Tape Talk | Investing, Business, Wealth, and Your Money

The headlines in the news this week are all about Turkey. On this week's Tape Talk we dive into the recent drama and explore why it seems to be impacting markets here in the US.

Emerging Markets Dive

The news of Turkey's war of words and tariffs with the United States set off a massive currency slide for the country. In the course of months, the Turkish Lira plummeted nearly 50%. An aggravator of the problem for the country is its foreign currency denominated debt. This debt, which is repaid in a currency other than its own, is causing currency moves to have disastrous effects for both the country which must now pay more and for the debt holders who face increasing default risk on their investment.

Contagion Watch

Markets might not just be worried about Turkey here. Since the exposure to the country's currency and debt may reach far and wide, Wall Street must contend with what the potential fallout of an expanding crisis might be. This is the action investors are seeing transposed into the financial markets with the recent volatility as managers attempt to assess and position for the potential risks to spread beyond borders.

Under the Hood

So, how does an investment manager navigate through such tumultuous times? Quint and Daniel give a look into some of the methods they use to manage clients' investments as well as their own.

On this week's episode of Tape Talk we check in with Lexington area's "Queen of Real Estate" Kelly Karls! We'll discuss some of the recent headlines impacting the housing market and whether investors should believe them.

Headlines

Before we get into this week's topic we take a look at some of the headlines making waves

First, social stocks through a tantrum but Apple rallies to new highs. What does this recent action mean for the markets? Should index investors be concerned about the large influence these technology stocks have on their portfolio?

Then, it's all about the Fed, or the FOMC to be more specific. The Fed was out this week with its latest rate decision and left rates unchanged, as expected. However, fed funds futures point to a high likelihood of two more rate increases this year while many on the street expect only one. We'll take a look at why this is and more.

Real Estate Update

You don't have to have sold or bought a house recently to know that the real estate market seems to have been firing on all cylinders. It seems like over recent months many of the key headlines in the financial news have been the rocketing prices of homes, especially in the nation's hottest markets.

However, the mood of headlines seems to have suddenly shifted in the past month. There's talk of a "crash" in southern California's housing market. There's also an indication that some buyers are finding home ownership to be not all they imagined it would be.

We'll dive into the headlines with local agent, and Lexington's Queen of Real Estate, Kelly Karls.

In addition to discussing the headlines, Kelly also talks about some of the key things buyers and sellers need to be thinking about in today's market!

On this week's Tape Talk, Quint and Daniel examine the recent action in the stock market and the varied reactions to the earnings coming out of the technology sector.

Alphabet (Google)

Early in the week Alphabet, the parent company of Google, set the mood for the week on a very positive note. Showing solid growth on both the top and bottom lines, there was a lot for investors to love. The stock moved higher in the following day's trade and gave investors hope for the rest of the tech titans' earnings.

Facebook

Investors clearly thought Facebook would follow in the steps of it's rival Alphabet. Facebook rallied in the days leading up to its earnings report, closing at all-time highs just before the quarterly report was due to be released. Unfortunately, its fate would not be the same as Alphabet. After Facebook reported slowing user growth and slimming margins the stock was crushed in after-hours trading, the carnage lasted into the next day and left the company with its largest single-day loss ever.

Mood Shift

The Facebook earnings set-off a mood shift in the technology stock growth area of the market. The sector that could previously do no wrong looks to be coming under pressure for the time being as investors are forced to reassess their assumptions about growth in this space going forward.

Revisit the Plan

Pullbacks in the market, whether they come from individual stocks, sectors, or the market as a whole, should not send investors into an immediate panic. Instead, it should be a time for reflection and revisiting your financial plan. It's a time to ensure your allocation is aligned with your goals and that you've been honest with yourself on the risk you're willing to take. In the long run, sticking to the plan is the one investment that may just pay dividends in both market rallies and market fits.

On this week's episode of Tape Talk, Quint talks through six important steps to take towards financial freedom. Listen in to find out how to get and stay on the road to your own financial well-being.

1. What's the Goal?

Do you have a goal or objective for your finances? If not, what are you working towards? Without a written out goal, it's almost impossible to develop a plan. The goal of financial freedom is not just to have more. Rather, there should be something specific you're trying to accomplish that will help you stay focused when the journey gets tough.

2. Know Where It Goes!

Where has your money been going? If you're running out of money before running out of month it's very likely you have no idea. It's time to start tracking where those dollars go every month. It doesn't have to be complicated but it does need to be a system you can stick to. So, start now, keep track of where every dollar goes so you can start identifying the opportunities for change.

3. Create A Budget

Once you know where your money is going, it's time to start telling it where you want it to go from now on. A budget is simply a plan for your spending. Instead of letting your money slip away each month you take the responsibility and put in the effort to make your plan a reality. 

