Is a Recession Ever a Good Thing? – Episode #335

Post-Covid we saw economic stimulus, now rising interest rates show federal fiscal strategies are changing. Is this a signal that recession is looming? On this episode of the Dentist Money™ Show, Ryan and Matt take a hard look at recession—what it means, the history of economic resets, and the negatives (and positives) that come when government tightens its monetary policies.

 

 

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Podcast Transcript

Ryan Isaac:
Hey everybody. Welcome back to another wonderful, beautiful glorious episode of The Dentist Money Show, brought to you by Dentist Advisors. Who’s Dentist Advisors? Well, Dentist Advisors is a no commission, fiduciary comprehensive financial advisor, just for dentist, just like you all over the country. And you can check us out at dentistadvisors.com. Today on the show, Matt and I are talking about a question he received from a client, which is such a good question. And which, by the way, we highly encourage you, dear listener, to please send us your questions, ’cause we’d love to talk about it. The question was, Is a recession ever a good thing? Wow. What a good question. And spurred a lot of good debate between us.

Ryan Isaac:
Matt and I highlight the pros and cons of a recession and what it means for different people and kind of a little historical context. So, great question. Is there, is there any such good thing as a good recession? Any such thing as a good recession basically is the question, and so good. Thanks for submitting that. Thanks for asking. That was great. If you’d like to ask a question, you can do so by emailing us or submit it on the form on the website at dentistadvisors.com. You can go to the, Facebook group, Dentist Advisors discussion group on Facebook and post a question. We’ll post an answer and talk about it on the show. If you wanna chat with us directly set up an appointment, have a friendly chat with one of our dental-specific advisors. Go to dentistadvisors.com. Click the “book free consultation” button. Let’s have a chat. Anyway, thanks for being here. We hope you really get a lot out of this episode and enjoy the show.

Announcer:
Consult an advisor, or conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now, here’s your host, Ryan Isaac.

Ryan Isaac:
Welcome to the Dentist Money Show where we help dentists make smart financial decisions and avoid the bad ones along the way. I am a person, a human, if you will, named Ryan, and I’m here with a definitely another human, an extraordinary human, his name is Matt The Hollywood Mountain Mulcock. What is up, Matt?

Matt Mulcock:
Yo Ryan.

Ryan Isaac:
Extraordinary human. How are you?

Matt Mulcock:
Hi, not too many people have accused me of that in my life, but I will take it. I appreciate it.

Ryan Isaac:
You’ll take it. How are…

Matt Mulcock:
It’s a Friday?

Ryan Isaac:
Yeah. How are you on this Friday?

Matt Mulcock:
I’m feeling good.

Ryan Isaac:
You’re feeling it? You’re feeling the good Friday?

Matt Mulcock:
I’m feeling good.

Ryan Isaac:
You received a question recently from a person, a human who’s a dentist, a dentist human.

Matt Mulcock:
Yes.

Ryan Isaac:
It’s a dentist thing, human, right?

Matt Mulcock:
Yes.

Ryan Isaac:
Okay.

Matt Mulcock:
Technically it was the spouse of the dentist.

Ryan Isaac:
A dentist human. Okay.

Matt Mulcock:
But, yes it was a client. Yes.

Ryan Isaac:
Okay.

Matt Mulcock:
And yes, they were a human.

Ryan Isaac:
[chuckle] They are human clients.

Matt Mulcock:
Yeah, they are human.

Ryan Isaac:
You do advise a few canines species.

Matt Mulcock:
I do. Yes, I do. Yep. [chuckle] Pro bono. Pro bono.

Ryan Isaac:
I guarantee there are, like dog financial advisors out there who manage… Because rich people leave money to their pets.

Matt Mulcock:
Yeah.

Ryan Isaac:
Like actually in an estate. I don’t know how, like someone’s a trustee I guess, but I guarantee there’s financial advisors to pets.

Matt Mulcock:
Oh, I’m sure. Like you gotta work with like the guardian of the pet.

Ryan Isaac:
Of the pet.

Matt Mulcock:
Yeah. [chuckle]

Ryan Isaac:
And they’re like, “I don’t know. Let’s see what Fido says today.”

Matt Mulcock:
Yeah. The dog walks in like a Versace jacket.

Ryan Isaac:
They do.

Matt Mulcock:
And with sunglasses, I’m sure. Yeah.

Ryan Isaac:
Okay.

Matt Mulcock:
But you’re just guessing the dog wanted to wear that.

Ryan Isaac:
Yeah.

Matt Mulcock:
I’m assuming.

Ryan Isaac:
I guess, well, the dog knew, the dog let you know. And he knew. The question you received is a really, really common popular question. And it’s popular right now because the stock market, as of today’s recording, which is April 22nd, 2022… That’s a cool set of numbers. It got hammered today. And it’s been one heck of a first quarter, so it’s a…

Matt Mulcock:
Actually didn’t even look what…

Ryan Isaac:
It’s not good.

Matt Mulcock:
Now I’m interested.

Ryan Isaac:
It’s triple digit reds. High triple digit reds. We’re almost at four…

Matt Mulcock:
Yeah. Oh, boy.

Ryan Isaac:
We’re almost at a four digit red today.

