Introduction: Welcome to the Fiscal Firehouse, a podcast
dedicated to promoting financial literacy to firefighters.
I'm your co-host, John Beatty, executive board member of Local 1309, a lieutenant,
and also a certified financial planner.
With me, I have the other co-host of the fiscal firehouse, Louis Barella, executive
Board member of Local 1309 ambulance driver, and want to be financial expert.
Together, John and I hope to bring clarity to the world of personal finance,
specifically relating to firefighters.
Firefighting is a difficult job making sound.
Financial decisions shouldn't be.
Opening: In today's episode of the fiscal firehouse, John and Louie will discuss the
current volatility in the stock market.
They'll give insight into how people behave and often make investing mistakes.
At the most un opportune times, John and Louis will answer the question,
is this time really different?
Lastly, they will offer five strategies to help investors remain
resilient in tough economic times.
Without further ado, let's kick it over to local 1309 studios.
And the recording of the fiscal firehouse.
Jon: Welcome back to another episode of the Fiscal Firehouse.
I'm your co-host John Beatty.
With me as always, I've got my partner in Crime lb, Louis Barilla.
What's up, E lb.
Louie: lb?
Hey, how you doing, John?
Jon: Oh man.
It's, uh, man, we are, we are fielding a lot of questions.
So we'll preface this with, uh, what is it, April 17th?
Louie: Yep.
April 17th.
Today,
Jon: April 17th.
Yep.
April 17th is a recording of this episode of the fiscal firehouse.
And man, we have got a lot of stuff coming down the pike from the stock
market, from the economy, and man, Louie and I are just getting berated right now
with questions, concerns, a lot of fear.
I am, I never like to see the stock market do this or the economy do
this, but I am, I'm really excited because this is a lot of the dialogue.
When Louie and I were talking about spooling up the podcast,
this was a lot of what we wanted.
Something that we could talk to people, um, talk to the audience and
give them some real time feedback.
because there's just a lot of people that are anxious and nervous about
a lot of different things right now.
And we thought this would be the perfect opportunity to be timely in
some of these conversations and set the record straight and hopefully,
just leave people a little bit more at.
At ease about where we are and where we're headed.
and we just really wanted to provide some commentary for one,
obviously these are opinions.
Yeah.
But we just wanted to reset the compass, so to speak.
And take some of that fear and anxiety that a lot of people are
feeling and hopefully, be able to give you some context for what we're
Louie: experiencing.
Yeah.
I don't know if you felt this, John, but I think there's a lot of
misconception about what, different things mean when it comes to an economic
slowdown or, tough economic times.
And I think that I've heard people use the wrong terms to
describe what might be happening.
and I, we get it like there, the market's been really volatile lately,
and if you, get onto any news service, you'll see tons of articles, headline
articles, attention grabbing articles.
And so, you know, we, we just wanna address that.
what does it mean if there's an economic slowdown or a recession
or a stock market crash?
Or I've even heard the word depression thrown around a lot,
which is a serious word, John.
let's, a serious
Jon: word, who is benefiting from all these, it's all
the market prognosticators.
And people that sell media, they love this because people are literally
glued to the television or their phone or their social media account.
X is blowing up.
Like people feel like the world will never be the same.
And it's just like all the fear mongering that we have seen with previous cycles.
And it's just like they love it.
and it's one of those things that sells a lot and advertisers like it.
There's a lot of people that benefit from hysteria and from fear, quite frankly.
So we just wanted to reset the barometer on some of these things.
Give you guys some context talk.
Louie: We were, we were talking about what to name this episode and I think
we need to get clicks and listen.
So we should name it like the impending economic, D-Day or we should name it.
Something like very attention grabbing so that people are
more likely to listen to it.
let's capitalize.
Jon: Let's capitalize.
Yeah.
We're at the fiscal firehouse, we're definitely for profit.
we're getting up.
Wait, wait a minute.
Louie: Haven't made profit, but that's okay.
Jon: made any profit yet.
But, you want to give us a little bit more, I mean, we try to be as accurate
as we can on the podcast, but maybe just a little bit of history lesson,
Louie, on just some of these terms.
Yeah.
We already talked about it.
Recessions,
Louie: Depressions.
Jon: crashes.
Sure.
All those things.
Just give the listeners a little bit more context of what do those things really
Louie: yeah.
So we'll start with talking about some of the common terms that you see in headlines
and what they mean so that we can all be sure that we're talking about the same
stuff around the firehouse table or when you're talking to your family about it.
so one of the first ones that you hear that comes up a lot because
this has happened and it has happened a lot over like the last.
50 years or, as long as there's been a stock market and that
is a stock market crash.
And a stock market crash is simply a sharp decline in stocks
over a short period of time.
So most economists consider that to be a 10% more drop within a week or so.
If that happens, that's called a crash.
So over the past couple weeks we experienced the stock market crash.
I don't know the last time you looked, John, but when I looked at
the s and p 500, I think a couple days ago, it was down, I wanna say
11 point a half, 12% year to date.
Yeah.
which is a big drop over a relatively short period of time.
A lot of that drop happened over a three, four week period.
Jon: post liberation day.
Louie: Post liberation
Jon: Exactly.
Yep.
Louie: Yeah, so that would be considered a stock market crash.
So it's important to know that if there is a stock market crash,
it does not necessarily mean that there is an economic downturn.
it can signal that something else is going on.
It signals a lot of uncertainty in the market or a lot of fear in the market.
Sometimes that's short-lived.
Sometimes it's, longer term concerns.
We don't know.
it's too early to say.
We don't know.
And I guess before we go any further, just to reiterate, we need to say that
John and I don't know what's gonna happen.
It market could go back up.
We could gain everything lost in a short amount of time.
We could be entering into really tough economic times.
We don't know.
And that's why we wanted to do this podcast, but that's
what a stock market crash is.
So we're delivering to you this podcast, during, a stock market crash.
Jon: Yep.
No, I think that's totally fair to say.
as far as what an actual, the values associated with a crash are, and I think
the thing that has people, especially newer investors, even more importantly
probably old investors, right at they're closer to retirement, is just the speed
and velocity that this has happened.
Yeah.
we're seeing we're, we are seeing swings of the market intraday that, that are.
Are historical, they have never moved this much in such a short amount of time.
Just because there is, and that you really clued into the word that the theme
of this and really why the market is behaving the way it is uncertainty, right?
On either direction, good and bad.
that is just a one thing that the market is trying to figure out.
And I think this is a good opportunity for people to just know
like how the stock market works.
So a lot of people think stocks are reflective of what is going on with
the corporation or the company today.
That is not the case.
Stock market is always future looking, right?
So they're trying to figure out where the company is gonna be from like
a profitability standpoint, three, six months, a year into the future.
They are not counting for what happened today.
They are looking forward, six months to a year in the future.
And that's why you're seeing so much volatility specifically going down
because with announcements of tariffs and stuff like that, all of a sudden the
stock market has to reprice potentially what earnings are gonna look like and
how that's gonna affect the bottom line.
So I think that's a really important point, is that the stock market, the
current price today is not reflective of what the company is doing today.
Yeah.
it's looking into the future and what that's gonna mean for earnings in the
future and how the company's gonna do.
So really important point of clarification
Louie: and John, I didn't put this in the notes, I just realized now, but so
there's, that's a stock market crash.
And then there's a level after that a lot of people like to call a bear market.
So a lot of people you hear, people are bearish on stocks or there's a bear
market going on, and all a bear market is.
It's basically a little bit bigger and more sustained crash.
So I think most economists consider a bear market to be, like a 20%
decline over weeks or months.
So more than a crash, not necessarily a recession, although it's a strong
indicator of recession, which we'll talk about in just a moment.
