Watch Intro Series

What COVID Has Revealed About Investor Biases – Episode 231


the dentist money show podcast

How Do I Get a Podcast?

A Podcast is a like a radio/TV show but can be accessed via the internet any time you want. There are two ways to can get the Dentist Money Show.

  1. Watch/listen to it on our website via a web browser (Safari or Chrome) on your mobile device by visiting our podcast page.
  2. Download it automatically to your phone or tablet each week using one of the following apps.
    • For iPhones or iPads, use the Apple Podcasts app. You can get this app via the App Store (it comes pre-installed on newer devices). Once installed just search for "Dentist Money" and then click the "subscribe" button.
    • For Android phones and tablets, we suggest using the Stitcher app. You can get this app by visiting the Google Play Store. Once installed, search for "Dentist Money" and then click the plus icon (+) to add it to your favorites list.

If you need any help, feel free to contact us for support.


Will an increased awareness about different types of risk affect your investment decisions? 

On this Dentist Money™ Show, Reese and Ryan take a quick look back … and a long look ahead as they discuss the effects of COVID on the stock market, on the dental community, and on themselves. Will a new mindset about money affect your decisions as an investor?

Sharing their personal observations, Reese and Ryan explain why seeing stocks through a COVID looking-glass may affect your attitude towards financial assets.


 

 

Podcast Transcript

Ryan Isaac:
Today on the show, Reese and I talk about three observations we’ve noticed during this COVID and quarantine shutdown. We’re still in the middle of it. It’s May 2020 if you’re listening to this in the future. Things are kind of on the edge of maybe getting back to normal soon. So, today we’re talking about these three things that we’ve noticed that have to do with risks, and investments and kind of happiness and peace of mind during these uncertain times. Some really interesting things, a couple polls from audience members and groups. And how to deal with this stuff down the road if and when it happens again.

Ryan Isaac:
So, thanks for tuning in, thanks for joining us. If you have any questions that you’d like to have answered from one of our awesome advisors just go to DentistsAdvisors.com, click the book free consultation button and schedule a phone call. We’d love to talk to you. Thanks for tuning in. We appreciate the support. We hope everyone is doing okay and well, and getting back to work soon. Enjoy the show.

Announcer:
Consultant 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 Dentists Advisors, a registered investment advisor. This is Dentist Money, now here’s your host Reese Harper.

Reese Harper:
Welcome to the Dentist Money Show where we help dentists make smart financial decisions. I’m your host, Reese Harper here with my trusty old co-host, Sir Ryan Isaac.

Ryan Isaac:
Yes. COVID edition.

Reese Harper:
Spring edition!

Ryan Isaac:
Spring, well it’s a summer basically-

Reese Harper:
Spring COVID.

Ryan Isaac:
It’s-

Reese Harper:
So, I guess it’s May. That’s not quite spring.

Ryan Isaac:
Yeah, we’re pushing summer-

Reese Harper:
We’d like to welcome everyone. It is beautiful. The birds are chirping, COVID is slowly starting to…

Ryan Isaac:
Retreat? Is it?

Reese Harper:
We don’t know. We’re not going to say-

Ryan Isaac:
It’s hiding outside.

Reese Harper:
There’s something ethically wrong of saying it’s over because then people are like, “Too soon, bro.”

Ryan Isaac:
Yeah, I won’t say that.

Reese Harper:
Because I don’t want to say it’s over. We don’t know, but you can’t even almost say anything optimistic because then you’re like, “Hey, don’t give it-”

Ryan Isaac:
Easy now.

Reese Harper:
Don’t give it legs.

Ryan Isaac:
Easy now.

Reese Harper:
It’ll go [crosstalk 00:01:52] to virus. You can’t control it.

Ryan Isaac:
It’s fair to say I think Americans are just running out of patience for sitting at home and waiting. And we’re just going to go see what happens. [crosstalk 00:02:02]-

Reese Harper:
That’s how-

Ryan Isaac:
Sounds fair.

Reese Harper:
I went out and I explored last night on my one wheel. I was wheeling around and as you well know, that one wheel has a life of her own. And I was like, “Why is this stupid thing tipping back on me?” It was going too slow. And I kept forcing it to go, and all of a sudden it just like-

Ryan Isaac:
Killed the motor.

Reese Harper:
Just killed the motor and it stopped. And I just flew off the front.

Ryan Isaac:
Dude, if you die-

Reese Harper:
I did wear a helmet.

Ryan Isaac:
You die during… You die from a one wheel accident during COVID.

Reese Harper:
During COVID.

Ryan Isaac:
That’s just the worst man.

Reese Harper:
Yeah.

Ryan Isaac:
It’s the worst. Okay, so today, speaking of all this COVID. So, today we want to… I have three different observations that have been kind of interesting observations during this time. The point of today is to talk about these observations and unique all this stuff was. But also, how does this help in the future?

Reese Harper:
Okay.

