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Careful What You Ask For

Written by Briton Ryle
Posted January 13, 2021

Running errands in the car on Sunday mornings, I tend to listen to the radio. Yeah, I have a whole bunch of records on my Spotify — funny, even with a digital streaming service where I could choose and order an infinite number of songs, this old-timer just has all the albums I love. And I listen to them that way too. I'll start with The Who's Quadrophenia or Meat Puppets II and let each song play in order, as it was intended. My kids don't get it. I try to tell them that Quadrophenia is the greatest rock 'n roll album of all time, and that to pick and choose songs is like being satisfied with just catching a glimpse of The Mona Lisa, or having just a sip of 1989 Dunn Howell Mountain Cabernet.

Some things... you gotta take them all in. You gotta close your eyes and let them just wash over you.

Now, I'm driving, so closing my eyes for full effect isn't a great plan. So it's the radio. Plus, these days, I am starved for human contact and sports talk radio is damn close to an actual conversation.

Sometimes though, I'm out and about before the sports talk guys come on, and I get subjected to the money-talk dingwads. These guys are one-trick ponies. They wanna sell some kind of annuity product that guarantees a fairly pitiful return on your money. The 4% doesn't change, the product doesn't change, and so the conversation is pretty much the same on any given Sunday. 

A few weeks back, they had a story that left me stunned. The set-up went like this: A couple of years prior, they had a prospective client that had amassed an $8 million nest egg. The couple wanted to "lock that in" — invest it so they could live off the interest and leave that $8 million to their kids. 

Now, these chuckleheads were slapping each other on the back about what a great job they had done for this family. To me, what they had done was borderline criminal, and I was so stunned that they were bragging about it, I nearly drove my car into a tree.

Careful What You Ask For...

For demonstration's sake, let's say these clients got "help" with their money sometime in 2018. The high for the S&P 500 in 2018 was 2,940.91. Yesterday, the S&P 500 closed at 3,801.19. From its highs in 2018, it's up 29.2%. That $8 million in a simple S&P 500 ETF would be worth $10,336,000 today. That family missed out on a $2,336,000 gain on their money!

Go back to 2017, and the story just gets worse. I found myself feeling sad for this family as if some curse had led them into the lair of terrible financial advice. 

Because advisors like the ones clogging up my Sunday morning radio aren't "advisors" at all. They aren't analysts, they don't do research, and they don't manage money. They are salesmen. They sell financial products — like annuities — that were created by somebody else. You can bet that "somebody else" is making more off of that money than this poor family. And you can also bet the financial advisors salesmen are taking a healthy cut of this family's money in the form of a commission. 

Now, the cornerstone of the sales pitch is that you buy one of these annuity products (usually created by an insurance company according to its actuarial tables), and you get to avoid all the ups and downs of the stock market. The thought of avoiding the 2008–2009 crash, or the COVID crash from last year, might sound good — if you don't think about it too much.

Last year's COVID crash set records. It was the steepest, fastest, fiercest sell-off the stock market has ever seen. And it was precipitated by an almost completely unique event. And yet here we are — staring at record highs for the S&P 500.

We can debate whether stocks *should* be where they are today. We can wonder what if the Fed hadn't acted. We can even imagine that there is no chance in hell that stocks can remain a good place to be over the next three years... five years... whatever time frame you wanna put in there.

The simple fact is: The UPS and DOWNS of the stock market is another sales job. The reality is the stock market is mostly up, with brief, fleeting periods of down. And I'll tell you why this is true now and why it will remain true in the future. 

A Bet on America!

I know the stock market often gets portrayed as this Wild West casino, where rustlers and highwaymen are waiting in the shadows to rob you blind. But what we're really talking about is a market where you can buy ownership in many of America's best companies. Of course, if you choose to buy shares of Dan's House of Rustlers and Highwaymen, well, it might not go so well. But you can just as easily buy shares of Apple or Target or Starbucks. 

The bottom line is that this is America. This is where the world's best and brightest come to fulfill their entrepreneurial dreams. So when you buy stock in great American companies, you align yourself with the best and brightest people in the world. 

Rest assured that the best and brightest will find ways to streamline processes, cut costs, and add little to the bottom line every year. Sleep well knowing that great marketing will attract new customers for the best products and services. Find peace that the U.S. population growth means that the customer consistently expands. And finally, take heart that a little inflation means that prices and net profits will also grow consistently.

You can put your money with a couple of local Sunday morning radio goofballs if ya want. Me, I'll take Walmart, Chewy, Netflix, Disney, or any of the other great American companies out there.

Until next time,

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Briton Ryle

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.

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