But it's basically a sign that something serious is going on.
This is not a bear market yet, but if things keep going the
way they are, it's very possible that we'll enter a bear market.
So that's a pullback in securities 20% or more over weeks or months.
And sometimes a bear market can last years.
So that's basically where prices stay depressed, around that 20% decline
or more over a long period of time.
Jon: Yeah, and we'll talk about that too.
and we'll highlight, it's very important because.
a lot of this comes down to terminology, but when you talk about the stock market,
and when Louie and I talk about the stock market, we gotta make sure that
we're talking about the same thing.
'cause within the overall market there's a lot of different indexes and indices.
And there are some indices specifically like the Nasdaq, which tr which
tracks a lot of, technology stocks.
They are in a full on bear market right now.
Louie: that's true.
Some sectors are in
Jon: Some sectors are definitely down more than 20% from their peak.
it really depends on what market or indices you're talking about.
And Lou and I will chat on that here or riff on that here a little
bit more, later on in the podcast.
But yep.
So that is just stock market crash.
Yep.
Versus what is a bear market.
And obviously the opposite of a bear market is what a bull market.
A bull market man.
And we've been ripping.
Yeah.
That's the other part is we have been in a bull market
since the end of 2022 into 2023.
And for the last.
Two years, like stocks have gone up.
Every industry, every stock market, every basic, more or
less, all the stocks have gone up.
They've gone up into the right.
So this is something that just to reset some of our expectations is like the
stock market has enjoyed some significant gains over the last couple years.
Louie: Yeah, absolutely.
Absolutely.
Jon: right, so what's a recession then?
So if we talked about the stock market crash or what that is,
and then we've talked about bear markets and bull markets.
what's a recession?
Louie: Yep.
A recession.
Actually, it doesn't have anything directly to do with the stock market,
so the crashes and the bear market, that has to do with the stock market.
but a recession has to do with just economic activity in general.
Now it is related to, a stock market decline generally because a recession is a
significant decline in economic activity.
And when there's an economic activity decline, there's generally
a pullback in stock prices.
So you'll see a, either a crash or even just a reduction in
prices across all equities.
So generally a recession, most economists would say that a recession
lasts, more than two months, and it includes falling gross domestic product.
It in, it includes an increase in unemployment and a slow down in business.
Investment.
So some economists disagree or have differing terms for what they consider
to be, a recession, but most economists say that a recession is two consecutive
quarters of negative GDP growth.
So that sounds
Jon: real nerdy.
Real nerdy.
You got GDP growth, you got negative quarters, all
Louie: I know.
I know.
And that's, and it's basically, it's backward looking.
So some, we might be in a recession right now and not know it 'cause
we don't know what the current GDP numbers are and how it compares.
But, they'll let you know, like the headlines love to talk about that.
'cause it gets views, it gets clicks.
it's possible that we're in a recession right now, we won't know.
But in general, two consecutive quarters of negative GDP growth,
would be considered a recession.
Yeah.
So are we in when John?
I don't know.
Jon: Yeah, and like you said, it is backward looking, so we
won't know until after the fact.
Honestly, when we're already in the recession or a lot of times when we've
already recovered, a lot of this is just the academics and the data is
lagging, so it just takes up a little bit of time to, to compile all that
information before they can do their forecast, and then they always do
revisions and everything else like that.
So, you know, this is something they talk a lot about on the news and in the media.
The difference between Wall Street and Main Street and how some of
those things interplay on each other.
and that's one of the things that can be really difficult is you can have,
it is a potential where you could have a decline in the stock market.
So actually, values are going down the stock market, but the overall economy
is still okay, is, and people will still have jobs and there is still a certain
amount of growth in certain sectors.
So they're not mutually exclusive, I think is the end point.
And I think a lot of times people convolute both of those terms and they
use 'em interchangeably and they are, they can be very much dependent on each
other, interrelated, but not all the time.
And I think that's one of these things right now is we are in,
a stock market decline, right?
Values have dropped down, but the overall economy still looks okay.
And that's what like the Federal Reserve has to look at when they're setting
policy and all these other things.
But it's just, what's really concerning is just.
The speed and velocity of these things.
but a lot of the data that moves either monetary or fiscal policy, it takes
a while for that stuff to develop.
So we're just in a lot of limbo and uncertainty right now, but it's good that
we all speak the same terminology and, a lot of Louis and I's purpose on this
podcast is to demystify a lot of the terms that are used and just make sure that
we're all te we're all talking the same
Louie: Yeah.
And the, and just so you guys can get a flavor for what a recession is.
I think one that a lot of us, a lot of our members can
remember was the Great Recession.
And that happened in 2007.
It was like 2007 to 2009.
And that was caused in part by the subprime mortgage crisis and the
housing market bubble bursting.
And, a lot of people could remember how tough it was to find a job.
wages were just stagnant for years.
Like some people were went without races.
I think West Metro, I wasn't here at West Metro at the time, but I think
West Metro went years without raises
Jon: We had to actually Yeah.
Forego some wages.
we had to, actually do some demotion, so we felt that, yeah.
across the district.
and at the department specifically, it was a significant change for us.
obviously being funded through property taxes and property values declining,
not nearly as much to some degree as, some of the other places like
the Midwest and even the Southwest, like Arizona, Phoenix and Las Vegas.
some of their markets dropped 50%.
we never reached that level of drop here.
It was honestly pretty tame compared to a lot of the country.
But nonetheless, we ultimately felt what that is.
Louie: and that was about as bad as a recession gets, like there's been
a lot of recession since then that a lot of people don't even remember.
Or maybe they remember.
but it just wasn't that
Jon: It affected everyone.
Yeah.
some recessions affect certain industries, right?
Specifically whether that's like the.com
bubble and the tech industry, like that was one that was felt by a lot of people.
But, the GFC, the great financial crisis was one of those that it, there was no
one that it did not affect, it affected everyone in a pretty meaningful way.
And part of that is, and Louie talked about this, is, there's
really no predetermined amount of time that recessions can last.
And that was one that was just really drawn out and prolonged for years
versus because of new monetary policy and even fiscal policy to some degree.
they're just not letting recessions last as long.
They're, injecting a bunch of liquidity through, fiscal policy and
some other things that, they just, there's no run of the mill recession.
Everyone is a little bit
Louie: Yeah.
Little fun fact about that great recession is, so it started, most
people say it started like around, I think November or December of 2007.
Beginning of 2008.
Yeah.
January in 2008.
I graduated from college in April or May of 2000 and.
Jon: and eight.
Ooh,
Louie: that was a brutal time.
I had a lot of people, I was in business school, had a lot of
people who had job offers from big banks and accounting firms.
And after they had been given their jobs, they were given letters
right After saying, sorry, no jobs
Jon: We're rescinding this offer.
Sorry, we're actually consolidating.
We're actually laying people off, so
Louie: it took me a long time to find a job.
I came back, came, moved back to Colorado after I graduated, and
I think I looked for nine months.
Oh man,
Jon: I didn't know that.
Louie: yeah, I had a hard time finding a job and fortunately I was
able to find one with the state, and that's how I started my career with
the state of Colorado because they were one of the few employers out
Jon: that were still hiring.
They still had funds from the government.
Louie: Yeah.
So that's how I got in.
But yeah, it was a rough time.
It's, it, that was a rough time for a lot of people.
and not all recessions are like that.
the most recent recession that we had was the COVID-19 recession, and that
lasted, I think two or three months.
Yeah.
and that was a artificially caused recession.
there was no reason to believe that would've happened had there
not been a forced shut down of businesses, by the government.
So anyway, that's just a little bit about recessions.
good to know when people talk about recessions, what that is.
and then John, I'll just move into the last one that we'll talk about
our last term, and that's depression.