Ryan Isaac:
For when we come out of this, either just normal every day habits, or the next time we go through something like this of some sort, some kind of economic crash or down turn or whatever.

Reese Harper:
Yeah.

Ryan Isaac:
So, the first thing is a little story. So, everyone’s wearing masks now. If you’re listening to this in the future, it’s May 2020 and I think it’s highly recommended by smart science people. But mostly I just feel really embarrassed if I don’t have a mask on and I have to go to the grocery store. I just feel like the biggest jerk in the world.

Reese Harper:
Yeah.

Ryan Isaac:
So many people, around here, at least, I’m in Phoenix, everyone’s wearing them in public now. I just feel like the biggest jerk ever. So, it’s masks time. The other day I’m driving down the road and I see, I’m at a stoplight, and I see a guy on a motorcycle. And he’s got his mask on but he’s not wearing a helmet.

Reese Harper:
Really?

Ryan Isaac:
Yeah, and I just thought, “Man, 2020 is the weirdest freaking year ever.” Because I just sat there and thought there was something in that guy’s head that triggered a warning of risk. Maybe it was social risk of not wearing a mask, like I feel. Or maybe he’s really concerned about spreading something and he’s just trying to protect the people. He’s wearing a mask-

Reese Harper:
Functional risk.

Ryan Isaac:
Yeah. But he’s not wearing a helmet while driving a motorcycle 50 miles an hour down the road. And I thought, wow, shout out to that guy. Has the mask but no helmet. And it just got me thinking, this is the first topic, okay? So, these are the questions I have. First topic is this idea of risks. And when everything happened over the last couple of months businesses dried up, liquidity dried up, emergency funds got tapped into, people without liquidity noticed immediately. So, there’s this notion of risks that we took up until this point and what will this change in the future in our perception of risks?

Ryan Isaac:
And risk is tricky. That’s what I sat there thinking at the stoplight was risk is hard to gauge and we’re heavily biased the way we look at it. Like this guy, got a mask on but no helmet on a motorcycle, you know?

Reese Harper:
Yeah. Mm-hmm (affirmative).

Ryan Isaac:
So, let’s start there. What have you, observations you learned about risk in general? And let’s just say in businesses, running a dental practice, and investing as all this stuff happened.

Reese Harper:
Well, I think one of the things I’ve noticed recently is that there’s a lot of, in behavioral finance, there’s a term called narrow framing. And narrow framing means that you are making decisions without considering all of the consequences of your decision. So, in your example, you put on the N95 mask-

Ryan Isaac:
Yeah.

Reese Harper:
Effectively eliminating the risk that 95% of the harmful particles will be eliminated from this N95 mask.

Ryan Isaac:
Yeah.

Reese Harper:
But not realizing that you’ve exposed yourself to a much higher probability risk, which is motorcycle accidents happen at a much higher frequency than people are passing away from COVID.

Ryan Isaac:
And I didn’t dig into the statistics but I’m sure helmet versus non helmet motorcycle accidents are drastically different [crosstalk 00:06:04]-

Reese Harper:
Yeah, yeah. I mean, so when you… I see a lot of people, particularly right now, there is a lot of narrow framing happening. And that’s a very common and understandable thing. I don’t want to make fun of anybody, just want to say that it does happen often.

Ryan Isaac:
What’s your takeaway from… How do you think people behave moving forward out of this? Does this scar people kind of mentally, emotionally when it comes to running a business? Will people keep six months of cash in their practice now? Will they avoid investing in stocks like before? Or how do you think people are going to take this [crosstalk 00:06:39]?

Reese Harper:
Did you see the ADA came out yesterday with their COVID dental expenditures report yesterday?

Ryan Isaac:
Not as of yesterday, no.

Reese Harper:
It was this like fairly substantial project if you go to Health Policy Institute inside of the ADA’s website. You’ll see this research project that they’ve been working on that shows dental expenditures estimated over the next few years. And shows kind of how dental expenditures publicly were fairing from 2008 and ’09 and 2010, 2011. Like how long does it take for people to get back to normal dental expenditure levels. And if you look at 2008, in the crisis then, the per capita dental spending, I think, is in the… It’s roughly in the $300 to $400 per year.

Ryan Isaac:
Oh, you mean consumer patient spending?

Reese Harper:
Yeah. Dental spending.

Ryan Isaac:
Oh, I did actually see this on a webinar with Clear the other day that we did.

Reese Harper:
Yeah, so ADA, they’ve had some existing stuff and they just had a COVID one that I just saw that they posted. And it was about all of the… Like how long is it going to take for public spending to get back to where it was.

Ryan Isaac:
Interesting.

Reese Harper:
But anyway, there’s this per capita number that’s somewhere in the range of $300 to $400 a year, high threes, low fours. And it actually, from 2008 to 2016, dental expenditures actually flat lined completely or declined slightly. So, for almost nine years, eight years to nine years after-

Ryan Isaac:
People weren’t spending as much on it.