Matt Mulcock:
Yeah. Yeah.

Ryan Isaac:
Popular question because of the stock market, which we’re gonna talk about whether or not that is rational, but it’s also a topic that is just constantly being thrown around. Before we get into the topic, we’re really teasing this out here. We did a client-only huddle meeting this morning. We do that quarterly, Jake, advisor extraordinaire threw out a quote from Morgan Housel about optimism and pessimism. Do you remember it well enough to like retell it? Because I kind of just want to like set the stage with this a little bit. When we hear pessimistic things being talked about in an optimistic way, like how do we view that? And this quote is like… I’d never heard it before until this morning.

Matt Mulcock:
So the quote, if I’m probably gonna butcher it, but the quote is.

Ryan Isaac:
Close enough.

Matt Mulcock:
Something along… Let me say the paraphrased. I’m gonna paraphrase it. Is optimism sounds like a sales pitch. And pessimism sounds like you’re trying to help.

Ryan Isaac:
Yes. Which is one of the reasons why we’re just…

Matt Mulcock:
I think I nailed that.

Ryan Isaac:
I think you got it, I think that was the idea of actual quote.

Matt Mulcock:
I think I nailed that. Yeah.

Ryan Isaac:
And it’s like so fascinating because if we were to do an episode on something and just be super negative, it sounds like help, you know, because you’re just being real, man. You’re just being real.

Matt Mulcock:
Just being real, man.

Ryan Isaac:
You know, you’re just telling the hard truth, but if you’re trying to like paint a rosy picture, it sounds like you’re selling something. And I’d never heard that quote before, but I think it applies in a lot of areas, and Morgan Housel said it, so I’m just gonna believe it.

Matt Mulcock:
Yeah. If Morgan says it, man, I’m all in, I’m a friend of the pod, as Jake would say. [laughter]

Ryan Isaac:
We’re talking about recession, folks, recession. What was the question you got exactly from your client?

Matt Mulcock:
Yeah, I actually, it was so good. And I actually told…

Ryan Isaac:
It was a good question, yes.

Matt Mulcock:
I told her and she… You know who you are. I know you listen. So, but I told her, I said, this is content. We’re gonna do this and I’m gonna message her after we do this, and I’m gonna tell her, she was the inspiration for this.

Ryan Isaac:
Nailed it.

Matt Mulcock:
But the question was, just out of the blue was just, “Hey, is the recession ever a good thing?” And I was like, “That’s a darn good question.”

Ryan Isaac:
Is a recession ever a good thing?

Matt Mulcock:
Yep.

Ryan Isaac:
Yeah. You showed that to me the other day, and that was… That’s a really, really good question. So, Matt and I were talking about this and we were like, “Hey, let’s do something where we each take a side of this argument.” And I hope we picked the right side.

Matt Mulcock:
We’re on a battle.

Ryan Isaac:
We probably picked the same side. And yeah, we will end up just like totally amicably agreeing with each other, like the non-confrontational people we are. [laughter]

Matt Mulcock:
It’s good to shake hands at the end and say, great points.

Ryan Isaac:
Okay, man, I think you’ve made a really good point there, so like totally, man, let’s just roll with that. Let’s define a few things here first. What is a recession? What does it even mean?

Matt Mulcock:
Oh, do you want me to go?

Ryan Isaac:
Yeah, you’re the only person I’m talking to, I do talk to myself a lot.

Matt Mulcock:
What’s that mean?

Ryan Isaac:
What is a recession? What does that even mean? Because I’m not sure everyone actually knows what that means.

Matt Mulcock:
Yup, yeah. They don’t, they certainly don’t know what that means, and you’ve talked about this before, it’s interesting that we label things. We just for whatever reason, wherever it came from, we just happen to label things, and sometimes those things mean something really good, and sometimes those things are really scary. Recession happens to be one of those things that people, I think… I bet if you walked up to most people on the street and said, “What is a recession?” They would not know, they wouldn’t be able to give you the technical definition.

Ryan Isaac:
Yeah. Or how often does it happen? Or is it bad or good? Yeah, great questions.

Matt Mulcock:
Right. So, generally speaking, if you want to just get really, really general, recession is a period of slow economic growth. That’s like a really quick, easy, high level answer. Technically, to be in a recession, you need to have two straight quarters of what’s called negative GDP, so gross domestic products, basically an indicator of the economy of the… Basically adding up all the goods and services of what the economy produces.

Ryan Isaac:
I looked this up really fast, I looked up what is included in GDP, ’cause I didn’t really know. Said the four components of GDP are personal consumption, business investment, government spending and net exports, so there we go. That’s what’s in…

Matt Mulcock:
Perfect. So it’s basically what you produce generally as a country, what is being produced, what’s the economic good services and that’s an indicator of that, if it’s positive, it means you’re growing, if it’s negative, it means you’re retracting. And so a recession technically is two straight quarters of negative GDP. So this actually brings up an interesting point here that you don’t know… A recession is always a lagging indicator, you don’t even know you are in a recession until after. So people are like, “Oh, we’re in a recession,” it’s like well, no, you… Now, how do you know this? You don’t know until the data comes out of two straight quarters, so it’s really a looking back metric.