I've actually seen some articles about that, some podcasts about it, where people
are saying, Hey, because of these tariffs, this could lead us into a depression.
And that is something that.
Most people listening to this podcast have ne probably all people listening to this
podcast have not experienced a depression
Jon: for Ron's side bottom.
Ronald, if you're listening to this brother, we know that you actually
lived through the Dust Bowl and you were part of the Great Depression.
It's all good, bro.
Louie: That's why he was always taking like leftover food home from us and he
was making his eat two week old food.
'cause he remembers the great depression times.
Jon: That's right.
That's right.
Louie: But a depression is basically a recession on steroids, so
it's a severe economic downturn.
We're talking about massive declines in GDP, super high unemployment,
collapsing businesses, massive reduction in consumer spending and business
investments, depressions last years, and there is usually, some amount
of systemic failure related to it.
they often result in bank collapses in the deflation of currency.
We don't have a lot of time to talk about what that means or any time to
talk about deflation and currency, but it's worse than inflation.
And everyone knows inflation is not good, and we need to keep that under control.
Deflation is even worse.
So in the Great Depression, which happened in the 1930s, GDP dropped
by 30% and unemployment was 25%.
Can you imagine?
Oh my gosh.
Jon: and I'm thinking back to, our most recent, big crisis was COVID-19.
And I feel like there was a portion in March when kind of the rollout
just happened where we reached some unemployment of about 20% just
because of all the unemployment claims that were being filed.
And obviously that was very short-lived and temporary because of all of the fiscal
policy, that the government instituted.
as far as, giving people stimulus checks or having the.
The PPP loans and all those other things.
Like they really, they wanted to learn from the great financial
crisis and some other things.
So they really got ahead of the curve on a lot of these things.
without some of that intervention there, there was definitely a lot of academic
dialogue about potentially we could have involved in other depression by basically
completely shutting down the economy.
but I'm happy we're not discussing that now, but it's just one of those
things like the depression is not a term that should be used lightly.
And I'm just really happy for most of our economic policy.
We don't have to talk about that.
'cause we do have forward thinkers that are trying to prevent that.
'cause I wouldn't wish that on anyone.
Louie: Yeah.
And we're not.
And we're not saying that we won't enter a depression.
We don't know John.
John and I don't know.
We're just letting you guys know what these terms mean.
So if someone tells you that we are in a depression or that a depression is
right here, I would first of all probably not believe him because that's severe.
And you'll know and everyone will know when we're in depression, the
whole country will be filling it even more so than the great recession
in 2008 that we talked about.
So with that being said, John, my first question to you is this time different?
We have tariffs now.
We got some crazy stuff going on in Washington.
We got people freaking out, trading partners, art.
Is this time different?
Jon: Yeah.
Everyone, that's everyone's favorite saying and there's always
gonna be some type of exogenous shock that creates something.
So in essence, everything is a little bit unique and is different, but,
there's actually a famous investor, old Sir John Templeton, and he is
quoted with this time is different.
Is the basically one of the most dangerous words in investing, right?
Because it is this concept of, it is important as investors to look
at historical trends and tendencies and to just understand long
term how things generally reset.
'cause there's always gonna be something different, whether there, whether it's
geopolitical, whether it's something from the government that they're instituting
different things, whether it's a pandemic, whether it's a, natural disaster.
There's always going to be something that we just didn't account for.
But ultimately, at the end of the day, these things all
follow some type of cyclicality.
And there are some patterns that we can recognize, oh, this is a
different mechanism for how we got.
Here, but we also know how the story ends, so to speak.
So it really is taking that, that breadth and then taking the long-term
view on that and just recognizing that, although, things are different,
we had tariffs back in the 18 hundreds and into the early 19 hundreds.
But, our economy is so much different from 1800, 1900.
So I have seen a lot of, and that's where a lot of the economists
are trying to forecast what, why this would change things.
And it's just like we don't have really good data because our technology and
our economy is so much more modernized than it was in the 19 hundreds.
So they don't know all the, all they can do is just plug in some variables, do
some data, and then do some projecting.
And this is how we get to where we do.
But, it really is, this time is different and some of the examples are,
we talked about a little bit like the.
the.com
bubble, right?
the great financial crisis.
We talked about meme stocks, cryptocurrencies, we've
talked about the pandemic.
We've talked about all these things.
But at the end of the day, what ended up happening after all that stuff?
Did the stock market go up several years down the road?
Or is, are we still have not recovered from some of these things, right?
Louie: It still went up, right?
It still went up.
And I think that's the, that's, so that's the key to answer that
question is this time different?
Yes, sure.
They're all different.
They're all a little different.
but I.
Should it, your next question should be, should that change what I do?
Should that change how I invest?
should that make me not an investor?
before we really talk about that, John, I want to ask you another question.
I have an investment opportunity for you, John.
You didn't know I was gonna do this.
So it's an investment opportunity in a country and I want to know
if you're interested in buying this investment opportunity.
So here's the thing, and this is good for you.
I am gonna tell you what happens to this investment over the next 50 or so years.
So you can tell me if you're interested in it.
Okay?
This is just
Jon: Oh, hypothetically speaking.
Okay.
Louie: there are going to be some very expensive wars
that this country gets into.
there's gonna be, this is over a 50 year period, okay?
Okay.
50, 60 years.
So there's gonna be some, a war like in Korea.
Afghanistan, Iraq.
Very expensive.
very expensive,
Jon: Billions.
I'm di I'm guessing.
Yeah.
Okay.
Yeah.
Louie: this country's going to experience some pretty de decent stagflation
for a period of time early on.
And following this, it's going to have 18% mortgage rates.
Brutal.
It's gonna be really expensive for people.
And John, sometime after that, this country's going to experience the
largest single day stock market crash in history, 25% in a single day.
So this is what you're buying into John.
A little time after that, the country's gonna experience,
a technology bubble burst.
And tons of companies are gonna go under, hundreds or thousands of country.
Oh, and then the country will experience the most devastating
terrorist attack in its history, and that will change the country forever.
And unfortunately John, that is going be followed, by a housing
crisis and a really bad depression.
Someone even call it a great recession.
not a depression
Jon: Okay.
Recession.
Yep.
Louie: oh.
And then the country's going to experience a pandemic that closes down businesses and
slows the wheels of economic productivity.
I, sorry John, I know this sounds like a shitty investment, but,
Jon: Where's the upside on this?
Louie: do you wanna buy that?
Can I get your money for this investment?
Now?
if you invested in that, what do you think that investment would
return every year on average over that time with all those things?
Jon: based on my lack of financial acumen, I would say that's probably not
a good investment in that I probably would expect a negative return.
'cause those are some major
Louie: things, man.
Jon: that you just described to me.
So that does not sound rosy.
That does not sound like something that I wanna put my money into.
Louie: who would wanna do that?
Who would wanna buy into that?
Jon: That sounds, yeah.
Not very optimistic.
Yeah.
Louie: yep.
And of course, we all know that's the United States, and that's
what's happened over the last 50 or 60 years in this country.
And the average return for the s and p 500 index fund over
that time has been about 10%.
Wow.
Jon: Despite all of those challenges and hiccups,
Louie: all of that, and that goes to John's point that he mentioned right
before that, which was, there's, every time it's different things, crazy things
happen, but the market always goes up.
that just illustrates, and of course you guys knew that's what I was
talking about was the United States, but it puts it in perspective, right?
I can talk to you about all the bad things that happen, and we could talk about all
the black swans and all the potential problems that a country's gonna face.
and we're gonna have more of those over the next 50 years.
We have no reason to believe that we're not gonna have that.
But even through all of that.
The stock market went up, up.