Reese Harper:
People weren’t spending as much on their dental care. And it started to tick up again for a few years right before COVID. And now, the ADA anticipates that this will have a big effect on dental spending. And probably not recover dramatically for another couple of years. And I think the reason that this is interesting to me is just that as a dentist right now, a lot of people are going to have the same approach when it comes to investing, when it comes to making growth decisions and hiring, and trying to compete. Everyone’s going to do the same thing that the dental patients are doing, on average. They’re going to hunker down and wait for things to get-

Ryan Isaac:
Hold on a little bit. Yeah.

Reese Harper:
And that’s what happens when people buy stocks, too, is they just kind of go, “Well, when it gets a little bit more clear and things get a little bit better, then I’ll invest.”

Reese Harper:
Ryan and I are pretty easy to talk with and so are our other advisors. Let’s just find a time that works for you so we can start a conversation about how to take control over your financial future. Gives us a ring at 833-DDS-PLAN to set up a free consultation. Or just go to the website at DentistsAdvisors.com and click book free consultation.

Reese Harper:
And when you go through a crisis, you become more risk adverse for quite awhile and that risk aversion makes people spend less and do less, and that’s just normal. And it’s okay. But as a practice owner, or as an associate, or as a specialist that is really trying to maintain market share, you have a very… The things that you do that are proactive right now will be the unusual thing that’s happening in the market. And if you can differentiate yourself by being a little more proactive with your marketing, with your training, with the amount of effort you put on improving your practice and dialing it in, making sure that you have the right staff in the right positions. And making sure that you’re not just stopping your investments, and you’re not stopping saving and you’re not just trying to stockpile massive amounts of cash for the next crisis.

Reese Harper:
It will be the unusual thing. I’m not saying that you don’t want to stockpile cash or not prepare for another crisis. We’ve talked about that in previous episodes but-

Ryan Isaac:
Oh yeah.

Reese Harper:
You’ll be the anomaly in the next three or four years if you take the position of I can’t just sit around and wait for things to get better. I have to go build my own reality. And that will help me thrive. That’s going to be the uncommon choice, I think.

Ryan Isaac:
At least for another couple years. And the people who acted that way post ’08 or even during ’08 with their investment accounts are the people who got the great returns over the last decade. As opposed to those who waited until 2012, 2014 to kind of feel it out, right?

Reese Harper:
Yeah. And a lot of people, just their comfort level is like, “Well, I just want to maintain.” I don’t know you. When it comes to investing in particular, I know stocks are… There are real assets in the world, like real estate, and a practice and a piece of equipment and cars that are depreciating. And there’s real assets. And then, there’s financial assets, like stocks and bonds and options. And these financial assets are claims on real assets. You actually can… They are rights to real assets.

Reese Harper:
When people look at their cash, I feel like they disproportionally value that as a real asset because they can go pull it out of the bank and get physical paper. And it feels different. I think that plays into the psychology, where stock is not really the same thing. It’s never actually… The physical shares are gone, physical certificates are now gone, and people don’t feel the same about them. For most people, I do think that there’s just a significant difference in how they feel about cash versus stocks. And so, they wait until the risk is gone before they’re willing to start investing again.

Reese Harper:
And by that time, all the risk… When the risk is gone, then the returns are also not as great.

Ryan Isaac:
The premium’s gone. Yeah.

Reese Harper:
And then, sometimes you end up being… That person ends up having the worst experience in the stock market. That’s my worry. That person has the worst experience because they’re always getting in and getting out during the worst periods.

Ryan Isaac:
And then just give up entirely.

Reese Harper:
And they give up entirely.

Ryan Isaac:
Yeah.

Reese Harper:
Rather than just being like, “You know what? I don’t really view this that differently from cash. I can convert it to cash as I need it.” It’s just way more volatile. But it’s a claim on a real asset. You know? I’d rather have a claim on a business than a claim on a physical paper. That, in many cases, the government controls the value of.

Ryan Isaac:
The value. You getting devalued-

Reese Harper:
Every day that they continue to buy their own bonds and devalue our currency, that effects the value of the real asset that I can pull out of the bank and the physical paper. But my claim on a business, my claim on a market, my claim on the energy sector and the entire global stock market, that’s a real asset too. And it’s got a lot of resilience, shown to have way more resilience than cash during difficult times. And it’s a much more valuable asset to own, so why not just own it all the time with the money that you know exceeds your one and a half times operating overhead in the bank plus six months.

Reese Harper:
It’s a crazy time though. I can’t believe how many people right, dude, still aren’t willing to… It’s harder today. Today it’s probably scarier because they’re like, “Well, the market’s already up so much.” Now-

Ryan Isaac:
I was just going to say that, yeah.

Reese Harper:
I’ve got to wait for it to go back down again so I can get a good deal, right?

Ryan Isaac:
It’s just tough man. The market does not have to do anything you want it to do. It doesn’t have to do any… I know. Some of us have our masks on and no helmets, unfortunately.