Ryan Isaac:
Yeah, it’s reverse, which is kind of the problematic thing with when it’s compared with the stock market, which is one of the things we’re gonna talk about today, is people think they’re the same thing, a recession, the economy is the stock market and that a recession causes changes in the stock market, which we’ll get into that, but… Yeah, the economy is, like you said, looking backward, a recession, we know that after it’s happened, whereas stock market is trying to look forward, it’s trying to price in things we think are gonna happen in the future. So here’s the question, why do people think the word recession… I think anyone who’s older than, I mean what would you have to be? Somewhere in your mid to late 20s to probably really feel this.

Matt Mulcock:
Yes. Probably in… Probably realistically, more in your 30s to really feel it.

Ryan Isaac:
Yeah, to really feel this. Why do people… You know where I’m going with this. Why do people hate the word recession so much?

Matt Mulcock:
Yeah, I mean, it’s ’cause the recency bias really, we all think of… We hear recession and we think ’08, ’09. We think of the Great Recession, understandably so, so yeah, they immediately they just hear that word and they think, “Oh, it obviously means that…

Ryan Isaac:
Yeah, and what was so only…

Matt Mulcock:
It’ll be the same magnitude.

Ryan Isaac:
Yeah, and what do we think about when we think about ’08, ’09? Okay, people lost jobs like crazy, people lost houses, they were forced out of their houses like crazy, the economy totally collapsed.

Matt Mulcock:
Companies going bankrupt.

Ryan Isaac:
Even going out of industries and bankrupt and money got hard to borrow and yeah, you know. Yeah, so we hear the word recession, most of us just think about 2008, and that was a gnarly time, that’s… I mean that’s… It was tough for a lot of people. Okay, so that’s what a recession is. What would you say to someone about the connection to the economy, the economy being in a recession and the stock market, how would you explain that to somebody?

Matt Mulcock:
It’s kinda what you just said, it’s… There’s definitely a disconnect, and I don’t have the data in front of me, maybe, Ryan, maybe you’ve looked at this. But there’s definitely a disconnect where it is possible, and we’ve seen this during economic periods where the stock market’s actually doing quite well and the economy is not. When you talk about inflation being a problem right now, and it is, people are identifying this as an issue and the Fed is obviously looking to raise rates to try to slow it down, you only have inflation when your economy is growing. And the whole idea is, again, with raising rates, is if it’s growing at too fast of a clip, and they’re trying to cool it off a little bit. But if you look at the stock market, it is disjointed from really what’s happening right now in the economy. Those are not the same thing, and I’d say the same thing about a recession, you can be in a recession and still be getting good returns in the market and vice versa.

Ryan Isaac:
Yeah, so I was just gonna read a little bit of data here. In the history of the country, going back a couple of hundred years, there’s been, since it’s been tracked, about 48 recessions from a time when it’s been really tracked well, which is a lot of people put that about the 1950s because there’s some different metrics that were put in place around mid-century around the economy, and there’s been 11 since then. Here’s the thing though about the stock market, is it’s almost 50-50 of years when there’s a recession and what the stock market… How it ends, up or down. So, it’s one of the… Maybe the main points to make right off the bat is that the market is not the economy, they’re measuring the economy in terms of GDP and other things, is a different measure over a different time period than measuring the stock market, which is just millions and millions of investors bidding a price on an asset constantly all day long, looking it backwards or forwards, different periods of time and then reacting. An economy’s metrics are very slow, they’re really slow. That’s what I was listening to Robbie this morning, he was going through the metrics of how inflation is measured and how it’s controlled by the government and how they try to like keep it in check and keep it in line and they let it get to a certain point, and then they make policies and they pull things back, I’m like, “That’s a really slow ship that that’s just… It’s like a giant cruise liner.” You know?

Matt Mulcock:
Oh, yeah.

Ryan Isaac:
And then the stock market feels like a little 1980s Jet ski. Just like one of the standup little… Whipping around in the lake. It’s just like, fast and quick, and it moves like on a dime. And they’re just two totally separate mechanisms. So historically speaking, a recession does not equal a drop in the stock market. And those are just good things to mention right out of the gate. They’re not the same thing. It’s not the same thing.

Matt Mulcock:
Yeah, and vice versa to that.

Ryan Isaac:
Yes.

Matt Mulcock:
A stock market that’s doing poorly does not mean the economy is not doing well.

Ryan Isaac:
Dude. So there’s this data from I think this was from, who did this? Oh, this is from BlackRock.

Matt Mulcock:
Oh, they’re a decently-sized company.

Ryan Isaac:
You guys have heard of BlackRock.

Matt Mulcock:
Only like the biggest investment asset management firm in the world.

Ryan Isaac:
It’s like saying, there’s this little band called, The Beatles.

Matt Mulcock:
Yeah.

Ryan Isaac:
I don’t know if anyone’s heard about them? Yeah, no, I saw this really interesting chart about some of the biggest draw-downs since the ’80s that weren’t recessions. So this was like Black Monday, Gulf War, there was Asian monetary crisis. This is ’98. I don’t really recall that in ’98 being…

Matt Mulcock:
I remember Black Monday of 1987. I was… October 1987, I was one years old.