And if you're not an investor, you lose out on that.
If you let fear dictate your decision to save and invest your money, you
would've lost out on some massive wealth building opportunity.
Incredible.
Jon: Yep.
And it's one of those things like the stock market, generally speaking,
if you wanna make an analogy, it's like a forest to some degree.
And we know that a lot of the trees, especially in Colorado, they
thrive or they only grow, is when there's a little bit of fire that
comes underneath there, The forest fire that comes underneath there.
And sometimes, just with the nature of the stock market it need, it does need
something to come in there and shake things up and recognize which companies
are good, which companies are bad.
And the ones that are good will always survive.
They've got certain, economic productivity and moats that will help keep them
safe and secure, even in bad times.
And then they end up thriving down the road.
And those companies that weren't really that great to begin with.
Guess what, they get flushed down the toilet and then a new company will
have the opportunity to come in there and take whatever space they were.
So it's just part of a natural business cycle.
And I know Louis, that's what his expertise is and that's what his schooling
was all in about was cycles and business productivity and how all that happens.
So at the end of the day, like it really is a question.
And we obviously have some home country bias.
We're all Americans here and obviously there's a lot of eng
ingenuity and innovation here.
But at the end of the day, like that's why I continue to put
money into the stock market.
'cause I believe in people like Louie and people that graduate from
Michigan and all these other schools that, their whole job is to make
businesses more efficient and effective.
And as long as we continue to have that spirit here, like I am a firm
believer that there are innovations, there are efficiencies and companies
will Continue to become productive.
So that's really what you're buying into.
It's not just even one specific company.
'cause Louis and I will talk about how we buy index funds, so we
don't invest in just one company.
But if you believe in the philosophy behind it and the concept behind
it, then you know, that's why we continue to invest day in and day out.
But, it's always, a little bit scary when you're in certain times.
And sometimes you just need a little resetting in perspective on what
you're actually doing, which kind of parlays into our next topic.
And that's to have basically a financial plan.
And I know at the very beginning, Louis and I talked about the
pillars, and one of the pillars is really having a sound strategy.
having an understanding of why you're investing.
To begin with, right?
what's even the purpose behind why you're setting money away for whatever goal or
whatever dream you have, and that's really creating that investor policy statement.
Yeah.
and it's times like now, which is really when you should step back and
revisit your investor policy statement.
Yeah, absolutely.
and look at that.
Louie: let's, and so let's unpack that a little bit.
John, I'm gonna ask you another question and actually, I probably know the
answer, but I'm gonna ask it anyway.
How much stock have you sold during this crash?
How much have you freaked out and sold some stock?
what percentage?
Jon: Oh, yeah.
How much have I, how much have I sold?
And went into some safety net, like cash, zero.
I have honestly only continued to add, just as my, monthly 4
57 contributions go in there.
Katie and I have our own little brokerage account and we
just continue to add to that.
So a lot of that is, I know what my time horizon
Louie: You
Jon: a plan?
I have a plan, yep.
I have a plan.
And I know that I don't need this money anytime in the near future.
Not in the next six months, not in the next year.
Not even the next five years.
I'm still, forward looking 15 years into the future, but.
Before, potentially I'll touch any of this stuff.
So I feel pretty safe and secure that over the next 10 or 15 years
that money will continue to compound and grow and everything else.
But yes, to go back to Louie's point is we have a sound statement, a policy that
this is why we're doing what we're doing and why we're not gonna deviate from that.
So that is a solid point.
How about yourself, Louie, you and Caitlyn?
Louie: Same.
Have you guys,
Jon: sold any, any stocks?
Are you taking some losses or,
Louie: about liquidating so we could build a bunker, in our backyard and we can buy
more ammo and toilet paper of course.
'cause that's apparently what, tough economic times means is
you need to buy toilet paper.
but.
Truthfully, no, we have not sold anything.
And same thing, in fact, we've probably bought more stocks
over the last few months.
Warren Buffet, one of the greatest investors of all time, has this quote,
and I'm gonna butcher it 'cause I actually don't remember what it was.
Jon: But you understand the
Louie: You understand the intent.
And it's that the stock, he's once said, the stock market's the
only thing that goes on sale and everyone runs away from and that's
what happens when stocks decline.
If you have a 10% decline in stocks or a 20% decline in stocks are on sale.
The value of those stocks, each share of those, of that stock is cheaper.
But instead of being like, Hey, this is awesome, this is an awesome sale,
I can get some discount stocks.
People instead generally say, maybe I should sell mine too.
Maybe I should get outta the market or turn down or whatever.
And that is generally not a good idea.
if the market's, zigging you, you probably want to be zagging.
That's just generally good advice.
And I think, John, you mentioned, an investor policy statement, having some
way that you can hold yourself accountable and say, look, it's scary right now.
There's a lot of crazy headlines, but I know that I have a long-term plan.
If you can do that, you will, you will be doing yourself a massive
favor throughout the years 'cause you will experience recessions, you will
experience crashes and bear markets.
And if you are not, able to be, flapping in the wind when that happens and
you can have a solid, plan that you stick to during those tough economic
times, you will not lose money.
And in fact, you'll make money in the long run.
Jon: run.
Yeah.
I was, listening to some podcast.
I can't remember which one it was, and it was right after Liberation Day, I think.
And then there was the following two or three days post that were, I think the
market had dropped like nine or 10%.
Yeah.
And then the following Monday, I think there were some more
announcements about some more tariffs.
and then it went down like another four or 5% that Monday, and I remember they
were referencing back volume flows.
And there's certain, custodians that are more retail friendly, like Robinhood
and some of these other ones Yeah.
Where they saw so much, people pulling out money on that Monday.
So after it already dropped about 10% and then it was dropping another two, two to
3% and they had withdrawn a lot of money.
And then it's the next day that they make these a new announcements that, oh, we're
actually gonna pause tariffs for 90 days.
And the stock market went up 10%.
And it literally is the worst thing they could have.
Possibly
Louie: Ugh.
Jon: And it just, and this happens, like we talk about how every
cycle is a little bit different.
Every crisis a little bit different.
Every reason that the stock market goes down is a little bit different.
There's some type of shock that was just un, unprecedented, unaccounted
for, but people, and it continues to happen all the time, is they absolutely
take their money out at the worst time.
Louie: Always
Jon: imagine fueling that.
oh my God, okay, I feel like this is gonna go to zero, so I'm gonna liquidate all my
things and be like, okay, now I'm safe.
And then literally within, the next day, within three hours, it shoots back up 10%.
And it's just one of those things you can just not time the market on these things.
And it's not just retail investors, it's even institutional folks.
It's hedge folks.
All people are susceptible to this whenever you're trying to time the market
or get in and out of certain positions.
So it's just one of those things.
But, so how about this, Louis, but what do you say to someone, and I've had
some of these conversations with someone that's so they're not a defined benefit.
Person.
Alright, so they're all in a money purchase.
So they are in our 4 0 1 a plan.
So that is what their retirement is based off.
They don't have the safety net at a fine benefit.
And they're in the stock market and they're invested and
their portfolio is down 25%.
So they've, I've talked to people and they've lost, $300,000 in
the last three weeks and they're like, okay, this sounds great.
Louie, you and John are both kicking back
Louie: to me.
Sure,
Jon: man, I'm down like 30% here and I just lost 300 grand.
what am I supposed to do
Louie: And I, yeah.
And, and that's a
Jon: and that's real and
Louie: it is totally real.
And let me tell you this, and I'm not gonna apologize for saying this.
If you are, just a few years out of retirement and you are a hundred
percent invested in stocks and you are experiencing this kind of economic,
downturn or shock to the stock market, you've already screwed up.
You already screwed yourself.