Reese Harper:
What have you observed that stood out to you the most?

Ryan Isaac:
Yeah. I mean, I just wonder how this is going to effect people moving forward. Although, for the most part, conversations I’m having with people day to day don’t tell me that people will drastically or radically change something in the future. I think people will be very conscious about always keeping a couple months of operating expenses in the business. I think you can get complacent with how good revenues might be and how good cash flow might be and go, “Eh, we can dip down to like 20 grand in the business because we’ll replenish and it’s fine. We can dip down for this project or whatever. I can take this for the house down payment.”

Ryan Isaac:
I think people will be a little bit more hesitant to do that. Be more cautious and protective of that. I think people will definitely think about their liquidity a little bit more. But I don’t know, for the most part, man, I don’t get the sense that people are going to change drastically or very radically what they’re doing. But that’s probably skewed a little bit. Those are people who have hired a financial advisor.

Reese Harper:
Yeah.

Ryan Isaac:
Anyway, kind of going into, I don’t know if you saw this the other day. I posted it in our company advisor group. But there was a study, there’s a few studies actually came out, of market. It’s kind of to your point before, how portfolio participants reacted over the last couple months. So, starting it off was a study from Morning Star. I actually, I put this in the DentistsAdvisors.com/group Facebook group. It’s in there, this article, this post.

Ryan Isaac:
But anyway, so Morning Star surveyed 635,000 people. They looked at their plans, their 401K plans, to see who made changes over the last 60 days. And this was for March and April. And only 5.6% of those 635,000 people made any changes in their portfolio. Well, it’s actually the first quarter of 2020. So, a really small percentage of people even changed anything in their 401K’s from this Morning Star survey.

Ryan Isaac:
And then, there’s also Vanguard did the same thing. So, Vanguard, it was a similar amount of people. They found that nine in 10 investors didn’t trade in response to market declines in the month of March, which was a terrible, crazy month. And seven of 10 people in their study actually bought stocks.

Ryan Isaac:
And then, another study from a group called Empower Retirement, they administer 401K plans that covers almost 10 million people. They found that only 16% of people even logged on to check their balances in the month of March. Out of 10 million people, only 16% of people even logged into their accounts to check.

Reese Harper:
Probably because the website sucks so bad they know that they’re just going to get locked out [crosstalk 00:17:55].

Ryan Isaac:
They don’t even know how to… They’re so tired of all the passwords they have to… They had to watch a webinar to figure it out. So, I just thought this was kind of interesting and I’m curious what your experience has been. I think for the most part I saw that behavior reflected in most that I know and work with. That people did not make any changes to their accounts. It doesn’t mean that people didn’t feel stressed or think about it. But I kind of saw the same thing reflected and I posted this in our group kind of just saying, “Hey, if you were stressed but despite that, you didn’t make any changes, you’re in good company because apparently a lot of other people didn’t make any changes either, despite the fact that it was a really crazy month.”

Ryan Isaac:
So, that’s one thought. When I read this data though, this makes me wonder a little bit, is if this also alludes to the fact that nobody’s rebalancing. I don’t know if this includes rebalancing when they say nobody has traded. And a lot of these are self directed people, so they don’t have an advisor that’s doing rebalancing for them. So, I think the other side to the coin is, A, if your portfolio isn’t well built in the first place and you go through a time like this, it might not be smart that you didn’t make any changes.

Ryan Isaac:
If you have a crappy portfolio, it’s expensive, it’s overly concentrated, it’s not diversified, probably would have been a good time to make some changes and harvest some losses. Also, if you’re not rebalancing during a time when there’s a lot of volatility, that’s also detriment to your returns over long periods of time. So, just curious what you think about that when you hear… I think you’ve seen the same thing in client behavior and people not doing anything. But there’s another side of that, you know-

Reese Harper:
For me, I think that the speed of the market declined and the speed of the recovery…

Ryan Isaac:
It’s too fast?

Reese Harper:
Is too fast for people to do anything.

Ryan Isaac:
If this was drug over eight months, like 2008-

Reese Harper:
Yeah, if you look at ’08 and ’09 and-

Ryan Isaac:
Was it 10 months?

Reese Harper:
Most of the panic selling only… The market conditions and the story change everything in terms of how people behave. From the very beginning of this, we didn’t really… From the… You didn’t really know you were in a bare market even until you’re down 15%, right? I mean, me and you aren’t even really getting calls with people being worried until March. And March is-

Ryan Isaac:
It takes 15/20% and it takes a lot of news on top of that to push it.

Reese Harper:
Yes. And so, we’re three weeks into the… We’re two weeks into the decline before we’re even really hearing anything. By the time we hit… The SNP’s, Goldman’s predicting the day… This is like March 16th.

Ryan Isaac:
Yeah.