4. Find and Allocate Extra

Now that you have a budget you can create margin. What's margin? It's the extra money you have that doesn't "have" to be spent. This is the amount you can allocate to debt or savings. Work ruthlessly to find the extra in your budget and begin telling it where to go from now on rather than just letting it slip away.

5. Snowball Your Debt

Sure, it makes mathematical sense to pay down your highest interest rate debts first. However, what may work best mentally is seeing the number of your debts evaporate quicker. To do this you need to use the snowball approach. To do this, pay off the smallest debt first, then use that extra money to add to your next smallest, and so on. Pretty soon your snowball is growing and you'll be paying significant amounts towards your largest debt.

6. Be Patient

Your personal finances are less exciting than watching grass grow in the desert. However, what distinguishes the people who succeed from those that don't is often patience and perseverance. The changes you make won't drastically change your situation overnight. However, with every prudent brick you lay you are creating your own road to financial freedom.

On this week's episode of Tape Talk we're talking about risk, specifically how to manage it! We'll explore five different approaches you can use in your investment life to help manage your risk.

1. Use Stops

One of the key ways to provide some risk protection when investing is to have a plan which includes predetermined levels at which you would exit and reassess your investments. This technique is referred to as a "stop" level. Whether you utilize an order placed in the market or a mental line at which you'll personally execute the order this technique allows you to go into an investment with an estimate of your initial risk should your thesis not pan out.

2. Take Profits

Exiting a position isn't reserved only for investments moving lower. If you are trading with a plan there may come a time when an investment has appreciated significantly and the wisest thing to do may be taking a portion of those profits to diversify elsewhere. Utilizing this strategy helps to ensure no one position becomes significantly overweighted at the top of its trend while also freeing up capital to be used for new opportunities. 

3. Don't Fear Cash

After taking profits, you'll be left with some cash in your account, this is nothing to fear. Cash is a resource to be deployed into an opportunity, not a burden to be relieved as quickly as possible. An important element of risk management is to avoid fear and anxiety over holding cash. When the correct opportunity comes along, this stockpile will allow you to move on something that others may miss.

4. Understand Your "Live" Risk

Your live risk is an important element of your investment portfolio. This level is best defined as the total risk from all of your investments. So, simply take the difference between the market price and the stop level of each position you hold and add this number for all your positions together, the total is your live risk. If every one of your positions were to revert to your stop levels, and you could exit at that price, this is the amount of your potential loss. Know this number, accept it, and ensure it doesn't keep you up at night.

5. Be Aware of Your Emotions

Emotions are a part of life. However, when unchecked these emotions can begin to overrule the plan you put in place. When volatility strikes or boredom sets in different emotions may begin to creep into your investment strategy. It's important to identify these, assess if anything in your plan has really changed, and make changes only if they're truly prudent. By carefully separating emotions from actual changing criteria in your plan you may save yourself a few investing missteps. 

On this week's episode of Tape Talk Quint takes a look at the recent action in the financial markets to examine what's going on under the hood. Is the recent end of quarter weakness an indication of what's in store for the remaining summer months? Are financial stocks broadcasting something about the overall market? With international stocks down is it time to increase exposure?

The world of Medicare can be complex and overwhelming. On this week’s Tape Talk Quint takes a break from the norm and sits down with independent Medicare insurance professional Kim Milner to discuss the various Medicare options seniors have when they become eligible for benefits.

On this week's episode of Tape Talk we discuss some of the big mistakes investors can make in a bull market. After all, it's not just bear markets that cause people to lose money. 

Headlines

In the news this week is the Federal Reserve who raised rates once again, to a range of 1.75-2.00%. The news release included a forecast for the Fed's consensus of two more rate hikes this year. However, the market doesn't believe the Fed here and sees only one rate hike left on the table before year's end. Why the disconnect? 

Misstep 1 - Equating a Bull Market with Intelligence

One of the biggest misstep investors make during the run-up of a bull market is thinking that the changing value in their investments is directly related to their intelligence and market savvy. This is a dangerous position to take! One of the powerful elements of a market that trends higher is that many of the underlying companies go along for the ride. Therefore, if you're making money in a bull market, it might just be more the market's fault than yours.

Misstep 2 - Underestimating Momentum

The saying among traders goes, "the trend is your friend." Still many an investor has sold their investment for modest gains only to see it tick higher for weeks, months, and years to come. Others investors have taken a contrarian view of the market and waited in cash because it's simply "too high." The fact is the trend is the trend until it ends. Understanding that momentum is a powerful force that will often keep things moving in a general direction is an important part of capitalizing on bull market trends.