And you should have had a financial planner, you should have had
a certified financial planner.
Walk you through a better stock allocation because the time to make moves is not
during the middle of a stock market crash.
Just like John said, people will lose out on the upswings after severe downswings.
So you've already messed up.
If you are a few years outta retirement and you're a hundred percent in stocks
and you cannot stomach a 25% drop if your portfolio cannot handle that, Bubba, you
need to start looking at either delaying your retirement, continuing to work, and
you need a financial planner to set you straight because you already messed up.
Jon: And that's one of the things where honestly, and I've said this before,
I think some of the best financial advice are where financial advisors
really make their money, so to speak, is not in outperforming the market.
We've already proven that is not effective, but it is in behavior and
letting their clients know that, this time it does feel different and it is
a little bit different, but we're gonna stick with the, our investment philosophy.
And they really prevent them from really go getting out over their
skis and really messing things up.
And that to me is sound financial advice.
And that's really what advisors are all doing for their clients.
Right now.
I have.
I have a few friends that are advisors, and these, the, they hate these markets
more than anyone because they are overwhelmed with client calls, people
calling in super nervous, super confused, wanting to do things, and a lot of 'em
are just spending time on the phones and just walking them through, listen.
We didn't know that this was gonna happen for one, but we are set up to
weather this storm and we're not gonna sell a bunch of things at losses.
and then try to make it up on the back end.
So I don't want to discount people's feelings and their being
scared, but I think at a minimum this should be a wake up call.
And if you are in, if you're one of the members that we're talking about
or listening to this or someone that's in this position, it's one of those
things where they do want to seek some financial counsel and some advice and,
help weather the storm and move forward and come up with a plan because, yeah,
I agree with you, your asset allocation.
So how much exposure you had to some risky assets, which stocks are all risky.
There's no safe.
Stock out there that's not susceptible to some type of declines.
And Louis and I will talk about just how natural it is for the stock market
to go, up and down throughout the year.
And this is all, some form of normalcy.
It's just the speed and the rate at which this has changed
that really have people concern.
So yeah.
But that, but I don't want to discount their feelings and their level of
scaredness, but for, people that are a little bit maybe further out on
the curve, like 10, 15 years out from retirement and you still, still feel
like This is not causing me to sleep.
It's not too late to change what some of your allocation looks like and
maybe going into some safer assets.
that's okay.
A lot of this, it's totally dependent on people's specific behaviors
and how they view certain things.
And there's some ardent investors that are like, man, if this thing
goes down 40%, I'm okay with that.
'cause I believe within the next two to three years that this thing will fully
recover and I don't need the money.
Like I'm okay with that.
Those are the exceptions and not the rule.
Most other people see, you know, they have a million and a half dollars in their
4 0 1 A and it goes down to a million.
They're panicking and I feel that and I respect that, but that should just help
reset your compass on what you should be doing in the future and just understanding
that yeah, stock market is risky and there are gonna be periods where it is
gonna drop 15, 20, 30% in a given year.
And that's just something that you have to understand and that you either
you have to weather or you have to have a portfolio that protects you
more from some of those swings.
Louie: Yep.
Jon: I don't know.
Is there anything else you got
Louie: no.
I agree with you.
I think you gotta have some protection.
The market always goes up in the long term, but in the short term it does not.
It goes up and down.
So you gotta tune out that noise and make sure that you're
comfortable with your plan.
And if you're losing sleep at night and if it makes you sick to your stomach thinking
about it 'cause you're close to retirement or for whatever reason, then that's a sign
that you're too aggressively invested.
you need to talk to a CFP and try to figure that out because you've
made some bad decisions so far.
Doesn't mean you can't recover from, doesn't mean it's the end of the world,
but it does mean you need to reconsider.
Jon: Yeah.
And that's one of the things I put in our little, our little notes page here,
is you have to decide and understand what game you're playing, so to speak.
And there's two different takes on that.
You're either on an investor or you're a trader.
You can't be both.
And this is where I see people make the most mistakes, is they they get
caught up in what game they're playing and there's either one strategy,
either go one way or the other.
An investor is someone that believes, in the stock market long term and they
make, certain, contributions to the stock market and they believe over
a long term that's gonna pay them back at some type of rate of return.
historically, about 10% traders are the people that CNBC and X and all
these other communication platforms, they are trying to engage you into.
Becoming a trader, and that's moving in and out of stock positions on either,
multiple times per day or holding it short term for a couple days and
then selling it and using all sorts of different technical analysis tools
to basically put on these, positions.
And I would say the majority of people are not built for that.
A, you don't have the technical expertise.
B, you don't have the bankroll for it.
And C, most of our folks just don't have the stomach for it.
They just don't truly, even if you have a gambler mentality, putting
all your eggs in one basket on a certain strategy and expecting it to
do one thing, man, people just get, they just get eaten up all day long
Louie: and the overwhelming majority of traders are gonna lose to investors.
The, like John said, the investor invest for the long term, they're in it
to build wealth over a long period of time, and that a trader wants to make
money within days or weeks or months.
but if you look at all those traders, that are doing that on a regular basis,
and you compare them to the average index fund investor, it's probably 98
or 99% of 'em lose to the investor.
So it's not a why strategy and it's gonna give you, all ulcers and
you're gonna lose sleep at night.
We, at the fiscal firehouse advocate for investing, right?
we are long term buy and hold, preferably index fund investors,
because we believe that is the key to financial freedom for most people,
for the vast majority of people.
Jon: And it's been proven for, over a century of this strategy, so to speak.
It is.
time and time again, despite of what crisis has been bestowed upon us, it
continues to prove to be effective.
And until that data changes and all of a sudden we, Louie and I are left in
the wind and this strategy no longer works, then we will be the first one to
cry Uncle and set the record straight.
But this has been proven time and time again.
And the other part is, and we know.
It's easy.
It is as easy as just setting it and forgetting it and not touching it for
30 years and then getting ready to retire and be like, man, this is great.
I've got this big pool of cash.
And you don't have to get caught up in the drama that the
financial media and everyone else likes to, that likes to create.
It literally just keeps you completely out of that and you're just focused
on your family and whatever brings you happiness and not having to worry on a
day-to-day basis on what the market's doing, you really shouldn't care.
Like for if you're 25 years old right now and you're on medic one,
you should not give two craps about what the stock market is doing
Louie: Not one bit.
Jon: in fact, if you're on the younger end of.
Things, you are actually hoping for the stock market to not go up at all
really for the foreseeable future.
So you can buy stocks at a cheaper price and have more shares in that
stock, and then towards the end of your career or the middle career,
that thing starts running up.
Then you've gotten all those things.
So I think there's a big misconception on people always want the stock market
going up because a lot of investors, especially younger ones do not, they
want that thing to stay depressed or at a minimal amount of gain every year.
So they continue to buy shares at a lower price, and then at the very
end, hopefully that thing goes up.
So it really once again gets to what game are you playing and
what's your time horizon exactly.
We're
Louie: said, John.
Well said.
Jon: So one of the things I wanted to talk about really quickly is we're just
trying to provide some financial literacy out there so people can speak a little
bit more intelligently on these things.
But when we talk about the stock market, Lou and I have referenced
that multiple times, there are certain different sectors or certain different
indexes that I think sometimes, the general media will basically refer to
two different type of indexes, right?
So whether the stock market went up or went down, it's basically
looking at two different indexes.
So one of 'em, and the longest running one is the Dow Jones indexed, right?
This thing, man, I had to put in the notes and I had to do some research,
but this thing has been around for a
Louie: Long time, man.
Jon: long time.
1896 is when this thing got founded and it started with 12 companies.
Now it has.
30 companies in it and it's had 30 companies in it for a long time.