Reese Harper:
Where Goldman’s predicting we could see a 2250 SNP level or, for those of you who are listening today, were probably at 2800, 2850 SNP level. So, we’re 20% higher to 25% higher than where Goldman was kind of anticipating the worst case to be. And we never actually got to the… We haven’t yet, in this crisis yet, haven’t got to the place that Goldman anticipated would be probably the worst case scenario. And that was kind of the big news was like, Goldman analyst comes out on the 16th. They put all this money behind this research project around COVID. And here’s their forecast.

Reese Harper:
And it went, it declined so quickly, within a month we hit the bottom that we’ve… Within 30 days from-

Ryan Isaac:
Yeah, so fast.

Reese Harper:
We had hit the bottom and we didn’t know we were at the bottom, but stimulus, talks of stimulus and talks of government action started three weeks after the market started declining. I mean, the government responded like, this wasn’t like an ’08, ’09 kind of response where they were like-

Ryan Isaac:
Oh wait, we were like seven or eight months into it.

Reese Harper:
I don’t know, we’ll think about… Let’s invent… If you remember in ’08 and ’09, what happened there was the government, for the first time, for the first time in the US’s entire history, we started considering something that you’ve probably heard of up until now, which is stimulus/financial engineering. There’s been, you’ll hear printing money. Something really-

Ryan Isaac:
What’s the meme on Twitter right now where you see all the memes that are like Money Printer, go burr.

Reese Harper:
Yeah. And-

Ryan Isaac:
That’s the best.

Reese Harper:
And what this means is the government, for the first time, said, “We don’t… there’s not really… No one’s going to trust us right now to lend us money and we need money. So, what we’re going to do is we’re going to borrow money but our own central banking system, our own federal reserve, because there’s not demand for our money, we can’t get loans from other countries easily right now. At least not at the interest rate that we want. We’re just going to buy our own bonds. Or we’re going to lend ourselves money. And in order to do that we’re just going to create a larger supply of money in the market. And we’ll pay ourselves back, at some point, with our own money instead of making another country buy our bonds.”

Reese Harper:
That’s fancy name for that would be quantitative easing. So, that never had happened before and that took a long time to consider. And there was a ton of debate around it, and months of consideration around-

Ryan Isaac:
It was slow. The new cycle was really slow.

Reese Harper:
Yeah.

Ryan Isaac:
I mean, it felt normal.

Reese Harper:
The panic selling didn’t happen in ’08 and ’09 until pretty late in the cycle. And we just don’t know if the government wouldn’t have intervened as quickly as they did in this cycle, panic selling never really happens within 30 days. Even if there’s a severe decline. I mean, it takes a lot to get people from happy and safe and content and feeling really well about their lives, which every economic indicator was really positive two and a half months ago, two months ago.

Reese Harper:
I mean, I was planning a trip to Europe, even during the time where COVID was being [crosstalk 00:24:40]-

Ryan Isaac:
Was out there and you’re like, “Yeah, maybe, maybe.”

Reese Harper:
And I’m like, “I don’t know, maybe.”

Ryan Isaac:
Yeah.

Reese Harper:
And now all of a sudden it’s just like boom, the world’s shut down.

Ryan Isaac:
Yeah, two weeks later, not only you had canceled. I canceled a trip to driving to California.

Reese Harper:
Yeah!

Ryan Isaac:
Mid trip. I was halfway there and I turned around. That’s how bad it got in two weeks.

Reese Harper:
Yeah. This crisis just didn’t allow people, and still hasn’t, enough pain for enough of a long period of time-

Ryan Isaac:
To make moves.

Reese Harper:
… to make a move. And you could argue that’s a positive thing, that the federal government did to intervene. Or you could say, if the federal government always intervenes to avoid all pain, which I view the fact that people aren’t buying or selling because they’re like, “Well, the government is dumping tons of money into stimulus.” That’s the reason there’s not a lot of panic selling. It’s like, “Well, the market’s going to be fine now that the government’s injecting two trillion, three trillion dollars.”

Reese Harper:
And dude, all the small businesses got loans, unemployment gets a massive amount of unemployment-

Ryan Isaac:
Yeah, yeah.

Reese Harper:
… increase. There’s been never a time in history-

Ryan Isaac:
Unbelievable.

Reese Harper:
… where it’s been this good during something this bad.

Ryan Isaac:
Yep.

Reese Harper:
They’re just like, “We’re going to take away all pain.” And part of me is like, “Man, I don’t know about that. That is not sustainable.”

Ryan Isaac:
It feels like numbing something with just tons of drugs.

Reese Harper:
Yeah.

Ryan Isaac:
Maybe this isn’t healthy.

Reese Harper:
Yeah, I’m like, I don’t know, I was listening to a podcast that I really enjoy the other day on NPR, Planet Money.

Ryan Isaac:
Oh yeah.

Reese Harper:
And they had an interview with a billionaire that I’m forgetting his name. He’s a tech entrepreneur that had an unknown company that I’ve never heard of. But he had this big rant on CNBC that kind of went viral.

