yes, I think that is certainly the case. I will attest to that even for myself. And coming back to some of the standards for retirement I mentioned I am right on the end of still being a millennial and the different generations does the way to react to this current market change depending on how close you are to retirement,

Unknown Speaker 23:01
the number one risk. And the most vulnerable people to this are the people that are getting ready to retire within the next two years. Because sequence of losing 20% in your first year of retirement on your portfolio is very different than losing 20% of your portfolio in your last year of life. Because you’re going to make that money last and where you start from and what your portfolio allocation is, is is very important. I mean, let’s face it, you shouldn’t be buying an umbrella once it starts raining, you need to have the umbrella ready to go. So if you are retiring in within the next couple of years, hopefully that you have, you know, throttle back on your risk so that this isn’t going to impact you nearly as much as if you were at 100% stocks.

Suburban Folk 23:47
And then risk tolerance, I assume plays some role in this is that any more of a role in a bear market as compared to a bull market?

Unknown Speaker 23:57
Well, so to risk tolerance The bad part about risk tolerance scores in general is it’s it’s a feeling at the time. I assure you that if I gave some people a risk tolerance questionnaire on January 15, their score would be very different than what their risk score is today. Right? So I think you need to understand what your What is your risk required, and what is your risk desired. So what’s the minimum risk that you need to have in your portfolio to live the infinite game and be able to make it through life without any with minimal sacrifice to your lifestyle? That’s the number one thing that matters. It’s Can I do what I want when I want with my money? That’s, that’s that’s the bottom line.

Suburban Folk 24:40
Well, let me ask you, this is the ideal client for you somebody that has an inverse risk tolerance, and what I mean by that is, maybe when you recognize the bull market, and they don’t get greedy, right, that, hey, this is the amount I need to have to do what I want to do with my lifestyle, but when the downturn happens, and maybe They weren’t super greedy and didn’t get hit as hard with the downturn are interested in getting real aggressive if they can afford it during a bear market? Is that something that you would encourage? Or how do you deal with somebody that’s, again, the inverse of what you tend to think the reactions to this kind of a setup,

Unknown Speaker 25:19
let’s talk about what the worst scenario is. First, the risks, the worst scenario is that you have a risk tolerance that is lower than your risk required. Because then we have to have a conversation about hey, you’re gonna have to take more risk that you need to be able to do what you want to do, or you’re gonna have to work longer, or you’re gonna have to spend less, or you’re gonna have to save more now, that’s, that gets into a lot of issues. The best client is the one that it doesn’t matter what their risk is, because they’re going to be able to do everything because they’ve done such a great job saving that they don’t, they can have any amount of risk that they need. What becomes the interesting conversation is understanding how we respond rather than react, how are we prepared for these type of events? That’s, that’s the thing that really matters in this equation.

Suburban Folk 26:11
And if somebody does say that they have money available and are interested in getting more aggressive, what is your advice on the approach to investing that money if that even is the right thing to do?

Unknown Speaker 26:26
The number one thing that everybody should do, regardless of what the market conditions are, is automate good behaviors. So it is very important that you’re in a place that if you can contribute $300 a month to some sort of fund, whether it’s for retirement or if you’ve maxed out your retirement funds into some taxable account, put yourself in a position where you can actually do something like that. Don’t do it just because the markets down 20% because at that point your while it might be more attractive price rise. price wise, I don’t know how much well Where this market is going to go. Markets are emotions, they are people. And they really don’t care about you. It’s It’s It’s a, it’s a persona of one, but it’s made up of several micro personas that have different reactions to the market.

Suburban Folk 27:18
So in restating that, if I have $10,000, then it would probably be more well advised to split that up into 12. Let’s say if you’re going to do it over the course of a year, whatever you would recommend that time being and put that increased amount into that investment that you’re already doing to your point of having the automated behavior, so that you’re not necessarily going to hit the very bottom and see this imagined return. But you hedge your bets that you’re not going to the other end, hit a very top you’re somewhere in between so that you’re maybe catching a little Bit of the good catching a little bit of the bad, but that’s the kind of the way to hedge your bets if you are looking to invest more money and then ultimately put that into your automated behavior,

Unknown Speaker 28:10
yeah, the studies have shown that, you know, establishing the system and the habit is very important. But if you told me you had $10,000, and based on what the study is telling me to do 66% of the time, a lump sum does better. So what I would probably do is let’s put in 6600 right now, and let’s automate the remaining 3400 over the next 12 months, so that we minimize regret and we’re playing we’re playing the odds based on what the market conditions have told us in the past.