And you guys would definitely recognize some of these companies.
Goldman Sachs is a big investment company.
UnitedHealth is one of the largest, health insurers in our country.
Microsoft Home Depot.
That's just some of these ones.
It typically tends to be, A little bit more, I would say defensive to
some degree as, as far as it doesn't have as many growth stocks or so
much, technology exposure as like the s and p 500, which we'll talk
about it in a minute, but at the end of the day, it's 30 large profitable
companies that makes up this index.
So that's one of the things when people talk about the stock market, that may
be a index that they're referencing.
And we, I put this in the show notes for, yesterday.
It was down about 7% year to date.
So from January 1st till April 16th, it had only been down about 7%.
Man, it feels like it's been down a lot more than that just because of the peaks
and valleys of this particular index and how much it's been really volatile.
And it's typically in the past has been something that hasn't been as
volatile as some of the other indexes.
So that is one, index that you might hear about in just some of the companies
that are incorporated into that.
The other most common.
reference index.
And this is when I talk about the stock market and when Louis talks
about the stock market and honestly, any professional that you talk about
it, this is what they're tracking.
This is how they are viewing the stock market, and that's the s and p 500 index.
All right.
Louis and I talk exclusively about this love,
Louie: the s and p
Jon: lu.
Love it.
And once again, this thing has been in, has been around for a long time.
Originally, it started as just the s and p standard is POS created
in 1923 with just 90 stocks.
It then got renamed in 1957.
and that's really where it brought in the five, 500 largest companies.
All right.
And this is once again, when we talk about the stock market, this
is the one that we talk about it.
how is it, how do they comprise the index, Louis, as far as
what makes up the s and P 500?
Is it just the most profitable companies?
Like how do they decide which ones go into that Index General?
Louie: Can they generally do it by the 500 largest companies,
and that's on market cap.
So it's based off a market cap, which, market cap for those that
don't know is the stock price times the outstanding shares, of a company.
And that is how much.
Value the company is worth, that's how much it's worth.
And there's probably some economists, I dunno if there's any economists
listening to this, but if there is, they'd probably be like rolling their eyes.
that's stupid oversimplification.
But in general, those are how you determine the size of a company.
So Standard and POS takes the 500 largest ones and they basically said
Hey, this is a really good representation of the United States economy 'cause
these are how the companies are doing.
So if other companies are a majority of the companies are doing well or
poor, it lets us know what, what's happening with the total economy.
At least that's the theory behind it.
And so that's what that index is.
Jon: perfect.
And that's one of those things, once again, when you think about the 500
largest companies that gives you exposure to basically the whole US economy, right?
So once again, these are US based companies that are in the s and p 500.
and there's based on how much I'm just looking at the
little components right now.
So Apple, Microsoft, Nvidia, Amazon, meta, those make up the top five
and even the heaviest weighted one.
So Apple, which is the number one, the weight of that whole
index is a little over 6%.
So what I want you guys to take away from this is this gives you, even though
there's 500 companies in here, there's still a certain level of concentration
within those top 10 companies that still make up a lot of the index.
And that's why when they're talking about the Mag seven, the magnificent
seven, how, how they controlled so much of this index because they're
so heavily weighted towards us.
So that's just one of those things.
But if you generally think about the overall economy, the s and p 500 is a
good representation of how businesses are doing within the United States.
Louie: and that's also why we really like index fund investing because if you were
to buy a share of an s and p 500 index fund, let's say you are basically buying a
small portion of each of those companies.
So you are buying the United States economy.
if you buy a share of s and p 500 Index fund, you're buying a little bit of
Apple and a little bit of Microsoft and a little bit of Walmart, and a little
bit of Costco, and you are continuing to buy those and you become an part owner.
very small owner in all of those companies, which is awesome.
that's how you build wealth and that's why we like index fund investing.
Whether times are good or times are tough.
Jon: Yep.
And the s and p 500 is great 'cause it's self-selecting.
So as the year goes through, if companies are not as profitable or
they're not making as much earnings for their shareholder, they fall off
and then someone, a more profitable company comes in and takes their place.
So it really is getting the best of the best as far as all the US
companies you can, and it's located within one stock, one, one mutual fund,
one ex, one exchange, traded fund.
You just buy the s and p 500 index and it really doesn't matter whether it's
Vanguard or Fidelity or Schwab, they all have a similar, makeup of this.
So it doesn't really matter.
Keep your costs low.
Figure out one of those things.
And it truly is one of those, set it and forget it mentalities
and just continue to, once again, this is not financial advice.
This is what Louis does, this is what I do.
generally looking forward, like this is just, to me, it
makes a lot of logical sense.
I, you're basically telling me that I own an index of the most profitable,
largest companies in the United States.
Sign me up.
Yep.
And that's what that thing is all about.
What I did wanna highlight specifically about the s and p
500, 'cause I know this is what a lot of people are invested in, is.
So from the high, which is right around, I believe the end of February to the
very bottom, it actually dropped 19%.
Which if we go back to our, our terminology, that is
almost a bear market, right?
It almost hit that 20% and that's really what got a lot of people nervous, right?
Because once again, John and Lou, you guys are talking to me, the s and p 500
that talks about the general economy and now we're in almost a bear market.
This sounds super concerning.
What we do wanna highlight and something that, this is where, once again,
data and research is super valuable.
So what is an anomaly about this specific circumstance similar to Covid is just the
speed and velocity for how this is all unfolded over a two, two and a half week.
Standpoint.
On average, the s and p 500 from the peak right to the bottom.
If I was to ask you, Louie, like on average, like how much would
that move and to consider that be a normal year, what would you say?
Is it like 3%, 5%?
I don't know.
What does that seem like?
Like
Louie: the volatility is what
Jon: yeah, so like from the time that it goes all the way up to the very, very
bottom, like what would be, if you had to average all that out, on a yearly
basis, what is, oh boy, 8%, 9%, 5%.
Louie: so this is not something I know.
I'll just guess 'cause I have no idea.
Let's do
9%.
Jon: All right.
you're a little bit off.
and this is one that actually surprised me.
So this goes, so this was, this data goes back from 1928 to 2023.
So almost a hundred year career.
All right?
it's 14%.
14% is the average draw down without any type of crisis going on.
Even on years in which we have gangbuster returns this thing, it will just move
that much between the high and the low.
So I'm not trying to discount the seriousness of what is
currently going on or how it.
Affects people.
We are once again, just trying to reframe things and set expectations for
people that are long-term investors.
And to not do the immediate panic is, which is the natural
inclination, is to go to safety.
And Warren Buffett, once again, we quote him, it's, he's always, greedy
when other people are fearful.
And then when other people are greedy, he basically starts selling, right?
that's the whole concept of, buy low, sell high kind of mentality.
And it's tough.
It is very tough to do from just a behavioral standpoint.
And the reason is, and this is one of the things that I appreciate
about my coursework when I got my education, is they spent so much
time focusing on loss aversion.
That's just this concept viscerally how we
Louie: feel.
Jon: when the market goes down 20%.
I didn't hear anyone that I talked to the Elations that they felt when the
stock market over the last two years went up 25% and then 24%, they weren't
like high five and be like, oh my God, this is the greatest thing ever.
They were just like, oh, this is naturally what happens, but that's not
Louie: no, not
Jon: happens.
But it just goes to show our emotional response how we process things.
We are so much more worried about losing things than gaining things.
And that is, and it's been proven time and time again in behavioral economics.
this is just how humans behave and it's very natural to be
fearful in the circumstance.
but that's just one of those things that you have to, you just have to
once again reset what your expectations are and just what is also some type
of normalcy within the stock market.
So I know for people that have been investing for a long time.
they tend to have this down a little bit better.