Ryan Isaac:
Oh! Yeah. Yeah, I remember that. I don’t remember who it was though.

Reese Harper:
Yeah, you’re a Twitter guy so you probably saw it.

Ryan Isaac:
Yeah, Twitter went crazy.

Reese Harper:
And anyway, he just said he thought that the response should be… We just let all of the big companies go down. And he’s like, let every billionaire just go broke. That’s what should happen right now. Do not intervene. And his logic was just…

Ryan Isaac:
The people will be okay. The employees will be okay.

Reese Harper:
Yeah.

Ryan Isaac:
He was… Yeah.

Reese Harper:
He’s just saying by bailing out these industries what you’re going to have happen is you’re going to create… When a company has a lot of extra cash, okay? It can do one of two things. It can pay out a dividend to shareholders. So, if Delta has a lot of money, it can pay dividends out to its shareholders. And a lot of the shareholders would be owners, you know? The board of directors get some of that dividend, and it could be a nice way to give cash back if you have too much. You could do what Apple does a lot of time and creates a new product or innovates, or it makes a change, which is kind of what you hope to see happen.

Reese Harper:
Rather than just being like, “Let’s pay out cash.” You want to see the airline industry maybe go like, “Let’s build a better-”

Ryan Isaac:
Change something.

Reese Harper:
… thing. Let’s do airlines better.” Right? But typically what ends up happening is they pay out dividends when they have extra money or, and what’s been really common in the last decade, is they do buy backs on stock. And a corporate buy back is just what it sounds like, it’s when a company takes its cash and goes to the stock market and buys some of its own stock back. And when they buy that stock back and retire it, essentially what happens is the stock sometimes gets a boost that day. It goes up a little bit when they do that buy back because there’s less shares, and so everyone’s shares just got worth a little bit more.

Reese Harper:
And what can tend to happen, this is a corporate governance kind of agency, they call it an agency issue when there’s incentives that are not aligned between the board of directors and the team or the employees. If you’re a company, a board of directors, and you’ve got a bunch of extra cash there. And you’re like, “Let’s go buy back all our stock.” And your own personal stock that you own just went up in a lot of value because now, there’s less shares available. That’s another way of increasing your compensation, to some degree, right? It can be a good thing for all shareholders, as it gives all shareholders a little bit of a boost. But the people that have the most stock get the most benefit from that transaction in many cases. It’s much more complex than this but I’m just going to provide you with one side of the argument.

Reese Harper:
And so, if you’re going to go give companies a bunch of cash to bail them out, but right before you give them all that cash they just bought back all of their stock and got rid of their cash, and got the company’s share value to get jacked up to compensate the executive team and board of directors by increasing the value of their stock. And they got rid of their cash. Shouldn’t the question be like, why didn’t you guys keep some cash around?

Ryan Isaac:
Yeah.

Reese Harper:
And so, you’re essentially enriching the company. It didn’t keep enough cash. And then, the government is telling the tax payers, “We’re going to pay for those companies to also get cash, even though they had it before and have been buying back their stock for the last 10 years and increasing their compensation.”

Ryan Isaac:
While the message at the same time is, “Hey general public individuals, you ought to have an emergency fund. Keep some cash around for times like these. We’ve been telling you.”

Reese Harper:
You guys should have kept more cash around!

Ryan Isaac:
We’ve been telling you.

Reese Harper:
Anytime the bulk of the cash in the whole country is being concentrated among a very small group of companies that continue to buy back their stock. And they’re not improving their products.

Ryan Isaac:
Hey Matt, what do you like to drink or snack on when we do our webinars every month?

Matt Mulcock:
Yeah, that’s a good question. I’m usually hitting a Red Bull. But it’s hard because it’s an evening webinar.

Ryan Isaac:
Yeah. These evening webinars taking place 6:30 PM mountain standard time.

Matt Mulcock:
Mountain time.

Ryan Isaac:
Once a month.

Matt Mulcock:
Where do you find it?

Ryan Isaac:
Well, if you’d like to find the webinar or you’d like to register for it, you go to DentistsAdvisors.com/webinar or just go to the website and click on webinars under the education tab.

Matt Mulcock:
It’s a good time.

Ryan Isaac:
It’s a great time. What kind of things do we cover in our webinar, Matt?

Matt Mulcock:
So, each month we’re going to hit an element, right? So, it’s going to be some component of your financial life. We’re going to dive a little bit deeper than we would on the Dentist Money Show, right? We’re going to draw pictures, there’s live polls. You can ask questions.

Ryan Isaac:
Yeah. It’s a great time.

Matt Mulcock:
Yeah, it’s a good time.

Ryan Isaac:
Well, we’d love to see you in attendance at one of our fantastic webinars. Just go to DentistsAdvisors.com. Sign up today for the next one. Thank you very much.

