The Dirty Secret Of The Financial Industry, Ep #101

2022-10-28

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What's up! It's episode 101 of Payne Points of Wealth and earning season is not so bad. Bank earnings looking relatively strong. Everything's still in the backdrop of what is the FED going to do. Are they going to keep raising interest rates? Are they going to pause? Are they going to start lowering interest rates? Nobody really knows. Meanwhile, the market's like a rollercoaster ride up one day and down the next. It can't really find any footing and uncertainty is high. Russia is still in invasion of Ukraine. Sounds like Xi Jinping is the ultimate ruler forever of China. It's a crazy world. We're going to give you our thoughts on exactly what's going on in the economy, what's going on in the stock market, the ying and yangs, everyday moves, and how to play it. On the Tipping Point today we're going to talk about how every investor on Wall Street gets treated the same. No matter how much money you have, it's bad. We're going to explain why. Check it out.

You will want to hear this episode if you are interested in...

What’s going on in the mind of J. Powell? [1:24]
Bad is good and good is bad [4:21]
You gotta be in to win [8:22]
The Tipping Point [12:57]
The dirty secret of our industry [14:19]
The sexiest investments [17:19]
Hidden Facts of Finance [22:35]

Nobody can predict what's unknowable

We're at a point in the market where good news is bad news and bad news is good news and then there's a little mixed bag of both. You have a GDP number coming out this week and some economists say it may be very, very strong. They've been a little weaker than they were last quarter, but they're still positive. Then you get these rip-your-face-off rallies from companies when they come in with really decent earnings. Lamb research came in the other day with decent earnings, really good earnings stock going from 300 to 370 in one week. The same thing happened with Lockheed Martin.

The problem with trying to time the market is that you can get on the sidelines and wait for the good news, but the good news happens, you can't get back in. So it's one of these cases where we're in a corrective phase of the market and it's going to stay a corrective phase until the FED stops. That may very well be happening right now but nobody can predict what's unknowable.

This week on the tipping point: Wall Street treats every investor the same

We've been looking at a lot of cases over the course of the last couple weeks at our boutique firm, Payne Capital Management, and we see every strategy under the sun. As we analyze portfolios, we look at all the underlying investments and the thing that blows my mind is it doesn't matter if you have $10 million or $10,000 Wall Street treats you the same. They sell you the same high-cost tax-inefficient products. It doesn't even matter how much money you have. It's kind of criminal and it's important as you build your net worth to make sure you're not constantly being treated like a retail investor.

It all comes down to the fiduciary rule. When President Obama proposed the fiduciary rule for the financial services industry, it was amazing. Banks, Wall Street firms, and insurance companies all fought it because they don't want to act in the investor's best interest, they wanna act in a shareholder's best interest. If you're ever going to invest with a wirehouse or a bank and insurance company, it's better to buy their stock because they're working in the best interest of the shareholder.

This week’s hidden facts of finance

Elon Musk's purchase of Twitter for $54.20 a share is at a price that is double the current valuation of Twitter's main rivals Meta and Snap. In line with Meta and Snap Musk should be paying more like $24 per share for Twitter. No wonder why he fought so hard to get out of this deal.
The current rise in mortgage rates has real consequences. The $1,900 a month payment on a $450,000 home with a 30-year mortgage at 3% can only support now a $300,000 loan at six and a half percent interest rates.
The only two bands that have surpassed the $2 billion sales mark for concert ticket sales in their history are the Rolling Stones and U2.
Stock prices aren't great at predicting recessions. The market provided a 1 month advance notice for the 2001 recession. It was 3 months late in its warning of the 1973 recession and 8 months late in the 2008 recession. False warnings came in 1962, 1977, and 1987. Sounds like the market's not really great at predicting economic downfall.

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