Ryan Isaac:
You remember that well?

Matt Mulcock:
It was a rough year, I remember that.

Ryan Isaac:
We’re gonna have to conserve diapers now.

Matt Mulcock:
I didn’t get a birthday cake that year.

Ryan Isaac:
Yeah. Asian monetary crisis, late ’90s. You got the tech bubble, this is all starting to become more familiar than financial crisis, trade war, COVID-19 sell-offs. Some of these ended up long term, but these are like really instantaneous, huge, problematic events. When the market was not doing well, that didn’t necessarily coincide, like follow or precede a recession. It was like a totally separate thing. And I think here, I think I have of the data on the 2008 recession was… Let’s see. Okay, so since the ’50s, the average recession lasts about 10 months, which is about two… So what we’re saying is two consecutive quarters of negative growth, or slowdown in the economy is a recession, and it usually lasts for about two months, which is like by the time you met…

Matt Mulcock:
It’s a 10 months, right?

Ryan Isaac:
Yeah, 10 months, which is kind of funny, ’cause it’s like, does that mean…

Matt Mulcock:
By the time you realize you’re in one year…

Ryan Isaac:
It’s over. [laughter]

Matt Mulcock:
It’s like almost over.

Ryan Isaac:
That’s it. I’m like, in my head I’m like, yeah, that means that by the time you measure one, you’re like, “Oh, well, we’re in a recession guys that it’s not…

Matt Mulcock:
And now we’re out here.

Ryan Isaac:
And you’re out but you don’t know you’re out until three months later, and then three months later, and you’re like, “Oh, now we’re out.” Okay.

Matt Mulcock:
Yep.

Ryan Isaac:
The 2008 crisis was almost 20 months long.

Matt Mulcock:
Yeah.

Ryan Isaac:
However, technical recession from COVID was very, very short.

Matt Mulcock:
It was…

Ryan Isaac:
Just like…

Matt Mulcock: The shortest possible recession you could ever have.

Ryan Isaac:
Yeah, just like the first technical crash of the stock market in March 2020.

Matt Mulcock:
It was 16 days.

Ryan Isaac:
Yeah, that was the first one we had had since the crisis crash, and it lasted about two weeks.

Matt Mulcock:
Yep.

Ryan Isaac:
So anyway, Matt and I compiled the list of… To go to this question. That was such a good question. We compiled the list of pros and cons, which sounds really funny when you’re talking about something negative. Like who’s the jerk on the pro side? That’s me.

Matt Mulcock:
Who is the jerk on the pro side?

Ryan Isaac:
That’s me. I’m on the pro side. I will take that role. Who’s the jerk on the pro side? It’s me. Well, we’re gonna go like…

Matt Mulcock:
You’re the one that’s selling something?

Ryan Isaac:
I am. I am. Yeah.

Matt Mulcock:
I’m the one just trying to help.

Ryan Isaac:
I’m the optimist trying to sell you, trying to pitch you on something. And yeah, Matt’s the negative pessimist, he’s just trying to help guys.

Matt Mulcock:
I’m the negative Nancy that’s just trying to help you out people.

Ryan Isaac:
Matt, do you wanna go like all the pros and then all the cons you wanna go like tit for tat, as they say in the business?

Matt Mulcock:
Let’s go tit for tat, yeah.

Ryan Isaac:
Let’s go tit for tat, all right. I mean, not that they’re gonna come inside.

Matt Mulcock:
Yeah, you start us off.

Ryan Isaac:
 I mean, I just have… Let’s see. What do I have? I have one, two, three, four.

Matt Mulcock:
‘Cause I wanna turn this into a game of like, what about.

Ryan Isaac:
Oh, yeah, cool.

Matt Mulcock:
Like you do something and I’m gonna be like, “Well, what about this?”

Ryan Isaac:
Yeah, which is really healthy. Okay.

Matt Mulcock:
How many do you have?

Ryan Isaac:
Four, four main ones.

Matt Mulcock:
Alright, yeah.

Ryan Isaac:
Okay. Now, I’m a little nervous going up against Matt. No one wants to go up against the mountain. It’s really stupid of me to have done this. All right. Pro number one. Pro number one is buying opportunities. So what happens during a recession, at least half of the time in terms of the stock market, but I’ll mention a couple of other asset classes too, about half of the time historically, when we have an economic recession we also have a decline in the stock market. When we have a decline in the stock market, no matter when that is, if it’s cheaper today than it was yesterday, you have on your hands, you got yourself a buying opportunity. You got yourself a sale in the stock market, okay? We always say it’s the weirdest asset class. It’s the weirdest thing in the world. That’s the only thing we never wanna buy when it’s cheap. I’ve got at least one email today, it was a rough day in the market, one email that came through this morning from a very well-meaning client who was asking, “Are we doing anything about this?” [chuckle] Market has been going down for a couple of months.

Matt Mulcock:
Yeah.

Ryan Isaac:
It’s not good and what’s wrong? And is something wrong? And what do we need to do about this? And, of course, that’s a whole other episode. But if it’s cheaper now than it was like, December 31 of last year, which it’s about, as of today, about 10% cheaper, then it’s a chance to buy something. I mean, I would gladly buy cheaper gas today if I could, right?