Reese Harper:
Right now, probably more than ever more liquidity through either investments in your liquid investments. Any liquid investment or cash are probably more important now than ever because of how much financial engineering is happening both at company levels and at the federal government level, that really effect all of our lives in a massive way. It effects the… If the government keeps borrowing money like this it effects the price of all goods and services that we consume. Inflation does start to kick in and all of our stuff become worth less. We need more cash and more liquidity in order to have a normal life.

Ryan Isaac:
We talked about this a lot at webinars and Facebook lives and the podcast. So, DentistsAdvisors.com. Go to the education library and just go search for the… There’s a topic of liquidity. And you can see, we’ve done a couple recent podcasts on it and a webinar about this. If you’re kind of confused, a lot of people hear that and they don’t know, like what does that mean to keep liquidity? So go check that out.

Ryan Isaac:
But one of my takeaways too, I think that’s a good point about the speed at which this happened, or why a lot of people maybe didn’t make adjustments in their portfolio. I read that news and I think it’s a good piece of news. It’s encouraging, but I also think that could indicate that there’s probably a lot of crappy portfolios though in those accounts that should have been looked at. People should have logged on and realize they were overly concentrated, had a good chance to harvest some losses and rebalance.

Ryan Isaac:
If that data does include people rebalancing, then that’s also probably not a good indicator. In fact, when the Vanguard study came out, it was about 30 days ago, and it said nine out of 10 people hadn’t traded. And seven out of 10 people bought stocks. A lot of financial people on Twitter were saying, “Well, doesn’t it indicate that people aren’t rebalancing?” And that’s a problem when you have a giant market correction and you’re not rebalancing your portfolio. It’s such a simple task that people don’t do on their own.

Ryan Isaac:
I don’t know why, it’s probably just tedious. It’s hard to remember. It’s hard emotionally to do. Rebalancing means you’ve got to go in, and sell the stuff that’s okay in your portfolio during a crash and buy the stuff that’s on fire.

Reese Harper:
Yeah. Well, do you know what’s funny too, is most people are set up on a quarterly rebalancing schedule.

Ryan Isaac:
Quarterly or annual rebalance.

Reese Harper:
Yeah, or annual rebalance.

Ryan Isaac:
Yeah, it’s default, annual rebalance.

Reese Harper:
This one need to be a little bit more dynamic than that.

Ryan Isaac:
Exactly.

Reese Harper:
And most people… This rebalance really needed to occur during the month of March, at some point-

Ryan Isaac:
Or the week of March 13th, or whatever.

Reese Harper:
Yes.

Ryan Isaac:
Yeah it was kind of crazy. So, I just think we’ve been preaching this for a long time. You get a human between you and your financial decision making and over a course of decades you’ll just end up in a better spot than if you don’t.

Ryan Isaac:
Last piece here, we’ll do this really fast. A friend of the show, a Twitter friend of mine, Dr. Daniel Crosby of the PhD variety, he put out a poll. There was 610 people that participated and then, I just basically copied this and I put it in our Facebook group. But he said, “How have the last two months impacted your happiness?” And the options are happier, same, or less happy. What would you say? Last two months, how has it impacted your happiness? Happy or same, or less happy?

Reese Harper:
For me, I’d be less happy but that’s just because of maybe my job, what I’m doing right now. I don’t know if it’s like… I don’t know how other people would have responded. I’d be less happy right now.

Ryan Isaac:
Yeah. Okay. Yeah, I would rank myself either the same or even happier, which is kind of weird. I don’t know. I feel like my brain is on overload. I’ve worked more in the last two months than I have in the last two years, easily.

Reese Harper:
That’s how I feel.

Ryan Isaac:
It’s been bad. I don’t-

Reese Harper:
But I don’t view that as a happy thing.

Ryan Isaac:
No. Yeah, that’s… There’s something. Maybe it’s just my kids are-

Reese Harper:
Like if you said a different… You asked that question different to me [crosstalk 00:35:27]-

Ryan Isaac:
Differently.

Reese Harper:
Like, “Hey, do you feel…” What was the survey? What was the survey?

Ryan Isaac:
So, out of 610 people, you mean the results?

Reese Harper:
Yeah.

Ryan Isaac:
So less happy, 42% said less happy. And same was 31%, happier was 26%. So, it’s almost-

Reese Harper:
Okay, so I’m not weird.

Ryan Isaac:
Same or happier was about 60% and-

Reese Harper:
I was worried that I was the outlier but it sounds like I’m normal-

Ryan Isaac:
On ours, so in the Facebook group, Dentists Advisors Facebook group 26% said less happy.

Reese Harper:
And what were the rest?

Ryan Isaac:
Everything else was better or-

Reese Harper:
The same?

Ryan Isaac:
The same, yeah. So, 73% was same or better. So, I don’t know, I think if I’m evaluating this, I think I like the fact that this forced all my kids’ activities to stop and me and my wife running around every single night of the week to different places. And everyone’s separate all the time. And it’s kind of just been nice to go like, “Yeah, there’s no plans.” That’s kind of nice man. There’s just no plans.