Misstep 3 - Not Knowing When It's Changed

No trend has yet to go on forever without some significant pullback. Therefore, regardless of the time frame you're utilizing for your investments it is important to identify and understand what signals a change of character for the trend you're in. We typically utilize a group of both technical and fundamental indicators to review the market's trend as a whole. However, regardless of what you use, it's important to identify what the current trend is and when you think it might be coming to an end.

Misstep 4 - Not Rebalancing

The market moves in cycles and assets classes, sectors, and different individual companies can often provide levels of diversification and risk mitigation. However, getting the full benefit of this diversification means taking funds from your outperforming assets and adding them to some currently underperforming assets. It can be difficult! But, when the trend changes and rotation takes place, a proper rebalance may just help you capitalize on new trends and opportunities. 

On this week's episode of Tape Talk, we consider the recent headlines about Social Security. Is this program, that millions of Americans rely on, in jeopardy or is the news just static?

Headlines

Before we get into the meat and potatoes of this week's show we start off with some of the week's biggest headlines!

Twitter (TWTR) is in the news this week after the stock extended its recent rally with the news that it would be replacing Monsanto in the S&P 500 Index. We look beyond the price action and consider what this means for investors. For instance, this may be a prime example of the index momentum factor. Every S&P index investor who may have never owned Twitter in the past will now own this company that was already up 60% year to date before the news. And, as more money goes into index funds more shares will be bought thus providing additional demand for the stock that might not have been there otherwise. This doesn't mean it has to go higher forever but simply a good example of the effects of index investing on the wider market.

AT&T (T) was downgraded this week on continued concerns of cable cutting affecting its entertainment subscription business. While this is not new news it did send the stock lower initially before later recovering. We'll take a look at the recent move lower in the stock and consider what this might mean for investors, especially the dividend investors typically attracted to this telecom stock. Is there an opportunity here to buy a decent yield at a good price or is this a dividend trap that investors should avoid?

How Social Security Works

With the news out this week that social security is going to dip into its trust fund reserves for the first time in decades, it may be a good idea to get on the same page of how this program works for the wide population of Americans who depend on it. For instance, while many know that they fund the program through their paychecks, few know where this money goes or how it's invested once it gets there. Furthermore, we need to explore what the potential headwinds for this type of program might be before we can discuss some potential solutions going forward.

What Does This Mean To You?

It's no secret that social security has had some issues coming down the road for some time now. In fact, it's often a hot topic around Washington and Congress that something must be done yet little ever happens. This is why we'll take some time to review some of the key issues surrounding this social program and how they might be resolved.

Think you have the solution for fixing the social security program? Check out this neat tool by the CRFB to see how your ideas might play out. Social Security Reform Simulator

The Importance of Planning

Most people know that retirement planning is a moving target but they may assume some aspects of their retirement are set in stone. As we consider that social security is a large portion of income for many retirement plans while at the same time the program requires fixes to be sustainable, it becomes clear that it may be time to take this aspect of your financial plan more seriously. If you haven't yet, it may be time to start developing your financial plan and laying the roadmap for your retirement. The sooner you start the more you can adjust as needed before you hit your target. To take the first steps, find out more HERE.

Employees and clients of Joule Financial own investments in Twitter and/or AT&T.

On this week's episode of Tape Talk, Quint and Daniel break down this week's happenings in financial markets. Is Italy set to weigh on Europe (and the world)? Are the new tariffs good for markets? Where is there opportunity lurking now?

Trade Scuffle

The White House was out his week with fresh news on tariffs. The new proposal targeted countries that would have been exempt in the prior round, with Europe and Canada being affected by the 25% steel and 10% aluminum price protection. Domestic producers of the metals reacted positively to the news on Thursday while users of the commodities faced headwinds. We'll look at what this means for markets and trade going forward.

Italy, Arrabiata!

Italy was all over the headlines this week after a breakdown in the country's political landscape raised questions about their future in the Eurozone. If the populist party gains strength in this year's elections investors will be forced to consider a possible departure for the country from the Euro. This caused Italian debt yields to spike and stocks to retreat for fear of contagion. We discuss whether investors need worry or if this news is all headlines.

All About The Fins

The litmus test for where the markets are headed in the near term just might be financial stocks. While not as glamorous as the often talked about tech stocks (we're looking at you FANG!) the financial sector often serves as the foundation for the rest of the market. In fact, it was this sector that was the first to turn lower before the Great Recession. We'll dive into what the sector is doing here, what level might concern us, and what it all means for the market.

Small Caps and Energy Look Rosy

Volatility isn't always a bad thing, it works to the upside too! There are a few areas that seem to be moving higher even as recent headlines point to headwinds for the market. Small caps, for instance, broke out to new highs even while the S&P still stands over 5% off its high. Also, as oil has been trending higher, energy stocks have rejoined the party and made some recent gains. We discuss these two areas and whether they might present an opportunity to investors or just a well-crafted trap.