Suburban Folk 28:42
That makes sense. So now I’m really gonna put you on the spot. What do you think, is the worst economic situation that could come from what we know at least today, and what would be the best scenario but based on what we know today?

Unknown Speaker 29:00
Don’t have the slightest idea.

Suburban Folk 29:03
Well, that’s too easy of an answer you got to give me something.

Unknown Speaker 29:07
I use context, often to find out where we are in various aspects of, of the market cycle. In 1964, you get from 1964 to the end of 2019. The average market return per year is 10%. That includes very high inflation in the 70s. If you take out all the inflation, it’s actually 6.1%. So, 6.1% plus the inflation rate is what you should expect for an annualized return based on the market conditions since 1964. If you look at the past 10 years, our returns were 11.64%. So this little down, drop right now shouldn’t be unexpected. However, If I look at the range of outcomes for that 10 year rolling return, what the annualized return is, it can get down as low as negative 4%. So I think you have to be prepared for what the moving average is the average is six 6.1 plus inflation. thing is we don’t get there on one step, we get, we usually go, we over overshoot, and on one side and undershoot it on the other, so we still have a ways to go to get to that 6.1%. So don’t underestimate the emotions of this market and the uncertainty of the coronavirus and the uncertainty of view of the oil war and be prepared for it. Hopefully you’re prepared for it before it happened.

Suburban Folk 30:43
And assuming that people are prepared for it, what are some of the other things to be looking for this year, let’s say in particular, so we talked about refinancing. Of course I just mentioned if you do have other cash reserves. And if you’re looking to invest additional funds, what else should people be getting prepared to do in a particular fiscal year where they will more than likely be seeing a negative return?

Unknown Speaker 31:16
Yeah, so a couple of things in that space number one, we had 31% return in 2019. So having a negative return, it’s more likely to have a 10% or greater return or a zero, or negative return than between zero or 10. Even though the average is is right between six and 10 depend on whether or not you’re using inflation. So it’s comical to me whenever I hear a prediction for the low rate returns. Now getting back to your question, so refinancing, I think, is a great thing to do, if it makes sense for you. Number two, consider a Roth conversion. So a Roth conversion is where you convert an IRA into a tax free Roth account. Now making that work. Make Money cost you some taxes this year. So make sure you’re talking to the right people to understand what it would cost you to do that. But right now, if the markets going down 20%, you could very easily be in a position where you do that conversion and catch the upside and catch it tax free. The third thing is talking about that additional cash flow or having money go to work. In my January newsletter. One of the things that I highlighted was that if you got in the market, if you put $100,000 to work in August of 2000, and you just let it go for until August of 2017. It would have been up 4.8%, I believe is how much it would have been up, maybe 4.4. I can’t remember off the top of my head. If you also put in $100,000 in August of 2000, but then decided to add $500 a month until August of 2017. Your returns would have been 4% higher. So imagine that you had gone through the.com bubble and the great financial crisis. And your returns because you decided to automate a good behavior and start and have a good habit. You’re now in a place where you can say your returns are 4% higher. That’s how you minimize regrets. That’s how you take emotions out of the equation. It’s with it’s with habits and systems.

Suburban Folk 33:17
And one clarification for the Roth conversion, like you said, it could affect what your taxes look like for the year. If you lose enough in your current investments that’s above what you convert over to a Roth. Does that mean that it would be a push so to speak as far as the taxes are concerned? Or is there a different way to look at that when you come time for tax season?

Unknown Speaker 33:46
So the way that I choose to look at it is that let’s say the market let’s say you have $100,000 in a rollover IRA or 401k, that’s been sitting dormant because you started a new job. And now because of the market It’s worth 80,000. If you are in the 22% tax bracket, and you do that conversion, you’re going to add $80,000 to your taxable income. And at 22%. That is, and let’s just say once you throw in your state tax depending on what state you’re in, it’s 25%. So that eight making that $80,000 conversion is going to cost you $20,000. Now, between state and local taxes in this particular example, you can either do that, or you can keep it in the IRA, and that 80,000 becomes 320,000. And you’re paying those taxes later. So to me, it’s an opportunity to pay the taxes when it’s at 80,000, as opposed to when it was 100. Or opposed to when it may get to $300,000 in the future.

