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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to How to Retire On Time. A show that answers your retirement questions. I'm Michael Decker, author of the book How to Retire On Time. With my associate David Franson here. As always, he's gonna be taking your questions and you're the voice of the people.
David:Okay.
Mike:Today we got a special show here. Submit your questions right now if you haven't already by going to retireontime.com/ask,ask. You can submit your questions anytime during the week. It's kind of fun. But this show is about getting into the nitty gritty.
Mike:Now, for today's conversation, what I really wanted to talk about more than anything else as the questions are pouring in is something that's that's been on my mind. And I'm gonna tell you a story to kind of lead up to this a little bit. Because how many times have you been in the bread line waiting for delicious French bread? Not French bread, but like French traditional bread. Right?
Mike:So I was in line at Prairie Village and I met these two wonderful women. Both really nice ladies. We're waiting in there for those beautiful crispy baguettes, the sourdoughs, things like that. There's this one French market that's just incredible. The food's insane.
Mike:And so if you're not there on time, you miss it. So it was an interesting experience and one of them might actually be listening to this of all things. But the interaction really took me by surprise. Because it was two people that were very similar, but took life very differently. And I want to highlight this because what I'm about to share in the market is essential.
Mike:It is it is massive. I think people are missing the point. They're distracted by politics and the straight of her moves, and not what they need to be looking at from a financial fundamental standpoint. However, if you're person one, you're going to see the information very different than your person two. So let me just indulge you real quick.
Mike:So I'm sitting there in line, all is well. Okay? And I hear them talking about all sorts of things, which was great. And then eventually, after, I don't know, ten, fifteen minutes or so, you know, they kinda asked me a question here or there. They found out that I'm a financial adviser.
Mike:I said, yeah, I'm a financial advisor. You know, I write for Kipling or all these things. That's fascinating. Said, yeah, and don't worry. I'm like, because you know how financial advisors, it's like, oh, I'm financial advisors, you wanna shut that conversation down because they're gonna sell you something?
David:Oh, sure.
Mike:I said, look, and I won't sell you anything like, don't worry. It's all good. Cause they had already proclaimed that they're retired and then all that stuff. Don't like those stupid awkward like, oh, they're gonna sell me something. So it was just a friendly conversation.
Mike:I established that very quickly. And then the one lady says, oh, have what do you think about this stock? Stock x y z. I don't wanna say the stock. Alright.
Mike:And I said this in the newsletter even this morning. It said stock x y z. I said, I don't generally give stock tips pretty quickly. I don't know your situation. I don't know if it's suitable or not.
Mike:I just don't like doing it that way. Right? And plus, unless I do a deep amount of research, that's kind of bad advice. Yeah. Right?
Mike:Unless you intimately know the stock. And then she turns around and says something very interesting. She says, oh, well I'm gonna give you a stock tip. Now, she's a retired, I believe it was a retired teacher.
David:Okay.
Mike:Okay? No financial background, was already expressing to this other lady concerns about retirement, translation retirement. But now she's trying to tell me about a stock tip that that she knew was right. Now after the conversation happened, and she she all got her bread and all as well. I looked up the stock.
Mike:Mhmm. And there were like warning signs all over the stock that, yeah, it's had great performance. But if you look at momentum, you look at trends, just a very simple technical analysis. This stock probably was gonna go down Mhmm. Pretty hard.
David:This is what you do, right? You you do, you don't
Mike:Yeah. I'm a professional. I literally have a database that we custom built out that scans every stock in the entire market, and then we put our filters over to read it just from a technical standpoint, not the fundamental analysis of it. So in a second I can know, oh, this is the gist of what that stock could be. And she's going, it's done well, therefore it should continue to do well.
Mike:Alright. Now notice two things that are are huge here. The first one is, she wants to be seen as, she wants to be smart, she wants to be seen as a someone that's intelligent, therefore she is offering advice without context of understanding what she's saying. This is called the Dunning Kruger effect. And the Dunning Kruger effect, those who lack experience overestimate their abilities.
David:And we probably all do this to some certain extent.
Mike:Everyone does it. You cannot not do it as a human Yeah. Unless you have humility.
David:Alright. Alright.
Mike:Now, so that was one lady, And then we we started talking about politics, which I'm very comfortable talking about politics casually with people. And when when she realized, I'm not hard left or right, but I'm really gonna dive deep into every policy, she got frustrated and then just walked away. Like that's fine. I wanna know truth. Right?
Mike:I wanna know what is right and not bandwagon one side or the other. And that frustrates some people. Yeah. The other lady was a very different mindset. And everyone that's listening in on the radio or on Zoom here on our live show and anywhere else on YouTube, I hope that you can move into the position of the second lady.
Mike:Because once she was a joy, now we didn't agree on everything, but it was so pleasant to talk to her. She was an attorney that worked in a wonderful capacity defending people that were wrong. Like, I don't wanna get too much of the details, but she was a cool lady.
David:Alright.
Mike:Right? We talked politics, we talked economics, we both learned things from each other, but notice she was never trying to be right. She wanted to learn so she could see what was right.
David:Oh, yeah.