For newer folks, not as much, but the longer you're investing,
typically the more assets you have.
So now when you lose 20% and you just lost 300 grand, that feels a lot different than
if you're a new person and you lost three perc or three grand, you still lost 20%.
But those numbers are massively
Louie: One can make you feel a little bit sicker to your stomach.
Jon: one can definitely make you feel sicker than the other.
So that's just to bring, some context, once again for generally speaking,
how much movement there is within the stock market within a given year.
And just because it goes up or goes down is not a good indicator
of, December 31st when we have this conversation where the stock
Louie: was.
The market up or down?
Yeah.
Was it up or down this year?
Yeah, absolutely.
Absolutely.
Jon: All right, so let's just finish up really quickly with some kind of, some
tangible strategies now that we've talked about what the stock market is all about,
some of these volatility moves and just how they do happen and why they happen.
Let's talk about like how to set yourself up for success moving
forward if you haven't already had to.
These are concepts that you could build into your investor policy
statement as well in order to set yourself up for success moving forward.
Louie: Yeah, we, so we, John and I, like we said before, we don't know
if this is going to be the start of some really tough economic times.
It might be, and it might not be.
This could be a flash in the pan or this could be a, another great
recession or a depression, I, who knows.
but there are things you can do to make yourself more resilient if
there is tough economic times ahead.
these are something that we put together, just from reading some
stuff and listening to other people.
There's, this is not a Bible or a guaranteed way, but these
are generally just good ideas whether times are tough or not.
But if you can implement these in your life before times get tough,
you will probably have a better time.
When times do get tough and times will get tough.
We do know that eventually times will get tough.
if that happens now, hopefully you can implement these.
before too long.
Number one, John, is to build an emergency fund.
we consider that a really important thing and we'll probably
do a whole episode on that
Jon: We will.
Yep.
Louie: We'll, yeah.
but basically an emergency fund just, all it really means is having a pile
of cash, so a pile of cash in your bank account that, man, that goes
a long way in staving off disaster.
and really three months, especially during tough economic times, three months
is the bare minimum that you should have three months of living expenses.
Yeah.
So if you, let's just throw numbers out there.
If you spend $5,000 a month, on your goods and services and mortgage and whatever
else, that means you should have $15,000.
A lot of people are probably like, oh no, that makes me feel nervous
'cause I spend $10,000 a month.
that means you should probably have $30,000 in cash.
not invested, not in the s and p 500, even as much as we love
that we're talking about cash, baby, you need to have this in a.
Savings account and a bank account just sitting there doing nothing to stave
off trouble during tough economic times.
Jon: Yeah.
It has to be readily accessible.
They'll always talk about, the fancy word is liquidity, but you need to be
able to access this today and not have to worry about taking a loss to sell it.
that's the whole concept behind it.
We don't, 'cause you could say the same thing for stocks.
I'll just sell it.
But if it's already down 30%, this is exactly what we're trying to prevent you
from doing is having to sell at a loss.
'cause you've got some, you've got that little piggy bank filled of
money that you can stave off having to sell any of those assets at a loss.
'cause the other thing is that generally speaking, the stock
market tends to recover quickly too.
Yeah.
We're not talking about 10 years of depression.
Where the stock market has not gone up in value for 10 years.
Yeah.
Like most of the time a lot of these recoveries there, are, these shocks
are happening more frequently, but the recovery is also expediting.
As well.
So this is just something to keep you comfortable.
God forbid, normally our profession is a pretty safe and secure
profession as far as job loss, not all lay lot layoffs going on.
And that's something from the union aspect, that would be the very last
thing that we would ever touch.
Before we would take pay cuts, we would do demotions, just like we did before.
We didn't lay off Uni Ford members when we had our big financial crisis here.
So that's just something though.
But it is super important 'cause we do get asked this, it has to be something that
is accessible today and you cannot take it out and have a, have some kind of loss.
Anything that's associated with that.
that's how an emergency fund should be funded
Louie: more to come on that, but in general that, that's a number one
first step to be resilient during tough economic times is have that
contingency fund or that emergency fund, whatever you wanna call it.
And number.
Go ahead.
Jon: No.
Yeah.
Next thing is be flexible, right?
And this is, once again, in our profession we have a pretty steady paycheck.
We know what we're gonna be making and that really has not adjusted.
But if we do have listeners out there, or members out there that,
their spouses or their significant others or whatever are being affected
because they are part of the federal government that's been downsized, or
even part of the corporate sector that is downsizing or whatever, and they've
got a job loss, this is just something, and we all naturally do this, right?
We just tighten our belts.
So we start thinking about we were planning on going on this vacation, but
because of what has happened, and maybe we don't have that emergency fund, we're
just gonna forego that vacation this year, or we're gonna do a staycation or
something else that is more in line with what your budget and what your finances
can basically handle at that point.
So I think a lot of these things are intuitive and I know a lot of our
members and listeners have already.
Undergone some of these things.
So it's just very natural that when when there is some uncertainty or there is a
job loss or some type of income is not coming in, we just reset what's important,
what are our priorities, and then just start to, constrict a little bit on,
on what your expenditures are gonna be.
Alright.
What about number three, Louie?
Louie: So the number three way, number three thing that you can do to be
more resilient is to pay off debt.
To be debt free.
Preferably, and we get that it's hard.
We're gonna also do another, we're gonna do a debt episode
where we talk more about that.
But reduce and eliminate debt is just huge to be flexible.
If you wanna talk about being flexible in tough economic times, basically what
debt is it's a weight around your neck.
It's something, it's a burden that you have to carry, right?
Everyone talks about debt burdens or the burden of debt.
So how flexible and, nimble can you be during tough economic times?
If you have two car loans and a couple outstanding credit card balances that
you need to pay off, and a personal loan and a HELOC and all these things that
you're making payments on, you can't.
if your pay gets cut and your spouse loses their job, you still have those, you still
have that debt that you have to pay off and it makes you, unable to be flexible.
So paying off debt is massive, not just during, tough economic times,
but during good economic times.
We'll talk more about that in a future episode, but we're telling
you guys right now that if you have.
Money going to debt repayment, then that is money that you cannot use for
your emergency fund or for investing, for buying stocks when they're on sale.
It just really hinders you.
Jon: Yeah, no, that's well said.
And that's something that we all kind of struggle with and to me debt just
equals more risk and you're just on the hook for all of these payments
and it's just, it's more risky
Louie: behavior.
Jon: if we have a lot of people that are more risk averse and they don't wanna take
that, then obviously we, pay with cash or however we fund these things or keep
our debt, limit as, as low as possible.
And when we do get some windfalls.
Pay that off as soon as possible.
I've never once again had anyone since I've been doing this regret, like paying
off their mortgage or paying off their car or, having to fund, paying for their kids'
college with cash or other investments and not having to take on more loans.
it is a certain peace of mind that like you can put a price on it 'cause we
know what interest costs it ends up.
But, from a, once again, from a behavioral, standpoint, that level
of freedom that it now bestows upon you, it is priceless to
Louie: lot priceless.
Jon: priceless to a lot of people
Louie: For sure.
Jon: So how do we make yourself a little bit more resilient?
And some of this is, you don't really know until you get into these situations.
that is understanding what your risk tolerance is.
And it's very easy to sit there and be like, oh man, I'm cool.
I'm aggressive, I'm a firefighter, I'm Type A, I take risks every
day, all of these things.
But.
There's a difference between risky profession or risky behaviors within
our profession and what we do on a daily basis versus financial risk.
And what you're willing, and this is really what's testing a
lot of people's stomachs, quite frankly, for their level of risk.
And I know a lot of people, once again, because the stock market just went up
almost 50% over the last two years, they're like, man, this is great.