Matt Mulcock:
Sure, yes.

Ryan Isaac:
I drive to Costco I drive out on my way past like three gas stations to get a little bit cheaper Costco gas.

Matt Mulcock:
Yeah, you burn more gas going to Costco but you feel better because you’re putting in cheap gas.

Ryan Isaac:
And then you put in cheap gas in the form of hot dogs and pizza from Costco, but that’s another story.

Matt Mulcock:
Exactly.

Ryan Isaac:
So what a recession does present us with is an opportunity to buy stuff that got cheap now, I will heavily couch this in saying sometimes when assets get cheap, it’s at someone’s detriment or someone’s peril and I totally recognize that. Having… I was a brand new homeowner, a brand new dad, a brand new business starter in ’08. It was a really stressful time and a lot of things were cheap then businesses were… People were going out of business and companies were going out of business, and…

Matt Mulcock:
You’re stealing my points here.

Ryan Isaac:
Oh, okay. All these are the cons. Yeah, these are the cons.

Matt Mulcock:
You’re stealing my cons. That’s okay.

Ryan Isaac:
I just don’t wanna sound like a totally ignorant jerk, and then we’ll roll into your con, I just wanted to say that during times of contraction in an economy, and especially if they coincide with the market, things are cheap and you can buy things sometimes when things are cheap, it’s because someone else lost their stuff, so things get cheap. And I think a pro of a recession is a chance for investors to reset and repurchase assets at more favorable… Probably market rate prices. That’s what I wanna say about that. The cons, there’s a direct… There’s a direct con to this and I’ve already introduced.

Matt Mulcock:
Yeah. What about, is we’re gonna go with.

Ryan Isaac:
Yeah, I like that.

Matt Mulcock:
The flip side of this is I have to log in and see my portfolio has lost X number of percentage points. So yeah, I think to your point, the assets are possibly a buying opportunity, but that also means that if you are an investor with current investments in these assets, real estate, financial markets, you’re building whatever it is, there’s a strong likelihood that those assets have dropped in value.

Ryan Isaac:
Okay, so what’s the argument if someone’s like, Well, the stock market’s not totally victimist ’cause what if I’m gonna retire tomorrow and the stock market is down, and I look at my balance like you just said and I’m getting hammered, and now I can’t retire ’cause all of my funds are down the day before my retirement, what say you Matt?

Matt Mulcock:
Ye say that… Not to be a mean about it, but I’d say the chances of you having planned poorly is high, in that situation.

Ryan Isaac:
If that’s the case, you’re saying that if my portfolio… If a movement in my portfolio just before my retirement caused me not to retire, I probably had an inappropriate portfolio that close to retirement.

Matt Mulcock:
Yeah.

Ryan Isaac:
That’s what you’re saying.

Matt Mulcock:
Yeah, exactly. And I’ve heard stories like this a bunch when I started my career, it was like, it was post ’08 or ’09, but not too soon after, and people… There was a story after story after story of people that said, Oh, ’08, ’09, completely ruined my retirement and forced me to work five or, whatever 10 years longer. I totally get that. And there’s things that were out of a lot of people’s control in a recession that is of that magnitude, right? They kind of felt like…

Ryan Isaac:
Widespread.

Matt Mulcock:
Widespread and for the most part felt like it came out of nowhere to the average person, there was a handful of people that saw it coming, have you ever read or seen Big Short?

Ryan Isaac:
Big Short.

Matt Mulcock:
Yeah right there was about five people in the world to knew it was coming.

Ryan Isaac:
And since then, they’ve been predicting the wrong things since then.

Matt Mulcock:
And they’ve been riding that wave ever since. Yeah, exactly, but for the most part, under, let’s say normal, a normal recession, if you will, I just [0:22:20.3] ____ said the rabbit ears if you couldn’t see.

Ryan Isaac:
Air quotes.

Matt Mulcock:
Yeah their quotes, if you’re at a place where you’re saying, Oh, recession hit… Or the market dropped 30% and that made me not being able to retire. Then again, my cold-hearted rational advisor response is, “Well, you probably weren’t allocated correctly, you probably hadn’t been planning for the 3-5 years prior to that point to make sure you were exiting properly.” Hey Ryan, tell me what happens during your consultation?

Ryan Isaac:
It’s a great question, Matt. The first thing we’d like to do is just get to know more about you and your practice. What are your career goals, what are you doing in your practice in your business, what kind of big decisions are you making in your personal financial life? Then we talk about how hiring a comprehensive fiduciary, dental-specific financial advisor can help you make better financial decisions in your future, help you grow your net worth, get more organized and get more peace of mind around your financial situation.

Matt Mulcock:
I mean, so you’re telling me it’s that easy and painless?

Ryan Isaac:
I am telling you it is that easy and totally painless. Exactly, Matt, just go to dentistadvisors.com, click the book free consultation button. Do it right now and talk to a friendly advisor today. Okay, so buying opportunity, the con is, to sum it up, you would say some people are getting hurt by that.

Matt Mulcock:
Just… Yeah, just your assets.

Ryan Isaac:
The people on the other side of that.

Matt Mulcock:
The flip side of that is your assets are now less money and there’s impacts there.