Mike:She was more interested in truth than political persuasions or headlines or this is what has happened, which means if it has, you know, past performance must be indicative of future performance. No, that's not how this works. And that's not just in finance, that's in relationships, that's in politics, that's in you name it. And the reason why I bring this up is so many people today, when they're concerned that they come in the market, they're doing the retirement plan, I'm concerned about the state of Hormuz. I'm concerned about tariffs.
Mike:I'm concerned about our judicial system. I'm concerned about the state of our democracy, therefore I want to leave to the country. And I'm not saying those are invalid conversations. They're very much valid. There are real concerns and they may influence you one way or the other.
Mike:But that's like the tip of the iceberg of the real issues that I see. That I would say most people aren't looking at these things. Okay?
David:So from your vantage point as like a financial advisor who does this. Yeah. Yeah. There's more than just those things you listed.
Mike:Let me let me put an equivalent. Okay? Alright. And I'm gonna switch the timeline a little bit. But do you remember Bill Clinton?
David:Oh, yeah. I remember that guy. Yeah.
Mike:You know, he's a pretty nice guy.
David:He's still out there kicking?
Mike:Yeah. And he got along with So he was the president. He got along with Newt Gingrich. Oh, yeah. There was a scandal in the White House.
Mike:K? You know, things happened, and we thought Yeah. Oh my gosh, like, this is like a horrible a terrible day on politics. Right? That was, you know, that's a time where we probably wish we could go back to.
David:Right.
Mike:You know, they balanced the budget. They they worked together. But but let's let's take that and say, man, that was an ugly political moment. Let's assume that happened in 1999.
David:Mhmm.
Mike:And everyone was focused more on that. And people were completely missing the financial breakdown of the capital expenditures or the money flowing into the .com era that then led to three years of downward momentum. As in three years of the markets going down. Now, yes. Should presidents be engaged in nefarious activities like that?
Mike:Absolutely not. Like, we we like to see a president maybe more more, you know, skip the politics though. Yeah. If your if it's that or your money is going down for three years, which one are you really gonna be more concerned about? It's gonna be your money, probably.
David:I would guess so.
Mike:Up to you. Yeah. So let's talk about money today. Not politics. Let's talk about money today.
Mike:And the things that I'm seeing, I've got a whole list here to make sure I'm on track of all this. So, because you don't it's not about appearing right. When you're near retirement, you need your money to last. Yeah. Which means past performance may not be indicative of future returns, especially today.
Mike:Here's a few things and this is just the way I see it. And I'm gonna be I'm gonna keep it very simple today. We don't wanna get too technical on the jargon. But hear me out. Okay?
David:Okay.
Mike:I believe our economy right now is mostly built on the house of cards. That's another political note to Kevin Spacey and what a great show that was. Right. No. Mean like the actual analogy, House of Cards.
Mike:Good. Okay. Let let me just take you down a little bit of rabbit hole. LLMs, large language models, which is what AI is. AI is not sentient.
Mike:AI is a sophisticated compression mechanism that creates statistical probability. So a lot of people don't realize this, but it's not thinking for you. It's giving you the statistically most probable next word, and then the next word, and next word. That's how it works. It's just probability.
Mike:And each model gets better and more efficient and more accurate and so on and so forth. That's just a layer of technology. Well what if they shift that technology? So it's not maybe using language, but using a different form and then puts out into our language the answer. That compression makes the cost of AI, let's say half.
Mike:Now just imagine, just for a moment. I'm using this as an example. What if they put, I'm using a ridiculous number, $2,000,000,000,000 into data centers across our country and then a year from now they realized they only needed 500,000,000,000 of data centers, and the rest is unneeded capacity for at least next five years.
David:And so these are tech companies that will be putting this money
Mike:Let's just say that were to happen, and I'm using fake numbers for easy math.
David:Alright. $2,000,000,000,000
Mike:is going into data centers. Let's just say this is not a real number.
David:Alright.
Mike:And then AI advances, becomes more efficient to operate, or the demand shifts, or they something something changes, and you go from 2,000,000,000,000 to 500,000,000,000 of need. Alright. That means three fourths of all the data centers, so all that money went into through private lending, private credit, or whatever went into these companies to build out these things are now nothing. They're not needed. Eventually they'll be used.
Mike:Yeah. But they won't really be needed.
David:So they overspend. Is that what we're saying?
Mike:They overspend on borrowed money. Okay. So David, let me use an example. You're gonna buy a $2,000,000 house. Oh.
Mike:In a year from now that house is gonna be worth 500,000.
David:Oh. That's not so good.
Mike:And the bank is gonna keep, you know, keep your mortgage going at $2,000,000 Yeah. Or call the loan. Yeah. Either way, you're in a crappy situation. Well, what if that happens?
Mike:Now, I'm not being pie in the sky, you know, sky is falling. I should say that's the more appropriate analogy. This is what happened in 02/2002. We built out more infrastructure than was needed with the Internet. This is why Cisco fell.
Mike:It was the largest company in the world. Fell over 86%.
David:What
Mike:if we didn't need NVIDIA chips for a couple of years? What if Microsoft, which is I believe 5% of NVIDIA's entire revenue is to one company, says, we have enough. Thanks. Yeah. That that alone sends shock waves into the market.
David:House
Mike:of cards. Let me keep going.
David:Okay.