I'm loving it.
And then it just reset.
And now they're like, I was planning on having all that money and that projected
into my retiring in two years, and now 30% of it just got wiped away, so
now I gotta add another two or three.
I did not plan for that.
with the ups as always gonna come the downs.
And you just have to understand what your level of that is.
and if it, if where you're currently putting your money is
not letting you sleep at night, you're taking on too much risk.
there's ways to prevent against that.
There are safer assets out there besides stocks and it's, it's a time to reconsider
what your asset allocation looks like, and maybe be a little bit more conservative.
Louie: I think you're right John.
You gotta know your risk tolerance and then you gotta build your portfolio,
build your investment portfolio to reflect that risk tolerance.
So having a diversified portfolio, in terms of your index funds and bonds,
if you're, especially if you're getting closer to your retirement, having
some bond funds are really important.
International index funds are really important too, because they spread
that risk out over more companies.
and that's all, we'll address those another episodes too.
We'll, we get to do a lot of those things where we dig down
into more of those, options.
But, having that investor policy statement that we talked about, managing
your risk that way, will go a huge way.
And here's the other cool thing.
I'll just say this 'cause we would be remiss not to mention it.
The fact that, if you're listening to this, you're probably a firefighter
and the chances are you have a pension.
That is a huge way that you've already diversified your risk.
because think about it this way.
if you retire this year, let's say, and the market's down 20% or
10% or whatever it might be, you are still gonna get your pension
check because it's defined benefit.
You have a pension coming in that you can rely on, and that means
you don't necessarily have to sell your own investments at a low price
in order to fund your retirement.
So you have given yourself this annuity that will pay you a consistent
outflow during tough economic times.
That is an awesome thing that most people don't have.
So this should be the part where you pat yourself in the back and
congratulate yourself for having a pension, because that helps, that will
help you in tough economic times because you've diversified your risk across,
an investment class, so to speak.
Jon: Yeah.
And the people that are reaching out to me and they're just questions
or concerns or wants, want my take, they're pretty much all exclusively
more or less money purchased.
Louie: Yeah.
Jon: because they, all of their money is tied up in the stock market to
some degree or some type of asset allocation, and they don't have.
That, that safety net, that FPPA for us, provides and just, they have professional
money managers that are managing that.
They're managing risk.
That's what they're there to do.
so they're doing all the heavy lifting rather than have the, to have that
be the responsibility on the member.
And that, and times like this, there's a lot of people that
are getting ready to retire and they're defined benefit and they're
honestly not really thinking twice.
They feel pretty confident in that they're gonna continue to get their
percentage, that they were owed to them.
So very good.
And the last, but not least, and this goes for everything, not just, financial,
but it's, get and stay healthy.
Louie: Oh man, this is my favorite one actually.
Yeah.
I feel like being mentally and physically and spiritually healthy
goes a long way, in being able to get through tough economic times.
Like this might be the most important one.
Maybe we should have said this one first.
Jon: Yeah.
Yep.
And it's one that ultimately you have the most control over.
Yeah.
Quite frankly, like Lou and I just talked about, we had got zero
control over the stock market, which ones we're investing in.
It just we're assuming over time it's gonna go up.
but this is one that you can take the accountability and how you're eating,
how you're working out, what you're doing on your days off, how much
sleep you're getting, all these other things on your day off like that is
something that you are the controller of your destiny and something that you
can really, set you up for success.
'cause our hope is that you retire at a reasonable age and that you get to
enjoy 30 or 40 years in retirement.
and all those other things.
We don't wanna put away all this money just to have.
You die early, and not get to have some of the benefits of the
fruits of your labor, so to speak.
So those are just some things to consider.
So we're, running right at about an hour here, but, as always, man,
it doesn't matter what we plan for.
Louis and I, we're pretty much gonna give you an hour every month.
So hopefully this was helpful for, some context first, and first and foremost,
maybe just increase our knowledge of the vocabulary, especially when it comes
to economic times and uncertainties.
and really just give you a roadmap on ways to help navigate this.
And just once again, not to.
Not to downplay just the seriousness of what is going on and how people feel.
You never wanna downplay people's reactions and
emotions 'cause they are real.
but it really is to just reset the compass and just get back to why are
you investing for the first place?
What's your goals?
How are you gonna get there?
and really just to tune out some of the noise 'cause it's real noisy out
Louie: there.
Absolutely.
Got big things in the podcast.
We got a special guest coming on next month.
That'll be really cool for a lot of people to hear and, get some insight from.
So we're doing big things.
We want to thank you guys for being with us, for, listening and supporting us.
As always.
And I know we say this every month because that's because we truly care.
If you guys have any feedback or comments, if you guys have any questions or things
that you think might, be beneficial for us to address on the podcast, you can send an
email to ask Fiscal firehouse@gmail.com.
You can also find us as at Instagram.
Our handle is fiscal firehouse, and you can drop us a line on there too.
John and I do pay attention to all those things that you guys.
Tell us.
And then I'll also say this, we really haven't asked this directly, but if you
guys can, leave us a review, five star review, if you really like the episode
and follow us, what on whatever podcast player you're listening to, whether
it's Spotify or Apple or whatever it is, that would really help us too.
That kind of helps get the word out there.
And then probably the most important thing is share this with a friend.
If you have someone who is a firefighter, whether they're with another department
or even outside of the state of Colorado, a lot of this stuff is very practical
and can benefit a lot of firefighters who are in similar situations.
So we would ask that you share it and just let 'em know about
it too, just to bring awareness
Jon: it.
Yeah, that's a super great point.
And we're not trying to, I guess we are to a level self-promoting, but we do see
and understand like the reach of this.
And we've had a lot of good feedback and I'll give an example is someone,
found us, they were actually listening to a different financial podcast,
but I don't know if it's based on their profile or whatever, but after
they got done listening to that, it actually recommended our podcast.
And I think a lot of that just has to do with the
Louie: algorithms Yep.
Jon: behind how some of these, platforms use it.
So those reviews do help.
And, mentioning anything firefighter related I think just ties it back to us
and what we're trying to accomplish here.
So we've gotten a lot of feedback and I've received feedback outside of the
state of Colorado, so I know that we're getting listened to outside of there.
And if you guys have noticed over the last.
I'd probably call it three or four episodes.
We really have tried to tailor it to a message more broad rather than just,
west Metro specifically, or even just the state of Colorado, but just broadening out
there, just, firefighters specifically.
A lot of this stuff will play out whether you work here or you work in Texas or
New York, it really doesn't matter.
So please continue to share the, the message out there.
And, we really appreciate what you guys are doing out there for us.
A lot of, personal gratification that I have received and I know Louie has.
And, there's nothing that makes you feel better when, if it just
moves the needle a little bit.
And if we can just get a couple people to make some of these changes earlier, man,
their future's gonna look really bright.
And that's something that I value.
And I know
Louie: that's why we're doing it.
That's why we're doing it.
Jon: Yep.
We're not getting paid.
We're not looking at starting a business.
This is truly out of our love.
not only for each other but our organization, but just
the, fire service in a whole.
really passionate about that.
But as always, Louis, you brought it today.
Some good
Louie: did you man.
Jon: Yep.
without further ado, stay safe and keep saving.
Louie: Keep saving.
Jon: All right, we'll see you guys
Disclosure: The Fiscal Firehouse Podcast is a podcast curated
specifically for local 1309 members.
This podcast is for informational and educational purposes only,
and should not be construed as professional financial advice.
Should you need professional advice, consult a licensed
financial advisor or tax advisor.
The opinions of John Beatty, Louis Barilla and their castmates are
solely their own, and don't reflect that of West Metro Fire Rescue.