Ryan Isaac:
So if you’re feeling something like that and you are close to a life event where you need money, maybe it’s not retirement, but maybe it’s something you need money and your money is not appropriately invested according to the time frame of that life event, then that’s when it’s time to like fix it. Chat with someone.

Matt Mulcock:
Yeah, now, one thing I do have to say to kind of counteract the point, now we’re just arguing with ourselves, you’ve got me on that argument train and now I can’t stop.

Ryan Isaac:
I like this.

Matt Mulcock:
But I do wanna just… Well, ’cause there might be people out there that are listening that are saying that that’s a little unfair what we just said as far as your portfolio is not structured the right way.

Ryan Isaac:
Yeah.

Matt Mulcock:
‘Cause one thing I will say, and it’s not lost on us that the current environment is very different than, let’s say, 20 years ago when it comes to a very clear delineation between stocks and bonds and what they’re doing for you in a portfolio. Right now we know the bond market is really tough, and it sets you up for more challenges that may be… Again, people retiring 20 years ago didn’t have to face like for example, 20 years ago, you could put it into a bond portfolio that’s yielding… What five, I don’t know…

Ryan Isaac:
Have you met dentists… I’ve met older dentists who actually spent their whole career investing in very large bond portfolios and kind of did well, did really well.

Matt Mulcock:
Of course, ’cause from 1980 to just a couple of years ago, we were in a massive bond bull market, and so now that’s flipped and we’re no longer in that, and so I do understand that there’s more challenges right now of like kind of the whole…

Ryan Isaac:
How to allocate.

Matt Mulcock:
There was no alternative, sometimes to…

Ryan Isaac:
Where to put it.

Matt Mulcock:
What they had back in the day of saying, higher interest rates…

Ryan Isaac:
You’re saying bonds are getting crushed right now too, and that’s totally true.

Matt Mulcock:
Yeah.

Ryan Isaac:
Yeah that’s totally true. Okay, here’s another point, another pro for a recession from the nice guy over here [0:25:39.6] ____.

Matt Mulcock:
For the recession guy.

Ryan Isaac:
Cheese. It’s the discipline gets introduced, reintroduced back into the system, kind of on a large scale.

Matt Mulcock:
Love that.

Ryan Isaac:
Thank you. [chuckle]

Matt Mulcock:
I mean I don’t. What a dumb point.

Ryan Isaac:
Exactly, you’re still talking to me. The most recent recession was so fast, I’m not sure we… And then the government gave us so much money, I’m not sure discipline became a huge… Actually, that’s probably not true. Dentist got tons of money from the government, and they held on to… For the most part, at least our clients, they held on to it to build up their cash reserves in their practices to pad from something like this in the future. Most people didn’t just go blow all the money on boats and cars or whatever. In ’08 though, and it’s probably similar and the next time we see one, money was so easy to be made in like… Man, you could just be the biggest idiot back then and just go put a $500 deposit on a new construction house, wait the 18 months it was taking to construct it, and then have $300 grand in equity and you just sell it and you flip it. And all of a sudden, you think you’re a professional house flipper.

Matt Mulcock:
You’re a genius. Yep.

Ryan Isaac:
And there were huge groups of people… This was happening in the west a lot where I live, but people are doing this on multiple homes, and they was ripping out equity from another one to put into another one, and just churning this thing on.

Matt Mulcock:
Creating their own little mini Ponzi scheme.

Ryan Isaac:
Yeah, basically.

Matt Mulcock:
They didn’t even know it was a Ponzi scheme.

Ryan Isaac:
People are doing this with houses, with businesses with all kinds of weird assets. People do it nowadays. I mean, if we wanna really start a fight, there’s some funny asset classes that are popping up now that people are pouring money into, and it still remains to be seen when times actually get tough, what gets cleaned up. So, discipline gets reintroduced when we all get smacked in the face, and like, “Okay, I guess I just can’t mess around frivolously in this thing I don’t know anything about. I probably should just pay attention to my career and better my career options and make some money and save it, and be a little bit smarter.” So discipline is one thing I think it’s reintroduced. It’s a pro of a recession. What’s the argument to that? What about?

Matt Mulcock:
Yeah. What about?

Ryan Isaac:
No, there’s no argument to it. Your points don’t have to coincide with my points.

Matt Mulcock:
Oh no, but it does.

Ryan Isaac:
Really?

Matt Mulcock:
It does. This is really on my list. I’m realigning my list to line up with yours. So I’d say on the flip side of that, is psychological and emotional pain that’s created.

Ryan Isaac:
Yes.

Matt Mulcock:
So, again, on the flip side, I think what your point… The point you’re making is what comes out of it in the long run. I think if approached correctly, I think it can turn it to be like that obstacle becomes an opportunity type of thing. But I think… And also for the wrong person or the wrong approach, the wrong reaction can lead to a lot of psychological stress and emotional issues, and where they actually maybe possibly respond negatively moving forward. So I’ll give you an example. Again, we’re saying ’08, ’09 is not a normal recession, but again, we’re just using recent example of a recession. I talk to people for several years after. I would be introduced to people through my work, that were sitting on cash for post ’08, ’09. They were too scared to invest because of what had happened. So it was like psychological scarring we’ll call it, is I think I think a negative of a recession.