Reese Harper:
I think, yeah, if you had asked me the question-

Ryan Isaac:
It felt good.

Reese Harper:
… like have you seen your kids more in the last few months?

Ryan Isaac:
Yeah, and has that been better?

Reese Harper:
Has that been better?

Ryan Isaac:
Maybe that’s been worse.

Reese Harper:
No. I’d be like, “No, that’s…” I think sometimes when people are anonymously voting they vote differently than when their face and who they are is going to be shown.

Ryan Isaac:
Yeah.

Reese Harper:
My understanding of Crosby’s vote-

Ryan Isaac:
Twitter is anonymous.

Reese Harper:
It’s anonymous.

Ryan Isaac:
It is.

Reese Harper:
And when you do it on a Facebook group, people get to see.

Ryan Isaac:
They see who it is.

Reese Harper:
Who it is. And you generally skew towards the positive in social settings-

Ryan Isaac:
What would be viewed.

Reese Harper:
Right?

Ryan Isaac:
Yeah, what would be viewed happier.

Reese Harper:
And so, I thought I was a… I mean, I’ve seen that in a few cases recently. And so, it’s interesting that even in our own Facebook group, from… We had 40 something percent of the people in Daniel Crosby’s say they were sad. Or less happy.

Ryan Isaac:
Less happy, yeah.

Reese Harper:
And 26% in our group said they were.

Ryan Isaac:
Yeah. [crosstalk 00:37:23]-

Reese Harper:
That could be just because we have happier people, generally.

Ryan Isaac:
It makes me wonder, we probably have generally people with more money.

Reese Harper:
Financially more well off.

Ryan Isaac:
That’s probably really the factor that makes or breaks two months of not working…

Reese Harper:
Bearable.

Ryan Isaac:
Yeah, that’s the… Yeah, bearable.

Reese Harper:
Honestly, if you do have… If you’re in a good financial situation, that is one of the most… People can get through a lot. It’s amazing to me how much they can get through if they’re okay financially.

Ryan Isaac:
It’s crazy.

Reese Harper:
Like a really tough marriage? Eh, it’s okay. We’ve got some money-

Ryan Isaac:
Yeah, good marriage, bad money? It’s over.

Reese Harper:
Yeah, good marriage, bad money? No dude.

Ryan Isaac:
Yeah.

Reese Harper:
It doesn’t…

Ryan Isaac:
Poor health with money? You can fix it.

Reese Harper:
Yeah.

Ryan Isaac:
Good health, no money? I don’t know.

Reese Harper:
I don’t know. It’s like I still kind of-

Ryan Isaac:
Maybe that’s not a good one.

Reese Harper:
Well, you want… You’re happy if you have good health, but you’re not happy if under any scenario… Money just adds pressure to any scenario-

Ryan Isaac:
It does. And I think even more simply to tie it back to what you said earlier and we can wrap this up. Good financial health can just mean good liquidity. I mean, you can make it even more simple. Just good, accessible liquidity, it makes a giant difference.

Reese Harper:
Yeah.

Ryan Isaac:
Dude, that was cool. Thanks for going through that today. Just some really interesting things, and again, this is… I don’t even know what day it is. It’s May 7th of 2020. May 8th might be a totally different landscape. Everyone might sell everything. The market might tank down to 50%. I mean, who knows?

Reese Harper:
Yeah.

Ryan Isaac:
June 8th might be a totally different scenario. July, who knows? But this has been fun. Thanks for sticking with us and joining us today. If you have some questions about all this stuff going on or this kind of triggers questions in your mind about what you are doing with your portfolio and making financial decisions, just go to our website and have a conversation with one of our advisors. DentistsAdvisors.com, click the book free consultation button and book something on our calendar. We’re happy to chat with you.

Ryan Isaac:
If you have a question you want to put in our Facebook group, DentistsAdvisors.com/group. It’s friendly, nice, informative place of good humans who will answer your questions promptly. And anything else, Reese? Any parting words of wisdom? I hope that the motorcycle guy wears a helmet.

Reese Harper:
Yeah, shout out to him.

Ryan Isaac:
You’re wearing a helmet on your one wheel, as do I.

Reese Harper:
Just thanks to everybody for all your support to us during this time. And we hope that you’re finding the silver lining in all of this and that you’re able to make some progress with your… in your practice as things get kind of warmed back up now. And we’re starting to open practices in different places around the country on a limited basis. Just, we’re thinking of you. We’re here for you. And make sure and reach out, and we can help you along in any way that we can.

Ryan Isaac:
All right. Thanks everybody. Thanks for tuning in, thanks for the support. We’ll catch you next time.

Reese Harper:
Carry on!

COVID-19, Investing

Get Our Latest Content

Sign-up to receive email notifications when we publish new articles, podcasts, courses, eGuides, and videos in our education library.

Subscribe Now

Related Resources