Suburban Folk 34:49
Yeah, and then that way, you have less of a burden at that time. So pretty hard to to get it to break even in any particular year, but you’re making that move when it works. be less painful. tax bracket wise, right would be another use

Unknown Speaker 35:04
it in the future, if you don’t, let’s say you don’t do a full amount of a Roth conversion, you’re still going to have other IRA that is taxable. And that’s going to put you in a different bracket. So it’s going to keep you in a lower bracket in the future number one, number two, it’s gonna make less of your Social Security, taxable. And number three, it’ll prevent you from potentially being taxed on Medicare because right now there’s a Medicare Premium Tax. So if you throw that all into the equation, the long term benefits of doing this Roth conversion now has has some really some a lot of hidden benefits. So you may not be thinking about

Suburban Folk 35:38
that makes sense. And it is something that’s on my radar at least I will say, before we end let’s turn back to main street a little bit more, and I’ll reference a quote I believe I’ve heard Mark Cuban say, talking about Hey, even deal with sales at stores and things like that, almost as an investment. So I want to say what I remember him comparing is if you see a really good deal on something that wouldn’t have an expiration date like toothpaste or

Unknown Speaker 36:08
something and sanitizer.

Suburban Folk 36:11
Maybe a bad example right now because the price of that stuff’s probably gonna not be going down anytime soon. But, but, right, should you look at anything like that in Mainstreet that may be going down in price? I hesitate to use travel as example. Because again, like I mentioned, we’re not making any recommendations as far as how to react to the health and so on. And certainly that’s a primary area that’s being affected, but we’re seeing it in the prices of certainly air airline tickets right now, are way way down, at least from what I’ve seen in the last couple weeks. Are there things like that, that you can even put into strategy, or would you kind of leave that world separate from investment? Well,

Unknown Speaker 36:56
I would leave it separate. I think I think there’s big things you can do the guy Long term impact that’s like scalping to me. And I don’t think that the long term benefit. I mean, everyone talks about getting the lattes and how the $5 latte is going to ruin your retirement. I think doing that kind of things in terms of things being on a discount in the short term. That’s, that’s probably more than a lot of people can handle when they work into jobs, and they have kids in school, and they got to cancel their vacation plans, because if they do, they’re going to have to have to have a nanny for two weeks because they’re in an area affected by the corona virus, and they’re not gonna be allowed to go back to school. So that’s already happening. Right. So I think that’s probably very low on the on the concern ratio right now for a lot of people.

Suburban Folk 37:41
Do you have any recommendations for how often somebody should be paying attention to the market and you can pull up your phone at any point in the day and see if it’s up or down? What’s too much and what’s too little, just to know what’s going on with your money.

Unknown Speaker 37:55
I think a lot of it is personality based. I look at it several times. A day because that’s what I do. And I’m process oriented. If you are emotionally driven and the markets are going to make you have a trigger, then I wouldn’t look at it at all. If anything, you could still stay in stocks and get into a different type of stock and into know as opposed to owning the market. Do you own minimum volatility stocks? Do you want to own utility companies and Procter and Gamble as opposed to companies that are very dependent on customer throughput if you will, like a Delta or Chipotle I, but that’s a conversation people should have with themselves and with their financial advisor and with me not knowing who’s listening to this, it’s really not appropriate for me to comment in terms of you know, how their unique situation needs to be uniquely treated.

Suburban Folk 38:47
And maybe that’s a good place for us to conclude that if you do need help, make sure you do your research in whatever area you’re in for a financial advisor, preferably a CFP, which I think we have mentioned and Some of our prior episodes, and folks should definitely go back to those I think for just general financial information that we have offered here. Anything else that we may have missed?

Unknown Speaker 39:13
No, I think that keep it tight. This set, you know, focus on control the controllables, you know, the raw, the refinancing, automating your behaviors and turn this into an opportunity and not an emotional threat.

Suburban Folk 39:27
That sounds like some good advice for us to end on JC again, I appreciate you taking some time to talk to us today on this very important subject.

Unknown Speaker 39:34
Thanks for having me.

Suburban Folk 39:36
If you enjoyed this episode, please leave us a review on Apple, Spotify, Google Play, or wherever you get podcasts. If you’d like to be notified of future weekly episodes, please hit the subscribe button. If you’d like to help us even further, visit Suburban Folk calm and you’ll find a Donate button where all the money goes back into the show for you. Thanks for listening. This recording is informational purposes only and should not be considered investment advice. opinions expressed are as of the date of the recording. Such opinions are subject to change. The participants on this podcast are not responsible for any trading decisions, damages or other losses resulting from or related to the information or opinions discussed or their use. All Investments are subject to investment risk, including loss of principle, individuals should consider if an investment is suitable for them by reference their own financial situation with their own financial professional before executing any financial decisions.

Transcribed by https://otter.ai