Ryan Isaac:
Kind of ancillary to this, there is some good data that shows that savings rates… This would be another point. The savings rates increase during and after those times, because people… We run out of options… Credit tightens up, we run out of options of getting debt. So what do we have to do? We have to go back to the boring old live within your means, save up some money, kind of stuff, and savings rates increased. Now, what was cool to see, I mentioned this before was during COVID when we got government money pumped into the businesses, everyone we work with was really smart with that money. Their businesses are thriving because of that money. It actually… They did the right things with this. So people got smart, they got more disciplined and become better savers, and they kind of relearned that habit, or learn it for the first time. So, that’s another pro of a recession.

Matt Mulcock:
I have to laugh because we literally have perfect kind of…

Ryan Isaac:
Do we really?

Matt Mulcock:
Yes, because the flip side of this, what about, Ryan. If savings goes up, that means spending is down. That means less fun is being had in your life. Because you’re so nervous and scared to spend, you’re piling money away, but you’re not having fun. Spending is down, that impacts the entire economy.

Ryan Isaac:
Well, yeah, consequence… That’s what you get out…

Matt Mulcock:
It’s a circle of hell.

Ryan Isaac:
That’s how you get out of a recession is you gotta go spend. We gotta spend our way out of the recession.

Matt Mulcock:
Yeah, but you don’t want to because you’re so nervous about it.

Ryan Isaac:
You can’t.

Matt Mulcock:
And you can’t, exactly.

Ryan Isaac:
Yeah, that’s a total double-edged sword. Like, “Cool, we’re savers now. Now we won’t buy that car or take that trip.”

Matt Mulcock:
We’re not gonna go on that trip.

Ryan Isaac:
Go to that restaurant or something.

Matt Mulcock:
Yep.

Ryan Isaac:
Although, man, I’m not sure that Amazon or DoorDash [chuckle] or anyone was hurting too much during the 2020 pandemic.

Matt Mulcock:
Oh, I can tell you right now… All the underrated part of, or industry of 2020, I feel like is like landscaping companies or like the nurseries that were selling plants. I can tell you first hand, my wife and I went ham.

Ryan Isaac:
Really?

Matt Mulcock:
Oh my gosh, we went crazy on the yard.

Ryan Isaac:
On landscaping or plants?

Matt Mulcock:
Yeah, ’cause we were stuck at home, couldn’t do anything. It was March, it was going into that… For that spring, and we spent way more money on our yard than we ever had.

Ryan Isaac:
Yeah, now that you mentioned it, think about what happened to the home gym equipment, or gym equipment industry. You couldn’t get a dumbbell delivered to your house for six months.

Matt Mulcock:
No. I looked. I tried.

Ryan Isaac:
Yeah, remember that? Or buying a hot tub?

Matt Mulcock:
Yeah, no way.

Ryan Isaac:
We got a hot tub the end of last year, whatever last year 2021. There was still a four-month waiting list for hot tubs, but a lot of this is supply chain, but a lot of this is also… Wow, we just sold out of everything so fast because now people are sitting at home and they want to garden, they wanna work out, they want a hot tub, bikes, did you ever try to buy a bike?

Matt Mulcock:
I was just gonna say… I was just gonna say, we had just bought our bikes like the year before our mountain bikes and I should have sold it, man, I would have made tons of money.

Ryan Isaac:
Yeah insane yeah, I remember trying to buy a beach cruiser during… Couldn’t find them anywhere like nowhere, and then people were reselling it for a ridiculous prices, you know so…

Matt Mulcock:
So did I wait… So did I just… Did we just prove my point incorrectly, that spending does not go down.

Ryan Isaac:
I don’t know.

Matt Mulcock:
Let’s be real COVID was not… COVID was not even recession. COVID was a whole…

Ryan Isaac:
COVID did not seem normal. We can’t even… We can’t even categorize that thing.

Matt Mulcock:
No, no.

Ryan Isaac:
Well, let future historians worry about how to categorize that.

Matt Mulcock:
Exactly.

Ryan Isaac:
One last thing I’m gonna say for a pro would be kind of like a shift in assets, so things get reallocated in the economy, money is pumping towards something that eventually like breaks or gets disrupted or gets exposed, and those resources, whether it’s money, whether it’s actual physical resources or people get reallocated into things that might actually have… That are better. I think about people being… Sounds a little it mean but people are reallocated when economy shift like that and businesses go out, but new ones are created because some of those awesome people, they’re the ones who go into industries and start things that didn’t exist before that many now rely on… That are part of our daily life. So kind of that shifting of… You can call it assets, but it’s just resources of people, money, physical resources get reshifted into things that we… That make the world better. That were needed new good services companies that were actually needed that didn’t… They didn’t exist and wouldn’t exist unless that kind of massive disruption hadn’t happened, so realignment of assets that’s all resource as well.

Matt Mulcock:
Well what about, Ryan?

Ryan Isaac:
What about…

Matt Mulcock:
Well, what about… So no the last one on my list, again, there’s more… Obviously, we could spend a lot of time on countless things, but the other con I’d say, again, generally speaking, is a magnifying social unrest or the likelihood of social unrest, societal unrest being increased during a recession, and the reason for that… Just like anything, just like, I think inflation or any hot topic right now housing, again, recession, it impacts people so differently, and especially because… Let’s be real, not like we’ve already highlighted COVID, ’08-’09, Black Monday, whatever you wanna call, these big events they impact or because they’re so different, and the reasons for those things are so different, they impact people on different levels and at different magnitudes, so we’ll use inflation as an example, it tends to impact the people on the lower end of the socioeconomic scale more than the people that are asset owners. Right. So because of that, I think something like a recession, I think can… Well, and history has shown it can create more social unrest and feeling of a bigger gap.

Ryan Isaac:
More gaps. Yeah bigger gaps between people that were already there and already causing a strain in people’s lives, and it can just make it even worse. Yeah, there’s a lot of data showing that people who are well off before the pandemic are better than they were before, you know…

Matt Mulcock:
Yes.

Ryan Isaac:
And that might be a lot of our audience too.

Matt Mulcock:
Yeah the floor raised right? The floor raised so people on the low end still got better during COVID, but not at the same level as the high end.

Ryan Isaac:
Yeah same level.

Matt Mulcock:
We’re not getting political here. By the way, we’re not getting political, we’re just stating facts.

Ryan Isaac:
Yeah I’m not smart enough to get political, it also… Usually it’s those people who have the resources during those times, they’re the ones who are able to go scoop up all the cheap stuff anyway and come out on the other side, so… Yeah, I think it highlights some disproportionate pieces of society that… Yeah, make it tough on people’s lives for sure. Did you really only have four… Like exactly four?

Matt Mulcock:
Well, no, there’s like…

Ryan Isaac:
Okay, there’s a lot.

Matt Mulcock:
There’s like 10-plus.

Ryan Isaac:
It’s probably more cons to a recession than pros. But I just went for it.

Matt Mulcock:
I didn’t know if we wanted to line them. I was just trying to line him up. But yeah, there’s more for sure.

Ryan Isaac:
Anything you wanted to mention or throw in there? My list is done we’ll end my list.

Matt Mulcock:
Yeah, no, again, I think some of it we’ve already said. The big ones, obviously, unemployment is generally higher during recession, income can tend to be can tend to drop in a recession, there’s… I’m not gonna call the minor things, they’re ancillary things that are structural to what happens with a recession, but I think the big ones we’ve already hit, rise in poverty, things like that.

Ryan Isaac:
Which is, we talked about The client quarterly meeting we did this morning, that’s what’s kind of interesting about the economic indicators right now, while the word recession is being thrown around for this year 2022, is the economic indicators are really healthy, so far earning season and earnings are like beating expectations by a higher margin than normal unemployment people filing. What did Jake say this morning, people filing for unemployment benefits are lower than… Lowest in 40 years.

Matt Mulcock:
Lowest it’s been in 40 years. Yeah.

Ryan Isaac:
I mean the indicators are really healthy while it’s just man, imagine being in charge of all this stuff, like How many complex things can be moving at the same time, and you’ve got to set rates and make policy…

Matt Mulcock:
It’s not a job I want.

Ryan Isaac:
No way, man. I just wanna be a podcaster.

Matt Mulcock:
Yeah, exactly, just wanna talk to a bunch of dentists about money.

Ryan Isaac:
love it.

Matt Mulcock:
Speaking of… Thanks for tuning in today. I hope this answered the question that your client had, that was a really good question.

Ryan Isaac:
Yeah, it was a great question.

Matt Mulcock:
Send them this episode, and tell them a very big thank you from us to help provoke a good conversation. If you have questions and you think it’d be a good discussion. We’d love it. This is awesome. So if you have questions, I don’t know, email us, DM us, find a way to contact us and tell us what your question is.

Matt Mulcock:
Can I just say, don’t DM me.

Ryan Isaac:
No Matt doesn’t chat.

Matt Mulcock:
I won’t respond I’m not on social media really. SO don’t DM me.

Ryan Isaac:
I’m a DM checker I log in to my socials a couple of times a week, and I see if there is an actual message notification, the other ones I don’t really look at, and then I just log off and then I don’t care any more.

Matt Mulcock:
Yeah, I rely on my friends to send me funny videos…

Ryan Isaac:
Memes.

Matt Mulcock:
From social media and memes, but that’s about it.

Ryan Isaac:
Yeah, you’re like, you’re like laughing at stuff that happened a couple of months ago, but it’s alright, you’re still laughing.

Matt Mulcock:
Yeah like oh it’s so funny. Did you see this? Or there’s like, Yeah, man, that came out like last October.

Ryan Isaac:
Matt just discovered the thing about the dress, so it looks blue or white, and he just barely saw that. [chuckle]

Matt Mulcock:
I’m like going around to everyone just… Guys, What color is this?

Ryan Isaac:
Yeah he had no idea. Everyone, Well, thanks Matt, for being here on this super glorious Friday, everyone, thanks for tuning in, and if you have any questions, go to dentistadvisors.com click the book free consultation button, love to have a chat and we’ll catch you next time on another episode of the Dentist Money Show, take care now, bye-bye.

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